Chapter Four

Analysing consumer markets and

organizational markets
 Chapter Questions
• How do consumer characteristics influence buying
behavior?
• How do consumers make purchasing decisions?
• How do marketers analyze consumer decision making?
• What is the business market, and how does it differ from
the consumer market?
• Who participates in the business-to-business buying
process?
• How do business buyers make their decisions?
• How can companies build strong relationships with
business customers?
 Customer analysis
• To develop effective marketing strategies, it requires to be
almost obsessive about understanding the needs of customers
• The success of any customer-focused program will involve
– imaginative product development,
– integrated distribution methods,
– well calibrated pricing and
– state of the art communications.
• Customer analysis involves analysis of
– Consumer buying behavior
– Organizational buying behavior.
 Consumer behavior
• Consumer is the customer who buys goods and services of all
types for personal as well as household usage.
• Consumers behavior is described as an investigation into the
way individuals make decisions on how to spend their
available resources (time, money, effort) on personal and
household products.
• A study of consumer behavior need to consider
– what occurs before people consume something,
– what goes on during the consumption period itself and
– how consumers handle the disposal of what they have
consumed.
Consolidated view of consumer behavior

Stages Process Roles Time

Need
Minutes
identification
Product
Acquisition
Product Purchaser
search Hours
Merchant
search Days
Negotiation
purchase Weeks

After-sales Months
support
Product
usage
Product
performance
User years
assessment
 What Influences
Consumer Behavior?

• Cultural factors
• Social factors
• Personal factors
 Cultural Factors

• Culture, subculture, and social class are

important influences on consumer buying
behavior.
• Culture is the fundamental determinant of a
person’s wants and behaviors.
• Each culture consists of smaller subcultures that
provide more specific identification and
socialization for their members.
 Subcultures

• Nationalities ( in USA population-we can find

Asians, Europeans, Africans, Latino and many
more..) (in Ethiopia many nations with their
own subculture)
• Religions ( Christian, Muslim, )
• Racial groups (black, white, Hispanics…
 Fast Facts About
American Culture
• The average American:
– chews 300 sticks of gum a year
– goes to the movies 9 times a year
– takes 4 trips per year
– attends a sporting event 7 times
each year
 Social Classes
• Upper uppers
• Upper middles
• Lower uppers
• Middle
• Working
• Upper lowers
• Lower lowers
Group Description

Upper- People from old wealthy families (the upper- upper class) as well
Class as society prominent new rich (lower - Upper), such as as top
1.5% professionals and corporate executives.
Ex: jewelry, Diamonds, travel, designer products

Upper- Successful professionals, owners of small business managers of

Middle large corporations. They want quality products that are symbol
12.5% of their status.
Future concerned + children future

Lower- Small business people, office workers, teachers, and technicians

Middle - the white- collar employees. They are in the "average "
s income group and try to save something for the future.
32% Ex: Home and family oriented
Upper- (working class) the blue collar workers- factory workers, skilled
lower laborers, and service people. Most earn good incomes
38% (especially in two-career families) but are still very concerned
about security.
They depend on sales people and advertising only. Less
confident.
Ex: moral class, they are often feel controlled by the world
around them

Lower- Unskilled laborers and people in very low-status occupations.

Lower These people usually don’t have much income but are good
16% markets for necessities and products that help them enjoy the
present.

Many Americas illiterates and poor.

 Characteristics of Social Classes
• Within a class, people tend to
behave alike
• Class may be indicated by a
cluster of variables (occupation,
income, wealth)
• Class designation is not fixed
over time
• Social class members show
distinct product And brand
preferences in many areas,
including clothing, home
furnishing, leisure activities,
and automobiles etc…
 Social Factors
• In addition to cultural factors , such as
– Reference groups
– Family
– Social roles
– Status
Affect our buying behavior
 Reference Groups
Membership groups
• Primary groups Dire
ct or
influ i
• Secondary groups ence ndirect
buyi
ng b on thei
• Aspirational groups ehav r
ior
• Dissociative groups
 Membership groups
1) Groups having a direct influence are called membership
groups.
a. Some membership groups are primary groups such as
family, friends, neighbors, and co-workers with
whom the person interacts fairly continuously and
informally.
b. Some membership groups are secondary groups such
as religious, professional groups that tend to be more
formal.
2) Reference groups expose an individual to new behaviors
and lifestyles, influencing attitudes and self-concept.
3) They create pressures for conformity that may affect
actual product and brand choices.
4) People are also influenced by groups to which they do
not belong:
a. Aspiration groups are those a person hopes to join.
b. Dissociative groups are those whose values or
behavior an individual rejects.
 Action of marketers
B) Where reference group influence is strong, marketers must
determine how to reach and influence the group’s opinion
leaders.  
C) An opinion leader is the person in informal, product-related
communications who offers advice or information about a
specific product or product category.  
D) Marketers try to reach opinion leaders by identifying
demographic and psychographic characteristics associated
with opinion leadership, identifying the media read by
opinion leaders, and directing messages at opinion
leaders.
 Family Affecting Buying Decisions

