COURSE MATERIAL

Program : BBA ENTREPRENEURSHIP Semester : III

Course : ENTREPRENEURSHIP LAB Course Code : B18BE3040
Unit. No. :4
Unit Title :
Course Presenter: PROF. ABHISHEK DUTTAGUPTA
Course Mentor: PROF. ABHISHEK DUTTAGUPTA
CONCEPT OF MARKET
In common parlance, the term ‘markets’ means a particular place or locality, where goods are bought
and sold. We often speak of the Mumbai market, the New York market, the Commercial Street market
and so on. In economics, however, this term is used in a broader sense. If reefers to a complex set of
activities by which actual and potential buyers as well as sellers with each other and the price as well
as the output are determined. In the process of determining the terms at which the exchange would
take place, they may make all sorts of bids and offers, using bargaining and haggling. The term
‘potential’ here implies that if the prevailing price of the commodity happens to be higher or lower
than the one at which some transactors plan to deal, those buyers or sellers in the two cases
respectively are eliminated from the market. Thus, market determines who buyers and sellers are,
what the price will be and what quantities will be brought and sold. Market is actually the essence of
business. All business decisions relating to price , output, product style, advertisement ,investment,
etc. are taken in the light of actual as well as potential competition by new entrants.`

NATURE OF COMPETITION
Competition has different meanings. The term always denotes the presence in a specific market of two
or more seller and two or more buyers of a definite commodity, each seller acting independently of
every other seller and each buyer independently of every other buyer. Competition implies freedom in
economic life. It has been considered as a healthy sign in consumption, production, distribution and
exchange . The presence and the pressure of competitive market forces in the modern business units
force the producers to produce as efficiency as possible. Those who are inefficient and not able to
cover up their minimum cost of production will automatically leave the market. The more perfect the
competition, the more perfect the market will be.

PERFECT COMPETITION
In economic theory, perfect competition has a meaning diametrically opposite to the everyday use of
this term as synonymous to rivalry. The perfect competition means complete freedom in economic life
and absence of rivalry among firms. It prevails, when all the conditions given here are simultaneously
present in the market. However, most of these stringent conditions are unlikely to be present in the
real world. The real world consists of various imperfections and monopolistic tendencies. The market
is rarely perfect in the actual sense. This suggests that perfect competition is a purely theoretical
market from, which is never observed in reality. However, the stock market is close approximation of
perfect competition. Here, any particular stock is homogenous, there is no information cost
(information is readily available through published prices), free entry and exit conditions for the
transactors having insignificant control on price.
The following features serve as a necessary set of assumptions or conditions underlying the model of
perfect competition.
• Large Number of Sellers and Buyers.
• Homogenous Product.
• Free Entry and Exit.
• Absence of Government Regulation.
• Perfect Mobility of Factors of Production.
• Perfect Knowledge.
• Absence of Transportation and Selling Costs.

PURE COMPETITION VERSUS PERFECT COMPETETION

Some economists, notably E.H. Chamberlin and F.H. Knight make distinction between pure
competition and perfect competition. According to Chamberlin, “Pure competition is unallowed by
monopolyelments.it is much simpler and less exclusive concept than perfect competition for the latter
may be interpreted to involve perfect in many other respects than in the absence of monopoly e.g.
perfect mobility or perfect knowledge or such other perfection as the particulars theorist finds
convenient or useful to him.”

Usually, the term pure competition and perfect competition are used interchangeably, since in both the
cases sellers as well as buyers are price takers with no control over the prevailing market price,
Further, the demand and supply curves of the firms as well as industry are similar in either situations.
Pure competition is a market situation where there is a large number of independent sellers offering
identical products. It means it is a term for an industry where competition is stagnant and relatively
non-competitive. Companies within the pure competition category have little control of price or
distribution of products.

MONOPOLY
Monopoly is a market from, which has always attracted the attention of economists. This word has
come from the Greek words, monos (single), polein (selling), which mean alone to sell, Therefore, in
literary terms, it implies a market structure, where there is a single seller. In economic theory,
monopoly is characterized by sole producer selling a district products for which there are no close
substitutes and there are strong barriers to entry. This sole producer (may be known as monopolist)
controls the entire supply of the market. Thus, the supply curve of the firm and the industry will be
one and the same. Under these circumstances, the monopolist will tend to have complete control over
the price of the product sold by him. That is why monopolist is a price maker rather than a price taker
and he need not fear the actions and reactions of rivals, at last in the near future. In other words, the
monopolist operates unfettered by the competition of rivals. The level up to which the monopolist can
raise the price, depends upon the elasticity of demand, while cost condition determine the level, down
to which the monopolist can lower the price.

Pure monopoly implies complete absence of competition both in short-run as well as long-run, while
under perfect competition, the competition is complete. In the actual world, there is neither pure
monopoly nor perfect competition. Between these two extreme opposite limiting cases, lie various
real intermediate market situations like monopolistic competition, oligopoly, (increasing order of
degree of monopoly and hence imperfections).These market forms differ from each other in respect of
degree of imperfections.

ORIGIN OF MONOPOLY (Kinds Of Monopoly)

The origin of monopoly may be legal or technological or both. A firm can continue to enjoy the
monopoly power, or competitive advantage, so long as, it can prevent the entry of other firms into the
industry. The moment other firms are able to enter into the industry, the position changes radically
and the erstwhile monopoly loses its monopoly power leading to a change in the market from
affecting check over pricing strategies. Following factors are responsible for creating conditions for
the emergence and growth of monopoly
• Control over Strategic Raw Material: Ownership and control of entire or most of the supply of basic
input and strategic raw materials or exclusive knowledge of production and distribution techniques by
a single firm lead to monopoly conditions.
• Small size of market: Sometimes, the size of the market or technology is such that output of only
one firm of optimum size is sufficient to meet the demand of the entire market comfortably. Under
these circumstances, all the firms except the largest and the most efficient.
• Patents, Copy Rights and Licenses: Legal backing provided by the Government to produce a
particular product through granting of patents ,copy rights, trade marks, licenses, and quota for a
given period may create and perpetuate monopoly.
• Limit pricing: Sometimes, the existing firm adopts a limit price policy combined with other policies
such as heavy advertising or continuous product differentiation to prevent entry by potential firms.
• Public Utilities: The Government generally undertakes the production of the product or of the
essential services like transportation, electricity, water, communication etc. to avoid the exploitation
of the consumers. We often find monopoly tendencies in these services on account of economics of
large scale.
• Monopolistic Combinations: Monopoly may be the result of combinations. It is possible for a
number of competing firms in an industry to come to a voluntary agreement among themselves to
eliminate competition in the matter of price, output and market share.
• Fiscal Monopoly: There are certain monopolies, created by the Government itself. Printing of
currency notes and stamps, minting of coins, etc. are some examples. The nature of these services is
that they cannot be entrusted to private enterprises.

