CUSTOMER RELATIONSHIP MANAGEMENT

UNIT I
Unit I: Introduction – Definition - Need for CRM- Complementary layers of CRM - Customer
satisfaction - Customer Loyalty - Product marketing - Direct Marketing.
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Definition of CRM:
Customer Relationship Management (CRM) is a comprehensive strategy and process of acquiring,
retaining and partnering with selective customers to create superior value and strong relationship with
customers.
A commonly cited definition of CRM is that of CRM (UK) Ltd (2002), as follows:
“Customer Relationship Management is the establishment, development, maintenance and optimisation
of long-term mutually valuable relationships between consumers and organizations”.
CRM is neither a product, nor service but a business strategy to learn more about customer behaviour and
requirements in order to create long term relationship with them. CRM involves use of technology in
attracting new and profitable customers while forming tighter bonds with existing one.
Needs / objectives of CRM:
1. Enable the company to identify, contact attract and acquire new customers:
CRM allows the company to focus its limited marketing resources on the most promising target markets
with the highest potential value. This is typically done using the information generated by CRM
application which
a) Automatically generates customer and market profiles
b) Identify and target market with high revenues

c) Generates, leads, tracks marketing campaigns across a variety of media

d) Selects appropriate contact media, plans promotions and incentives
e) Manages the proposal process through negotiations to close.
2. Obtains a better understanding of the customers- their wants and needs:
CRM applications, often used in combination with data warehousing, e-commerce applications and call
centers, allow companies to gather and access information about customers buying behavior, wants in
terms of products or services provided by the company. The information is used in planning and

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execution go marketing campaigns. It enables customers to seek products and reveal their preferences in
an interactive manner.
3. Defines the appropriate product and service offering and match it to the unique needs of the
customer:
CRM provides customization and personalization capabilities that gives customers the power to view the
enterprise in a way that they can relate to, there by making it easier for them to do business with it. This
includes configuration, pricing, quotation, catalog and personal generation capabilities that harness the
power of Internet while ensuring the flexibility to respond quickly to changing technical and business
conditions.
4. Manages and optimizes company’s sales cycle:
The productivity of the sale process is increased by accurating the contracting process and improving
revenue velocity. This is accompanied to capabilities such as online order entry, credit card processing,
tax calculations, auctions, billing, order status and payment processing. CRM solutions also include tools,
which provide the ability to communicate important information from supply chain modules to the
customer interface in real time. These tools can help in determining feasibility, profitability and delivery
dates, while understanding the constraints of the entire supply production and logistics chain across
multiple channels and enterprises.
5. Increases retention of existing customers through improved sales, service and support:
CRM applications document all post –close service and support related interaction with customers, record
customer requests and collect feedback from variety of communication channels and use the information
to anticipate the demand for service and technical assistance and maximize customer satisfaction and
retention while maximizing customer service staff. The goal is to ensure greater customer loyalty. CRM
provides capabilities for providing online support information, online product registration to an electronic
help desk, self service support logging and tracking and integration with call centers.
6. Identifies Cross selling and up selling opportunities :
CRM can help in identifying opportunities for cross selling and up selling of higher value added services
to the existing customers, based on their past purchasing behaviour.

Complementary Layers of CRM / CRM perspectives

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CRM is a term that is often referred to in marketing. However, there is no complete agreement upon a
single definition. This is because CRM can be considered from a number of perspectives. In summary,
the three perspectives are:
1. CRM from the Information Technology Perspective.

2. CRM from the Customer Life Cycle (CLC) Perspective.

3. CRM from the Business Strategy Perspective.
1. CRM from the Information Technology Perspective.
From the technology perspective, companies often buy into software that will help to achieve their
business goals. For many, CRM is far more than a new software package, the renaming of traditional
customer services, or an IT-based customer management system to support sales people. However, IT is
vital since it underpins CRM, and has the payoffs associated with modern technology, such as speed, ease
of use, power and memory, and so on. Information Technology (IT) and CRM have three key elements,
namely Customer Touch Points, Applications, and Data Stores. This section is based loosely upon Raisch
(2001) The e-Marketplace.
Customer Touch Points are vital since your business has a marketing orientation and focuses upon the
customer and his or her current and future needs. This is the interface between your organisation and its
customers. For example you buy a new car from a dealership, and you enter a showroom. The dealership
is a contact point. You meet with a salesperson whom demonstrates the car. The salesperson is a contact
point. You go home and look at the car manufacturer's website, and then send the company an e-mail.

