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Q. 1 Internal databases always give information about opportunities and problems


help to plan marketing programs and evaluate performance, being a Marketing
Manager of any Fast Moving Consuming Goods (FMCG), what information would you
like to have in your internal database? How this information would be used?

INTRODUCTION:

The term FMCG refers to those retail goods that are generally replaced or fully used up over
a short period of days, weeks, or months, and within one year. This contrasts with durable
goods or major appliances such as kitchen appliances, which are generally replaced over a
period of several years.

FMCGs have a short shelf life, either as a result of high consumer demand or because the
product deteriorates rapidly. Some FMCGs – such as meat, fruits and vegetables, dairy
products and baked goods – are highly perishable. Other goods such as alcohol, toiletries,
pre-packaged foods, soft drinks and cleaning products have high turnover rates.
The following as the typical characteristics of FMCGs:

From the consumers' perspective:

Frequent purchase
Low involvement (little or no effort to choose the item -- products with strong brand loyalty
are exceptions to this rule)
Low price

From the marketers' angle:

High volumes
Low margins
Extensive distribution networks
High stock turnover

ROLE OF MARKETING MANAGER:

By itself information has no worth its value come from its uses in many cases information
will do a little in changing managers decisions or the cost of the information may exceeds the
returns from the improved decision marketers should not assume that the information should
always be worth obtaining rather they should always weigh carefully the cost of getting more
information against the benefits resulting from it .Marketing manager can obtain the needed
information from:

• Internal data
• Marketing intelligence
• Marketing research.
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INTERNAL DATABASE

"Electronic collection of consumer and market information obtained from data source within
the company network"

Many companies build extensive internal database ,electronic collections of consumer and
market information obtained from that sources within the company network marketing
manager can readily access and work with information in the database to identify marketing
opportunities and problems plan programs and evaluate performance information in the
database come from many sources .the accounting department prepare a financial statement
and keep a detailed record of cash flow statements sales and cost operations report on
production schedule shipment and inventories ,the sales force report on reseller reactions and
competitors activities .the marketing department furnishes information on customer
demographics psychographics and buying behavior and the customer services department
keep the record of customers satisfaction or services problems research studies done for one
department provides use full information for several others.

EXAMPLE:

Pizza hut's database contains detailed customer data on 40 million U.S. households, gleaned
from phone orders, online orders, and point-of-sale transactions at its more than 7,500
restaurants around the nation. The company can slice and dice the data by favorite toppings
what you ordered last, and whether you buy a salad with your cheese and pepperoni pizza. It
then uses all this data to enhance customer relationships. For example, based on extensive
analysis of several years of purchase transactions, pizza Hut designed a VIP (very into pizza)
program to retain its best customers. It invites these customers to join the VIP program for
$14.95 and receive a free large pizza. Then, for every two pizza ordered each month, VIP
customers atomically earn a coupon for another free large pizza. Pizza Hut tracks VIP
purchases and targets member with additional email offers. In all, the campaign not only
retained pizza Hut's top customers but attracted new customers as well. The program also
generated a lot of online buzz. Says one blogger, "so who is always on my mind when I feel
like pizza? Who is sending me coupons and free things that make me want to get pizza rather
than make dinner? You got it, pizza Hut. They had me buy in and now they'll have my
loyalty. They make it so easy that I wouldn't want to bother getting it any where else."

Internal database usually can be accessed more quickly and cheaply than other information
sources but they also present some problems because internal information was often collected
for other purposes, it may be incomplete or in the wrong form for making marketing
decisions. For example, sales and cost data used by the accounting department for preparing
financial statements must be adapted for use in evaluating the value of a specific customer
segment, sales force, or channel performance. Data also ages quickly; keeping the database
current requires a major efforts.

MARKETING INTELLIGENCE:

"The systematic collection and analysis of publicly available information about consumers,
competitors, and developments in the marketing environment"
Marketing intelligence is the systematic collection and analysis of publicly available
information about customers, competitors, and developments in the marketplace. The goal of
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marketing intelligence is to improve strategic decision making by understanding the


consumer environment, assessing and tracking competitors' actions, and providing early
warnings of opportunities and threats. marketing intelligence gathering has grown
dramatically as more and more companies are now busily eavesdropping on the market place
and shopping on their competitors .good marketing intelligence can help marketers to gain
insights into how consumers talk about and connect with their brands .many companies send
out team of trained observers to mix and mingle with customers as they use and talk about the
company's products.

MARKETING RESEARCH:

"The systematic design collection analysis and reporting of data relevant to a specific
marketing situation facing an organization."

In addition to marketing intelligence information about general consumer competitors and


market place, happening marketers often needs formal studies that provide customer and
market insight for specific marketing situation and decisions marketing mangers use
marketing research in a wide variety of situations

EXAMPLE:

Marketing research give market insights into customer motivations purchase behavior and
satisfaction it can help them to access market potential and market share or to measure the
effectiveness of pricing product distribution and promotion activities.
some large companies have their on research departments that work with marketing managers
on marketing research projects this is how Procter and gamble , and many other corporate
giants handle marketing research .it has four steps .which are as follows:

• DEFINING THE PROBLEM AND RESEARCH OBJECTIVES:

Marketing managers and researchers must work closely together to define the problem and
agree on research objectives the managers best understand the decisions for which
information is needed the research best understands marketing research and how to obtain the
information defining the problem and research objectives is often the harder step in the
research process the manager my know that something wrong without knowing the specific
cause after the problem has been define carefully the managers and the workers must set the
research objectives .

• DEVELOPING THE RESERCH PLAN:

Once the research problems and objective has been define researchers must determined the
exact information needed, developed a plan for gathering it efficiently and present the plan to
the management .the research plan outline source of existing data and spell out the specific
research approaches contact method, sapling plans and instruments that researchers will use
to gather ideas .research objective must be translated into specific information needs.

• IMPLEMENTING THE RESEARCH PLAN:


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The researchers next put the marketing research plan into action this involves collecting
analyzing and processing the information data collection can be carried out by the company's
marketing research staff or by outside firm's that collection phase of the marketing research
process is generally the most expensive and the most subjects to errors researchers should
watch closely to make sure that the plan is implemented correctly.

• INTERPRETING AND REPORTING THE FINDINGS:

The market researchers must now interpret the findings draw conclusion and report them to
the management researchers should not try to overwhelm the managers with numbers and
fancy statistical techniques rather the researchers should present important findings and
insights that are useful in the major decisions faced by the management thus management and
researchers must work together closely when interpreting research work and both must share
responsibility or the research process and the resulting decision.

CONCLUSION:

It is concluded from the above discussion that the marketing manager can obtain the needed
information from internal data marketing intelligence and marketing research.
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Q. 2 (a) What is the difference between a product and service? How service
marketing is different from product marketing? Also describe why marketing of
services is difficult than marketing of goods. Answer with support of examples.

PRODUCT:
"Anything that can be offered to a market for attention acquisition use or consumption that
might satisfy a want or need"
SERVICE:
"Any activity or benefit that one part can offer to another that is essentially intangible and
does not result in the ownership of anything"
DIFFERNCE BETWEEN PRODUCT AND SERVICES

The difference between product and services is that can products are tangible it includes
car ,computer or cell phones product also includes services ,event person places ideas or
mixes of these on the other hand services are form of product that consist of activities benefit
or satisfactions offered for sale that re essentially intangible . e.g. banking hotel airline home
repair services. The ownership between products and services is different.
• You can count products in the same way as you can count your money (or have your
service you this information). A service is not countable, but is "leveled;" better than
the best service is not possible. There is a limit in what a service can offer.
• A product is produced by a manufacturing process. A service is offered by the utility
element of companies; you subscribe to a service in the same way that you subscribe
to your gas and electricity supplier
• Products will have a long storage life and are mostly non perishable. Whereas services
are delivered at that moment and do not have a long life or cannot be stored for repeat
use.
• Products are tangible, and transferable while the services are intangible and non
transferable
• Products are separable, and non – perishable while services are inseparable.
• Products are homogeneous while services are heterogeneous.