MONOPOLISTIC COMPETITION
Monopolistic competition refers to a market structure in which there are many sellers selling similar
but differentiated products and there is existence of free entry and free exit of firms. In other words, it
is a situation, where there is a keen, but, not perfect competition among sellers producing close, but
not perfect substitutes. Consumer goods like tooth pastes, brushes, bathing soaps, detergents, textiles,
television sets, refrigerators, automobiles, etc. fall under the category of monopolistic competition in
the Indian market. Here, each firm is a monopolist of its own differentiated product. But, the products
supplied by the firms are close substitutes of each other. Hence, Price and output decisions of a firm
depend upon the policies of the rivals only to some extent.

FEATURES OF MONOPOLISTIC COMPETITION

A firm under monopolistic competition faces competition from rival firms producing similar
products(close substitutes). At the same time, unlike a perfectly competitive firm, it has some
influence over the price of the product. That is why, it has downward sloping average revenue and
marginal revenue curves. The greater is the difference between average revenue (price) and marginal
revenue, the greater is the degree of imperfection and vice-versa. The main features of monopolistic
competition are:
• Many Sellers: The numbers of firms under monopolistic competition are fairly large, though, it is
not as large as found under perfect competition. Each firm shall be a small size firm controlling only a
small part of the total market.
• Product Differentiation: product differentiation is one of the most distinguishing features of
monopolistic competition. According to Chamberlin, it is the basic characteristic of monopolistic
competition. H defines product differentiation as follows, “A general class of product is differentiated,
if any significant basis exists for distinguishing the goal (or services)of one seller from those of
another. Product differentiation may involve qualitative material or workmanship differences in the
products.
• Sales promotion or Selling Cost: Advertising and other selling expenses have an important role
under monopolistic competition on account of imperfect knowledge on the part of buyers. Advertising
broadens the market and encourages competition. Salesman salaries, other expenses of sales
department, window displays and different types of demonstrations are some examples of selling
expenses. Advertisement may, however, be broadly classified as promotional advertisement and
competitive advertisement.
• Identical Demand and Cost Curves: Demand and cost curves are assumed to be identical under
monopolistic competition .This highly simplifying assumption will mean similar effects on the
demand and cost conditions of the firms on account of changes in the quality of their products and/or
selling costs.
• Free Entry and Exit: Under monopolistic competition, there is freedom of entry and exit of the firms
in the long run. New firms enter the group .When the existing firms earn super normal profits by
differentiating their products, This will result in a decrease in the demand of existing products at least
to some extent and/or an increase in the cost.
• Other characteristics: Other characteristics of monopolistic competition are actually the basic
assumptions of chamberlin’s large group model. These assumptions are mostly same as those of pure
competition except that of homogeneous product (which is replaced by the assumption of product
differentiation).
(i) The goal of the firm is profit maximization both in the short-run as in the long-run.
(ii) The price of factor inputs and technology are given.
(iii) The firm is assumed to behave as if it possessed information regarding the demand and cost
curves with certainty.
(iv) The long-run is assumed to consist of identical short-run periods, independent of on another, so
that decisions in one period neither affect future periods nor are affected by past actions.

OLIGOPOLY
Apart from the case of large number of small firms producing differentiated products, we also often
find a small number of big firms, whose products may or may not be differentiated. Such situation
leads to another market from, termed as oligopoly. This term is derived from two Greek words,
‘oligi’, which means a few and ‘polien’ which means ‘to sell.’ Oligopoly is defined as the market
structure in which there are a few sellers of the homogeneous or differentiated products, who
intensively complete against each other and recognize interdependence in their decision making.
Actual number of sellers under oligopoly depends on the size of the market. If there are only two
sellers, it’s called duopoly.

FEATURES OF OLIGOPOLY
Some special characteristics are found under oligopoly, which distinguish it from other market forms.
Main features of oligopolistic market are:
• Few Dominant Firms : Under oligopoly, Few large sellers dominate the market for a product. Each
seller has sizeable influence on the market, Every firm possesses a large number of market’s total
demand .It uses all resources at its disposal to counter the actions of rival firms to ensure its survival
and growth in the market. Thus, each firm acts as a strategic competitor.
• Mutual Interdependence: As the number of firms is small, each (sizeable) firm has to to its price, or
promotion. This will enable the firm to know how the buyers of its influence the price, output and
profits of other firms in the market. On the other hand, it cannot fail to take into account the reactions
of other firms to its price and output policy. Therefore, there is a good deal of interdependence of the
firm under oligopoly. Successful decision making depends on the prediction of the reactions of the
rival firms be as unpredictable as possible to rivals. Since more than one reaction-pattern is possible
from other firms, we must make assumption about the reaction of others before providing certain and
determinate solution of price-output fixation under oligopoly.
• Entry of Firms: On the basis of ease of entry of competitors in the market, oligopoly may be
classified as open or closed. Under open oligopoly, new firms are free to enter the market. On the
other hand, closed oligopoly is dominated by a few large firms with blockaded entry of new firms.
• Leadership: On the basis of presence of price leadership, the oligopoly situation may be classified as
partial or full .Partial oligopoly refers to the market situation, where one large firm (called price
leader) dominate the market and the other firms (called followers) look to the price leader with regard
to the policy of price fixations. Full oligopoly, on the contrary, exists, where no firm is dominant
enough to take the role of a price leadership is a conspicuous by its absence.
• Agreement: Oligopoly may be classified into collusive and non-collusive oligopoly on the basis of
agreement or understanding among the firms. Collusive oligopoly refers to a market situation, where
the firms, instead of competing with each other, combine together and follow a common price and
follow a common price policy. The collusion may be open or tacit (secret). On the other hand, non-
collusive oligopoly implies absence of any agreement or understanding.
• Coordination: An oligopoly situation may be classified into organized and syndicated oligopoly on
the basis of the degree of coordination found among the firms. Under organized oligopoly, the firms
organize themselves into a central association for fixing price, output, quota, etc. On the contrary,
syndicated or unorganized oligopoly refers to a situation, where the firms sell their products through
the centralized syndicate.