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Both are contact points. Other contact points include 3G telephone, video conferencing, Interactive TV,
telephone, and letters.
Applications are essentially the software and programmes that support the process. Incidentally, this is
what some would call CRM - but we know better. Applications serve Marketing (e.g. data mining
software* and permission marketing**), Sales (e.g. monitoring Customer Touch Points), and Service
(e.g. customer care).

Data Stores contain data on every aspect of the customer, and the Customer Life Cycle (CLC). For
example, an organisation keeps data on the products you buy, when you buy them, and where they are
sent. Data is also kept on the web pages that you visit and the products that you consider, but then do not
buy. Leads are stored here. Data on the life time value of individual customers is stored here, as well as
details of how and when the customer was recruited, how - and for how long - individuals have been
retained, and details of any products that have been extended to individuals are also stored. The data is
analysed using Applications.

*Data Mining is where an organisation evaluates large Data Stores for patterns, or relationships between
groups or individuals (or segments). Applications present 'patterns' in a format that can be used for
marketing decision-making.

** Permission Marketing is where a customer elects to accept (or 'opt-in' to) marketing material from an
organisation e.g. where you buy insurance and the vendor asks if you wish to receive further details from
them, or similar organisations. It is so called because marketers need your 'permission' to market to you.
Permission marketing can occur at any of the Customer Touch Points.
2. CRM from the Customer Life Cycle (CLC) Perspective.
The Customer Life Cycle (CLC) has obvious similarities with the Product Life Cycle (PLC). However,
CLC focuses upon the creation of and delivery of lifetime value to the customer i.e. looks at the products
of services that customers need throughout their lives. It is marketing orientated rather than product
orientated. Essentially, CLC is a summary of the key stages in a customer's relationship with an
organisation.
The Customer Life Cycle (CLC) has obvious similarities with the Product Life Cycle (PLC). However,
CLC focuses upon the creation of and delivery of lifetime value to the customer i.e. looks at the products
or services that customers NEED throughout their lives. It is marketing orientated rather than product

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orientated, and embodies the marketing concept. Essentially, CLC is a summary of the key stages in a
customer's relationship with an organisation. The problem here is that every organisation's product
offering is different, which makes it impossible to draw out a single Life Cycle that is the same for every
organisation.

Let's consider an example from the Banking sector. HSBC has a number of products that it aims at its
customers throughout their lifetime relationship with the company. Here we apply a CLC. You can start
young when you want to save money. 11-15 year olds are targeted with the Livecash Account, and 16-17
year olds with the Right Track Account. Then when (or if) you begin College or University there are
Student Loans, and when you qualify there are Recent Graduate Accounts.

3. CRM from the Business Strategy Perspective:

The Business Strategy perspective has most in common with many of the lessons and topics contained on
this website, and indeed within the field of marketing itself. The diagram below shows the Marketing
Teacher Model of CRM and Business Strategy. Our model contains three key phases - customer
acquisition, customer retention and customer extention, and three contextual factors - marketing
orientation, value creation and innovatove IT.

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We now consider the Business Strategy Perspective on CRM. Here, we propose a model, which is a
hybrid, and typical of many of the models and diagrams of CRM that you will find on The Internet and in
popular books on the topic of marketing/ecommerce. The model has three key phases and three
contextual factors:
Three key phases:
1. Customer Acquisition.
2. Customer Retention.
3. Customer Extension.
Three contextual factors:
1. Marketing Orientation.
2. Value Creation.
3. Innovative IT.

1. Customer Acquisition - This is the process of attracting our customer for the first their purchase. We
have acquired our customer.
Growth - Through market orientation, innovative IT and value creation we aim to increase the number of
customers that purchase from us for the first time.
2. Customer Retention - Our customer returns to us and buys for a second time. We keep them as a
customer. This is most likely to be the purchase of a similar product or service, or the next level of
product or service.
Growth - Through market orientation, innovative IT and value creation we aim to
increase the number of customers that purchase from us regularly.
3. Customer Extension - Our customers are regularly returning to purchase from us. We introduce
products and services to our loyal customers that may not wholly relate to their original purchase. These
are additional, supplementary purchases. Of course once our loyal customers have purchased them, our
goal is to retain them as customers for the extended products or services.

