Assignment No.

01
Marketing Management

Question No. 1
Part (a)

Marketing Management:
Marketing management is a business discipline focused on the
practical application of marketing techniques and the management of a firm's marketing
resources and activities. Marketing managers are often responsible for influencing the
level, timing, and composition of customer demand in a manner that will achieve the
company's objectives.

Functions:
• Marketing research and analysis
• Marketing strategy
• Implementation planning
• Project, process, and vendor management
• Organizational management and leadership
• Reporting, measurement, feedback and control systems

Marketing research and analysis:

In order to make fact-based decisions regarding marketing strategy
and design effective, cost-efficient implementation programs, and firms must possess a
detailed, objective understanding of their own business and the market in which they
operate. In analyzing these issues, the discipline of marketing management often overlaps
with the related discipline of strategic planning. In company analysis, marketers focus on
understanding the company's cost structure and cost position relative to competitors, as
well as working to identify a firm's core competencies and other competitively distinct
company resources. Marketing managers may also work with the accounting department
to analyze the profits the firm is generating from various product lines and customer
accounts. The company may also conduct periodic brand audits to assess the strength of
its brands and sources of brand equity. Marketing managers may also design and oversee
various environmental scanning and competitive intelligence processes to help identify
trends and inform the company's marketing analysis.
Marketing Strategy:
Once the company has obtained an adequate understanding of the
customer base and its own competitive position in the industry, marketing managers are
able to make key strategic decisions and develop a marketing strategy designed to
maximize the revenues and profits of the firm. The selected strategy may aim for any of a
variety of specific objectives, including optimizing short-term unit margins, revenue
growth, market share, long-term profitability, or other goals.

To achieve the desired objectives, marketers typically identify one or more target
customer segments which they intend to pursue. Customer segments are often selected as
targets because they score highly on two dimensions: 1) The segment is attractive to
serve because it is large, growing, makes frequent purchases, is not price sensitive (i.e. is
willing to pay high prices), or other factors; and 2) The company has the resources and
capabilities to compete for the segment's business, can meet their needs better than the
competition, and can do so profitably. In fact, a commonly cited definition of marketing
is simply "meeting needs profitably."

Implementation Planning:
After the firm's strategic objectives have been identified, the target
market selected, and the desired positioning for the company, product or brand has been
determined, marketing managers’ focus on how to best implement the chosen strategy.
Traditionally, this has involved implementation planning across the "4Ps" of marketing:
Product management, Pricing, Place (i.e. sales and distribution channels), and Promotion.

Taken together, the company's implementation choices across the 4Ps are often described
as the marketing mix, meaning the mix of elements the business will employ to "go to
market" and execute the marketing strategy. The overall goal for the marketing mix is to
consistently deliver a compelling value proposition that reinforces the firm's chosen
positioning, builds customer loyalty and brand equity among target customers, and
achieves the firm's marketing and financial objectives.

Project, process, and vendor management:

Once the key implementation initiatives have been identified,
marketing managers work to oversee the execution of the marketing plan. Marketing
executives may therefore manage any number of specific projects, such as sales force
management initiatives, product development efforts, channel marketing programs and
the execution of public relations and advertising campaigns. Marketers use a variety of
project management techniques to ensure projects achieve their objectives while keeping
to established schedules and budgets.

More broadly, marketing managers work to design and improve the effectiveness of core
marketing processes, such as new product development, brand management, marketing
communications, and pricing. Marketers may employ the tools of business process
reengineering to ensure these processes are properly designed, and use a variety of
process management techniques to keep them operating smoothly.
Reporting, measurement, feedback and control systems:
Marketing management employs a variety of metrics to measure
progress against objectives. It is the responsibility of marketing managers -- in the
marketing department or elsewhere -- to ensure that the execution of marketing programs
achieves the desired objectives and does so in a cost-efficient manner.

Marketing management therefore often makes use of various organizational control

systems, such as sales forecasts, sales force and reseller incentive programs, sales force
management systems, and customer relationship management tools (CRM). Recently,
some software vendors have begun using the term "marketing operations management" or
"marketing resource management" to describe systems that facilitate an integrated
approach for controlling marketing resources. In some cases, these efforts may be linked
to various supply chain management systems, such as enterprise resource planning
(ERP), material requirements planning (MRP), efficient consumer response (ECR), and
inventory management systems.

