An Introduction to Marketing, Marketing

Process, and Marketing Strategy

Nagasimha Balakrishna Kanagal

Agenda

Marketing and Marketing Concept

Marketing Process

Marketing Strategies
Agenda

Marketing and
Marketing Concept
Marketing Process

Marketing Strategies
• Definition of Marketing

• Marketing Management is the art and science of choosing target markets and getting, keeping
and growing customers through identification, creation, capture, communication and
delivery of superior customer value.

• The American Marketing Association defines marketing as the activities, set of institutions,
and processes for creating, communicating, delivering and exchanging offerings that have
value for customers, clients, partners, and societies at large.
Basic Aspects
Needs, Wants, Target Markets

Fundamental and Initiating Questions

Who is the target market

What is his / her needs and what is his / her wants.

Market Places

Market Spaces

Meta Markets
cluster of complementary products and services that
are closely related in consumer minds but are spread \
across a diverse set of industries. Automobile
metamarket consists of auto manufacturers, dealers,
service shops, auto magazines, auto sites on Internet.

Marketer à Marketed
à Customer
à suspect, prospect, customer, client,
advocate, partner

Markets
place where buyer and seller meet
collection of buyers and sellers
customer groups
key markets – consumer markets, business or B2B markets,
global markets, non-profit and governmental markets
need market (health seeking), product market (blades market)
demographic market (youth market), geographic market (India),
labor markets , money markets, material markets
Marketing Concept is about satisfying consumer needs and wants simultaneously
meeting organizational objectives

There are five types of needs:

stated needs: the customer wants an inexpensive car

unstated needs: customer expects good service from a dealer
real needs : customer wants a low operating cost car, not just a low price
secret needs: customer wants to be known as a savvy consumer
delight needs: customer wants a navigation system to be installed
Marketing people are in involved in marketing ten types of entities

Ø Goods
Ø Services
Ø Experiences
Ø Events
Ø Persons
Ø Places
Ø Properties
Ø Organizations
Ø Information
Ø Ideas
 Core concepts

Exchanges, transactions, and contracts

Demand management
Marketing concept is that of exchanges.

A transaction is a measured exchange.

Contract formalizes a transaction either for the present or for future and
Legalizes it if necessary and also provides a recourse in case of a market failure
There are five conditions of exchange

1. There are at least two parties

2. Each party has something that might be of value to the other party
3. Each party is capable of communication and delivery
4. Each party is free to accept or reject the exchange offer
5. Each party believes it is appropriate or desirable to deal with other party
• A transaction is distinguished from a
transfer. A gives X to B but does not
receive anything tangible in return. E.g.
gifts, subsidies, charitable contributions.

• Persons making such transfers are

possibly expecting gratitude or changed
behavior in the person who accepts the
transfer.
• Marketing Management is Demand
Management.

• Demand represents:

• desire and willingness to pay

• ability to buy
 Eight demand states are possible
• Negative demand – ex-convicts and alcoholics in factories for
employment
• No Demand – Indian College students in semi-urban areas have no
demand for foreign language courses
Marketing • Latent Demand – Strong latent demand for harmless cigarettes or fuel
Management is efficient cars
• Declining Demand – for Yamaha in Pianos in 1980s
Demand Management.
• Irregular Demand - Metro rail demand through the day, seasonality
• Full Demand – Organizations sell to maximum capacity
• Overfull Demand – Waiting list on Honda Scooters at the dealership
• Unwholesome Demand – Hard Drugs
Benefits Skills / Resources
 • Benefits

• A product is a bundle of benefits.

• Product features lead to consumer end advantages from which consumers derive benefits.

• This in selling is commonly called FAB

• A market offering consists of benefits, functionality, performance, and business model.

The marketer as such has to keep in mind that the firm has to deliver on benefits.
• Skills / Resources

• Resources are the origins / sources of a firms assets and capabilities. Resources have value. Resources could be financial resources,
natural resources including raw materials, people resources, information and knowledge resources including information technology
resources, organizational resources such as organizational processes, stocks of factors of production such as land, labour, capital and
entrepreneurship,

• Skills are abilities of the firm and its employees to deliver benefits and along with knowledge and behaviour contribute to firm’s
capabilities.

Skill India initiative was launched by the Prime Minister in 2015. As far as institutional mechanism is concerned, the National Skill Development
Corporation (NSDC), Ministry of Skill Development and Entrepreneurship and the scheme - Prime Minister Kaushal Vikas Yojana (PMKVY) have been
effected. The essential requirement of skill development (Cabral and Dhar, 2009*) from a government perspective is to achieve technology adoption and
women empowerment in the country

• * Skill India – Wikipedia ; Cabral, Clement; Dhar, Rajib Lochan (25 June 2019). "Skill development research in India: a systematic literature review and future research agenda". Benchmarking: An International Journal. 26 (7): 2242–
2266. doi:10.1108/BIJ-07-2018-0211. ISSN 1463-5771.
 Skills / Resources Benefits

Delivery of benefits can be made possible only when the firm is equipped with skills / resources.

A match between the two would lead to possible competencies of / for the firm that when deployed wherein there
are market opportunities, leads to value exchange opportunities also called business possibilities.

An asset-capability combination is a competency. Superior sales and service network of Eureka-Forbes is a competency.

Certain competencies that are fundamental to business drivers are called core competencies. Example innovation is a core
competency of a high technology firm; distribution is a core competency of a consumer marketing firm.
 • Marketing Myopia

• a nearsighted focus on selling products and services, rather than seeing

the “big picture” of what consumers really want.

• companies are too focused on producing goods or services and don’t

spend enough time understanding what customers want or need.
Therefore, Levitt “encouraged executives to switch from a production
orientation to a consumer orientation.”

• It can be restated that the Airlines in India are ‘not just in the airway
business’ they ‘are in the transport business’ – this is how we can have
shuttle services and satellite town bus services to major nearby towns such
as Mysore provided at airports.

• Appropriate business definition needed for success.

Levitt, T. (2008). Marketing myopia. Boston, Mass: Harvard Business Press.

Marketing Frameworks

• 4Ps

• 5Cs

• 4As

• STP
 Four Ps of Marketing – McCarthy framework

Product
product variety, quality, design, features, brand name, packaging,
sizes, services, warranties, returns

Price
list price, discounts, allowances, payment period, credit terms

Promotion
sales promotion, advertising, sales force, public relations,
direct marketing

Place
channels, coverage, assortments, locations, inventory, transport
5Cs

• Market forces are usually represented as 4Cs – Customer, Company, Competitor, Context

• A useful Marketing Framework would be 5Cs – Customer, Company, Competitor, Context, and
Collaboration

• In the digital / online marketing environment once can also use the 7Cs
- Customer, Company, Competitor, Context, Collaboration. Content, and Communities
4As of Marketing – Jagdish Sheth and Rajendra Sisodia

• Awareness
• brand awareness
• product knowledge
• consumer role – seeker

• Affordability
• able to buy (economic)
• willing to pay (psychological)
• consumer role – payer

• Accessibility
• availability
• convenience (last mile distribution that includes retailing)
• consumer role – buyer

• Acceptance
• offering meets or exceeds expectations
• functionality the root of acceptance (in hi-tech parlance called UD, UI and UX).
• consumer role - user
 Target Markets, Segmentation and Positioning (STP)

Who is the target consumer meaning which is the target market

How does one group buyers based on identified demographic, psychographic,

behavioural characteristics

Firms develops a market offerings that its positions in target buyers’minds

Volvo is a world built on quality, safety and care for the environment.
VALUE FRAMEWORK AND SUSTAINING VALUE
 Value Framework

Identification / Exploration of value – Marketing Concepts / Process / Strategy

Choosing Value --- Buyer Behavior / STP

Constructing / Creating Value --- Product / Brands including Co-creation

Capture Value -- Price

Communication of Value – Promotion

Delivery of Value – Place

Marketing Management can also be regarded as a Value framework process wherein the value is in the market
offerings that includes goods/services/benefits/functionality, performance, and business model with the
market being sensitive to the connect with customers. This means integration of
Positioning
CVP
Quality associations
Branding (including associations with celebrities, opinion leaders, cognoscenti),
Customization
Salesmanship
USP
Communications to the market
Moment of truth management
Offering delivery management
Service delivery quality
Satisfaction management
 Value Framework centres around about customer satisfaction

Customer Satisfaction

Hyundai Launches ‘Hyundai Sonata’

In the untapped Rs.10-20 lakh Volvo, Sweden has been very successful in
Segment - acquisition Customer retention, with a repeat purchase
Rate of up to 80% over last 40 years.

Customer Acquisition Customer Retention

Good customer satisfaction is obtained by focusing on both the customer

acquisition and customer retention processes.
 Value and Satisfaction

Value = Benefits – Costs; (benefits = intangible benefits + tangible benefits)

Value – qsp – quality, service, price combination (customer value triad)

Value >> as quality >>

Value >> as service >>
Value << as price >>

Satisfaction – judgment of consumer of performance in relation to expectations

Performance < expectations à disappointment

Performance << expectations à dissatisfaction (deep dissatisfaction
leads to regret)
Performance = expectations à satisfaction
Performance >> expectations à delight
Societal marketing considerations are evolving as of recent times that includes corporate social responsibility, sustainability,
cause related marketing, corporate philanthrophy, ethics in marketing,
POLL Questions – Marketing Concepts
Agenda

Marketing and Marketing Concept

Marketing Process
Marketing Strategies
 Functional School

Schools of Managerial School

thought in
Marketing Buyer Behaviour School

Organizational Dynamics School

Functional School: Marketing is organized along functions – product
management, sales, advertising, market research

Managerial School: The marketing that is taught comprising of PLC,

marketing mix, market segmentation and positioning.
Pioneered by Joel Dean, John Howard, Neil Borden
William Lazer, Theodore Levitt, Philip Kotler

Buyer Behavioral School: Unwise to target an “Eonomic Man”. Consumer

behavior study will lend more depth. Pioneers include
Ernest Dichter, John Howard, George Katona,
James Engel

Organizational Dynamics School: Interorganizational behavior is the key focal

point for understanding marketing process.
Marketing Concept has evolved over five stages

-Production concept: It holds that consumers will prefer products that are widely available and inexpensive

-product concept: Consumers will favor those products that offer the most quality, performance or innovating features

-selling concept: Consumers do not buy enough, so firms must put in extra efforts to sell products.

