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MBA-SEM II-Bharathiar University, CBE




E-Mail : CELL PHONE : 9481778351

Unit - I
Marketing Concepts & Tasks. Defining & delivering customer value & satisfaction. Value Chain : Delivery Network, Marketing Environment, Adapting Marketing to new liberalised economy. Digitalisation, Customisation, Changing Marketing Practices, e-business : settingup web sites. Marketing Information System, Strategic
Marketing Planning & Organisation.

Reference Books
SL. No.



1 Marketing Management

Kotler, Keller, 13th Edition-A South Asian Perspective Koshy & Jha

( Pearson Education-Prentice Hall )

2 Marketing Management
( Tata McGraw Hill Publication )

Rajan Saxena Arun Kumar & N.Meenakshi

Biplab .S. Bose

3 Marketing Management ( Vikas Publications )

4 Marketing Management

Philip Kotler



Definition of Market
Market is a geographical region or a place which facilitates interaction & exchange between Buyers & Sellers. It can be an actual or conceptual place, where in forces of demand & supply operate.

Types of Markets
On Geographic or Area basis 1. Local market 2. National market 3. International market or Global market On Economic basis 1. Perfect market 2. Imperfect market On the basis of Business 1. Wholesale market 2.Retail market On the basis of Customer type 1. Consumer market 2. Business market or Industrial market

What is Marketing ?

Definition of Marketing
Traditional Definition : Marketing is a

management process that identifies, anticipates & satisfies customer needs profitably, in order to achieve the organizational goals & objectives.
Modern Definition : Marketing is an organizational function and a set of processes for creating, communicating & delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders.

Needs, Wants & Demands

Need : Something you have to have

Want : Something you would like to have

Demand : Want accompanied by buyers ability to buy

Needs, Wants & Demands Needs: are the basic human

requirements, such as : food, air, water, clothing, shelter, etc.
People also have strong needs for recreation, education & entertainment. A Human need is a state of felt deprivation of some basic necessity or satisfaction.

Marketers cannot create basic Needs, but constantly try to create specific Wants

Wants: Needs become Wants when they are directed to specific objects that may satisfy the needs.
Wants are shaped by ones Society, Culture & Individual Personality. Wants are desires for specific satisfiers of these deeper needs.

Eg: An American Needs food, but Wants burger. An Indian also Needs food but Wants Rice. So basic human Needs are the same as outlined above, but human Wants keep on changing & can be unlimited.

Demands: are wants for specific products, backed by an ability to pay & willingness to buy them.
Companies must not only measure how many people want the product, but how many would actually be willing & able to buy them.

Customer Needs & Wants are fulfilled through a Marketing offering, which may be products, services, information or experiences or a combination thereof, offered to a market to satisfy a need or want.

The American Marketing Association (AMA) defines Marketing as The process of planning & executing the conception, pricing, promotion and distribution of ideas / goods / services to create exchanges that satisfy individual & organizational goals.

Marketing starts with identifying customer needs and wants and ends with satisfying them through a coordinated set of activities that also allows a firm to achieve its own goals, profitably. Marketing lays emphasis on providing the right type of products to customers at the right place, at the right price, at the right time and in the right form i.e. Marketing provides Form, Time, Place & Possession Utilities to customers. { The extent
to which a product / service satisfies customer needs / wants is called Utility }. Communication of information about

the product helps customers determine whether the product satisfies their needs.

The Core Concepts of Marketing

1 3 2

Needs Wants

Value Cost
6 5


Exchanges Transactions Relationships




Marketing Management
Marketing Management is a business discipline which is focused on the practical application of marketingtechniques & the management of a firm's marketing resources & activities.

Functions of Marketing

Importance of Marketing
(A) Importance of marketing to society 1. Delivery of standard of living 2. Provides Employment 3. Decrease in distribution cost 4. Increase in national income (B) Importance of marketing to the Firm 1. Helpful in business planning & decision-making 2. Helpful in increasing profits 3. Helpful in communication between firm & society


The stage of barter The stage of money economy The stage of industrial revolution The stage of competition The emergence of marketing

DISTINCT CONCEPTS OF MARKETING The Exchange concept The Production concept The Product concept The Sales concept The Marketing concept

Evolution of Marketing
1. Product Era : 1600 1750 2. Production Era : 1780 1920 3. Sales Era : 1920 - 1955

4. Marketing Era : 1955 - 1985

5. Modern Marketing : Since late 1980s

Marketing Concept :
i. ii. iii. iv. Customer Orientation Long - term Profitability Functional Integration CRM / SCM / BPO / e-C / BM & RE

Company Orientations Towards the Marketplace

Production Concept
Consumers prefer products that are widely available and inexpensive Consumers favor products that offer the most quality, performance, or innovative features

Product Concept
Selling Concept Marketing Concept

Consumers will buy products only if the company aggressively promotes/sells these products
Focuses on needs/ wants of target markets & delivering value better than competitors

Short sighted & inward looking approach to marketing that focuses on the needs of the firm instead of defining the firm and its products in terms of the customer' needs and wants. Such self-centered firms fail to see and adjust to the rapid changes in their markets and, despite their previous eminence, falter, fall, and disappear. This concept was discussed in an article (titled 'Marketing Myopia,' in July-August 1960 issue of Harvard Business Review) by Professor of Marketing, Theodore C. Levitt, who suggests that firms get trapped in this bind because they omit to ask the vital question, "What business are we in?"

Marketing Myopia

Difference between Marketing & Selling Marketing

1. Marketing focuses on customer needs 2.Customer enjoys supreme importance

1.Selling focuses on the needs of the seller 2.Product enjoys supreme importance

3.Integrated approach to achieve long term goals 4.Converting customers needs into products 5.Cavet Vendor (Let the seller beware) 6. Profits through customer satisfaction

3.Fragmented approach to achieve immediate goals 4.Converting customer needs into profits 5.Cavet Emptor (Let the buyer beware) 6.Profits through sales volume


Emphasis on product

Emphasis on consumer needs and wants

Company manufactures the product Company first determines customer first and then decides to sell it needs and wants and then decides how to deliver a product to satisfy these wants

Management is sales volume oriented

Planning is short-term oriented in terms of todays products and markets

Management is profit oriented

Planning is long-term oriented in terms of new products, tomorrows products and future products

Stresses needs of a seller Views business as a goods producing process

Emphasis on staying with existing technology and reducing cost

Stresses needs and wants of a buyer Views business as a consumer satisfying process
Emphasis on innovation in every sphere, on providing better value to customers by adopting a superior technology


Different departments work as highly separate watertight compartments Cost determines price

All departments of a business operate in an integrated manner, the sole purpose being generation of consumer satisfaction Consumers determine price, price determines cost Marketing views the customers as the very beginning of a business

Selling views customers as the last link in business

The Marketing Concept holds that the key to achieving organizational goals consists of the company being more effective than its competitors in creating, delivering & communicating customer value to its target markets.
The Marketing Concept rests on four pillars: Target Market, Customer Needs, Integrated Marketing & Protability.
Relationship Marketing aims to build long-term mutually satisfying relations with key parties : customers, suppliers & distributors in order to earn and retain their long-term preference and business.

Relationship Marketing
Relationship Marketing is an integrated & coordinated effort to identify, maintain & build up a network with individual customers & other parties ( employees & suppliers ) & continuously strengthen the network for the mutual benefits of all the parties concerned. Transactional Marketing is one in which a Company or its employees communicate & offer their products or services to the customers only when they approach the firm. Gaining Customer-Loyalty is not a priority. There is clear lack of personal touch / focus on the customers requirements. Egs: Govt. Services, Public Sector Banks, etc. 28

Relationship Marketing
is a philosophy of doing business that focuses on keeping current customers and improving relationships with them. does not necessarily emphasize acquiring new customers. is usually cheaper for the firm ( keeping a
current customer costs less than attracting a new one ).

the focus is less on attraction & more on retention and enhancement of customer relationships.

Customer Goals of Relationship Marketing

A Loyal Customer is One Who...

Shows Behavioral Commitment

from only one supplier, even though other options exist increasingly buys more and more from a particular supplier provides constructive feedback/suggestions

Exhibits Psychological Commitment


consider terminating the relationship has a positive attitude about the provider says good things about the provider

Underlying Logic of Customer Retention Benefits to the Organization

Customer Satisfaction

Customer Retention & Increased Profits

Quality of Products/Service

Employee Loyalty

Benefits of Relationship Marketing :

( I ) Benefits for the Firm :
1. 2. 3. 4. 5. Customer Loyalty Reduced threat from Competitors Increased revenues from existing customers Positive Word-Of-Mouth Publicity High Employee / Supplier morale

( II ) Benefits for the Customers :

1. Satisfying Service Benefits. 2. Reliable & Personalized Attention 3. Time & Cost Benefits

The Societal Marketing Concept holds that the organizations task is to determine the needs, wants & interests of target markets and to deliver the desired satisfactions more effectively and efficiently than competitors in a way that preserves or enhances the consumers and the societys well-being.
The Societal Marketing concept calls upon marketers to build social and ethical considerations into their marketing practices. They must balance and juggle the often conicting criteria of company prots, consumer want satisfaction and public interest.

Holistic Marketing
Holistic Marketing is a process of integrating the : value exploration, value creation & value delivery activities, with the purpose of building long-term, mutually satisfying relationships and co-prosperity among key stakeholders.

Holistic Marketing Dimensions

The Marketing Process

Below is a 5-step model of the Marketing Process:
1. Understand the market-place and customer needs & wants.
2. Design a customer-driven marketing strategy. 3. Construct a marketing program that delivers superior value. 4. Build profitable relationships and create customer delight. 5. Capture value from customers to create profits & customer quality.

In the first four steps, we create value for customers and build customer relationships. In the fifth step, we capture value from customers in return.

What is a Product ?
Product is anything that can be offered to a market for attention, acquisition, use or consumption, that will satisfy a need. It is considered to be a bundle of benefits or utilities. Products include more than
just tangible goods. Broadly defined, products include physical objects, services, events, persons, places, organizations, ideas or mixes of these entities. Services are a form of product that consists of activities, benefits or satisfactions offered for sale that are essentially intangible and do not result in the ownership of anything.

Places Goods Services



Persons Properties Experiences



Classification of Products

Health Care; Education; Hotels; Hospitality; Banking; Legal Services; Travel; Transportation; Beauty & Body Care; Entertainment, Security, Auditing;

( Durables & Non-Durables )

Egs: Tea, Chocolates, Soap

Egs: Steel, Wood, Cotton ,etc

2. COMPONENTS Egs: Tyres, Spare Parts, Gear Box, etc
3. CAPITAL GOODS Egs: Machinery, Equipments, etc

Egs: Furniture, TV, Bike, Jeans

Egs: Jewelry, Car, Flat

Recreation; etc

Egs: Gluco-Meter, Hearing Aid

Product & Service Classifications: Products fall into two classes based on how consumers use them : 1. Consumer Products & 2. Industrial Products
Consumer Products are the products bought by final consumers for personal consumption. They include: (a) Convenience Products: These are the products that customer buys frequently, immediately and with a minimum amount of comparison and buying effort. Eg: Soap, Bread, Milk, Tea/Coffee, Tooth Brush/Paste. (b) Shopping Products: These are the products that customers compare carefully on suitability, quality, price and style. They are less frequently purchased products. Eg : Furniture, TV, Cell Phones, etc.

(c) Specialty Products: These are products with unique characteristics or brand identification for which buyers will make special purchase effort. For these kind of products, buyers can even travel to great distances & spend a lot of time before purchasing. Egs : Expensive Jewellery, Property, Cars, etc. (d) Unsought Products: These are the products that either the customer does not know or does not think of buying under normal circumstances. These products are bought due to emergency situations. Egs : Medical Aids, Life/Medical /Fire Insurance, etc.

2. Industrial Products: are those

products which are purchased for further processing for use in conducting business or for Re-Sale. They include: ( i ) Raw Materials & Consumables ( ii ) Components & Parts. ( iii ) Capital Goods : These products
help the buyer in production or operation.

The Marketing Mix

Marketing Mix refers to the tools available to an organization to gain the reaction it is seeking from its target market in relation to its marketing objectives. Traditionally it is known as the 4 Ps of Marketing, i.e.

1. Product 2. Price 3. Promotion 4. Place or Physical Distribution

NOTE : The success of a firm, depends upon the coordination of these ingredients in such a way as to create a suitable mix to the particular situation in hand.

Elements of the Marketing Mix

Design Quality Features PLC Branding Product Line Product Mix Packaging Labelling Warranties

Pricing ------- Strategies Discounts Allowances Payment Terms Credit Period

Advertising Sales Promotion Personal Selling Publicity / PR Direct Marketing

[Physical Distribution ]

Channels of Distribution ( Wholesalers & Retailers ) & Logistics of Distribution (Assortments Locations Inventory Transport )

The Marketing Mix

Blend of the Marketing Mix depends upon : Marketing Objectives Type of Product Target Market Market Structure Rivals Behaviour Global Issues (Culture/Religion, Etc. ) Marketing Position Product Portfolio

Marketing Mix : 4Ps vs


From the Sellers view From the Buyers view

Product Price Promotion Place


Customer Satisfaction Cost to the customer Communication Convenience

Marketing Tasks
1. Marketing Mix 2. Segmentation 3. Targeting ( Target Markets ) 4. Positioning.


Segmentation, Targeting & Positioning

Market Segmentation
1. Identify segmentation variables and segment the market

Market Targeting
3. Evaluate attractiveness of each segment 4. Select the target segment(s)

Market Positioning
5. Identify possible positioning concepts for each target segment

2. Develop profiles of resulting segments

6. Select, develop, and communicate the chosen positioning concept

Defining & Delivering Customer Value & Satisfaction

Customer Value is the ratio of the perceived benefits & costs that the customer has to incur in acquiring a product or a service. Value for Customers includes different types of benefits such as economic, functional & emotional, that they seek / expect from the product or service. Costs include monetary costs, time costs, energy costs & cognitive costs.

Michael Porter


Michael Porter : is the founder of a nonprofit

organization called the Initiative for a Competitive Inner City and one of the founders of The Monitor Group. His main academic objectives focus on

how a firm or a region can build a competitive advantage & develop a competitive strategy.

Porter's strategic system consists of:

Porter's Five Forces Analysis, Strategic Groups , Value Chain, Generic Strategies, Global Strategy, Porter's clusters of competence for regional economic development & the Diamond model.

The VALUE CHAIN, also known as Value Chain Analysis, is a concept from business management that was first described and popularized by Michael Porter in his 1985 best-seller, Competitive Advantage: Creating & Sustaining Superior Performance.

He suggested that activities within the organisation add value to the products & services that the organisation produces, and all these activities should be run at optimum level if the organisation is to gain any real competitive advantage. If they are run efficiently the value obtained should exceed the costs of running them.

Porters Generic Value Chain

Primary Value Chain activities are :

Inbound Logistics: the receiving & ware housing of raw materials, and their distribution to manufacturing as they are required. Operations: the processes of transforming inputs into finished products and services. Outbound Logistics: the warehousing and distribution of finished goods. Marketing & Sales: the identification of customer needs and the generation of sales. Service: the support of customers after the products and services are sold to them.

These Primary Activities are supported by a set of Support Activities, such as: The Infrastructure Of The Firm : organizational structure, control systems, company culture, etc. Human Resource Management : employee recruiting, hiring, training, development, and compensation. Technology Development : technologies to support value-creating activities. Procurement : purchasing inputs such as materials, supplies, and equipment.

It is in these activities that a firm has the opportunity to generate superior value. The firm's margin or profit then depends on its effectiveness in performing these activities efficiently, so that the amount that the customer is willing to pay for the products, exceeds the cost of the activities in the value chain.
A competitive advantage may be achieved by reconfiguring the value chain to provide lower cost or better differentiation.




Marketing Environment

Marketing Environment
The Marketing Environment consists of external forces that directly or indirectly influence an organization acquisition of inputs & creation of outputs. It can be classified into :

1. Micro Environment ( Internal ) & 2. Macro Environment ( External ).

Internal Environment include those factors over which a firm has full control & External Environment are those factors which cannot be directly controlled by an organization.

Factors Affecting Mktg. Environment Micro / Internal Macro / External

Company Employees Market / Customers Suppliers Share-Holders Financers Competitors Media Intermediaries & Public. Demographic Economic Government Political / Legal Cultural Technological & Global Environment

Environmental Scanning
The major components of Environmental Scanning are :
1. External Environmental Scanning 2. Customer Analysis 3. Competitor Analysis 4. Market Analysis 5. Company Analysis

Environmental Scanning
The major components of Environmental Scanning are :
1. External Environmental Scanning 2. Customer Analysis 3. Competitor Analysis 4. Market Analysis 5. Company Analysis

Environmental Appraisal

Environment of any organization is the sum of all conditions, events & influences that surround and affect it The Marketing Environment is Complex, Dynamic, Multi-faceted & has a Farreaching consequences. It is therefore crucial for any organization to understand the environmental influences on its business.

Various Environmental Components.

1) Market Environment: Clients needs, preferences, perceptions, attitudes, values, buying behavior, satisfaction. Product factors like demand, image, features, utility, design, life cycle, price, promotion, distribution, differentiation etc Competitor factors like different types of competitors, nature of competition. 2) Technological Environment : Sources of Technology; Technological development, R&D, Cost of Technology; Effects of technology on environment, human beings.

Components contd..
3) Supplier Environment:
Cost, availability, and continuity of supply of raw material, components, parts. Infrastructural support and ease of availability of the different factors of production.

4) Economic Environment:
The economic stage at which the country exists at a given point of time. The economic structure adopted, capitalistic, socialistic or mixed. Economic policies, industrial, fiscal. Per capita income, balance of payments etc.

Components contd..
5) Legal or Regulatory Environment:
Policies related licensing, monopolies, FDI, Policies related to distribution and pricing. Policies related to sick industries, public sector, backward areas, consumer protection etc.

6) Political Environment: The political system and its features, ideological forces, coalition compulsions. Political stability. Political funding of elections. Governments role in business.

Components contd..
7) Socio-Cultural Environment: Demographics like population, its density and distribution, age composition, inter state migration, income distribution etc. Socio-cultural concerns like environmental pollution, consumerism, corruption etc. Family structure changes.

Components contd..
8) International or Global Environment: Globalization process. Global economic forces. Global trade and commerce. Global financial system. Global markets and competitiveness. Global communication Global technology and quality systems.

Macro Environmental Analysis : PEST Analysis


PEST Analysis
Political Environment : Legislations / Govt. Rules /
Pollution Control & Environmental Laws / Taxes & Duties / Pricing Policies / Consumer Protection Laws / Impex Policies FDI / Patent Laws / Labour Laws / Subsidies, etc

Economic Environment : Interest & Exchange Rates /

Inflation / GDP / Per Capita Income / Demand-Supply Situation / Economic Trend (BC) , etc

Social Environment : Values & Beliefs / Life Styles /

Culture & Tradition / Religion & Language / Demographic Factors ( Age, Gender, Income, Education, etc )

Technological Environment : Quality of Materials &

Machinery / Innovations / Mktg Research / e- Commerce ,etc



Micro Environmental Analysis

Consumer Analysis Competitors Analysis Market Analysis Company Analysis


(SWOT Analysis)

SWOT Analysis
SWOT analysis is a tool for analysing a business - organization and its environment. It is the first stage of planning and helps marketers to focus on key issues. SWOT stands for Strengths, Weaknesses, Opportunities & Threats. Strengths & Weaknesses are Internal factors. Opportunities & Threats are External factors.

Strengths could be:

1. Your specialist marketing expertise. 2. A new, innovative product or service. 3. Location of your business. 4. Quality processes and procedures. 5. Any other aspect of your business that adds value to your product or service.

Weakness could be:

1. Lack of marketing expertise. 2. Undifferentiated products/services 3. Location of your business. 4. Poor quality goods or services. 5. Damaged reputation.

Opportunity could be:

1. A developing market such as the Internet. 2. Mergers, joint ventures or strategic alliances. 3. Moving into new market segments that offer better profits. 4. A new international market. 5. A market vacated by an ineffective competitor.

