Marketing Mix=4 P’s

• Product
• Price
• Place
• Promotion
Marketing Mix: Product

“The point of all this is that there is It can be a:

no guarantee against product • Physical Object
obsolescence. If a company’s own
research does not make it obsolete, • Service
another’s will.” Levitt • Place
• A product is anything that can be • Person
offered to a market for attention, • Organization
acquisition, use or consumption
that might satisfy a want or need. • Idea
• Product is central to a marketing • Experience
exchange
Product Categories
Product can be:
• Product only
• Service only
• Major Good + some Service
• Major Service + some Good
Categorization of Goods
• Convenience goods: No
effort=Salt
• Shopping goods: Considerable
effort=TV
• Specialty goods: Lots of effort=
BMW car, Rolex watch
Do the Products Fail?
• Pond’s toothpaste vs Pond’s
cosmetic products
• Vanilla Coke vs regular Coca-Cola
• Harley Davidson aftershave and
perfumes vs Harley Motorcycles
• Rasna fizzy fruit drink Oranjolt vs
Rasna drink powders
• Many online games
• If a company does not get the
product right, then all the costs
that it has incurred would be
wasted and no amount of
advertising and promotion will be
able to put that right.
• Yes, advertising and promotion are
important, but never as influential
as some people make them out to
be. It is much easier and cheaper
to change a product than to change
people’s minds about it.
Marketing Mix: Product

A Product can have:

• Name
• Label
• Quality
• Ingredients
• Price
• Advertising Message
• Appeal
• Endorsement
• Display
• Distribution
• Sales promotion schemes
• Aftersales care
APPEAL ON A
PRODUCT
 • Product Portfolio Matrix
Concept: • For long-term Strategic planning
BCG Matrix
(Boston Consulting • To consider Growth opportunities
Group) • To make decisions=whether to invest in a product, or to
develop it further or to discontinue
• Stars=High Growth Market and high Market share
• Question Marks or Problem Child=High Growth Market but Low Market share
• Cash Cows=Low Growth Market but have high market share
• Dogs=Low Growth Market and Low Market share
Product Mix=Product Lines (Width,
Length, Depth, Consistency)
 Why have Product Mix:
• Growth Objectives
• New revenue sources
• Higher market share
• Moving into different markets
• Leveraging current capabilities
• Increased market participation
Google Images
Product Lines
Product Mix
• Width=Number of product lines= Colgate
Colgate Toothbrush Toothpowder Mouthwash Bodywash Liquid Shaving Skin Cream Shampoo
Toothpaste Handwash Cream

• Length=Number of products present in a line=Products are added to a

line to cater to different market segments=Colgate Oral Care
Colgate Toothpaste, Toothbrush, Toothpowder, Mouthwash

• Product Depth=Number of variations in a product=Different Variants

of Colgate Toothbrush
Colgate
Sonic Power
• Consistency=Degree of closeness or relatedness between
product lines=Pepsico has soft drinks, snacks, juice, breakfast
Sensitive
food, energy drinks. Rival Coca Cola has soft drinks, coffee,
Extra Clean
bottled water, fruit-based drink.
Colgate Kids -Coca Cola is more consistent than Pepsico.
Zigzag -Impact of low consistency=Different Production Processes,
Charcoal Distribution systems, less transfer of competencies, target
Max white consumers
Product
Differentiation
• Marketers face the challenge of “How do I differentiate
my product?”
• Their assumption has been that commodities can not be
differentiated.
• Levitt (1980) challenged this assumption by saying that
everything can be differentiated. Both goods and
services can be differentiated
• Although generic product in many cases is similar and
undifferentiated, the offered product can make a critical
difference

• He argued that the Attributes of products give the

marketer opportunity to win the customer from the
competition and, having won the customer, to keep him!
Product Levels
(Value addition for Differentiation)