Product marketing
"Product marketing deals with the first of the "4P"'s of marketing, which are Product, Pricing,
Place, and Promotion. It deals with marketing the product to prospects, customers, and
others."
Services marketing
"Services marketing is marketing based on relationship and value. It may be used to market a
service or a product".
DIFFERENCE BETWEEN PRODUCT AND SERVICE MARKETING:

It may be commonly perceived by many people that there is a world of difference between
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product and service marketing. They could not be further from the truth because in fact there
is hardly any difference. This may be because most people are not given to purchasing
products and services. Instead, what makes them buy a product or service is the usefulness of
the product or service and how it will benefit them.
The product or service that people purchase is meant to be a solution to some problem, which
may be simple or it could be serious problem. The job of marketing is to give to the customer
something that is wanted and it may require attracting people to seek a particular solution that
is a product or service. There must also be consistent follow-up action that will keep the
customer informed about the benefits of the product or service being marketed.
Thus, the main difference between marketing products or services is that there is much more
personal contact required when marketing a service as compared with marketing products.
Marketing services may require meeting the customer in a face-to-face basis, or it may mean
contacting prospective customers over the telephone. Once your marketing efforts get you
good prospective clients who are coupled with follow-up action, the chances of converting a
good percentage of these prospective customers into paying customers will greatly improve
and there will be no real perceivable difference between marketing a product or service
except perhaps the amount of personal contact made with the customer while marketing your
product or service.

WHY MARKETING OF SERVICE IS DIFFICULT THAN MAKETING OF GOODS

Marketing any type of product or service presents its own unique group of challenges. Both
types of marketing can be very successful, but both require you to gain sufficient knowledge
in your field before you can expect to find success. So before you start marketing your
product or service, you should learn the difference between marketing a product or service.
When you market a service instead of a product, you should realize that services are
intangible, and therefore may be a bit more difficult to market. When you buy a product, you
have something that you can actually put your hand on, something that you can physically see
and even test out before you commit to buying it. You can purchase a product, pay for it and
expect to have it within a few days. Services, on the other hand, are much more customized.
They are more tailored to your customers' needs. You may have to make adjustments to your
service, depending on the needs and wants of your customers. With a service, your customer
may make an agreement with you to get certain things, and then ask you to fix a problem that
was not originally included in your agreement. Services can have an adjustable amount of
profit and can last for many years.
When marketing a product, you realize that you can sell a product to basically anyone. Yes,
you need to be sure that you have the correct demographic group, but after that point, anyone
who can afford to buy your product can be included in your marketing group. But with a
service, you must be more selective when choosing your potential customers. A service may
be more expensive for customers in the long run because it can be used over time. Services
require you to build a relationship with people and continue to develop it. When marketing
products, you don't have to get to know your customer. . When marketing a product, you can
usually pick a set budget and stick to it. It's usually pretty easy to calculate. But with a
service, you may have to re-negotiate your marketing costs. In general, services are more
difficult to price and so in the initial stages of your marketing campaign you will need to
spend extra time and money determining just how you're going to divide up the prices of your
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service.
Marketing a service is not a difficult thing. But it does require a slightly different set of
marketing ideas. Learning these differences can make marketing your service a hundred
times easier in the long run.

EXAMPLE:
we’re a marketing company, so we deal with creating strategic marketing plans and
implementing campaigns. Occasionally, we get prospects who see us solely as a graphic
design firm and submit projects that are so tightly regulated that no strategy or creativity is
involved – in other words, prospects who want to micromanage every step of the way – even
if they have no marketing experience what so ever. If you’ve been in your industry for any
length of time, I’m sure you’ve run across 1-2 ‘difficult’ prospects or clients who are just not
happy with anything you do. Perhaps the job you quoted was not exactly what your client
thought it was going to be or perhaps your client kept adding additional elements into the
project (scope creep)… regardless, with services, you have a number of business issues that
you don’t often find if you were just dealing with taking a product order, filling it, and
shipping it to the client

(b) How companies can position their products for competitive advantage in the
marketplace? Discuss.

Product Positioning is very important in the marketing world. Think about a product, let's say
a car. Now try thinking about a clothing brand or a certain food. What came to your mind?
The reason those products came to your mind is because of those product's positioning. For
some reason those products stuck with you, and that is because of the marketing strategies
behind the products.

Why is Product Positioning Important?

It is important for long-term success for your company because it will make your product
memorable and also make your product desired by your market segments. A company will
position a product, which means that they are trying to create an image or an identity in their
targeted market's mind. This can be done for their product, brand or organization. The
company creates what they want their market to think and feel about the product, which
establishes their perception of the brand image. Businesses do this so their segments become
familiar with the product and recognize it based off of the position. This goes hand and hand
with brand image because through positioning a company is creating a brand's image.
However, the hard part is that a company needs to try to create a desired position. If this is
achieved then the company has the position that is desired by the target market, which will
most likely increase the success of the company. But if a company fails to create the desired
position then the target market will not value the image and the product, and this could lead
to losing consumers to a competitor that has a valued image.
How company can position their product?
A company needs to create a desired position for their product, brand or organization. This
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can be achieved through perceptual mapping. Perceptual mapping is a method marketers use
to visually display and measure the perceptions of consumers or potential consumers to
develop a product's position. In general, the product's position is displayed comparative to
their competition. This is an important technique that should be used by marketers when
deciding a product's position. It is important because it identifies what the competition is
doing, what consumers' perceptions are of that market, and how one could successfully fit in
that market to become desired by consumers.
Although the research needed for perceptual mapping might be extensive and time
consuming, it is worth it. A successful product position could create long-term success for a
company and produces continual desire for the product by consumers.
Why some companies lose their competitive advantage
Loss of focus and inability to change and adapt are the two main reasons why companies fade
away or lose their competitive advantage in this ever-changing world. With the culture
changing daily and becoming more and more dependent on faster, newer, and better,
companies need to remain flexible and maintain the ability to "roll with the punches". If the
desire to change remains, a lot of time the inefficiency and lack of focus from the
management can lead to a downturn in business or loss of competitive advantage.
Management turnover, lack of focus, or lack of motivation all lead to inefficiency in
companies. The inability to change, adapt, and grow in the particular industry is the major
dilemma facing failing companies today. With the newer generations always wanting their
products in higher quantity, bigger, and faster, companies cannot afford to rest on their
previous achievements and not strive to grow or expand. If companies want to stay
competitive and continue to be major players in their prospective industries, the officers and
managements of said companies must be willing to evaluate, adjust, and remain focused on
remaining profitable and keeping the competitive edge.
CONCLUSION:
From the above discussion it is clear that product marketing differs from the services
marketing, thus, the main difference between marketing products or services is that there is
much more personal contact required when marketing a service as compared with marketing
products. When you market a service instead of a product, you should realize that services are
intangible, and therefore may be a bit more difficult to market.
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Q. 3 Examine product life cycle and answer the following questions? What stage you
think is:
• Most critical
• Most risky
• Most profitable
• Most negative
Your answer must be based on logical arguments.

PRODUCT LIFE CYCLE:

"A new product progresses through a number of stages from introduction to growth maturity
and decline. This sequence is known as product life cycle".

EXPLANATION:

Product Life – Cycle The course of a products sales and profits over its lifetime. It involves
five distinct stages.

1. Product Development
2. Introduction
3. Growth
4. Maturity
5. Decline

After launching the new product, management wants the product to enjoy a long and happy
life. Although it does not expect the product to sell forever, the company wants to earn a
decent profit to cover all effort and risk that went into launching it, Management is aware that
each Product will have a life cycle, although the exact shape and length is not known in
advance.

1. Product development:-

Begins when the company finds and develops a new product idea. During product
development, sales are zero and the company’s investment costs mount.

2. Introduction Stage:-

The introduction stage starts when the new products in first launched. In which the new
product is first distributed and made available for purchase.

In this stage as compared to other stages profits are negative or low because of the low sales
and high distribution and promotion expenses. Much money is needed to attract distributors
and built their inventors.