Threat could be:

1. A new competitor in your home market. 2. Price wars with competitors. 3. A competitor has a new, innovative product or service. 4. Competitors have superior access to channels of distribution. 5. Taxation is introduced on your product or service.

Simple Rules for successful SWOT Analysis :

1. Be realistic about the strengths and weaknesses of your organization when conducting SWOT analysis. 2. SWOT analysis should distinguish between where your organization is today, and where it could be in the future. 3. SWOT should always be specific. Avoid grey areas. 4. Always apply SWOT in relation to your competition i.e. better than or worse than your competition. 5. Keep your SWOT short and simple. Avoid complexity and over-analysis 6. SWOT is subjective.

Example : Wal-Mart SWOT Analysis.

Strengths : Wal-Mart is a powerful retail brand. It has a reputation for value for money, convenience and a wide range of products all in one store. Weaknesses : Wal-Mart is the World's largest grocery retailer and control of its empire, despite its IT advantages, could leave it weak in some areas due to the huge span of control. Opportunities : To take over, merge with, or form strategic alliances with other global retailers, focusing on specific markets such as Europe or the Asia Pacific Region. Threats : Being number one means that you are the target of competition, locally and globally. 79

Student Activity
Undertake SWOT Analysis of atleast two companies, each in : IT, Telecom, Retail, Automobile, Petroleum, Consumer Electronics, FMCG, Power, Steel, Infrastructure & Service Sectors.

What is e-Business?

is the continuous optimization of a firms business activities through digital technology. [Digital or
Information Technologies are things like computers & the Internet, that allow the storage & transmission of data in digital formats]

The booming growth of e-business, has

led to many solid successes today and exciting new growth areas will soon emerge.

Key Questions for Corporations:

How to use information technology profitably ? How to understand what technology means for their business strategies? How time-tested concepts by marketers can be enhanced by the Internet, databases, wireless mobile devices, and other technologies? Whats next after the rapid growth of the Internet and the dot-com bubble has marketers wondering ? How can we use technology to build new business models that add customer value and/or increase customer satisfaction ?

What is E-Marketing?
E-Marketing is the application of a broad range of information technologies for :

Transforming marketing strategies to create more customer value (more effective segmentation, targeting, differentiation and positioning strategies),
More efficiently planning & executing the conception, distribution, promotion and pricing of goods / services / ideas. Creating exchanges that satisfy individual consumer and organizational customers objectives.

E - Marketing Implications
Marketers who grasp what Internet technologies can do will be better poised to capitalize on information technology. Internet : creates opportunities beyond those possible with the telephone, television, postal mail, or other communication media. It leads to more effective & efficient implementation of the marketing strategies. Corporates & Customers can have easy, & quick access to information & can transact business in an inexpensive way. The market reach can be extended to the entire world.

E-marketing Implications..
E-marketing is the result of information technology applied to traditional marketing. Increases efficiency in traditional marketing functions. The technology of e-marketing transforms many marketing strategies. New trends such as Integrated & Collaboration Software, Web services, Data Security, Wireless Technologies, Portable-Computing, etc will help businesses move forward with e-marketing.

Modern Trends in Marketing

Green Marketing Cause Marketing Buzz Marketing Mobile Marketing Network Marketing E - mail Marketing CRM Event Marketing Niche Marketing Social Marketing Viral Marketing WOM Marketing Social Networking Media Online Search Ads Sports Marketing Grey Marketing

Modern Marketing Trends....

Increased use of digital media and a decrease in radio & print media. Increased use of internet & e-mail to reach out to prospects and customers more frequently at a very low cost. Increased use of quality, targeted content (textual / video) that tells a company's story & engages the prospective customer. Increased use of blogs, social networking, & other social media to create dialog and relationships with customers / prospects.

Modern Marketing Trends....

Increased use of analytics tools (e.g., Google Analytics) to spot ways to improve ROI. Increased focus on Search Engine Optimization (SEO) content targeting & other trackable paid marketing techniques such as pay-per-click and other. Increased use of online webinars & decreased use of large trade shows. Increased use of outsourced marketing functions, especially specialised functions such as Marketing Research & Advertising.

Types of E-Markets

is a marketplace in which sellers & buyers exchange goods & services for money using electronic medium such as computers & phones.

E-marketplace is an online market,

usually B2B, in which buyers and sellers exchange goods or services. The three types of e-marketplaces are : Private, Public & Consortia.

1. Private e-marketplaces: Online markets owned by a single company; can be either Sell-side or Buy-side market-places
Sell-side e-marketplace: A private e-market in which a company sells either standard or customized products to qualified companies Buy-side e-marketplace: A private e-market in which a company makes purchases from invited suppliers.

2. Public e-marketplaces: B2B markets, usually owned and/or managed by an independent third party, that include many sellers and many buyers; also known as exchanges

3. Consortia: E-marketplaces owned by a small group of large vendors, usually in a single industry

Types of Internet Advertising / Marketing

Banner Ads:

most popular, different sizes and

styles Pop-up ads: popular, another type is PopBehind or Pop-Under Ads : E-mail Marketing: powerful, economical, legal implications, spam. Affiliate marketing: commission-based, benefit of the selling sites brand in exchange for the referral.

Search Engine Positioning

Potential customers find web sites in many different ways :
Some site visitors will be referred by a friend, others by affiliates, some will see the sites URL in a print advertisement or on television Many site visitors will be directed to the site by a search engine, such as Google Search.

Student Activity

Write down the Definitions, with suitable examples, of all the terms listed-out under the : Modern Trends in Marketing


The Importance of Information

Companies need information about their : Customer Needs Competition Marketing Environment Managers need timely, accurate, relevant ( TAR ) & up-to-date information, for better decision-making. According to AMA, Marketing Information System (MkIS or MIS) is a set of procedures & methods for the regular, planned collection, analysis & presentation of information for use in marketing decisions. Information for use in MkIS is gathered from customers, competitors & from the market itself.

Philip Kotlers definition says, an MkIS 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 & procedures to gather, sort, analyse, evaluate and distribute pertinent, timely & accurate information for use by marketing-decision makers to improve their marketing planning, implementation & control".

MkIS helps Marketing Managers to :

1. Assess Information Needs, 2. Develop Needed Information, 3. Distribute Information.

Kotlers Model of MkIS

Target Markets, Marketing Channels, Suppliers, Competitors, Publics, Macroenvironment Forces

Marketing Managers

Marketing Information System

Analysis, Planning, Implementation, Control

Marketing Environment

Assessing Information Needs Distributing Information

Developing Information Internal Marketing Records Intelligence Decision Support Marketing Research

Marketing Decisions & Communications

The three main constituent parts of an MkIS in developing information are : 1. The Internal Reporting Systems 2. Marketing Intelligence System & 3. Marketing Research System
Information needed by Managers can be obtained from:
Internal Data
Computerized Collection of Information from Data Sources (i.e. Accounting) within the Company. Collection and Analysis of Publicly available Information about Competitors & the Marketing Environment Design, Collection, Analysis & Reporting of Data about a Specific Marketing Situation Facing the Organization.

Marketing Intelligence
Marketing Research

Marketing Info. System

Developing Information
Internal Data
Marketing Intelligence Marketing Research

Internal data is gathered via customer databases, financial records, and operations reports. Advantages of internal data include quick/easy access to information. Disadvantages stem from the incompleteness or inappropriateness of data to a particular situation.

Marketing Info. System

Developing Information
Internal Data

Marketing Intelligence
Marketing Research

Marketing Intelligence is the systematic collection and analysis of publicly available information about competitors and trends in the marketing environment. Competitive intelligence gathering activities have grown dramatically. Many sources of competitive information exist.

Sources of Competitive Intelligence

Company Employees Internet Published Information Other Sources
Competitors Employees Trade Shows Benchmarking Channel Members & Key Customers


Marketing Info. System

Developing Information
Internal Data

Marketing Intelligence

Marketing Research

Marketing Research is the systematic design, collection, analysis & reporting of data relevant to a specific marketing situation facing an organization. Marketing Research Process.

Definition of Research
RE-SEARCH means To Search Again. It is the systematic investigation & study of material and sources in order to establish new facts and reach new conclusions.
Research is defined as human activity based on intellectual application in the investigation of nature & matter. The primary purpose of research is discovering, interpreting & development of methods & systems for the advancement of human knowledge on a wide variety of matters of our world.

Types of Research :
1. Basic Research: (also called Fundamental

or Pure Research) is primarily concerned with the advancement of knowledge and the theoretical understanding of the relations among variables. It is often driven by the researchers curiosity, interest & intuition. 2. Applied Research: is research accessing and using some part of the research communities' accumulated theories, knowledge, methods, and techniques, for a specific or client driven purpose.

MARKETING RESEARCH Marketing Research is the systematic & objective identification, collection, analysis, dissemination & use of information for the purpose of improving decision making related to the identification & solution of problems & opportunities in Marketing.


Types of Marketing Research

( I ) Exploratory Research: to gather preliminary information that will help define problems and suggest hypotheses. ( uses Secondary Data & Focus
Groups )

( II ) Conclusive Research : ( a ) Descriptive Research : to describe things, such as the market potential for a product or the demographics & attitudes of consumers who buy the product.(Hypotheses Testing) ( b ) Experimental Research : (Causal Research) to establish the cause-and-effect relationships.

Qualitative Research & Quantitative Research Qualitative Research explores attitudes, behaviour & experiences through such methods as Interviews & Focus Groups with the idea of getting an in-depth opinion from participants. Quantitative Research involves analysis of numerical data. It involves the generation of statistics through the use of large-scale survey research, using methods such as questionnaires or structured interviews.

The Quantitative approach views human phenomena as being amenable to objective study i.e. able to be measured.

The Marketing Research Process

Defining of the Research Problem 2. Cost vs Value Analysis of the Information 3. Selecting the Research Design 4. Selection of the Data Collection Method 5. Selection of the Sample 6. Selection of the Method of Data Analysis 7. Estimate the Resources required 8. Data Collection / Analysis 9. Interpretation of Results / Conclusions 10. Report Writing / Presentation.

The 3 Rs of Marketing
In the process of Marketing Research, companies collect a lot of different types of information. David G. Bakken is of the opinion that it is easy to think of all these in terms of Three Rs of Marketing:

1. Recruiting New Customers. 2. Retaining Current Customers. 3. Regaining Lost Customers.

To Recruit New Customers, the researchers study different market segments to develop the right products & services consumers need & want. To Retain Existing Customers, the marketer may conduct customer satisfaction studies. Marketers realise that good relationship with customers is important for long-term positive sales results. Regaining Lost Customers can be a formidable problem. It needs innovative marketing & outstanding communications.

Many companies face the dilemma of deciding for or against Marketing Research Firms. That is why it is advisable for you to know the needs of your concern well before making any decisions; as Market Research is a highly important for a good marketing strategy.
In-house Market Research divisions can only yield results when people with thorough knowledge of research techniques are employed. Major business houses, usually have a vast inhouse Marketing Research Division.

Outsourcing makes good business sense, especially when the firm lacks expertise or time in a particular area of business. Many companies prefer to off-load Advertising & Marketing Research to specialized companies, who have the expertise & experience to do a much more effective & efficient job. Market Research Companies are concerns, which help their clients scan & understand their consumers thus helping them to successfully promote and sell their product. Companies that fulfill market research needs, specialize in data analysis i.e. their employees are specifically trained for gathering and analyzing information.

Student Activity
List out the top ten Indian & top ten Global :
1. Market Research Companies.

2. Advertising Companies


What is Strategy ?
The word Strategy has been derived from the Greek word stratgos, which derives from two words: Stratos (Army) & Ago (ancient Greek for Leading). i.e. Stratgos referred to a 'Military Commander' during the age of Athenia Democracy.

Strategy is a set of key or crucial decisions taken or a grand design or a comprehensive master-plan or a specific course of action which a person or an organisation chooses to achieve the primary or long term goals & objectives.

Simply put by Edward de Bono :

Strategy means putting things in place carefully, and with a great deal of thought. It is the opposite of just waiting for things to happen. In a changing environment one of the most difficult things in business is to know when to stick to your strategy and when to change it.

Basic Definitions:
Plan : is a future course of action where in we select
our goals & determine the means to achieve it.

Policy : is an understanding by a group of people that makes action of each member more predictable to the other members. It is essentially a guide for taking action. Procedure : is a system that describes in detail the specific steps to be taken in order to accomplish a job. Principle : is a universal & enduring statement which remains true in all circumstances & is always followed.

Strategic Management : is a process of

designing & implementing an effective set of strategies with an overall approach to deal with both internal & external agencies by taking appropriate decisions & actions in order to achieve pre-determined goals & objectives. It was Igor Ansoff (popularly known as the Father of Strategic Management), who pioneered the concept of Strategy during 1950s & 60s. Later, Henry Mintzberg, Michael Porter & Peter Drucker enriched the concept with their original contributions to the field of Strategic Management.

Henry Mintzbergs 5Ps of Strategy



5 Ps




Henry Mintzberg, in his book, The

Rise & Fall of Strategic Planning in
1994, points out that "Strategy" is used in

several different ways, the most common being :

1. Strategy is a PLAN, a "how," a means of getting from here to there. 2. Strategy is a PATTERN in actions over time; for example, a company that regularly markets very expensive products is using a "high end" strategy. 3. Strategy is POSITION; that is, it reflects decisions to offer particular products or services in particular markets. 4. Strategy is PERSPECTIVE, that is, vision and direction. 5. Strategy is a PLOY, i.e. It is a specific manoeuvre intended to outwit an opponent or competitor.

Student Activity
( I ) Write down the history & ------- contributions of : 1. Igor Ansoff 2. Henry Mintzberg, 3. Michael Porter & 4. Peter Drucker ( II ) Read at least one book, each, written by these eminent Management Gurus.

Corporate Planning : includes all

functional aspects of management such as setting up of objectives, decision making, organizing work, resources / people / systems/, budgeting, directing, motivating & controlling in a economical way so as to achieve the organisational goals & objectives. It can be classified into :

Strategic Planning & Operational Planning


Definition : Strategic Planning is the process of identifying an organization's long-term goals & objectives and then determining the best approach for achieving those goals and objectives.

The Objective of Strategic Planning is :

To guide the company successfully through all changes in the environment. To create competitive advantage, so that the company can outperform the competitors in order to have dominance over the market.

Need for Strategic Planning :

1. It encourages management to think ahead . 2. It forces managers to clarify objectives & -------- policies. 3. It leads to better coordination of company -- efforts. 4. It provides clearer performance standards for - control. 5. It is useful for a fast-changing environment ---- since strategic planning helps the company --- anticipate & respond quickly to changes & -- sudden developments in the environment.

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Characteristics of Strategic Decisions :

Strategic issues require top management decision. Strategic issues involve the allocation of large amount of company resources. Strategic issues are likely to have a significant impact on the long term prosperity of the firm. Strategic issues are future oriented Strategic issues usually have major multi functional or multi-business consequences. Strategic issues necessitate considering factors in the firm's external environment.

Components of Strategic Management or Steps in Strategic Planning : 1. Company Vision & Mission 2. Situational Analysis (Envrmtal. Scanning) 3. Long Term & Short Term Objectives 4. Corporate Strategy (Grand Design) 5. Designing the Business Portfolio 5. Functional or Operational Strategies 6. Implementation (Organising) 7. Evaluation (Measuring Results) 8. Control (Taking Corrective Action)

Mission and Vision Statements are written mainly for the customers and the employees of companies or corporations. Mission Statements are sentences or short paragraphs written by companies, corporations or businesses which reflects their core purpose, identity, values and principle business aims.

The Vision Statement is a sentence or a short paragraph providing a broad and inspirational image of the future.

A Vision articulates the position that an organization would like to attain in the distant future. Vision therefore is future aspirations that lead to an inspiration to be the best in ones field of activity. The Companys Vision is should provide a description of what the organization is trying to do & to become. It gives a view of the organizations future direction & course of business activity.

Why should organizations have a Vision


visions are inspiring & exhilarating. It creates a common identity and a shared sense of purpose. They are competitive, unique and simple. Good visions foster risk-taking and experimentation. They represent integrity.

COMPANY MISSION : is a statement of the organization's purpose. Mission is what an organization is and why it exists. It should be realistic, specific & motivating.
Mission should define the essential purpose of the organization, concerning philosophical questions like What is our business, the nature of business it is in, who are our customers it looks to satisfy.

The Mission of a company should identify the scope of the companys operations, describe the companys products, markets, technological areas of thrust & should reflect the values & priorities of its strategic decision makers. It should also set apart a company 131 from its competitors.

Mission Statements

should be feasible: Though mission should aim high, it should be realistic & achievable. It should be precise: It should not be very narrow nor should it be too broad. It should be clear enough to lead to action. It should be motivating: It should motivate employees to achieve its mission. It should be unique and distinctive: unique because an organization should be seen by market and customers as different. It should indicate the strategic direction for the organization.

General Motors Mission Statement : "G.M. is a multinational corporation engaged in socially responsible operations, worldwide. It is dedicated to provide products and services of such quality that our customers will receive superior value while our employees and business partners will share in our success and our stock-holders will receive a sustained superior return on their investment." General Motors Vision Statement : "Over the past 100 years, GM has been a leader in the global automotive industry. And the next 100 years will be no different. GM is committed to leading the industry in alternative fuel propulsion."

Ford Motor Mission Statement: "We are a global family with a proud heritage passionately committed to providing personal mobility for people around the world. Wal-Mart Stores Mission Statement: "Wal-Marts mission is to help people save money so they can live better.

INFOSYS : Vision : "To be a globally respected corporation that provides best-of-breed business solutions, leveraging technology, delivered by best-in-class people. Mission : "To achieve our objectives in an environment of fairness, honesty, and courtesy towards our clients, employees, vendors and society at large." 134

Student Activity
Write down the Vision & Mission statements of atleast ten Indian Companies & ten Global Companies.

Setting-up of Goals & Objectives

The second step in the Strategic Planning process requires the manager to set company goals & objectives and be responsible for achieving them. The mission leads to a hierarchy of objectives including business & marketing objectives. Objectives should be as specific as possible. Objectives are an organisation's performance targets - the results and outcomes it wants to achieve.

The Goals & Objectives function as yardsticks for tracking an organisation's performance and progress. Strategic objectives relate to outcomes that strengthen an organisation's overall business position and competitive vitality. Objectives are open-ended attributes that denote the future state or outcomes, whereas Goals are close-ended attributes, which are precise & expressed in specific terms.

Role of Objectives :
Objectives define the organisation's

relationship with its environment. Objectives help an organisation pursue its mission and purpose. Objectives provide the basis for strategic decision making. Objectives provide the standards for performance appraisal.

Characteristics of Objectives
1. Objectives should be understandable 2. Objectives should be concrete and specific 3. Objectives should be related to a time frame 4. Objectives should be measurable and ------- controllable 5. Objectives should be challenging 6. Different objectives should correlate with ----- each other 7. Objectives should be set within constraints

Strategic Management Model

Perform external analysis to identify key opportunities & threats Functional-Level Strategy Identify current mission, objectives, and strategies SWOT, Strategic choice Business-Level Strategy Global Strategy Corporate-Level Strategy Perform internal analysis to identify key strengths & weaknesses Match strategy, structure, and controls Manage strategic change Design organization structure

Design control systems

Levels at which Strategy operates

For many companies, a single strategy is not enough. There is a need for multiple strategies at different levels. Many companies are organized on the basis of operating divisions. These divisions are known as Strategic Business Units (SBU) or Profit Centers.

Levels of Strategy Planning :

2. 3.

Corporate Level Long Term Business Level Medium Term

Functional Level Medium & Short Term 4. Operational Level Short Term

Strategy at Different Levels

Corporate Office

SBU A Finance


SBU C Personnel



Corporate & SBU Level Strategies.

CLS is a master-plan of action, covering the various functions performed by different SBUs. The Corporate Level Strategies deal with the objectives of the company, allocation of resources and coordination of the S B Us for optimal performance. SBU Level Strategies is a comprehensive plan providing objectives for SBUs, allocation of resources among functional areas, and coordination between them for making an optimal contribution to the achievement of corporate level objectives.