Question No. 2
Part (a)
Marketing is process of customer orientation. Elaborate thus statement.

Customer Orientation:
Manufactured, outsourced business services companies (MOBSC)
provide their client organizations with services that have a substantial manufacturing
base. They source data from their client firms, deliver a range of service solutions to these
same organizations and deliver manufactured outputs of their services directly to the
customers of their client organizations. Considerable research has been undertaken in
establishing viable measurement techniques suitable for market orientation surveys.
However, consequent strategies for improving the firm’s market orientation have been
directed largely at the intangible resources of the firm – in marketing, research and
knowledge management. Through its failure to demonstrate how the tangible resources of
the firm, such as manufacturing and logistics, might participate in this construct, market
orientation theory has been criticized as operationally impractical (Chase and Stewart,
1994). In light of the critical importance of manufacturing operations to MOBSC in the
value creation process, this gap in the literature illustrates the need for new explanations
for market orientation in outsourced services firms.
Proposition 1: While acknowledging the value creating potential residing in other
Stakeholders, a market oriented firm will place its highest priority on Customers and the
delivery of superior customer value.
Market-oriented companies use information acquisition, market sensing, shared
diagnosis, and inter-functional decision making to deliver superior value to customers
and to pre-empt competitors (Cravens, Greenley, Piercy and Slater, 1998; Day, 1994a,
1994b; Morgan, 1992). Jaworski and Kohli (1993) concluded that organizational systems
were antecedents to a market orientation. They were particularly concerned with intra-
divisional ‘connectedness’ and the impact of incentive schemes, training programmes and
inter-departmental communication practices on market orientation.
In exploring Proposition 1, time series analysis of documented management decisions
over seven years showed that during that period 50 management decisions had an impact
on the firm’s business orientation during the period of the study.
Approaches to Re-position the Orientation of the Firm
Nomenclature Direction Focus on Benefit to Attempts
Total Quality Management Internal Systems Firm 4
The Customer Comes Second Internal Employees Firm 2
Customer-focused Quality Internal Systems Customer 9
Strategically Driven Quality Journey Internal Systems Market 2
Market-oriented Strategic Alignment Internal Resources Market 13
Customer-driven Company External Customer Customer 3
Customer-oriented Ideology External Customer Customer 6
Increased Customer Value External Customer Customer 1
Market-oriented Ideology External Market Market 1

Question No. 2
Part (b)
How can marketer focus customer value and satisfaction? And how will he attract
and retain customer?

It's hardly news that customer satisfaction and customer loyalty are imperatives in the
banking business.
The Charlotte, N.C.-based Wachovia Corp. has taken those concepts a bit further,
however. The company already scores at the top of the annual Customer Satisfaction
Index compiled by the University of Michigan, but it is now embarking on a new
initiative to define and promote customer equity.
"Consulting companies are saying you should be interested in customer lifetime value,
and they'll give you an average value for those customers," said Dan Thorpe, senior vice
president, and statistics and modeling director of Wachovia's Customer Analysis Research
and Targeting (CART) Group. "We are calculating individual estimates for each of our
households. We really think households drive customer value."
That's no small task. Wachovia has more than 13 million customers and breaking them
down into households requires understanding the relationships within a household, which
may include more than just checking accounts and mortgages for a husband and wife, but
a brother or sister and a business as well.
Thorpe's CART team plans to have the estimates for household customer equity complete
by the end of the year, when the company can begin applying it to customer contact
campaigns.

"Rather than just the responses to a campaign or products a customer uses, we want to
look at what it does for customer lifetime value," Thorpe said.

For example, a household may have a checking account and a credit card with Wachovia
and may be a candidate for a home equity loan. But before making that loan offer and
looking at just the value of the one loan, Wachovia will be able to see how that affects all
the products the customer might be eligible for now and in the future. Also, the data will
be used to optimize customer contacts, not just blasting out messages but showing whom
to contact when, and what is the best value. Further down the line, Thorpe hopes to use
the models to test advertising and sponsorship programs.

Thorpe has a 10-person statistics and modeling team working on the customer equity
calculations. The team works within the CART Group, which acts in collaboration with
Wachovia's marketing unit.

