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What is Marketing?

There are many different definitions of marketing. Consider some of the following alternative definitions: The all-embracing function that links the business with customer needs and wants in order to get the right product to the right place at the right time The achievement of corporate goals through meeting and exceeding customer needs better than the competition The management process that identifies, anticipates and supplies customer requirements efficiently and profitably Marketing may be defined as a set of human activities directed at facilitating and consummating exchanges
The marketing concept is about matching a company's capabilities with customer wants. This matching process takes place in what is called the marketing environment.

Pricing - key influences on pricing


The factors that businesses must consider in determining pricing policy can be summarised in four categories: (1) Costs In order to make a profit, a business should ensure that its products are priced above their total average cost. In the short-term, it may be acceptable to price below total cost if this price exceeds the marginal cost of production so that the sale still produces a positive contribution to fixed costs. (2) Competitors If the business is a monopolist, then it can set any price. At the other extreme, if a firm operates under conditions of perfect competition, it has no choice and must accept the market price. The reality is usually somewhere in between. In such cases the chosen price needs to be very carefully considered relative to those of close competitors. (3) Customers Consideration of customer expectations about price must be addressed. Ideally, a business should attempt to quantify its demand curve to estimate what volume of sales will be achieved at given prices

(4) Business Objectives Possible pricing objectives include: To maximise profits To achieve a target return on investment To achieve a target sales figure To achieve a target market share To match the competition, rather than lead the market

Pricing - full cost-plus pricing


Author: Jim Riley Last updated: Sunday 23 September, 2012 Full cost plus pricing seeks to set a price that takes into account all relevant costs of production. This could be calculated as follows: (Total budgeted factory cost + selling / distribution costs + other overheads + MARK UP ON COST)/Budgeted sales volumes The advantages of using cost plus pricing are: Easy to calculate - Price increases can be justified when costs rise - Price stability may arise if competitors take the same approach (and if they have similar costs) - Pricing decisions can be made at a relatively junior level in a business based on formulas The main disadvantages of cost plus pricing are often considered to be: This method ignores the concept of price elasticity of demand - it may be possible for the business to charge a higher (or lower) price to maximise profits depending on the responsiveness of customers to a change in price

The business has less incentive to cut or control costs - if costs increase, then selling prices increase. However, this might be making an "inefficient" business uncompetitive relative to competitor pricing; It requires an estimate and apportionment of business overheads. For example, total factory overheads need to be calculated and then allocated in some way against individual products. This allocation is always arbitrary.

Pricing - the link with business objectives


The pricing objectives of businesses are generally related to satisfying one of five common strategic objectives: Objective 1: To Maximise Profits Although the maximisation of profits can have negative connotations for the public, in economic theory, one function of profit is to attract new entrants to the market and the additional suppliers keep prices at a reasonable level. By seeking to differentiate their product from those of other suppliers, new entrants also expand the choice to consumers, and may vary prices as niche markets develop Objective 2: To Meet a Specific Target Return on Investment (or on net sales) Assuming a standard volume operation (i.e. production and sales) target pricing is concerned with determining the necessary mark-up (on cost) per unit sold, to achieve the overall target profit goal. Target return pricing is effective as an overall performance measure of the entire product line, but for individual items within the line, certain strategic pricing considerations may require the raising or lowering of the standard price. Objective 3: To Achieve a Target Sales Level Many businesses measure their success in terms of overall revenues. This is often a proxy for market share. Pricing strategies with this objective in mind usually focus on setting price that maximises the volumes sold. Objective 4: To Maintain or Enhance Market Share As an organisational goal, the achievement of a desired share of the market is generally linked to increased profitability. An offensive market share strategy involves attaining increased market share, by lowering prices in the short term. This can lead to increased sales, which in the longer term can lead to lower costs (through benefits of scale and experience) and ultimately to higher prices due to increased volume/market share. Objective 5: To Meet or Prevent Competition

Prices are set at a level that reflects the average industry price, with small adjustments made for unique features of the companys specific product(s). Firms that adopt this objective must work backwards from price and tailor costs to enable the desired margin to be delivered.

Pricing - return on investment ("ROI") method


The "return on investment" pricing method determines the price of a product based on the target return on the amount invested in a product: The calculation is as follows: Unit Price Total costs (fixed and variable) + (% return x Investment) Budgeted sales volume

The use of a targeted return on investment to determine price has the following advantages: - Consistent with other performance measures - e.g. Return on Investment - A suitable method for market leaders which are able to set a price which competitors follow - A relevant pricing method for new products - particularly those which have a substantial investment. The method does, however, have some disadvantages: - With new products, there is an inherent uncertainty about what the achieved sales volume will be - which in turn will be influenced by the price chosen - Some investment may be common to several products or product groups (e.g. an extension to a factory; investment in new development facilities). This raises the question of how to apportion investment amongst products.

Pricing - expansionistic pricing


Expansionistic pricing is a more exaggerated form of penetration pricing and involves setting very low prices aimed at establishing mass markets, possibly at the expense of other suppliers. Under this strategy, the product enjoys a high price elasticity of demand so that the adoption of a low price leads to significant increases in sales volumes.

Expansionistic pricing strategies may be used by companies attempting to enter new or international markets for their products. Lower-cost version of a product may be offered at a very low price to gain recognition and acceptance by consumers. Once acceptance has been achieved more expensive versions or models of the offering can be made available at higher prices. The extreme case of expansionistic pricing, where offerings are made available to the (overseas) market at a price that is actually less than the cost of production is known as dumping. This practice is closely scrutinised by governments since it can force domestic producers out of business and many countries have enacted anti-dumping legislation. Markets that might benefit from expansionistic pricing strategies include those of magazine and newspaper publishers. Where low prices (annual subscription rates) attract a large number of subscribers, publishers can benefit from the higher rates that they are able to charge advertisers for their advertising space. Book and CD clubs also use expansionistic to attract new members.

Pricing Strategies - Penetration Pricing


You often see the tagline special introductory offer the classic sign of penetration pricing. The aim of penetration pricing is usually to increase market share of a product, providing the opportunity to increase price once this objective has been achieved. Penetration pricing is the pricing technique of setting a relatively low initial entry price, usually lower than the intended established price, to attract new customers. The strategy aims to encourage customers to switch to the new product because of the lower price. Penetration pricing is most commonly associated with a marketing objective of increasing market share or sales volume. In the short term, penetration pricing is likely to result in lower profits than would be the case if price were set higher. However, there are some significant benefits to long-term profitability of having a higher market share, so the pricing strategy can often be justified. Penetration pricing is often used to support the launch of a new product, and works best when a product enters a market with relatively little product differentiation and where demand is price elastic so a lower price than rival products is a competitive weapon. Amongst the advantages claimed for penetration pricing include: - Catching the competition off-guard / by surprise - Encouraging word-of-mouth recommendation for the product because of the attractive pricing (making promotion more effective) - It forces the business to focus on minimising unit costs right from the start (productivity and efficiency are important)

- The low price can act as a barrier to entry to other potential competitors considering a similar strategy - Sales volumes should be high, so distribution may be easier to obtain Penetration pricing strategies do have some drawbacks, however: - The low initial price can create an expectation of permanently low prices amongst customers who switch. It is always harder to increase prices than to lower them - Penetration pricing may simply attract customers who are looking for a bargain, rather than customers who will become loyal to the business and its brand (repeat business) - The strategy is likely to result in retaliation from established competitors, who will try to maintain their market share

Pricing Strategies - Skimming


The practice of price skimming involves charging a relatively high price for a short time where a new, innovative, or much-improved product is launched onto a market. The objective with skimming is to skim off customers who are willing to pay more to have the product sooner; prices are lowered later when demand from the early adopters falls. The success of a price-skimming strategy is largely dependent on the inelasticity of demand for the product either by the market as a whole, or by certain market segments. High prices can be enjoyed in the short term where demand is relatively inelastic. In the short term the supplier benefits from monopoly profits, but as profitability increases, competing suppliers are likely to be attracted to the market (depending on the barriers to entry in the market) and the price will fall as competition increases. The main objective of employing a price-skimming strategy is, therefore, to benefit from high short-term profits (due to the newness of the product) and from effective market segmentation. There are several advantages of price skimming Where a highly innovative product is launched, research and development costs are likely to be high, as are the costs of introducing the product to the market via promotion, advertising etc. In such cases, the practice of price-skimming allows for some return on the set-up costs By charging high prices initially, a company can build a high-quality image for its product. Charging initial high prices allows the firm the luxury of reducing them when the threat of competition arrives. By contrast, a lower initial price would be difficult to increase without risking the loss of sales volume

Skimming can be an effective strategy in segmenting the market. A firm can divide the market into a number of segments and reduce the price at different stages in each, thus acquiring maximum profit from each segment Where a product is distributed via dealers, the practice of price-skimming is very popular, since high prices for the supplier are translated into high mark-ups for the dealer For conspicuous or prestige goods, the practice of price skimming can be particularly successful, since the buyer tends to be more prestige conscious than price conscious. Similarly, where the quality differences between competing brands is perceived to be large, or for offerings where such differences are not easily judged, the skimming strategy can work well. An example of the latter would be for the manufacturers of designer-label clothing.