Functional & Operational Strategies

Functional Level Strategies deal with a relatively restricted plan providing objectives for a specific function, allocation of resources among different operations within that functional area, and coordination between them for optimal contribution to the achievement of SBU and corporate level objectives. Operational Strategies are also needed to be set at lower levels, one step below the functional level. Eg : A Functional Strategy such as
in Marketing could be sub divided into Operational Strategies such as Sales, Distribution, Pricing, Product & Advertising Strategies.

Strategic Decision Making

Successful business strategies result not from rigorous analysis but from a particular state of mind. The people at the Helm of Affairs or Top Management, such as Chairman, CEO, MD, BoD, Entrepreneurs, Management Consultants, etc are involved in the Strategic Decision making process, implementation & control. Strategists do not reject analysis, but they use it only to stimulate the creative process, to test the ideas that emerge, to work out their strategic implications, or to ensure successful execution of high potential wild ides that might otherwise never be implemented Read The Mind of The Strategist by Kenichi Ohmae

Grand Strategies
1. Survival Strategy or ----Stability Strategy 2. Expansion Strategy or --Growth Strategy. 3. Retrenchment Strategy. 4. Combination Strategy.

Stability Strategy
Is adopted by on organization when it attempts at an incremental improvement of its functional performance by marginally changing one or more of its business. Eg: A copier machine company provides better after sales service to improve its image and product image too.

Expansion or Growth Strategy

This strategy is followed when a company aims at high growth by increasing the scope of one or more of its businesses in terms of their respective customer groups, functions and technology.

Retrenchment Strategy
This is followed when a company aims at contraction of its activities through substantial reduction or elimination of its business. E.g. A pharmaceutical company may withdraw from its retail operations so that it can focus on institutional sales.

Combination Strategy
This is followed when a company adopts a mixture of all the strategies either at the same time in its different businesses, or at different times in the same business with the aim of improving its performance.

Marketing Strategy
Demographic Economic Environment Marketing Channels Technological Natural Environment

Product Suppliers Place Target Consumers Promotion Price Publics

Political Legal Environment


Social Cultural Environment

Marketing Strategies for Competitive Advantage

Market Leader Market Challenger


Market Nicher

Market Follower

Depending upon their market shares in a particular market, companies can be classified as : 1. Leaders 2. Challengers & 3. Followers 4. Nichers
The Challenger companies have to attack the Leader, other comparable firms & smaller firms in their bid to gain market share. Attack has a greater probability of success when there is customer dissatisfaction with the current leader.

Market Structure
Depending upon their market shares in a market, companies can be classified as :
Market Leader : the firm with the largest market

Market Challenger : a runner-up firm that is

fighting hard for an increased market share.

Market Follower : another runner-up firm that is

willing to maintain its market share and not rock the boat.

Market Nicher : firms that serve small market

segments not being served by larger firms.

Strategic Analysis
1. Company Level :
i. SWOT ( Strength, Weakness, Opportunities & Threats ) ii. ETOP ( Environmental Threat & Opportunities Profile ) iii. PIMS ( Profit Impact of Marketing Strategies ) iv. VA ( Vulnerability Analysis )

2. Corporate Level : ( Portfolio Analysis )

i. BCG Growth - Share Matrix
ii. GE

Nine Cell Planning Grid ( GE Spot Light Grid ) iii. ADL Life Cycle Approach iv. Ansoff Product - Market Matrix.

The Ansoff Product - Market Growth Matrix is a marketing tool created by Igor Ansoff and first published in his article "Strategies for Diversification" in the Harvard Business Review (1957). The matrix allows marketers to consider ways to grow the business via existing and/or new products, in existing and/or new markets there are four possible product/market combinations. This matrix helps companies decide what course of action should be taken given current performance. The matrix consists of four strategies :

1. 2. 3. 4.

Market Penetration (existing markets, existing products) Product Development (existing markets, new products) Market Development (new markets, existing products) Diversification (new markets, new products).

Ansoffs Product - Market Growth Matrix


1. Market Penetration: This involves increasing sales of an existing product & penetrating the market further by either promoting the product heavily or reducing prices to increase sales. 2. Product Development: The organisation develops new products to aim within their existing market, in the hope that they will gain more custom & market share. Eg : Sony launching the Play-Station2 to replace their existing model.
3. Market Development: The organisation here adopts a strategy of selling existing products to new markets. This can be done either by a better understanding of segmentation, i.e who else can possibly purchase the product or selling the product to new markets, overseas. 4. Diversification: Moving away from what you are selling (your core activities) to providing something new. Eg : Moving over from selling foods to selling cars.

Business Portfolio & PA

A Business Portfolio is the collection of businesses &/or products that make up the company. Four basic questions to be answered:
Which SBUs need to be Built ? Which SBU to be Maintained ? Which SBU to be Harvested ? Which SBU to be Divested ?

Tools for Portfolio Analysis

Most Portfolio Analyses evaluate the SBUs of a firm on two important dimensions: the Attractiveness of the SBUs market & the Strength of the SBUs position in the market. The best known Portfolio-planning & analysis methods / tools are : BCG Matrix & GE Nine Cell Grid.

The BCG Matrix ( Boston Consulting Group ) is a
matrix / model that was created by Bruce Henderson for the Boston Consulting Group in 1970 to assist Corporations with analyzing their Strategic Business Units or Product Lines. This helps the company allocate resources and is used as an analytical tool in brand marketing, product management, strategic management, and portfolio analysis. Companies that are large enough to be organized into strategic business units face the challenge of allocating resources among those units.



Resources are allocated to business units according to where they are situated on the grid as follows:
1. Cash Cow - a business unit that has a large market share in a mature, slow growing industry. Cash cows require little investment and generate cash that can be used to invest in other business units. 2. Star - a business unit that has a large market share in a fast growing industry. Stars may generate cash, but because the market is growing rapidly they require investment to maintain their lead. If successful, a star will become a cash cow when its industry matures. 3. Question Mark (or Problem Child) - a business unit that has a small market share in a high growth market. These business units require resources to grow market share, but whether they will succeed and become stars is unknown. 4. Dog - a business unit that has a small market share in a mature industry. A dog may not require substantial cash, but it ties up capital that could better be deployed elsewhere. Unless a dog has some other strategic purpose, it should be liquidated if there is little prospect for it to gain market share.

Four strategies suggested by the BCG Matrix : Build, Hold, Harvest or Divest BUILD : Invest more in the business unit in order to build (increase) its share. HOLD : Invest just enough to hold (keep) the SBUs share at the current level [ i.e. Preserve
SBUs market share ]

HARVEST : The Company can harvest the SBU, milking its short-term cash flow regardless of the long-term effect . DIVEST : ( Sell or Liquidate ) Get rid of the SBU by selling it or phasing it out and using the resources elsewhere.

Porter's Generic Competitive Strategies

( Ways of Competing )
A firm's relative position within its industry determines whether a firm's profitability is above or below the industry average.
Michael Porter developed three generic strategies that can be used to create a defendable position & to outperform competitors, whether they are within an industry or across nations. These strategies are generic because they are applicable to a large

variety of situations and contexts. The strategies are :

(1) Overall Cost Leadership, (2) Differentiation, & (3) Focus [ on a particular Market Niche ]


Porter's Generic Competitive Strategies


1. Cost Leadership : The low cost leader in any market gains competitive advantage from being able to many to produce at the lowest cost. Factories are built & maintained, labor is recruited and trained to deliver the lowest possible costs of production. Cost Advantage' is the focus. Costs of every element of the value chain are reduced. Products tend to be 'no frills.' However, low cost does not always lead to low price. Producers could price at competitive parity, exploiting the benefits of a bigger margin than competitors.
Eg : Toyota is very good not only at producing high quality autos at a low price but have the brand & marketing skills to use a premium pricing policy. 167

2. Differentiation : Differentiating the product or service, requires a firm to create something about its product or service that is perceived as unique throughout the industry. Customers must perceive the product as having desirable features not commonly found in competing products. The customers also must be relatively price-insensitive. Adding product features means that the production or distribution costs of a differentiated product may be somewhat higher than the price of a generic, non-differentiated product.

Differentiation may be attained through many features that make the product or service appear unique. Possible strategies for achieving differentiation may include: Warranties ( Khaitan Fans, Whirlpool ) Brand image ( Nike Shoes ) Technology (Hewlett-Packard Printers, I Pods) Features ( Nokia Mobile Hand sets ) Quality / Value ( Sony ) Service / Dealer Network ( Maruti Cars )

Differentiation makes a firm's products less susceptible to cost pressures from competitors because customers see the product as unique and are willing to pay extra to have the product with the desirable features. Differentiation may lead to customer brand loyalty and result in reduced price elasticity. Differentiation may also lead to higher profit margins and reduce the need to be a low-cost producer.


A Niche Market refers to that small segment of the overall market base, which if targeted in a focused manner, results in higher yields rather than focusing on all the market segments. It is such focused and targetable group of potential customers, which if targeted, will result in higher yield due to its unique value proposition (UVP).
Features Of Niche Marketing: a) The customers in the niche have a distinct set of needs b) They will pay a premium to the firm that best satisfies their needs. c) The niche is not likely to attract other competitors d) The niche gains certain economies through specialization. e) The niche has size, profit and growth potential.

3. Focus Strategy :
Segmentation Strategy)

(also called Niche Strategy or

involves concentrating on a particular customer, product line, geographical area, channel of distribution or a market niche. The underlying premise of the Focus Strategy, is that a firm is better able to serve a limited segment more efficiently than competitors can serve a broader range of customers. Focus strategies are most effective when customers have distinctive preferences or specialized needs.

A Focus Strategy is often appropriate for small, aggressive businesses that do not have the ability or resources to engage in a nationwide marketing effort. Such a strategy may also be appropriate if the target market is too small to support a large-scale operation. Many firms start small and expand into a national-organization.
A firm following the Focus Strategy concentrates on meeting the specialized needs of its customers. Products and services can be designed to meet the needs of buyers. Firms utilizing a focus strategy may also be better able to tailor advertising and promotional efforts to a particular market niche.

Unit - II

Buyer Behaviour, Market Segmentation & Targeting, Positioning & Differentiation Strategies Life Cycle strategies, New Product Development, Product Mix & Product Line Decisions, Branding & Packaging. Setting: Objectives, Factors & Methods, Price Adapting Policies, Initiating & responding to Price changes.




A Customer is any person or group or organization who buy or purchase products /services, but a Consumer" is the one who consumes the products or services.

Definition : Consumer is an individual (or a group) who buys products or services for personal use (or house-hold use) and not for manufacture or resale.

Behavior or Behaviour refers to the actions of a system or organisms or people, usually in relation to its environment. i.e. Behaviour is the response of the system or people to various stimuli or inputs, whether
internal or external, conscious or subconscious, overt or covert & voluntary or involuntary. Generally, human-beings have a greater capacity to learn new responses and thus adjust their behavior.

Human Behavior (and that of other organisms & mechanisms) can be common, unusual, acceptable or unacceptable. Humans evaluate the acceptability of behavior using social norms and regulate behavior by means of social control. Buyers or Consumers, at any given time, are generally influenced by a set of motives, which may vary at different times & occasions.

Consumer Behaviour is the acts of 'individuals' which are directly involved in making decisions to spend their available resources (time, money, energy) in obtaining and using goods / services.

Definition of Consumer Behaviour

Consumer Behaviour is the study of individuals / groups / organizations & the processes they use to select, secure, use & dispose products (goods, services, experiences or ideas) to satisfy needs and the impacts that these processes have on the consumer & society.

Consumer Behaviour deals with the study of

various aspects of purchase & consumption & disposal of products / services by individuals, families & organisations, keeping the personal social, environmental, psychological & factors in mind. The study of Consumer Behaviour is an inter-disciplinary approach. i.e. It uses concepts from a variety of fields such as Anthropology, Sociology, Psychology, Economics & Marketing.

Marketers need to study the potential / existing customers needs, perceptions, attitudes, preferences, buying behaviour & buying patterns in order to develop their marketing plans. Studying Consumer Behaviour is absolutely essential in: a) Market Analysis b) Market Segmentation c) Product Positioning d) Developing Marketing Strategies e) Designing the Marketing Mix & f) Social Marketing.

Consumer Buying Role

User Influencer

Buying Decision




Different Roles played by Buyers/Consumers:

Consumers often play different roles in the purchase process, such as : 1. Initiator: the person who first suggests or thinks
of the idea of buying a particular product or service. 2. Influencer: a person whose views or advice ---carry weight in making the final buying decision. 3. Decider: the person who ultimately makes the --- final buying decision or any part of it. 4. Buyer: the person who makes the actual purchase. 5. User: the person who consumes the product or service.

Consumer Buying & Decision-Making Process

Need Recognition
Information Search
Cultural, Social, Individual and Psychological Factors affect all these steps

Evaluation of Alternatives Purchase Post-Purchase Behavior

The Buyer Decision Process

Step 1. Need Recognition
Need Recognition
Difference between an actual state and a desired state

Internal Stimuli Hunger

A persons normal needs

External Stimuli
TV advertising

Magazine ad
Radio slogan

Stimuli in the environment

The Buyer Decision Process Step 2. Information Search

Personal Sources Commercial Sources Public Sources Experiential Sources
Family, friends, neighbors Most influential source of information Advertising, salespeople Receives most information from these sources Mass Media Consumer-rating groups Handling the product Examining the product Using the product

The Buyer Decision Process

Step 3. Evaluation of Alternatives
Product Attributes
Evaluation of Quality, Price, & Features

Degree of Importance
Which attributes matter most to me?

Brand Beliefs
What do I believe about each available brand? Based on what Im looking for, how satisfied would I be with each product?

Total Product Satisfaction

Evaluation Procedures
Choosing a product (and brand) based on one or more attributes.

The Buyer Decision Process Step 4. Purchase Decision

Purchase Intention Desire to buy the most preferred brand

Attitudes of others

Unexpected situational factors

Purchase Decision

Types of Consumer Decisions

Based on the level of involvement, Consumers may exhibit three types of problem-solving behavior : 1. Extensive Problem Solving occurs when buyers purchase more expensive, less frequently purchased products in an unfamiliar product category requiring information search & evaluation. 2. Limited Problem Solving occurs when buyers are confronted with an unfamiliar brand in a familiar product category. 3. Routinised Response Behavior occurs when buyers purchase low cost, low risk, brand loyal, frequently purchased or items with which they are familiar.


The Buyer Decision Process

Step 5. Post-Purchase Behavior
Consumers Expectations of Products Performance Products Perceived Performance

Satisfied Customer !

Dissatisfied Customer

Cognitive Dissonance

Post-Purchase Dissonance
Post-purchase Dissonance : is a consumer reaction after making a difficult decision that involves doubt and anxiety.
Probability of experiencing dissonance increases based on: Degree of commitment or irrevocability Importance of the decision Difficulty in choosing Individuals tendency to experience anxiety

Model of Consumer Buying Behavior

Marketing Stimuli
Product Price Place Promotion

Other Stimuli
Economic Technological Political Cultural

Buyers Characteristics
Cultural Social Personal Psychological

Buyers Decisions
Product Choice Brand Choice Dealer Choice Purchase Timing Purchase Amount

Buyers Decision Process

Problem Recognition Information Search Evaluation Decision Post-Purchase Behavior

Consumer purchases are highly influenced by two factors.

Psychological Personal

Cultural Social

Factors Influencing Buying Decisions

Cultural Factors Personal Factors
Cultural Culture Subculture Social Class

Social Factors Psychological Factors

Reference Groups.


Age & Life cycle stage

Psychological Motivation Perception Learning


Economic sit. Lifestyle Personality & Self Concept

Role and Status

Beliefs & Attitudes

Cultural Factors Affecting Consumer Behavior:

Most basic cause of a person's wants & behavior.

1. Values 2. Perceptions
Groups of people with shared value systems based on common life experiences. Hispanic Consumers African American Consumers

Social Class
People within a social class tend to exhibit similar buying behavior.


Asian American Consumers

Mature Consumers


Social Influences
Behavior is learned so the traditions, values, attitudes of society all influence it Has a major influence on consumers behavior Formal or Informal Groups to which we belong or would like to be associated with. Key group in terms of attitudes, beliefs & learned behavior
Personal characteristics such as age, occupation, family lifestyle, etc

Social Class Reference Groups

Family Personal Influences

1. CULTURE : The sum total of learned beliefs, values, and

customs that serve to regulate the behavior of members of a particular society. Culture offers order, direction & guidance in all phases of human problem solving.

2. SOCIAL CLASS : Relatively permanent & ordered

divisions in a society whose members share similar values, interests and behavior. It is the division of members of a society into a hierarchy of distinct status classes, generally based on wealth, power & prestige. Egs : Working Class, Middle Class, Upper Class, Rich Class, etc

3. REFERENCE GROUP : Any person or Group (actual or

imaginary) that serves as a point of comparison for an individual in the formation of either general or specific values, attitudes, or behavior. These are people whom consumers tend to look to for influence or advice. The more important a Group is in our lives, the greater our desire to accept & conform to its norms.

Psychological Factors Affecting Consumer Behavior:


Beliefs and Attitudes

Psychological Factors



1. Motivation : Human drive to attain a goal

Drive : Energy that impels us to act Goal Object : Something we seek, with the assumption that it will bring us comfort / value.

2. Learning : A process by which individuals

acquire the purchase-and- consumption knowledge & experience that they apply to future related behavior.

3. Perception : The process by which people

become aware of & interpret a stimulus.

4. Attitude : A learned predisposition to respond to

an object in a consistently favorable/unfavorable way. 199

Personal Factors Affecting Consumer Behavior

Personal Influences
Age and Family Life Cycle Stage Economic Situation Occupation

Personality & Self-Concept

Lifestyle Identification
Activities Opinions


Personality is a particular combination of emotional, attitudinal & behavioral response patterns of an individual. It is the inner psychological characteristics (psyche or mental make-up) that both determine & reflect how a person responds to his or her environment.
Thus Personality depends upon unique psychological traits such as: Sociability, Self confidence, Dominance, Autonomy, Adaptability, Defensiveness, etc

Activities, Interests & Opinions (AIO)

are characteristics of an individual used by researchers to create a psychographic profile of the individual.
When combined with quantifiable characteristics such as age, income, or education level, an AIO Profile provides great insight into an individual's likes & dislikes as a consumer. Product-specific AIOs, may be used in new product development or copyrighting to predict consumer response.

Theories of Personality

Freudian Theory : Unconscious needs or drives are at the heart of human motivation Neo-Freudian Personality Theory : Social relationships are fundamental to the formation and development of personality Trait Theory : Quantitative approach to personality as a set of psychological traits

Family Stages in Consumers Life Cycle


Some of the important Theories of Motivation are:

1. Maslows Hierarchy of Needs. 2. Herzberg's Two Factors Theory Of Motivation 3. Mc Clellands Trio of Needs Theory.

4. McGregor's Theory X and Theory Y

5. Victor Vrooms Expectancy Theory, etc

Maslows Hierarchy of Needs


Maslows Hierarchy of Needs : The most basic or pre-potent needs are shown at the bottom of the pyramid, with prepotency decreasing as one progresses upwards.
5. SELF - ACTUALISATION : reaching your maximum potential, doing your own best thing, realising your inner-most self, 4. ESTEEM : respect from others, self-respect, recognition

3. BELONGING ( Social Needs ) : affiliation, acceptance, love, friendship, being part of something
2. SAFETY & SECURITY : physical safety, psychological security 1. PHYSIOLOGICAL : ( Biological Needs ) hunger, thirst, sleep, sex

Abraham Maslow's Theory of Hierarchy of Needs is one of the most widely discussed theories of motivation. The theory can be summarized as follows: 1. Human beings have wants and desires which influence their behavior. Only unsatisfied needs influence behavior, satisfied needs do not. 2. Since needs are many, they are arranged in order of importance, from the basic to the complex. 3. The person advances to the next level of needs only after the lower level need is satisfied. 4. The further the progress up the hierarchy, the more individuality, humane & psychological health a person 208 will demonstrate.