3. Growth Stage:-

The product life cycle stage in which a product’s sales start climbing quickly.
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If the new product satisfied the market, it will enter a growth stage, in which sales will start
climbing quickly. The early adopters will continue to buy and later buyers will start following
their lead, especially if they hear favourable word of mouth

4. Maturity Stage:-

The stage in the product life cycle in which sales growth slows or levels off.

At some point, a products sales growth will slow down, and the product will enter a maturity
stage. This maturity stage normally lasts longer them the previous stages, and it possess
strong challenges to marketing management. Most products are in the maturity stage of the
life cycle. And therefore, most of marketing management deals with the mature product.

5. Decline Stage:-

The product life cycle stages in which a product’s Sales decline the sales of most product
forms and brands eventually dip. The decline may be slow, as in the case of oatmeal cereal.
As in the case of phonographs records.

Sales may plunge to zero. Or they may drop to a low level where they continue for many
years. This is the decline stage.

Not all product follow this product life cycle. Some products are introduced and die quickly,
other stay in the mature stage for along, long time some enter the decline stage and are then
cycled back into the growth through strong promotion or repositioning.

• MOST CRITICAL:-
The most critical stage in the product life cycle is product development
because it shows whether the product idea can be turned into a workable product .it is stage
where there is a large jump in investment .this stage is characterized by zero sales, the firm
bearing the costs of such development, typically resulting in negative profitability.
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• MOST RISKY:
The most risky stage in the product life cycle is the introduction stage. it is
because in this stage s compared to the other stages ,profit are negative or low because of the
low sales and high distribution and promotion expense in this stage much money is needed to
attract distributors and built their inventories. In the introduction process firm focus their
selling on those buyers who are the most ready to buy.

• MOST PROFITABLE:
Growth and maturity are the most profitable stage in product life cycle
because at this stage sales will start climbing quickly\ profits start to increase during this
period, they do not match the growth in sales. This is because the awareness of the new
product and growth in product sales make the market for the product more attractive to
potential new entrants and competitors. During this period of high sales growth, many
competitors may choose to enter the market, reducing the company's relative market share
and, in the process, its profitability. As the sales volume increases, the manufacturing and
promotional spend per unit decreases, which also helps to increase profitability.

On the other hand maturity stage is also consider as the most profitable stage in the life cycle
because, Typically, the growth in sales decreases quite significantly and manufacturer's over-
capacity (that is, larger than required inventories) results in a reaction by the firm and its
competitors to slash prices the slow down in sales growth result in many producers with
many products to sell .Ultimately, the maturity stage becomes the key turning point for
companies because at some point during this period, sales will start to decrease and
potentially never experience positive growth again.

• MOST NEGATIVE:
Declining stage is the most negative stage in the product life cycle this is
because of the reason, at this stage sales of the most product form and brands eventually dips
at the declining stage sales may plunge to zero because of the many reasons including
technological advancement shift in consumer tastes and increased competition as the sales
and profit declines some firms withdraw from the market.

CONCLUSION:

It is very clear from the above whole discussion that Understanding the Product Life Cycle
(PLC) is of critical importance to a firm launching a new product. It helps a firm to manage
the risk of launching a new product more effectively, whilst simultaneously maximizing the
sales and profits that could be achieved throughout the product's life cycle.
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Q. 4 Select three different products of your own choice and explain the factors
(including demand, competition, costs, and other marketing mix) that have influenced
its price?

What is price?

In the narrowest sense, price is the amount of money charged for a product or service. More
broadly, price is the sum of all the values that consumers exchange for the benefits of having
or using the product or service.

Price is the only element in the marketing mix that produces revenue; all other elements
represent costs. Price is also one of the most flexible elements of the marketing mix. Unlike
product features and channel commitments, price can be changed quickly. At the same time,
pricing and price competition is the number one problem facing many marketing executive.
Yet, many companies do not handle pricing well.

Factors to Consider When Setting Prices:

A company’s pricing decisions are affected by both internal and external environmental
factors.

Internal Factors Affecting Pricing Decisions:

Internal factors affecting pricing include the company’s marketing objectives, marketing
strategy, costs and organizational considerations.

Marketing Objectives:

Before setting a price, the company must decide on its strategy for the product. If the
company has selected its target market and positioning carefully, then its marketing mix
strategy, including price, will be fairly straightforward. For example, when Honda and
Toyota decided to develop their Acura and Lexus brands to compete with European luxury-
performance cars in the higher income segment, this required charging a high price. Pricing
strategy, thus, largely determined by decisions on market positioning.

At the same time, the company may seek additional objectives. Common objectives include
survival, current profit maximization, market share leadership, and product quality
leadership. Companies set survival as their major objectives if they are troubled by too much
capacity, heavy competition, or changing consumer wants. To keep a plant going, a company
may set a low price, hoping to increase demand. In the long run, however, the firm must learn
how to add value that consumers will pay for or face extinction.

Many companies use current profit maximization as their pricing goal. They estimate demand
and costs will be at different prices and choose the price that will produce the maximum
current profit, cash flow, or return on investment. Other companies want to obtain market
share leadership. To become the market share leader, these firms set prices as low as possible.
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A company might decide that it wants to achieve product quality leadership. This
normally calls for charging a high price to cover higher performance quality and high cost of
R&D. Fort example, Caterpillar charges 20 percent to 30 percent more than competitors for
its heavy construction equipment based on superior product and service.

A company might also use price to attain other, more specific objectives. It can set prices low
to prevent competitors from entering the market or set prices at competitors’ level to stabilize
the market. Prices can be set to keep the loyalty and support of resellers or to avoid
government intervention. Prices can be reduced temporarily to create excitement for a
product or to draw more customers into retail store. One product may be priced to help the
sales of other products in the company’s line. Thus, pricing may play an important role in
helping to accomplish the company’s objectives at many levels.

Not-for-profit and public organizations may adopt a number of other pricing objectives. A
university aims for partial cost recovery, knowing that it must rely on private gifts and public
grants, to cover the remaining costs. A not-for-profit hospitals may aim for full cost recovery
in its pricing. A not-for-profit theatre company may price its production to fill the maximum
number of theatre seats. A social service agency may set a social pricing geared to the
varying income situations of different clients.

Marketing Mix Strategy:

Price is only one of the marketing mix tools that a company uses to achieve its marketing
objectives. Price decisions must be coordinated with product design, distribution, and
promotion decisions to form a consistent and effective marketing program. Decisions made
for other marketing mix variables may affect pricing decisions. For example, producers using
many resellers who are expected to support and promote their products may have to build
larger reseller margins into their prices. The decision to position the product on high-
performance quality will mean that the seller must charge a higher price to cover higher cost.

Costs:

Costs set the floor for the price that the company can charge. The company wants to charge a
price that both covers all its cost for producing, distributing, and selling the product and
delivers a fair rate of return for its effort and risk. A company’s costs may be an important
element in its pricing strategy. Many companies, such as Southwest Airlines, Wal-Mart, and
Union Carbide, work to become the “low-cost producers” in their industries. Companies with
lower costs can set lower price that result in greater sales and profits.

Organizational Considerations:

Management must decide who within the organization should set prices. Companies handle
pricing in a variety of ways. In small companies, prices are often set by top management
rather then by the marketing or sales departments. In large companies, price is typically
handled by divisional or product line managers. In industrial markets, salespeople may be
allowed to negotiate with customers with a certain price ranges. Even so, top management
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sets the pricing objective and policies, and often approves the prices proposed by lower-level-
management or salespeople.

In industries in which pricing is a key factor (aerospace, steel, railroad, oil companies),
companies often have a pricing departments to set the best prices or help others in setting
them. This department reports to the marketing department or top management. Others who
have an influence on pricing include sales manager, production managers, fiancé managers
and accountants.

External Factors Affecting Pricing Decisions:

External factors that affect pricing decisions include the nature of market and demand,
competition, and other environmental factors.

The Market and Demand:

The seller’s freedom varies with different types of markets. Economists recognize four types
of markets, each presenting a different pricing challenge.

Under pure competition, the market consists of many buyers and sellers trading in a uniform
commodity such as wheat, copper of financial securities. No single buyer or seller has much
effect on the going market price. A seller cannot charge more than the going price, because
buyers can obtain as much as they need at the going price.