-marketing concept: Customer-centered:

- sense the market and respond with offerings;
- find the right products for your customers, not the right customers for your products
- identify, create, capture, communicate and deliver superior customer value.

-holistic marketing concept: development. design and implementation of marketing programs, processes and activities
recognizing their breadth and interdependencies.
includes dimensions of
relationship marketing
integrated marketing
internal marketing
performance marketing
 Relationship Marketing

Initiate, build, maintain, enhance and terminate if needed mutually satisfying

long term relationships to earn and retain business

Long term relationships with key constituents

customers,
employees
marketing partners (channels, suppliers, distributors, dealers, agencies)
members of financial communities (shareholders, investors, analysts)

Create prosperity to key constituents and balance the returns to key stake holders

Resulting relationships deliver a marketing network

Key is to own brands than assets and outsource wherever it is more effective

Includes customer relationship management (CRM) and partner relationship management (PRM)
 Integrated Marketing

Develop marketing programs with

- activities that create, communicate and deliver customer value
- design and implement activities keeping in mind other activities

When a customer buys a MRI machine for instance from GEMS he not
only expects a good product but also good installation, maintenance and training activities

Design an integrated communication strategy so that the customer gets an integrated and coherent
message despite the multiplicity of channels.

When deciding on one channel option keep in mind its implications on other channel options;
selling through own showrooms and independent dealers at the same time may give rise to
conflict
 Internal Marketing

Includes hiring, training and motivating employees

Marketing activities inside the firm as important as activities outside the firm
a product usage to specification translation as important as an
assessment of need gaps in the market

Interdepartmental coordination between engineering, purchase, finance.

production and marketing

Internal marketing required for integrated marketing efforts

example in an airline coordination required between customer care, and
human resource requirements; low fares, and inexpensive maintenance

Vertical alignment with senior management, horizontal alignment with other

departments
 Performance Marketing

Measure returns of marketing through metrics such as:

market share, customer loss rate or churn, customer satisfaction,
product quality feedback

Consider the legal, ethical, social and environmental responsibilities and effects
of marketing activities and programs
Value Chain a tool for identifying ways to create value and deliver value to customers

The firm conducts a series of activities as a part of the value chain that are
synthesised to produce, market, deliver and support the good.

The primary activities are (i) inbound logistics (ii) operations (iii) outbound
logistics (iv) marketing that includes sales and (v) service

The secondary or support activities are (i) procurement (ii) technology development
(iii) human resource management and (iv) firm infrastructure that includes planning,
finance, accounting, legal and government affairs.

The value chain activities are continuously benchmarked and ways are found to
improve it.
 Set Objectives for Marketing e.g. sales targets, market share targets, customer satisfaction targets

Identify Target Market e.g. Youth market in urban areas (Metros, Tier 1 cities)

Assess Target Market’s Needs and Wants e.g. Youth need health conscious food and beverage

Do Segmentation, Targeting, Do Customer Profiling to

Positioning exercise outline the Typical Customer

Design and Develop the Product Competitive

Drive the Strategies
Obtain the Product Strategy / Brand Strategy Advantages are
from Competitive
Obtain the Price using relevant Pricing Strategy Sourced by
Advantages
Layout the Communication Strategy Superior Assets
Develop and Build the Channel Strategy and Capabilities

Develop the Annual Marketing Plan

Develop the Strategic Marketing Plan Execute the Marketing Strategy

Observe and Monitor the Performance of the Product in the Market

Compare the Performance with the Respective Metrics derived from the Objectives.
Conduct the necessary Strategic Control and Tactical Control.

Continue with Next Time Period Activities.

Figure 1: Steps in the Marketing Process

 Customers / Consumers

Retailers / Dealers, Front Line Employees,

Sales Teams, Service Teams, Market
Researchers, Digital Marketers

Product managers, Brand Market Society

managers, Application And
Looking into the developers, Marketing Institutional
Market strategists, Marketing Environment
communicators

Implementors –
CEO, Leaders, Figure 2: Tiering the Marketing Organization
Business Dev.
Officers

Industry and Product Designers, Quality

Looking into the
Trade / Heads, Technical Leads, Price and
Organization
Business Costing Heads, Channel Players
Environment such as Buyers, Purchase
Managers, Trade Appointers

Research and Development, Innovators and

Ideators, Concept Developers, Systems Engineering
Interface Personnel, Supply Chain Heads
 Core Business Processes

Effectiveness and efficiency of work along with core business processes

determine firm’s success.

Core business processes include:

1. Market sensing process

2. New offering realization process
3. Customer acquisition process
4. The customer relationship management process
5. The fulfilment (of orders) management process

Use of cross functional teams to integrate work flows

Partnering of firm with other firms both in supply side (supply chain) and
selling side (distributor) results in a value delivery network also called a
Value Chain (or end to end value chain).
THE NEW SEC SYSTEM
THE NEW SEC SYSTEM
The new SEC system is used to classify households in India.
It’s based on two variables:
•Education of chief earner
•Number of “consumer durables” ( from a predefined list)-owned by the family.
The list has 11 items, ranging from ‘electricity connection’ and ‘agricultural land’
-to cars and air conditioners

We have 12 grades in the new SEC system, ranging from A1 to E3

(A1, A2, A3, B1, B2, C1, C2, D1, D2, E1, E2, E3)
THE NEW SEC SYSTEM
10Items owned / have access at home
1a Electricity Connection 01
Ceiling Fan 02
LPG Stove 03
Two Wheeler 04
ColourTV 05
Refrigerator 06
Washing Machine 07
PersonalComputer/ Laptop 08
Car/Jeep/Van 09
AirConditioner 10
1b Agricultural Land 11
POLL Questions – Marketing Process
Agenda

Marketing and Marketing Concept

Marketing Process

Marketing Strategies
Marketing Strategy -
Fundamental characteristics
of Markets

Consumer Heterogeneity

Market Uncertainty
 Marketing Strategy
..Functional view
..
Manifestation of Functional strategies
product strategy
pricing strategy
communication strategy
distribution strategy

Underlying Functional strategies are Competencies or

Competitive Advantages
Cost leadership
Cost focus
Differentiation
Differentiation focus
 Intensive Growth Opportunities

Growth Opportunities Integrative Growth Opportunities

Diversification Growth Opportunities

 Intensive Growth Strategies – Ansoff’s Product-Market Expansion Grid

Current Products New Products

Current Market Product Development Strategy

Markets Penetration Strategy

New
Markets Market Development Strategy (Diversification Strategy)
Identification of Growth Opportunities … cont

Integrative growth opportunities

backward (acquiring suppliers) , forward (acquiring
channel members) and horizontal integration (acquiring
competitors)

Diversification growth opportunities

concentric – technological or marketing synergies to a new
group of consumers e.g. audio cassettes from
a firm making computer tape
Conglomerate – new opportunities which have no relation
to current technologies, products or markets
Reliance into Telecom
Horizontal diversification – Appeal to current customers
with new technologies e.g. Music company
produces CD / Cassette racks
 SWOT Analysis

Strengths and Weaknesses are part of the internal environment of the

organization.

Strengths are those assets, capabilities or competencies that the

organization is capable of or capable in developing if not present.

Weaknesses are those aspects of performance conditioned by importance that

the organization is not able to provide as reflected by a limitation of resources
(assets and capabilities), or constraints on deployment of resources.

Sony has strong innovation strength.

Dell’s weakness is that it does not have a strong brand and lacks in solid
dealer relationship.

Both strengths and weaknesses can be gauged on dimensions of management

that include, marketing, finance, manufacturing and organization.
 SWOT Analysis

Opportunities and threats are part of the external environment of the organization.
It is necessary for the business to monitor key macro-environmental forces and
significant micro-environmental factors through effective marketing intelligence
systems that affect the firm’s ability to earn profits.

An opportunity is an area of unmet buyer need that can be profitably met.

There are three sources of opportunities

a. Offer something that is in short supply – Dining out is in supply deficit –
the pain points are availability, affordability and culinary choice this
shortage gives rise to concept of restaurants emerging with small dine-in
facility but with large kitchen to meet demand through door delivery.
b. Offer an existing good / service in a new or superior way
i. The problem detection method
ii. The ideal method – ask the consumer for the ideal product
iii. Consumption chain method – ask consumers about
acquiring, using and disposing of the product.
c. Offer a totally new product or service.
 SWOT Analysis …………. Opportunities cont….
Methods to spot opportunities

i. Benefit from converging trends / introduction of hybrids

e.g. Computers and Communications
ii. Make buying process more convenient or efficient
e.g. use of RFID based smart card at NHAI toll-ways
iii. Meet the need for more information and advice.
e.g. aggregators for fashion apparel.
iv. Customization of product or service
e.g. Real time design ordering on Mercedes Benz cars
v. Introduce a new capability
e.g. apps booking for cars as with Uber
vi. Able to deliver a product / service faster
e.g. FEDEX next day delivery
vii. Offer at lower price
Versions of cars – no frills and fully loaded; generics vs brands

Market Opportunity Analysis

i. Articulate the benefit convincingly to a target audience
ii. Locate the target market and reach them through cost effective media and trade channels.
iii. Does the firm have the competencies to cater to the consumer benefit areas * example next slide
iv. Can the firm deliver the consumer benefit areas better than actual and potential competitors
v. Can the firm get the required ROI.

Opportunities can be evaluated by both the dimensions of success probability and attractiveness.
 SWOT Analysis …. Threats ………..
A threat is a challenge or difficulty caused by an unfavourable trend or development that in the absence of defensive
marketing action could lead to a lower sales or profit.

Threat is evaluated both on dimensions of probability of occurrence and seriousness.

PC devices are faced by a threat on their demand by increasing availability of feature rich smart phones.

Illustration of competencies matching key benefit areas

Pain Points of FMCG – Quality, Hygiene, Freshness, Convenience

Packaged Meat Provider – Licious brand

Quality – vertical integration, world class processing, stringent quality control.

Hygiene – aseptic cold chain processing managed by doctors and meat scientists

Freshness – vacuum packing and modified atmospheric packing

Convenience – IoT powered refrigerator technology making meat available

at the time needed.