Frederick Herzbergs Two - Factor Theory of ( Intrinsic / Extrinsic ) motivation, concludes that certain factors in the workplace result in job satisfaction, but if absent, lead to dissatisfaction.
The factors that motivate people can change over their lifetime, but "respect for me as a person" is one of the top motivating factors at any stage of life. He distinguished between: Motivators (egs: challenging work, recognition, responsibility, status) which give positive satisfaction & Hygiene factors; (egs: job security, salary, fringe benefits, etc) that do not motivate if present, but, if absent, result in demotivation.
The name Hygiene Factors is used because, the presence will not make you 209 healthier, but absence can cause health deterioration.

3. McClellands Theory of Needs : David McClelland

developed a theory on three types of motivating needs : [ Trio of Needs ]

i. Need for Power :

McClelland noticed that many of those who reach the top of organisations and are rated as highly effective in their positions, demonstrate a concern for influencing people. Power motivation refers to a need to have some impact, to be influential and effective in achieving organisational goals. The individual with a high need for affiliation will reflect sensitivity to the feelings of others, a desire for friendly relationships & a reference to situations which involve human interactions. The need for affiliation is similar to Maslow's need for Belonging or Social need. achievement, have a number of distinctive characteristics which separate them from their peers. First of all, they like situations where they can take personal responsibility for finding solutions to problems. This allows them to gain personal satisfaction from their achievements. They do not like situations where success or failure results from chance. The important thing is that the outcome be the result of their own skill and effort.

ii. Need for Affiliation :

iii. Need for Achievement : Individuals with a high need for


Segmentation, Targeting & Positioning


Market Segmentation

Market Segmentation is the process by which a Market is divided into distinct buyer groups. Market Segmentation is defined as the process of defining & sub-dividing a large heterogeneous market into clearly identifiable segments having similar needs / wants or demand characteristics. Its objective is to design a marketing mix that precisely matches the expectations of customers in the targeted segment.

Once the market is segmented the company has to select those segments that they find profitable to cater to & these selected segments constitute the 213 Target Market.


By segmenting the market, the marketer is attempting to break the market into more strategically manageable parts, which can then be targeted and satisfied far more precisely by developing product and marketing program tailored to each segment.

Factors considered for Market Segmentation :

1. Needs / Benefits sought 2. Importance attached to Attributes/Feature 3. Usage Rate

4. Brand Loyalty
5. Purchase Influencers

6. Product Adoption Stage

7. Geographic Location

8. Channel Type
9. Life Style / Status / Personality.

Requirements for Effective Segmentation


Requirements for Effective Segmentation 1. Accessibility : The firm should be able to reach
out to the market segments through various distribution & promotion channels economically. 2. Measurability : The variables used for market segmentation should be easily understandable & assessable. 3. Substantiability : The ROI from the selected segments should be attractive & profitable. 4. Actionability : The chosen segments should exhibit variations in their market behaviour & respond differently to marketing mixes that are designed on an individual basis. 217

Benefits of Market Segmentation

1. 2. 3. 4. 5. 6. 7. Understand potential customers Pay proper attention to particular areas Formulate effective marketing programs Select channels of distribution Understand competition Use marketing resources efficiently Efficient & Customized design of the marketing mix : i.e Product , Price, Promotion & Place


The first step in Segmentation of customers, in a heterogeneous market is to select a set of variables or characteristics (called Segmentation Bases) to assign potential-customers to homogeneous groups. These variables should be related to some aspect of potential customers needs or wants and should reflect differences between customers.

Bases for Segmentation

A Segmentation Variable is a characteristic of individuals, groups or organisations that marketers use to divide and create segments of the total market.

Segmentation Descriptors fall under four major categories : Geographic, Demographic, Psychographic & Behaviouristic Variables.
Geographic : focus on where the customers are located. Demographic : identify who the target customers are. Psychographic : refer to lifestyle & values. Behaviouristic : identify benefits customers seek & product usage rates.

Types of Market Segmentation


Types of Market Segmentation


Demographic Segmentation
Demographic Segmentation consists of dividing the market into groups based on measurable population characteristics such as age, gender family size, income, occupation, education, religion, race, nationality, etc. It considers a number of potential influences on buying behaviour, including attitudes, activities & expectations of consumers. If these are known, then products and marketing campaigns can be customized so that they appeal more specifically to customer motivations.

Demographic variables are the most popular bases for distinguishing customer groups. One reason is that consumer wants, preferences and usage rates are often associated with demographic variables. Another is that demographic variables are easier to measure. Consumer wants and abilities change with age. Persons in the same part of the life cycle may differ in their life stage.



Men & Women tend to have different attitudinal and behavioral orientations, based partly on their genetic makeup & partly on socialization practices.


is a popular demographic variable for segmenting customers because income level influences consumers wants and determines their buying power.


& Education have also very


important bearing on consumers purchasing behaviour.


Demographic approach assumes that customers differ according to some criteria about themselves. information on its own doesn't define the consumer needs, it doesn't define the product or service required, or the promotional stance to take.



role demographic plays is to help you identify for each segment a profile of the typical customer to be found in each segment. This in turn will help you understand how to reach each segment.


Geographic Segmentation
Geographic Segmentation tries to divide markets into different geographical units, such as :
Zones, Regions, States, Districts, City / Town / Village, etc Population: Urban, Suburban, Rural, Semi-Rural Climate: Coastal / Inland / Rainy, etc

Most MNCs & other large companies have different regional and national marketing programmes and need to alter their products, advertising & promotion to meet the individual needs of different geographic units.



The Geographic approach assumes that customers found within a particular geographic zone would have common preferences and therefore, can be targeted with the same offer. Like climate has strong impact on residents needs and purchasing behaviour such as their clothing, airconditioning and heating system, foods, sports and entertainments.


While there could be some common preferences of people residing in same geographic area, it does not mean that everyone down a particular street buys the same items. Everyone in the northern regions of our country (as individual consumers or as businesses) does not have the same buying criteria, or responds to only one type of message.


This approach on its own doesn't define the consumer needs, it doesn't define the product or service required, or the promotional stance to take. It can, however, play a role in segmentation by providing further help in identifying how to reach the customers found in particular segments.

Psychographic Segmentation :divides

the market into Customers Groups according to

Lifestyles, Personalities & Values. It considers a number of potential influences on buying behaviour, including attitudes, expectations & activities of consumers. If these are known, then products & marketing campaigns can be customized so that they appeal more specifically to customer motivations.
Eg: Recent examples include the growth of demand for organic foods
or products that are ( perceived to be) environmentally friendly.231


People within the same demographic group can exhibit very different psychographic profiles. Although this approach on its own does not define the product or service required, by identifying the internal drivers of decision makers it can help define the most appropriate promotional stance to take for different segments. The opinions that consumers hold & the activities they engage in will have a huge impact on the products they buy & marketers need to be aware of any changes.

Psychographic Factors for Segmentation

1. Lifestyle : Culture, Sports,

Outdoor, Page 3, etc

2. Personality : Introvert,
Extrovert, Compulsive, Ambitious, Authoritarian, etc

Behaviouristic Segmentation
Dividing the market on the basis of such variables as use occasion, benefits sought, user status, usage - rate, loyalty status, buyer readiness stage & attitude is termed as Behaviouristic Segmentation.

Behavioral Factors for Segmentation

1. Occasions : Regular, Special 2. Benefits : Utility, Durability 3. User Status : Non User, Regular 4. Usage Rate : Light, Heavy 5. Loyalty Status : Medium, Strong 6. Readiness Stage : Unaware, Aware 7. Attitude Toward Product : Positive,

Negative, Indifferent

Consumer & Business Markets

Markets can be broadly divided into : Consumer Markets (B2C) & Business Markets (B2B). Ultimate Consumers buy goods or services for their own personal or household uses that are satisfying strictly non-business ones. That constitutes what is called a Consumer Market. Business Users are business, industrial or institutional organizations that buy goods or services to use in their own organizations, to resell or to make other products. Business Users constitute the

Business Market.

Segmenting Business Markets

Some of the bases for segmenting the consumer market are also useful for segmenting the business market for example, geographic basis, business demographics like size, etc., business market generally can be segmented by:

Type of customer Size of the customer Type of buying situation

Steps in Segmentation & Targeting

Identify Bases for Segmenting the Market

Develop Profiles of Resulting Segments

Develop Measures of Segment Attractiveness

Select the Target Segments

Ensure that Segments Are Compatible

The Marketing Segmentation Process

Find ways to group consumers according to their needs Find ways to group marketing actions available to the organization
Develop a market/product grid to relate the market segments to the firms products and actions

Select the product segments toward which the firm will direct its marketing actions

Take marketing actions to reach target segments

Three important Statistical tools commonly used for Market Segmentation are:

Conjoint Analysis

Cluster Analysis Factor Analysis


Market Coverage Strategies based on Segmentation

Undifferentiated Multi-Segment Concentrated

Market Coverage Strategies based on Segmentation :

1. Undifferentiated Marketing Approach : [ Mass Market Approach ] : aims at serving all the customers by offering a single marketing mix.
Eg : Fire Insurance or Health Insurance.

2. Differentiated Marketing Approach : aims at targeting customers of various segments by offering different products / services for each segment.
Eg : Travel Agencies approach to Domestic Travelers, Business Travelers & International Travelers.

3. Concentrated Marketing Approach : or Single Segment Strategy aims at serve a single or just a few segments in the total market.

Targeting Market Segments

Instead of aiming a single product & a single marketing programme at the mass market, most companies identify relatively homogeneous segments and accordingly develop suitable products & marketing programmes by matching the wants and preferences of each segment.

The chosen segments ( Target Market ) should be the most profitable for the company & should help in delivering superior value to the chosen customer base.

Factors for Targeting include :

1. Segment Size & Growth Potential 2. Structural Attractiveness : analysing present

& potential competitors, substitute products / services & the relative power of suppliers & buyers. 3. Companys Objectives & Resources

The Target Marketing Process

Identify markets with unfulfilled needs Determine market segmentation Select market to target Position through marketing strategies

Product Positioning: Developing a

marketing program in such a way that the product is perceived to be very different from competitors products.


Positioning in Marketing is a process by which marketers try to create an image or identity in the minds of their target market for its product, brand or organization. Re-positioning involves changing the identity of a product, relative to the identity of competing products, in the collective minds of the target market. De-positioning involves attempting to change the identity of competing products, relative to the identity of your own product, in the collective minds of the target market.

Product Positioning is a decision reached by a marketer to try to achieve a defined brand image relative to competition within a market segment. Product positioning decisions are strategic decisions and have an impact on long-term success of the brand.

Process of Determining the Positioning Strategy :

The following steps need to be taken to reach a decision about Positioning : Identify Competitors

Assessment of Consumers Perceptions of Competition

Determining Competitors Position Analysing the Consumers Preferences Making the Positioning Decision.

Product Differentiation (also known simply as Differentiation") is the process of distinguishing a product or offering from others, to make it more attractive to a particular target market. This involves differentiating it from competitors' products as well as a firm's own product offerings. Differentiation can be a source of competitive advantage. This is done in order to demonstrate the unique aspects of a firm's product and create a sense of value. The term Unique Selling Proposition refers to advertising to communicate a product's differentiation


A company must decide how many ideas (benefits, features, etc) to convey in its positioning to its target customers. Many marketers advocate promoting only one central benefit, which is called as the Unique Selling Proposition or USP for each brand and stick to it.
i.e. companies should favour one consistent positioning message. The brand should tout itself as "number one" on the benefit it selects. Number one positioning includes 'best quality', 'best performance', 'best service', 'lowest price', 'safest', 'fastest' etc.

UNIQUE VALUE PROPOSITION (UVP) : It may so happen that single benefit positioning i.e. USP may not be able to overpower competition, in which case a company should try to offer a unique combination of multiple benefit positioning known as Unique Value Proposition (UVP) in order to be successful.
For Eg : An Automobile can be positioned as a most fuel efficient, cheapest in its category, and providing best service.

Common bases used for Positioning include: Features Benefits

Manufacturing Process


Product Class Price/Quality Country or Geographic Area

Positioning Statement or a Value Proposition : It is a statement expressed clearly in few words that identifies the target market for which the product is intended. It also specifies the product category in which it competes and highlights the unique benefit it offers. How Many Differences to Promote ?
Successful positioning depends on effectively communicating the brands differential advantage. A USP is an outstanding advantage and the best strategy to create a products position, provided it is not only persuasive for the consumers but also sustainable.

Some popular positioning approaches are:

Positioning by Corporate Identity Positioning by Brand Endorsement Positioning by Product Attributes and/or Benefits Positioning by Use Occasion & Time Positioning by Price-Quality Positioning by Product Category Positioning by Product User Positioning by Competitor


Developing a Positioning Strategy

What position do we have now? Does our creative strategy match it? What position do we want to own?

Do we have the tenacity to stay with it?

The Position
Do we have the money to do the job?

From whom must we win this position?

Positioning Strategies
How should we position ?
Attributes and Benefits? Price or Quality? Use or Application? Product Class?

Product User ?
Competitor ?

Cultural Symbols?

Developing a Positioning Platform

1. Identify the competitors

3. 4. 5. 6.

Assess perceptions of them

Determine their positions Analyze consumer preferences Make the positioning decision Monitor the position

Positioning Errors
1. Under Positioning : When the brands position is so vague that it is seen as just another entry in a crowded marketplace. 2. Over Positioning : Buyers may have too narrow an image of the brand and they may think it to be unaffordable for them.

Positioning Errors.
3. Confused Positioning : Buyers might have a confused image of a brand resulting from company's making too many claims or changing the brand's positioning too frequently. 4. Doubtful Positioning : Buyers may find it hard to believe the brand claims in view of the product's features, price or manufacture.

Differentiation is the process of creating a different and distinguished offering by a company through a number of available tools, which adds meaningful value to the offering. Criteria for Differentiation : All products can be differentiated to some extent, but not all brand differences are meaningful or worthwhile for which it should satisfy one or more of the following criteria : Important, Distinctive, Superior, Preemptive Affordable, Profitable, etc.

Differentiation may be attained through many features that make the product or service appear unique. Possible strategies for achieving differentiation may include: Warranties ( Khaitan Fans, Whirlpool ) Brand image ( Nike Shoes ) Technology (Hewlett-Packard Printers, I Pods) Features ( Nokia Mobile Hand sets ) Quality / Value ( Sony ) Service / Dealer Network ( Maruti Cars )

Types of Differentiation

1. 2. 3. 4.

Product Differentiation Service Differentiation Personnel Differentiation Image Differentiation

There are several variables through which a company can differentiate its market offerings such as : 1. Product Differentiation : A product can be differentiated in many ways such as : by changing the form and by varying the features or by setting a superior performance quality or by having a unique and superior design or by having a high degree of reliability or higher durability or simply by having a unique style. Eg : I-Pod, I-Phone, etc

2. Service Differentiation : When the physical product cannot be easily differentiated, the key to competitive success may lie in adding valued services & improving their quality. A company does so by providing miscellaneous Services, offering an improved product warranty or maintenance contract; it can also offer rewards, provide customer training, etc. Eg: Maruti Cars

3. Personnel Differentiation : Companies can gain a strong competitive advantage through having better trained people. Better trained personnel exhibit six
characteristics: Knowledge & Competence, Courtesy towards Customer, Individual Credibility, Reliability, l Responsiveness towards Customers, & l Communication Skills.

4. Image Differentiation: Brand Identity & Brand Image need to be distinguished. Identity comprises the ways that a company aims to identify or position itself or its products. Image is the way the public perceives the company or its product. Eg : Nike Sports wear, Sony, etc

Positioning is the result of differentiation decisions. It is the act of designing the company's offering and identity (that will create a planned image) so that they occupy a meaningful and distinct competitive position in the target customer's minds. The end result of Positioning is the creation of a
market-focused value proposition, a simple clear statement of why the target market should buy the product. Once the company has developed a clear positioning strategy, the company must choose various signs and cues that buyers use to confirm that the product delivers the promise made by the company.


Product is anything that can be offered to a market, such goods, services, places, ideas, information, etc, for attention, acquisition, use, or consumption that might satisfy a need. It is considered to be a bundle of benefits / utilities. A Brand is an offering from a known source.
Value and Satisfaction : In terms of Marketing, the Product or Offering will be successful, if it delivers value & satisfaction to the target buyer.

Types of Products

Consumer Products


Industrial Products

Product Classification: Consumer Goods

Convenience Goods
Buy frequently & immediately

Shopping Goods
Buy less frequently

Low priced Mass advertising Many purchase locations i.e Candy, newspapers

Higher price Fewer purchase locations Comparison shop i.e Clothing, cars, appliances

Specialty Goods
Special purchase efforts

Unsought Goods
New innovations

High price Unique characteristics Brand identification Few purchase locations i.e Lamborghini, Rolex

Products consumers dont want to think about Require much advertising & personal selling i.e Life insurance, blood donation

Product Classification: Industrial


Raw materials, manufactured materials, and parts

Capital Items

Materials and Parts

Industrial products that aid in buyers production or operations

Supplies and Services

Operating supplies, repair/ maintenance items


Product Item / Line / Mix

Product Item

A specific version of a product that can be designated as a distinct offering among an organizations products.

Product Line

A group of closely-related product items.

Product Mix

All products that an organization sells.

Product Mix

Width : No. of Product Lines a company has

Length : No. of Products in a Product Line

Depth : No. of variants of each product within

a Product Line.

Consistency : How closely related the

Product Lines are in end use

Eg -1 : Gillettes Product Lines & Mix

Depth of the Product Lines

Width of the Product Mix

Blades & Razors
Fusion 5 blade Mach 3 Turbo Mach 3 Sensor Trac II Atra Swivel Double-Edge Lady Gillette Super Speed Twin Injector Techmatic

Series Adorn Toni Right Guard Silkience Soft and Dri Foamy Dry Look Dry Idea Brush Plus

Writing Instruments
Paper Mate Flair S.T. Dupont

Cricket S.T. Dupont


Line Stretching : Line stretching occurs

when the company lengthens its product line beyond its current length. Down Market Stretch: A company position in the middle market may want to introduce a lower price line for any of three reasons:
1. The company may notice strong growth opportunities down the line. 2. The company may wish to tie up lower end competitors who may otherwise try to move up market and thus offer low priced offering. 3. The company may find that the middle market is stagnating or declining.

Up Market Stretch : Companies may wish to enter the high end of the market for more growth, higher margins or simply to position themselves as full-line manufacturers. Two Way Stretch: A company serving the middle market might decide to stretch their line in both directions. Line Filling : A product line can be also be lengthened by adding more items within the present range. Eg: Maruti introduces Alto in

between Zen & 800


PLC concept is concerned with the courses that a products sales and profits take over its life time. The concept holds that these two parameters (sales & profits) change over time in a predictable way, and that products go through a series of five distinct stages: 1. 2. 3. 4. 5. New Product Development or Pre-Introduction Introduction Growth Maturity Decline

Each of these stages provide distinct opportunities and threats, thereby affecting the firms strategies and marketing programmes.

Product Life Cycle Curve

Sales & Profits in Rs.


New Product Development Introduction Growth Maturity Decline

Sales & Profits Over the Products Life From Inception to Demise

Features of Each Stage of the PLC Curve

S a l e s

Introduction Growth High & Increasing Low sales Low growth Profit is zero Few competitors
sales / profits

Static but high sales and profits Emphasis on low costs

Declining sales

Entry of competitors
Stable price

Declining profit or losses

Exit of competitors

High promotional expenditure

Fight for market Stable promotional share with established expenditure competitors Competition is the peak

Reduced promotional expenditure

Reduced price


Product Life Cycle has five distinct stages:1. New Product Development : Begins when the company finds and develops a new product idea. At this stage sales are zero, companys investment costs mount. 2. Introduction : A period of slow sales growth as product is introduced in the market. Profits are non existent at this stage because product introduction cost are high. 3. Growth : A period of rapid market acceptance & increasing profits. 4. Maturity : A period of slowdown in sales growth as product gets acceptance by almost all potential buyers. Profits level off or decline because of increased marketing outlay to defend the product against competition.


5. Decline : A period when sales fall off and profits drop .



Starts when the product is first launched . Takes time and the sales growth is slow. Profits are negative or low as sales are low and distribution and promotion expenses are high. As market is not ready to accept product refinement at this stage the firm produces a basic version of the product. Selling is focused on those buyers who are ready to buy. The market pioneer must choose a launch strategy consistent with the intended product positioning. It should realize that it is the first step in the total marketing plan for the PLC. If pioneer uses launch strategy to make a killing it sacrifices long revenue for short term gain. As pioneer moves to later stages it will have to continually formulate new pricing , promotion and other marketing strategies.