Growth - Through market orientation, innovative IT and value creation we aim to increase the number of
customers that purchase additional or supplementary products and services.
4. Marketing Orientation - means that the wholes organisation is focused upon the needs of customers.
Customer needs are addressed by the Three Levels of a Product whereby the organisations not only
supplies the actual, tangible product, but also the core product and its benefit, and also the augmented

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product such as a warranty and customer service. Marketing orientation will focus upon the needs of
consumers for all three levels of a product. (N.B. 'market' orientation and 'marketing' orientation are not
the same).
5. Value Creation - centres on the generation of shareholder value based upon the satisfaction of
customer needs (as with marketing orientation) and the delivery of a sustainable competitive advantage.
6. Innovative IT - is exactly that - Information Technology must be up-to-date. It should be efficient,
speedy and focus upon the needs of customers. Whilst IT and/or software are not the entire story for
CRM, it is vital to its success. CRM software collects data on consumers and their transactions. Huge
databases store data on individuals and groups of individuals. In some ways, CRM means that an
organisation is dealing with a segment of one person, since every consumer displays different purchasing
habits and preferences. Organizations will track individuals, and try to market products and services to
them based upon similar buyer behavior seen in other individuals (e.g. When Amazon tells you those
customers that viewed/bought the same product as you, also bought another product).

Customer Satisfaction:
Oliver defines Customer satisfaction as follows “Satisfaction is the customer fulfillment response. It is a
judgment that a product or service feature, or the product or service itself provides a pleasurable level of
consumption related fulfillment.” Satisfaction can be viewed as contentment. Satisfaction may also be
associated with some sense of happiness. For those services that really surprise in the positive way,
satisfaction may mean delight. And in some situations, where the removal of negative aspect leads to
satisfaction, the consumer may associate a sense of relief with satisfaction. Retention in competitive
markets is generally believed to be a product of customer satisfaction. Satisfaction is a psychological
process of evaluating perceived performance outcome based on predetermined expectations.
Satisfaction drivers:
Cumby and Barnes suggest that driver exist on five levels and, that these generally involve progressively
more personal contact with the service supplier:
1.Core product or service
2. Support service and systems
3. Technical performance
4. Elements of customer interaction
5. Affective dimension of services
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1. Core Product or service: this is the basic product or service provided by the company and probably
provides the supplier with the least opportunity to differentiate or add value.
2. Support services and systems: These include the peripheral support services that enhance the
provision of the core product or services. The customer may well receive an excellent core product or
service from the supplier but are dissatisfied with the supplier because of inferior support service and
systems.
3. Technical Performance: The level of “customer satisfaction model” deals with whether the service
provider gets the core product or whether service and the support services and systems are in place but
they do not get them right on every occasion.
4. Elements of customer interaction: This level relates to the way the service provider interacts with the
customer either face-to –face or through technology based contact.
5. Affective dimensions of service: Beyond the basic interaction of the company are the messages,
sometimes subtle and often unintentional, that companies send to their customers that leave them with
positive or negative feelings towards them. A considerable amount of dissatisfaction has nothing to do
with core products and services. Indeed the customer may be satisfied with more aspects of interaction.
The problem may lie with “little things” that may not be noticed by the staff.
It is quite possible for the supplier to get things right on the first four levels and to dissatisfy the customer
because of something that happens on the fifth level. This emphasize the importance of ‘critical episode’
in the exchange process.

Customer Satisfaction Process:

At the heart of any successful strategy to ‘manage’ customer satisfaction is the ability to “listen to the
customer”. They suggest five categories of approach.
1. Customer satisfaction indices
2. Feedback
3. Market research
4. Front-line personnel
5. Strategic activities
1. Customer Satisfaction Indices:

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Customer satisfaction indices are among the most popular methods of tracking or measuring customer
satisfaction. Indeed, business of all sorts now divert consider energies into tracking customer satisfaction
in this way.
2. Feedback:
Feedback in this context includes comments, complaints and questions ,It may be among the most
effective means of establishing what the customer regards as a satisfactory level of performance and
whether ‘dissatisfiers’ exist within the operation as it is based on actual performance rather than
contrived situations.
3. Market Research:
In addition to research among customers and non-customers into potential ‘satisfiers’, ‘dissatisfiers’ and
‘customer expectations’, market research can be used as customer entrance (to establish drivers which
bought the customer to the company) and customer exit (to establish those factors which cause the
customer to go elsewhere).Again more valuable information may be achieved in the latter rather than the
former as it is based on actual behavior rather than the perception.
4. Frontline Personnel:
Direct contact with staff can provide a good means of listening to the customer. As it is frequently
suggested that many customers, rather than making a formal complaint to the company, will simply break
the relationship. Frontline staff provides an opportunity for less formal sounding on complaints which
might to otherwise not be heard. The crucial factor here is how this information is fed back into the
decision-making process.
5. Strategic activities:
Actively involving in the customer in the company decision making may be means of pre-empting
potential “dissatisfiers” and establishing potential “satisfiers”.
Benefits of Customer satisfaction
Many companies adopt strategies to improve customer satisfaction with the perceived objectives of
strengthening bonds and achieving customer loyalty. Great claims are made regarding higher satisfaction
levels. It is suggested that customer satisfaction:
 Increases customer loyalty
 Reduces price elasticity
 Insulates market share from competitors
 Lowers transaction cost
 Reduces failure rates and cost of attracting new customers
 Improves the firm’s reputation in the market place
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Customer satisfaction .....Customer retention ....Customer profitability
Simple return on Relationship model
Except in a few rare cases, customer satisfaction is the key of securing customer loyalty and to generating
superior long-term financial performance