Under monopolistic competition, the market consists of many buyers and sellers who trade
over a range of prices rather than a single market price. A range of prices occurs because
sellers can differentiate their offers to buyers. Either the physical product can be varied in
quality, features, or style or the accompanying services can be varied. Buyers see differences
in sellers’ products and will pay different prices for them.

Under oligopolistic competition, the market consists of a few sellers who are highly sensitive
to each other’s pricing and marketing strategies. The product can be uniform (steel,
aluminum) or non-uniform (computers, cars). There are few sellers because it is difficult for
new sellers to enter the market. Each seller is alert to competitors’ strategies and moves. If a
steel company slashes its price by 10 percent, buyers will quickly switch to this supplier.

In a pure monopoly, the market consists of one seller. The seller may be a government
monopoly (the US postal service), a private regulated monopoly (a power company), or a
private non-regulated monopoly. Pricing is handled differently in each case. A government
monopoly can pursue a variety of pricing objectives.

In a regulated monopoly, the government permits the company to set rates that will yield a
“fair return”, one that will let the company maintain and expand its competitors as needed.
Nonregulated monopolies are free to price at what the market will bear.
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However, they do not always charge the full price for a number of reasons; a desire to attract
competition, a desire to penetrate the marker faster with a low price, or a fear of government
regulation.

Consumer Perception of Price and Value:

In the end, the consumer will decide whether a product’s price is right. Pricing decisions, like
other marketing mix decisions, must be buyer-oriented. When consumers buy a product, they
exchange something of value (the price) to get something of value (the benefits of having or
using the product). Effective, buyer-oriented pricing involves understanding how much value
consumers place on the benefits they receive from the product and setting a price that fits this
value.

Competitors’ Costs, Prices, and offers:

Another external factor affecting the company’s pricing decisions is competitors’ cost and
prices and possible competitor reactions to the company’s own pricing moves. A consumer
who is considering the purchase of a Canon camera will evaluate Canon’s price and value
against the prices and values of comparable products made by Nikon, Minolta,

Pentax, and others. If canon follows a high-price, high -margin strategy, it may attract
competition. A low-price, low-margin strategy, however, may stop competitors or drive them
out of the market.

Canon needs to benchmark its costs against its competitors’ costs to learn whether it is
operating at a cost advantage or disadvantage. It also needs to learn the price and quality of
each competitor’s offer. Once canon is aware of competitors’ price and offers, it can use them
as starting point for its pricing. If Canon’s cameras are similar to Nikon’s, it will have to
price close to Nikon or lose sales. If Canon’s cameras are not as good as Nikon’s, the firm
will not be able to charge as much. If Canon’s products are better than Nikon’s, it can charge
more. Basically, Canon will use price to position its offer to the competition.

Other External Factors:

When setting prices, the company also must consider other factors in its external
environment. Economic conditions can have a strong impact on the firm’s pricing strategies.
Economic factors such as boom or recession, inflation, and interest rates affect pricing
decisions because they affect both the cost of producing a product and consumer perception
of the product’s price and value. The company must also consider what impact its prices will
have on other parties in its environment. How willrese ller react to various prices? The
company should set prices that give resellers a fair profit, encourage their support, and help
them to sell the product effectively. The government is another important external influence
on pricing decisions. Finally, social concerns may have to be taken into account. In setting
prices, a company’s short-term sales, market share, and profit goals may have to be tempered
by broader social considerations.

General Pricing Approaches:


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The price the company charges will be somewhere between one that is too low to produce a
profit and one that is too high to produce demand. Product costs set a floor to the price;
consumer perceptions of the product’s value set the ceiling. The company must consider
competitors’ prices, and other external and internal factors to find the best price between
these two extremes.

Companies set prices by selecting a general pricing approach that includes one or more of
these three set of factors. The three approaches are: the cost based approach cost-plus pricing,
break- even analysis, and target profit pricing), the buyer based approach (value- based
approach), and the competition based pricing.

Cost-Based pricing:

The simplest method is cost-plus pricing-adding a standard markup to the cost of the product.
Construction companies, for example, submit job bids by estimating the total project cost and
adding a standard markup for profit.

To illustrate mark up pricing, suppose a toaster manufacturer has the following costs and
expected sales:

Variable cost: $10, Fixed costs: $ 300,000, and Expected unit sales : 50,000

Here unit cost is $16= Variable cost +Fixed cost / unit sales.

Now suppose the manufacturer wants to earn a 20 percent mark up on sales. The
manufacturer’s mark up price is given by:

Markup price= unit cost / 1- Desired Return on Sales = $16/ 1-.2= $ 20

Break-Even Analysis and Target Profit Pricing:

Another cost-oriented pricing approach is break-even or a variation called target profit


pricing. The firm tries to determine the price at which it will break even or make the target
profit it is seeking.

Break-Even Volume: Fixed cost /selling price- variable cost. If a company has fixed cost
of $ 30,000 and Variable cost $ 10 and selling price per unit is $ 20, then its Break- Even
Volume is= $ 30,000/$20-$10= $ 30,000.
The company’s sales must be above Break-even sales to earn a profit.

Value-Based Pricing:

An increasing number of companies are basing their prices on the product’s perceived value.
Value-based pricing use buyers’ perception of values, not the seller’s cost, as the key to
pricing.
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Cost -based pricing:

Product------------- Cost---------------Price--------------------Value------------customers.

Value-based Pricing:

Customers------------Value-------------------Price---------------Cost-----------------Product.

Competition-Based pricing:

Consumers will base their judgment of a product’s value on the prices that competitors
charge for similar products. One form of competition-based is going –rate pricing, in which a
firm base its pricing largely on competitors’ prices, with less attention to its own costs or to
demand.

Competition-based pricing is also used bids for jobs. Using sealed –bid pricing, a firm bases
its price on how it thinks competitors will price rather on its own cost or on the demand. The
firm wants to win a contract, and winning the contract requires pricing less than other firms.

Pricing Strategies:
New- Product Pricing Strategies:

Pricing strategies usually change as the market passes through its life cycle. The introductory
stage is especially challenging. Companies bringing out a new product face the challenge of
setting prices for the first time. They can choose between two broad strategies: Market-
skimming pricing and market -penetration pricing.

Market-skimming pricing: many companies that invent new product initially set high prices
to “skim” revenues layer by layer from the market. Sony frequently uses this strategy, called
market-skimming pricing. When Sony introduced the world’s first high- definition (HDTV)
to the Japanese market in 1990, the high-tech set costs $ 43,000. In 1993, a 28 inch HDTV by
only $ 6,000 and in 2001 a 40-inch HDTV was sold only for $ 2,000.

Market –Penetration Pricing:

The market penetration pricing is normally adopted by companies who try penetrate a
market. They set a low initial price in order to penetrate the market quickly and deeply- to
attract a large number of buyers quickly and win a large, market share. Companies like Dell
used penetration pricing to enter the highly competitive market.

Product Mix Pricing Strategies:

The strategy for setting a product’s price often has to be changed when the product is part of
a product mix. In this case, the firm looks for a set of prices that maximizes the profits on the
total product mix. Pricing is difficult because the various related demand and costs and face
different degrees of competition. We now take a closer look at five product mix pricing
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actions: product line pricing, optional-product pricing, captive-product pricing, by-product


pricing, and product bundle pricing.

Product Line Pricing:

Setting the price steps between various products in a product line based on cost differences
between the products, customer evaluation of different features, and competitors’ prices.
SONY sets different pricing for different models of TVs, DVDs. Optional-Product Pricing:
The pricing of optional or accessory products along with a main product. The original
product is offered with an optional product with some special price.

Captive-Product Pricing:

Setting a price for products that must be used along with a main product such as blades for a
razor, and a film for a camera. The original product is offered at as low as possible and
charge a premium price for the captive product. Gillette sells low priced razors but makes
money on the replacement cartridge.

By-Product Pricing:

Setting a price for by –products in order to make the main product’s price more competitive.
In producing processed meats, petroleum products, chemicals and other products, there are
often by-products. The company can charge a price of these by-products that allow the firm
to cover the storing and delivering costs and this certainly gives the firm a competitive
advantage in selling the original product.