Pricing - variable cost or marginal cost pricing


With variable (or marginal cost) pricing, a price is set in relation to the variable costs of production (i.e. ignoring fixed costs and overheads). The objective is to achieve a desired contribution towards fixed costs and profit. Contribution per unit can be defined as: SELLING PRICE less VARIABLE COSTS Total contribution can be calculated as follows: Contribution per unit v Sales Volume The resulting profit in a business is, therefore: Total Contribution less Total Fixed Costs The break even level of sales can be calculated using this information as follows: Break even volume = Total Fixed Costs / Contribution per Unit Consider a business with the following costs and volumes for a single product: The advantages of using a variable/marginal costing method for pricing include the following: Good for short-term decision-making; Avoids having to make an arbitrary allocation of fixed costs and overheads; Focuses the business on what is required to achieve break-even

Promotion - direct marketing


Introduction Direct marketing is concerned with establishing an individual relationship between the business offering a product or service and the final customer. Direct marketing has been defined by the Institute of Direct Marketing as: The planned recording, analysis and tracking of customer behaviour to develop a relational marketing strategies The process of direct marketing covers a wide range of promotional activities you may be familiar with. These include: Direct-response adverts on television and radio Mail order catalogues E-commerce (you bought this marketing companion following tutor2us direct marketing campaign!) Magazine inserts Direct mail (sometimes also referred to as junk mail) Telemarketing Direct mail Of the above direct marketing techniques, the one in most widespread use is direct mail. Direct mail is widely thought of as the most effective medium to achieve a customer sales response. Why? The advertiser can target a promotional message down to an individual level, and where possible personalise the message. There are a large number of mailing databases available that allow businesses to send direct mailing to potential customers based on household income, interests, occupation and other variables Businesses can first test the responsiveness of direct mailing (by sending out a test mailing to a small, representative sample) before committing to the more significant cost of a larger campaign Direct mailing campaigns are less visible to competitors it is therefore possible to be more creative, for longer However, direct mail has several weaknesses:

A piece of direct mail is less interactive than a television or radio advert, although creative packaging can still stimulate customer response Lead times to produce direct mailing campaigns can be quite long There is increasing customer concern with junk mail the receipt of unsolicited mail which often suggests that the right to individual privacy has been breached. The Direct marketing database Direct mailing is based on the mailing list a critical part in the direct marketing process. The mailing list is a database which collects together details of past, current and potential customers. A properly managed mailing database enables a business to: Focus on the best prospective customers Cross-sell related products Launch new products to existing customers How is the mailing database compiled? The starting point is the existing information the business keeps on its customers. All forms of communication between a customer and the business need to be recorded so that a detailed, upto-date profile can be maintained. It is also possible to buy mailing lists from elsewhere. There are numerous mailing list owners and brokers who sell lists of names. The Internet, directories, associa

Promotion - introducing the promotional mix


Promotional mix

It is helpful to define the five main elements of the promotional mix before considering their strengths and limitations. Advertising Advertising is any paid form of non-personal communication of ideas or products in the "prime media": i.e. television, newspapers, magazines, billboard posters, radio, cinema etc. Advertising is intended to persuade and to inform. The two basic aspects of advertising are the message (what you want your communication to say) and the medium (how you get your message across)

Direct marketing Direct marketing creates a direct relationship between the customer and the business on an individual basis. Personal Selling Personal selling refers to oral communication with potential buyers of a product with the intention of making a sale. The personal selling may focus initially on developing a relationship with the potential buyer, but will always ultimately end with an attempt to "close the sale". Sales Promotion Sales promotion refers to the provision of incentives to customers or to the distribution channel to stimulate demand for a product. Public Relations Public relations is the communication of a product, brand or business by placing information about it in the media without paying for the time or media space directly Factors that determine the type of promotional tools used Each of the above components of the promotional mix has strengths and weaknesses. There are several factors that should be taken into account in deciding which, and how much of each tool to use in a promotional marketing campaign: (1) Resource availability and the cost of each promotional tool Advertising (particularly on television and in the national newspapers can be very expensive). The overall resource budget for the promotional campaign will often determine which tools the business can afford to use. (2) Market size and concentration If a market size is small and the number of potential buyers is small, then personal selling may be the most cost-effective promotional tool. A good example of this would be businesses selling software systems designed for supermarket retailers. On the other hand, where markets are geographically disperse or, where there are substantial numbers of potential customers, advertising is usually the most effective. (3) Customer information needs Some potential customers need to be provided with detailed, complex information to help them evaluate a purchase (e.g. buyers of equipment for nuclear power stations, or health service

managers investing in the latest medical technology). In this situation, personal selling is almost always required - often using selling teams rather than just one individual. By contrast, few consumers need much information about products such as baked beans or bread. Promotional tools such as brand advertising and sales promotion are much more effective in this case.

Promotional Mix - Introduction


It is a common mistake to believe that promotion by business is all about advertising. It isnt. There are a variety of approaches that a business can take to get their message across to customers, although advertising is certainly an important one. Promotion is all about communication. Why because promotion is the way in a business makes its products known to the customers, both current and potential. The main aim of promotion is to ensure that customers are aware of the existence and positioning of products. Promotion is also used to persuade customers that the product is better than competing products and to remind customers about why they may want to buy. In fact, promotion has many potential uses in business. It can be used to: Increase sales Attract new customers Encourage customer loyalty Encourage trial Create awareness Inform Remind potential customers Reassure new customers Change attitudes Create an image Position a product Encourage brand switching To support a distribution channel

It is important to understand that a business will use more than one method of promotion. The variety of promotional methods used is referred to as the promotional mix. Which promotional methods are used depends on several factors: Stage in the life cycle E.g. advertising is important at the launch stage

Nature of the product Competition Marketing budget Marketing strategy Target market

How much information is required by customers before they buy What are rivals doing? How much can the firm afford? Other elements of the mix (price, product, place etc) Appropriate ways to reach the target market

The main methods of promotion are:


Advertising Public relations & sponsorship Personal selling Direct marketing Sales promotion

A business will use a range of promotional activities for its product, depending on the marketing strategy and the budget available. The way in which promotion is targeted is split into two types:

Above the line promotion paid for communication in the independent media e.g. advertising on TV or in the newspapers. Though it can be targeted, it could be seen by anyone outside the target audience. Below the line promotion promotional activities where the business has direct control e.g. direct mailing and money off coupons. It is aimed directly at the target audience.

Promotional Mix - Personal Selling


Personal selling is where businesses use people (the sales force) to sell the product after meeting face-to-face with the customer. The sellers promote the product through their attitude, appearance and specialist product knowledge. They aim to inform and encourage the customer to buy, or at least trial the product. A good example of personal selling is found in department stores on the perfume and cosmetic counters. A customer can get advice on how to apply the product and can try different products. Products with relatively high prices, or with complex features, are often sold using personal selling. Great examples include cars, office equipment (e.g. photocopiers) and many products that are sold by businesses to other industrial customers.

The main advantages and disadvantages of personal selling can be summarised as follows: Advantages High customer attention Message is customised Interactivity Persuasive impact Potential for development of relationship Adaptable Opportunity to close the sale Disadvantages High cost Labour intensive Expensive Can only reach a limited number of customers

Point-of-sale merchandising can be said to be a specialist form of personal selling. POS merchandising involves face-to-face contact between sales representatives of producers and the retail trade.

Promotion - public relations


Author: Jim Riley Last updated: Sunday 23 September, 2012 Introduction The Institute of Public Relations defines public relations as follows: The planned and sustained effort to establish and maintain goodwill and mutual understanding between an organisation and its publics What is meant by the term publics in the above definition? A business may have many publics with which it needs to maintain good relations and build goodwill. For example, consider the relevant publics for a publicly-quoted business engaged in medical research: Employees Shareholders

Trade unions Members of the general public Customers (past and present) Pressure groups The medical profession Charities funding medical research Professional research bodies and policy-forming organisations The media Government and politicians The role of public relations is to: Identify the relevant publics Influence the opinions of those publics by: o Reinforcing favourable opinions o Transforming perhaps neutral opinions into positive ones o Changing or neutralising hostile opinions Public relations techniques There are many techniques available to influence public opinion, some of which are more appropriate in certain circumstances than others: Consumer communication Customer press releases Trade press releases Promotional videos Consumer exhibitions Competitions and prizes Product launch events Celebrity endorsements Web sites Business communication Corporate identity design Company and product videos Direct mailings Web site Trade exhibitions Internal / employee communication In-house newsletters and magazines Intranet

Notice boards Employee conferences Email External corporate communication Company literature (brochures, videos etc.) Community involvement programmes Trade, local, national and international media relations Financial communication Financial media relations Annual report and accounts Meetings with stock market analysts, fund managers etc Shareholder meetings (including the annual general meeting Given the wide range of techniques used in public relations, how is it possible to measure the effectiveness of public relations? It is actually quite difficult to measure whether the key messages have been communicated to the target public. In any event, this could be quite costly since it would involve a large amount of regular research. Instead, the main measures of effectiveness concentrate on the process of public relations, and include: Monitoring the amount of media coverage obtained (press cuttings agencies play a role in keeping businesses informed of this) Measuring attendance at meetings, conferences Measuring the number of enquiries or orders received in response to specific public relations efforts.

Promotion - Push & Pull Strategies


Author: Jim Riley Last updated: Sunday 23 September, 2012 "Push or Pull"?

Marketing theory distinguishes between two main kinds of promotional strategy - "push" and "pull". Push A push promotional strategy makes use of a company's sales force and trade promotion activities to create consumer demand for a product. The producer promotes the product to wholesalers, the wholesalers promote it to retailers, and the retailers promote it to consumers. A good example of "push" selling is mobile phones, where the major handset manufacturers such as Nokia promote their products via retailers such as Carphone Warehouse. Personal selling and trade promotions are often the most effective promotional tools for companies such as Nokia for example offering subsidies on the handsets to encourage retailers to sell higher volumes. A "push" strategy tries to sell directly to the consumer, bypassing other distribution channels (e.g. selling insurance or holidays directly). With this type of strategy, consumer promotions and advertising are the most likely promotional tools. Pull A pull selling strategy is one that requires high spending on advertising and consumer promotion to build up consumer demand for a product. If the strategy is successful, consumers will ask their retailers for the product, the retailers will ask the wholesalers, and the wholesalers will ask the producers.