Augmented
Product

Actual
Product

Core
Value
 • It is the value that a customer perceives to obtain by buying a
product.
• It is the difference between the total obtained benefits
according to the customer perception and the cost that he had
to pay for that.
• Customer perceived value is seen in terms of satisfaction of
Customer needs a product or service can offer to a potential customer.
• The customer will buy the same product again only if he
Perceived perceives to be getting some value out of the product. Hence
delivering this value becomes the motto of marketers.
Value (CPV) • Customer Perceived Value = Total Perceived Benefits – Total
Perceived Costs
• The CPV is kind of an evaluation done by customer on what
value a product or a service would be able to provide if he
buys it by paying money.
• The benefits and costs also include the emotional benefits and
costs.
Two ways for a Company to grow
(Continuous supply of new products is required to replace the ones that decline or
fade-out)
Product Acquisition New Product Development

Inorganic way Organic way of growth

• Moov (Reckitt Benckiser) • Face Mask
• D’cold • Lifebuoy sanitizing products
• Krack
• Itch Guard
• Kesh King
• Horlicks (HUL)
Fast Moving Consumer Goods FMCG
• Products that cost low (relatively)
• Sold quickly
Company Hindustan ITC Limited Nestle India Britannia Godrej Dabur India Marico Ltd. Varun
Unilever Ltd. Industries Ltd. Consumer Ltd. Beverages Ltd.
Limited Products Ltd.

Revenue 40511 Cr 51321 Cr 12117 Cr 11211 Cr 10156 Cr 8813 Cr 7465 Cr 6695 Cr

Sales Growth 6.89% 7.25% 11.37% 9.60% 6.98% 2.67% 6.82% 14.58%

Top Brands Surf Excel Vivel Maggi Good Day Cinthol Vatika Parachute Pepsi
Rin Bingo KitKat Tiger Dabur Honey Saffola Mirinda
Wheel Ashirwaad Nescafe Milk Bikis Red Livon Mountain Dew
Vim Savlon Cerelac Real juices Set Wet
Lux Classmate Milkmaid Pudin Hara
Lifebuoy Sunfeast Odonil
Dove
Pond’s
Vaseline
Lakme
Pepsodent
Close Up
Bru
Kissan
 FMCG-International Co.s
Country USA Switzerland USA USA Belgium USA Netherlands France

Company Johnson & Nestle Procter & Coca-Cola AB InBev PepsiCo Unilever L’Oreal
Jonson Gamble
P&G
Revenue $ 366 $ 286 bn $ 256 bn $ 193 bn $ 164 bn $ 162 bn $ 154 bn $150 bn
billion
Products Gillette Beer Cosmeti
Ariel cs
Pampers

Colgate-Palmolive
Reckitt Benckiser=Veet, Strepsils, Durex,
Parle Agro
AMUL
New Products

New Products
• Laundry Sanitizer
• Strain Remover
• Surface Cleaner
• Germ Kill Spray
• Air Sanitizer
• Healthy grain- based Snacks
 • New to the world=Innovative novel creations
New Products (Post-it-notes)
• New to the company=Companies expand their
can be: offerings=Adding new product lines (TATA adding
food line TATA Sampann)
• Additions to product line= Adding new type to
product line for evolving customers and to beat
competitors (Dant Kanti vs Colgate Vedshakti)
• Product Improvement= The product is considered
new because of some new change. Different
types of Colgate toothbrushes, Samsung
refrigerator running on inverters.
Concept: Ansoff Product and Market Growth Matrix
Product and Market=New or Existing
New Product
Development
Process
 • The DoI theory tries to explain how and why new ideas, product,
Concept: Diffusion of structures, or phenomena (innovations), spread across users and social
Innovations-How does a new systems. It posits among other things that there are at least five
Product gets spread in the conditions that define the rate of adoption of an innovation, including
relative advantage, compatibility, complexity, trialability, and
market (Rogers, 1995) observability.
 Why do some products take
longer to diffuse (spread) in
Two important a market=Innovation
Characteristics
factors related to
Diffusion of Why do some consumers
Innovations take longer to adopt
innovations=Psychological
Characteristics
Innovation Characteristics=Products take
longer to disseminate