• A more direct influence on everyday buying

behavior is the family members
– the person’s spouse and
– children.
 Personal Factors

Personal characteristics that influence a buyer’s decision

include
• Age
• Life cycle stage and economic circumstances
• Occupation
• Wealth
• Personality
• Values
• Lifestyle
• Self-concept
 Age and Stage in the Life Cycle
 
A) Our taste in food, clothes, furniture, and
recreation is often related to our age.
B) Consumption is also shaped by the family-life
cycle and the number, age, and gender, of
people in the household at any point in time.
C) In addition, psychological life-cycles may
matter.
D) Marketers should also consider critical life
events or transitions as giving rise to new
needs.
 Marketers also consider critical life events or transitions

• Marriage, • These should alert

• Child Birth service providers –
• Illness • Banks, lawyers,
• Relocation • And marriage and
• Divorce bereavement
• Career change counselors
• Widowhood
 Occupation and Economic Circumstances

• Occupation influences consumption patterns

and economic circumstances influence product.
Product choice is greatly affected by economic
circumstances including:
A) Spendable income (level, stability, and time pattern)
B) Savings and assets
C) Debts
D) Borrowing power
E) Attitudes toward spending and saving
 Personality and Self-Concept

• Each person has personality characteristics that influence his or

her buying behavior.
• Personality: A set of distinguishing human psychological traits
that lead to relatively consistent and enduring responses to
environmental stimuli.
A) Brands also have personalities, and consumers are likely to
choose brands whose personalities match their own.
 B) Consumers often choose and use brands consistent with their
actual self-concept (how we view ourselves).
C) Others self-concept (how we think others see us).
 Lifestyles and Value
• People from the same subculture, social class, and occupation may lead
quite different lifestyles.
A) A lifestyle is a person’s pattern of living in the world as expressed in
activities, interests, and opinions. It portrays the “whole person”
interacting with his or her environment.
B) Marketers search for relationships between their products and lifestyle
groups.
C) LOHAS is an acronym standing for: Lifestyles of health and sustainability.
• Consumers who worry about the environment, want products to be
produced in a sustainable way, and spend money to advance their
personal health, development,
appliances such as Solar
• Ex: organic food, energy-efficient
panels, alternative medicine, etc
 Modern view of consumer behavior

Stages Process Roles Time

Need
identification Minutes
Product
Acquisition Product search
Merchant search Hours
Purchaser
Negotiation
purchase
Days

Product Weeks
usage After-sales
support
Product User Months
performance
assessment
years
Product
disposal Resell
Recycle Terminator
Discard
THE BUYING DECISION PROCESS: THE FIVE-
STAGE MODEL
Direct purchase ex: TOOTH PAST

27
 Problem Recognition
 The buying process starts when the buyer recognizes a problem
or need.
• The need can be triggered by internal or external stimuli.
• Marketers need to identify the circumstances that trigger a
particular need by gathering information from a number of
consumers.
Marketers’ Role
• Identify the drives
• Develop marketing strategies to trigger the
thoughts about the possibility of making
purchase.
28
 Marketers need to do some research

• Who buys product or services?

• Who makes the decision to buy the product?
• Who influences the decision to buy product ?
• How is the purchase decision made?
• Why do customers buy certain product?
• How is our product is perceived by customer?

29
 Information Sources
 
1) Personal (family, friends)
2) Commercial (advertising, Web sites, salespeople)
3) Public (mass media, consumer organizations)

4) Experiential (handling, examining, using the product)

• Generally speaking, consumers receive the greatest amount of

information about a product from commercial sources.
 