COMPETITOR
In this competitive world there is no business that operates in isolation, there are many businesses that
are marketing products similar to or substitute of products you are marketing. These organizations are
your rivals and you have to compete with your rivals. Business competition is the rivalry of two or
more businesses that target the same customers, for example Coca-Cola and Pepsi, or McDonald's and
Burger King. Business organizations to be successful in long run have to identify their competitors
and analyze their strengths and weaknesses to defeat them.

Meaning of Competitor
Competitor is a person or an organization against whom other person or organization is competing. In
business, competitor is a business organization or a company operating in the same industry or a
similar industry which offers a similar product or service. For example - Wal-Mart and Target are big
players in Retail chain industry, they both are competitor of each other.

The presence of competitors in an industry means consumers have more alternatives to choose from,
it forces competitors to reduce prices of their products or services to grab the maximum share in the
market.

Identifying Competitors
In the process of developing a successful marketing strategy, the first step is to identify the key
competitors in your market. Competitor identification is important to increase managerial awareness
of competitive threats and opportunities. Identification of key competitors is necessary to gain
competitive advantage by offering your customers a greater value than the competitors. Not only
current competitors are required to be identified, but future competitors are also to be anticipated.

Under Market Commonality, we sort competitors on the basis of the degree to which they serve
market needs similar to the focal firm. Under Resource Similarity, we sort competitors on the basis of
the degree to which their resource endowment is similar to that of the focal firm in terms of type and
composition.

To map the competitive field of a focal firm we have to locate candidate competitors on the graph. On
the x-axis we display Resource Similarity as an increasing function. On y-axis we display Market
Commonality as an increasing function.

Firm that scores high in both Resource Similarity and Market Commonality is one that serves same
market needs with the use of same type of resources as the focal firm. Such firm are found in the
Quadrant 1 of the graph. These firms are the direct competitors of the focal firm. Example of such
firm can be Coca-Cola if Pepsi is the focal firm.
Firm that scores high in Resource Similarity and low in Market Commonality is one that uses same
resources as the focal firm, but serves different market needs. Such firms are found in the Quadrant 4
of the graph. These firms are the potential competitors of the focal firm. Example of such firm can be
a caterer and a local restaurant. Both uses almost similar resources like chefs, kitchen equipment, etc.,
but their market is different, caterer serves party foods and dinners for large functions, whereas
restaurant serves to individuals and small groups.
Firm that scores high in Market Commonality and low in Resource Similarity is one that serves same
market needs as the focal firm, but with the use of different resources. Such firms are found in the
Quadrant 2 of the graph. These firms are the indirect competitors or substitutes. They satisfies similar
needs with the use of different resource or technology. For example - Kodak and Sony. Camera may
be used to take picture with film based technology using mechanical capabilities or similar picture can
be taken using camera based on digital technology. Kodak is a film based technology camera uses
mechanical capabilities, whereas Sony is digital technology based camera uses electronic capabilities.

Firm that scores low on both dimensions is one that serves different market and uses different
resources than the focal firm. Such firms are entirely outside the competitive set at present, although
this could change in future as the firms change their positions. Such firms are found in the Quadrant 3
of the graph. These firms are not the competitors of the focal firm.

Types of Competitors
According to Ferrell, Hartline, Lucas, and Luck, 1998, there are different varieties of competitors :-
Brand Competitors - Such type of competitors are those who market exactly similar products, at
similar price, and also to the same customers. For example, Pepsi and Coca-Cola.
Product Competitors - Such type of competitors are those who market similar products, but with
different features and benefits, and at different prices. For example, Pepsi and Maaza (fruit drink).
Generic Competitors - Such type of competitors are those who market different products, but provide
the same utility or benefit. For example, Audio cassettes and CDs, or Pepsi and Water
Total Budget Competitors - Such type of competitors are those who market different products, but
competing for the same financial resources of the customers. For example, Pepsi and Potato-chips.

Analyzing Competitors
Competitor analysis helps an organization to identify opportunities for and threats to the organization
from the competitive industrial environment. Competitor analysis is an assessment of the strengths
and weaknesses of current and potential competitors. It is an essential component of corporate
strategy; while formulating organization's strategy, managers must consider the competitor
organisations' strategies. Competitor Analysis can be defined as the analysis of data and information
about competitors to generate intelligence that is useful in strategic decision making.

COMPETITOR ANALYSIS FRAMEWORK

In formulating business strategy, managers must consider the strategies of the firm's competitors.
While in highly fragmented commodity industries the moves of any single competitor may be less
important, in concentrated industries competitor analysis becomes a vital part of strategic planning.

Competitor analysis has two primary activities, 1) obtaining information about important competitors,
and 2) using that information to predict competitor behavior. The goal of competitor analysis is to
understand:

 with which competitors to compete,

 competitors' strategies and planned actions,
 how competitors might react to a firm's actions,
 how to influence competitor behavior to the firm's own advantage.

Casual knowledge about competitors usually is insufficient in competitor analysis. Rather,

competitors should be analyzed systematically, using organized competitor intelligence-gathering to
compile a wide array of information so that well informed strategy decisions can be made.