The calculations are done with sophisticated data mining, survival analysis, and
multistage modeling with technology from the Cary, N.C.-based SAS Institute Inc.,
Wachovia's longtime technology vendor.

"SAS is the only language out there," Thorpe said. He maintains a strong relationship that
he formed with the company's research and development team when he was with W.L.
Gore and Associates, the makers of GORE-TEX, two years before coming to Wachovia.
Wachovia uses SAS to provide customer analysis for each unique channel and banking
group, including wholesale banking, Wachovia Direct, and the e-commerce division.
"Banking data tends to have 30 deviations for spread. A lot of your simple statistics are
not accurate. Having SAS's strength allows us to put the correct summary in place."

Back in 1999, Wachovia began placing an emphasis on customer satisfaction, and the
focus on customer equity has evolved from that. In fact, customer loyalty is one of the
company's top seven priorities over the next five years, according to a spokesperson. It's
long been a priority at Wachovia, and CEO Ken Thompson continues to push for it.

"We recognize you just can't relax on this; that's why loyalty is the next step on
satisfaction, and lifetime equity is the next step in profitability," Thorpe said. "When we
do presentations to senior executives, I always include lifetime customer value equity
calculations as I would with customer acquisition.
 Question No. 3
Part (a)
Describe marketing process. How marketing information system help a firm to run
a business successful?

The Marketing Process:

Under the marketing concept, the firm must find a way to
discover unfulfilled customer needs and bring to market products that satisfy those needs.
The process of doing so can be modeled in a sequence of steps: the situation is analyzed
to identify opportunities, the strategy is formulated for a value proposition, tactical
decisions are made, the plan is implemented and the results are monitored.

Situation Analysis
|
V
Marketing Strategy
|
V
Marketing Mix Decisions
|
V
Implementation & Control

Marketing Information System:

The Functions of Management:

Clearly, information systems that claim to support managers
cannot be built unless one understands what managers do and how they do it. The
classical model of what managers do, espoused by writers in the 1920's, such as Henry
Fayol, whilst intuitively attractive in itself, is of limited value as an aid to information
system design. The classical model identifies the following 5 functions as the parameters
of what managers do:

1 Planning
2 Organizing
3 Coordinating
4 Deciding
5 Controlling

Managerial Roles:
Mintzberg suggests that managerial activities fall into 3 categories:
interpersonal, information processing and decision making. An important interpersonal
role is that of figurehead for the organization. Second, a manager acts as a leader,
attempting to motivate subordinates. Lastly, managers act as a liaison between various
levels of the organization and, within each level, among levels of the management team.
A second set of managerial roles, termed as informational roles, can be identified.
Managers act as the nerve centre for the organization, receiving the latest, most concrete,
most up-to-date information and redistributing it to those who need to know.

A more familiar set of managerial roles is that of decisional roles. Managers act as
entrepreneurs by initiating new kinds of activities; they handle disturbances arising in the
organization; they allocate resources where they are needed in the organization; and they
mediate between groups in conflict within the organization.

Decision Making:
Decision making is often seen as the centre of what managers do,
something that engages most of a managers time. It is one of the areas that information
systems have sought most of all to affect (with mixed success). Decision making can be
divided into 3 types: strategic, management control and operations control.

Strategic decision making: This level of decision making is concerned with deciding on
the objectives, resources and policies of the organization. A major problem at this level of
decision making is predicting the future of the organization and its environment, and
matching the characteristics of the organization to the environment. This process
generally involves a small group of high-level managers who deal with very complex,
non-routine problems.
Management control decisions: Such decisions are concerned with how efficiently and
effectively resources are utilized and how well operational units are performing.
Management control involves close interaction with those who are carrying out the tasks
of the organization; it takes place within the context of broad policies and objectives set
out by strategic planners.

Components of a marketing information system:

A marketing information system (MIS) is intended to bring
together disparate items of data into a coherent body of information. An MIS is, as will
shortly be seen, more than raw data or information suitable for the purposes of decision
making. An MIS also provides methods for interpreting the information the MIS
provides. Moreover, as Kotler's1 definition says, an MIS is more than a system of data
collection or a set of information technologies:

"A marketing information system is a continuing and interacting structure of people,

equipment and procedures to gather, sort, analyze, evaluate, and distribute pertinent,
timely and accurate information for use by marketing decision makers to improve their
marketing planning, implementation, and control".
• Internal reporting systems
• Marketing research systems
• Marketing intelligence systems
• Marketing models
 Question No. 3
Part (b)
Give an overview of forecasting and demand measurement?