Brand salience of Licious – market longing for a change is way meat is consumed;
brand promoted as champion of change – as aresult liking developed.
 Porter’s Five Forces Model
Threat from
new
entrants

Rivalry Bargaining
Bargaining
among power of
power of
existing buyers
suppliers
competitors

Threat of
substitutes
Rivalry among existing competitors Porter’s Five Forces Model
Number of competitors and industry concentration, industry growth, margins, quality and branding, barriers to exit, and switching costs

Threat of new entrants

Barriers to entry, economies of scale, capital requirements, switching costs, government policies.

Threat of substitutes

Number of substitutes, propensity to substitute, substitution economics including switching costs, product differentiation

Bargaining power of suppliers

Number of suppliers, extent of integration of end-to-end value chain, control and / versus margin, firm extended family or supplier extended family

Bargaining power of buyers

Number and size of buyers, key accounts, differential values / competition, price sensitivity, value added reselling, co-creation
 Core Competencies
Firms focus on what they can do best called core competencies and tend to
outsource whenever there is better quality or lower cost.
Characteristics of Core Competencies:

1. Source of competitive advantage that contributes directly to customer benefits

2. Are common strengths that can be applied in wide variety of markets
logistics and information technology – key strengths for hyperlocal delivery
3. Difficult for competitors to imitate
Market driven organizations excel in three distinctive capabilities that accompany
core competencies – market sensing, customer linking and channel bonding.

To maximize core competencies firms may realign on three dimensions:

1. define and redefine business concept

2. shape and reshape business scope that includes geography
3. position, reposition the firm’s brands.

Core competencies of Amul that helped it succeed in the chocolates space is

branding and good distribution setup apart from striking a chord with the youth.
Resource Based View (RBV)

Resources are the internal aspects of a firm if products are considered as the external aspects of the firm

Just as firm defines itself with a portfolio of products or product-markets, it can also be considered that firms can
view themselves as a portfolio of resources. Resources in this sense could be factors of production (land, labour, capital),
brand names, in-house knowledge or technology, employment of skilled personnel, trade contacts, machinery, efficient
procedures.

Ultimately resources should lead to high returns and this means appropriate deployment and management, including
developing and exploiting resource position barriers (for product-markets these are entry barriers); leveraging of a
single resource across a range of products or sequential entry; economies of scope in resources (several resources in a
product and several products from a resource).

The ultimate aim of a RBV to marketing strategy can thus be postulated to be:
a) increase in long term resource position of the firm
b) convert resources into profits or high returns.
Dynamic Capabilities

Refers to the ability of the firm to

a) reconfigure its assets and capabilities to align with the reformulations of marketing strategy
as and when they occur

b) develop fresh competitive advantages every time the competitive advantage cycle is renewed
with the erosion of the earlier competitive advantages

c) reorient its marketing strategy also called as a market reorientation as and when necessitated
by a change of environment; this becomes relevant when the organizations act as complex
systems in a dynamic environment.
 Nature of a Marketing Plan

A Marketing Plan is a written document, that summarizes the marketer’s

understanding of the marketplace, and indicates how the firm will
reach its marketing objectives through marketing programs informed by strategies
and specified with tactical guidelines and financial allocations over the planning period.

Deliverable of the marketing process. Limited in scope than a business plan.

Links to other departments such as production, human resources, finance.

Shortcomings of current marketing plans are lack of realism, insufficient

competitive analysis and a short run focus.
 The context of a marketing plan

Strategic Planning is prioritized into three key areas;

1. Manage the business as an investment portfolio

2. Assess the market’s growth rate and the company’s position in that market
3. Establish a strategy

Firms operate at four organizational levels:

1. corporate; 2. division; 3. business unit; 4. product

There is planning at each level

Refer Figure 2.1 in text, for strategic planning, implementation and control

The marketing plan usually operates at the level of product (product line, brand). Consists of the
strategic marketing plan and the tactical marketing plan.

Strategic marketing plan lays out the target markets and the firm’s value proposition given
an understanding of the firm’s best market opportunities.

The tactical marketing plan specifies marketing tactics such as product features, promotion,
merchandising, pricing, sales channels and service.
 Contents of a Marketing Plan

1. Executive Summary and Table of Contents

2. Situation analysis
1. Includes data on sales, costs, competition, macro-environment
2. Definition of target market – size and growth rate
3. Trends and Critical issues
4. SWOT analysis
3. Marketing Strategy
1. Mission, Marketing and Financial Objectives, needs of the customers
intended to be satisfied with offerings, competitive positioning
2. Inputs from purchasing, manufacturing, sales, finance and human resource
4. Marketing Tactics
Key benefits and features, pricing across customers, channels, discounts and
allowances, different avenues to distribution, message and media strategy
5. Financial Projections
Sales forecast (by month and product category), expense forecast (includes
costs of marketing, breakeven analysis (number of units to be sold by month,
and years to offset fixed costs), risk analysis (optimistic, pessimistic and most likely)
for each variable causing uncertainty such as demand and sensitivity analysis on returns.
6. Implementation and Control
Goals and budget every month or quarter with results and corrective actions
 Ultimate Aim of
Marketing Strategy

Improve Long Term Financial Performance

– sales, market share, market capitalization
POLL Questions – Marketing Strategies
Market Environment and Market Research
 Marketing Environment

Broad environment
Task environment
• Firm Demographic environment
• Target Customers Economic environment
• Suppliers Socio-cultural environment
• Material suppliers Natural environment
• Service suppliers Technological environment
• Market research agencies Political-legal environment
• Advertising agencies
• Banking and Insurance In short SPEND T
• Transport companies
• Telecom companies
• Distributors
• Dealers
• Agents
• Brokers
• Manufacturer representatives
Environmental forces

Demographic forces
population size, growth rate, age distribution,
ethnic / religious mix, educational levels, household patterns,
movement of people
Political / Economic forces
purchasing power, income distribution, savings rate, debt,
credit availability
Socio-cultural forces
views of themselves, of others, of organizations, of society,
Natural
shortage of raw materials, energy costs, anti-pollution
pressures or going green phenomena, governmental protections
Technological
pace of change, opportunities for innovation, varying R&D budgets,
increased regulation of change
Conducting Market Research
Context of Decision Making in
Marketing
Planning / Strategic Market Planning
Marketing Strategy or Game Plan
Tactical Decision Making
Context of Strategic Decision Making
in Marketing

What are firm’s core markets and products

Should the company be in a particular business

- includes entry decision

What businesses should be repositioned or divested

How should resources be allocated among product

markets
Context of Marketing Decision
Making in Marketing

How should a leadership position be achieved and

sustained in a product market

Allocation of resources within a product market.

Requirement of Decision Making
for Marketing

Obtainment of Information
Undirected Viewing

Conditioned Viewing

Informal Search

Formal Search
Market Research involves

Formal Search

Of Information For

Strategic Decision Making in Marketing

And

Tactical Marketing Decision Making

 Nature of Information

Timely

Accurate

Actionable

Information on Consumers, Competition, Brands of Firms

Lead to Marketing Insight

Could be in the form of a survey, product preference test, advertising

evaluation, sales forecast by region etc.

Benefits of Information from Market Research should exceed the costs of

obtaining it.
 Importance of Insights

Marketing insights provide diagnostic information abut how and why

marketers observe certain effects in the market place and what it means to firms.
e.g. The symptom of declining sales has roots in customer dissatisfaction
which is caused by faulty product design.

Marketing insights could lead to surprises through revelations about marketplace

understanding.
e.g. the most common requirement of shaving habits in India is the
falling off of hair follicles, which is solved by Gillete Guard

Marketing insights could fill in gaps of information required for marketing and hence
lead to new or modified insight.
e.g. the most common washing motion in India is the one-two, one-two
hand washing motion, which is incorporated in Whirpool’s 1-2,1-2 washing
machine.
 Introduction to Market
Research
! Definition of market research
American Marketing Association

Marketing Research is the function which links the consumer,

customer and public to the marketer through information - information
used to identify and define marketing opportunities and problems;
generate, refine and evaluate marketing actions; monitor marketing
performance; and improve understanding of marketing as a process.
Marketing research specifies the information required to address these
issues; designs the method for collecting information; manages and
implements the data collection processes; analyses the results; and
communicates the findings and their implications.
 Introduction to Market
Research
Step 1 – Define the problem and research objective

Step 2 – Develop the research plan

Step 3 – Collect the information

Step 4 – Analyse the information

Step 5 – Present the findings

Step 6 – Make the decision

 Introduction to Market
Research
Problem versus Objective

Decision problem solving process versus Research Problem solving

process

Syndicated research versus Customized research

Research Brief versus Research Proposal

Marketing Problem

The sales of GEMS products are decreasing at a rate of 10% in the past two quarters

Marketing Objective

1. To improve customer satisfaction to 90% in the next two years.

2. To examine the reduction in price by 10%
3. To launch on a new version of imaging systems to capture high end of market
in one year
4. To revamp the customer service systems.
Objective:

1. To achieve 30% growth rate for IDS financial planning products in the
Next 3 years.

Problem:

1. Improve customer retention programs to increase retention rates by 50%

in three years
2. To increase sales force size and reduce sales force churn
3. To address the customer with a wider range of financial products
 Problem Formulation
! Problem formulation
! state the variables to be studied in exact relation the pieces of
information specified in the research questions
!information categories
" state of being
" state of mind
" behavior
!information categories
" facts
" estimates
" generalizable relations
" rumours
 Problem Formulation
! Requirements of problem formulation
!skill to breakdown problem into researchable sub-problems and
integrate solutions into a coherent set

!judgmental evaluation of symptomatic evidence - much like a

doctor diagonising a patient

!use of pilot studies for precise problem formulation; check if info

obtained will solve the research /decision problem on hand

!keep cost considerations in mind; keep the nature of research

objectives - survey or exploratory or causal ..etc in mind
 Problem Formulation
! Decision problem vs Research problem
!research problem emanates from decision problem though in some
cases, research throws up issues that call for decision making
that forms a separate contextual situation and is handled separately
!distinguish between symptoms and real problem; symptoms are outer
manifestations stemming from a more subtle problem; useful in
developing checks and cross-checks while probing the market

!research problem can pertain to any stage of the decision making

process

!research problem solving process expected to reduce cost of decision

making
 Problem Formulation
! Decision problem vs Research problem
Decision problem solving process

§ establish need for taking decision

§ define specific area of decision making or decision problem
§ identify alternative courses of action
§ evolve criteria for decision making and evaluating
alternatives
§ evaluate alternatives on the criteria
§ select the most suitable action alternative
§ implement and monitor ; learn outcomes for future decisions
 Problem Formulation
! Decision problem vs Research problem
Research problem solving process
§ define research problem in decision making context
§ lay out research objectives and / or research hypotheses
§ develop the research plan (research design, instruments, contact
§ methods)
§ collect data
§ analyse data
§ interpret and feed into the decision making situation
 Problem Formulation
! Common pitfalls of problem formulation
!failure to define the real problem; a problem well defined is half-solved

!failure to distinguish between overt symptoms and the real problem

!not breaking down the problem ; trying to handle too much at once

!not very clear of decision problem; confusion of competing (price

vs quality) and complementary objectives (quality and differentiation)

!not taking full cognisance of constraints of the marketing situation

!looking at situation too broad or too narrow; too short or too long term
 Qualitative and Quantitative Research

Qualitative Research is exploratory research and includes techniques such

as focus groups, depth interviews, case studies, projective techniques.
It is a relatively unstructured, has few data points (small sample size) and
is inferential in its outputs.