Customer Loyalty:
Definition of Loyalty:
Loyalty may be defined as “The biased behavioral response, expressed over time by some decision
making unit with respect to one out of a set of processes resulting in brand commitment”.
Loyalty must be seen as “biased repeat purchase behavior” or repeat patronage accompanied by a
favorable attitude. Loyalty can originate from factors extrinsic to the relationship such as the market
structure in which the relationship exists, but also in intrinsic factors such as relationship strength and
handling of critical episodes during the relationship.
Advantages for setting up Loyalty:
1. Building lasting relationships with customers by rewarding them for their patronage.
2. Gathering high profits through extended product usage and cross-selling
3. Gathering customer information
4. Decommodifying brands i.e., differentiating from crowds.
5. Defending market position
6. Planning against competitive activity

Classification of customers with reference to Loyalty:

There are six classifications of customers in respect of loyalty:
1) Current loyal customers who will continue to use the product or service
2) Current customers who may switch to another brand
3) Occasional customers who would increase consumption of the brand if the incentives were right.
4) Occasional customers who would decrease consumption of the brand if competitor offered the right
incentive.
5) Non-users who could become customers.
6) Non- users who could never become customers.

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It is important to distinguish between loyalty to the generic product, the brand and particular supplier.
Many people drink coffee as beverage. Those who drink considerable quantity of coffee can be described
as having a product loyalty. Within the group, there will be some that buy just the cheapest coffee or
drink whatever available. They are product loyal but not brand loyal. They are not disloyal as that implies
that there has been a loyalty, but they have no loyalty at all to a particular brand. Those who have a
particular brand loyalty, they always buy a particular brand or at least a brand from the same product.

Types of Customer Loyalty:

1. Supplier Loyalty:
Many customers are not only loyal to a particular brand, but also loyal to particular supplier, a type of
customer known as hostage i.e., somebody who has no choice but to be a customer of a particular brand
or supplier. Such a situation could occur in a small village community where there is only a shop selling
perhaps just one brand of bread. A customer who is without transport could be forced, if they really want
bread beans, to be loyal to that one brand and that one supplier. The term introduced for this is PSEUDO-
LOYALTY.
2. Supra-Loyalty:
Supra-loyalty is a term that can be applied to those who are extremely loyal to an organization, product or
service. In the case of loyalty to an organization, that have normally build up a personal relationship with
the organization over a period of time or in these of product/service, their identify themselves with it. It is
as if they have internalized relationship and consider themselves almost part of the organization instead
of being a customer.
3. De-loyalty:
A customer who makes a deliberate decision to move to another organization because he or she has been
let down by an organization that they were previously loyal can be described as being DE-LOYAL. This
is not same as disloyalty, which suggests that it is the customer who is doing something wrong. In the
case of de-loyalty, it is the organization which has let the customer down. There is evidence that people
are willing to forgive one mistake or one case of poor service. Customer loyalty can be retained even
after a mistake provided that rectification (an apology) is speedily forthcoming. However, if a super-loyal
customer becomes disenchanted, they may take their business else where, In effect becoming de-loyal. if
they are very disappointed they may become ANTI- LOYAL, seek retribution against the organization.

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4. Disloyalty:
It is a mute point as to whether a customer can actually be disloyal. Customers owe nothing, in terms of
loyalty to suppliers. Many customers may feel that they are being disloyal if they go else where but
feeling disloyal is not the same as being disloyal. The only obligation actually placed on the customer is
to render payment for the product or service provided by payment of monetary and other terms.
Organizations, having a responsibility to their customers, can be disloyal too. Disloyalty is not providing
a product or service deliberately to a previously loyal customer. An example of this would be an
organization that treated a new customer better, deliberately or unintentionally than the existing
customers. In this case, the organization would be being disloyal to relationship that had been built up. If
the existing customer decides to go elsewhere, then they would be making a perfectly valid and proper
decision. Disloyalty implies an act and not the customer is capable of such an act. The customer may be a
– loyal, de-loyal or even anti-loyal but never disloyal.