Sales Promotion
Sales promotion is the process of persuading a potential customer to buy the product. Sales promotion is designed to be used as a short-term tactic to boost sales it is rarely suitable as a method of building long-term customer loyalty. Some sales promotions are aimed at consumers. Others are targeted at intermediaries and at the firms sales force. When undertaking a sales promotion, there are several factors that a business must take into account:

What does the promotion cost will the resulting sales boost justify the investment? Is the sales promotion consistent with the brand image? A promotion that heavily discounts a product with a premium price might do some long-term damage to a brand

Will the sales promotion attract customers who will continue to buy the product once the promotion ends, or will it simply attract those customers who are always on the look-out for a bargain?

There are many methods of sales promotion, including:


Money off coupons customers receive coupons, or cut coupons out of newspapers or a products packaging that enables them to buy the product next time at a reduced price Competitions buying the product will allow the customer to take part in a chance to win a prize Discount vouchers a voucher (like a money off coupon) Free gifts a free product when buy another product Point of sale materials e.g. posters, display stands ways of presenting the product in its best way or show the customer that the product is there. Loyalty cards e.g. Nectar and Air Miles; where customers earn points for buying certain goods or shopping at certain retailers that can later be exchanged for money, goods or other offers

Loyalty cards have recently become an important form of sales promotion. They encourage the customer to return to the retailer by giving them discounts based on the spending from a previous visit. Loyalty cards can offset the discounts they offer by making more sales and persuading the customer to come back. They also provide information about the shopping habits of customers where do they shop, when and what do they buy? This is very valuable marketing research and can be used in the planning process for new and existing products. The main advantages and disadvantages of sales promotion are: Advantages Effective at achieving a quick boost to sales Encourages customers to trial a product or switch brands Disadvantages Sales effect may only be short-term Customers may come to expect or anticipate further promotions May damage brand image

Promotion - Sponsorship
An increasingly common form of promotional activity is sponsorship. What is sponsorship? Sponsorship can be defined as follows:

Supporting an event, activity or organisation by providing money or other resources that is of value to the sponsored event. This is usually in return for advertising space at the event or as part of the publicity for the event. There are many kinds of sponsorship: Television and radio programme sponsorship. The increasing fragmentation of television in the UK through new digital channels is providing many more opportunities for sponsorship of this kind Sports sponsorship: major sporting events have the advantage of being attended and (more importantly) watched by large numbers of people. They also attract significant media coverage. Arts sponsorship; arts events or organisations are not as well attended as sports events but are often regarded as more worthy and more in keeping with the image of certain businesses and brands. Educational sponsorship; this can take several forms from the sponsoring of individual students at college through to the provision of books and computers nationwide using the redemption of product or store-related vouchers.

Difference Between Advertising and Publicity


1. Advertising is paid form of ideas, goods and services while publicity is not paid by the sponsor. 2. Advertising comes from an identified sponsor while publicity comes from a neutral and impartial source. 3. Advertising is controllable by the organisation while publicity is not controllable because it comes from a neutral source. 4. Advertising is less credible in comparison to publicity while publicity is more credible because it comes from an impartial source. 5. Advertising is what you or your organisation says and promotes about you or your organisation but publicity is what others say for you or your organisation. 6. In advertising same content is repeated by the sponsor while in publicity it is not generally possible. 7. Advertising always carries a positive message about your organisation because it is the content you pay for but publicity can be positive or negative because it comes from an impartial source.

8. In advertising you have full chance to show your creativity but in publicity creativity is limited because it comes from non paid source. 9. Advertising is targeted to the practicular audiences by the sponsor while in publicity it is not focused. 10. Most of the times in advertising social responsibility is ignored while in publicity special focus is given on social responsibility.

Products - introduction
A product is defined as: "Anything that is capable of satisfying customer needs" This definition includes both physical products (e.g. cars, washing machines, DVD players) as well as services (e.g. insurance, banking, private health care). The process by which companies distinguish their product offerings from the competition is called branding. For most companies, brands are not developed in isolation - they are part of a product group. A product group (or product line) is a group of brands that are closely related in terms of their functions and the benefits they provide (e.g. Dell's range of personal computers or Sony's range of televisions). There are two main types of product brand: (1) Manufacturer brands (2) Own-label brands Manufacturer brands are created by producers and use their chosen brand name. The producer has the responsibility for marketing the brand, by building distribution and gaining customer brand loyalty. Good examples include Microsoft, Panasonic and Mercedes. Own-label brands are created and owned by distributors. Good examples include Tesco and Sainsbury's. The main importance of branding is that, done well, it permits a business to differentiate its products, adding extra value for consumers who value the brand, and improving profitability for the company.

Businesses should manage their products carefully over time to ensure that they deliver products that continue to meet customer wants. The process of managing groups of brands and product lines is called portfolio planning. Two models of product portfolio planning are widely known and used in business: The Boston Group Growth-Share Matrix, and GE Market Attractiveness model These models are described in more detail in other tutor2u revision notes. Businesses need to regularly look for new products and markets for future growth. A useful way of looking at growth opportunities is the Ansoff Growth matrix which suggests that there are four main ways in which growth can be achieved through a product strategy: (1) Market penetration - Increase sales of an existing product in an existing market (2) Product development - Improve present products and/or develop new products for the current market (3) Market development - Sell existing products into new markets (e.g. developing export sales) (4) Diversification - Develop new products for new markets A product is defined as: "Anything that is capable of satisfying customer needs" This definition includes both physical products (e.g. cars, washing machines, DVD players) as well as services (e.g. insurance, banking, private health care). The process by which companies distinguish their product offerings from the competition is called branding. For most companies, brands are not developed in isolation - they are part of a product group. A product group (or product line) is a group of brands that are closely related in terms of their functions and the benefits they provide (e.g. Dell's range of personal computers or Sony's range of televisions). There are two main types of product brand: (1) Manufacturer brands (2) Own-label brands

Manufacturer brands are created by producers and use their chosen brand name. The producer has the responsibility for marketing the brand, by building distribution and gaining customer brand loyalty. Good examples include Microsoft, Panasonic and Mercedes. Own-label brands are created and owned by distributors. Good examples include Tesco and Sainsbury's. The main importance of branding is that, done well, it permits a business to differentiate its products, adding extra value for consumers who value the brand, and improving profitability for the company. Businesses should manage their products carefully over time to ensure that they deliver products that continue to meet customer wants. The process of managing groups of brands and product lines is called portfolio planning. Two models of product portfolio planning are widely known and used in business: The Boston Group Growth-Share Matrix, and GE Market Attractiveness model These models are described in more detail in other tutor2u revision notes. Businesses need to regularly look for new products and markets for future growth. A useful way of looking at growth opportunities is the Ansoff Growth matrix which suggests that there are four main ways in which growth can be achieved through a product strategy: (1) Market penetration - Increase sales of an existing product in an existing market (2) Product development - Improve present products and/or develop new products for the current market (3) Market development - Sell existing products into new markets (e.g. developing export sales) (4) Diversification - Develop new products for new markets

Product Life Cycle


The product life cycle is an important concept in marketing. It describes the stages a product goes through from when it was first thought of until it finally is removed from the market. Not all products reach this final stage. Some continue to grow and others rise and fall. The main stages of the product life cycle are:

Introduction researching, developing and then launching the product

Growth when sales are increasing at their fastest rate Maturity sales are near their highest, but the rate of growth is slowing down, e.g. new competitors in market or saturation Decline final stage of the cycle, when sales begin to fall

This can be illustrated by looking at the sales during the time period of the product.

A branded good can enjoy continuous growth, such as Microsoft, because the product is being constantly improved and advertised, and maintains a strong brand loyalty. Some key features of each stage in the product life cycle can be summarised as follows: Introduction New product launched on the market Low level of sales Low capacity utilisation High unit costs - teething problems occur Usually negative cash flow Distributors may be reluctant to take an unproven product Heavy promotion to make consumers aware of the product Relevant strategies at the introduction stage might include: Aim to encourage customer adoption High promotional spending to create awareness and inform people Either skimming or penetration pricing

Limited, focused distribution Demand initially from early adopters Growth Expanding market but arrival of competitors Fast growing sales Rise in capacity utilisation Product gains market acceptance Cash flow may become positive Unit costs fall with economies of scale The market grows, profits rise but attracts the entry of new competitors Relevant strategies at the growth stage might include: Advertising to promote brand awareness Increase in distribution outlets - intensive distribution Go for market penetration and (if possible) price leadership Target the early majority of potential buyers Continuing high promotional spending Improve the product - new features, improved styling, more options Maturity Slower sales growth as rivals enter the market = intense competition + fight for market share High level of capacity utilisation High profits for those with high market share Cash flow should be strongly positive Weaker competitors start to leave the market Prices and profits fall There is a wide variety of possible options for a product that has reached the maturity stage: Product differentiation & product improvements Rationalisation of capacity Competitor based pricing Promotion focuses on differentiation Persuasive advertising Intensive distribution Enter new segments Attract new users Repositioning Develop new uses Decline Stage

Common features at this stage include: Falling sales Market saturation and/or competition Decline in profits & weaker cash flows More competitors leave the market Decline in capacity utilisation switch capacity to alternative products Potential strategies are: Harvest by spending little on marketing the product Rationalise by weeding out product variations Price cutting to maintain competitiveness Promotion to retain loyal customers Distribution narrowed Extension strategies These extend the life of the product before it goes into decline. Again businesses use marketing techniques to improve sales. Examples of the techniques are:

Advertising try to gain a new audience or remind the current audience Price reduction more attractive to customers Adding value add new features to the current product, e.g. video messaging on mobile phones Explore new markets try selling abroad New packaging brightening up old packaging, or subtle changes such as putting crisps in foil packets or Seventies music compilations

Some criticisms of the product life cycle The shape and duration of the cycle varies Strategic decisions can change the life cycle It is difficult to recognise exactly where a product is in its life cycle Length cannot be reliably predicted Decline is not inevitable? Assumes no reversion to earlier consumer preferences It can become a self fulfilling prophecy

Distribution (Place) - Introduction


Place (or its more common name distribution) is about how a business gets its products to the customers. Place (or its more common name distribution) is about how a business gets its products to the customers.