Quantitative research uses the survey / questionnaire as the research instrument,

and includes techniques such as hypotheses tests, descriptive or summary statistics,
bivariate analysis (such as Anova, correlation), multivariate analysis (such as
factor analysis, cluster analysis, discriminant analysis, multidimensional scaling
or perceptual mapping. It is relatively structured, has large number of data points
(large sample size), and is descriptive or conclusive in its outputs.
Introduction to Market
Research
! Practical examples of marketing research

§ Syndicated research

§ Customised research
 Introduction to Market
Research
! Practical examples of marketing research
§ Syndicated research
Indian Readership Survey

IRS is conducted by Hansa Research for MRUC, used by media planners for
Planning media strategy. It also gives insights into consumption habits of
Indian consumer. Covers 350+ publications, 150+ channels, cinema, internet,
15+ radio stations. The survey covers 250,000 respondents from 24 states and
91 cities. It covers 70+ FMCG products, 30+ durable products ownership details,
financial services, urban and rural lifestyle indicators.
 Introduction to Market
Research
! Practical examples of marketing research
§ Customised research

§ Market sizing for Maruti Suzuki in premium cars

§ Customer profiling for Raymond

§ Market preferences and market sizing for general knowledge

magazines
 Introduction to Market
Research
! Using an outside research agency
Research Brief : a communication to the outside marketing research
firm by the firm seeking answers to certain marketing problems
delineating the following :
§ brief description of the company
§ outline of the marketing problem at hand
§ type of research issues being considered
§ outline of the expected research outputs; strategic analysis of the
research outputs
§ specific segments or accounts they would like addressed
§ what they do not need or expect from the research outcome
§ time scheduling, costs and prices
 Introduction to Market
Research
! Using an outside research agency
Research Proposal

§ commitment by the MR agency on the deliverable; outline of

what to expect so that the commissioning firm knows
before the primary data collection is started; saves time
and money
§ proposal acceptance is a freeze on the specification of the final
research output of the agency
§ proposal normally backed by a pilot study of sorts
Marketing Mathematics
Agenda

Marketing Metrics

Break Even Volume

Customer Life Time Value

Marketing
Metrics
Useful Terms

Gross Revenue
Discounts and Allowances
Net Revenue
Cost of Goods Sold
Gross Margin Cost of Goods Sold
Variable costs
Operating Expenses Manufacturing overheads
Net Margin Operating Expenses
Interest Paid R&D expenses
Selling, General and Administrative Expenses
Net Income Before Tax
• Marketing Performance Evaluation

• Set Objectives (Company A should achieve 10% market share of product X in 3 years)

• Set Targets based on objectives (Achieve 50% Awareness, 20% Trial)

• Set Tactics (Achieve high visibility, Conduct promotion contests)

• Arrive at Metrics ( Reach, Gross Opportunity to See (GOTS), Sampling)

• Metrics Performance (Reach 70%; GOTS 140%, Sampling 30% Target Market)

• Actuals Performance (Reach X%, GOTS Y%, Sampling Z% Target Market)

• Result (5% market share initial six months)

Metrics

End Result Metrics

Sales, Profit

Intermediate / In-Process Metrics

Awareness, Preference

Metrics

Internal Focus
ROI

External Focus
Awareness, Preference

Combined with both internal and external data

Market share by units, value
• Three cardinal rules in choosing metrics

• 1. Metrics should be easy to understand and use

• 2. Metrics should be easily replicated

• 3. Metrics should provide actionable information that impacts

business.
Useful Metrics

Net Promoter Score -- Measures Customer Loyalty

On a scale from 1 to 10 how likely is it that you would recommend the firm to a friend or colleague

9-10 promoter; 7-8 passively satisfied; 0-6 detractors

NPS = % of promoters - % of detractors

75% indicates high brand loyalty

ROI (Return on Investment)

(Net Profit / Cost of Investment ) *100

Payback Period

Upfront costs / Annual contribution

• Useful Metrics

Brand Awareness

Recall
Top of mind
Unaided recall
Aided recall

Recognition

Brand Preference

Prefer Brand A over Brand B

Purchase Intention

Definitely will buy

Will buy
May or may not buy
Will not buy
Definitely will not buy
• Useful Metrics

• Manufacturer suggested retail price (MSRP)

• Maximum Retail Price

• Minimum Advertised Price (lowest price that retailers are allowed to advertise a brand)

• Cost plus Price (Rs. 100/- cost with 25% markup is Rs 125 selling price)

• Markup on Sales (Rs. 100/- cost with 20% markup on sales is Rs. 125 selling price)
•
• Useful Metrics

• All Commodity Volume = Sales of retail outlets carrying a given brand / sales of all relevant retail outlets.

• Distribution Percentage = Number of retail outlets carrying a given brand / sales of all relevant retail outlets

• Inventory Turns = 12 months retail sales / 12 month average inventory at retail price

• Sales per square foot – Retail sales / retail square footage.

• Traffic – Number of people who walk into a given store (buyers plus nonbuyers)

• Conversion = Number of sales transactions / Traffic

• Average basket size = Rupee / Dollar sales / Number of sales transactions

• Useful Metrics

• Cannibalization = Existing product sales lost / New Product sales. (value or volume)

• Percentage of sales from new products = Revenue from new products / Total revenue

•
 Break even volume is that volume at which the firm’s total contribution equals total fixed cost.

Break Even Calculations

8000

7000

6000

5000
Fixed Cost
Revenue

4000 Var Cost Breakeven Volume

Total Cost = 1000
3000 Revenue
Contbn
2000

1000

0
0 500 1000 1500
Quantity sold
• Customer Lifetime Value
CLV is one way of capturing long term customer profitability

CLV represents the present value of the stream of expected profits over the customer’s lifetime purchases.

Profits represent the excess of revenue over the costs of attracting, selling, and servicing, the account of the customer.

The stream of expected profits is discounted to arrive at the present value.

Optimizing CLV represents optimizing or developing a loyal customer base. This involves acquisition, reducing defection,
and retention of customers.

Acquisition could be through different methods that include advertising in media, direct mail, and email to prospects.

Different acquisition methods would lead to different acquisition costs, leading to varying CLVs.

Defection reduction involves reducing customer churn. Churn represents the net of customers defecting from the firm in a
given period to the customers acquired during the same period.

Retention programs include bonding with customers through financial incentives, social processes, customization programs
or attempting joint investment (as in franchises).

The above apart managing the customer loyal base involves lengthening the longevity of customer relationship and increasing
the share of wallet of customer. Also terminating unprofitable relationships and doing ABC analysis of customer base.
Customer Lifetime Value Calculations 𝑝! is the price paid by consumer at time t

𝑐! is the direct cost of servicing the customer at time t

% &'
CLV = ∑$!"# 𝑟! ! !! - AC
()*+)
i is the discount rate or cost of capital for the firm

𝑟! is probability of customer repeat buying or being alive at time t

and can also be called the survival probability

AC is the acquisition cost

T is the time horizon for estimating CLV

Proposed by Donald Lehmann and Sunil Gupta

Using an infinite time horizon and assuming the margin or price minus cost as well as retention rate probability
remaining the same the CLV reduces to
$
𝑟 𝑟 1+𝑖
𝐶𝐿𝑉 = 𝑚 + ' 𝑚 ∗ 𝑟 ! /(1 + 𝑖)! − 𝐴𝐶 = 𝑚 + 𝑚 ∗ − 𝐴𝐶 = 𝑚 1 + − 𝐴𝐶 = 𝑚 ∗ − 𝐴𝐶
1+𝑖−𝑟 1+𝑖−𝑟 1+𝑖−𝑟
!"#

Where m = (p-c)
r = retention rate
i = interest rate or discount rate.
CLV = m * L – AC

m is the contribution margin from a customer in a given time period = 𝑝! − 𝑐!

L is expected purchasing life of a customer in the same unit of time as m

AC is the up-front cost of acquiring the customer; Retention Rate (RR) = 1 – Churn rate (CR from records)

𝑟) = 1; 𝑟- = 𝑟) * RR = RR as 𝑟) = 1;

𝑟. = 𝑟- * RR
…
𝑟! = 𝑅𝑅 !&)

If CR, and RR are constant over lifetime of purchases

)
then L = /0 = ∑1 !") 𝑅𝑅
!&)

CLV = M/CR – AC = ∑1
!") 𝑚 ∗ 𝑅𝑅
!&)
− 𝐴𝐶
)*+
If the time value of money is incorporated then 𝐶𝐿𝑉 = ∑1
!") 𝑚 ∗ 𝑅𝑅
!&) /(1 + 𝑖)!&) − 𝐴𝐶 = 𝑚 ∗ - AC
()*+&00)

This formulation is obtained under the condition that retention rate RR in period 1 is 1.
Consumer Buying Behavior
Analyzing Consumer Markets and Buying
Behavior

• Interest in examining aggregate market response to firm specific decision

variables
ð understanding
ð explaining
ð predicting

• Method
ð analyze individual level behavior
ð analyse aggregate market behavior
Analysing Consumer Markets and
Buying Behavior
Translation of individual level behavioral analysis to aggregate level
market response is faced with the issue of aggregation problem.