Product Bundle Pricing:

Using product bundle pricing, sellers often combines several of their products and offer the
bundle at a reduced price. Thus, theaters and sports teams sell season tickets at less than the
cost of single tickets, hotels sell specially priced packages that include room, meals, and
entertainment.

Table Showing Product Mix Pricing Strategies


Strategy Description
*Product Line pricing Setting prices between production liner items
*Optional-product Pricing optional or accessory products sold with the main
pricing product
*Captive-product
pricing Pricing products that must be used with the main product
*By-product pricing Pricing low-value by-products to get rid of them
*Product bundle pricing Pricing bundles of products sold together
Price Adjustment Strategies:

Companies usually adjust their basic prices to account for various customer differences and
changing situations. Here is six price adjustment strategies: discount and allowance pricing,
segmented pricing, promotional pricing, geographical pricing, and international pricing.
190561 Marketing Theory Muhammad Naeem

Discount and Allowance Pricing:

A straight reduction in price on purchases during a stated period of time. A cash


discount, a price reduction to buyers who pay their bills promptly. A typical example is,
“2/10, net 30,” which means that although payment is due within 30 days, the buyer can
deduct 2 percent bill if the bill is paid within 10 days.

A quantity discount is a price reduction to buyers who buy large volumes. A typical example
might be “ $ 10 per unit for less than 100 units, $ 9 per unit for volume for 100 or more
units.”

A functional discount (also called a trade discount) is offered by the sellers to trade- channel
members who perform certain functions, such as selling, storing, record keeping.

A seasonal discount is a price reduction to buyers who buy merchandise or services out of
season. For example, lawn and garden equipment manufacturers offer seasonal discounts to
retailers during the fall and winter months to encourage early ordering in anticipation of the
heavy spring and summer selling seasons.

Allowances are another type of reduction from the list price. For example, trade-
allowances are price reduction given for turning in an old item when buying a new one.

Segmented Pricing:

Companies will often adjust their basic prices to allow for differences in customers, products
and locations. In segmented pricing, the company sells a product or service at two or more
prices, even though the difference in prices is not based on difference costs. Segmented pricing
takes several forms. Under customer-segment pricing, different customers pay different prices
for the same product or service. For example, people who buy the product of a particular
company through CREDI CARD may get a special discount. Under product-form pricing,
different versions of the product are priced differently but not according differences in their
costs. Using a location pricing, a company charges different prices for different locations, even
though the cost of offering each location the same. Universities offer different pricing for
students outside the host. Country.

Psychological Pricing:

A pricing approach that considers the psychology of the prices and not simply the economics;
the price is used to say something about the product. In buying a product that is highly
psychological, price is considered to be the most important factor for buying or not buying
the company’s product. When a company reduces the price, customer will hesitate to have a
product of their preference.

Reference Prices:

Prices that buyers carry in their minds and refer to when they look at a given product.
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Promotional Pricing:
With promotional pricing, companies will temporarily price their products below list price
and sometimes even below cost to create buying excitement and urgency. Promotional
pricing takes several forms. A loss leader is to attract customers to the store in the hop e that
they will buy other items at normal markups. Special -event pricing in certain seasons to draw
more customers. Thus, Linens are promotionally priced every January to attract weary
shoppers back into stores.

Geographical Pricing:
A company must also decide how to price its products for customers located in different parts
of the country or world FOB-origin pricing- a geographical pricing strategy in which goods
are placed on board a carrier, the customers pays the freight from the factory to destinations.
Customers pay the freight depending on their locations.
Uniform-delivered pricing:
A geographical pricing strategy in which the company charges same price plus freight to all
customers, regardless of their locations. Zone Pricing: A geographical pricing strategy in
which the company sets up two or more zones. All customers within a zone pay the same
total price; the more distance the zone, the higher the price.

Basing-point pricing:
A geographical pricing strategy in which the seller designates some city as basing point and
charges all customers the freight cost from that city to customer.

Freight- absorption pricing:


A geographical pricing strategy in which the seller absorbs all or part of the freight charges
in order to get the desired business.

International Pricing:
Companies that market their products intentionally must decide what prices to charge in the
different countries in which they operate. In some cases, a company can set a uniform
worldwide price. For example, Boeing sells its jetliners at about the same price everywhere,
whether in the United States, Europe, or a third-world country.

The price that a company should charge in a specific country depends on many factors,
including economic conditions, competitive situations, laws and regulations, and
development of the wholesaling and retailing system. Consumers’ perceptions and
preferences also may vary from country to country, calling for different prices. Or the
company may have different marketing objectives in various world markets, which require
changes in pricing strategy. For example, Panasonic might introduce a new product into a
mature market in highly developed countries with the goal of quickly gaining mass-market
share- this would call for a penetration-pricing strategy. In contrast, it might enter a less
developed market by targeting smaller, less price sensitive segments; in this case, market-
skimming pricing make sense.
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Q. 5 Direct marketing is the practice of delivering promotional messages directly to


potential customers on an individual bases. Obtain information from any commercial
organization (such as Dawlance, Acer, and LG etc) and answer the following questions:

1. What kind of direct marketing efforts they apply?


2. How do they make it easy to order their product?
3. How are their products different from competitors?
4. What are their competitive advantages and disadvantages?

DIRECT MARKETING

Direct marketing is a communication between seller and buyer directly. No


intermediary media is used. No distractions come between hopefully. Direct marketing is
generally visual and sometimes auditory. It is also, to an extent sensual and olfactory. That is,
impressions are obtained from feel and smell that affect the communication. It is direct
communication but with a marketing purpose. It is most often in text format. Layout and
delivery (both the form and the timing) have an impact on the acceptability of the
communication. Research shows that a combination of brochure and Internet works,
persuading people to buy – the Internet needs the brochure’s reassuring feel and existence,
giving an Internet site substance.

The Direct Marketing Association (DMA) defines direct marketing as ‘communications


where data are used systematically to achieve quantifiable marketing objectives and where
direct contact is made, or invited, between a company and its customers and prospective
customers’.

Direct Marketing Tools

Direct marketing includes a number of different marketing tools that require you to buy now.
These marketing tools may be emails, sales letters, telesales, or other tools.

Direct Marketing Emails

Emails may be a form of direct marketing or they can be e- newsletters. The difference
between direct marketing emails and other emails is that they require an action now that can
be tracked and measured. The email may, for example, be a description of a product and at
the end give the person the call to “buy it now” by visiting your website. You will be able to
track how many people clicked on the link and bought your product using online tracking
software. When writing direct marketing emails though you need to be aware that you cannot
write them in the same way you would write other direct marketing materials as this will
probably get them caught in spam filters so try to disguise your direct marketing message
while still giving a powerful call to action.
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Telesales
Who hasn’t received those telephone calls trying to sell you something? This form of direct
marketing is telesales and although many customers don’t like it, it can still bring results and
so businesses still use it. In order to get the best results from telesales you should target your
lists and try a two-call system whereby you first of all call to find out the customer’s needs
and then phone back later for the direct marketing call

Sales Letters
Direct marketing sales letters, such as those seen on websites and in magazines are another
form of direct marketing. They have compelling copy that calls people to take action now and
usually repeats this call a number of times throughout the letter. The trick with achieving
success at sales letters is to write compelling copy that appeals to your target market’s
perceived needs and desires and tells them how your product can help them fulfill these.

Infomercials are direct marketing on the television. Notice how many times during an
infomercial you are encouraged to contact the company to purchase their products.
Infomercials need to be professionally done, use celebrities or scientists to create credibility
and usually come with many bonuses or a money back guarantee.

There are a number of different tools that are used in direct marketing but the most important
aim of these tools is to get the person to act immediately and not wait. This is done
differently depending on the tool used and it is important to know how to use each of these
tools for direct marketing.