Introduction:
Almost every decision a manager takes needs a forecast. If he has an
idea of what will happen in the future, he can make appropriate management decisions.
He also needs to assess the effect of his present decisions on the future so that the right
decisions are made today to create a desired condition tomorrow. Fertilizer is capital
intensive and, therefore, cost sensitive. If we know what fertilizer types are likely to be
demanded, where and when, we can improve the quality of decisions concerning
production, procurement, placement and promotion. Consequently, we can minimize
funds tied up in inventories, save interest costs, conserve foreign exchange, avoid running
out of stock and, generally, increase sales and improve profits.

This manual looks at major concepts in demand measurement and describes different
methodologies. The significance of forecasts both where there is market competition and
where there is a parastatal monopoly and the relative advantages of different techniques
will be presented. Even though some of the forecasting models are too complex to be
relevant to all countries, brief outlines have been provided to facilitate further study by
those who wish to try applying them to their specific situations. The purpose is to provide
practical advice on fertilizer forecasting methods to improve marketing efficiency at the
company level and strengthen the supply management system at national level.

Reasons for Demand Forecasting:

Because fertilizer demand depends on a variety of agro-economic
factors it is not stable nor is it amenable to accurate prediction. The choice of forecasting
methodologies is thus particularly important, both for successful operation of fertilizer
companies and for the formulation of appropriate policies by governments.

To arrange timely supplies of the right fertilizer types in thousands of villages, it is

necessary to have an assessment of the likely demand for each fertilizer type at numerous
locations at different times in both the short and medium terms. Effective demand
forecasting can enable importers to take full advantage of world market price
fluctuations. Required storage, transport, staffing, credit, financial and foreign exchange
arrangements are dependent on demand. If actual fertilizer demand is less than the
fertilizer produced in or imported into a country, heavy financing costs and product losses
will be the result. Considering that fertilizer procured but not sold may have to be kept
for a year before it finds a buyer and that a storage duration of a year can cause high
quantity and quality losses, the importance of demand forecasting can be readily
appreciated. If the actual demand is larger than forecast, this leads to shortages, lower
agricultural production and, often, political implications.
All plans of fertilizer manufacturing or marketing companies should be derived directly
or indirectly from the demand forecast. From a national demand forecast a company's
expected sales can be estimated by assessing its market share in each area of the country.
The sales forecast tells the production department what to produce, how much and when.
For imported fertilizer, the sales forecast is the basis for the procurement schedule. The
finance department is able to prepare, based on the sales forecast, a plan of cash inflow
and outflow, assess the working capital gap and arrange necessary support from the bank.
The marketing department is guided by the forecast in deploying sales staff, arranging
storage at appropriate locations, contracting for wagons and trucks and activating a
wholesale and retail network to cope with the expected volume of business. With the help
of a detailed sales estimate by region and month, it is possible to identify primary storage
locations in such a manner as to optimize transport cost, minimize storage duration and
avoid wasteful inter-store movements.

Forecasting Methods:
Fertilizer forecasting can be divided into three stages
complementary to each other, i.e. (i) assessment of potential, (ii) forecast of demand and
(iii) forecast of sales. To the government the first two stages are significant. To marketing
organizations, the second and third stages are relevant. The government wishes to know
the gap between potential and demand to determine what it needs to do to transform part
of the potential into effective demand. A company wishes to know what the effective
demand is and what share of it can be met through the company's sales.

As regards the technique employed, forecasting methods fall into one of four basic
approaches:-

• measurement of potential through need-oriented or agronomic method

• time series analysis and projection
• causal models
• Qualitative approach.

Question No. 4
Part (a)

Explain consumer behavior with the help of model. Also explain major factors
influencing buying behavior.

Consumer Behavior:
Consumer behavior is the study of how people buy, what they buy,
when they buy and why they buy. It blends elements from psychology, sociology,
sociopsychology, anthropology and economics. It attempts to understand the buyer
decision making process, both individually and in groups. It studies characteristics of
individual consumers such as demographics, psychographics, and behavioral variables in
an attempt to understand people's wants. It also tries to assess influences on the consumer
from groups such as family, friends, reference groups, and society in general.