Direct Marketing:
Definition:
Direct Marketing is an interactive Marketing system that uses one or more advertising media to affect a
measurable response and / or transaction at any location.
Today, many direct marketers see direct marketing as a broader role, that of building a long-term
relationship with the customer (Direct Relationship Marketing). Direct Marketers occasionally send
birthday cards, information materials or small premiums to select numbers in their customer database.
Airlines, hotels and other business build strong customer relationship through frequency award
programmes and club programmes.
Advantages of Direct Marketing:
The following are the advantages of Direct Marketing-
1) Delivers near-perfect solutions to customer’s problems
2) Gives individual attention to customers
3) Facilitates finalizing of offers through interaction with the manufacturers, wholesalers or retailers as
the case may be.
4) Offers customized products as per the preference of the customers.
5) Helps achieve excellence in products/services.

6) Eliminates the hassles of going through marketing channels / stores.

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7) Facilitates sharper segmentation and targeting, ultimately each individual becomes a specific target
market.
8) Facilitates relation building with the customers
9) Is better measurable, compared to mass marketing
10) Is more cost effective
11) Saves channel costs for the most part
12) Saves advertising cost almost totally
13) Is a versatile form of marketing, helps being selective in treating customers and pay special attention
to large accounts.
14) Benefits the customers too by enabling them to shop by sitting at homes save their precious time.
15) With every development in IT, Direct marketing’s efficiency keeps increasing, cost keeps decreasing.

Forms of Direct Marketing:

Direct Marketing has several forms as it incorporates a variety of media. Direct –Mail Marketing is one
form of Direct Marketing. Customized Mailing through databases and “Mail Merge” of word processing
is the medium used here. Telemarketing is another form of Direct Marketing. Here, the phone is the
medium used. Today, Direct Marketing uses the new age tools such as Computers, Mobile phones and
the Internet for reaching prospects customers individually. Their availability at a low-cost and high-reach
has substantially enlarged the Direct Marketing Opportunities.
1. Direct Mail Marketing:
Direct Mail Marketing is similar to Mail Order Marketing / Catalogue Marketing. Usually, when a
trading house markets various products by mail order, it is referred to as Mail Order Marketing and when
a manufacturer practices the same method it is known as Direct Mail Marketing. Certain softwares allow
creation of personalized letters, messages and offerings. In direct mail marketing, not only letters /
brochures are mailed to the prospects, but product samples, gifts and complaints are also mailed,
depending on the context.
Example: Mother Care India does Direct Mail Marketing .It targets the mothers who buy
items meant for kids.
2. Direct Response Marketing:
Direct Response Marketing is another expression of direct marketing. Direct Response Marketing uses
different media (including letters / mailers), like telephone, radio, TV and Internet. Some direct response

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marketing campaign, rely totally on television “infomercials” (Commercials which give information
about products, benefits and usage aspects and obtain responses). Toll-Free telephones too serve as a
useful tool of direct response marketing. Toll free telephones help better ordering by the customer, better
dialogue between the customers and the company and better service to the customer.

Example: Dell Computers is one Company that heavily relies on toll free numbers to elicit customer
responses.

3. Database Marketing:
Data base Marketing is yet another expression in direct marketing. Although all forms of direct marketing
are data base-driven, some experts treat database marketing as distinct form of direct marketing.
4. Tele-Marketing:
Telemarketing is yet another form of direct- marketing tool. Hence, the marketer goes direct to the
customer using telecom / IT facilities. Telemarketing is less expensive as compared to most other forms
of selling. Moreover, it can be used in respect of different types of products. It suits industrial products,
services and consumer durables. Telemarketing is usually done through special campaigns. Contact is
established with hundreds of prospects in a campaign that normally runs through a few days. Several tele
callers are hired for the tele-call operations. The Call Centre is the real operation theatre in telemarketing.
5. Tele-shopping /Home Shopping:
Tele-shopping, alternately known as home shopping is yet another of direct marketing. One of the major
characteristic of Teleshopping is that it is a low cost retailing system. Here, the marketer hawks the
products on air and the consumer watches it on his TV screen at home, phone up the marketer and buys
his requirement. With tele-shopping, in addition to the convenience, discounts, gift offers are also given
to the customers.
Example: Doordarshan, for example allowed its channel for tele-shopping by Dee’s network on a profit
sharing basis. DD gained a share from every item sold by the network.
6. Face to Face Selling:
The original and oldest form of direct selling is the field sales call. Today most industrial companies rely
heavily on a professional sales force to locate prospects, develop them into customers, and grow the
business or to hire the manufacturer’s representative agents to carry out the direct selling task. In