Product Characteristics influence on Diffusion e.g Dishwasher vs mobile phones. Speed of

spread of a product depends upon:
• Relative Advantage: Is the new product better in solving my problems? If customer perceives
this advantage, he is likely to buy. Computers vs laptops
• Compatibility: Does the new product match my needs, values and practices? Use of Pressure
cooker vs slow way of cooking
• Trialability: Allowing a consumer to take a trail helps in adaptability of the product. E.g. Car
test drives
• Observability or communicability: Letting a consumer observe features and functions before
buying. The seller can communicate about physical product the product.
Consumer Characteristics' influence on Diffusion
Different consumers- different responses. Some take longer to adapt- some adapt easily

There are 5 categories of consumers as per the time taken by them to adopt:
• Innovators=2.5% of population and are the first to adopt anything new.
Psychologically these people are considered daring, risk takers,
Stage and Distinguishing
adventuresome. Innovators are educated, use multiple information
sources and are socially connected with others. Some may try a few new
aspect
products some may try any new product. The new product marketers
target these consumers. Innovators=Adventure
• Early Adaptors: 13.5%, socially networked and act as opinion leaders for
other members of their social system. They are respected for their social
skills. They use mass media and interpersonal resources to spread the Early Adaptors=Leadership
word.
• Early Majority: 34%, They deliberate more respond less. They do
and respect
extensive planning and calculation.
• Late Majority: 34%, take longer, approach innovations cautiously, Use of
Early Majority=Deliberation
new product happens after peer pressure or economic necessity
• Laggards: 16%, Traditional and suspicious of new ideas and things Late Majority= Skepticism
Laggards=Traditional
 Diffusion of Innovation Process-Decision Process
How consumer moves through sequential different stages before he buys
a new product

Five sequential Stages

Stage 1: Knowledge: Information and awareness
Mental Exercise
Consumer is gets awareness about the product. The stimulus or inputs
about the product can come from Word of Mouth or media
communication. It is up to the consumer how he interprets the
communication.
Knowledge=Information and Awareness
Stage 2: Persuasion= Formation of Attitude, Perceived risk and
consequences of buying the product
Persuasion= Formation of Attitude
Consumer assess the product and will have favorable or unfavorable
feelings towards it.
Stage 3: Decision=Adoption or rejection
Decision=Adoption or rejection
Consumer at this stage decides to buy the product or not. Those who
adopt the innovation Adopters and those who do not are Non-adopters
Stage 4: Implementation= Marketing Mix works here to make sure the
Actual Behavior
consumer buys and use this new product. Demonstration, sampling,
discount offers, additional services etc. work here to facilitate the
purchase
Stage 5: Confirmation: Communication is necessary here otherwise Implementation
consumer may end up with self doubt and decides not to buy the
product. Confirmation
Marketing Mix: Price
• Price is the money that customers pay to buy something
• Price=Cost + profit
• Marketers manipulate the price by playing upon consumer psychology (Actual cost + profit margin +
Imaginary consumer perception/idea)
• Revenue=Units sold multiplied by Price per unit
• Price and Demand=Inverse relationship
• Quantity and Cost
• Rare commodities have more value
• Abundantly available commodities do not command high price
• Pricing is complex and also the most critical.
• It is the P that brings in the revenue. The other three-Product, Place, Promotion- are related to expenditure
• It can also have these names-Fees, Fare, Remuneration, Rent
• Price was determined by the Macro forces of supply and demand
 Market Structures and Pricing Control
Perfect Competition Monopoly Monopolistic Competition Oligopoly
-Imperfect Competition
Large number of firms- Market is dominated by one Large number of firms enjoy A few firms dominate the
No single firm has the control single player a modest degree of control entire market. Each big
over the market player has substantial control
Product homogeneity- Monopolist control the entire Manipulation of Marketing When one firm reduces the
No product differentiation market and sets the price Mix happens-Goods price others also do the price
Perceived value is equal produced by other firms are cut. Price increase is not
similar but not perfect copied though.
substitutes
Resource mobility- Leads to inefficient and Discrimination is added that
Absence of any entry and exit ineffective allocation of leads to buyer
barriers resources discrimination/choice.