Basic model of consumer decision making

Stage Brief description

Problem recognition
Information search
Alternative evaluation
Purchase decision
Post-purchase evaluation
The consumer perceives a need and becomes motivated to
solve a problem.
The consumer searches for information required to make a
purchase decision
The consumer compares various brands and products
Attitude formation
The consumer decides which brand to purchase
Integration
The consumer evaluates their purchase decision
Learning.

Major factors influencing buying behavior:

Cultural Factors
In a diversified country like India cultural factors exert the broadest and deepest
influence on consumer behavior; we will look at the role played by the buyer’s culture,
subculture, and social class.
Culture: Culture is the most fundamental determinant of a person’s wants and behavior.
Whereas lower creatures are governed by instinct, human behavior is largely learned. The
child growing up in a society leans a basic set of values, perceptions, preferences and
behaviors through a process of socialization involving the family and other key institution
.Thus a child growing up in America is exposed to the following values: Achievement
and success, activity , efficiency and practicality, progress, material comfort,
individualism, freedom, external comfort, humanitarianism, and youthfulness.

Subculture:
Each culture contain smaller group of subculture that provide more specific
identification and socialization for its members. Four types of subculture can be
distinguished .Nationality groups such as the Irish, polish, Italians, and Puerto Ricans are
found with in large communities and exhibits distinct ethnic tastes and Jews represent
subculture with specific culture preference and taboos.

Social Class:
Virtually all human societies exhibit social stratification. Stratification sometimes
takes the form of a caste system where the members of different caste are reared for
certain roles and cannot change their caste membership .More frequently; stratification
takes the form of social classes.
Social Classes have several characteristics. First, Person with in each social class tends to
behave more alike than persons from two different social classes. Second, persons are
perceived as occupying inferior or superior positions according to their social class.
Third, a person’s social class is indicated by a number of variables, such as occupation,
income, wealth, education , and value orientation, rather than by any single variable ,
fourth, individuals are able to move from one social class to another up or down during
their lifetime. The Extent of this mobility varies according to the rigidity of social
stratification a given society.

Social Factors:
A consumer’s behavior is also influenced by social factors, such as the
consumer’s reference group, family, and social roles and statuses.

Reference Group: A person’s behavior is strongly influenced by many group .A persons

reference group are those groups that have a direct (face to face) or indirect influence on
the person’s attitudes or behavior. Group having a direct influence on a person are called
membership group. These are group to which the person belongs and interacts. Some are
primary groups. With which there is fairly continuous interaction, such as family, friends,
neighbors, and co-workers. Primary group tend to be informal. The person also belong to
secondary group, which tend to be more formal and where there is less continuous
interaction: they include religious organizations, professional associations, and trade
unions.

Family Group: Members of the buyer’s family can exercise a strong influence on the
buyer’s behavior. We can distinguish between two families in the buyer’s life . The
family of orientation consists of one’s parents. From parents a persons acquires an
orientation towards religious, politics, and economics and a sense of personal ambitions,
self –worth, and love. Even if the buyer no longer interacts very much with his or her
parents, the parents influence on the unconscious behavior of the buyer can be
significant. In countries where parents continue to live with their children, their influence
can be substantial.

Question No. 4
Part (b)
Differentiate consumer market from institutional and government market.