A prime characteristic of consumers is their variation in preferences,

tastes, likes, dislikes, purchase behavior patterns. Meaning thereby that
markets are heterogenous and consumers exhibit heterogeneity

Object of consumer behavior analysis answer - both with emphasis on decision

- buyer or user ? maker
Behavioral processes of consumers
An integrative conceptual framework

Market-Society
Enculturate and
Communication
individuality Environment
sensitivity

() – Behavioral
Process of
Consumers
Rational and
Economic
Decision making or
Choice processes
Behavioral Processes of Consumers- Communication
Sensitivity
Within Market

Word of Mouth (buzz), Web conversations

Within
Market Diffusion Processes

P&G VocalPoint has a targeted

word-of-mouth social network of
Communication sensitivity 500,000 moms. Test bed for product launches and
driving word-of-mouth publicity.
Firm To Vocalpoint is a community (USA) of women who love to
Market voice their opinions on their favorite brands &
products, share fun stories & life-hacks, and
forge authentic connections.

Firm to Market
Communication -Consumer Behaviour Concepts
-One way/Two way.
Behavioral Processes of Consumers-
Communication sensitivity

Consumer Behaviour Concepts – Endogenous Factors

Selectivity
Involvement
Persuasion
Learning
 Selectivity

• Marketers have to work hard to get consumer’s notice

Selective attention • consumers are more likely to notice stimuli of current need, stimuli they anticipate,
stimuli whose deviations are large e.g. $25 off $100, rather than $5

• tendency to twist information into personal meanings that will fit our preconceptions
Selective distortion e.g. A customer of LG may interpret an advertisement saying that they are No. 1
company in Microelectronics to be No.1 company in all of consumer durables

• consumers likely to remember good points of products they like and forget good points of
Selective Retention competing products e.g. a user may remember that Pears soap is the only soap good for
dry skin though in the market Dove, Santoor and Mysore Sandal Gold is also good for dry
skin

Subliminal • Apart from consumer’s active engagement and through influencing selective perception,
is also the claim that subliminal perception embedded by marketers in covert subliminal
perception messages, in ads and packaging also influence consumer behavior.
 Involvement Persuasion Learning
Krugman proposed the concept of Low Involvement products use the Guided by inner drives, but
level of involvement influencing peripheral route to persuasion e.g. influenced by cues, stimulus and
buyer-behavior. celebrity endorsements. reinforcement

Products purchased are either low High Involvement products use

involvement or high involvement. both the central route (cognitive
Assael has classified types of reason) to persuasion and the
buying behavior based on peripheral route to persuasion.
involvement
Assael’s Classification of types of Buying Behaviour

High Involvement Low Involvement

Significant Variety-Seeking’
Difference Complex Buying
Behaviour Buying
Between
Brands
Behaviour

Few Dissonance Habitual

Difference Reducing Buying
Between Behaviour Behaviour
Brands
Assael’s Classification of types of Buying
Behaviour
Complex: First develop beliefs about product. Then develop attitudes and then
make a choice

Dissonance: First Act, then develop beliefs. Then end up with attitudes

Habitual: salt- out of habit, beliefs from passive learning-choice-

evaluation/attitudes

Variety seeking- lot of brand switching- chocolates (Low involvement)-Beliefs-

Choice-Attitudes.
Behavioral Processes of Consumers- Enculturate Individuality

Consumer Behaviour
Concepts
Culture
•Personality and Self
Sub Culture
concept
Social Class Enculturate
•Life style
Individuality
•Motivation
• Memory
Personal
- Age and Life cycle Social
-Reference groups
- Occupation -Opinion Leaders
- Economic -Family
Circumstances -Roles and Status
Independent Factors

1. Culture –
a) Cultural factors exert the deepest and broadest influence on
buyer behavior. Culture is fundamental determinant of a person’s wants
and behavior
b) Subculture – countries, regions, races, religions
c) Social class

2. Social factors
a. Reference groups – primary (family, coworkers), secondary
(religious groups)
b. Reference groups – aspirational groups and disassociative groups
(Nestle during the boycott).
Honda car is an aspirational car of the Indian middle class;
most of the auto car positioning has been aspirational in India

c. Three influences of reference groups –

1. individual exposed to new behaviors, lifestyle – Café Coffee Day
sells conversations along with coffee.
2. create pressures for conformity (affects choice thereby)
3. influence attitudes and self concept

d. Opinion Leaders who are highly confident, socially active and frequent users
of the product category, offer informal advice and information about which
brands are best and how a product may be used.
2. Social Factors
- Cliques in a social structure view of interpersonal communication, members of cliques,
and small groups interact frequently and influence behavior.

- Family
- Family of orientation – influences beliefs, values, attitudes
- Family of procreation – influences day-to-day living and
purchases

3. People buy products that communicate their role and status in society
Endogenous Factors – Enculturate Individuality

• Lifestyle

A lifestyle is a person’s pattern of living in the world as expressed in

activities, interests, opinions. Lifestyle portrays the ‘whole person’.
Marketers search for relationships between their products and lifestyle
groups. If it is found that most computer buyers for home purpose are
achievement oriented, then the marketer may aim his brand at
achiever lifestyle

Psychographics is a way of using psychology and demographics for

understanding consumers.

Tatas have lifestyle brands such as top end jewellery brand Tanishq.

Lifestyle needs vary by generation – from child to adoloscent to young

adult to middle age to elderly – Titan watches are a lifestyle brand
upwards of 35 years. For younger than 35 years Tatas have Fastrack.
Enculturate Individuality – Endogenous factors

• Personality and Self Concept

Personality is a set of distinguishing human psychological traits that lead to

consistent responses to environmental stimuli. E.g. self confidence (Colgate
toothpastes,
dominance (Gillette – the best a man can get), autonomy (credit cards),
sociability (luxury cars), defensiveness (preventive health care, insurance)

Brand Personality is a specific mix of human traits attributable to a particular brand

consumers choose brands which have a personality similar to that of their own.

• Self Concept
- Actual self concept – how he/she views him/herself (mother – caring - Nestle)
- ideal self-concept – how she/he likes to view her/himself (LUX _ Beauty)
- others self concept – how he/she thinks others see him/her (value for money –
shops at ‘more’ retail)

A marketer has to judge the form of self concept from the above to market his brand
Endogenous Factors – Enculturate Individuality

Motivation

A person has many needs (biogenic, psychogenic). A need becomes a motive

when it is aroused to a sufficient level of intensity. In other words a motive
is a need that is sufficiently pressing to drive the person to act.

Freud’s Theory

Motivation Theories Maslow’s Theory

Herzberg Theory
• Freud’s Theory

Consumers’ behavior is shaped largely by unconscious psychological forces.

A technique called LADDERING is used to trace the person’s motivation
from the stated ones to the terminal ones. The marketer can then decide to
target his appeal to the most appropriate level.

Motivation researchers also use projective techniques such as word association

sentence completion, picture interpretation etc.
Maslow’s Theory Self Actualization Needs

Esteem Needs

Social Needs
Safety Needs

Physiological Needs

This helps how various products fit into lives, goals and plans of consumers.
Consumers fill their needs starting from lowest to highest. So it is not of much use
to target a high end need product to a person who is still satisfying his lower
end need.
Endogenous Factors – Enculturate Individuality – Motivation

Herzberg Theory

Factors for buyer motivation are of two types – hygiene factors (or dissatisfier removers) and motivators
(satisfiers). It is not enough if hygiene factors are present. Motivators must be present for a purchase.

From Savlon (antiseptic solution), Godrej Protekt (handwash), Blue Star (AC), Lifebuoy (soap), Aquaguard (water
Purifier) which are health and fitness gear and supplements brands, the positioning are clearly and sharply around the
core value of consumer protection (hygiene factor) be it the promise of the product or that of the brand.

Hygiene is a motivating factor in the above four brands.

Behavioral Processes of Consumers- Beliefs and Attitudes

Communicati Enculturate
on Individuality
sensitivity

Experience & usage

Beliefs/Values
In Decision making
For consumption
Society & Mkt. Environment

Attitudes

Inputs from rational and Economic

Decision Making
Beliefs / Values and Attitudes

A Belief is a descriptive thought that a person holds about something. On Blind Test Diet Coke and Diet Pepsi are equally preferred. But on revealing
brand names Diet Coke was preferred by 65% of consumers and Diet Pepsi by 35%. This is an illustration of role of beliefs.

An attitude is a person’s enduring favorable or unfavorable dispositions (evaluations, emotional feelings and action tendencies) toward some object
or idea.

A marketer is well advised to fit his product into existing attitudes rather than try to change attitudes, which take a long time. Sometimes it pays to
change attitudes

1. Buying New in exchange for old – pays to change attitude as market is going to be large

2. These days food brands should have a diet variety as there is health consciousness in the market – pays to fit product
 Behavioral Processes
of Consumers- Decision making process
Rational and
Need or Problem Recognition
Economic Decision
making Information Search

Buying Roles (also called insiders)

Evaluation
ð Initiator, Influencer, Decider, Buyer, User
Purchase

Post-Purchase
Behavioral Evaluation
results in preference formation and includes evaluation on perception

Processes of Purchase
It is the brand choice process governed by rational and economic
Consumers-Rational decision making
In brand choice consideration sets can be dynamically updated based
and Economic on non-availability of preferred brands to include segment-
performance trade-offs – consumers may dynamically prefer through a
Decision making process of self selection, higher performing brands of economy /
budget segments to lower performing brands of budget/ premium
segments respectively or consumers may prefer brands of budget /
premium segments to lower performing brands of economy / budget
segments (assuming the segmentation on the price-performance
continuum is a segment-rating order with segments from economy to
budget to premium or vice-versa and a rating within each segment
from five stars to one star or vice-versa).
Behavioral • Purchase decision
• Non compensatory models of consumer choice