A distribution channel can be defined as: "all the organisations through which a product must pass between its point of production and consumption" Looking at that definition, you can see that a product might pass through several stages before it finally reaches the consumer. The organisations involved in each stage of distribution are commonly referred to as intermediaries.

Why does a business give the job of selling its products to intermediaries? After all, using an intermediary means giving up some control over how products are sold and who they are sold to. An intermediary will also want to make a profit by getting involved. The answer lies in efficiency of distribution costs. Intermediaries are specialists in selling. They have the contacts, experience and scale of operation which means that greater sales can be achieved than if the producing business tried to run a sales operation itself. The main function of a distribution channel is to provide a link between production and consumption. Organisations that form any particular distribution channel perform many key functions: Information Promotion Contact Matching Negotiation Physical distribution Financing Risk taking Gathering and distributing market research and intelligence - important for marketing planning Developing and spreading communications about offers Finding and communicating with prospective buyers Adjusting the offer to fit a buyer's needs, including grading, assembling and packaging Reaching agreement on price and other terms of the offer Transporting and storing goods Acquiring and using funds to cover the costs of the distribution channel Assuming some commercial risks by operating the channel (e.g. holding stock)

All of the above functions need to be undertaken in any market. The question is - who performs them and how many levels there need to be in the distribution channel in order to make it cost effective?

Distribution Channels
Each layer of marketing intermediaries that performs some work in bringing the product to its final buyer is a "channel level". The figure below shows some examples of channel levels for consumer marketing channels:

In the figure above, the first two channels are "indirect-marketing channels". Channel 1 contains two intermediary levels - a wholesaler and a retailer. A wholesaler typically buys and stores large quantities of several producers goods and then breaks into the bulk deliveries to supply retailers with smaller quantities. For small retailers with limited order quantities, the use of wholesalers makes economic sense. This arrangement tends to work best where the retail channel is fragmented - i.e. not dominated by a small number of large, powerful retailers who have an incentive to cut out the wholesaler. A good example of this channel arrangement in the UK is the distribution of drugs. Channel 2 contains one intermediary. In consumer markets, this is typically a retailer. The consumer electrical goods market in the UK is typical of this arrangement whereby producers such as Sony, Panasonic, Canon etc. sell their goods directly to large retailers and e-tailers such as Comet, Tesco and Amazon which then sell onto the final consumers. Channel 3 is called a "direct-marketing" channel, since it has no intermediary levels. In this case the manufacturer sells directly to customers. An example of a direct marketing channel would be a factory outlet store. Many holiday companies also market direct to consumers, bypassing a traditional retail intermediary - the travel agent.

What factors should be taken into account in choosing the best distribution channel? Here is a summary:

Nature of the product


Perishable/fragile? A product with a short-life Technical/complex? Complex products are often sold by specialist distributors or agents Customised? A direct distribution approach often works best for a product that the end consumer wants providing to a distinct specification Type of product e.g. convenience, shopping, speciality Desired image for the product if intermediaries are to be used, then it is essential that those chosen are suitable and relevant for the product.

The market
o o o

Is it geographically spread? Does it involve selling overseas (see further below) The extent and nature of the competition which distribution channels and intermediaries do competitors use?

The business Its size and scope e.g. can it afford an in-house sales force? Its marketing objectives revenue or profit maximisation? Does it have established distribution network or does it need to extend its distribution option o How much control does it want over distribution? The longer the channel, the less control is available
o o o

Legal issues
o o

Are there limitations on sale? What are the risks if an intermediary sells the product to an inappropriate customer?

Distribution - Selling Direct


Introduction A key decision a business has to make about distribution is whether to sell direct. This method of distribution is usually called direct marketing. Direct marketing means selling products by dealing directly with consumers rather than through intermediaries.

Traditional methods include mail order, direct-mail selling, cold calling, telephone selling, and door-to-door calling. More recently telemarketing, direct radio selling, magazine and TV advertising, and on-line computer shopping have been developed.

Distribution - Role of Intermediaries


There is a variety of intermediaries that may get involved before a product gets from the original producer to the final user. These are described briefly below: Retailers Retailers operate outlets that trade directly with household customers. Retailers can be classified in several ways: Type of goods being sold( e.g. clothes, grocery, furniture) Type of service (e.g. self-service, counter-service) Size (e.g. corner shop; superstore) Ownership (e.g. privately-owned independent; public-quoted retail group Location (e.g. rural, city-centre, out-of-town) Brand (e.g. nationwide retail brands; local one-shop name) Wholesalers Wholesalers stock a range of products from several producers. The role of the wholesaler is to sell onto retailers. Wholesalers usually specialise in particular products. Distributors and dealers Distributors or dealers have a similar role to wholesalers that of taking products from producers and selling them on. However, they often sell onto the end customer rather than a retailer. They also usually have a much narrower product range. Distributors and dealers are often involved in providing after-sales service. Franchises Franchises are independent businesses that operate a branded product (usually a service) in exchange for a licence fee and a share of sales. Agents Agents sell the products and services of producers in return for a commission (a percentage of the sales revenues)

Marketing research - introduction

Marketing research - introduction


Author: Jim Riley Last updated: Sunday 23 September, 2012 To undertake marketing effectively, businesses need information. Information about customer wants, market demand, competitors, distribution channels etc. Marketers often complain that they lack enough marketing information or the right kind, or have too much of the wrong kind. The solution is an effective marketing information system. The information needed by marketing managers comes from three main sources: (1) Internal company information E.g. sales, orders, customer profiles, stocks, customer service reports etc (2) Marketing intelligence This can be information gathered from many sources, including suppliers, customers, distributors. Marketing intelligence is a catch-all term to include all the everyday information about developments in the market that helps a business prepare and adjust its marketing plans. It is possible to buy intelligence information from outside suppliers (e.g. Mintel, Dun & Bradstreet, Mori) who set up data gathering systems to support commercial intelligence products that can be profitably sold to all players in a market. (3) Market research Management cannot always wait for information to arrive in bits and pieces from internal sources. Also, sources of market intelligence cannot always be relied upon to provide relevant or up-to-date information (particularly for smaller or niche market segments). In such circumstances, businesses often need to undertake specific studies to support their marketing strategy - this is market research.

Marketing research - qualitative research


In terms of data capture and analysis there are two main types of market research: Qualitative Research Quantitative Research Qualitative Research Qualitative Research is about investigating the features of a market through in-depth research that explores the background and context for decision making.

There are two main qualitative methods - depth interviews and focus groups. However qualitative research can also include techniques such as usability testing, brainstorming sessions and "vox pop" surveys. Depth Interviewing Depth interviews are the main form of qualitative research in most business markets. Here an interviewer spends time in a one-on-one interview finding out about the customer's particular circumstances and their individual opinions. The majority of business depth interviews take place in person, which has the added benefit that the researcher visits the respondent's place of work and gains a sense of the culture of the business. However, for multi-national studies, telephone depth interviews, or even on-line depth interviews may be more appropriate. Feedback is through a presentation that draws together findings across a number of depth interviews. In some circumstances, such as segmentation studies, identifying differences between respondents may be as important as the views that customers share. The main alternative to depth interviews - focus group discussions - are typically too difficult or expensive to arrange with busy executives. However, on-line techniques increasing get over this problem. Group Discussions Focus groups are the mainstay of consumer research. Here several customers are brought together to take part in a discussion led by a researcher (or "moderator"). These groups are a good way of exploring a topic in some depth or to encourage creative ideas from participants. Group discussions are rare in business markets, unless the customers are small businesses. In technology markets where the end user may be a consumer, or part of a team evaluating technology, group discussions can be an effective way of understanding what customers are looking for, particularly at more creative stages of research.

Quantitative Research Quantitative research is about measuring a market and quantifying that measurement with data. Most often the data required relates to market size, market share, penetration, installed base and market growth rates. However, quantitative research can also be used to measure customer attitudes, satisfaction, commitment and a range of other useful market data that can tracked over time.

Quantitative research can also be used to measure customer awareness and attitudes to different manufacturers and to understand overall customer behaviour in a market by taking a statistical sample of customers to understand the market as a whole. Such techniques are extremely powerful when combined with techniques such segmentation analysis and mean that key audiences can be targeted and monitored over time to ensure the optimal use of the marketing budget. At the heart of all quantitative research is the statistical sample. Great care has to be taken in selecting the sample and also in the design of the sample questionnaire and the quality of the analysis of data collected. Market research involves the collection of data to obtain insight and knowledge into the needs and wants of customers and the structure and dynamics of a market. In nearly all cases, it would be very costly and time-consuming to collect data from the entire population of a market. Accordingly, in market research, extensive use is made of sampling from which, through careful design and analysis, Marketers can draw information about the market.