Consumer knowledge- Government regulations It is done through Automobiles and

Consumers are fully informed sometimes create monopoly promotions, advertising, Petrochemical industries
and aware of prevailing price e.g. Indian Railways packaging, product features
hence no firm can etc. Soap, detergent, mobile -
overcharge phone, car etc.
Price based Competitive Battles

• Nirma detergent
• Ghari detergent
• Priyagold biscuit
• Gola Shoes
• Mobile Phones?
 Four Factors of Pricing • Fixed Cost
• Variable Cost
• Return on
Cost Investment

• Visible and measurable

factor
• Price cuts are attempts • Demand, Quantity
• Supply
to poach customers
• Income
• Product Differentiation • Needs and desires
is done
• Few competitors in the
Competitors Price Consumers •
•
Perception of benefit
Willingness to pay
market- they keep
close eye on each
other’s moves
• Profit Maximization
Company • Selling more volume at low
Objectives Price
• Selling less but at a high
price
• Have high market share
Price Determination=Calculate breakeven
point first
• Break-even Point=A point where the company neither earns profits
nor suffers any losses.
• It earns the revenue that covers all the costs incurred by the company
• All costs incurred=Total Revenue
• Helps in determining the number of units to be sold/ volume of an
item to earn back the breakeven amount
 Pricing Method=Price decisions are crucial decisions and are
based on cost, demand, revenue, investment
For setting Prices, an organization can have
Cost Orientation=Cost-plus pricing approach
Price should recover all costs
Cost + profit margin=price
Costs to consider=Total cost= fixed cost, variable cost,
marginal cost, direct cost, indirect cost, overhead costs
Markup Pricing=Different markups for different goods, in
case of trades where there is no price standardization
E.g. Made to order Automobile designing, jewelry, food
catering
Higher Markup=More profit
Low Markup=Less profit
Not a good assumption. Customer should find it attractive
Stock Turnover Rate=At a certain markup, how long does it
take to sell the stock
Demand Orientation=Two approaches for setting the price
Different customers=Different demands
Pricing is based on the nature of consumer demand
Perceived Value Pricing=Price consumers are willing to pay as
per their assessment of the worth of the product
E.g. Increasing price of cigarettes. Customers who perceived
high value of cigarettes and did not quit smoking continue to
buy at high price
Inaccurate assessment can lead to assigning over or under
value. Value of a product or service is influenced by many
factors.
Value perceptions change=Different Positioning of the similar
products in the mind of the customer, emergency need of a
product or service.
Price Discrimination= Selling same product at different
prices. Reasons could be different Customer, Place, time and
product form
 Pricing Method=Price decisions are crucial decisions and are
based on cost, demand, revenue, investment
For setting Prices, an organization can have

Competition Orientation Pricing=Price charged by competitors affects the pricing

Price can be lower or higher than the competitor
Since the market structures are either monopolistic or oligopolistic=many competing firms in the market
Going rate Pricing=To avoid price-based competitive war in case of undifferentiated products. Consumers tend to shift
to another brand in case of product homogeneity. E.g. Cola drinks, petrol, salt etc.

To gain pricing freedom, marketers try to differentiate the products. That is why companies work on building brands.

Real product differentiation based on product features and characteristics is quickly copied by the competitors.