FITTING DIRECT MARKETING INTO THE INTEGRATED MARKETING


ENVIRONMENT

Marketing purpose Direct marketing is no different from other forms of marketing in that it is
trying to achieve a marketing purpose. The marketing purpose is to meet a marketing
objective; the direct marketing activities may be in support of other marketing activities or as
one of a sequence of direct marketing activities – often called a campaign. Direct marketing
achieves the purpose directly. The fact that direct marketing is a one-to-one communication
allows the communication to be special and tailored to the recipient. If you do not use its
special characteristics and its individual capability, you are missing a trick and the true
benefit of direct marketing.

The old business-orientated way of operating Marketing In marketing, in the last decades of
the 20th century, the basic marketing effort was managed as a three-part exercise for the
benefit of the business, often by separate operations, first trying to generate leads (the old
marketing bit), secondly to process sales (the task of the sales force to close sales) and finally
to retain the customer (the domain of customer service). Separation of the three parts no
longer really works. However carefully people are told to join together as a team to support a
customer, if they belong to different parts of a business they are likely to retain in-house
rivalries. It is a human condition. Integration means working as one, probably achievable
only under one leader.

An integrated marketer is aware of four factors: the recent customer research on consistency
of message (the customer shies away from purchase if the message is inconsistent); the
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discerning nature of customers, reflecting a greater maturity; the customer only believing
messages that are supported by reality; finally, the pace of life itself is moving customers to
bond with a brand that delivers what they need because they do not have the time to waste re-
examining the marketplace every time they make a repeat purchase. (Tesco is the consumer
model here with 43 per cent of their high value customers 100 per cent bonded to the brand –
that is, they do not shop anywhere else. Viking is an equivalent good example on the
business-to-business side.) The wise marketer now looks at the whole approach from product
and service (concept) awareness to demonstrating relevance and performance, to showing
clear advantage of the concept and finally bonding, that is, from the viewpoint of the
customer, creating a seamless consistent view, which persuades the customer not to even
consider or think of buying from anyone else.
The newer integrated marketing purpose

The marketing purpose for an integrated marketer must be the whole approach of the
customer seen from the customer’s viewpoint. That is:

■ The delivery of an advantageous marketing proposition to put


forward a marketing proposition. This is a proposal somehow conveying
advantage – it may be information about special purchasing opportunities, it may be an
entreaty to purchase. It is, however, entirely persuasive and conducive to a customer’s
purchase. The marketing proposition meets the needs of the customer -communicated from
their perspective, best expressed by the six Cs. It also uses a sales process that matches the
buying process preferred by the customer. Two blinding flashes of the obvious here. First the
six Cs are the marketing mix elements but seen from the customer view- point – cost,
convenience, communication, customer relations, concept and consistency. The marketer
implants this information as favourable and complete messages in the mind of the customer
in a form that is customer digestible. Second the buying process has to be discovered and the
sales process then designed and matched to it.

■ The customer bonding with the brand to increase a customer bond


with a brand, by imparting specific messages that strengthen that bond and building long-
term relationships for repeat or further sales. Customers, if approached correctly, bond in a
way that is much stronger than any loyalty scheme. It requires continuing confirmation of the
excellence of the customer decision to bond and must continue to demonstrate advantage.
The result, if achieved though, is repeat purchase and ongoing business. This bonding is so
effective it is now being used as a measure of future share value prediction. It is in
consequence a CEO deliverable. Again direct marketing is particularly

suited to achieve customer bonding with a brand. It will often require more than one direct
marketing activity – a campaign – over a period of time. The need to build relationships is
important. Building relationships is a marketing activity and direct marketing is the superior
implementation method for this. For relatively small effort, a large number of repeat sales can
be achieved. Direct marketing is good at cementing relationships with customers to achieve
sales. In business-to- business where costs of advertising in the specialist press seem
profligate and in any case marketing budgets are more limited and seeming wastage is
unwelcome, direct marketing is an ideal tool. Indeed customers can be readily persuaded to
share in the saving of cost by ordering online and allowing automated systems to cut out the
usual business interfaces – intermediary persons, firms or organizations. Airline and some rail
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ticketing can and now do save on cost for consumers. It is particularly important to make
contact with those who have bought before, both in an appropriate and a timely fashion. It is
important to establish re-order frequency and match a contact call or letter to that period.
Some advocate a 90- day period between contacts. This is no longer subtle enough.

From experience, a buying pattern can be established. Customers can even be asked how
frequently they want to be contacted; for a professional firm seeking new business it is even
possible to ask how frequently contact should be made. It can then be made into a process
with a contact plan for each client. That is, persons in the team are tasked with maintaining
contact at set frequencies and the type of that contact decided. The process can be managed
centrally using a database. For example, the car dealer mentioned before, should ascertain the
buying period between car purchases of customers – even asking the customer to say when
they had previous cars and for how long. The period in between purchases should build a
relationship – perhaps seeking assistance with new product development, finding out the
customer preference and demonstrating how the new products will meet those preferences.
Then in the pre-purchase period, really putting forward the sell, based on the knowledge of
the customer.

When to use direct marketing

Direct marketing is most appropriate in a number of situations. The following paragraphs list
some of these and, of course, the reverse where direct marketing is inappropriate.

Obtaining a list of customers for direct mail or telemarketing activities


First, there is some obvious logic (blinding flash of the obvious): to carry out some direct
marketing activities (eg e-mail, direct mail, catalogue) you need to know your customers by
name and address, or e- mail address or telephone number. Only if you have customers can
you carry out those direct marketing activities. But if you do not have those customers, then
you do have the following direct marketing alternatives:

■ Advertise for customers.


Carry out direct response marketing activities first , to achieve sufficient numbers of
customers’ details to carry out direct marketing as part of a campaign. Make the ones you
want an offer they cannot refuse. Of course, you do not necessarily want the whole
population, so it must be targeted. (For example, Jaguar offering an X-typefor the weekend if
you leave your BMW or Mercedes with them, thus targeting the wealthy 30+ age group.)
Non-direct response advertising can produce customers but may well be much slower, as you
require the customer to take action unprompted and unless your advertising persuades and/or
makes an incredible offer that has customers putting in effort to seek out purchase outlets, a
lot of potential customers may not bite.

■ Use PR
This is probably riskier than non-direct response advertising as you do not control the
channel. You could use some high profile concept (product/service) launch that captures
sufficient media interest for journalists, commentators and editors to publish and promote
your concept. Beware, they may do so, but not always in ways you can imagine.
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■ Buy potential customer names.


Technically, you hire the names for each time you use the list, which comes in a database
format. The database, the list, needs to match the profile of your target. Legally, you need to
ensure that the database is properly used – that the customers listed have sanctioned your
communicating with them on this topic.

■ Non-names direct marketing.


The direct marketing activities that do not depend on knowing the customers’ names,
addresses, etc, are: direct response (inserts, tip ons, pop ups), piggy back, door-to-door,
leaflets and handouts.

■ Field marketing.
Field marketing encompasses face-to-face direct marketing . Generally this is a relatively
expensive form of direct marketing as you are paying for people’s time to undertake direct
marketing and they are usually only in contact with one or a few customers at any time.

Start-ups
As a start-up business you do not have any customers, so why not use someone else’s? Piggy
back may offer the perfect solution, providing you select the right partner who has lots of the
right type of customers. So just after you have arrived and set up in an area and do not know
the locals, pick a piggy back partner who has customers with a concept that has an affinity
with yours.

Commodity products
Clearly for an item in general use such as a commodity (cosmetic/personal hygiene, food,
cleaning materials) you do not need a name and address and door-to-door (see Chapter 9) is
an easy and cheap way of delivering a marketing message to households. It is quite possible
to target households fairly accurately by the type of persons living there. A number of
organizations offer profiles of household types by area or street. A commodity cannot yet be
sent over TV or radio or poster, though you can stick on samples to other printed media.
Complex propositions Direct marketing is comfortable with complex propositions. You
cannot deliver the small print in a TV advertisement or a poster or even really in a press
advertisement (where the amount of reading is less suited to newsprint than in a printed
brochure). Also, financial services are a personal matter suited to direct mail, which is a one-
to-one medium, versus a newspaper, which is impersonal.