• The most effective information often comes from personal sources or
public sources that are independent authorities

30
Successive Sets involved in consumer Decision Making

31
 Evaluation of Alternatives
 

• No single process is used by all consumers, or by one

consumer in all buying situations. The most current
models see the consumer forming judgments largely
on a conscious and rational basis.
A) First, the consumer is trying to satisfy a need.
B) Second, the consumer is looking for certain benefits
from the product solution.
C) Third, the consumer sees each product as a bundle
of attributes with varying abilities for delivering the
benefits.
 
32
 Purchase decision
In executing a purchase intention, the consumer
may make up to five sub decisions:
• Brand ( what)
• Dealer ( where)
• Quantity (No.)
• Timing ( weekend)
• Payment method (credit card)

33
 Post purchase Behavior
• Post purchase satisfaction ( satisfied,
dissatisfied, delighted)
• Post purchase action ( re-purchase, good talk)
• Post purchase use and disposal (safety use)

34
 Organizational buying behavior
• Organization buyers are customers that
comprised of various organizations such as
– industrial firms,
– commercial businesses, or
– governmental organizations and institutions
• It is also known by the Business-to- Business
Marketing (B2B marketing)
• B2B markets have fewer buyers that can be
communicated through personal selling than
mass advertising
What is Organizational Buying?
•Organizational buying refers to the decision-
making process by which formal
organizations establish the need for
purchased products and services, and
identify, evaluate, and choose among
alternative brands and suppliers.
 Characteristics
• It is concerned with the marketing of products
and services from one organization to another.
• The customer is an organization with
organizational goals
• Business to business marketing is the process
of trying to match a company’s products and
services to the organizational goals of its
target customers.
 Continued…
Dimension Characteristics of Explanation
business market

Nature of Demand Derived Demand The demand from a business is

derived from its own sales volume

Buying influences Many influences There are often many interested

parties who influence the buying
decision (bid committee, experts,
etc)

Market structure Often concentrated A small number of large customers

often make up a substantial share
demand of the market

Purchasing motives organizational, rational Products purchased for the

achievements of organizational
goals

Purchasing decision Often complex and Decisions can involve long and
complex analysis and negotiation
process lengthy

Purchasing skills Professional, trained Buyers are often professionally

qualified in purchasing
 Example
• Coal = Electricity thermal power generators
• Sugar cane = sugar factories
• Rubber= tire manufacturers
• Tires = car /truck manufacturers
• Train coaches/ rails etc: railways
• Buses : Transportation companies
• Water bottles + plastic bottles
• Military : Govt bid for food and cloth suppliers
• Dam and Road constructions: Govt. bid….
• To create and capture value, sellers need to understand
these organizations’ needs, resources, policies, and buying
procedures.
 The Business markets
• The business markets consists of all organizations that
acquire goods and services used in the production of other
products or services that are sold or supplied to others.
• Ex: Major Industries making up business markets.
– Agriculture,
– forestry,
– fisheries,
– mining,
– finance, insurance; distribution and services.
 Example of leather industry
• Hide venders sell to hide tanners

in
• Tanners sell to shoes manufacturers

cha
• Manufacturers to whole sellers

ply
• Whole sellers to retailers

sup
• Retailers to customers

• Each party in the supply chain also buy many other

goods and services in support of their operations.
 Characteristics of Business Markets

• Fewer, larger buyers • Derived demand

• Close supplier-customer • Inelastic demand
relationships • Fluctuating demand
• Professional purchasing • Geographically
• Many buying influences concentrated buyers
• Direct purchasing
 Fewer, larger buyers

Apollo Tyres, JK tyres, Bridgestone, and Birla

Tyres depend on the major automobile
manufacturing companies to get contracts as
Original equipment manufacturer or OEM
supplier of tiers
 Close supplier-customer relationships

• Because of the smaller customer base and

the importance and power of the larger
customers, suppliers are frequently expected
to customize their offerings to individual
business customer needs.
 Professional purchasing
• Business goods are often purchased by
trained purchasing agents,
• Who must follow organization purchasing
polices.
• Constraints Ex: proposals
• Requirements
• Contract agreements.
 Multiple buying influences
• Buying committees consists of :
– Technical persons
– Bid committee
– Senior Managers
• Business marketers need to send well –
trained sales representatives and sales teams
to deal with the well trained buyers.
 Derived demand
• The demand for business goods is ultimately
derived from the demand for consumer
goods.
• Ex: Boom in construction industry
– Demand for cement and steel
 Inelastic Demand
• The total demand for many
business goods and services is
inelastic that is, not much
affected by price change.
• Ex: if price of leather falls ?
• If price of leather increases?
• Demand increase or decrease?
In short run
 Direct purchasing