Marketing Research - Sampling


Introduction Market research involves the collection of data to obtain insight and knowledge into the needs and wants of customers and the structure and dynamics of a market. In nearly all cases, it would be very costly and time-consuming to collect data from the entire population of a market. Accordingly, in market research, extensive use is made of sampling from which, through careful design and analysis, Marketers can draw information about the market. Sample Design Sample design covers the method of selection, the sample structure and plans for analysing and interpreting the results. Sample designs can vary from simple to complex and depend on the type of information required and the way the sample is selected. Sample design affects the size of the sample and the way in which analysis is carried out. In simple terms the more precision the market researcher requires, the more complex will be the design and the larger the sample size. The sample design may make use of the characteristics of the overall market population, but it does not have to be proportionally representative. It may be necessary to draw a larger sample than would be expected from some parts of the population; for example, to select more from a minority grouping to ensure that sufficient data is obtained for analysis on such groups. Many sample designs are built around the concept of random selection. This permits justifiable inference from the sample to the population, at quantified levels of precision. Random selection also helps guard against sample bias in a way that selecting by judgement or convenience cannot.

Defining the Population The first step in good sample design is to ensure that the specification of the target population is as clear and complete as possible to ensure that all elements within the population are represented. The target population is sampled using a sampling frame. Often the units in the population can be identified by existing information; for example, pay-rolls, company lists, government registers etc. A sampling frame could also be geographical; for example postcodes have become a well-used means of selecting a sample. Sample Size For any sample design deciding upon the appropriate sample size will depend on several key factors (1) No estimate taken from a sample is expected to be exact: Any assumptions about the overall population based on the results of a sample will have an attached margin of error. (2) To lower the margin of error usually requires a larger sample size. The amount of variability in the population (i.e. the range of values or opinions) will also affect accuracy and therefore the size of sample. (3) The confidence level is the likelihood that the results obtained from the sample lie within a required precision. The higher the confidence level, that is the more certain you wish to be that the results are not atypical. Statisticians often use a 95 per cent confidence level to provide strong conclusions. (4) Population size does not normally affect sample size. In fact the larger the population size the lower the proportion of that population that needs to be sampled to be representative. It is only when the proposed sample size is more than 5 per cent of the population that the population size becomes part of the formulae to calculate the sample size. Types of Sampling There are many different types of sampling technique. We have summarised the most popular below: Sampling Method Cluster Sampling) Definition Units in the population can often be found in certain geographic groups or "clusters" (e.g. primary school children in Derbyshire. A random sample of clusters is taken, then all units within the cluster are examined Uses Quick & easy; does not require complete population information; good for face-to-face surveys Limitations Expensive if the clusters are large; greater risk of sampling error

Convenience Uses those who are willing to volunteer Sampling

Readily available; large amount of information can be gathered quickly

Cannot extrapolate from sample to infer about the population; prone to volunteer bias Very prone to bias; samples often small; cannot extrapolate from sample Not random, so still some risk of bias; need to understand the population to be able to identify the basis of stratification

Judgement Sampling

A deliberate choice of a sample - Good for providing the opposite of random illustrative examples or case studies Aim is to obtain a sample that is Quick & easy way of "representative" of the overall obtaining a sample population; the population is divided ("stratified") by the most important variables (e.g. income,. age, location) and a required quota sample is drawn from each stratum Ensures that every member of the Simply to design and population has an equal chance of interpret; can selection calculate estimate of the population and the sampling error

Quota Sampling

Simply Random Sampling

Need a complete and accurate population listing; may not be practical if the sample requires lots of small visits all over the country Can be costly and time-consuming if the sample is not conveniently located

Systematic Sampling

After randomly selecting a starting point from the population, between 1 and "n", every nth unit is selected, where n equals the population size divided by the sample size

Easier to extract the sample than via simple random; ensures sample is spread across the population

Market research - ad hoc & continuous


Ad-hoc Market Research Ad-hoc research studies focus on specific marketing problems. They collect data at one point in time from one sample of respondents. Good examples of ad-hoc studies include: Product usage survey New product concept tests (where consumers are asked to trial new brands, product prototypes etc)

Advertising development (how does the sample of consumers respond to a specific advertising campaign? Most TV adverts are researched in this way) Corporate image surveys (often quite enlightening) Customer satisfaction surveys (these can often turn into continuous research) Continuous Research Continuous studies interview the same sample of people, repeatedly. The major types of continuous research are: Consumer panels Consumer panels are formed by recruiting large numbers of households who provide information on their buying over time. Research agency AC Nielsen has one of the largest consumer panels in the world, continuously interviewing 125,000 households in 18 countries. The main competitor for AC Nielsen is TNS which runs panels in 20 countries. Retail Audits By gaining the cooperation of retail outlets, sales of brands can be measured (using bar coded sales data) to track changes in brand loyalty, market share and effectiveness of different retail formats. Television Viewership / Radio Listening Panels These panels aim to measure Viewer ship or listening minute by minute. This data is critical information for broadcasters to determine their programme strategy (what kinds of programmes to produce and when to broadcast them) as well as for advertisers (who is watching, listening, and when?). In the UK, the main source of such data is produced by the Broadcasters' Audience Research Board ("BARB").

Marketing research - uses of research


A wide variety of information used to support marketing decisions can be obtained from market research. A selection of such uses are summarised below: Information about the market Analysis of the market potential for existing products (e.g. market size, growth, changing sales trends) Forecasting future demand for existing products

Assessing the potential for new products Study of market trends Analysis of competitor behaviour and performance Analysis of market shares Information about Products Likely customer acceptance (or rejection) of new products Comparison of existing products in the market (e.g. price, features, costs, distribution) Forecasting new uses for existing products Technologies that may threaten existing products New product development Information about Pricing in the Market Estimates and testing of price elasticity Analysis of revenues, margins and profits Customer perceptions of just or fair pricing Competitor pricing strategies Information about Promotion in the Market Effectiveness of advertising Effectiveness of sales force (personal selling) Extent and effectiveness of sales promotional activities Competitor promotional strategies Information about Distribution in the Market Use and effectiveness of distribution channels Opportunities to sell direct Cost of transporting and warehousing products Level and quality of after-sales service A wide variety of information used to support marketing decisions can be obtained from market research. A selection of such uses are summarised below: Information about the market Analysis of the market potential for existing products (e.g. market size, growth, changing sales trends) Forecasting future demand for existing products Assessing the potential for new products Study of market trends Analysis of competitor behaviour and performance Analysis of market shares

Information about Products Likely customer acceptance (or rejection) of new products Comparison of existing products in the market (e.g. price, features, costs, distribution) Forecasting new uses for existing products Technologies that may threaten existing products New product development Information about Pricing in the Market Estimates and testing of price elasticity Analysis of revenues, margins and profits Customer perceptions of just or fair pricing Competitor pricing strategies Information about Promotion in the Market Effectiveness of advertising Effectiveness of sales force (personal selling) Extent and effectiveness of sales promotional activities Competitor promotional strategies Information about Distribution in the Market Use and effectiveness of distribution channels Opportunities to sell direct Cost of transporting and warehousing products Level and quality of after-sales service

Marketing segmentation - introduction


A market segment can be defined as follows: A customer group within the market that has special characteristics which are significant to marketing strategy Segmentation is most often applied to markets, but it is equally relevant to distribution channels and customers. However, similar principles of how to segment apply to all three. Overall definition of segmentation Segmentation involves subdividing markets, channels or customers into groups with different needs, to deliver tailored propositions which meet these needs as precisely as possible.

Market Segmentation - Bases (Overview


The most common profilers used in customer segmentation include the following: Profiler Examples Geographic Region of the country Urban or rural Demographic Age, sex, family size Income, occupation, education Religion, race, nationality Psychographic Social class Lifestyle type Personality type Behavioural Product usage - e.g. light, medium ,heavy users Brand loyalty: none, medium, high Type of user (e.g. with meals, special occasions)

Market Segmentation - Behavioural Segmentation


Behavioural segmentation divides customers into groups based on the way they respond to, use or know of a product. Behavioural segments can group consumers in terms of: Occasions When a product is consumed or purchased. For example, cereals have traditionally been marketed as a breakfast-related product. Kelloggs have always encouraged consumers to eat

breakfast cereals on the "occasion" of getting up. More recently, they have tried to extend the consumption of cereals by promoting the product as an ideal, anytime snack food. Usage Some markets can be segmented into light, medium and heavy user groups Loyalty Loyal consumers - those who buy one brand all or most of the time - are valuable customers. Many companies try to segment their markets into those where loyal customers can be found and retained compared with segments where customers rarely display any product loyalty. Benefits Sought An important form of behavioural segmentation. Benefit segmentation requires Marketers to understand and find the main benefits customers look for in a product. An excellent example is the toothpaste market where research has found four main "benefit segments" - economic; medicinal, cosmetic and taste.

Market Segmentation - Demographics


Demographic segmentation consists of dividing the market into groups based on variables such as age, gender family size, income, occupation, education, religion, race and nationality. As you might expect, demographic segmentation variables are amongst the most popular bases for segmenting customer groups. This is partly because customer wants are closely linked to variables such as income and age. Also, for practical reasons, there is often much more data available to help with the demographic segmentation process. The main demographic segmentation variables are summarised below: Age Consumer needs and wants change with age although they may still wish to consumer the same types of product. So Marketers design, package and promote products differently to meet the wants of different age groups. Good examples include the marketing of toothpaste (contrast the branding of toothpaste for children and adults) and toys (with many age-based segments). Life-cycle stage

A consumer stage in the life-cycle is an important variable - particularly in markets such as leisure and tourism. For example, contrast the product and promotional approach of Club 18-30 holidays with the slightly more refined and sedate approach adopted by Saga Holidays. Gender Gender segmentation is widely used in consumer marketing. The best examples include clothing, hairdressing, magazines and toiletries and cosmetics. Income Another popular basis for segmentation. Many companies target affluent consumers with luxury goods and convenience services. Good examples include Coutts bank; Moet & Chandon champagne and Elegant Resorts - an up-market travel company. By contrast, many companies focus on marketing products that appeal directly to consumers with relatively low incomes. Examples include Aldi (a discount food retailer), Airtours holidays, and discount clothing retailers such as TK Maxx. Social class Many Marketers believe that a consumers "perceived" social class influences their preferences for cars, clothes, home furnishings, leisure activities and other products & services. There is a clear link here with income-based segmentation. Lifestyle Marketers are increasingly interested in the effect of consumer "lifestyles" on demand. Unfortunately, there are many different lifestyle categorisation systems, many of them designed by advertising and marketing agencies as a way of winning new marketing clients and campaigns!