Therefore, Perceptions based differentiation is created. Here the products are projected as entities that can affect the
psychosocial factors of a consumer. Watches like Rolex, Tag Heuer, Omega, Rado, Seiko, Cartier etc. are more of a
perceptual entity than a time keeping instrument and are accordingly priced.
Pricing Strategies=Two types
Market Penetration=Low Prices
• Maruti, Nirma, Micromax, Priyagold, Jio
• Market penetration by low prices
• To target price sensitive customers
• To gain bigger market share
• Volume Oriented approach
• Target lower end of the market pyramid
• Tend to generate small profit from a large base of
customers
• Volume of production should be such to have low
production costs-Mass Production, Economies of
scale, Cost cutting Practices, Quality compromises
• Firms need to have resources for producing high
volumes
• Competitors can enter easily hence need to
capture high market share
Market Skimming=High Prices
• Apple, Rolls Royce, Omega, Bose, Armani,
• Concentrating on the top end of the market
• Some companies charge premium prices
• Target only a small section of the total market
• Specific segment of customers
• Revenue model is to maximize return per customer
• These brands offer maximum perceived value
• Consumers are not price sensitive
• Sellers sell fewer units
• Skimming is recommended if= there are customers
who are willing to pay higher price, they are not
price sensitive, there is no threat of competition.
• Firms have differentiation advantage because of
technology, perceived image, goodwill, prestige,
patented design etc.
• Niche Markets get created
Pricing Wars
Why=for Market Share, tit for tat attitude, want to win at any cost

HUL Surf Excel Surf Excel Blue HUL responded by cutting

price
P&G Ariel Tide Cut the Price

Cause and Control:

Lack of product differentiation
P&G tried to take market share
HUL faced revenue loss
Retailers and Distributors pressured HUL to cut
price
HUL cut price-Dealers put price cut stickers on
Surf packets
How to handle the Potential Threat from
a competitor:
Existing companies with large market
share reduce the price of their cut or keep
the price so low that it deters the new
entrant and low price acts as a ENTRY
BARRIER
e.g. Air fares
Effects of Price Wars
• Low Profits
• Low Profit Margin
• Decreased Revenue
• Need to sell more units now
• Since price cuts are from both the parties, the industry revenue
decreases
Pricing of a New Product
• Pricing a new product is difficult because there is no earlier product
like it
• Company wants high volume sales and high revenue
• If they keep the price low sales increase
• If they keep the price high sales are low
• Moreover, a competitor can copy the product and can fight for
market share
• The time taken to copy depends upon Patents, investment required,
sales potential, strength of the competitor
Benefits of keeping high Price

• Some products are priced high initially to earn as much profit as

possible before a competitor comes=Aggressive selling
• Some plan to earn from top rich layer of pyramid
• High revenue in initial stages can generate required funds
• Demand can be created by reducing prices later
Benefits of keeping low Price

• Generates Mass appeal

• Earned Revenue is high
• Revenue is earned from large consumer base of the pyramid
• Ideal for price sensitive customers
• Economies of scale is achieved
Factors that affect new product price
determination
• Possible demand
• Costs
• Marketing targets-sales volume to achieve
• Promotion to achieve desired consumer response
• Acceptance of price and promotional strategies by the distribution
channel
Week th nd
Nov.16 -22 , ’20
Goal: Go through the slides
Marketing Mix: Place=Distribution Channel=Marketing Channel
Manufacturer

Purpose: To make the Carry & Forward

product available Agent C&FA Intermediaries=Channel
Partners=Entities
between a manufacturer
Distributor and a consumer