Michael Porter presented a framework for analyzing competitors. This framework is based on the
following four key aspects of a competitor:

 Competitor's objectives
 Competitor's assumptions
 Competitor's strategy
 Competitor's capabilities

Objectives and assumptions are what drive the competitor, and strategy and capabilities are what the
competitor is doing or is capable of doing. These components can be depicted as shown in the
following diagram:

Competitor Analysis Components

A competitor analysis should include the more important existing competitors as well as potential
competitors such as those firms that might enter the industry, for example, by extending their present
strategy or by vertically integrating.

Competitor's Current Strategy

The two main sources of information about a competitor's strategy is what the competitor says and
what it does. What a competitor is saying about its strategy is revealed in:

 annual shareholder reports

 10K reports
 interviews with analysts
 statements by managers
 press releases

However, this stated strategy often differs from what the competitor actually is doing. What the
competitor is doing is evident in where its cash flow is directed, such as in the following tangible
actions:

 hiring activity
 R & D projects
 capital investments
 promotional campaigns
 strategic partnerships
 mergers and acquisitions

Competitor's Objectives

Knowledge of a competitor's objectives facilitates a better prediction of the competitor's reaction to

different competitive moves. For example, a competitor that is focused on reaching short-term
financial goals might not be willing to spend much money responding to a competitive attack. Rather,
such a competitor might favor focusing on the products that hold positions that better can be
defended. On the other hand, a company that has no short term profitability objectives might be
willing to participate in destructive price competition in which neither firm earns a profit.

Competitor objectives may be financial or other types. Some examples include growth rate, market
share, and technology leadership. Goals may be associated with each hierarchical level of strategy -
corporate, business unit, and functional level.

The competitor's organizational structure provides clues as to which functions of the company are
deemed to be the more important. For example, those functions that report directly to the chief
executive officer are likely to be given priority over those that report to a senior vice president.

Other aspects of the competitor that serve as indicators of its objectives include risk tolerance,
management incentives, backgrounds of the executives, composition of the board of directors, legal or
contractual restrictions, and any additional corporate-level goals that may influence the competing
business unit.

Whether the competitor is meeting its objectives provides an indication of how likely it is to change
its strategy.

Competitor's Assumptions
The assumptions that a competitor's managers hold about their firm and their industry help to define
the moves that they will consider. For example, if in the past the industry introduced a new type of
product that failed, the industry executives may assume that there is no market for the product. Such
assumptions are not always accurate and if incorrect may present opportunities. For example, new
entrants may have the opportunity to introduce a product similar to a previously unsuccessful one
without retaliation because incumbant firms may not take their threat seriously. Honda was able to
enter the U.S. motorcycle market with a small motorbike because U.S. manufacturers had assumed
that there was no market for small bikes based on their past experience.

A competitor's assumptions may be based on a number of factors, including any of the following:

 beliefs about its competitive position

 past experience with a product
 regional factors
 industry trends
 rules of thumb

A thorough competitor analysis also would include assumptions that a competitor makes about its
own competitors, and whether that assessment is accurate.

Competitor's Resources and Capabilities

Knowledge of the competitor's assumptions, objectives, and current strategy is useful in

understanding how the competitor might want to respond to a competitive attack. However, its
resources and capabilities determine its ability to respond effectively.

A competitor's capabilities can be analyzed according to its strengths and weaknesses in various
functional areas, as is done in a SWOT analysis. The competitor's strengths define its capabilities. The
analysis can be taken further to evaluate the competitor's ability to increase its capabilities in certain
areas. A financial analysis can be performed to reveal its sustainable growth rate.

Finally, since the competitive environment is dynamic, the competitor's ability to react swiftly to
change should be evaluated. Some firms have heavy momentum and may continue for many years in
the same direction before adapting. Others are able to mobilize and adapt very quickly. Factors that
slow a company down include low cash reserves, large investments in fixed assets, and an
organizational structure that hinders quick action.

Competitor Response Profile

Information from an analysis of the competitor's objectives, assumptions, strategy, and capabilities
can be compiled into a response profile of possible moves that might be made by the competitor. This
profile includes both potential offensive and defensive moves. The specific moves and their expected
strength can be estimated using information gleaned from the analysis.

The result of the competitor analysis should be an improved ability to predict the competitor's
behavior and even to influence that behavior to the firm's advantage.
MARKETING

In the modern world, Marketing is everywhere; most of the task we do and most of the things we
handle are linked to marketing. Marketing is an activity. Marketing activities and strategies result in
making products available that satisfy customers while making profits for the companies that offer
those products. Your morning tea, your newspaper, your breakfast, the dress you put on for the day,
the vehicle you drive, the mobile in your pocket, the quick lunch you have at the fast food joint, the
PC at your desk, your internet connection, your e-mail ID almost everything that you use and
everything that is around you, has been touched by marketing. Marketing has its imprint on them all
depending on the product and the context/experience the imprint may be visible or subtle. But it is
very much there. Marketing permeates most of your daily activities. Marketing is an omnipresent
entity. Marketing deals with customers. It is delivery of customer satisfaction at a profit. The twofold
goal of marketing is to attract new customers by promising superior value and to keep current
customers by delivering satisfaction.

The American Marketing association defined marketing as “Marketing is an organizational function