Marketing Segmentation - Geographic


Geographic segmentation tries to divide markets into different geographical units: these units include: Regions: e.g. in the UK these might be England, Scotland, Wales Northern Ireland or (at a more detailed level) counties or major metropolitan areas Countries: perhaps categorised by size, development or membership of geographic region City / Town size: e.g. population within ranges or above a certain level Population density: e.g. urban, suburban, rural, semi-rural

Climate: e.g. Northern, Southern Geographic segmentation is an important process - particularly for multi-national and global businesses and brands. Many such companies have regional and national marketing programmes which alter their products, advertising and promotion to meet the individual needs of geographic units.

Why Segment a Market?


There are several important reasons why businesses should attempt to segment their markets carefully. These are summarised below Better matching of customer needs Customer needs differ. Creating separate offers for each segment makes sense and provides customers with a better solution Enhanced profits for business Customers have different disposable income. They are, therefore, different in how sensitive they are to price. By segmenting markets, businesses can raise average prices and subsequently enhance profits Better opportunities for growth Market segmentation can build sales. For example, customers can be encouraged to "trade-up" after being introduced to a particular product with an introductory, lower-priced product Retain more customers Customer circumstances change, for example they grow older, form families, change jobs or get promoted, change their buying patterns. By marketing products that appeal to customers at different stages of their life ("life-cycle"), a business can retain customers who might otherwise switch to competing products and brands Target marketing communications Businesses need to deliver their marketing message to a relevant customer audience. If the target market is too broad, there is a strong risk that (1) the key customers are missed and (2) the cost of communicating to customers becomes too high / unprofitable. By segmenting markets, the target customer can be reached more often and at lower cost Gain share of the market segment

Unless a business has a strong or leading share of a market, it is unlikely to be maximising its profitability. Minor brands suffer from lack of scale economies in production and marketing, pressures from distributors and limited space on the shelves. Through careful segmentation and targeting, businesses can often achieve competitive production and marketing costs and become the preferred choice of customers and distributors. In other words, segmentation offers the opportunity for smaller firms to compete with bigger ones.

Introduction to Services Marketing Definition & Characteristics of a Service


Introduction

The world economy nowadays is increasingly characterized as a service economy. This is primarily due to the increasing importance and share of the service sector in the economies of most developed and developing countries. In fact, the growth of the service sector has long been considered as indicative of a countrys economic progress. Economic history tells us that all developing nations have invariably experienced a shift from agriculture to industry and then to the service sector as the main stay of the economy. This shift has also brought about a change in the definition of goods and services themselves. No longer are goods considered separate from services. Rather, services now increasingly represent an integral part of the product and this interconnectedness of goods and services is represented on a goods-services continuum.
Definition and characteristics of Services

The American Marketing Association defines services as - Activities, benefits and satisfactions which are offered for sale or are provided in connection with the sale of goods. The defining characteristics of a service are: Intangibility: Services are intangible and do not have a physical existence. Hence services cannot be touched, held, tasted or smelt. This is most defining feature of a service and that which primarily differentiates it from a product. Also, it poses a unique challenge to those engaged in marketing a service as they need to attach tangible attributes to an otherwise intangible offering.
1. Heterogeneity/Variability: Given the very nature of services, each service offering is unique and cannot be exactly repeated even by the same service provider. While products can be mass produced and be homogenous the same is not true of services. eg: All burgers of a particular

flavor at McDonalds are almost identical. However, the same is not true of the service rendered by the same counter staff consecutively to two customers. 2. Perishability: Services cannot be stored, saved, returned or resold once they have been used. Once rendered to a customer the service is completely consumed and cannot be delivered to another customer. eg: A customer dissatisfied with the services of a barber cannot return the service of the haircut that was rendered to him. At the most he may decide not to visit that particular barber in the future. 3. Inseparability/Simultaneity of production and consumption: This refers to the fact that services are generated and consumed within the same time frame. Eg: a haircut is delivered to and consumed by a customer simultaneously unlike, say, a takeaway burger which the customer may consume even after a few hours of purchase. Moreover, it is very difficult to separate a service from the service provider. Eg: the barber is necessarily a part of the service of a haircut that he is delivering to his customer. Types of Services 1. Core Services: A service that is the primary purpose of the transaction. Eg: a haircut or the services of lawyer or teacher. 2. Supplementary Services: Services that are rendered as a corollary to the sale of a tangible product. Eg: Home delivery options offered by restaurants above a minimum bill value. Difference between Goods and Services

Given below are the fundamental differences between physical goods and services:
Goods A physical commodity Tangible Homogenous Production and distribution are separation from their consumption Can be stored Transfer of ownership is possible Services A process or activity Intangible Heterogeneous Production, distribution and consumption are simultaneous processes Cannot be stored Transfer of ownership is not possible

The 7 Ps of Services Marketing

The first four elements in the services marketing mix are the same as those in the traditional marketing mix. However, given the unique nature of services, the implications of these are slightly different in case of services. 1. Product: In case of services, the product is intangible, heterogeneous and perishable. Moreover, its production and consumption are inseparable. Hence, there is scope for customizing the offering as per customer requirements and the actual customer encounter therefore assumes particular significance. However, too much customization would compromise the standard delivery of the service and adversely affect its quality. Hence particular care has to be taken in designing the service offering. 2. Pricing: Pricing of services is tougher than pricing of goods. While the latter can be priced easily by taking into account the raw material costs, in case of services attendant costs - such as labor and overhead costs - also need to be factored in. Thus a restaurant not only has to charge for the cost of the food served but also has to calculate a price for the ambience provided. The final price for the service is then arrived at by including a mark up for an adequate profit margin.

3. Place: Since service delivery is concurrent with its production and cannot be stored or transported, the location of the service product assumes importance. Service providers have to give special thought to where the service would be provided. Thus, a fine dine restaurant is better located in a busy, upscale market as against on the outskirts of a city. Similarly, a holiday resort is better situated in the countryside away from the rush and noise of a city. 4. Promotion: Since a service offering can be easily replicated promotion becomes crucial in differentiating a service offering in the mind of the consumer. Thus, service providers offering identical services such as airlines or banks and insurance companies invest heavily in advertising their services. This is crucial in attracting customers in a segment where the services providers have nearly identical offerings. We now look at the 3 new elements of the services marketing mix - people, process and physical evidence - which are unique to the marketing of services. 5. People: People are a defining factor in a service delivery process, since a service is inseparable from the person providing it. Thus, a restaurant is known as much for its food as for the service provided by its staff. The same is true of banks and department stores. Consequently, customer service training for staff has become a top priority for many organizations today. 6. Process: The process of service delivery is crucial since it ensures that the same standard of service is repeatedly delivered to the customers. Therefore, most companies have a service blue print which provides the details of the service delivery process, often going down to even defining the service script and the greeting phrases to be used by the service staff. 7. Physical Evidence: Since services are intangible in nature most service providers strive to incorporate certain tangible elements into their offering to enhance customer experience. Thus, there are hair salons that have well designed waiting areas often with

magazines and plush sofas for patrons to read and relax while they await their turn. Similarly, restaurants invest heavily in their interior design and decorations to offer a tangible and unique experience to their guests.

Services Marketing - Moment of Truth


Every business knows that in order to thrive it needs to differentiate itself in the mind of the consumer. Price has proved inadequate since there is a limit to how much a firm can cut back on its margins. Product differentiation is also no longer enough to attract or retain customers since technological advances have resulted in products becoming almost identical with very few tangible differences from others in the same category. Consequently, marketers have realized the importance of service differentiation as a sustainable strategy for competing for a portion of the customers wallet.
Service Encounter / Moment of Truth

A moment of truth is usually defined as an instance wherein the customer and the organization come into contact with one another in a manner that gives the customer an opportunity to either form or change an impression about the firm. Such an interaction could occur through the product of the firm, its service offering or both. Various instances could constitute a moment of truth such as greeting the customer, handling customer queries or complaints, promoting special offers or giving discounts and the closing of the interaction.
Importance

In todays increasingly service driven markets and with the proliferation of multiple providers for every type of product or service, moments of truth have become an important fact of customer interaction that marketers need to keep in mind. They are critical as they determine a customers perception of, and reaction to, a brand. Moments of truth can make or break an organizations relationship with its customers. This is more so in the case of service providers since they are selling intangibles by creating customer expectations. Services are often differentiated in the minds of the customer by promises of what is to come. Managing these expectations constitutes a critical component of creating favorable moments of truth which in turn are critical for business success.
Moments of Magic and Moments of Misery

Moments of Magic: Favorable moments of truth have been termed as moments of magic. These are instances where the customer has been served in a manner that exceeds his expectations. Eg: An airline passenger being upgraded to from an economy to a business class ticket or the 100th (or 1000th) customer of a new department store being given a special discount on his purchase. Such gestures can go a long way in creating a regular and loyal customer base. However, a moment of magic need not necessarily involve such grand gestures. Even the

efficient and timely service consistently provided by the coffee shop assistant can create a moment of magic for the customers. Moment of Misery: These are instances where the customer interaction has a negative outcome. A delayed flight, rude and inattentive shop assistants or poor quality of food served at a restaurant all qualify as moments of misery for the customers. Though lapses in service cannot be totally avoided, how such a lapse is handled can go a long way in converting a moment of misery in to a moment of magic and creating a lasting impact on the customer.