If the new product satisfies the market, it will enter he growth stage. Sales will start climbing quickly. Early adopters will continue to buy, later buyers will start following their lead especially if they hear favourable word of mouth New competitors may now make an entry attracted by the profit opportunities by adding new features Market will now expand Increasing competition leads to an increase in number of distribution outlets Prices remain where they are or fall only slightly Promotion spending may be the same or slightly higher Goal is educating the customers and meeting competition Profits increase as promotion costs are over large volumes and unit manufacturing costs fall



The firm uses several strategies to sustain rapid growth as long as possible It improves product quality and adds new product features and models It enters new market segments and develops new distribution channels Shifts some advertising from building product awareness to product conviction and purchase It lowers product prices to at the right time to attract more buyers At his stage the firm faces a trade off between high market share and high current profit By spending a lot of money on product improvement, promotion, and distribution the firm can capture a dominant position In doing so it gives up maximum current profit which it hopes to make up in the next stage



At some point of time the products sales growth slows down and the product enters the maturity stage This stage lasts longer than the previous stages The slowdown in sales growth results in many producers with many products to sell The overcapacity in the market leads to greater competition Competitors begin marking down prices, increasing their advertising and sales promotion The R&D budgets are increased to find better versions of the product These steps lead to a drop in profit Weaker competitors start dropping out (decline) The market eventually contains only well established competitors Most successful products are in a stage of continuous evolution to meet changing customer needs and preferences



At this stage firms may also chose to modify he market , the product or he marketing mix In modifying the market the firm tries to increase the consumption of the current market It looks for new users and market segments. Looks for ways to increase usage among present customers The firm may also try modifying the product by changing the characteristics such as quality, features, or style to attract the new users and inspire more usage It may improve the products quality and performance, its durability, reliability, speed and taste The firm can also try modifying the marketing mix to improve sales by changing one or more marketing mix elements. Can cut prices to attract new users and competitors customers. Better ad campaigns, aggressive sales promotion, trade deals. New and improved services.



At this stage sales of most product forms and brands eventually dip. Decline may be slow or rapid Sales may plunge to zero or they may drop to a low level where they continue for many years Sales decline may be due to technological advances, shifts in consumer tastes, and increased competition As sales and profits decline some firms withdraw from the market Those remaining prune their product offering, drop smaller market segments and marginal trade channels Some firms cut the promotion budget and reduce the prices further Carrying a weak product is costly for a firm Products failing reputation can cause customer concerns about firm and its other products Keeping a weak product delays the search for replacements, creates a lopsided product mix, hurts current profits, weakens companys foothold on the future.



At this stage a firm needs to pay more attention to the ageing products . The firms task is to identify those products in the decline stage by regularly reviewing sales, market share, costs and profit trends The firms has to decide whether to maintain, harvest or drop each of these declining products Firm may decide to maintain the brand in the hope that competitors will leave the industry May also decide to reposition or reformulate the brand in the hope of moving it back to the growth stage Firm may decide to harvest the product, which means reducing various costs (plant and equipment, maintenance, R&D, advertising, sales force) and hoping that sales hold up. Harvesting, if successful, increases firms profit in the short run Firm may also decide to drop the product from its line May sell it to another firm or liquidate it at salvage value

New Product Development

In Business, New Product Development (NPD) is used to describe the complete process of bringing a new product or service to market.
There are two parallel paths involved in the NPD process: one involves the idea generation, product design & detail engineering; the other involves market research and marketing analysis. Companies typically see new product development as the first stage in generating & commercializing new products within the overall strategic process of Product Life Cycle management used to maintain or grow their market share.

Causes of New Product Failures

Overestimation of Market Size Product Design Problems Product Incorrectly Positioned, Priced or Advertised Costs of Product Development Competitive Actions
a. b.

To create successful new products, the company must :

understand its customers, markets and competitors. develop products that deliver superior value to customers.

New Product Development Process


New Product Development Process

Idea Generation Idea Screening Conceptual Testing Business Analysis Product Development Test Marketing Commercialization

Idea Generation & Screening


Generation stage includes alternative specifications for product concepts utilizing end user analysis or problem analysis. Focus groups and direct observation provide insights for product development. Brainstorming is used for Idea Generation of new product or service The Idea Screening Stage begins to confirm the new product concept. Product candidates are evaluated on initial estimates of potential demand & the chances/barriers to success.

NPD Process : 1. Idea Generation

Systematic Search for New Product Ideas

Internal sources
Customers Competitors Distributors Suppliers

Lab Experiments

2. Idea Screening : The object is to eliminate unsound concepts prior to devoting resources to them.
The screeners must ask at least these questions: i. Will the customer in the target market benefit from the product? ii. What is the size and growth forecasts of the market segment/target market? iii. What is the current or expected competitive pressure for the product idea? iv. What are the industry sales and market trends the product idea is based on? v. Is it technically feasible to manufacture the 294 product?

3. Concept Development & Testing :

Develop the Marketing & Engineering details :
i. ii. iii. iv. v. vi. vii. Who is the target market and who is the decision maker in the purchasing process? What product features must the product incorporate? What benefits will the product provide? How will consumers react to the product? How will the product be produced most cost effectively? Prove feasibility through virtual computer aided rendering, and rapid prototyping. What will it cost to produce it? 295

4. Business Analysis :

Estimate likely selling price based upon competition and customer feedback :
Estimate sales volume based upon size of market b. Estimate profitability and breakeven point

5. Product Development : ( Technical Implementation ) :

a) New program initiation b) Resource estimation

c) Requirement publication
d) Engineering operations planning e) Department scheduling f) Supplier collaboration g) Logistics plan

h) Resource plan publication

i) Program review and monitoring j) Contingencies planning

6. Market Testing :
i. Produce a physical prototype & test

the product in typical usage situations. ii. Conduct focus group customer interviews or introduce at trade show. iii. Make adjustments where necessary. iv. Produce an initial run of the product and sell it in a test market area to determine customer acceptance.

7. Commercialization : (often considered post-NPD) Launch the product Produce & place advertisements & other promotions Fill the distribution pipeline with product

Stages in the Consumer Adoption Process






Adopter Categories
Percentage of Adopters

Early Majority Innovators

Late Majority

Early Adopters


34% 16%



Time of Adoption Late


The Diffusion of Innovations Theory : 1. Innovators : Risk Takers, Variety Seekers, High
Product Interest, Less Well Integrated, More Individualistic.

2. Early Adopters : Independent, Quick to Assess

Social Leaders, Popular, Educated;

3. Early Majority : Deliberative, Adopt only if they see

No Risk, Many informal social contacts;

4. Late Majority : Skeptical, Traditional, Lower SocioEconomic Status, Extremely Risk Averse.

5. Laggards : Resist / Postpone / Avoid Spending,

Neighbours & Friends are main info sources, Fear of Debt.


Influence of Product Characteristics on the Rate of Adoption

Communicability Can results be easily observed or described to others? Relative Advantage Is the innovation superior to existing products?

Can the innovation be used on a trial basis?

Product Characteristics

Compatibility Does the innovation fit the values and experience of the target market?

Is the innovation difficult to understand or use?

Brand Management
A Brand is an identifying name, term, symbol, word/s, design or mark or a combination of these that distinguishes a product or a company from its competitors.
Usually Brands are registered (trade-marked) with a regulatory authority and so cannot be used freely by other parties. Branding is an essential part of marketing. Brand Management is the application of marketing techniques to a specific product, product line or brand. It seeks to increase the perceived value to the customer and thereby Increase brand image & brand equity.

Brand Name

Brand Name refers to Words, Letters or Symbols that make up a name used to identify and distinguish the firms offerings from those of its competitors. Brand Identity refers to a unique set of brand associations that the brand strategist aspires to create or maintain.

Brands Marks or Logos

Trademark is a Registered Brand Name / Mark

Trade Mark is a Brand that has

been given legal protection and has been granted solely to its owner.

Most Valuable Global Brands

Brands Brand value

Coca Cola Marlboro Nescafe Kodak Microsoft Budweiser Kellogg's Motorola Gillette Bacardi
Source: Financial World

$ 36 $ 33 $ 11 $ 10

Billion Billion Billion Billion

$ 9.8Billion $ 9.7 Billion

$ 9.3 Billion $ 9.2 Billion $ 8.2 $ 7.1 Billion Billion

What is a Brand ?

Its the companys definition of what they have to offer. A brand is a product that has a personality. A promise to the customer, but it must be backed up by performance. What the customer knows about your specific product. Its your image. A brand signifies a relationship with the customer. It is the companys most valuable asset. Its also the main differentiator, the best defense against price competition & the key to customer loyalty.

Meanings conveyed by a Brand

Attributes Benefits Values Culture Personality Satisfaction

Advantages of Branding :
Easy Selling Legal Protection Customer Loyalty Easy Market Segmentation Image Building

According to Jean-Noel Kepferer, a brand is complex symbol and capable of conveying up to six dimensions or meanings: 1. Physique: Physique dimension refers to the tangible, physical aspects. The physical dimensions are usually included in the product such as name, features, colours, logos & packaging. Eg : The physique of IBM brand would be, Servers, Desktop / Notebook - PCs & Service, Etc. 2. Personality: Marketers deliberately may try to assign the brand a personality; or people on their own may attribute a personality to a brand. It is not surprising that people often describe some brands by using adjectives such as young, masculine, feminine, exciting, rugged, rebel, energetic, etc., as if they are living persons. Brands usually acquire personalities because of deliberate communications from marketers and use of endorsers. Bajaj Pulsar ads communicate Definitely male. The personality of Boost is seen as young, dynamic, energetic and an achiever.

3. Culture: Culture includes knowledge, belief, rites and rituals, capabilities, habits & values. A brand reflects its various aspects and values that drive it. Culture manifests various aspects of a brand. For instance, Apple computers reflect its culture. It is a symbol of simplicity, and friendliness. Its symbol (munched Apple) connotes being different from others and not following the beaten path. Mercedes symbolises disciplined, efficient, high quality German Engineering. 4. Relationship: Brands are often at the heart of transactions and exchanges between marketers and customers. The brand name Nike is Greek and relates to Olympics & suggests glorification of human body. Just Do It is all about winning, the unimportance of age, and encourages us to let loose. Apple conveys emotional relationship based on friendliness. Relationship is essentially important in service products.

5. Reflection: This refers to defining the kind of people who use it. It is reflected in the image of its consumers: young, old, rich, modern and so on. For example, Pepsi reflects young, fun loving, carefree people. The reflection of Allen Sollys brand is a typical young executive. However, it does not by any chance mean that they are the only users. The concept of target market is broader than reflection. 6. Self-Image: This means how a customer relates herself / himself to the brand. Self-Image is how a customer sees herself / himself. The self-image of users of Bajaj Pulsar motorcycle is believed to that of be tough, young males. Users of Nike see their inner reflection in the brands personality.

Major Branding Decisions


Characteristics of a Brand : At the time of choosing a

brand name, various aspects require careful consideration. Very often, manufacturers invite brand names from the consumers, & Distributors.

General Considerations in Branding :

1. The name should be easy to read, pronounce,

understand & recall. Eg : Pepsi, Dettol, Tide, etc 2. The name should be appropriate for the product. Eg: All Clear, Head & Shoulders, Close Up, etc 3. It should be short & easy to remember like Vim, Lux, Zen, Gems, Wheel, Dove, Ikon, Alto, etc. 4. It should not have any negative meanings associated in the local language. Eg : NOVA, HENKO, 5. As far as possible, it should be descriptive in nature. Eg : Fair & Lovely, First Flight Courier, DTDC,

Types of Brands :
(Brand Sponsor Decisions)

Manufacturers Brand
Private Brand (Distributors Brand) Generic Brand

Licensed Brand

Manufacturer Brands : are initiated by

manufacturers & identify the producer. This type of brand generally requires the initiator involvement in its distribution, promotion & pricing decisions. The brand quality is assured / guaranteed & the aim of promotion-mix is to build company and / or Brand Image and encourage Brand Loyalty.

Private Brands are resellers initiated brands

& the manufacturers are not identified on the products. Wholesalers & Retailers use Private Brands to develop more efficient promotions to build store image & generate higher gross margins. The Resellers have the freedom and advantage of
buying specified quality at an agreed upon cost from the manufacturer without disclosing manufacturer identity. Nearly 20% of he consumer goods sold in most of the Supermarkets / Hypermarkets in developed countries are Private Brands. Egs : Wal-Mart, Shoppers Stop, Food World, Nilgiris

Generic Brands are those, which indicate only the product category, such
as Aluminium-Foil, Cellophane-Tape, Granite,
Tissue-Paper, Teak-Wood, Medicated-Cotton, etc . Only the generic name of the product is mentioned & the manufacturing companys name is written just to conform to legal requirements, such as DDT, Urea, Paracetamol, Tetracycline, etc. They do not include any other identifying marks. Generic Brands are usually sold at lower prices than their branded versions.

Generic Brands are fairly common in the AgroIndustry, Pharmaceutical Industry, Industrial Raw -Materials, Pesticides, etc

Licensed Brand is a relatively new trend & involves licensing of trademarks. Entering into a licensing agreement, a company allows approved manufacturers to use its trademark for a mutually agreed fee. The royalties may range anywhere between 2 % to10 %.
The company obtaining the license would be responsible for all production and promotional activities, & would bear the costs in case the licensed product fails. The benefits of this arrangement can bring extra revenues, free -publicity, new images & protection of trademark. Eg : P&G licensed its Camay brand of soap in India to Godrej for a few years.

Methods of Branding
( Brand Name Decisions)

1. Individual Branding : Separate Names for all Products of one company. Eg : HUL Soaps : Lux, Rexona, Dove, Life Bouy, Pears, Liril, Breeze, etc 2. Umbrella or Family Branding : Blanket Family Name for all Products or separate Family Names for separate Product Lines Eg : Lakme, Ponds, Maggie, Nescafe, etc

Methods of Branding..

3.Corporate Branding : Also known as

Endorsement Branding is using Companys
Trade Name combined with individual product names. Eg : TATA STEEL, TATA SALT, SONY, GODREJ, BAJAJ, HONDA, TOYOTA, etc.

4.Co - Branding : Associating & promoting

two brands together. Co-branding, also called Brand Partnership, is when two companies form an alliance to work together, creating marketing synergy.
Eg : HP & Intel, Citibank & Indian Oil, Maruti Auto Card & SBI Credit Card, etc

Co-Branding is an arrangement that associates a

single product or service with more than one brand name, or otherwise associates a product with someone other than the principal producer. The typical co-branding agreement involves two or more companies acting in cooperation to associate any of various logos, color schemes, or brand identifiers to a specific product that is contractually designated for this purpose. The object for this is to combine the strength of two brands, in order to increase the premium consumers are willing to pay, make the product or service more resistant to copying by private label manufacturers, or to combine the different perceived properties associated with these brands with a single product.

List of HULs Famous Brands:

Product Category : Household Care, Fabric Cleaning, Skin Cleansing, Skin Care, Oral Care, Hair Care, Personal Grooming & Tea-based Beverages, under following famous Brands:

Lux, Lifebuoy, Dove, Pears, Hamam, Breeze, Liril, Rexona, Vaseline, Fair & Lovely, Ayush, Ponds, CloseUp, Surf, Sunsilk, Lipton, Bru, Vim, Surf, Pepsodent, All Clear, Wheel, Lakme, Kissan, Kwality Walls, etc

Four Brand Strategies


Product Category New Brand Extension

Line Extension Multibrands

Brand Name


New Brands


Brand Strategy

Extension : Existing brand names

extended to new forms, sizes & flavors of an existing product category. Brand Extension : Existing brand names extended to new or modified product categories. Multibrands : New brand names introduced in the same product category. New Brands : New brand names in new product categories.

Brands Equity
Brands have equity because they have high awareness, many loyal consumers, a high reputation for perceived quality, proprietary assets such as access to distribution channels or to patents, or the kind of brand associations (such as personality associations) Brand Equity is defined in terms of marketing effects uniquely attributed to the brands.

Brand Equity


Brand Equity is the difference between the expected future sales of a branded product & an unbranded product.
i.e. Brand Equity is the value of a brand built up over a period of time. It is composed of four major components namely : Image, Perception,

Awareness and Loyalty.


BRAND AWARENESS: is the ability of prospective customers to recall a brand & its product category.
BRAND ASSOCIATION : conveys the meaning of the

product in terms of how it fulfills a customer need. Brand Associations create positive feelings which create a sense of uniqueness in favour of the Brand. Companies & people who behave in a socially responsible manner are much more likely to enjoy ultimate success than those whose actions are motivated solely by profits.
BRAND LOYALTY : is the physical / emotional relationship

between a company / product & its customers.

Brand Loyalty is the biased behavioural response expressed over time by some decision-making unit, with respect to one or more alternative brand out of a set of such brands, and is a function of psychological processes. Advantages of Brand Loyalty :
Generates higher sales volume / profits Gives flexibility in pricing & in the introduction of new products 3. Lower cost for the company 4. Publicity & WOM recommendations attract new customers 5. Greater Trade advantages.
1. 2.

Walfried Lasser. Banwari Mittal & Arun Sharma identified 5 dimensions of

Customer Based Brand Equity:

1. Performance: The aspect of brand equity focuses on the physical and functional attributes of a brand. Customers are concerned about how fault free and durable the brand is, based on their judgement. 2. Social image: This focuses on what social image the brand holds in terms of its esteem for customers social and reference groups. 3. Value: This refers to the customers value perception of the brand. This is the ratio between what are the involved costs and the perceived delivered value. 4. Trustworthiness: This means the customers extent of faith in the brands performance, quality, and service. This reflects reliability of the brand, that it would always take care of customers interest and the people behind the brand can be trusted. 5. Identification: To what extent customers feel emotionally attached to the brand. Their association with the brand is important because it matches their self-concept & aspirations. This means psychological association with what the brand stands for in the customers perceptions.

Packaging is the science, art & technology of enclosing or protecting products for storage, distribution, sale & use.
Packaging also refers to the process of design, evaluation & production of packages. Packaging can be described as a coordinated system of preparing goods for transport, warehousing, logistics, sale & end use. Purpose of Packaging :- To :contain, protect,
preserves, transport, inform & sell a Product


Packaging & Labelling

Packaging is the art & science of designing & producing the container or wrapper for a product. It has become extremely important & is often referred to as the 5th P of the Marketing Mix Steps in developing a good package:
Develop specific elements of the package, Elements must support products position and marketing strategy.


: Package Labelling or a

Label is any written, electronic or graphic communications on the packaging or on a separate associated Label.

Label performs several functions:

Identifies product or brand Describes several things about the product Promotes the product through attractive graphics


Purposes of Packaging & Labels

Packaging & Package Labeling have several objectives, namely : 1.Physical Protection : The objects enclosed in the
package may require protection from, shock, vibration, compression, temperature, etc.

2. Barrier Protection : A barrier from oxygen, water

vapour, dust, etc., is often required in order to keep the contents clean, fresh, sterile and safe for the intended shelf life .

3. Containment or Agglomeration : Small objects

are typically grouped together in one package for reasons of convenience & efficiency.

4. Information transmission : Packages & Labels communicate how to use, transport, recycle, or dispose of the package or product. For certain items like pharmaceuticals, food, medical & chemical products, some types of information are statutatory requirements. Some packages and labels also are used for track & trace purposes. 5. Marketing : The packaging and Labels can be used by marketers to encourage potential buyers to purchase the product. Package graphic design and Marketing communications are applied to the surface of the package and (in many cases) the point of sale display. 6. Security : Packaging can play an important role in reducing
the security risks of shipment. Packages can be made with improved tamper resistance to deter tampering and also can 338 have tamper-evident features to help indicate tampering.

7. Convenience : Packages can have features that add convenience in distribution, handling, stacking, display, sale, opening, reclosing, use, dispensing, and reuse. 8. Portion Control : Single serving or single dosage packaging has a precise amount of contents to control usage. Bulk commodities (such as salt) can be divided into packages that are a more suitable size for individual households. It is also aids the control of inventory. Eg: selling sealed one - litre bottles or packets of milk, rather than having people bring their own bottles to fill themselves.