The market environment is a marketing term and refers to all of the forces outside of
marketing that affect marketing management’s ability to build and maintain successful
relationships with target customers. The market environment consists of both the macro
environment and the microenvironment.
The microenvironment refers to the forces that are close to the company and affect its
ability to serve its customers. It includes the company itself, its suppliers, marketing
intermediaries, customer markets, competitors, and publics.
The company aspect of microenvironment refers to the internal environment of the
company. This includes all departments, such as management, finance, research and
development, purchasing, operations and accounting. Each of these departments has an
impact on marketing decisions. For example, research and development have input as to
the features a product can perform and accounting approves the financial side of
marketing plans and budgets.
The suppliers of a company are also an important aspect of the microenvironment
because even the slightest delay in receiving supplies can result in customer
dissatisfaction. Marketing managers must watch supply availability and other trends
dealing with suppliers to ensure that product will be delivered to customers in the time
frame required in order to maintain a strong customer relationship.
Marketing intermediaries refers to resellers, physical distribution firms, marketing
services agencies, and financial intermediaries. These are the people that help the
company promote, sell, and distribute its products to final buyers. Resellers are those that
hold and sell the company’s product. They match the distribution to the customers and
include places such as Wal-Mart, Target, and Best Buy. Physical distribution firms are
places such as warehouses that store and transport the company’s product from its origin
to its destination. Marketing services agencies are companies that offer services such as
conducting marketing research, advertising, and consulting. Financial intermediaries are
institutions such as banks, credit companies and insurance companies.
Another aspect of microenvironment is the customers. There are different types of
customer markets including consumer markets, business markets, government markets,
international markets, and reseller markets. The consumer market is made up of
individuals who buy goods and services for their own personal use or use in their
household. Business markets include those that buy goods and services for use in
producing their own products to sell. This is different from the reseller market which
includes businesses that purchase goods to resell as is for a profit. These are the same
companies mentioned as market intermediaries. The government market consists of
government agencies that buy goods to produce public services or transfer goods to
others who need them. International markets include buyers in other countries and
includes customers from the previous categories.
Competitors are also a factor in the microenvironment and include companies with
similar offerings for goods and services. To remain competitive a company must consider
who their biggest competitors are while considering its own size and position in the
industry. The company should develop a strategic advantage over their competitors.
The final aspect of the microenvironment is publics, which is any group that has an
interest in or impact on the organization’s ability to meet its goals. For example, financial
publics can hinder a company’s ability to obtain funds affecting the level of credit a
company has. Media publics include newspapers and magazines that can publish articles
of interest regarding the company and editorials that may influence customers’ opinions.
Government publics can affect the company by passing legislation and laws that put
restrictions on the company’s actions. Citizen-action publics include environmental
groups and minority groups and can question the actions of a company and put them in
the public spotlight. Local publics are neighborhood and community organizations and
will also question a company’s impact on the local area and the level of responsibility of
their actions. The general public can greatly affect the company as any change in their
attitude, whether positive or negative, can cause sales to go up or down because the
general public is often the company’s customer base. And finally, the internal publics
include all those who are employed within the company and deal with the organization
and construction of the company’s product.
The macro environment refers to all forces that are part of the larger society and affect
the microenvironment. It includes concepts such as demography, economy, natural forces,
technology, politics, and culture.

Question No. 5
Part (a)

Discuss new product development process.

Idea Generation:
• Ideas for new products can be obtained from customers (employing user
innovation), designers, the company's R&D department, competitors, focus
groups, employees, salespeople, corporate spies, trade shows, or through a policy
of Open Innovation. Ethnographic discovery methods (searching for user patterns
and habits) may also be used to get an insight into new product lines or product
features.
• Formal idea generation techniques can be used, such as attribute listing, forced
relationships, brainstorming, morphological analysis and problem analysis.

Idea Screening:
• The object is to eliminate unsound concepts prior to devoting resources to them.
• The screeners must ask at least three questions:
o Will the customer in the target market benefit from the product?
o Is it technically feasible to manufacture the product?
o Will the product be profitable when manufactured and delivered to the
customer at the target price?

Concept Development and Testing:

• Develop the marketing and engineering details
o Who is the target market and who is the decision maker in the purchasing
process?
 o What product features must the product incorporate?
o What benefits will the product provide?
o How will consumers react to the product?
o How will the product be produced most cost effectively?
o Prove feasibility through virtual computer aided rendering, and rapid
prototyping
o What will it cost to produce it?
• Test the concept by asking a sample of prospective customers what they think of
the idea.

Business Analysis:
• Estimate likely selling price based upon competition and customer feedback
• Estimate sales volume based upon size of market
• Estimate profitability and breakeven point

Beta Testing and Market Testing:

• Produce a physical prototype or mock-up
• Test the product (and its packaging) in typical usage situations
• Conduct focus group customer interviews or introduce at trade show
• Make adjustments where necessary
• Produce an initial run of the product and sell it in a test market area to determine
customer acceptance.

Technical Implementation:
• New program initiation
• Resource estimation
• Requirement publication
• Engineering operations planning
• Department scheduling
• Supplier collaboration
• Logistics plan
• Resource plan publication
• Program review and monitoring
• Contingencies - what-if planning

Commercialization:
• Launch the product
• Produce and place advertisements and other promotions
• Fill the distribution pipeline with product
• Critical path analysis is most useful at this stage
 Question No. 5
Part (b)

What is PLC (Product Life Cycle)?