Customers Expectations and Delight


Customer Needs and Expectations

Customer needs comprise the basic reason or requirement that prompts a customer to approach a service provider. For instance, a person visits a restaurant primarily for the food it serves. That is the customers need. However, the customer expects polite staff, attentive yet non intrusive service and a pleasant ambience. If these expectations are not properly met the guest would leave the restaurant dissatisfied even if his basic requirement of a meal being served has been met. Thus knowing and understanding guest expectations is important for any service provider.
Customer Satisfaction, Dissatisfaction and Delight

Based on the quality of the service experience a customer will either be satisfied, dissatisfied or delighted. Knowing a customers expectation is instrumental in developing a strategy for meeting and exceeding customer expectations.
1. Customer Dissatisfaction: This is a situation when the service delivery fails to match up to the customers expectations. The customer does not perceive any value for money. Its a moment of misery for the customer. 2. Customer Satisfaction: In this case, the service provider is able to match the customers expectations and deliver a satisfactory experience. However, such a customer is not strongly attached to the bran and may easily shift to a competing brand for considerations of price or discounts and freebies. 3. Customer Delight: This is an ideal situation where the service provider is able to exceed the customers expectations creating a Moment of Magic for the customer. Such customers bond with the brand, are regular and loyal and will not easily shift to other brands. Meeting and Exceeding Customer Expectations

Exceeding customer expectations is all about creating that extra value for the customer. The hospitality industry specializes in creating customer delight. Example, most 5 star hotels maintain customer databases detailing room order choices of their guests. So if a guest has asked for say orange juice to be kept in the mini bar in his room, the next time that he makes a reservation at the hotel, the staff ensures that the juice s already kept in

the room. Such small gestures go a long way in making customers feel important and creating customer delight. Another novel way of exceeding guest expectations is often demonstrated by travel companies. Since, they usually have details on their customers birthdays, they often send out an email greeting to their guests to wish them. This not only makes an impact on the guest but also helps to keep the company acquire top of the mind recall with the guest.

Maintaining Service Quality


After having attained the desired service level, the next great challenge faced by service providers is to maintain service standards at levels of excellence. This is as important, and as tough, as establishing service standards and attaining to them in the first place. There are basically two approaches that any organization can have towards maintaining service standards a proactive approach or a reactive approach. Proactive: A proactive approach entails actively reaching out to customers and trying to gather their feedback on service quality and suggested areas of improvement. This can be done by way of

Surveys and administering questionnaires Gap Analysis, and Staff training

a. Surveys and questionnaires: Such an approach helps a brand to anticipate customer demands and expectations and align its service offering accordingly. Also, the findings of such surveys can help to identify common issues and demands of customers hence helping a company to customize its service offering. b. Gap Analysis: Another approach that is adopted for analyzing service quality is that of the gap analysis. The company has an ideal service standard that it would like to offer to its customers. This is contrasted with the current level of service being offered. The gap thus identified serves both as a measure and as a basis for planning a future course of action to improve the service offering. c. Staff Training: Another crucial aspect of the proactive approach is staff training. Companies nowadays spend generously on training their personnel to adequately handle customer queries and/or complaints. This is particularly true if a company is changing its service offering or going in for a price hike of its existing services. For example, when a fast food chain increases the price of its existing products, the staff has to handle multiple customer queries regarding the hike. Lack of a satisfactory explanation would signify poor service standards and lead to customer dissatisfaction.

Reactive: A reactive approach basically consists of resorting to a predetermined service recovery mechanism once a customer complains about poor service quality. It usually starts with apologizing to the customer and then taking steps to redeem the situation. The fundamental flaw

with this approach is that, here the customer has already had a bad experience of the brands service.
Measuring Service Quality

Another crucial element to be kept in mind while seeking to maintain service quality is to have in place a metric for measuring quality. The particular parameters selected would depend on the type of business, service model and the customer expectations. For example: at a customer service call center of a telecom provider, the metric for measuring service quality could be the average time taken for handling a call or rectifying a complaint. For a fast food outlet, the metrics for measuring service quality of the sales staff could be the number of bills generated as a percentage of total customer footfalls or the increase in sales month on month. Once a system is put in place for measuring quality, a standard can then be mandated for the service standard the organization is seeking to maintain.

The Changing Face of Services Marketing


Marketing of Services has emerged as an important sub discipline of marketing in its own right. It has evolved phenomenally to emerge as a major field of study with far reaching implications in todays increasingly service driven economies. It is then, only natural, to wonder what is the future course that this field of study is most likely to take. At first glance, one can see that there are as yet many opportunities available for Services Marketing to evolve and gain in relevance as the role of the service economy continues to expand. A large chunk of Third World economies are now beginning to move into the service domain. The role and share of the service sector in these economies is growing with an increased monetization of services However, there are several challenges also. There has been a change in the basic nature of services. Services, today, can no longer be described according to the parameters of intangibility, heterogeneity, inseparability and perishability. These changes are detailed below: 1. Intangibility: While services maybe intangible, the process of delivery and even the customer experience of the service is not necessarily so. Thus while service providers focus on pre purchase behavior they often fail to pay attention to customer experience during the process of service delivery, the nature of output (which may manifest in an observable physical change) or the learning outcomes of the delivery process. 2. Heterogeneity: Heterogeneity of services is also not applicable to the services domain today. Across sectors and industries we see an increased pressure for standardization of services. This is being achieved in some instances through automation such as through ATMs and vending machines. Even in cases where automation is not possible there is greater focus on standardizing the service delivery process by way of service scripts and strict adherence to service cycles. For example, most fast food outlets and quick service

restaurants follow the & steps of the service cycle that starts with greeting the customer (using standard phrases) through to saying good bye. 3. Inseparability: Even this criterion does not hold true for all services rendered. Inseparability implies that the production and consumption of services is simultaneous. Thus, consumers need to be present and/or involved in the production process. In reality however, there are several services that are separable. Example: insurance, repair and maintenance where production happens prior to consumption and the customers need not necessarily be present at the time the service is rendered. The same is witnessed in the phenomenon of outsourcing of services. 4. Perishability: even though this is true for a lot of services, there are several notable exceptions. In todays information era there are several information based services that can be recorded and saved in electronic media and reproduced on demand. Moreover, for greater clarity in this regard it is necessary to have a distinction between the perishability of productive capacity, of customer experience and of the output. Thus the definition of services is not as clear cut as it was once assumed to be. Consequently this is one of the major challenges lying ahead for the field of Services Marketing.

Introduction to Relationship Marketing


Ask any frequent flyer and a globe trotter, who enjoys flying with and always chooses his favorite airline as to why he insists on using the same airline every time. The answer will be that he is happy with the Customer Service. The airline spares no efforts to ensure that he is comfortable and enjoys his journey. The airline recognizes him as a valuable customer and has built a relationship with him over a period of time. It is this relationship, the comfort of being recognized, looked after and cared for individually that has resulted in loyalty in the relationship. All of us enjoy being members of several loyalty programs and enjoy collecting rewards and redeeming them. In doing so we have enjoyed the relationship with the Supplier or the Company and continue to be loyal customers. In everyday life we are used to going back to the same supermarket, the same garage and bank with the same bank all the time. This happens because we have grown to accept an unspoken relationship that exists with these businesses for various reasons and we feel happy dealing with the same vendors day in and day out. Every human interaction and transaction is built around relationships. Networks of relationships is the fundamental design of the human society. No wonder that this fundamental fact has been recognized and explored by all the businesses where in they have been building business strategies around the customer and strive to build a relationship with every Customer. Relationship Marketing therefore has evolved not only as a marketing strategy but has been the foundation on which the Companies build their core values and ethics. Relationship Marketing defines the framework for the Company to reach out as well as and orient themselves to the outside markets, to the end customer as well as to the business partners, the suppliers and vendors too. Relationship marketing is not limited to Customers and Suppliers

alone but has been extended in scope to cover he internal employees as well as an effective way of reaching out to attracting best talent too. If you scan any advertisement of a leading Corporate in the Newspaper, you will see that major portion of the advertisement for recruitment is related to the Companys background, culture and the effort to reach out to the prospective employees. The advertisements are designed to strike a cord amongst the readers that prompts one to apply for the job. In the high tech age where the marketing concepts and tools have undergone major changes with the introduction of e commerce, online selling, network marketing, direct marketing, B2B and B2C business models, relationship marketing has become the base on which the Business strategies as well as Marketing strategies are built. Business Organizations today have begun to recognize and consider the human quotient as well as the emotional quotient of business relationships. Relationship Marketing has evolved as a discipline that helps the Businesses to look beyond transactions to long term business associations. Successful Relationship Marketing strategy helps the Organization deepen and strengthen its revenue streams on long term basis. Relationship Marketing is a considered to be a core Corporate Philosophy on which the Business strategy is built upon. It is reflected in all of the Marketing disciplines including branding, advertisements, promotions, public relations as well as through all sales channels and networks through which the Company reaches out to the Markets and Customers.