Processes of • Use of heuristics or mental shortcuts

• Conjunctive heuristic that sets a minimum acceptable cutoff for

Consumers-Rational
each attribute and chooses the first alternative that meets the
minimum standard for all attributes
• Lexicographic heuristic wherein consumer chooses the best
and Economic brand on the basis of perceived most important attribute
• Elimination by aspects heuristic wherein consumer compares
Decision making brands on an attribute selected probabilistically (based on
importance of the attribute) and eliminates brands that do not
meet minimum acceptable cut-offs.
• Intervening factors
• Attitude of others
• Intensity of others’ negative attitude towards our preferred
alternative
• Our motivation to comply with other’s wishes
• Unanticipated situational factors.
Behavioral • Post Purchase Behavior
• Post purchase satisfaction
Processes of • disappointed, satisfied, delighted
Consumers-Rational • Post purchase actions
• Repurchase vs. return or abandon
and Economic • Dissonance vs. regret
Decision making • Post purchase uses and disposal
• Product usage, consumption rate, replacement or
repurchase, provision of information to
consumers
Behavioral Processes of Consumers-Rational and Economic Decision
Making

Consumer Behaviour Segment-Performance

Processes/Concepts Trade-offs

Individual constraints Post Purchase

Budget constraints Feelings
Rational and
Situational factors Economic -Cognitive
Decision making Dissonance
Beliefs and values Or Choice processes
- Regret Theory
Attitudes

Market environment
Store Environment
Firm decision variable
Competitor decision variable
Behavioral Outcomes of Rational and Economic Decision making Process

Evoked set
Consideration set
Purchase intention
Rational and Purchase preference
Economic Purchase Behaviour
Decision making
Purchase behaviour decisions
What to Buy (Basket of goods decision)
Where to Buy (Store choice)
Which brands to buy (Brand choice)
Post purchase feelings
How much to Buy (purchase quantity)
How often to Buy (Purchase timing)
Analyzing Business Markets
Issues in Industrial
Markets
• Business Market consists of all the organizations that acquire goods and services
used in the production of other products that are sold, rented, or supplied to others.
any firm that supplies components for products is in the business to business
marketplace.

• Biggest adversarial force to B2B markets is Commoditization. As such differentiation

is a meaningful part of B2B marketing.

• Other challenges for B2B marketing includes (i) need to build stronger difference
between marketing and sales; (ii) building stronger innovation-marketing interface;
(iii) extracting and leveraging relatively less imperfect and relatively more complete
customer and market knowledge and building information asymmetries.

• Imperatives for B2B marketing are (i) demonstrating marketing’s contribution to

business performance; (ii) deep engagement with customers and customers’
customers; (iii) finding the right balance between decentralized and centralized
marketing activities; (iv) developing marketing talent and competencies
 Institutional
markets
Large
organizational Small
markets Organizational business
markets Market

Government markets
• Fewer, Larger Buyers – Tire manufacturers have OEM contracts with few
automobile manufacturers.

• Close supplier customer relationship – as there are fewer customers,

suppliers tend to develop a closer customer relationship.

• Professional purchasing – use of buying instruments such as quotations,

proposals and purchasing contracts; buyers guided by firm’s purchasing
policies, constraints and requirements

• Several buying influences – the buying committee may consist of technical

experts, senior management, gatekeepers from consultancies etc. Thus the
seller should send trained sales people.

• Multiple sales calls – sales cycles extends from few days to few years; thus
seller needs to make multiple sales calls to win orders.
• Derived demand – The demand for industrial goods is driven by the demand
for consumer goods. The boom in the construction industry is driving the
demand for cement and steel.

• Inelastic demand – Demand for many business goods and services is

inelastic - that is not much affected by price changes. For example the
demand for batteries is not going to change much with price as the demand
of batteries is driven by the demand for automobiles.

• Fluctuating demand – A small increase in the consumer demand can give

rise to a significantly large increase in industrial demand – this effect is
called the acceleration effect. Similarly a 10% fall in consumer demand can
cause a significant decrease of the industrial demand.

• Geographically concentrated buyers – there is clustering to rationalize

production – software in Bangalore; hosiery in Coimbatore; auto-ancillaries
in Pune and Nasik etc.

• Direct Purchasing – Firms buy direct mostly rather than thru intermediaries
Key Elements of
Industrial Buying
Behavior
 Buy Situations Straight Re-buy – routine order –
consumables, office supplies; outside
suppliers tend to get in on dis-satisfac
tion of existing supplier

Modified Rebuy – Modify specs,

prices, delivery requirements. In-
Buying Process suppliers have to protect an account;
out-suppliers try for an opportunity
e.g. computers

New Task – Buy for first time; greater the cost / risk –longer it takes to decide
pass through stages – awareness, interest, evaluation, trial, adoption.
includes setting specs, price limits, delivery terms, order qty, acceptable
suppliers and selected supplier(s). If there is complex selling use of
dedicated missionary sales force by seller.

Systems Buying and Selling – also called turnkey solutions – large projects
– dams, steel factories etc.

Buying Centre - Includes all members
of the organization who play any of
seven roles in the purchase decision
process (can also be called insiders).
1. Initiators – those who put up the request
2. Users - Those who use the product; many times the user is the initiator
3. Influencers – help define specs, provide info for evaluating alternatives,
technical people are good influencers
4. Deciders – those who decide on requirements.
5. Approvers – those who authorize deciders and buyers
6. Buyers – members authorized to select supplier and decide terms
7. Gatekeepers – Members who are info conduits to other members of buy
center e.g. receptionists, agents
 • Several individuals can occupy a given role (e.g. many users / influencers) and
one individual can occupy multiple roles.

• The buying center may include people outside the organization such as

Characteristics
government officials, consultants, technical advisors and other members of the
marketing channel.

of BUY • Different members of the buy centre have different influences, for e.g. the
engineering department may be concerned with actual performance of the

CENTER product, whereas production may be more interested in ease of use and reliability
of supply.

• Members of buy centre – different personal motivations, perceptions and

preferences which in turn are dependent on - age, income, education, job position,
personality, attitudes towards risk and culture
 • Small sellers are advised to concentrate on key
buying influencers. Large sellers go for
multilevel in-depth selling

Characteristics • Sellers are advised to periodically question or

revise their assumptions about the buy center
of BUY CENTER to adapt to organizational changes
………..
Cont……. • It is ultimately individuals and not
organizations who make purchasing decisions.
Organizational needs legitimate the buying
process and outcomes.
 • Decide on the target firms to market to

• Decide who to target within the Buy Centre

Business firms need to:
* Key Buying Influences
* Multilevel in-depth selling
* Revise assumptions about buy centre participants
* Develop insights into buy centres and firms
* Consider end users or customers’ customers

• Framing occurs when customers are given a perspective or point of view to allow
the seller to put the best foot forward. Make sure customers perceive the best benefits
or become more influential in the customers’ thinking of the whole purchase process.
• Purchasing / Buying Orientations

• Buying Orientation – Buy at lowest price given a quality level . Use two
techniques (a) commoditization – regard the product is only a commodity and
care only about price (b) multisourcing to bring in competition among vendors

• Procurement Orientation – look for collaborative relationships and seek

savings through better management – such as material requirements
planning, just-in-time management and even product design.

• Supply Chain Management Orientation – purchasing is a strategic value

adding operation and purchase department betters its role as a part of the value
chain from raw materials to finished goods
 BUYGRID FRAMEWORK

BUYCLASSES

New Modified Straight

Task Rebuy Rebuy

1. Problem recognition Yes Maybe No

2. General need description Yes Maybe No
BUY Yes Yes Yes
3. Product specification
PHASES Yes Maybe No
4. Supplier Search
5. Proposal Solicitation Yes Maybe No
6. Supplier selection Yes Maybe No
7. Order-routine specification Yes Maybe No
8. Performance review Yes Yes Yes
 Marketer stimulates problem recognition by
direct mail, telemarketing, calling on prospects

Internal stimuli – new product development

for which parts are needed, breakdown of
equipment, existing suppliers unsatisfactory

Problem recognition Buyer attends a trade show, sees and ad.

Purchase Manager senses an opportunity to
get lower prices or better quality
 Standard items – go as per internal records or
as per specs laid out in ISI documents

Complex items – collaborate with engineers,

users; else sit with marketer’s application
engineers who do consultative selling and
work out specs and likely price
General need description
and product specification

Certain buying organizations attach a PVA or

product value analysis team to the project
who will conduct extensive analysis to arrive
at specs that will lead to minimum cost without
adversely affecting product performance.
PVA also used a tool for positioning to win an
Account.
 Identify suppliers
- trade directories,
- hunt online catalogs for suppliers
- contacts with other firms
- trade shows
- trade advertisements
- Auction firms
- Spot or exchange markets, barter markets
- Internet search or e-procurement
- e-hubs centered on industries such as plastics, steel,
paper also called searching in vertical markets
Supplier Search
- functional hubs for logistics, media buying, energy
- Direct extranet links to major suppliers (WalMart – P&G)
- Buying alliances to get best price.
Coca-Cola, Sara Lee, Kraft, PepsiCo, Gillette
P&G, have joined to form alliance – Transora
- Company buying sites – Firms like GE have their
own site where it places Requests for Proposal,
negotiate terms, place orders

Suppliers task is to ensure the right leads to customers who can

then go through the buying process.
 Invite suppliers to make detailed proposals

Set up quality standards if any e.g ISO 9000 or

ISI etc.

Large technology systems need a detailed

Techno-Commercial proposal. The technical
Proposal Solicitation quote will be cleared first and after that only
qualified technical bidders will be called for
commercial negotiation

Buyers can invite suppliers to make presentations.

 A supplier rating list is made by some companies
based on relative importance given to a select set
of attributes.

For routine order products the factors are : price,

supplier reputation, delivery, reliability.

For procedural problem products such as copiers the

important attributes are : technical service, supplier
Supplier Selection flexibility, reliability and price

For political problem products such as choice of a

set of computers the factors are price, reputation,
reliability and flexibility

One way to encounter price factor from supplier side

is to talk of total cost of product or life cycle cost.
 Buyers negotiate the final order with the selected
suppliers, and details the tech. specs., the quantity
the delivery time, return policies, warranties etc.

For maintenance and repair items , firms are moving

towards a blanket contract that establishes a long run
relation. Such contracts are called stockless
purchase plans as the stock is held by the supplier
Order routine
specification Long run contracts are also agreed upon in case of
shortage raw materials / inputs so that there is a
steady flow of material. In many cases the supplier
locates his factory near the buyer for bringing down
inventory and transport costs.