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addition, many consumer companies use a direct selling force. Insurance agents, stock brokers and
distributors working for direct sales organizations such as Avon, Amway, Mary kay and Tupperware.
7. Email marketing:
Email marketing is also a direct marketing tool. A major concern is spam, which actually predates
legitimate email marketing. As a result of the proliferation of mass spamming, ISPs and email service
providers have developed increasingly effective email filtering programs. These filters can interfere with
delivery of e-,mail marketing campaigns, even if the person has subscribed to receive them as legitimate
email marketing can possess the same hallmarks as spam.

8. Door to Door Leaflet marketing:

Leaflet distribution services are used extensively by the fast food industries, and many other business
focusing on a local catchments business to consumer business model. similar to direct marketing, this
method is targeted purely by area, and costs a fraction of the amount of a mailshot due to not having to
purchase stamps, envelopes or having to buy address lists and the names of home occupants.
9. Voice Mail Marketing:
Another type of direct marketing which has emerged is personal voice mail boxes and business voice
mail systems. Voice mail marketing is a cost effective means to reach people with warmth of human
voice. More recently, business has utilized guided voice mail (an application where pre-recorded voice
mails are guided by live callers) to accomplished personalized business-to- business marketing formerly
reserved for telemarketing. As there are abundance of “voice spam”, jurisdictions have passed many laws
for regulating consumer voice mail marketing.
10. Multi level Marketing:
Multi level marketing is a modified version of direct selling .Some times, it is referred to as network
marketing, member to member marketing and affiliate marketing. Only firms which do not mind
experimenting in reading customers practice it. The Process begins with sales person cum distributors
introduced to the company by a sponsor. Each distributor picks up a product worth a certain sum and
sells directly .After they have sold first consignment, they are allowed to pick up next. The distributor
can recruit a second ring of distributor. The distributor earns commission at two levels and the process
goes so on. Amway, Avon, Oriflame are the largest MLM outfits in the world. The Indian firm Modi care
also sells its range of house hold and personal care products.

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11. Online Marketing:
As many people find way onto Internet, the cyberspace population is becoming more mainstream and
diverse. As a whole, Internet population is younger more affluent and better educated, they are more
likely to use Internet for entertainment and socialising. Marketers are doing on-line marketing by creating
an electronic presence on the Internet, placing ads online, participating in forums, newsgroups, bulletin
boards and web communities, and using e-mail and web casting.
Other direct selling forms:
Some direct marketers also use media such as door hangers, coupons, package inserts, magazines,
newspapers, radio, television, email, internet banner ads, digital campaigns, pay per click ads, billboards,
transit cards etc.
Direct Marketing in India:
While direct selling has thrived in India all along in the Insurance business, in other businesses, it has
been catching up in the country only in recent years. But the progress has been rapid in the short period.
Amway, Avon, Oriflamme, Tupperware are all present in India. And Modi care has been using the
method for selling its homecare and personal care products. Hindustan Unilever has also set up in more
schemes, its direct selling outfit for its Aviance range of cosmetics

Product Marketing:
Marketing is any business activity that is designed to plan, place, promote, and distribute want satisfying
products, services and ideas to target markets so that an organization can achieve its objectives.

* IDENTIFY CUSTOMERS
* ATTRACT THEIR ATTENTION
* SATISFY WANTS
Product Marketing: - Definition
"The essential element of marketing is customer want satisfaction. The customer’s want satisfaction is
the economic and social reason for an organisation’s existence."
The Marketing Plan: - Definition
".... a document prepared for the purpose of providing guidelines for a business units marketing
programmes and allocations over a prescribed planning period."