What is Price ?
Price Has Many Names
Rent Fee Rate Commission Assessment Tuition Fare Toll Premium Retainer

Salary Wage Interest Tax


Definition of Price
Price is the amount of money charged for a
product or service, or the sum of the values that consumers exchange for the benefits of having or using the product or service. It is the only
element in the Mktg. Mix that generates revenues.

Pricing refers to the process of setting a specific

price for a product or service offered. Pricing allows

Sellers to :
Charge lower prices & / or reap higher margins. Monitor customer behavior & tailor offers. Alter prices to adjust for changes in demand / costs. Negotiate prices in online auctions and exchanges. 342

Pricing Process
1. Set Pricing Objectives 2. Analyze demand 3. Draw conclusions from competitive intelligence 4. Select pricing strategy appropriate to the P, E, S, T Environment. 5. Determine specific prices

1. SURVIVAL (short-term objective, i.e. due to
heavy competition, changing customer needs, too much production, not enough sales ) RETURN ON INVESTMENT PROFIT MAXIMIZATION MARKET STABILISATION MARKET SHARE LEADERSHIP (lower price due to economy of scale) MEETING / FOLLOWING COMPETITION

2. 3. 4. 5.


Pricing Objectives

(Contd .)


car manufacturing -add on purchases) 7. MARKET SKIMMING (enter market with

high price, lower as market matures) 8. MARKET PENETRATION (enter market with low price, increase as market stabilizes) 9. EARLY CASH RECOVERY 10. PREVENTING NEW ENTRY (Low price may prevent new entrants)

Factors to Consider in Pricing :

Internal Factors
Marketing Objectives Marketing Mix Strategies Costs Organizational considerations

External Factors
Nature of market and demand Competitors costs, prices & offers Other Environmental elements

Factors to Consider in Pricing : Internal Factors

Marketing Objectives Marketing Mix Strategies Costs Organizational considerations
Market positioning influences pricing strategy Other pricing objectives:
Survival Current profit maximization Market share leadership Product quality leadership

Not-for-profit objectives:
Partial or full cost recovery Social pricing

Factors to Consider in Pricing :

Internal Factors
Marketing objectives Marketing Mix strategies Costs Organizational considerations

Pricing must be carefully coordinated with the other marketing mix elements Target costing is often used to support product positioning strategies based on price Non-Price positioning can also be used

Factors to Consider in Pricing :

Internal Factors
Marketing objectives Marketing mix strategies
Types of costs:
Variable Fixed Total costs

Organizational considerations

How costs vary at different production levels will influence price setting

Factors to Consider in Pricing :

Internal Factors
Marketing objectives Marketing Mix strategies Costs
Who sets the price?
Small companies: CEO or Top Management Large companies: Divisional or Product Line Managers

Organizational Considerations

Price negotiation is common in Industrial settings Some Industries have Pricing Departments

Factors to Consider in Pricing : External Factors

Nature of Market & Demand
Competitors costs, prices & offers Other environmental elements
Types of markets
Pure competition Monopolistic competition Oligopolistic competition Pure monopoly

Consumer perceptions of price and value Price-demand relationship

Demand curve Price elasticity of demand

Factors to Consider in Pricing : External Factors

Nature of market and demand
Consider competitors costs, prices, and possible reactions when developing a pricing strategy Pricing strategy influences the nature of competition
Low-price low-margin strategies inhibit competition High-price high-margin strategies attract competition

Competitors costs, prices & offers

Other environmental elements

Benchmarking costs against the competition is recommended


Factors to Consider in Pricing :

External Factors
Economic conditions
Affect production costs Affect buyer perceptions of price and value

Nature of market and Reseller reactions to demand prices must be Competitors costs, prices, considered and offers Government may restrict

Other Environmental elements

or limit pricing options Social considerations may be taken into account


Pricing Methods (Approaches to Pricing)

1. 2. 3. 4. Cost Based Pricing Value Based Pricing Competition Based Pricing. Market Based Pricing

1. Skimming Price For Introducing New Products 2. Penetration Price 3. Loss Leader Price 4. Psychological Price

General Pricing Approaches

( I ) Cost-Based Pricing :

1. Cost-Plus Pricing :
Adding a standard markup to cost Price = Cost of Production + Margin of Profit. Ignores demand and competition

Popular Pricing technique because:

It simplifies the pricing process Price competition may be minimized It is perceived as more fair to both buyers & sellers 355

General Pricing Approaches : ( I ) Cost-Based Pricing :

2 ) Break-Even Analysis & Target Profit Pricing

Break-even charts show total cost and total revenues at different levels of unit volume. The intersection of the total revenue and total cost curves is the break-even point. Companies wishing to make a profit must exceed the break-even unit volume.

General Pricing Approaches..

( II ) Value-Based Pricing:

Uses buyers perceptions of value rather than sellers costs to set price. Measuring perceived value can be difficult. Consumer attitudes toward price and quality have shifted during the last decade.
Introduction of less expensive versions of established brands has become common.

General Pricing Approaches.. ( III ) Competition-Based Pricing : Also called Going-Rate Pricing
May price at the same level, above, or below the competition Sealed - bid Pricing : Bidding for work is another variation of competitionbased pricing


Pricing Strategies
Market-Skimming Pricing :
Setting a high price for a new product to skim maximum revenues layer by layer from segments willing to pay the high price.

Market-Penetration Pricing :
Setting a low price for a new product in order to attract a large number of buyers and a large market share.

3. Loss Leader Pricing :

Loss Leaders are goods or services offered at steep discounts (generally below cost) in order to attract new customers to a store.
It is a time-honored practice that has been met with much success, especially by large discount retailers. The intent of this pricing strategy is to not only have the customer buy the (Loss Leader) sale item, but other products that are not discounted.

When to Use Loss Leader Pricing ?

Move Overstock: If you have inventory that isn't moving or if you're overstocked on a particular item, a Loss Leader can move it. By cutting the price of such an item, you'll not only free up the shelf space and reduce inventory, but you'll also increase cash flow. Brand Awareness: If you would like to be known for having low prices then the loss leader pricing strategy will help associate your business with that belief. Keep in mind that people want good quality merchandise for less money and not junk. Increased Traffic: Using loss leaders as a marketing tool can help gain new customers & increase return visits. People are likely come back to shop, when they 361 like a bargain .

Psychological Pricing approach is suitable when consumer purchases are based more on feelings or emotional and factors such as love, affection, prestige, self-image etc, rather than rational factors. Price sometimes serves as a surrogate indicator of quality. Companies attempt to differentiate their offers based on non-functional product attributes, such as image and lifestyle etc.

Marketers set artificially high prices to communicate a status or high quality image. Psychological Pricing method is appropriate for perfumes, jewellery, autos, liquor, and ready-to-wear garments etc. and is not appropriate for industrial products.

Price Changes
Initiating Price cuts is desirable when a Firm : Has excess capacity Faces falling market share due to price competition Desires to be a market share leader

Price Changes.. Price Increases are desirable :

If a firm can increase profit, faces cost

inflation, or faces greater demand than can be supplied. Methods of Increasing Price Alternatives to Increasing Price Reducing product size, using less expensive materials, unbundling the product.

Price Changes
Buyer reactions to price changes must be considered. Competitors are more likely to react to price changes under certain conditions, such as : Number of firms is small Product is uniform Buyers are well informed

Unit - III

Marketing Channel System :Functions & flows; Channel Design.

Channel Management :- Selection, Training, Motivation & Evaluation of Channel Members; Channel Dynamics:- VMS, HMS, MMS; Market Logistics Decisions.




is the third P of the Marketing Mix. It consists of two parts, namely ( I ) Channels of Distribution &

( II ) Logistics of Distribution Place is the market-place where the customer buys / consumes the product /service.
Place refers to how an organisation will distribute the product or service they are offering to the end user. The organisation must distribute the product to the user at the right place at the right time. Efficient and effective distribution is important if the organisation is to meet its overall marketing objectives. Place is sometimes referred to as the Marketing Channels, Physical Distribution, Logistics or Location. 369

Distribution: includes activities that make

products available to customers when and where they need them. A Channel of Distribution or Marketing Channel is an organisation or a set of individuals that directs the flow of products from producers to the consumers. Marketing Intermediaries : link producers to other intermediaries or to the ultimate users of the product. Operate between the producer or manufacturer and the final buyer.

Distribution Functions
Types of utilities Distribution offers: TIME...when the customers want to purchase
the product. PLACE...where the customers want to purchase the product. POSSESSION...facilitates customer ownership of the product. FORM...sometimes, if changes have been made to the product in the distribution channel, i.e. Pepsi/Coke, concentrate to bottlers.

The Distribution Channel


Wholesalers / Brokers / Agents

Retailers Consumers

Channels of Distribution
Marketing Intermediary or Middleman is a marketing organization that links a producer & user within a marketing channel. Merchant Middleman : takes title to products by buying them Functional Middleman : helps in the transfer of ownership of products but does not take title to the products Retailer: buys from producers or other middlemen & sells to consumers Wholesaler : sells products to other firms

A Channel of Distribution comprises of a set of organizations which perform all of the activities required to move a product & its title from production to consumption. Types of Channel Intermediaries : There are many types of intermediaries such as Wholesalers, Agents, Retailers, Internet, Overseas Distributors, Direct Marketing (from manufacturer to user without an intermediary) etc. Two types of Channel of Distribution methods are commonly used : Indirect & Direct.

Indirect Distribution involves distributing your product by the use of one or more intermediaries such as : Manufacturer to Wholesaler to Retailer to a Consumer. Direct Distribution involves distributing direct from a manufacturer to the consumer. For Eg : Dell Computers selling directly
to its target customers.

The main advantage of Direct Distribution is that it gives a manufacturer complete control over their product.

Why a Firm May Want to Use Direct Channels :

Greater Control Lower Cost Value added subsequent to production process

Some Reasons for Choosing Direct Channels


Direct contact with Customer Needs

Quicker Response or Change in Marketing Mix

Suitable Middlemen Not Available

Distribution Channel Functions

Distribution Channel

Key Functions
Gathering and distributing marketing research about the environment

Promotion Contact
Matching Negotiation Physical Financing Risk Taking

Developing and spreading persuasive communications about an offer Finding and communicating with prospective buyers
Shaping and fitting the offer to the buyers need Agreeing on price and terms of the offer so ownership or possession can be transferred Distribution: transporting and storing goods Acquiring and using funds to cover the costs of channel work Assuming financial risks such as the inability to sell inventory at full margin

Distribution Strategies
Depending on the type of product being distributed there are three common distribution strategies available: 1. Intensive Distribution: involves distribution through as many retail outlets as possible. It is mainly used to distribute low priced or impulse purchase products. Eg : Chocolates, Soft Drinks, etc. 2. Exclusive Distribution: Involves limiting distribution to a single outlet usually for is usually highly priced-products. Eg : Sale of Vehicles thro Exclusive Dealers.

3. Selective Distribution: A small

number of retail outlets are chosen to distribute the product. Selective Distribution is common with ConsumerElectronics i.e. products such as
computers, televisions, washing-machines, refrigerators, household -appliances, etc

where consumers are willing to shop around & where manufacturers want a large geographical spread.

Channels for Consumer Products (B2C)

A manufacturer may use multiple channels To reach different market segments To increase sales or capture a larger market share

15 | 380

Channels for Industrial Products

Producer to Industrial User ( B2B )


used for heavy machinery, airplanes, major equipments, etc Allows the producer to provide expert and timely services to customers


Channels for Industrial Products (contd)

Producer to Agent Middleman to Industrial User


used for operating supplies, accessory equipment, small tools, components, standardized parts, etc


Marketing Intermediaries
Justifications for marketing intermediaries :

Intermediaries perform essential marketing services Manufacturers would be burdened with additional record keeping & maintaining contact with numerous retailers Costs for distribution would not decrease, and could possibly increase due to the marketing inefficiencies of producers

Intermediaries are specialists in the exchange process, provide access to and control over important resources for the proper functioning of the marketing channel. ( Division of labour ).

Functions of Intermediaries :
Primary role of middlemen is to transform the assortment of products made by producers in the assortments desired by consumers. Producers make narrow assortments in large quantities, consumers want broad assortments in small quantities, discrepancy in quantity and assortment .i.e. to match Supply and Demand.

Other functions of Marketing Intermediaries include:


Risk : Provide working

capital by paying for goods before they are sold.

Information flow Financing Payment & Title Negotiation Contacts Promotion



CHANNEL TERMS & CONDITIONS The producer stipulates terms and condition and responsibilities of channel partners to develop better mutual understanding and usually include : Price Policy, Trade Margins,
Payment Terms, Territorial Demarcation, Guarantee/Returns Policy, & Mutual Responsibilities etc.

EVALUATION OF CHANNEL ALTERNATIVES : In making a decision about channel alternatives, producers evaluation criteria is generally based on some combination of the following factors: Product characteristics. Buyer behaviour and location. Severity of competition. Cost effectiveness and channel efficiency. Degree of desired control on intermediaries. Adaptability to dynamic market conditions.

Selecting Channel Members Customer needs : Attracting channel members : A

small chain hotel be advised to choose one travel agency chain or work in key cities that are likely to generate business.

Evaluating major channel alternatives

1. Economic Criteria : MGM Hotel : Tour Operators vs. Travel Agencies. 2. Control Criteria : Franchise control / Quality control

CHANNEL SELECTION & TRAINING After determining the most appropriate Distribution Channel, the producer has to select the most qualified parties and arranges for their training.
In case of Exclusive Dealerships & Franchisees where personal contact with customers and service delivery are important, company appointed dealers play an important role. They practically become the company for the customers and any negative impressions may severely damage company image & reputation.

Motivating channel intermediaries is a challenging task for producers, but essential to obtain best possible performance from them. Motivation programmes for channel

intermediaries focus mainly on Financial & Nonfinancial Rewards. Financial Rewards usually include higher margins, extended credit facilities, bonuses and allowances, special deals, and sharing intermediaries promotional expenses.

Non-financial Rewards include training programmes at company expenses in areas such as technical skills, service, selling territory -management, human resource, etc. Other Nonfinancial Rewards include sales and display contests, recognition for outstanding performance, company paid holidays, spending money on arranging lavish distributors/dealers meet at exotic places, etc.

PERFORMANCE EVALUATION OF INTERMEDIARIES : Producers must periodically evaluate performance of dealers against laid down and agreed upon parameters. The evaluation criteria differ across industries and from one company to another in the same industry. Companies may use a set of criteria that may include some combination of factors with differing weight given to each element in order of its importance, such as achievement of sales targets, average inventory maintained, performing promotional activities, customer service & attending training programmes etc.

Types of Wholesale Intermediaries

There are 2 main types of Wholesalers:

1.Merchant Wholesalers : who buy products from manufacturers & resell them to other intermediaries.

2.Functional Wholesalers : who do not take title, but only facilitate exchanges among producers and resellers, compensated by fees and/or commission.

Types of Wholesalers ( Contd )

Merchant Wholesalers are of two types:
( 1 ). Full Service Wholesalers :- offer widest possible range of functions. Categorized as: a) General Merchandise MW : wide mix (unrelated), limited depth. b) Limited Line MW : only few products but an extensive assortment. c) Specialty Line MW : narrowest range of products. d) Rack Jobbers : are specialty line that own and maintain display racks, take back unsold products.

Types of Wholesalers ( Contd )

( 2 ) Limited Service Merchant Wholesalers : provide only some of the marketing functions.
a) Cash

and Carry wholesaler : customers pay for and make their their own arrangements for transportation. No credit is extended. Mainly B2B. b) Truck Jobbers : Operate rolling
warehouses and sell a limited line of products directly from their trucks to their customers. Follow regular routes, primarily perishable products. Egs : Vegetables, Fruits, Flowers

Types of Wholesalers ( Contd )

( 2 ) Limited Service Merchant -- Wholesalers : c) Drop Shippers or Desk Jobbers : take title, negotiate sales but do not take possession. d) Mail Order Wholesalers : use catalogues instead of sales force to sell.

Types of Wholesalers ( Contd ) Agents & Brokers :

Negotiate purchases, expedite sales but do not take title. They are Functional Middlemen who bring buyers and sellers together. Compensated with commission / brokerage. Agents represent buyers and sellers on a long term basis. Brokers represent buyers and sellers on a temporary basis.

Types of Agents & Brokers

1. Manufacturers Agent : Represent two or more sellers and offer customers complete lines. Handle non- competing or complementary products & have written agreements with the manufacturers. 2. Selling Agent : market either all specified line or manufacturers entire output. Perform every wholesaling activity except taking title of the product. Used in place of a marketing department. Represent non-competing product lines.

Types of Agents & Brokers ( Contd.. )

3. Commission Merchant : focus primarily on the selling task. Receive goods on consignment from local sellers and negotiate sales in large central markets. 4. Auction Companies : provide storage for inspection. Sales made to the highest bidder. 5. Brokers : negotiate exchanges & perform the fewest intermediary functions. Assume no risk.

Types of Wholesalers ( Contd )

Manufacturers Sales Branches & Sales Offices : are manufacturer owned & resemble merchant wholesalers operations. Sales Branches : sell product & provide support services to manufacturers sales forces
Sales Office : are normally associated

with Agents. Like Sales Branches, they are located away from a manufacturing plant & do not carry any inventory.

Wholesalers Responsibilities

in large quantities and then sell in smaller quantities Deliver goods Stock in one place a variety of goods Promote products to retailers Provide market information for both producers and retailers Provide financial aid to Retailers in the form of delayed billing, loans, inventory management, etc
15 | 401

Wholesalers Services to Manufacturers

Provide instant sales forces to manufacturers Reduce manufacturers inventory costs by purchasing finished goods in sizable quantities Assume the credit risks associated with selling to retailers Furnish vital market information to the manufacturers
15 | 402

HIERARCHY OF MARKETING SYSTEM With the passage of time and changes in business environment and strategies, marketing channel systems evolve and new Wholesaling & Retailing Institutions appear. The traditional marketing channels include members who are independent entities and no party has complete control over others in the channel system. Each seeks to maximise its own profit goals without much concern for others in the same system.


Some recent changes in channel systems that have emerged include:
1. Vertical Marketing Systems (VMS),

2. Horizontal Marketing Systems (HMS), and 3. Multichannel Marketing Systems(MMS)

{ or Hybrid Systems }

Conventional Distribution Channel Vs. Vertical Marketing Systems

Conventional Marketing Channel Wholesaler Retailer Vertical Marketing Channel Manufacturer





Vertical Marketing Systems (VMS)

Vertical Marketing System refers to an arrangement in which the whole channel focuses on the same target market at the end of the channel.
This includes Producer, Distributors, Wholesalers, & Retailers acting in an integrated manner.

Vertical Marketing Systems (VMS)

In a VMS, any channel member, a

Manufacturer, Distributor, Wholesaler, or a Retailer can become a Channel Captain, who helps direct the activities of the entire channel and tries to eliminate or resolve conflict. The Channel Captain assumes the leadership role because the captain is either the owner, a franchisee, or wields so much power that all others cooperate.

Types of Vertical Marketing Systems

Common Ownership at Different Levels of the Channel


Degree of Direct Control

Contractual Agreements Among Channel Members


Leadership is Assumed by One or a Few Dominant Members


Corporate VMS
Corporate VMS refers to the producers ownership of the entire channel, right from manufacturing to wholesaling & Retailing.
Egs : Vimal Fabrics, Titan Watches, Bata, etc
Manufacturer can accomplish this through vertical integration (acquiring firms at different levels of channel activity). This offers greater buying power, stable sources of supplies, better control of distribution and quality & lower overheads.

Administered VMS
Administered VMS is achieved when some members, because of their size, position and power in the industry, are in a commanding position to secure cooperation and support from resellers at different levels.
Members informally agree to cooperate with each other on matters like routine ordering, sharing inventory & sales information over networks, standardize accounting and integrate their promotional activities.