The recognized uses for direct marketing Drayton Bird (2000) considers there are five major
activities that can be applied singly, in stages or over time, which develop a
relationship for direct marketing to persuade the recipient to:

■ buy through the post;

■ ask for catalogues;

■ request a demonstration;

■ visit a retail establishment;


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■ take part in some action.

ADVANTAGES OF DIRECT MARKETING

- Direct marketing offers the advantage of reaching large number of well-defined target
customers and almost eliminates waste coverage.
- Good quality databases are available from independent suppliers and the marketer can
segment customer groups with considerable precision.
- Direct marketer can personalise the message.
- Direct marketing can deliver almost perfect offers to customers.
- Marketer can build desired frequency level based on media.
- Direct marketing offers creative flexibility in different media.
- Direct marketer can quickly develop a list of specific profiles for direct mail.
- Direct marketing is more effective in building customer relationship.
- It is very cost effective considering the sale generated per contact.
- The results can be measured most accurately.

WHY LG FOLLOWED DIRECT MARKETING STRATEGY FOR


MICROWAVES?

- People were Unaware of Usage and Utility of MWOs


- To Research Regarding Consumer Buying Behavior Pattern
- Customized MWOs Launched According To Geographic Segmentation
- Home Demonstration And Health Platform as USP
- Post Purchase Costumer Satisfaction
- Market Research For Consumer Buying Behavior Pattern
- Spreading Awareness About MWOs in People
- Customization of Product as Per Consumer Preference
- Home Demonstration and Post Purchase Service

MARKETING STRATEGIES OF DAWLANCE AND LG

Comparative Study.

The study is based on the comparison of marketing strategies applied in LG. and Dawlance.
In this study, the main focus to see the effectiveness of the marketing strategies applied by
both the companies — Dawlance and LG, for selling their products particularly Refrigerators.

Just to understand the marketing strategies in general and refrigeration market in particular,
one should know that what marketing strategies ought to be? Who are the main players in the
market? What kind of other products do they produce? How do they promote and supply their
products? What type of competition is going on in the market? And finally what are the
marketing strategies being applied by both the companies? These are the questions to be
addressed, but the main theme is the marketing strategies of Dawlance and LG Refrigerators.
This paper is mainly divided in to four sections.

The first section deals with the marketing strategies in general. The second section focuses on
the main players of Refrigerators in the Pakistan market. The third section sheds light upon
the marketing strategies of Dawlance and L.G. Though the marketing strategies of all the
270561 Marketing Theory Muhammad Naeem

products may be the same. But mainly it has been focused on the refrigerator marketing
strategies here. Finally, the paper is concluded in the last section.

All the information that is presented in this paper has been acquired and extracted from
various primary and secondary sources. In this study, best possible efforts have been made to
collect the correct and uncovered information. For this, the information has been collected by
both primary and secondary sources. Primary data is based on the interviews from the top
officials of both the companies based on the semi-structured questionnaire. The secondary
data is based on the published reports and Internet.

MARKETING STRATEGIES IN GENERAL

Fluctuating customer requirements and competitive forces are putting more pressure on
marketing and are demanding superior marketing strategy and tactical execution. The cycle
time from product creation, to product launch, for a winning go-to-market strategy, leaves no
margin for error.

Marketing puts the customer at the center of the organization. The organizations, which do
so, reap the profits. The idle marketing ought to be or the key steps to a successful strategy
can be summarized as:

BE CLEAR ABOUT MISSION

The common, customer-orientated thread running through all the activities of the
organization and how we define the kind of market oriented organization we want to be.

MEASURE AGAINST STANDARDS AND CONTROL.

Main Players of the Refrigerators in Pakistan Market

Just to understand the refrigeration market, first of all we should know who the main players
in the market are? Actually there are two types of marketers: those who manufacture
refrigerators locally and those who import and market the same in Pakistan.

Local Manufacturers of Refrigerators are: Dawlance, Waves, Pel and Singer. These
manufacturers roughly cater 80% need of the market.

Imported Manufacturers of Refrigerators are: LG, Super, General, Hair, Sam Sung, Indesit,
Semins,

Parties import refrigerators from their principal and market the same in Pakistan. In-fact these
all parties contribute only 20% of the market requirement. The above all are direct
competitors of Dawlance and LG. electronics.

"Marketing Strategies of Dawlance and L.G Refrigerator"

Before discussing the marketing strategies of Dawlance and L.G, first we will go through the
profiles of the companies in brief.
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DAWLANCE:

Dawlance United Refrigeration Industries Ltd. was established in 1980. It is the Largest
Company in Pakistan engaged in appliance business. Dawlance stands for durable & reliable
household appliances. Its refrigerator Factory is located in Hyderabad. The main Objectives
are to provide dependable and reliable product at reasonable price to majority of Pakistanis
and to enhance their quality of Life. Present Market Share of Dawlance product is:
refrigerators 65%, Washing Machines 35%, Microwave Oven 40%, Chest Freezers 45%, Air
Conditioners 15%,

L.G.

Haniska International is a multinational company, located in Korea. LG is an agent of


Haniska International in Pakistan market. LG is an importer of home appliances in Pakistan.
It imports Refrigerators, Air Conditioners, Washing Machines & Microwave Ovens from
Korea and China. LG has got around 300 dealers all over the country. Marketing objectives
of L.G are: to provide world class product to upper and upper middle class to enjoy real
luxury in their life. Present Market Share of L.G product is: Refrigerators 4%, Washing
Machines 2%, Microwave Oven 3%, Chest Freezers nil, Air Conditioners 25%.

MARKETING STRATEGIES

The marketing mix is the organization's overall offer, or value, to the customer. 'The basic
marketing mix is often nick named "the 4Ps" (product, place/distribution, pricing,
promotion); these are elements in the marketers armory — aspects that can be manipulated to
keep ahead of the competition'. Here I've explored the marketing strategies of Dawlance in
terms of marketing mix have been explored.

PRODUCT STRATEGY

The object of Dawlance is to provide refrigerator to all people who fall in lower middle,
middle, and upper middle class in this country such that most of the families should have
refrigerators in their home because they enhance better quality of life. Dawlance has got
products, which are as per international standards and carry all the basic features, which need
in any such type of appliances.

Dawlance believe that whatever they provide to their customers should be durable and
reliable. All the products, which Dawlance market, are durable enough and customer can
keep on using them for quite many years without any problem. It provides its refrigerators, 3
years compressor guarantee and 1 year chest freezer, and free service in spare parts under
normal use.

Whereas, LG's objective is to provide world class product to upper class and upper middle
class to enjoy real luxury in their life. Since LG is a Korean brand and being imported from
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Korea, it has very advanced features, which are normally demanded by in developed
countries.

LG also insures that whatever product they market should be durable enough which last quite
many years and give trouble free service to their customers. It provides its refrigerators, five
years compressor guarantee and one year free service in spare parts under normal use.

PRICING STRATEGY

Dawlance has got around 52 models in their refrigerator product line. From the price list and
discussion had with their management, it appears that they have position their product pricing
in such a way that their main focus is middle and upper middle class. However, they have
some selected range for upper class as well. Product-wise price list enclosed in appendix for
reference.

Dawlance has got a policy that their all product price should be the same in all cities and
town in Pakistan market. Dawlance bear freight cost and make their product available to their
dealers irrespective of where they are located. For this, they give uniform margin to their
dealers irrespective of whether he is big or small.

Dawlance consider pricing as one of an important element of marketing mix. It believes that
their retail prices should be uniform all over the country irrespective of whether customers
buy from Peshawar or Karachi. In order to maintain a uniform price all over the country,
Dawlance bear transportation charges and make the product available at cost price at dealer
premises.

Whereas the LG pricing strategy is cost + fixed mark up to cover their GP. Since they cater to
upper middle and upper class, therefore their 90% dealers are in big cities only. Product-wise
price list enclosed in appendix for reference. LG follows pricing policy in which their normal
formula is import cost + reasonable gross profit to cover their marketing expenses and also
give them reasonable profit.