and a set of process for creating, communicating value to customers and for managing customer
relationships in ways that benefit the organization and its stakeholders."
According to Dahl and Hammond; the purpose of production, assembling, storage, and transportation
was consumption. All these steps from production to ultimate consumption were included in the term
marketing. Hence, marketing is a set of activities without which what is produced cannot reach the
ultimate consumer. Hence it might be said that the importance of these activities is the study of
marketing.
Kotler says; “Marketing is a societal process by which individuals and groups obtain what they need
and want through creating, offering, and freely exchanging products and services of value with
others.”
To him, to define a marketing situation there should be two or are parties with potential interest,
capable of communicating with each other and each possessing things of value to the other. From this
definition is could be noted that marketing consists of a number of facilitating activities.
Often marketing is confused with selling.
To clarify this, Kadda’s distinction between the selling and marketing. Selling is the process by which
the salesman tries to dispose of the product at the best possible price. Marketing is much ore
comprehensive and aims at maximizing the returns to the producer, at an affordable price to the
consumer. Marketing starts with production and ends with the customer finally purchasing the
product.
Kaddar’s definition is very clear in pointing out that selling is just one activity in the marketing chain
of activities.
Pyle’s view of marketing was That phase of business activity through which human wants were
satisfied by the exchange of goods or services for valuable consideration usually money or its
equivalent.
According to Philips; Marketing was all the activities necessary to place tangible goods in the hands
of the customer and includes only such activities as would involve a charge in the form of the goods.
This definition is narrow in the sense that it excludes creation of place and time utility and such
efforts as to inform the prospective buyers to motivate them. When marketing is viewed as a process
of moving goods and transferring rights of ownership with or without changes in the physical form of
product, it involves several functions relating production to consumption.
Irwin classified the marketing functions into tangible and intangible functions. Tangible functions
included mainly the transporting, processing, storing and grading of products while intangible
functions were those connected with transfer of ownership, financing, risk taking and guiding
products to consumers in place, form and time.

Marketing meant different things to different people; to the housewife it meant shopping for food; to
the farmer it means the sale of his product; and to the fertilizer distributor it meant the selling to the
farmer. In short, marketing would include all the activities performed from the stage of production to
ultimate consumption. In other words it refers to functions of marketing viz., assembling,
warehousing, grading, barding, packing, labeling, distribution, selling and servicing.

EVOLUTION OF MARKETING
Marketing is as old as human civilization. Even in the earliest stage of human civilization exchange
was taking place, though, without any consideration. The evidence of this could be noted from the
anthropological studies. The number of excavations that have taken place around the world has also
confirmed this. However in those days, the exchange was not so well organized or structured. This
was because, there was very little surplus and efforts to create surplus was not even realized. When
groups of human beings started living in batches, there arose the need for exchange within the group
or among the groups. Historical evidence indicated that this took place in a very crude barter term.
This was the earliest seed for modern marketing.
Another convincing evidence is the number of ancient literatures of Indian origin. All of them referred
to the classification of the society in to four groups viz., Brahmins, Shathriyas, Vysyas And Sudras.
Of these four groups, was mainly indulging in exchange activities. They were governed by ethical
practices and considered it as sin to violate such practices.
As years rolled, the approach to marketing also changed. From a stage of household exchange of
goods and services, exchange started taking place between families and households. Such an
exchange always took place through barter system. But when exchange took place between different
groups in the society, the need for a medium of exchange was felt. Originally stones were used which
was replaced by anything which commanded social respect was accepted. But in due course, precious
metals like gold and silver were used as a medium. It is interesting to note that till very recently, the
value of many was linked to the value of gold. When man invented money, exchange became very
smooth devoid of all the problems associated with the barter exchange system. While exchange was
getting perfected, the world stated looking at marketing in different ways. Till the mid 1940‟s it was
thought that the producers should produce what is possible and then make efforts to sell what is
produced. In this approach, marketing was viewed from producers/sellers side. But this was proved to
be a fatal mistake by Levitt through his historic article. Levitt brought sense to the world of
marketing. He proved that market should be facing customer rather than the customer facing the
market. In other words, manufacturers should contently look at the market to capture signals and
translate that into acceptable products or services. Hence, marketing became customer focused and
customer centered. So the approach now turned out to be „Produce what the consumers want‟. This
automatically made every producer to identify his consumer and study his requirements so that what
is produced is what is wanted.