• Business Buyers often buy directly from

manufactures rather than through
intermediaries, especially items that are
technically complex or expensive such as
mainframes or aircraft.
 Major influences on
business buyer behavior

Environmental

Organisational

Interpersonal

Individual
 Major Influences on Business Buyers

Key Factors • Economic trends

• Supply conditions
• Environmental • Technological change
• Organizational • Regulatory and political
environments
• Interpersonal • Competitive
• Individual developments
• Culture and customs
 Major Influences on Business Buyers

Key Factors • Objectives

• Policies
• Environmental • Procedures
• Organizational • Organizational
• Interpersonal structure
• Individual • Systems
 Major Influences on Business Buyers

Key Factors • Authority

• Status
• Environmental
• Persuasiveness
• Organizational
• Interpersonal
• Individual

7 - 53
 Major Influences on Business Buyers

Key Factors • Authority

• Age
• Education
• Environmental
• Job position
• Organizational
• Personality
• Interpersonal • Risk attitudes
• Individual
7 - 54
 Stages in the Buying Process: Buy phases

• Problem recognition
• General need description and product
specification
• Supplier search
• Proposal solicitation
• Supplier selection
• Order-routine specification
• Performance review
 Factors Affecting
Buyer-Supplier Relationships
• Availability of alternatives
• Importance of supply
• Complexity of supply
• Supply market dynamism
 Chapter Five

Market segmentation, targeting and

positioning
Segmentation, Targeting, and Positioning

6. Develop Marketing
Mix for Each Target Segment Market
5. Develop Positioning Positioning
for Each Target Segment
4. Select Target
Segment(s) Market
3. Develop Measures Targeting
of Segment Attractiveness
2. Develop Profiles
of Resulting Segments
Market Segmentation
1. Identify Bases
for Segmenting the Market
 5.1 Market Segmentation
• In market aggregation, the total market is viewed as
a single unit as one mass, aggregate market.
• To the contrary, there is an approach that views a
market as being composed of many smaller,
homogenous units.
• Markets consist of buyers with different
– wants,
– resources,
– geographical locations,
– buying attitudes, and
– buying practices.
 Continued…
• Market segmentation is the process of dividing the total,
heterogeneous market for a product in to distinct and
meaningful groups of buyers, each of which tends to be
homogenous in all significant aspects.
• Management then selects one or more of these market
groups or segments as the organization's target market.
– The objective of aggregation is to fit the market to the product;
– whereas the objective of segmentation is an attempt to fit the
product to the market believing that each segment calls for a
different product, promotional appeal, or other element in the
marketing mix.
• The focus of segmentation is enhancing a separate
program in a pin pointed market.
 Why Segmentation?
• Market segmentation is a customer - oriented philosophy.
• Specifically, it has the following benefits
– Investing money and effort to most profitable market.
– Designing and developing products, which match with
the market demand as it focuses on selected target
markets.
– Choosing the best promotional activity and channel of
distribution at a relatively lower cost
– It helps to determine an appropriate marketing mix
strategy for a segment.
– Flexibility of organizational resources and programs in the
time of fierce competition can be done at a lower cost.
 Micromarketing
Products to suit the tastes of individuals or locations
(complete segmentation)
Niche Marketing
Different products to subgroups within segments
( more segmentation)
Segment Marketing
Different products to one or more segments
(some segmentation)
Mass Marketing
Same product to all consumers
(no segmentation)
Levels of Market Segmentation
 Bases for Segmenting Consumer Markets