Vendor managed inventory is when the responsibility

rests with the vendor for maintaining inventory

Important parameters to see are OT – deliver on time

IF – in full, NE – No error
 Three methods of review

1 Ask for evaluation from buyers

2 Buyer rates supplier on weighted score
method
3. Based on drawbacks of performance the
buyer may come up with adjusted cost
of purchase including price
Performance Review 4. Managers are rewarded for good buying
performance
• Institutional and Government Markets

• Institutional Markets are – schools, colleges, universities, hospitals,

nursing homes.

• Institutions normally ask for lowest price given a minimum quality.

In government organizations the normal process is bidding with the
order going to the lowest bidder(s).

• Negotiated contracts are applicable where the project is complex

and risky.

• Governments tend to favor domestic suppliers.

• Government decisions are subject to review, so there is lot of

paperwork in contracting.

• Director General of Supplies and Disposals is the central purchasing

unit of Indian Government.
 Segmentation,
Targeting, Positioning
Agenda

Definition and Concepts of Segmentation Targeting

Conceptual discussion of Clustering / Discriminant Analysis

Market Targeting
 • Segmentation is the process of placing together
consumers into groups such that consumer
Identifying heterogeneity on specified characteristics is
minimized within groups and maximized across
Market groups e.g. value for money buyers as distinct
from economy buyers.
Segments • Market structuring can be thought of as taking a
and Selecting market and dividing them into groups based on
some common characteristic (mostly of product)
Target e.g. diet-colas, regular colas.
Markets • A market segment consists of a group of
customers who share a similar set of needs and
wants.
 Mass Marketing or Undifferentiated Marketing
e.g. Model T Henry Ford
Segment Marketing – Cars – Honda Jazz,
Hyundai i20, Maruthi Swift, Skoda Fabia is a
Sedan Segment
Niche Marketing – specialize to a narrowly defined
customer group – Temple jewellery for South Indian
women wanting to take part in cultural programmes
Levels of Market
Segmentation
Local Marketing – Athica for IIMB and around

One to One Marketing

Individual Marketing
Mass customization –
ability to prepare on a
mass basis individually
designed products
 Flexible market offering – naked solution containing the
No frills product and discretionary options that are
Priced extra such as A/C, power windows, moon roof

Homogenous preferences e.g. bite size candies, eclairs

Segment Marketing Diffused Preferences – House Buildings

(Patterns of Segment
Markets)
Clustered Preferences – distinct clusters in the
Market also called natural market segments
e.g. car market; e.g. in the luxury car segment
Why is segmentation useful ?

• Segmentation helps firm tailor their marketing programs (premium pdt for affluent, standard product for mass consumption,
customized pdt for BOP)

• focuses an actionable and accessible set of the market (Project Shakti)

• cuts of wasteful expenditures on unwanted consumers

• matches needs and wants of specific groups of buyers to firm’s offerings

• stimulates demands through multi-products for multi-segments

• resource allocation to segment specific marketing mix activities will be made more efficient

• Segmentation is a way to plan rather than explain

 Criteria for
Segmentation
1. Measurable – size, purchasing power etc – finding the size of
market for refurbished home appliances is not that easy.

2. Substantial – large enough for the firm to find it as a marketing

opportunity – Limousine car market in India may
not be substantial to warrant local manufacture

3. Accessible – segments can be effectively reached and served –

in communication, serving last mile is not easy

4. Differentiable – segments should be differentiable from one another –

rural consumers and urban consumers show
no difference in features of mobile handsets

5. Actionable – It should be possible for formulating marketing programs for

serving the segment (it cannot add segment descriptors
so easily) – how to sell money for luxury value products such as
expensive watches and pens – not only the monetarily rich
buy it, the mentally rich also buy – how to identify

Threats of five forces to the long run attractiveness of a market segment

Threat of intense segment rivalry, threat of new entrants, threat of substitute products,
threat of buyer’s growing bargaining power, threat of supplier’s growing bargaining power.
 Bases for Consumer
Market Segmentation
 Geographic - Nations / states / districts/ cities / neighbourhoods; Rural / Urban;
metropolis/city/town/village; modern retail stores/kirana stores / mandis/ haats;
Use of zip codes, PRIZM (geoclustering); customer cloning ( best prospects live
where most of the customers already come from).

Demographic – Age and Life Cycle Stage, Family Size (nuclear or joint ),
gender, income, occupation, education, SEC, religion, race, generation,
nationality, social class;
Important aspect of demographic variables is that they are observables.

Bases P&G advertise on Gender equality, and hence appeal to the women segment.

Psychographic – Use of Psychology and demographics; consumers in the

same demographics can exhibit different psychographic profiles.
* Lifestyle (AIO) – Nike, Benetton, Gatorade
In the lifestyle segment, Future Group has Pantaloon –
a fashion retail chain.
* Personality – Femina – woman of substance
* Values – HiDesign leather accessories – consumers who hold the value
‘style and elegance in a classical sense’

Behavioral Segmentation – Next Slide

Behavioral Segmentation - based on buyer’s knowledge of, attitude towards,
use of, or response to a product

Needs and Benefits – In soaps - Dettol – antiseptic, Lux – Beauty

Decision Roles – Initiator, Influencer, Decider, Buyer, User

User and Usage Related Variables

Occasions – Marriage, Birth – Archies and Hallmark cards

User Status – Non users, first time users, potential users, regular user

Usage rate – Light users, medium users, heavy users

Buyer Readiness State – Cold Prospect, Hot Prospect

Loyalty status – Hard Core Loyals, Split Loyals, Shifting Loyals, Switchers

Attitude – enthusiastic, positive, indifferent, negative, hostile

Multiple Bases
Bases of Industrial Market Segmentation

Nested Basis
Nested Approach

Demographic
Operating variables
Purchasing
approaches
Situational factors
Personal Characteristics
Classification of Nests

Inner middle nest

Personal Purchase
characteristics Innermost nest Purchase process
decision
Outer nests
Situational factors

Company variables
Demographics Operating
Purchasing approaches variables
Demographic Variables
Industry, Company Size (Large, SMEs) , Location

Operating Variables
Technology, User or Nonuser status (light, medium, heavy users)
Customer requirements (few services or extended requirements)

Purchasing Variables
Purchasing function approach (centralized or decentralized), Power
structure( technology top, finance top, marketing top), Nature of
existing relationships( old firms or new firms), general purchasing
policies ( leasing, service contracts, sealed bidding ) , purchasing
criteria (quality, service, price)

Situational Factors
Urgency of requirement, size of order

Personal Characteristics
Loyalty, attitude toward risk, some similarities between buyer-seller
Segment based on existing relationship

First time prospects, novices, sophisticates

Segment based on purchasing criteria –

price oriented customers, solution oriented customers

strategic value customers (enterprise selling or partners)

Micro segments: small localities and neighbourhoods, Variation in a broad

segment category – Junior Horlicks, Mother’s Horlicks.

Super Segments

A set of segments sharing some exploitable similarity

Perfume manufacturers target to modern women rather
only to working women or rich women. Both segments have
a similarity of attempting to obtain – independent identity
 Qualitative / Quantitative Experience of
Segmentation/ Targeting

• Self Selection

• Profiling – Qualitative Experience of Segmentation

• Competitive Market Structuring

• Attitudinal Segmentation – Quantitative Survey Method – Clustering Conceptualized

• Discriminant Analysis
Self Selection

One of the powerful means of segmenting markets is to allow consumers to

Self select by mass-customizing the marketing offer

American Express works on self selection of customers on dimension of

extent of spending by offering different categories of rewards for light and
heavy users ; Heavy users – 2 airline round trip tickets to extra-spending
within six months; Light users – money towards purchase of car by saving
in five years.
Profiling

Method of describing a set of consumers on market

Characteristics and attaching a tag description to it.
Basic profiling of customers in toothpaste market

Segment 1 Segment 2

Demographic

Age 15-40 years 3-60 years

Family size Small (<4) Large (5+)

Education Well educated Moderately educated

Psychographics Conservative shopper Utilitarian shopper

Behavioral Quality seeking twice a Economy seeking

day brusher, loyal once-a-day brusher
deal-prone
Possible segment Upwardly mobile Conventional large
descriptor nuclear family family
Clustering Conceptualized
1. Whom to Interview.
In a survey of finding segments of customers who are travelers / tourists
to Europe, it is not appropriate to count only those who have been to
Europe, because that accounts for a small percentage. You have to
talk to potential travelers

2. Frame of reference for questioning

When you are questioning customers on vacations do you take (a) overall
experience of vacations (b) last vacation

3. Find different ways of segmentation

For example : Vacation to Europe, segment on (a) Favourability towards
Europe (b) Segmenting on Income brackets © segmenting customers
based on desires sought on their last vacation

In a study on 1750 interviews for vacationing the following segments were

Uncovered – (1) visit friends and relatives segments (2) good for family sight-
Seeing (3) outdoor vacationeer (4) resort vacationeer (5) foreign vacationeer
Segment Profiling Based on Cluster Analysis
The severe sufferers
• The severe suffers are the extreme group on the potency side of the
market. They tend to be young, have children, and be well educated.
They are irritable and anxious people, and believe that they suffer more
severely than others. They take the ailment seriously, fuss about it,
pamper themselves, and keep trying new and different products in search
of greater potency. A most advanced product with new ingredients best
satisfies their need for potency and fast relief, and ties in with their
psychosomatic beliefs.
The Active Medicators:

The Active Medicators are on the same side of the motivational spectrum.
They are typically modern suburbanites with average income and education.
They are emotionally well adjusted to the demands of their active lives.
They have learned to cope by adopting the contemporary beliefs of seeking
help for every ill, and use remedies to relieve even minor signs of ailments
and every ache and pain. In a modern product they seek restoration of their
condition and energy, mental recovery, and a lift for their active lives.
They tend to develop strong brand loyalties.
 • The hypochondriacs are on the opposite side of
the motivational spectrum. They tend to be older,
not as well educated, and women. They have
conservative attitudes toward medication and a
deep concern over health. They see possible
dangers in frequent use of remedies, are concerned
The over side effects, and afraid of remedies with new
ingredients and extra potency. To cope with these
Hypochondri concerns they are strongly oriented toward medical
acs authority, seeking guidance in treatment and what
products they should use. They hold rigid beliefs
about the ailment and are disciplined in the
products they use and how frequently they use
them. They want a simple, single-purpose remedy
that is safe and free from side effects and backed by
doctors or a reputable company.
 • The practicalists are in the extreme position on
this side of the motivational spectrum. They tend
to be older, well educated, emotionally the most
stable, and least concerned over their ailment or
the dangers of remedies. They accept the ailment
and its discomforts as part of life, without fuss
The and pampering. They use a remedy as a last
resort, and just to relieve the particular

Practicalist: symptom. They seek simple products whose

efficacy is well proved, and are skeptical of
complicated modern remedies with new
ingredients and multiple functions.