• C&FA
• Distributor
Wholesaler • Wholesaler
• Retailer
• Brick and Mortar vs
Online Retailer
• Multiple Dealers Outlet
vs One Dealer Outlet
Customer
Marketing Channel:
• A Marketing Channel is a set of independent organizations involved in
the process of making a product or service available for use or
consumption to the consumer within an arm’s length of his desire &
support to sales management
What do the channel partners do= Make
products Available
• Movement & storage of Finished Goods stocks nearest to the customer
• Follow visit plan/beat plan/call plans (in walking order) to minimize
coverage time and maximize productive calls
• Push range selling – brands & packs, ensure high visibility, rotate slow
movers
• Add orders and ensure timely execution, Manage credit – as per policy
• Recommend corrective promotions and incentives Analyse reports and
make proposals for adaptation of good practices 7. Ensure prompt actions
& follow-up on complaint redressal 8. Support in ensuring high visibility,
wide distribution, and placement 9. Initiate participation plans and manage
spends / revenues 10. Ensure good placements and visibility 11. Ensure
adherence to guidelines for training, development and evaluation
• Own sales force ( e.g. Eureka forbes) C&FAs or Depots – to break
bulk Distributors, agents, dealers, stockists Transporters,
warehouse operators Independent wholesalers in the market
Independent retailers ( modern trade) E-commerce Internet direct
selling (B2B)
• Channel Management – gives Place, Time & Possession utility to
various layers …& finally to the consumer Marketing channel –
internal organizational units and / or external contractual organization
through which a commodity, product or service is marketed i.e.
reached to the end consumers Necessarily needed since the
consumer has to be reached at his/her place , in time to effect the
transfer of possession
• A Marketing Channel is a set of independent organizations involved in the
process of making a product or service available for use or consumption to
the consumer within an arm’s length of his desire & support to sales
management…Coughlan, Anderson, Stern & Ansary Marketing channels
are the distribution networks through which producer’s products flow to
the market … Cundiff, Still & Govoni A distribution channel is a set of
independent organizations involved in the process of making a product or
service available for use or consumption by the customer or the industrial
user … Kotler & Armstrong A distribution channel is the structure of intra
company organization units and extra company agents, dealers,
wholesalers and retailers through which a commodity, product or service is
marketed i.e. reached to the consumers… American Marketing
Association…
• Marketing Channels –Evolution - Examples Brooke Bond & Wimco –
Direct distribution untill mid 90’s Hindustan Lever Ltd (HUL)
Wholesalers & major retailers Registered wholesaler wholesalers
major retailers (company operated units) C&FA Re-distribution stockist
(RD) wholesalers major and other retailers ( RD ‘s distribution units) IT
enabling all above internet based capturing of transactions by RD’s
distribution units online interaction of retailer’s orders - RD stocks &
orders - C&FA stocks & replenishments daily, pack-wise, brand-wise, RD-
wise, territory –wise, area –wise, state-wise and so on …. Eureka Forbes (
Direct Distribution) 600 + metros , cities & smaller towns 5500+sales
personnel ; 900+ service centres ; 80 % of the customers within 3 kms
radius of a service centre Later Added retail network to tap the walk-in
customer who remembered the sales & health story when the company
representative called at home earlier
• Channel Responsibilities & Value addition In addition to providing
time, place & possession utility, the channel adds value by
Attending to the consumer complaints w.r.t. quality ( FMCG)
Providing delivery, installation & after sales service ( consumer
durables) Installation, test runs, peak capacity up scaling, routine
maintenance guidance (industrial products / IT hardware)…
• Channel Alternatives Consumer products Consumer durables
Pharmaceutical products Industrial products Sales & service
industry Project consulting & execution industry
• Costs, Margins & Profitability Costs Capital investment -
Distribution vans, IT / office hardware, warehousing Working capital
Stock & handling of goods / inventory Market credit Office &
market operating expenses Margins C&FA – 1 to 2% of value of
goods handled Distributor – 4 to 10% mark-up ROI – 25 to 50%
Wholesaler – 1 to 2% on turnover Retailer – 20 to 50% on turnover.
• Marketing Channel Structure – Critical Variables Customer Related…