Administered VMS
The agreement is informal and the members retain some of the flexibility of traditional distribution system. Companies with strong brands command substantial market power & are able to get cooperation from resellers at different levels of distribution.
Egs: Hindustan Unilever Ltd., Procter & Gamble, Maruti Udyog Ltd, ITC, IBM, Sony, TELCO etc.

Contractual VMS
Contractual VMS consists of independent businesses at different levels in the channel including production & distribution, and is most popular. Members agree to cooperate with each other by entering into contract that spells each members rights & obligations and gain economies of size and sales impact.

Contractual VMS can be Franchiser, Wholesaler or Retailer Sponsored, such as Coke, Pepsi ,Body Shop, Shahnaz Herbal,

Vertical Marketing Systems

Type of Channel
Administered Contractual Corporate

Vertical Marketing Systems

Amount of cooperation Control maintained by

Little or none

Some to good
Economic power and leadership

Fairly good to good Contracts

One company ownership




General Florsheim McDonalds Electric

Formal contract governing : Supply Responsibilities Division of profits Franchisors provide : Use of trademark & Access to product Co-operative advertising Training & Standardized operating procedures Site selection & Plant design Financing, etc

Vertical Marketing System


The franchisor permits the franchise to use its trademark, name and advertising. In U.S.A. 700,000 franchise ~about $ 850 billion sales Franchised hotels account ~ 65 percent of room supply.
Starting a new business: 20 percent chance for survival Buying an existing business: a 70 percent chance for survival Buying a franchise: a 90 percent chance for survival

Hotel franchises: Choice Hotels, Holiday Inns, Sheraton Inns, Hilton inns

Restaurant franchises: Mc Donalds, Burger King, KFC, Pizza Hut, T.G.I. Franchises

Vertical Marketing System


1. Capital for growth 2. Faster growth 3. Additional management 4. Additional income

1. Lower potential profits 2. Controlling service quality 3. Controlling firm image

1. Lower risk 1. Franchisee fees 2. Established brand name 2. Lack of freedom 3. Successful business plan 3. Controlled by franchisor 4. Expert assistance

Horizontal Marketing System

Horizontal marketing system occurs when two or more related or unrelated companies working at the same level come together to exploit marketing opportunities. By coming together they have the option to combine their capital, production capabilities, marketing strengths to gain substantial advantage than by each company working alone.

Horizontal MS
In a Horizontal VMS, the arrangement can be on a temporary or permanent basis. Horizontal marketing system particularly offers efficiencies & economies of scale in promotion, marketing research, and bringing together specialists.
Egs : Credit Card Companies, Banks, Retail Petrol businesses & Consumer Goods companies have joined hands. Auto manufacturers have joined hands with finance institutions to finance customers.

Multi-Channel Marketing System

Companies use two or more channels to distribute same products to the same target market. Some companies use several marketing channels simultaneously to reach diverse target markets. Each channel involves different group of intermediaries. This system is also called Hybrid Channels or Multi-Channels MS or Dual Distribution.

Egs. of Hybrid Channels or MCMS :

1. LG sells its goods through retailers, company shop, and online.

2. Coca Cola supplies direct to McDonalds, and the fast food chain sells no other soft drinks but Coca Cola.

The goal of all channel members is to distribute products profitably and efficiently. However, at times they disagree about the methods to accomplish this goal. It is fairly common among channel members to make little or no effort to cooperate with each other.

Defn.: Channel conflict is a situation in which one channel member perceives another channel member(s) to be engaged in behaviour that prevents or impedes it from achieving its goals. The amount of conflict is, to a large extent, a function of goal incompatibility, domain and differing perceptions of reality.

Channel Conflict Management

To manage conflict, it is first of all necessary to understand the type, cause & intensity of the conflict. Types of Channel Conflict : 1. Vertical Channel Conflict : conflict between the
producer & distributors, or between wholesalers & retailers.

2. Horizontal Channel Conflict : situation

developing between channel members at the same level, such as when one stockiest starts price-cutting and others at the same level start complaining,

3. Multichannel Conflict : results when the producer

has established two or more different channels to sell the product to the same target market.

Causes of Channel Conflicts


Incompatibility : Manufacturer

wants to achieve rapid market growth via lower prices; Retailer interested in large margins Unclear Roles & Rights : Territory boundaries, (who gets credit for sale) Differences in Perception : Optimistic manufacturer, pessimistic retailer Level of Dependence : of Retailer on Manufacturer or vice-versa

Intensity of Conflict
This refers to how serious is the conflict. In some cases, the intensity of conflict might be just minor and at other times, the severity might demand immediate attention from the producer otherwise the consequences might be serious if it is not resolved.
Eg : Managing incidences of price-cutting or territory jumping can be handled relatively easily.

Managing the Channel Conflict

Managing conflict in certain cases may be quite a demanding task. Conflict magnitude can range from minor to serious leading to termination, lawsuits, or company boycotts. The frequency and seriousness of conflict determines how speedily the situation must be managed. Some of the common approaches for effective conflict management are : Regular Communication Forming Dealer Councils Arbitration & Mediation Co-option

Physical Distribution or Outbound Logistics refers to the forward movement of products, services & information from a manufacturer to Its customers, and involves defined network of transportation links, warehousing / storage, and finally delivery at the destination in a cost effective manner within the desired time.
Terms such as Supply Chain Management & Logistics Management are much broader concepts than Physical Distribution.

Physical Distribution System includes Warehouse Management Transportation & Material Handling

Delivery & Storage

Transaction Processing

Cross Docking ( Re-Packing )

Ticketing & Marking ( Labels & Tags )

Inventory Management : involves building

and maintaining enough product assortments to meet the customer demand. Investment in inventory forms a significant part of company assets and affects physical distribution costs in a major way.
Very little inventory can create shortages of products or out-of-stock situation. This is detrimental to company and can lead to brand switching, lower sales, and the most serious consequence of losing customers. When too much inventory of products is carried, particularly of slow moving products, costs and risks of product obsolescence, damage, or pilferage increase. To strike a balance, companies focus on determining when and how much to order.

Inventory Management .
To find out when to order, the marketer must know the order lead time, the usage rate, and the safety stocks required. Order Lead-time refers to average time lapse between placing the order and receiving supplies. The usage rate represents the rate at which the inventory of product gets sold during a specified time period. Buffer Stock is the extra inventory that is maintained to guard against out-of-stock situation from increased demand or to cover longer lead-time than expected. Following formula can be used to calculate when to reorder: Reorder Point = (Order Lead Time Usage Rate) + Buffer Stock

Inventory Management .

EOQ : To determine how much to order, its

necessary to examine inventory carrying costs and order processing costs. Considering both sets of costs determines Economic Order Quantity (EOQ), which is the order size that has the lowest total of both inventory carrying and order processing costs.
However, the aim of minimising total inventory costs must be weighed against meeting or exceeding customer service level objectives.

Inventory Management .
JIT : Just-in-Time approach is a system where-in products arrive as and when they are needed for use in production process or for resale. This allows companies to maintain very low inventory levels and purchases at that time are also in smaller quantities. JIT system reduces physical distribution costs, especially inventory and handling related costs.

Physical Distribution (contd) Materials Handling : deals with the

physical handling of goods, in warehousing & during transportation. Physical handling of products is necessary for efficient warehouse functions & transportation from the point of manufacture to final points of consumption. The nature of product often influences how a product should be moved and stored.

Materials Handling (contd)

Techniques & procedures used for material handling can increase warehouse capacity, reduce the number of times a product is handled, improve customer service and their satisfaction. Various activities such as packaging, loading, movement, labelling systems must be coordinated to reduce costs and increase customer value . Equipments such as Cranes, Conveyors, Fork-Lifts, Stackers, etc are used in Factories & Warehouses for Material Handling.

Warehousing is an important physical distribution function and refers to the design & operation of facilities for storing and moving goods. Warehousing functions offer time utility and help companies to adjust for dissimilar production & consumption rates. Especially, mass produced products create a much greater stock of products than can be sold in the market immediately and companies store excess stocks till the time, customers are ready to buy.

Warehousing activities include : Receiving, Identifying, Sorting, Dispatching, Goods to Storage, Holding Goods, Recalling, Picking & Assembling goods, etc Types of Warehouses : Private Warehouses :- owned and operated by the manufacturer or by another company. Public Warehouses :- Third Party owners offer their services to all firms.

Choice of Warehouses : can

range between Companys Own Dedicated Warehouses or shared space with others in Third Party Owned Warehouses. A company can also decide to have some kind of combination of both. By making the right choices, a company may minimise physical distribution costs.

Companies are concerned with transportation decisions because choices affect the pricing, delivery time & condition of goods when they arrive at destination. There are five main

transportation modes for moving goods that include Railways, Roadways, Waterways, Airways & Pipelines. Each of these offers
certain advantages & disadvantages. Some companies prefer to use a combination of these modes, depending on product nature, delivery schedule, and geographic locations.

Student Activity List out the Advantages & Disadvantages of each mode of Transportation.

Transportation (contd)

Carrier : A firm that offers

transportation services to producers.

Common Carriers : Services are available for

hire to all shippers

Contract Carriers : available for hire by one or

several shippers; not available to the general public Private Carriers : owned and operated by the shipper

Freight Forwarders : Agents who

facilitate the transportation process for shippers by handling the details of the process

Not in BhU Syllabus

A few Slides on Retailing have been included just for Students info - NP

Definition of Retailing
Retailing is the last stage in the distribution process & encompasses all the business activities involved in selling goods & services to Consumers for their personal, family or household use.

Classification of Retailers
1. Store Based & Non-Store Based

Under Store Based (depending on

type of Ownership)

1. Independent Store 2. Chain Store 3. Franchise Store 4. Leased Store 5. Consumer Co-operatives

Classification of Retailers
2. Food Oriented & General Merchandise Retailer: -

1. 2. 3. 4. 5.

Convenience Store Specialty Store Conventional Supermarket Departmental Store Hypermarket


Classification of Retailers (Contd .)

Non - Store Based Retailers ( I ) Traditional :

1. Direct Marketing / Selling 2. Telemarketing 3. Tele-Shopping ( TV ) 4. Network Marketing 5. Vending Machine

( II ) Non Traditional :
1. Internet ( On-Line Shopping ) 2. Video Kiosk / Catalog

Classes of In-Store Retailers

Independent Retailer : A firm that operates only one retail outlet Chain Retailer : A company that operates more than one retail outlet Department Store : A retail store that (1) employs 25 or more persons and (2) sells at least home furnishing, appliances, family apparel, and household linens and dry goods, each in a different parts of the store. Discount Store : A self-service, general merchandise outlet that sells products at lowerthan-usual prices

Classes of In-Store Retailers (contd) Convenience Store : A small food store that sells a limited variety of products but remains open well beyond normal business hours. Catalog Showroom : A retail outlet that displays well-known brands and sells them at discount prices through catalogs within the store Warehouse Showroom : A retail facility in a large, low-cost building with large onpremises inventories and minimal service

Classes of In-Store Retailers (contd)

Supermarket : A large self-service store

that sells primarily food and household products Superstore : A large retail store that carries not only food and nonfood products ordinarily found in supermarkets but also additional product lines Warehouse Club : A large-scale, members-only establishment that combines features of cash-and-carry wholesaling with discount retailing

Global Players in Retailing

Wal-Mart, Kmart, Target, Woolworth, Wendy, Tesco, Carrefour, Safeway, Home Depot, Costco, Toys R Us, KFC, McDonalds, Pizza Hut, Starbucks, Metro, Barista, Sears, Burger King, Ikea, etc

Indian Retail Companies


MARKET : Big Bazaar, Spencers, Vishal Retail ,

Sparr, Magnet, Star India Bazaar, Shop Rite, etc

DEPARTMENT STORES : Shoppers Stop, Pantaloons,

Lifestyle, Globus, Westside, etc


Nilgiris, Food World, Subhishka, Reliance Fresh, Spencers

SPECIALITY STORES : Bata, Titan, Tanishq, etc SPECIALITY FORMATS : Archies, Landmark, Planet M, FURNITURE RETAILING : Concept, Living Room, Style- Spa,


Vijay Sales, etc

Unit - IV

Marketing Communication Process & Mix; Advertising, Sales Promotion & Public Relation decisions. Direct Marketing - Growth, Benefits & Channels; Telemarketing; Sales Force : Objectives, Structure, Size And Compensation.


What is Communication ?
It is the transfer & understanding of meaning.
Transfer means the message was received in a form that can be interpreted by the receiver. Understanding the message is not the same as the receiver agreeing with the message.

Communication Communication

Communication between two or more people


All the patterns, network, and systems of communications within an organization

Marketing Communication Process

The Communication Process is a two-way process involves the following elements : 1. Source or Sender 2. Encoding 3. Medium 4. Receiver 5. Decoding 6. Response or Feed back. 7. Noise or Disturbance.


Components in the Communication Process




4. 5.

Source or Sender : Presumably a person who creates a message. Message : which is both sent by the information source and received by the destination. Transmitter : encompasses a wide range of transmitters. The simplest transmission system, that associated with face-to-face communication, has at least two layers of transmission. Signal : which flows through a channel. Channel : or Medium of Communication includes air (TV), electricity, radio, paper & postal systems.

Noise : secondary signals that obscure or confuse the signal carried. Today we use noise more as a metaphor for problems associated with effective listening. 7. Destination or Receiver : is the person or group who receive, understand and processes the message. 8. Feed Back : is the acknowledgement or reply or from the Receiver back to the Sender, for having received & understood the message.

Promotional Decisions
SL. No.

Promotion Decision
Who is the target audience ?

Element in the Comnctn. Model

1. 2. 3. 4. 5. 6.

Receiver Responses & What responses are sought ? Decoding What message should be Message & developed ? Encoding What media should be Media selected ? What source should be Sender chosen? What feedback should be Feedback collected ?

The Promotion Mix

Promotion serves three essential roles : It informs, persuades & reminds existing & prospective customers about the company and its products / services. The Promotion-Mix is a specific mix of Advertising, Personal Selling, Sales Promotion, Public Relations & Direct Marketing tools that a company uses to pursue its marketing objectives.

Promotion Mix

Main Elements of the Promotion Mix

1. Advertising : Any paid form of non-personal presentation & promotion of ideas, goods or services by an identified sponsor.
Different types of Media used in Advertising : Print Media, Radio, Television, Billboards, Direct Mail, Brochures / Catalogs, Signs, Posters, In-store Displays, Motion Pictures, Web Pages, Banner Ads, E-mails, etc.

2. Personal Selling: Setting sales

appointments & meetings, home parties, making presentations and any type of one-to-one communication, to inform & persuade your prospects / customers & strengthen your relationship with them.
Personal Selling occurs where an individual Salesperson sells a product, service or an idea to a prospect / customer. Sales-People match the benefits of their offering to the specific needs of a customer. Today, Personal Selling involves the development of longstanding customer relationships. Egs : Sales Presentations / Meetings , Telemarketing, etc

3. Sales Promotions : Incentives designed to stimulate the purchase or sale of a product, usually in the short term.
Egs: Coupons, Sweepstakes, Contests, Samples, Rebates,, Trade Shows, Exhibitions, etc.

4. Public Relations : Paid form of presenting

the company or its products/services/ideas in a positive light by planting significant news about it or a favorable presentation of it in the media to build trust and goodwill with its stake holders.
Egs: Articles/Reports in Newspapers, Magazines, TV &/or Radio, Charitable Contributions, Event Sponsorship, 462 Issue advertising, Corporate Social Responsibilities, etc.

5. Publicity: is a form of non-personal, mass communication involving the organisation &/or its ideas / products & services not paid for by the organisation. It occurs usually in the form of Editorials, News Story, TV Talk Shows, Films, etc. 6. Direct Marketing: is the use of mail / email, catalogs, etc in order to reach targeted audiences to increase sales and test new products &/or alternate marketing tactics.

Integrated Marketing Communications

is a management concept that is designed to make all aspects of marketing communication such as advertising, sales promotion, public relations, direct marketing, etc work together as a unified force, rather than permitting each to work in isolation. IMC ensures that all forms of marketing communications and messages are carefully linked together, so that they work together in harmony & convey the desired message to the target customers.

Factors Leading to IMC

Two major factors are changing the face of today's marketing communications :

markets have fragmented, which is why marketers are shifting away from mass marketing & moving toward focused programs. in computer & IT are speeding the movement toward segmented marketing. New technologies have provided means to reach smaller segments with tailored messages.


Some of these changes include :

Changing technology, which has made it possible for media organizations to identify, segment, select, and attract smaller audiences for their respective vehicles. The trend toward de-regulation that has allowed for increased competition within many industries, such as air travel, banking, and utilities. Globalization of the marketplace, which causes promotional efforts, including advertising, sales promotion, public relations and personal selling, to be implemented throughout a worldwide market. Customisation for different cultures is key to competing successfully in this arena. Changes in the demographic & psychographic profiles of today's consumers, that have paved the way for new product category opportunities.

Advertising is the structural and composed nonpersonal communication of information, usually paid for and usually persuasive nature, in about organization, products, services, ideas by identified sponsors through various media. An ad campaign includes a series of ads placed in different media based on an analysis of marketing and communications situations.
Examples: Print Media, Radio, Television, Billboards, Direct Mail, Brochures / Catalogs, Signs, In-store Displays, Posters, Motion 467 Pictures, Web Pages, Banner Ads, E-mails, etc.

The Functions of Advertising

Builds awareness of products & brands Provides product & brand information Creates a brand image Persuades people Provides incentives to take action Provides brand reminders Reinforces past purchases and brand


How Advertising Works ?

The marketer can also be seeking a cognitive, effective or behavioural response from the consumer through the process of advertising. The marketer has to study the present state of the consumers' mind in terms of its knowledge about the organisation and its products and also the attitude towards them. The advertisement works in the consumers mind in a Response Hierarchy Model. It is assumed that the buyer, after being exposed to the advertisement, passes through a cognitive, effective and behavioural state in that order. Four best known

Response Hierarchy Models are : 1. AIDAS Model 2. Hierarchy of Effects Model 3. Innovation- Adoption Model 4. Communications Model

AIDA is an acronym used in marketing that describes a common list of events that may be undergone when a person is selling a product or service. { The term & approach
are attributed to American advertising & sales pioneer, E. St. Elmo Lewis. According to Lewis, the most successful salespeople followed a hierarchical, four layer process using the four cognitive phases that buyers follow when accepting a new idea or purchasing a new product. }

A - Attention (Awareness): Attract the attention of the customer. I - Interest: Raise customer interest by focusing on and demonstrating advantages and benefits (instead of
focusing on features, as in traditional advertising).

D - Desire: Convince customers that they want & desire the product or service and that it will satisfy their needs. A - Action: Lead customers towards taking action i.e. purchasing.

Producing An Effective Advertisement for Print, Broadcast or Electronic Media

Copy : The Verbal Appeal Art : The Visual Appeal Auditory Appeal





Steps in Advertising - Planning

1. Identify the target audiences
2. 3. 4. 5. 6. Set Advertising Objectives Decide on In-house Advertising or Agency. Establish a tentative Advertising Budget. Consider Co-operative Advertising (partnership). Decide on Advertising Message Strategy:

Message Idea Copy Platform Message or Creative Format

Steps in Advertising - Planning.

7. Select Advertising Media. 8. Decide on timing of advertisements. 9. Pretest Advertisements. 10. Prepare final Advertising Plan and Budget. 11. Measure & evaluate Advertising success.


Steps involved in a Advertising Plan :
1. Establishing Advertising Objectives 2. Selecting the Advertising Message 3. Setting the Advertising Budget 4. Developing a Media Strategy 5. Evaluating Advertising Effectiveness.

1. Establishing Advertising Objectives : i. Creating Awareness & Encouraging Information Search

ii. Persuading & Prompting Direct Action iii. Reminding or Reinforcing Attitudes iv. Relating the Product to Needs v. To Modify Attitudes vi. To increase Sales / Market Share

2. Selecting the Advertising Message :

I. II. III. IV. V. VI. Generic Strategy Pre-emptive Strategy Unique Selling Proposition or USP Strategy Brand Image Strategy Positioning Strategy Resonance Strategy


3. Setting the Advertising Budget :

( a ) Methods Used : Objectives. & Task Method / Percentage
of Sales Method / Competitive Parity Method / Affordable Method, Marginal Analysis Method, etc

( b ) Factors influencing the Advertising Budget are:

i. ii. iii. iv.