MARKETING CONCEPTS
Marketing concept has undergone a great change over the period. The different stages of change are
explained below.
1. PRODUCTION CONCEPT OF MARKETING
This is the oldest concept of marketing. It emphasizes that consumers will favour those products that
are available and highly affordable and therefore management should focus on improving production
and distribution activities. This holds good when
i. the demand for a products exceeds the supply and
ii. the product cost is high.
To overcome the problem of cost, production should take place in large scale to meet the demand. At
the same time, price should also be addressed so that by making available large quantity, buyer who
wants to buy the product would be able to buy. But there are occasions when the product is not
attractive, even at low price, the buyers may not buy the product.
2. PRODUCT CONCEPT OF MARKETING
This concept believed that the consumers will favour those products that offer the best quality,
performance and features and therefore the organization should devote its energy to making
continuous product improvements. This concept implies that there is no effort required for marketing
a product, as long as the product is good and its price is reasonable. This concept remained as an
important guideline for the manufacturers for quite a long time. But when considering the reality, it
could easily be proved that this concept is not true. A producer may feel that he should come up with
a good quality product, while the consumers may look for better solution to a problem. FOR
EXAMPLE, colleges may feel that the high school students want a liberal arts education, failing to
note that the preference is for vocational education. Hospitals may feel that patients want fast cure but
patients may be looking for permanent remedy. The consumers may not be aware of the product
features and qualities unless a vigorous selling effort is made by the producers. Further, now a days
every manufacture has a separate research and development section to facilitate continuous product
improvement. For example, from a stage of ordinary washing soap, continuous research has brought
us the detergent powder easy to use. But this concept of marketing would expect a well organized
promotional drive to make the product a success.
3. SELLING CONCEPT OF MARKETING
In this concept the importance of sales efforts to be undertaken to make the consumers buy the
products which otherwise will remain unsold. So every organization has to make substantial selling
and promotional effort to push the sales of its product. Even the best product cannot have desired
sales without the help of sales promotion and aggressive salesmanship. This concept points out that
goods are not bought but they have to be sold through organized advertisement and sales promotion
efforts. FOR EXAMPLE, goods like automobiles are not readily bought by the consumers and they
have to be sold only through promotional effort. Hence, the producers have to develop effective
promotional effort. Hence, the producers have to develop effective promotional programmes to sell
the products. Even in the case of election, several political parties attempt to project their candidates
by using various promotional efforts. While, there is nothing illogical about this approach, yes,
producer might have to conceal the flaws in the product and hard sell the product. Hence, more often
than not, the consumers regret their decision after purchasing the product. Even if they try to force the
producers to compensate the loss, it might not be forthcoming.
4. PROFIT CONCEPT OF MARKTING
According to profit concept of marketing, there is a necessity for the marketing function to generate
profit for the organization. But it is the production activities which would determine the cost of
manufacturing and so profit generation becomes the ultimate responsibility of the marketing function.
For this purpose, the marketing personnel have to identify the right product and take it to the right
people at the right time at right price through the right channel and with right promotion. This would
indicate the extent to which the marketing function has to ensure profit realization for a firm. This in
turn will force the production function to minimize its cost of production so that marketing function
can try to optimize its activities by maximizing profit at minimum cost. On its part, the production
department has to protect its own interest. So now a days, the production department would sell the
product to marketing at a price befitting its cost of production and a market quantum of profit. In turn,
the marketing would determine a price with which it would be able to generate profit and also meet its
promotional expenses. Hence this concept of marketing underscores the need to minimize cost at
every level, so that at every level every function can earn profit.
5. MODERN MARKETING CONCEPT
The modern marketing concept revolves around customer. It focuses on the ultimate customer and
undertakes to meet his requirements in full. For this the organization has to correctly understand the
customer requirement and deliver the desired products more effectively and efficiently than the
competitors.
Hence a major shift took place in emphasis from product to customer. This has led to the
manufacturers accept the philosophy, manufacturer is following the old approach, [manufacturing
what he can], then be would be out of business in no time. The modern concept is build in recognition
of consumers‟ sovereignty and so it helps every organization to maximise customer satisfaction and
profit. It is this realization of the need to study customer want that very detailed research efforts are
made to study and analyse consumer behavior. Similarly marketing information system has become a
significant method of receiving valuable inputs about consumers‟ wants and needs. Based on this
approach, every manufacturer has to redefine his production decision from design to delivery. A
constant study of the change in consumer’s behavior has become a necessity to remain in business.
The unique selling proposition is developed on the basis of customer’s reaction to various product
features. Further, every manufacturer and marketing personnel tries to exceed customer expectations
so as to win the customer from the competition. Customer complaints are given utmost respect and
importance and the business consider the customer complaints as the best input for product
improvement. A compiling customer is seen as the contributing customer. Hence the modern
marketing concept has changed the market for almost every product from sellers market to buyers
market. At the same time, it should be noted that the tall claim that every organization tries to meet
the customer expectations in full, is proved to be true on paper than in practice.
6. SOCIAL MARKETING CONCEPT
This philosophy of marketing underlines the importance of marketing activities to support and ensure
social well-being. Marketing should determine the needs, wants and interests of target markets and
deliver the desired satisfaction effectively. Only through this marketing can keep the competitors at
bay. This broadened role of marketing is prescribed for marketing as in modern days, a number of
products and services hasten environmental pollution, scarcity and inflation. FOR EXAMPLE,
excessive use of ground water resources to produce mineral water and earn money will result in faster
depletion of water source. Similarly, use of harmful ingredients in product manufacturing/process,
would cause irreparable damage to human beings. Further questionable business practices and
unethical actions would bring about a severely damaged social fabric. Another important example is
the Bhopal gas tragedy. Years have rolled without little efforts to uplift the victims. Profit maximizing
efforts have only helped a small segment of the community and caused impoverishment of the
community. Hence, in these days, marketing concept emphasizes that every organization should
consciously explore the scope for it to contribute to the social-well being. When firms have started
adopting this approach, not only they could substantially increase their sales, the society also
benefited from this. Social marking concept therefore aims at enabling consumers to get maximum
satisfaction and contribute to their quality of life, designing product with consumer’s interest as an
input and ensuring all marketing efforts to have consumer as the focal point.

DIFFERENCE BETWEEN SELLING & MARKETING

Selling is an important activity of Marketing. It consists in transferring goods and services to the
customers. The main emphasis in selling is on profit maximization through sales volume. Marketing
on the other hand is a broader area and its functions as a whole aim at customer satisfaction and
profits through such customer satisfaction. Again, in Marketing, the selling efforts are customer –
oriented but in selling the efforts is company oriented.
The concept of selling assures that consumers if left alone will not buy enough of the company‟s
products. Thus goods are already produced and an aggressive selling and promotion effort has to be
perused]. The customers‟ demand on the other hand, determines production in marketing. Thus, in
selling the focus in on products while in marketing the focus is on customer needs. The difference of
marketing and selling can be shown as follows:

SELLING MARKETING
Selling starts with the seller and is
Marketing starts with the buyer and focuses
preoccupied all the time with the needs of
constantly on the needs of the buyer
the seller.
Selling starts with the corporation’s Under marketing, all activities and products take
existing activities and products. their direction from the consumer and his needs.
Selling emphasizes saleable surpluses
within the corporation; seeks to convert
Marketing emphasizes identification of a market
products‟ info „cash emphasizes getting rid
opportunity; seeks of convert customer needs‟ into
of the stocks; concerns itself with the tricks
products emphasizes fulfilling the needs of the
and techniques of getting the customers to
customers.
part with their cash for the products
available with the salesman
Selling over emphasizes the exchange Marketing concerns itself primarily and truly with
aspect without caring for the value the value satisfactions that should blow to the
satisfactions inherent in the exchange. customer from the exchange.
Views business as a good producing
Views business as a customer satisfying process.
process.
The seller determines what „product‟ is to What should be offered as a product is determined by
be offered. the buyer; the seller makes a total product offering
that would match and satisfy the identified needs of

The „product‟ precedes the marketing
efforts becomes the consequence of the
product on hand.
In selling, packaging is essentially seen as a
mere protection or a mere container for the
product.
Cost determines price.
Transpiration, storage and other distribution
functions are perceived as mere extensions
of the production function.
The emphasis is one somehow selling‟
there is no coordination among the different
functions of the total marketing task.
Different department of the business
operate as separate watertight
compartments.
In firms practicing „selling‟ production is
the central function; sales are a subordinate
or secondary function.
Selling views the customer as a link in the
business.
the identified customers.
The product is the consequence of the marketing
effort; the marketing effort leads to products the
consumers would actually want to buy in their own
interest
In marketing, it is seen from the point of view of the
customer; it is designed to provide the maximum
possible convenience and satisfaction to the
customer.
Consumer determines price; price determines costs.
They are seen as vital services to be provided to the
customer-not grudgingly, but in the most willing
manner.
The emphasis is on an integrated approach; through
an integrated strategy covering product, promotion,
pricing and distribution.
All department of the business operate in close
integration with the sole purpose of producing
consumer satisfaction.
In Firms practicing marketing is the central function;
the entire company is organized around the
marketing function.
Marketing views the customer as the very purpose of
the business; sees the business from the point of
view of the customer; customer consciousness
permeates the entire organization, all department and
all people in the organization all the time.