nature & specific requirements. Locations, numbers, nature,
frequency & intensity of coverage required. Product Related…
Physical characteristics of the product – nature (physical product or
service), size, weight, unit value, perishability, ambience requirements
etc. Company Related… size, affordability and managerial capability.
Competition Related…system, intensity, unique features-if any
Intermediaries Related… role definition, required quality, numbers,
readiness vs. training needs, supervision needs. Cost Related…
margins, logistics / transportation, market servicing…
• Planning Process / Stages Segmentation… Expectation of customer
clusters (segments) from the marketing channel. Prioritization of the
segments to be covered. Positioning – locations, numbers, nature,
frequency & intensity of coverage. Competition – system, intensity,
unique features-if any Intermediaries – role definition, required
quality, numbers, readiness vs. training needs, supervision needs.
Costs – margins, logistics / transportation, market servicing…
• Defining Customer Needs Lot Size – nature & specific requirements
basis the product category Waiting Time – locations, numbers,
nature, frequency & intensity of coverage. Choice of assortment –
segment wise, unique featuresif any Place Utility – intensity of
distribution versus consumer requirements ; service setup for
consumer durables Service support – efficient balancing of service
levels basis cost of providing the service
• Defining Channel Objectives Reach – nature & specific requirements
Deliverables – customer or product wise Competition – improvements
over competition, system, Regulatory requirements – of the place of
operation…
• Channel Alternatives Intermediaries - current vs. required C&FAs;
logistics service providers ; super distributors; distributors; wholesalers ;
retailers ; service centers Numbers & types - required vs. currently
available; optimal needs ; training requirements ; financial strength –
current & future requirements Hybrid - combination of one or more
channel types viz. Own sales force for specific outlets / customers +
distributors for mass distribution + e-commerce portal – own vs. existing
for online selling increased reach yet important customers serviced as per
requirement ; faster & authenticated information flow ; controlled
dependence…
• Cost of Channel Systems Margins of the channel partners Cost of
transportation of goods to the end consumer Cost of order booking and
execution Cost of stock returns / date expired stocks taken back from the
market Cost of any reverse logistics e.g. getting empties back…
• Evaluating Channel Alternatives Infrastructure – present vs. required
Ability to understand policy guidelines, operate & manage the SOPs w.r.t.
operations & reporting Adaptability w.r.t. addition / deletion of product
range, service support, territorial extension, fairness in distribution,
additional volumes – warehousing & financing Cost of operation – own
vs. exclusive /non-exclusive partners optimal alternative – deliver
required service at least cost Ideal Channel Structure – optimizes
customer service delivery and the costs associated with it
• Channel Partner - Selection Necessary requirements Market
coverage – of existing & development of new Key Accounts –
development & service Working capital – inventory, market credit,
claims, promotions Technical service & support – product category
based Customer complaints – resolution Reporting - business
transactions, market & competition C&FA – selection matrix
Distributor – selection matrix
Why do companies have distribution channels?
• If there is no channel- partner,
then the company will have to
do direct selling or direct
distribution which could be
tedious for a large company that
is selling tens of products.
• To have strong contact with
large number of customers who
are geographically dispersed
• To manage transactions with
customers
• To reduce time, effort and cost of
reaching a customer
• To cater to the needs of every
customer. Each customer has a
different expectation
• To have effective and efficient
operations
• Channel partners perform several
functions that help companies sell
more
What all flows among channel partners:
Upward Flow-Downward Flow
Physical Product
Ownership of Goods
Promotions Advertising, sales promotions,
personal selling techniques
Information Customer Customer feedback, emerging
Manufacturer changes in tastes and preferences
Other channel partners of the customers, Competitor
activity in their area, Market
information
Money
Marketing Mix: Promotion
• Advertising
Class Test 2 Walmart Analysis-
Two chains-sold same products, wanted each other’s customers, similar
names, started together 1962, Discount store battle