PROMOTION STRATEGY

Dawlance promotion budget is around 1.75% of their turnover. 40% spending of their budget
is Print Media, 20% goes on TV, 20% on Out door activity and balance 20% on Sales
Promotion activity. They believe that print media and out door activity help them to reach to
their target customer. Due to satellite transmission and having multi-channels, it does not pay
one unless you have very huge budget to spend on this media. On promotion, their spending
is more on consumer incentive schemes. Since it pay them and there is direct relationship
between sales and consumer. Further, it gives customer a direct benefit in shape of price
reduction.

As far as Advertising strategy of LG is concerned, it is being planned and executed by LG,


Korea through their Pakistan Office keeping in view their global approach and theme line.
Local Agent of LG simply gives advice and coordinate in its implementation. Since LG is a
multi-national brand, their spending on advertising is in such a way that their all product get
promoted. Although for different product they have got different agent; like for TV, New
Electronics/Karachi. For computer monitor, Vision Computer. For mobile phone, Chimera.
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It was not possible to get the exact advertising budget of LG, but it appears from their
spending and the figures collected from Pakistan Advertising Association and from some
other sources that their spending is around 6/7 per cent of their sales in Pakistan territory.
Due to being a multi-national company and as a part of their global Strategy they, most of the
time, divert their funds from strong market and spend more on weak or under developed
markets.

Further, as far as Sales Promotion strategy is concerned, it is being designed and


implemented by their respective agent of each product in Pakistan. For the promotion of
Home Appliances products: Hanaska International designs their own strategy. Their major
approach and emphasis on promotion through trade. They offer very handsome incentives to
their dealers, who in return push their product among the customer and thus they get their
desired volumes in Pakistan. It has been noted that due to being import base product they are
always high price vis-a-vis other brands in the market and it is one of the reason why they
give so much emphasis on the motivation of dealers.

DISTRIBUTION STRATEGY

Dawlance has got around 800 dealers all over the country. Dawlance ensures that its
refrigerators are available almost in all appliances markets of Pakistan. They have got 80%
penetration in dealer sector. One can get very easily their product in any city or small town of
Pakistan.

Dawlance has got various types of dealers according to their potential. Around 25% of
dealers are "A-class" dealers who sell over 1000 units and above per year. "B-class" dealers
are those dealers who sell from 400 units up to 999 units per year. They are around 50% in
total dealer and the rest are in best 25% of "C-class" dealers sell from 200 up to 399 units per
year.

In order to provide quick and timely delivery to their dealers: they have got big warehouses
located in almost all big cities and towns. Whenever they get order from the dealer they try to
provide supplies to their dealer from closest warehouse. In case stock is not available in the
warehouse then it is delivered directly from Hyderabad Factory. The maximum delivery time
incase stock is delivered from Hyderabad Factory is four (4) days. However if supply is given
from closest warehouse then hardly it takes 2-3 hours time. They believe that, timely delivery
of their product to the dealer, is one of an important element in their success in Pakistan.

As it has already been stated in earlier that LG refrigerators are imported. Mostly they import
from Korea and some of the models are imported from China as well. LG relatively don't
maintain loose stock at their end. Simply based on historical forecast and feedback of their
dealer about the possible demand, they import from their principal.

They ask their dealer to maintain sufficient stock at-least 4-6 week at their end. Rather they
believe in replenishment of dealer stock based on their sales. It means dealers stock always
remain in within a limit, doesn't exceed beyond 6 week level.

As mentioned above, they have only 300 dealers mostly in big cities and some in small
towns. They also have got a policy that retail price all over the country should be uniformed
for the customers, whether he/she buy from Karachi, Islamabad, or Peshawar.
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They also bear transportation cost and thus provide supplies at uniform rate to their dealers.
They have got three big warehouses in Karachi, Lahore and in Islamabad. From these
warehouses they feed their product to their dealers and thus they make their product available
to them.

PRODUCT LIFE CYCLE

Dawlance is an ISO 9000 certified company and among its mission statement. It is one of
their missions to provide quality product to their customers. Therefore, they ensure that every
product, which is delivered from their factory, must go through rigorous quality check. So
that only perfect product, free from any defect is delivered to their customers.

Since LG is an international name in home appliances, therefore LG ensures that their


product must meet their rigorous quality standard. So, when it is delivered to the customer, it
must meet customer's expectations.

AFTER SALES SERVICES

Dawlance believes that after sales service is one of the most important elements of marketing
mix and thus give due emphasize in providing quality after sale service to its refrigerator
customers. Dawlance has got qualified foreign-trained engineers in its team of after sale
service and also properly trained technicians and supervisors who look after service centers
and provide reliable quality after sales service to its customers.

Dawlance has got 17 its own service centers in different parts of country. Besides, they have
got 34 franchise workshops to cover remote areas, where its service center doesn't exist.
These are service centers and franchise workshops cover almost 99% market of Pakistan.
Wherever Dawlance dealer is, there you'll find Dawlance workshop or either franchise
workshop to take care of service need.

In order to provide satisfactory after-sales service, Dawlance ensures that in all of its service
centers sufficient inventory of spare parts is maintained, even these are available with
franchise workshops.

Dawlance has got the policy first of all to carryout repair, if required at customer place.
Incase if refrigerator problem is not diagnosed at customer premises then it is taken to its
workshop. Whenever they get any complain, they prepare job sheets and puts its record in
computer and whenever at later date if complain is repeated, in that case they also have a
history with them of such product in their data bank. Even after five years if you want to find
out from Dawlance service center that how many times there refrigerators have been referred
on account of technical problem to their center, they can dig out from their computer record.
In nutshell, we can say that Dalliance's after sales service workshops are very well properly
organized and they work according to international service standard. As far as service charges
are concerned Dawlance consider that it is not a profit center rather it's a support center for
sales.

As it has been mentioned earlier that LG has got market of refrigerators only in big cities and
some of its big towns in Pakistan. Therefore, they have got relatively lesser number of service
centers as compared to Dawlance. At present LG has got only eight after sales service centers
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in Pakistan. From these service centers LG provides after sales service to each customers.
They also maintain spare parts of serviceable items. Since their product is 100% imported,
the souring of spare parts is only import based.

Relatively LG refrigerator's parts are expensive comparative to locally made because LG


imports spare parts from Korea and various other LG production centers. One of the reasons
for being these parts expensive is that LG's local agent has to pay almost 70% of the product
cost towards import duty, sales tax and other import cost.

We can say that LG also believe in quality, after sale service to its customers and also
considers after sales service as one of the important element of marketing mix.

CONCLUSION

From the above information, it has been analyzed that there is no comparison between
Dawlance and LG. There are several reasons behind it. For example: Dawlance is a big local
manufacturer of refrigeration industry in Pakistan. It has got all engineering capabilities and
very good finance and of course technical know-how to produce internationally accepted
quality refrigerators locally. On the other hand L.G is a multinational company and has got
different agents in some of the big cities of Pakistan. It is simply an importer and imports
refrigerator from Korea and markets the same in Pakistan.

Since Dawlance has very strong industrial base as well as deep-rooted marketing network in
Pakistan, they don't feel any threat from any of their competitors, either local or from
importers. In the contrary L.G refrigerator is an import-based activity. Every year due to
weakness of Pak Rupee, US $ cost of import is going up and thus LG refrigerator is
becoming costlier day by day. Therefore, they have a big challenge before them to maintain
their market share and also to maintain their reasonable growth against local manufacturers.

All Dawlance products are made for middle, upper-middle and upper class. While LG
products are made for upper-middle and upper class. Present market share of Dawlance
refrigerators is 65% while L.G's present market share for refrigerators is 4%.

In the light of above evidences, it could be said that Dawlance is a leading company as
compared to LG, due to its dominance in the market, lower prices, and availability of spare
parts and after sale service, etc. Hence people prefer to buy their products. Dawlance is
dominant in the Pakistan market because not of its marketing strategies but least competition
by L.G. L.G being a foreign company suffers because of government policies by paying
heavy import taxes. It means, it is not only the marketing strategies of any company which
plays a dominant role but it the success of product lies in the marketing strategies as well as
the policies of the Government i.e favorable or unfavorable. As far as the case of L.G is
concerned, it is suggested that instead of depending on import it should install its plant in
Pakistan so that it may lessen its burden on taxes.