MARKETING MIX
The process of marketing or distribution of goods requires particular attention of management
because production has no relevance unless products are sold. Marketing mix is the process
of designing and integrating various elements of marketing in such a way to ensure the
achievement of enterprise objectives. The marketing mix is a key foundation on which most
modern marketing strategies and business activities are based. But what is it? What are its
components? And why is it so heavily relied upon?

The concept of the ‘Marketing Mix’ came about in the 1960s when Neil H. Borden, professor
and academic, elaborated on James Culliton’s concept of the marketing mix. Culliton
described business executives as ‘mixers of ingredients’: the ingredients being different
marketing concepts, aspects, and procedures. However, it’s now widely accepted that Jerome
McCarthy founded the concept. After all, it was McCarthy who offered the marketing mix as
we know it today; in the form of ‘The 4Ps of Marketing’: Product, Place, Price, & Promotion.
The 4Ps then paved the way for two modern academics, Booms and Bitner, who, in 1981,
brought us the extended version of the marketing mix: the ‘7Ps’. The 7Ps comprise
McCarthy’s 4 original elements, and extend to include a further 3 factors: ‘Physical
Evidence’, ‘People’, & ‘Processes’.

The Marketing Mix is as follows:

Product - The Product should fit the task consumers want it for, it should work and it should
be what the consumers are expecting to get.

Place – The product should be available from where your target consumer finds it easiest to
shop. This may be High Street, Mail Order or the more current option via e-commerce or an
online shop.

Price – The Product should always be seen as representing good value for money. This does
not necessarily mean it should be the cheapest available; one of the main tenets of the
marketing concept is that customers are usually happy to pay a little more for something that
works really well for them.

Promotion – Advertising, PR, Sales Promotion, Personal Selling and, in more recent times,
Social Media are all key communication tools for an organisation. These tools should be used
to put across the organisation’s message to the correct audiences in the manner they would
most like to hear, whether it be informative or appealing to their emotions.

People – All companies are reliant on the people who run them from front line Sales staff to
the Managing Director. Having the right people is essential because they are as much a part
of your business offering as the products/services you are offering.

Processes –The delivery of your service is usually done with the customer present so how the
service is delivered is once again part of what the consumer is paying for.

Physical Evidence – Almost all services include some physical elements even if the bulk of
what the consumer is paying for is intangible. For example a hair salon would provide their
client with a completed hairdo and an insurance company would give their customers some
form of printed material. Even if the material is not physically printed (in the case of PDFs)
they are still receiving a “physical product” by this definition.

Though in place since the 1980’s the 7 Ps are still widely taught due to their fundamental
logic being sound in the marketing environment and marketers abilities to adapt the
Marketing Mix to include changes in communications such as social media, updates in the
places which you can sell a product/service or customers expectations in a constantly
changing commercial environment.

In some spheres of thinking, there are 8 Ps in the Marketing Mix. The final P is Productivity
and Quality. This came from the old Services Marketing Mix and is folded in to the Extended
Marketing Mix by some marketers so what does it mean?
Productivity & Quality - This P asks, “is what you’re offering your customer a good deal?”
This is less about you as a business improving your own productivity for cost management,
and more about how your company passes this onto its customers.

THE FOUNDATIONS OF STARTUP MARKETING

Before you start laying bricks, you need a solid foundation. A successful startup marketing strategy
follows that same principle. Before you jump into marketing your startup, make sure you have the
following bases covered.

1. Choosing a Market
It’s easy for startup founders to believe the whole world will love their products. After all, founders
eat, sleep and breathe their products. The reality is that only a small portion of the population is
interested in your product. If you try to market your startup to everyone, you waste both time and
money. The key is to identify a niche target market and go after market share aggressively.
How do you choose a market? There are four main factors to consider:

 Market Size – Are you targeting a regional demographic? Male? Children? Know exactly
how many potential customers are in your target market.
 Market Wealth – Does this market have the money to spend on your product?
 Market Competition – Is the market saturated? As in, are their many competitors?
 Value Proposition – Is your value proposition unique enough to cut thru the noise?
2. Defining Keywords
With a clearly defined market, you can begin building a keyword list. You’ll use the keyword list
primarily for blogging, social media and your main marketing site. Essentially, you want to build a
list of words or phrases that are highly relevant to your brand. Ask yourself this: What would
someone type into Google to find your startup’s website? Start with a core keyword list. This is a list
of three to five keywords that completely summarize what your startup does. For example,
Onboardly’s core keyword list is: customer acquisition, content marketing and startup PR. Your core
keyword list should be based on your value proposition. What is it that you’re offering customers?
3. Defining Success
Success is different for every startup. Maybe success is 500 new signups per month for Startup A
while Startup B thinks success is $50,000 in revenue per month. Whatever your idea of success may
be, define it early and define it rigidly. Write it down or send it to the entire team. Just make sure
everyone you’re working with knows your definition of success and is prepared to work towards it.
Be sure to stay consistent. It doesn’t matter if you’re defining success by signups, revenue, profit or
anything else you can think of. What does matter is that it’s tied to real growth (no vanity successes)
and that it’s measured the same way each month. For example, don’t define success as 500 new
signups one month and then $50,000 in revenue the next. Pick one definition and commit to it.
4. Setting Core Metrics
Just as you shouldn’t indulge vanity success, you shouldn’t indulge vanity metrics. Eric Ries refers to
working with vanity metrics as “playing in success theatre”. While vanity metrics are appealing, if
only to your ego, they are useless. They are not tied to real growth, meaning you won’t know if your
startup is a roaring success or total flop until it’s far too late. Be sure your core metrics are accurately
measurable and specific. For example, let’s assume you’ve defined success as 500 new signups per
month. You might measure the conversion rate of three calls to sign up. The idea is to have a few
highly valuable metrics based on actions taken throughout the customer acquisition funnel (e.g.
signups, newsletter subscriptions, eBook downloads). Don’t try to measure everything. Focus on the
key indicators of success.
5. Estimating a Conversion Rate
The next step is to assign conversion rates and values. Consider newsletter signups, for example. 100
new newsletter signups per month could be incredible growth if your conversion rate is 20%. That is,
if 20% of your newsletter subscribers become paying customers. If your conversion rate is closer to
1%, those 100 newsletter signups might be insignificant. Estimate (based on historical data) your lead
conversion rate. Now do the same to estimate the lifetime value of a customer. If you know how many
of your leads convert and how much those conversions generate for your startup, you can assign
values to goal completions like newsletter signups. $2,500 per month from your newsletter is a lot
more indicative of success than 100 new newsletter signups
6. Setting a Budget
At the end of the day, it all comes down to the money. How much can you afford to spend on your
startup marketing strategy? Remember that while inbound marketing leads cost 61% less than
outbound marketing leads, they are not free. Set a budget early in the game and accept that limitation.
More importantly, carefully plan how you intend to divide that budget. Maybe your blog has been
your most powerful tool to date and you want to invest 40% of the budget on it. Or maybe you want
to spend 35% of the budget to develop a new eBook or online course. Just be sure you have the
logistics settled before you start spending (or you might just lose your hat).
BEST PRACTICES IN STARTUP MARKETING
1. Sell the Solution
Too many startups focus on the problem instead of the solution. It makes sense, of course. Founders
design a solution for the problem, which makes the problem a founder’s first love. Unfortunately, it’s
the solution that appeals to potential customers. Realistically, there are hundreds of products that
could solve the problem of, for example, low productivity. What makes your solution the perfect
choice?
2. Have a Compelling Story
Storytelling is a powerful sales tool. Just ask Seth Godin! If you have a compelling story, use it. How
did you come up with your solution? Did you struggle in the beginning? Are you still struggling? Use
your story to differentiate yourself from the competition. Startup marketing is all about the customer
and establishing an authentic relationship. Having a relatable story to tell is a fast-track.
3. Use All Your Resources
Your team is arguably one of your biggest marketing tools. Their passion for what your startup is
doing is called evangelism. Use it to your advantage. Send them out into the world excited to tell your
startup’s story to anyone they meet. But don’t stop there. Ride the buzz from a trending topic by
writing a blog post on it or creating a video about it. Run a contest around a major holiday to drum up
some hype. Be sure you’re not overlooking any marketing resources, big or small.
Conclusion
Startup marketing is a complex science. Some great ideas have failed due to a lack of media attention
and customer awareness. Others have gone under thanks to a poor strategy. Still, other great ideas
have spiraled to billion dollar fame!

PRICING STRATEGIES FOR STARTUPS

1. Cost-led pricing

This is the most common pricing mechanism. Start by calculating all the costs involved in
manufacturing the product or delivering the service (variable costs), add the other expenses (fixed
expenses), and add certain margin (expected profit) to arrive at the pricing. The pitfall of this method
is its practically impossible to determine all costs as well as predict volumes required to recover
them. Always keep a margin of 5-10% to be safe, rather than run into losses.

2. Competition-led pricing
For a like to like product or service, determine what is the competition offering to customers and
match them. While pricing is an important factor for customers, you should have a compelling reason
for your customers to buy from you apart from the pricing factor. Once you are aware of competition
pricing, you may also decide to sell either too low or too high, to create a differentiation for your
company.
3. Customer-led pricing
Ask your customer what he or she is willing to pay, and offer it at that price. Absurd as it may sound,
this is one of the most efficient pricing mechanism (think about how you buy ads on google!). 4. Loss
leader If you cannot match your large competitors marketing muscle, then hurt them a little by
offering low priced items. This will help you attract some customers, and increase your base.
However, be careful - always enter this game knowing when and how to get out. 5. Introductory offer
If you are confident your customers will love you once they try your products or services, then start
with introductory offers. This maybe free or heavily discounted - typically for 15-30 days after launch
or for first 100 customers etc.
4. Loss leader
If you cannot match your large competitors marketing muscle, then hurt them a little by offering low
priced items. This will help you attract some customers, and increase your base. However, be careful -
always enter this game knowing when and how to get out.
5. Introductory offer
If you are confident your customers will love you once they try your products or services, then start
with introductory offers. This maybe free or heavily discounted - typically for 15-30 days after launch
or for first 100 customers etc.
6. Skimming
Start as high as possible and keep coming down gradually. At the beginning of your venture, you may
not know how much your customers will pay and how many will customers you will get. It is always
good to recover maximum value at an early stage to ensure you remain cash flow positive.
7. Odd numbers
Bata's strategy of pricing shoes at Rs 499 rather than Rs 500 has got a lot to do with consumer
psychology rather than MBA methods! Play with your price, keep them at odd numbers which will
ensure customer recall!
8. One number
Remember the dollar store, where everything is priced at 1 dollar. This strategy will be profitable if
you know what are the average prices and what will be the mix of items you are selling.
9. Bundled pricing
If you can bundle a set of products or services, with a perceived value higher than what customers pay
for, it may increase your volumes and reduce your overheads per unit.
10. Range pricing
For a category of products, you can create a range starting from Rs 100 and go up to Rs 10000. This
will allow you to sell the range of your company products or services to different category of
customers.

The biggest problem in pricing at an early stage company is uncertainty - about customer traction,
volume, orders, payments etc. Many entrepreneurs also feel shy about asking for money against
services, and quite literally are taken for a free ride! As an entrepreneur, we have to experiment with
pricing to overcome our fears. In fact, the same product can be offered to different customers at a
different price!