Walmart Kmart
• Sam Walton • Joseph Antonini
• Forced resignation 1995
• 7 years
• Advised to find a “different niche” and to stop
competing against Walmart
• Have major operational and managerial issues
• Investors had believed in Kmart and Antonini
and had doubted Walmart strategies.
• Investors thought Antonini had more style
and suaveness and vitality.
• Investors had thought Kmart had better
locations and a turnaround plan
Walmart
• Analysts attribute different fate of
the two similar companies to the
better management of Walmart.
• They say Sam Walton was smarter
than Antonini.
• Computer systems helped
Walmart track and replenish
merchandise swiftly and efficiently
Kmart
• Analyst felt Antonini has taken a
tired, dispirited company and
revived it
• Analyst felt Walmart stock were
overpriced and investing in Kmart
was a better option.
• 1987-Antonini took charge of
Kmart
• His hands were full. He had some
17 years old stores with broken
floors and fixtures. Poor and cheap
shelf space displays in the middle
of the aisles
• Computer system not implemented
by his predecessors
Walmart Kmart
• 1198 stores • 2223 stores
• $15.96 bn • $25.63 bn sales
• Consistent record of earnings and revenue • Logo “K” more visible
growth • More advertising
• Walmart located stores outside of small
towns • More urban presence
• Customer base came from old mom and pop • Stores on expensive urban real estate
local shops • Personality: Antonini, 53 years old, would
• Sam Walton mentioned with awe that he felt dismiss Walmart executives and would use
Kmart stores were superior to Walmart derogatory terms for them
stores. • To face competition from Walmart Antonini
• Walmart expanded rapidly across rural focused on marketing and merchandising
landscape
• No advertising
• Operations preferred over marketing
• Computer system linking cash inflow to
headquarters
Walmart
• Quickly restocking goods
• Invested heavily in Trucks and
Distribution centers
• Increased control
• Reduction in costs
• Offered lower prices, more discounts
• Preferred Discount retailing
• Started deep discount members only
Sam’s Cub
• Hypermart for groceries did not work
• Supercenter, smaller than Hypermart
worked
Kmart
• Advertising: Invested heavily in
national television Advertising
campaigns and glamorous tv star
brand ambassador who was also
Kmart clothes supplier.
• Focus on enhancing image and
customer loyalty
• Diversified: Increased the product
base-sports-goods, office-supplies,
books.
• Not for discount retailing
Walmart
• 1990 Walmart surpassed Kmart $32.6 bn
• Still had fewer stores 1721
• Sophisticated distribution, inventory and
scanner systems helped sales.
• Stocks never depleted from shelves and
price-check delays did not happen
• Has reduced costs and is still underpricing
Kmart
Kmart
• Kmart $29.7bn
• Stores 2330
• Antonini thought Walmart will come to urban
area. He launched a $ 3.5 bn plan to renovate,
enlarge and replace old stores
• Analysts were in favor of this and called him a
visionary
• Poor distribution. Warehouse had stocks
instead of the retail shops on Christmas time
• 1993 report-Kmart employees lacked skill to
plan and control inventory
• Billing people did not have up to date
information and would enter wrong prices.
• This led to a lawsuit costing $985000 to Kmart
in 1994
Walmart
• Twice as large as Kmart stores
• Opened many Supercenters to buy groceries
and general items in one store, at a discount
• Walmart market share increased from 20.1%
to 41.6%
• Leadership attitude, organizational best
practices, preferred to discuss Walmart’s
weaknesses
Kmart
• Specialty stores contributed 30%. Share
holders asked Antonini to sell stakes in these
• 1996- one third stores not renovated and
those that were did not produce expected
sales gains
• Had to reduce capital spending
• 1987 Antonini joined-Kmart market share
reduced from 34.5% to 22.7%
• Antonini would not accept suggestions for
change and thought others can not tell him
much.
• Not much hiring of managers from outside
the company
• Not following consultants’ advice
• Antonini, in 1993, mentioned writing a book
detailing a retail success (which Kmart was
not)
Brand Management
• Involvement Level
• Low involvement=behavior is a direct response to situational
constraints and not especially reflective of one’s attitudes or
knowledge
• High involvement=person should be more motivated to act in
accordance with knowledge and internal values.
Branding: The Marketing Iceberg
References
• The Marketing Book Baker & Hart (Harvard B School)
• Marketing Prof. Harsh Verma (FMS,DU)
• The fortune at the bottom of the pyramid CK Prahlad (Univ.of
Michigan)
• Marketing Myopia T Levitt