Geographic
Nations, states,
regions or cities

Demographic
Age, gender, family
size and life cycle, or
income

Psychographic
Social class, lifestyle, or
personality

Behavioral
Occasions, benefits, uses, or
responses
 Psycho-graphic Segmentation
• In psycho-graphic segmentation consumer markets can be divided
in to different groups on the basis of
– social class, life style or personality characteristics.
• Even if consumers are on the same demographic characteristics,
they can have different psycho-graphic profiles.
• These social class, life style and personality characteristics result
from psychological and sociological aspects of the individual;
 Geographic Segmentation
• Many organizations segment their market on some geographic basis
such as nations, states, regions, countries, cities, urban-suburban-
rural, topography or climate depending on the notion that
consumer needs or responses vary geographically.
• Here it should be considered that the marketing costs and
potentiality of each segment varies depending on the geographic
needs and preferences.
• A firm can decide to operate in one or a few geographic areas or
operate in all but pay attention to variations in needs and
preferences of the specific location.
 Demographic Segmentation
• Probably the most widely used basis for segmenting consumer market is
demographic characteristics.
• In demographic segmentation, the market is divided into different
customer groups on the basis of demographic variables such as age, sex,
family size, family life, cycle, education, occupation, religion ethnic
background, income and nationality.
• Demographic variables have long been the most popular bases for
distinguishing customer needs and preferences for certain reasons.
– customer wants, preferences and usage rates are highly associated
with demographic variables.
– they are easily quantifiable and accessible than most other types of
variables.
• Even when the target market is described in non-demographic factors, the
link to demographic variables is vital to know the size of the target market
and how to reach it efficiently.
 Behavioral Segmentation
• Some organizations try to segment their consumer markets on the basis of a
consumer behavioral characteristics related to the product.
• The variables used in behavioral segmentation include the consumer's
knowledge, attitude, use or response to an actual product or its attributes.
• Behavioral segmentation can be done with respect to the following factors:
– Purchase occasion with regard to time such as regular and special occasion.
For example, air traveler for vacation, family or business.
– Benefits sought from the product in relation to individual interest such as
low price, durability, general product quality and so on.
– User status with respect to the existence and potentiality of customers such
as non-users, ex-users, potential and regular users of a product.
– Usage rate with respect to the size of purchase such as light users, medium
users or heavy users.
– Readiness stage of the customers to buy a product depending on their
information, interest, intention and degree of awareness of a product.
 Segmentation of organizational markets

• Organizational size
• Industry sector
• Geographical location
 Organizational size
• Annual sales turn over
• Number of employees
• Volume of production
 Industry sector
• Banking (service)
• Manufacturing
• Mining
• Assembly
• Government
• others
 Geographical location

• Domestic and
• Export markets
• Each can also be further subdivided
Requirements for Effective Segmentation
Measurable
• Size, purchasing power, profiles
of segments can be measured.
Accessible
• Segments must be effectively
reached and served.

Substantial
• Segments must be large or
profitable enough to serve.

Differential
• Segments must respond
differently to different marketing mix
elements & actions.

Actionable
• Must be able to attract and serve
the segments.
 5.2 Targeting and Positioning
• Targeting is the process of assessing the relative worth of different market
segments and selecting one or more segments in which to compete- these
become the target segment
• Positioning is the identification of a particular appeal that the firm can
make to customers in each target segment, which is designed to
convenience customers to choose that firm over its rivals
• Target market
– A group of customers at which the seller directed the marketing programs
• Marketing for the targeted market
– Marketing strategy (positioning)
– Marketing mix (Product, Promotion, Price, Distribution)
 Evaluating Market Segments

• Segment Size and Growth

– Analyze sales, growth rates and expected profitability.
• Segment Structural Attractiveness
– Consider effects of: Competitors, Availability of Substitute
Products and, the Power of Buyers & Suppliers.
• Company Objectives and Resources
– Company skills & resources relative to the segment(s).
– Look for Competitive Advantages.
 C. Concentrated Marketing
Segment 3
Company
Segment 2 Marketing
Mix
Segment 1
B. Differentiated Marketing
Company
Segment 3
Marketing Mix 3
Company
Segment 2
Marketing Mix 2
Segment 1 Company
Marketing Mix 1
A. Undifferentiated Marketing
Company
Market Marketing
Mix
Market Coverage Strategies
 Choosing a Market-Coverage Strategy

Company
Resources

Product
Variability

Product’s Stage
in the Product Life Cycle

Market
Variability

Competitors’
Marketing Strategies
 Positioning the Product
• Product’s Position - the place the product
occupies in consumers’ minds relative to
competing products; i.e. Volvo positions on
“safety”.