• (Wells 1975, p.203; Journal of marketing

research published by the AMA)
Discriminant Analysis Conceptualized
Competitive Market Structuring
Caffeine
Non-cola
Caffeine-Free
Cola

Regular Regular
Diet
Diet

C CF C CF C CF C CF

BRANDS
Market Structure of Soft drinks
Market structuring is showing trends to develop micro segments such as Junior
Horlicks, Women’s Horlicks, Mother’s Horlicks.

Competitive Market structuring can also be obtained, by putting brands

Together in groups based on choice probabilities. In this way, market segments
Are a group of consumers who are homogenous in terms of probabilities of
Choosing different brands in a product class

Coke, Pepsi – consideration set

Segment 1 Segment 2 Segment 3

Coke 0.50 0.30 0.70

Pepsi 0.5 0.70 0.30

Descriptor Hedonist or Mature Age Seekers of

Variety Seeker Protagonist ‘Real Thing’
Market Targeting
 Single Segment Concentration
Zodiac concentrating on executive and professionals

Selective Specialization – may be or may not be

Synergy among the segments selected
HLL in Soaps

Product specialization - Specialized product to

Market Targeting several segments – TVS makes scooters of all
ranges to several socio-economic classes

Market specialization – Serving many needs of

a single customer group. Financial services to
NRIs

Full Market Coverage - General Motors uses

differentiated marketing, Tiger biscuits uses
undifferentiated marketing.
 POSITIONING
What is Positioning
Positioning a brand is obtaining mind-space of the consumer for the brand with
Respect to competition

Positioning is the act of designing the company’s offering and image to occupy
a distinctive place in the mind of the target market so as to maximize the
Potential benefit to the firm. The result of positioning is the successful creation
Of a customer focused value proposition

e.g. – Colgate Total – Multi-benefit toothpaste as a one product solution for

people with tooth problems
As against Colgate Dental Cream – Core Identity for strong, white teeth meaning
a toothpaste to maintain healthy teeth.

2. Pantaloon Position – Affordable Fresh Fashion

1. Embrace the obvious position possible in the market or granted by the
market. Positioning should be in line with the perception of consumers’
mind not against it

Coke: ‘The Real Thing’ is fine; it is the original cola

Coke: Always Coca-Cola may not be fine as half the market is Pepsi

2. Many positioning ideas are founded on how company estimates the future

Samsung – Challenging Limits – Looks alright

Avis: We are No.2. We try harder

3. Be Simple: Volvo – Drive Safely

4. Positioning is long term. Do not be driven by the stock market

Choose a competitive frame of reference

A. Identify competitors
1. Define category membership
2. Identify the actual and potential competitors
3. Examine competition from an industry point of view
(group of firms offering a class of products that are substitutes)
criteria to classify industry include number of sellers, degree of
product differentiation, presence or absence of entry options, mobility
within industry and category, exit barriers, cost structure, degree of
vertical integration, degree of globalization).
4. Examine competition from a market point of view
Competitors are those firms that satisfy the same customer need
communication – post, courier, email, mobile, landline.
A. Choose a competitive frame of reference

B. Analyze competitors
1. SWOT
2. Strengths and weaknesses of competitors
3. Competitive evaluation by target market
4. Competitor strategy review

C. Establish POD

Next Few Slides on POD follows

D. Establish POP

Category POP
Correllational POP or Conflicting points
Competitive POP

POPs and PODs can cater to both head and heart (includes rational and emotional branding)

E. Establish Multiple frames of Reference if needed

Starbucks competes with local cafes as well as is for consumption
by both households and office staff.

F. Choosing specific POPs and PODs.

G. Use of Perceptual Maps.

Important considerations in choosing Points of Difference (PODs)

(1) PODs are desirable by the customer

- Relevant and important to the customer – e.g. price of HP

Laptop

- Distinctiveness – Service backup is not a common feature

of all foreign made laptops in India

- Believable – HP has been in the electronic business for

decades
(2) PODs are deliverable to the customer

- Feasibility – HP has the required organization to make the

service deliverable and the required technology
to offer a value for money product

- Communicability
- HPs products are not known as very expensive

- Sustainable
- HP has the required R&D to continue making
state-of –art upgrades

In this case PODs are anchored at the benefit level, sometimes they could be
Anchored at the attribute or value level
Handling Conflicting POPs and PODs (Correlational Points)

Sometimes attributes and benefits are negatively correlated or move in the opposite
Direction. Ideally consumers want to maximize their benefit package.

Examples of such cases are

(1) Low Price vs High Quality

(2) Taste vs Low Calories

(3) Nutritious vs Good Tasting.

Methods to overcome such situations

- Go for straddle positioning – do both simultaneously. Satchets

Of FMCG products from leading firms are both low price and good quality.

- Present the communication messages for each attribute / benefit

separately. Britannia has gone to the extent of separating indulgence biscuits (high
In taste) from wellness biscuits (harmful fat taken out, fortified biscuits )

- Leverage equity of another entity e.g. Intel Inside

- Redefine the relationship – Teach customers that the relation between

attributes is redefined and now stands positive e.g. Apple is user friendly
and not regarded as powerful. Apple came up with an ad campaign that
had the tag – ‘Power to be your best’, teaching customers that they used it
because it was user friendly and having used it successfully it was powerful.
 Ground Instant
Coffee
Mildness
sanka
Brim
Taste
Maxwell
Folger’s
Store brands HillsBros
Caffeinated Decaffeinated
Chuck Full o Nuts

Regular Freeze Dried Regular Freeze dried

Mildness Mildness Mildness
High Point Mildness
Nescafe’ Taster’s Choice Sanka
Folger’s Sanka Nescafe’ Taster’s
Maxwell house Maxium Choice
Brim
Taste Taste Taste Taste

Hierarchical definition of the coffee market with perceptual maps in each submarket (Urban
Johnson and Brudnick 1981)
STEPS TO POSITIONING
• Determine Target Market

• Laptop for the business professional

• Determine category membership of the brand under consideration

• Hewlett Packard dv1000 is a sophisticated business laptop

• Identify the competition

• Sony, Toshiba
4. Establish the Category Points of Parity to fulfill the necessary conditions
of category membership

there are three main ways to convey a brand’s category membership

- announcing category benefits
centrino mobile technology; core processors

- comparing to exemplars
on par with HP’s excellence in instrumentation

- relying on the product descriptor

HP Pavillion dv1000 is an entry level business
laptop
5. Establish the Competitive Points of Parity to establish the equivalence of
Product benefits, attributes, values with respect to competition

HP’s manufacturing quality is no way behind Sony or Toshiba. It is

backed by decades of manufacturing electronic systems

6. Establish the Points of Difference if any to take a differentiated position

If no POD exists then the brand takes a head on position or a me-too
position

HP has an excellent service network in India as compared to Toshiba.

HP is not as expensive as Sony
7. Monitor Competition
Assess potential threats from competition using
- share of market – market share
- share of mind – percent of target market giving top of mind
recall (unaided)
- share of heart – percent of target market giving first
preference to any given brand.
Firms that make steady gains in mind share and heart share will lead to gains
in market share and profitability.

7. Write out the Positioning Statement

To the young urban professional (target market) our product – HP

Pavilion dv 1000 is a rugged system with all the necessary features of a state-
Of-art business computer and is offered as a value for money laptop with
Excellent service backup.
Positioning errors

1. Under positioning: Vague idea of a brand, no clarity e.g. NIMA vs NIRMA

2. Doubtful positioning: Hard to believe brand claims e.g Hair loss stoppage brands
3. Confused positioning: Too many claims of a brand e.g. Let us say PS/2
4. Over positioning: Too narrow an image of a brand e.g. Consumers assess TITAN as
a watch brand above Rs. 5000/- when indeed it has watches above Rs. 500/-
RTB – Reasons to believe

Coffee Brand Positioning Bull’s Eye

 Differentiation
It is the process of adding a set of meaningful and valued differences to
Distinguish a company’s offering from competitor offerings

A difference will be stronger if it satisfies one or more of the following criteria

1. Important - Infrastructure investment of business school

2. Distinctive , but not necessarily superior - Bajaj motor cycles

3. Superior - Product superiority of Gillette

4. Preemptive - cannot be easily copied – Milk Position of Cadbury

5. Affordable - Personal Computer of Acer

6. Profitable - MTR’s food products

Dimensions on which differentiation can be achieved by firms

1. Product / Services

2. Personnel

3. Design

3. Channel

4. Image
Product / Services

- Product / Service Quality

performance based – BMW
conformance quality – CMM in software
physical signs and cues – Tata Indica
- Form- Satchets
- Features – Cameras
- Durability – Volvo
- Reliability – Maytag
- Repairability – Maruti
- Style – Benetton
- Design – Designer wear
- Customization – Avon in cosmetics
Services
- Ordering ease – FlipKart
- Delivery – Pizza Hut Home delivery (PHD)
- Installation – Mobile
- Customer Training – GE Medical Systems
- Customer Consulting - Saree selling
- Maintenance and repair – Premium apartments in the city.
- Returns and exchanges – returns controllable by firm with better management
such as improved handling and storage; returns not controllable by
firms due to customer need to try suitability of product.
Design
- Offers functional benefits and aesthetics to products that appeals to
both rational and emotional sides.

Personnel

- Trained personnel should exhibit the following

- Competence – Repair engineers of process plants

- Courtesy - Front line staff in premium hotels

- Credibility – Premium hospital doctors

- Reliability – Parallel computers

- Responsiveness and Communication – Beauty Consultants

 Channel

- Coverage – HLL

- Expertise – Avon

- Performance - Caterpillar

Image

- Differentiate Identity – Mysore Sandal Gold vs Dove

- Differentiate Logo, colors, slogans, events and sponsorships – Coca-Cola