Marketing Planning - Definition:

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Marketing planning is vital for all successful companies because the business environment is highly
complex, dynamic, and competitive. Marketing and market planning is relevant to large and small
organisations in both public and private sectors.
The Marketing Plan:
1. Market Research: - Situation Analysis
 A situation analysis is broken down into several different areas. These are: SWOT Analysis,
Customer Analysis (to establish a target market), Competitor Appraisal, and Resource Analysis.
 The business must make a Situational Analysis based on the influences of the Macro environment,
as well as the proximate environment
 Market Segmentation (target market) involves dividing up groups of people into buyers of certain
products/services
A. Customer Analysis:
A target market can be established by looking at the following factors:
 Where it is accessible (both the product and message)
 The demography (the population in a group or area(s)) of an assortment of places
 What size should the market be - In numbers (Sizeable?)- And in boundaries (Measurable)
 What are the identifiable factors of this market (how it differs to other target markets)
 Psycho graphically - Lifestyle based/image of the target market
 Geographically - Which regions/areas
 Benefit - Focus on the benefit the product provides, for this target market, not on the customer
characteristics
 Size - Frequency of use/level of demand in the target market, being either heavy, medium, or light
using the above factors in formulating a group which satisfy all of the above points, you have now
established a target market
B. Competitor Appraisal:
Once a target market has been established you must then analyse the competition (if any). There two
three types of competition a company can have:
1. Direct Competition - When one business approaches the customers of another business and attempts
to win them over. This only happens when two or more companies are producing the same product
2. Substitute Products - Another type of competition which can come from one company producing a
substitute product of another company’s product line
Competitor Monitoring:
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This is a vital part of the market research. The best form of competitor monitoring, is to calculate their
market share by estimating the total value of the market. If a competitor is gaining a greater market share,
it is time for the company to re-organise their marketing plan. Competitive advantage refers to all things
an organisation can do better than its competitors.
C. Resource Analysis:
Once you have completed a competitor appraisal you must then do a resource analysis. The businesses
resources are broken down into three areas, these are:
1. Staff - The marketing plan should analyse the skills of every employee involved in marketing. Your
staff should be promoting the image you wish the public to think of the company. They should be well
trained in areas such as the art of selling, good customer relations, and more. The people should have the
following skills: Alertness, good knowledge of product, good appearance, good communication skills,
and dedication to maintain the product in a competitive environment.
2. Finance- Finance is needed for different methods of advertising or promoting the product. These needs
vary according to the life cycle of the business. Finance is necessary for the promotion or development of
new products
3. Assets - The fixed assets of a business will determine the capacity of the production system. A
successful product can be stopped from greater production if resources are at full usage. The marketing
plan should recognize:
D. SWOT Analysis:
This needless to say means an analysis of the:
Strengths - which areas a business excels compared to its competitors
Weaknesses - which areas other businesses has to improve on in relation to its competitors
Opportunities - All things which benefit the business
Threats - All things which can threaten a business’s survival or a product's survival Aspects which
influence a SWOT analysis are:
- Market share - Sales - Profits
- Competition - Advertising - Size of customer base
- Pricing - Innovative potential.
- Product characteristics (company reputation, price, design, colour uniqueness, quality, warranty,
packaging, sales support, and positioning in market)

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Marketing Mix
Marketing Mix is a combination of marketing tools that a company uses to satisfy
their target customers and achieving organizational goals. McCarthy classified all these marketing tools
under four broad categories:

 Product

 Price

 Place

 Promotion
These four elements are the basic components of a marketing plan and are collectively called 4 P’s of
marketing. 4 P’s pertain more to physical products than services. Below is an illustration for
marketing mix.
 Price
 Product
 Place
 Promotion
 Target customers
The important thing to note is that all these four P’s (variable) are controllable, subject to internal and
external constraints of marketing environment. Marketers, using different blends of these variables, can
target different group of customers having different needs. So, a customer may call marketing mix “the

offering”.

Product
Product is the actually offering by the company to its targeted customers which
also includes value added stuff. Product may be tangible (goods) or intangible
(services).
While formulating the marketing strategy, product decisions include:
 What to offer?
 Brand name
 Packaging
 Quality
 Appearance
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  Functionality
 Accessories
 Installation
 After sale services
 Warranty
Price
Price includes the pricing strategy of the company for its products. How much customer should pay
for a product? Pricing strategy not only related to the profit margins but also helps in finding target
customers. Pricing decision also influence the choice of marketing channels. Price decisions include:
•

 Pricing Strategy (Penetration, Skim, etc)

 List Price
 payment period
 Discounts
 Financing
 Credit terms
Using price as a weapon for rivals is as old as mankind. but it’s risky too. Consumers are often sensitive
for price, discounts and additional offers. Another aspect of pricing is that expensive products are
considered of good quality.