• Marketers must:
– Plan positions to give products the greatest advantage
– Develop marketing mixes to create planned positions
 Users
F
Usage B Against a
E
Occasions D Competitor
A
C
H
G
Benefits Away from
Offered Competitors
Product Product
Attributes Class
Positioning for Competitive Advantage: Strategies
 Steps to Choosing and Implementing
a Positioning Strategy

• Step 1. Identifying a set of possible competitive

advantages: Competitive Differentiation.

• Step 2. Selecting the right competitive advantage.

• Step 3. Effectively communicating and delivering the

chosen position to the market.
Image Personnel
Areas for Competitive
Differentiation
Service Product
Differentiation
Developing Competitive
Selecting the Right Competitive
Advantages

Important

Profitable Distinctive
Criteria
for
Determining
Which
Affordable Differences Superior
to
Promote

Preemptive Communicable
Generic product Positioning map

Exceptional Brands
High Premium Brands

Q
u Standard Brand
a
l
i
t
y Budget Brands
Cowboy Brands

Low

Low High
Price
 Chapter Six

Designing and Managing Product

 What is a product?
• A product is any offering by a company to a
market that serves to satisfy customer needs
and wants.
• A product may be defined as a set of tangible
and intangible attributes, including color,
packaging, and manufacturer's and retailer's
services which satisfy the needs and wants of
customers.
• It can be an object, service, idea,etc.
 Augmented Product

Installation After-sales service

Packaging
Packaging Features
Features

Core benefit
Core
or service
benefit/se
Brand
rvice
Delivery styling
Brand Quality
&
styling
credit
Quality
Core
Tangible Product
Product

Product levels
 Product classification
• products can be classified into two major categories depending on the
intended use of the product.
• These are
– consumer goods and
– industrial goods.
• Consumer goods are products purchased by ultimate household consumers
for ultimate use or non-business purposes, usually for consumption or
personal use.
• Industrial goods are products intended to be sold primarily for use in
producing other products or rendering services for business purposes.
• The fundamental basis for distinguishing between the two groups is the
ultimate use for which the product is intended in its present form.
• Therefore, the same product can be categorized either as consumer or
industrial good depending on the intended use or service of the product.
 Consumer goods classification
• A useful way to classify these goods is on the
basis of consumer shopping habits because
they have implications for marketing strategy.
• Convenience Goods
• Shopping Goods
• Specialty Goods
• Unsought Goods
 Consumer goods and marketing considerations
Marketing Marketing Convenience Shopping Specialty Unsought
Mix Activity goods goods goods goods

product packaging important less important Not

important important
price price shift of Conditional not important Important
change demand

promotion advertising important Less features non Important

important effective
location
effective

distribution No. of many Few Few Many

outlets
 Industrial goods classification
• Raw Materials
• Operating Supplies
• Accessory Equipment
• Installations
• Fabricating parts and materials
• Business services
Product Items, Lines, and Mixes

A specific version of a product

Product Item that can be designated as a
distinct offering among an organization’s products.

A group of closely-related
Product Line
product items.

All products that an

Product Mix
organization sells.

90
 Product Mix
• The assortment of products that a company offers to
a market
• Width – how many different product lines?
• Depth – the number product variations in the
product line
Gillette’s Product Lines & Mix

Width of the product mix

Depth of the product lines

Blades and Writing

razors Toiletries instruments Lighters
Fusion – 5 blade
Mach 3 Turbo
Mach 3 Series Paper Mate Cricket
Sensor Adorn Flair S.T. Dupont
Trac II Toni S.T. Dupont Atra Right Guard
Swivel Silkience
Double-Edge Soft and Dri
Lady Gillette Foamy
Super Speed Dry Look
Twin Injector Dry Idea
Techmatic Brush Plus

92
 Brand
• A name becomes a brand when consumers
associate it with a set of tangible and
intangible benefits that they obtain from the
product or service
• It is the seller’s promise to deliver the same
bundle of benefits/services consistently to
buyers
 Brand Equity
• When a commodity becomes a brand, it is said
to have equity.
• The premium a brand can command in the
market
• The difference between the perceived value
and the intrinsic value
 Brand Power
• Customer will change brands for price reasons
• Customer is satisfied. No reason to change.
• Customer is satisfied and would take pains to
get the brand
• Customer is devoted to the brand
Brand Equity – Competitive Advantages