Importance of Relationship Marketing


The recent trend seen in the Organizations across the world is that they are faced with changing times and the changing economies and business is forcing them to change themselves too. Organizations today have no option but to change and evolve. The change has to do with every aspect of business and not limited to any one aspect of its business. Those who are not able to see the trends and change themselves are perishing. Technology has been the single most important change agent. Technology has redefined all aspects of business. What we see today is the definitive shift of power from the Organization into the hands of the Customer. Customers today know their position and the power they wield. Especially the medium of internet has brought the customers closer to the Organisation as well as to the other Customers. Information, discussions, feedbacks and opinions are now visible and available to one and all almost instantaneously. Social networking is a medium that the Organizations cannot afford to ignore. This is both a boon as well as a bane to the Organizations. Marketing Managers are learning to use this to manage their relationship with the customers at large. Customer redressal too is another important phenomenon that has contributed to the Customer becoming powerful in the market place. The fact that the information and interaction happens on live basis and the customer reactions can be instantaneous puts a lot of pressure on the Organizations to be on their guard all the time. Any adverse opinion shared or feedback from a dis-satisfied customer can spearhead a word of

mouth campaign that can harm the Organisation. Therefore the internet and social network is a double edged sword as far as the Organizations are concerned. When used effectively this medium can help the Organization build a relationship with the customer and strengthen that relationship. This medium helps the Organization to reach out individually to the customer which may not be possible otherwise. The marketing departments are able to not only communicate and address the customer individually, with the help of technology and data mining techniques, they are able to understand the customers needs and customize solutions as per the specific individual needs of the customer. CRM packages and technology become the enablers to make this happen. Banks, Airlines, Insurance as well as Services like Pizza hut, Macdonalds are some of the businesses that have developed effective means to recognize and communicate with individual customers and thereby build an emotional connect with the customers. Product Companies have begun to use social networking sites effectively as a platform to engage with customer on technical and product related discussions and build a community around its products and services. Building relationships in such situations is easier and more effective. One of the outcomes of the evolution of Relationship Marketing has been the birth of CRM solutions. Besides CRM we have also seen the birth of new departments and disciplines in Organizations namely Customer Service Department as well as Key Account Management. It is very easy for students to equate RM with CRM and that both are one and the same. Relationship Management forms part of the vision and business ethics that the Company envisages to imbibe as its core value system. When an Organization chooses to build its business blocks around Relationship Management, the Organization is marrying its Profit Making goal with Customer Relationship to build a synergy by which all the divisions as well as the functions of the Organization look at their function and business through the RM lens. This helps build a strong customer orientation and culture of Customer Sensitivity across the Organization at all levels, branches and functions. In any Organization several of its departments are involved with the external customers. Starting with Marketing, Sales, Distribution to After Sales Service, Quality as well as Finance Departments are involved with Customers and their orientation towards the Customer interaction is fashioned by the RM outlook of the Organization. CRM on the other hand can best be described as an enabler of RM in any Organization. CRM involves process including software and hardware components that automates and helps manage customer engagement. While RM works at a strategy level, CRM helps implement the Strategy. The success of CRM as a concept is widely seen due to the aggressive marketing of CRM solutions by the IT companies who have developed the CRM packages. This has helped the Multi National Organizations to implement standardized process of Customer management on large scale across geographies and markets. Besides Software driven Packages, there are several services and schemes that are available locally that are tailor made to suit particular industry. In a market place where every company is

vying for space in the minds of the customer what helps the company gain that customer loyalty is the RM outlook that comes across via the CRM channel.

Organizations and Types of Relationships


Organizations today live in highly dynamic environments. Essentially the existence and growth of the business is dependent upon several external and internal factors such as highly segmented geographical markets, aggressive competition and shorter life cycle. These and many more factors exert a lot of pressure on the Organizations to innovate both in terms of its product offering as well as in its organizational development and ways of conducting business. Revenue and profits do form the primary basis of its business transactions. However in the long term growth perspective Organizations have got to be able to manage both external and internal relationships on the basis of the values and culture on which it is founded.
Share Holders

Gone are the days when share holders were a community content with the returns they received from the Company and went along with whatever the Managements thought good. Managements today are seen becoming increasingly answerable to the share holders. Recently we have seen several cases where CEOs of the Companies having been voted out by the share holders for not falling in line with the thought process of the Organization and the share holders. We saw major changes in Hewlett Packard wherein the shareholders took the call to change the management and the strategic approach of the Company to business. Organizations today exist in a situation which demands that they extend products and services as well as keep investing into building products and technology for tomorrow. If the business needs to exist and grow there is no option but to invest into the future. Therefore the shareholders take the centre stage when it comes to approval of and financing the Organisational business and growth plans. Shareholders today are aggressive demanding that the Organization walk the talk when it comes to the bottom line as well as in terms of its culture. Brands like IBM, HP and GE etc are more vulnerable to the stake holders as well as to the public as an Organization. These and other Corporate are using internet, Multimedia and websites to speak to the investors and extend the relationship with the share holders and investors. Internet platform allows the corporate open up relationship with the share holder community on an interactive basis thus giving the Company the control on how to manage the relationship as well as build investor confidence. For Companies that are looking for investments to fuel their growth engines, there exists a need to demonstrate and cultivate the right corporate image and capability besides the past performance figures which alone will not help attract investors. Companies are therefore engage in Public relations as well as corporate communications to reach out to the prospective investor public as well as institutions to build the right kind of corporate image. Image building and

relationship building become the long term strategy of the corporate communications of the Organization.
Social Responsibility

In the recent times the social responsibility and attitude of the Companies towards their responsibilities is becoming more and more visible and public. NGOs and specific interest groups are taking the lead in keeping track of and benchmarking social responsibility performance of the Corporate thus making them accountable. The brand image of the Organization is definitely affected by the way it is managing its social responsibility with the community, investors as well as policy makers being active participants as watchdogs. Organizations have had to engage with the communities by way of participative activities as well as using communication strategies and by maintaining and managing relationship to be able to get across the right perspective as well as the right information. The recent example of GAP having had to withdraw from sourcing clothing from Indian Companies and suppliers who engaged child labour in the production lines is an ideal example which showcased the power of the community and the stake holders forcing the Company to take immediate action and use its relationship to project the right image for itself. The recent oil spill of BP in the west coast is another ideal case for study of how BP manages the relationship with the Govt, with its share holders, with the affected communities as well as manage its social responsibility.

Introduction to E Commerce and Internet


Simply put, E Commerce is Using Electronic Platform for Business Transactions. It is also called a Virtual Market Place. Every minute millions of people from all over the world are logging into the Internet looking for some information, for product, services, to look for news, download music, for online shopping and so on. Every individual is looking for something that he would like to obtain or buy online instead of having to go through a physical transaction. Imagine what this means to the business organisations. If they are able to identify and access those individual users who have a specific need or want, they have a ready customer in waiting. One could wonder whether it is the online community or the technology that is paving way for E Commerce. The answer is that both these factors are driving the E Commerce. The technological developments are providing the backbone for business transactions to take place and the growing volumes of users buying online is making it possible for E Commerce and markets to grow. E Commerce is characterized by Business to Business and Business to Customer business models. We are very familiar with the Business to Customer model for banking; insurance as well as online shopping, online booking etc that have become very popular and accepted modes in our daily lives. On the B to B front too, business organisations have re-engineered their Business processes including Advertising, Marketing, Sales Order Management besides Supply chain management and Customer Relationship management to suit the E Commerce mode. Dell has successfully adapted online selling model on a global scale. It allows the customers to

configure the model and to Order Online. Once the transaction has been successfully carried out and payment has been received, Dell executes the order and ensures that the DELL Products are delivered at the Customers door step within seven working days. DELL has not only used E Commerce successfully as its major selling channel, but at the backend they have put in place Built to Order process where in the Computer is assembled against the specific customer order and is delivered to the customer. By integrating E Commerce and its Manufacturing process, DELL has managed to do away with holding inventories and managed to bring its costs down. E Commerce has become a major business process for Global organisations and Multi National Companies. Most MNCs depend upon Online selling as well as Online Procurement on global scale. E Commerce has made it possible for them to access global markets as well as source raw materials from across the world. Besides, E Commerce has brought down the cost of selling as well as cost of procurement drastically adding to the bottom line. In the consumer world, Insurance, banking, airlines and hospitality sectors have stood to benefit from E Commerce model of selling. E Commerce is a reality. Several multiple technologies, platforms, agencies and networks make it possible for E Commerce to happen. EDI and Online banking and transactions have been the major enablers that have made it possible for business transactions to take place. It is simply amazing to think that with the click of a button one can buy, sell or affect financial transactions worth millions of dollars in a few minutes. However this is true and E Commerce is the future.

Advantages of E-Commerce
E commerce brings its own unique advantages and contribution to the businesses. First and foremost internet being a world wide web, opens up the world as a market to the businesses. Businesses can reach out to millions of customers in an instant which is not possible in any conventional mode of marketing. One of the most significant advantages that E Commerce offers is the cost. The cost of marketing online across the globe is miniscule when compared to the actual cost of marketing in the conventional ways. The cost per transaction works out to be very cheap. More over E Commerce promotes paperless offices and processes thus contributing to savings in terms of resources too. These and many more advantages make obvious business sense for Companies to market their products and services online. In the last few years the speed of internet as well as the applications, software and hardware supporting E Commerce have developed and integrated to make E Commerce a real time business process. Online financial transaction capability has given a significant push to E Commerce. E commerce has not only caught the imagination of B to B and B to C businesses but today we have online trading which has perhaps changed the way stock markets, financial markets and commodity exchanges across the world function. Todays customers are net savvy and know what they want. In essence todays customers are not willing to wait. No matter how good the product may be, speed is the essence here. From online

shopping to online dating and searching for life partners, all of the individuals needs are being addressed by businesses via the web. Looking at E Commerce from a marketing perspective brings the product or the service closer to the customer. It enables the customer to view, read, download and experience the product. The other significant difference from conventional marketing is that the online marketing enables the marketing company to customise its sales pitch or product offering to the customer. As against the conventional modes which target consumers and markets at large, with internet marketing and E Commerce it is possible to target every single individual making it more personalised and customised offer. E Commerce is just catching up. How E Commerce will develop and grow and its future impact on the way business is carried on cannot be imagined and every business small or big has no choice but to jump on to the E Commerce bandwagon.