Place (Placement)
It not only includes the place where the product is placed , all those activities
performed by the company to ensure the availability of the product to the targeted
customers. Availability of the product at the right place, at the right time and in the
right quantity is crucial in placement decisions.
Placement decisions include:
 Placement
 Distribution channels
 Logistics
 Inventory
 Order processing
 Market coverage
 selection of channel members
Promotion

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Promotion includes all communication and selling activities to pursuade future
prospects to buy the product. Promotion decisions include:
 Advertising
 Media Types
 Message
 Budgets
 Sales promotion
 Personal selling
 Public relations
 Direct marketing
As these costs are huge as compared to product price, So it’s good to perform a break-even analysis
before allocating the budget. It helps in determining whether the new customers are worth of promotion
cost or not.
It often takes time and requires market research to develop a successful marketing mix.
You should not depend on one mix always try new mixes. While designing the mix, make changes to all
mixes in such a way that all conveys the same message. Don’t confuse your customers by just changing
one variable and keeping the rest same.
Limitation of Marketing Mix
Marketing mix (4 P’s) was more useful in early 19’s when production concept was in and physical
products were in larger proportion. Today, with latest marketing concepts, marketing environment has
become more integrated. So, in order to extend the usefulness of marketing mix, some authors introduced
Fifth P and then seven P’s
(People, Packaging, Process). But the foundation of Marketing Mix still stands on the
basic 4P’s

Seven phases to new product development Process:

Only a few ideas are good enough to reach commercialization. Ideas can be generated by chance, or by
systematic approach. Need a purposeful, focused effort to identify new ways to serve a market. New
opportunities appear from the changes in the environment.
Idea Generation: Continuous systematic search for new product opportunities.
 Marketing oriented sources--identify opportunities based on consumer needs, lab research is
directed to satisfy that research.
 Laboratory oriented sources--identify opportunities based on pure research or applied research.

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 Intra-firm devises--brain storming, incentives and rewards for ideas are given. Ideas should not be
criticized, no matter how off-beat they are.
Product Screening and Evaluation
 New product check list; list new product attributes considered most important and compare each
with these attributes. Check list is standardized and allows ideas to be compared. General characteristics,
Marketing Characteristics and Production Characteristics.
 Ideas with the greatest potential are selected for further research.
 Do they match the organizations goals (DuPont and ICI have many patents that they have not
exploited for this very reason.)
 Look at company’s ability to produce and market the product.
 Need to look at the nature and wants of the buyers and possible environmental changes.

Concept Testing
Sample of potential buyers is presented with the product idea through a written or oral description to
determine the attitudes and initial buying intentions. This is done before investing considerable sums of
money and resources in Research and Development. This help to better understand product attributes and
the benefits. Customer’s opinion on the product is most important on the following aspects:
 Would they like to buy the product?
 Would they replace your current brand with the new product?
 Would this product meets real needs?
Business Analysis
Analyze potential contribution to sales, costs and profits.
 Does the product fit into the current product mix?
 What kind of environmental and competitive changes can be anticipated?
 How will these changes effect sales etc.?
 Are the internal resources adequate?
 Cost and time line of new facilities etc.?
 Is financing available?
 Is there Synergies with distribution channel etc

 MIS to determine the market potential sales etc.

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 Find out if it is technically feasible to produce the new product. If you can produce the new product
at a low enough cost so as to be able to make a profit.
Product Development
 Develop a prototype, working model, lab test etc.
 Attributes that consumers have identified that they want must be communicated through the design
of the product.
Test Marketing
 Test Marketing helps to observe actual consumer behavior. Limited introduction in geographical
areas chosen to represent intended market. It aims to determine the reaction of probable buyers. It is the
sample launch of the Marketing Mix.
 Determine to go ahead, modify product, modify marketing plan or drop the product.

PROS are:
 Lessens the risk of product failure.
 Reduces the risk of loss of credibility or undercutting a profitable product.
 Can determine the weaknesses in the MM and make adjustments.
 Can also vary parts of the MM during the test market.
 Need to select the appropriate MM and check the validity.
CONS are:
 Test market is expensive.
 Firm's competitors may interfere.
 Competitors may copy the product and rush it out. Alternatively , can use a simulated test market.
Free samples offered in the mall, taken home and interviewed over the telephone later.
Commercialization
 Corresponds to introduction stage of the Product Life Cycle.
 Plans for full-scale marketing and manufacturing must be refined and settled.
 Need to analyze the results of the test market to determine any changes in the marketing mix.
 Need to make decisions regarding warranties etc (reduces consumers risk).
 Warranties can offer a competitive advantage.
 Spend a lot on advertising, personnel etc. Combined with capital expenditure makes
commercialization very expensive.

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