• Reduced marketing costs

• Can charge a higher price
• Can easily launch brand extensions
• Can take some price competition
 Advantages of branding
• Easy for the seller to track down problems and process orders
• Provide legal protection of unique product features
• Branding gives an opportunity to attract loyal and profitable
set of customers
• It helps build corporate image
 Naming the Brand
• Product benefits
• Product qualities
• Easy to pronounce
• Should be distinctive
• Should not have poor meanings in other
languages and countries
 Packaging as a marketing tool
• Self service
• Company and brand image
• innovation
 Designing packaging
• Packaging concepts
• Technical specifications
• Engineering tests
• Visual tests
• Dealer tests
• Consumer tests
• Packaging innovations
• Environmental considerations
 Labels
• Identification
• Grade classification
• Description of product
• Manufacturer identity
• Date of mfg.,
• Instructions for use
• Promotion
 Labels as a marketing tool
• Labels need to change with time or packaging
changes to give it a contemporary and fresh
look
 New Product Development
• A new product can be defined as innovative or
improvements to the already existing products
Three recognizable categories of new products are
as follows:
• Products that are really innovative- truly unique.
• Replacements for existing products which are
significantly different from the existing goods.
• Imitative products which are new to a particular
company but not new to the market.
 Product Development Stages
• Generation of New Product Ideas
• Screening of Ideas
• Analysis of Ideas or Business Analysis
• Product Development
• Market Testing
• Production and Marketing Stage or
Commercialization
 Business analysis
• The most customer appealing offer is not
always the most profitable to make
• Estimate on costs, sales volumes, pricing and
profit levels are made to find out the optimal
price – volume mix.
• Breakeven and paybacks
• Discounted cash flow projections
 Product Life Cycle
• An important management tool used to design marketing
strategy is the product life cycle.
• The product life cycle plots the sale of a product, over a
period of time.
• It is typically divided into four stages:
– Introduction
– Growth
– Maturity-saturation
– Decline and possible abandonment
 Product Life cycle

Growth

introdu
ction Maturity Decline and abandonment

Sales/profit

Sales

Profit
loss
 1. Introduction Stage

• In this stage the product is launched in to the market in full-scale production

and marketing program.
• It has gone through the embryonic stages of idea evaluation, pilot models, and
market testing.
• Operations in the introductory stage are characterized by
– slow sales growth, high cost, net losses, limited distribution outlet and
absence of competition.
– Product weaknesses and failures can be identified and eliminated at this
stage.
– Promotional activities emphasize on the type of product rather than the
brand.
2. Growth (Market Acceptance) Stage
• Growth is marked by rapid sales and profit rise.
• The rise in sales and profit tempts to attract competitors.
• As a result, distribution outlets are increased with expected price reduction.
• At this stage manufacturing and distribution efficiency are the key elements for
success.
• Selective advertising is required emphasizing on its own brand's advantages.
Profits may tend to decrease at the end of the growth stage.
 3. Maturity

• During the first part of this period, sales continue to increase but
at a decreasing rate.
• While sales are leveling, profits are declining. It is marked by
stiffening competition accompanied by increased marketing
expenses used to defend the product against fierce price
competition.
• Competitors heavily promote their brands using subtle differences
because supply exceeds demand making demand simulation
essential.
4. Decline and Possible Abandonment
• The market decline stage is marked by either the products gradual
replacement by a new product or by any evolving change in the
consumer behavior.
• It is a period of highly aggravated sales reduction, and profit
declines more than ever.
• Consumers shift their attention to other newly introduced
products.
• A number of competitors withdraw from the market
 Summary of PLC
Introduction Growth Maturity Decline

Characteristics
Sales Low, Fast growth, Slow growth, Decline,
Profits Negligible Peak levels Declining low or zero
Cash flow Negative Moderate High Low
Customers Innovative Mass market Mass market Laggards
Competitions Few Growing Many rivals Declining Number

Responses
Strategic focus Expand market Market penetration Defend share Productivity
Marketing Expenditure High High (declining) High (rising) Low
Mktg. Emphasis Brand awareness Brand preference Brand loyalty Selective
Distribution Limited Intensive Intensive Selective
Price High Lower Lowest Rising
Product Basic Improved Differentiated Rationalized

Characteristics and responses of product life cycle stages (source:

Hise/McDaniel, cases in marketing, 1984: 363)