Product Life Cycle:

A product's life cycle (PLC) can be divided into several stages characterized by
the revenue generated by the product. If a curve is drawn showing product revenue over
time, it may take one of many different shapes, an example of which is shown below:

Introduction Stage:

When the product is introduced, sales will be low until customers become aware
of the product and its benefits. Some firms may announce their product before it is
introduced, but such announcements also alert competitors and remove the element of
surprise. Advertising costs typically are high during this stage in order to rapidly increase
customer awareness of the product and to target the early adopters. During the
introductory stage the firm is likely to incur additional costs associated with the initial
distribution of the product. These higher costs coupled with a low sales volume usually
make the introduction stage a period of negative profits.
During the introduction stage, the primary goal is to establish a market and build primary
demand for the product class. The following are some of the marketing mix implications
of the introduction stage:

Product - one or few products, relatively undifferentiated

Price - Generally high, assuming a skim pricing strategy for a high profit margin as the
early adopters buy the product and the firm seeks to recoup development costs quickly. In
some cases a penetration pricing strategy is used and introductory prices are set low to
gain market share rapidly.
Distribution - Distribution is selective and scattered as the firm commences
implementation of the distribution plan.
Promotion - Promotion is aimed at building brand awareness. Samples or trial incentives
may be directed toward early adopters. The introductory promotion also is intended to
convince potential resellers to carry the product.

Growth Stage:

The growth stage is a period of rapid revenue growth. Sales increase as more
customers become aware of the product and its benefits and additional market segments
are targeted. Once the product has been proven a success and customers begin asking for
it, sales will increase further as more retailers become interested in carrying it. The
marketing team may expand the distribution at this point. When competitors enter the
market, often during the later part of the growth stage, there may be price competition
and/or increased promotional costs in order to convince consumers that the firm's product
is better than that of the competition.

During the growth stage, the goal is to gain consumer preference and increase sales. The
marketing mix may be modified as follows:

Product - New product features and packaging options; improvement of product quality.
Price - Maintained at a high level if demand is high, or reduced to capture additional
customers.
Distribution - Distribution becomes more intensive. Trade discounts are minimal if
resellers show a strong interest in the product.
Promotion - Increased advertising to build brand preference.

Maturity Stage:

The maturity stage is the most profitable. While sales continue to increase into
this stage, they do so at a slower pace. Because brand awareness is strong, advertising
expenditures will be reduced. Competition may result in decreased market share and/or
prices. The competing products may be very similar at this point, increasing the difficulty
of differentiating the product. The firm places effort into encouraging competitors'
customers to switch, increasing usage per customer, and converting non-users into
customers. Sales promotions may be offered to encourage retailers to give the product
more shelf space over competing products.

During the maturity stage, the primary goal is to maintain market share and extend the
product life cycle. Marketing mix decisions may include:

Product - Modifications are made and features are added in order to differentiate the
product from competing products that may have been introduced.

Price - Possible price reductions in response to competition while avoiding a price war.
Distribution - New distribution channels and incentives to resellers in order to avoid
losing shelf space.
Promotion - Emphasis on differentiation and building of brand loyalty. Incentives to get
competitors' customers to switch.

Decline Stage:

Eventually sales begin to decline as the market becomes saturated, the product
becomes technologically obsolete, or customer tastes change. If the product has
developed brand loyalty, the profitability may be maintained longer. Unit costs may
increase with the declining production volumes and eventually no more profit can be
made.

During the decline phase, the firm generally has three options:
Maintain the product in hopes that competitors will exit. Reduce costs and find new uses
for the product.
Harvest it, reducing marketing support and coasting along until no more profit can be
made.

The marketing mix may be modified as follows:

Product - The number of products in the product line may be reduced. Rejuvenate
surviving products to make them look new again.
Price - Prices may be lowered to liquidate inventory of discontinued products. Prices
may be maintained for continued products serving a niche market.
Distribution - Distribution becomes more selective. Channels that no longer are
profitable are phased out.
Promotion - Expenditures are lower and aimed at reinforcing the brand image for
continued products.