Stage in the PLC Competition Product Differentiation Market Share

4. Developing a Media Strategy :

i. Determining the Target Audience ii. Media Selection iii. Media Scheduling iv. Media Buying

Categories of Advertising Objectives

Informative / Persuasive / Reminder Advertising 1. Informative Advertising:

To create awareness of the organization. To explain the characteristics of the organization. To correct false impressions about the organization. To reduce peoples apprehensions or fears about visiting the organization. To build (or enhance) the organizations image or position.

Advertising Objectives..

2. Persuasive Advertising :

increase customer preference for the organizations services. To increase customer loyalty to the organization. To encourage customers to switch from using a competitive organization. To convince customers to book at the organization now or in the future. To change customers perceptions.

Advertising Objectives..
3. Reminder Advertising :
To remind customers about where they can

book the organizations services. To remind customers about facilities or services that are unique to the sponsoring organization. To remind customers about when they should book or reserve the organizations services. To remind customers of the existence of the organization.

Difference between Consumer Ads & Trade Advertising

Consumer Advertising : aimed at the

end-customers or consumers, who will actually use products / services being promoted. Trade Advertising : aimed at the marketing intermediaries, such as Wholesalers & Retailers who will distribute the products & influence customers buying decisions.

Advertising Message Strategy

The Advertising Message Strategy describes what is to be communicated & how it is to be communicated. It consists of the : Message Idea : the main theme, appeal, or benefit to be communicated in the message. Copy Platform : a written statement that fully describes the message idea. Message or Creative Format : a broad creative approach used to communicate the message idea to the target audiences.

Advertising Appeals
Appeal is the central idea of an advertisement. An appeal is the earnest request or a plea to the prospects. It is the approach to attract the attention of the consumers To influence consumers feeling towards products, services or concepts

Appeals & Execution Style

Advertising Appeals
The approach used to the The approach used to attractattract attention of consumers the attention of consumers Toinfluence consumer feelings To influence consumer feelings toward a product, toward a product, service or a service or cause cause

Execution Style

The way appeal is turned into an The way anan appeal is turned advertising message into an advertising message The way the message is presented to the consumer

The Creative Strategy must define the Target Audience; Product Concept; Communications Media & the Advertising Message which should be relevant to the target-audience. The Advertising Appeal is the manner in which an advertising message is developed & expressed, to derive a particular consumerresponse or influence decision-making. They can be broadly classified into three categories :

1. Rational or Logical Appeal 2. Emotional Appeal 3. Other Appeals.


Types of Advertising Appeals

Rational/Logical Appeal
Price (Tide)
Quality (BB Tea) Feature (Apple i-Fone)
Competitive Advantage

Emotional Appeal
Humor (Sprite) Fear (Saffola) Music (Airtel) Sex (Axe)

Additional Appeal
Star (ThumsUp) Reminder Advt.
(Vardhman Wools)

Teaser Advt.

(Head & Shoulders) News (Matiz) Product / Service Popularity ( Hero Honda)

Creative Formats in Ads :

1. Animation
2. Slice - of - Life 3. Testimonial 4. Authoritative 5. Demonstration

6. Fantasy
7. Informative

The Creation Stage :

1. Idea Generation : Orientation; Preparation;
Analysis; Ideation; Incubation; Synthesis & Evaluation

2. Copywriting :

Headline; Subhead; Body Copy; Slogan; Logo / Address; Visual Photographs; Computerised Visuals

3. Illustration : Hand-made Paintings; Clip Art;

4. Layout : Thumbnail / Preliminary Layout /

Comprehensive Layout / etc

5. Copy Testing & Diagnosis : Pre-Testing &

Post -Testing

PRE - TESTING : 1. Consumer Jury ( For ranking the various copies ) 2. Rating Scales ( Dimensions such as relevancy, confusion,
entertainment, brand reinforcement etc are numerically rated by respondents & weights are assigned for each dimensions )

3. Portfolio Tests

( Series of Ads are shown & responses are recorded )

4. Psychological Tests 5. Physiological Tests

( Projection Techniques for testing the emotional content in the Ad such as Humour, Fear, Sex Appeal, Nostalgia ) ( Lab Tests & Special Eqpmts are used. Egs : Pupil Dilation, Galvanic Skin Response, )

POST - TESTING : ( To test the Effectiveness of the Ads )

1. Recall Tests ( Aided & Unaided )

2. Recognition Tests

Media Planning : is a process of designing a

Course of action that shows how advertising time & space will be used to contribute to the achievement of Advertising & Marketing Objectives. It consists of four key steps :
1. 2. 3. 4.

Environmental Analysis Setting up of Media Objectives

Reach (C/R) / Frequency / Continuity (C/P/D) / Costs

Developing the Media Strategy

Target Audience / Media Budgeting, Selection & Scheduling

Implementation & Follow-up


Advertising Media Selection Considerations


markets and their reading, viewing, and listening habits. Positioning approach, promotional goals, and advertising objectives. Media evaluation criteria. Relative strengths and weaknesses of each media alternative. Creative requirements. Competitive media placements. Approximate total advertising budget available.

Media Evaluation Criteria



Lead time and flexibility.

Clutter and dominance.

Message permanence.

Persuasive impact and mood.

Sales Promotions


Sales Promotions: are incentives

designed to stimulate the purchase or sale of a product, usually in the short term.
Egs: Coupons, Sweepstakes, Contests, Product Samples, Rebates, Exhibitions, Trade Shows, Trade-ins, Premiums, etc.

Sales Promotions are of two types :

1. Trade Promotions
2. Consumer Promotions

Trade Promotions are targeted at Channel members (Wholesalers & Retailers) to motivate them to carry the companys products & promote them more effectively / aggressively. Trade Promotions assist in implementing the companys Push Strategy. Consumer Promotions are targeted at consumers in order to motivate / induce them to buy the companys products. Consumer Promotions assist in implementing the companys Pull Strategy.

Sales Promotion Tactics

Samples Coupons Cash refund offers Price offs Premiums Prizes Patronage rewards Free trials

Price offs Allowances Free goods Sales contests Trade shows Specialty advertising


Sales Promotion Strategies : There are three types of sales promotion strategies: Push, Pull, or a Combination of the two.
A Push Strategy involves convincing & coaxing trade intermediary channel members to "push" the product through the distribution channels to the ultimate consumer via promotions and personal selling efforts.
The company promotes the product through a wholesaler who in turn promotes it to another reseller or the final consumer. Tradepromotion objectives are to persuade retailers or wholesalers to carry a brand, give the brand shelf space, promote the brand in advertising, and/or push a brand to final consumers. Typical tactics employed in Push Strategy are: Trade Allowances, Buy-back Guarantees, Trade Contests, Special Discounts, Displays / Co-operative Advertising, Training, etc.

A Pull Strategy attempts to get consumers to "pull" the product from the manufacturer through the marketing channel. The company focuses its marketing communications efforts on consumers in the hope that it stimulates interest and demand for the product at the end-user level.

This strategy is often employed if distributors are reluctant to carry a product. Consumer-Promotion objectives are to entice consumers to try a new product, lure customers away from competitors products, get consumers to "load up" on a mature product, hold & reward loyal customers, and build consumer relationships.

Typical tactics employed in Pull Strategy are: Samples, Coupons, Cash refunds, Rebates, Loyalty Programs, Rewards, Bonus Packs, Contests, Sweepstakes, Premiums, Point-ofPurchase (POP) Displays, etc.
Car manufacturers / dealers often provide a good example of a Combination Strategy. If you pay attention to car dealers' advertising, you will often hear them speak of cash-back offers and dealer incentives.

Factors behind increasing Importance of Sales Promotions :

1. Growth of organised Retail Sector

2. Increase in Competition
3. Maturing Markets

4. Introduction of Private Label Brands

5. Similarities in Competing Brands 6. Frequent Brand Switching 7. Decline in effectiveness of Advertising 8. Consumer Preference to Promotional Offers

9. Short - term focus of Companies


Objectives of Consumer Promotions :

1. To encourage trial by new customers. 2. To improve the sales of existing products.

3. To increase brand loyalty of the customers.

4. To build / enhance Brand-Equity.

Objectives of Trade Promotions :

1. To secure the support of channel-members for

new product launch. 2. To ensure the support of channel-members for existing products. 3. To shift the inventory to the Wholesalers & Retailers.

Public are the stakeholders of an organization. PR is proactive and future orientated & has the goal of building and maintaining a positive perception of an organisation in the mind of its publics. This is often referred to as Goodwill.


PR activities are undertaken by big companies & Corporate Houses to have a favourable public image & to garner support for the various projects/programs undertaken by them. DEFN : Public Relations is the deliberate, planned & sustained effort to establish & maintain mutual understanding between an organization & its public. Types of PR :
1. 2.

Corporate Public Relations Marketing Public Relations


Functions of Public Relations 1. Press relations or press agentry. 2. Product publicity. 3. Public affairs. 4. Lobbying. 5. Investor relations.

Tools of Public Relations

i. News. ii. Speeches. iii. Special Events. iv. Written Materials (such as annual reports, brochures, articles, company newsletters & magazines). v. Audiovisual Materials (such as films, slide-and-sound programs, video and audio cassettes). vi. Corporate Identity Materials (such as logos, stationery,
brochures, signs, business forms, business cards, buildings, uniforms, and company cars / trucks).

vii. Companies also improve public relations by contributing

time and money to public service and other Corporate Image Building activities.

Direct Marketing
Direct Marketing is about business organisations seeking a relationship with their customers without going through an agent/consultant or a retail outlet. It involves using marketing communications through telemarketing, direct-mail & internet to inform & / or persuade customers, with the aim of providing customized services through direct interaction with the customers & to obtain immediate & measurable responses.
Direct Selling is the direct personal presentation, demonstration & sale of products / services to consumers, usually in their homes or at their jobs. Direct Selling is a retail channel for the distribution of goods / services, by selling products, person-toperson away from a fixed retail location.

Advantages of Direct Marketing :

1. Customization
2. Selective Reach 3. Response Driven 4. Effectiveness can be measured 5. Edge over Competitors

Disadvantages of Direct Marketing :

1. Rejected easily as Junk Mail / Spam 2. Can be Expensive

Plan for Direct-Marketing

For successful implementation of Direct-Marketing, marketers must : Establish Objectives, Specify Target Market, Select suitable DM - Strategies, & Set Evaluation Criteria.


According to Edward L. Nash, there are five important decision areas in Direct Marketing :

Product, offer, medium, distribution method & creative strategy.

The common approaches are : 1. One-Step Approach 2. Two-Step Approach 3. Direct Mail 4. Catalogues 5. Use more of Broadcast Media & less of Print Media

Tele - Marketing
Direct Marketing through telephone is called Telemarketing. It gives the marketer a better chance of influencing the prospect and win a customer or for screening process.
Typical Telemarketing Companies hire several telephone-callers, mostly girls, or operate through hired agents. Call Centres have become a real arena of telemarketing activity. Several teams of 5 to 6 members are formed and for each team there is a supervisor. Individual team members sit in front of a computer terminal wearing a headset. They call different telephone numbers from a list and present the sales talk based on pre-tested script and update information on the computer screen.

Scope of Telemarketing
Customer Service Prospecting and Lead Qualification Account Management Promotion Support

Companies provide customers with a number they can call if they have questions. Firms are taking a proactive approach to prospecting by having telemarketers call prospects or qualify them for face-to-face selling. Selling secondary product lines or service small customers by phone, thereby freeing their salespeople to concentrate on larger customers & strategic product lines. Develop newspaper & magazine Ads. that feature either a local or an 800 number to get additional product information or place an order.

Telemarketing Advantages & Challenges

Advantages :
Low cost per sales call
Profitably serve small to medium customers

Speed/time saving of telephone ordering

Challenges :

Acceptance by field salespeople

Management Role of the Internet

Personal Selling
Personal Selling is the process of using personal communication to inform & persuade people to buy products / services.
All the other elements of the Promotion Mix are targeted at the mass market, but Personal Selling aims at specific customers & allows a two way communication.

Objectives of Personal Selling

1. Building Product Awareness 2. Creating Interest 3. Providing Information

4. Stimulating Demand 5. Reinforcing the Brand.


Advantages of Personal Selling:

1. Most effective MC tool since it targets 2.



individual or a small group of customers. Can be customized as per requirement Highest Impact on customers preferences & attitudes. Helps in PR. Highly interactive with customers Most effective in building Long-term relationships with customers Can get instant feed-back on companys products & lots of information about competitors marketing strategies.

Dis - Advantages of Personal Selling :

1. Most Expensive in terms of average cost

2. Very Limited Reach

3. Dependent on Sales Persons abilities &

approach. Hence Company has lesser control 4. Chances of confusing / irritating the customer. Hence can have negative impact at times 5. Often creates conflicts between Sales & Marketing / other departments

The job description of the salesperson is to create and keep customers. The measure of effectiveness of a salesperson is how many new customers he / she creates or re-sales they generate, in any given time period. Everything else that a salesperson does is secondary. Therefore, the only time a sales person is working is when he is face-to-face with a prospect or customer.

Types of Personal Selling :

a. Service Selling b. Developmental Selling
Classification depending upon on the type of Customer :

1. Retail Selling 2. Trade Selling 3. Business to Business Selling



Respond to already committed customers THE SELLING FUNCTION

Do not directly receive orders- talk to specifiers rather than buyers Attempt to persuade customers to place an order

Order- takers

Order- creators Front-line sales people

Order- getters

Sales support people

Consum er sales people

Inside ordertakers

Delivery sales people

Outside ordertakers

Missionary sales people

New business

Merchanisers Organisational

sales people

Tech support sales people

sales people

Roles & Responsibilities of Sales Personnel :

1. Order Taking [ Inside Order Taking / Outside Order Taking ] 2. Order Getting

3. Order Supporting [ Missionary Sales People & Technical Specialists ] 4. Various Other Roles :

i. CRM ii. Market Intelligence iii. Market / Business Analyst iv. Sales Team Coordinator v. Customer Support / Service Provider



Determining sales force objectives and goals Finalizing sales force organization, size, territory & quota Forecasting & Budgeting sales Selecting, recruiting & training of the sales force Motivating & Leading the sales force Designing compensation-plan & control systems Designing career growth plans and building relationship strategies with key customers

AIDA Model
AIDA ( or AIDAS ) is an acronym used in marketing
that describes the stages thro which a person goes during the selling process of a product or service: A - Attention : attract the attention of the customer. I - Interest : raise customer interest by focusing on and

demonstrating advantages and benefits (instead of focusing on features, as in traditional advertising). D - Desire : convince customers that they want and desire the product or service and that it will satisfy their needs. A - Action : lead customers towards taking action of purchasing. In recent years, another letter as been added to this model to form AIDA(S): S - Satisfaction : satisfy the customer so they become a repeat customer and give positive WOM about the product.

The Personal Selling Process 1. Prospecting 2. Pre - Approach 3. Approach 4. Presentation 5. Handling Objections 6. Closing the Sale 7. Post-Sale Follow-up.

1. Prospecting
Prospecting refers to identifying and developing a list of potential clients ( Leads ). Sales people can seek the names of prospects from a variety of sources including trade shows, commercially-available databases or mail lists, company sales records and in-house databases, website registrations, public records, referrals, directories and a wide variety of other sources. Prospecting activities should be structured so that they identify only potential clients who fit the profile and are able, willing and authorized to buy the product or service.

2. Pre - Approach
During the Pre-approach phase of the Personal Selling process, sales professionals try to understand the prospect's current needs, current use of brands and feelings about all available brands, as well as identify key decision makers, review account histories (if any), assess product needs, plan/create a sales presentation to address the identified and likely concerns of the prospect and set call objectives.

3. Approach
This is the point of the selling process where the sales professional meets and greets the prospect, provides an introduction, establishes rapport that sets the foundation of the relationship, and asks open-ended questions to learn more about the prospect and his or her needs.

4. Presentation
During the presentation part of the selling process, the sales professional tells that product "story" in a way that speaks directly to the identified needs and wants of the prospect. A highly customized presentation is the key component of this step. At this point in the process, prospects are often allowed to hold and/or inspect the product and the sales professional may also actually demonstrate the product. Audio visual presentations and/or slide presentations may be incorporated at this stage and this is usually when sales brochures or booklets are presented to the prospect.

5. Handling Objections
When prospects offer objections, it often signals that they need and want to hear more in order to make a fully-informed decision. Uncovering objections, asking clarifying questions, and overcoming objections is a critical part of training for professional sellers and is a skill area that must be continually developed because there will always be objections.

6. Closing the Sale

Although technically "closing" a sale happens when products or services are delivered to the customer's satisfaction and payment is received, but for practical purposes one can define Closing as Asking for the Order and adequately addressing any final objections or obstacles.-------------------------------------------------. Too many sales professionals are either weak or too aggressive when it comes to closing. If you are closing a sale, be sure to ask for the order. If the prospect gives an answer other than "yes", it may be a good opportunity to identify new objections and continue selling.

7. Post-Sale Follow-up
After an order is received, it is in the best interest of everyone involved for the sales person to follow-up with the prospect to make sure the product was received in the proper condition, at the right time, installed properly, proper training delivered, and that the entire process was acceptable to the customer.
This is a critical step in creating customer satisfaction and building long-term relationships with customers.

Sales Tips
1. Plan your Sales Call diligently. 2. Be sincere with your prospects. 3. Listen to your prospects carefully.

Prospects are not really bothered about what you think is important, they want to know that you understand their needs and their problems. 4. Ask a lot of questions tactfully & find out what your prospects want.

5. You must be able to : a. Demonstrate to your prospects that you understand their needs or problems. b. Communicate the value of your product or services to your prospect powerfully. 6. "Listen to understand, not to respond." You should listen for information or clues the customer is telling us, anything from their successes & obstacles, to stories about their children or hobbies. All this will help in the selling process. You should also be listening for emotional clues about how they feel about your product or service or any fears they may have with moving forward.


Learn to empathize : Along with the ability to

listen to your prospects, you should also be able to understand their needs and problems.

Show personal interest in the prospects ideas. Help them find what they are looking for. 9. Answer your prospects queries patiently & honestly. Remember the Golden Rule KISS ( Keep It Short & Straight ). 10. Never ever get into arguments & do not mislead your prospects / customers. 11. Always keep your promises, and follow up on your commitments. Walk the talk !

Sales Tips ( Contd )

12. The close of the sale is not the end, but just the beginning of the relationship. 13. Have a strong desire to learn something new in sales and personal development. Please

understand that sales is always evolving and it is extremely essential to constantly update your knowledge / information & hone your communication skills. 14. Never take it personally when someone provides you with feedback or a better approach. One should always be open to new ideas & ways to improve your performance.

15. Put aside your fears and problems & sound

enthusiastic / energized. This will be attractive to your prospects and encourage them to want to build a relationship with you. 16. Have a positive attitude under all circumstances & never give up. 17. Your job is to continue to find those businesses who are the right customers. Also, spend most of your time with the prospects that have the greatest chance of becoming a customer. 18. Be enthusiastic / confident & get into the 20% Club !

Selling can be fun, if U have the right attitude !


Sales Force Management

Designing Sales force Strategy & Structure

Recruiting & Selecting Salespeople Training Salespeople Compensating Salespeople

Leading & Motivating Salespeople

Evaluating 536 Salespeople

1. Sales Planning : Forecasting & Budgeting 2. Organising Sales : Recruiting & Selecting
Sales Personnel, Territory Allocation, etc

3. Directing Sales : Training, Fixing Quotas &

Targets, Motivating & Leading.

4. Controlling the Sales Force : Incentive,

Compensation, Sales Meeting, etc

Sales Forecasting is the art & science that predicts the likelihood of economic activity on the basis of certain assumptions. The process of estimating the future sales, based on past performance is referred to as Sales Forecasting. The various steps in Sales Forecasting are :
Defining the objectives to be achieved Dividing the market territory into homogenous groups Analysing the importance of various factors to be studied for sales forecasting & selecting the Forecasting method Collecting, Analysing & Drawing conclusions from the related information. Implementing the decision taken, Reviewing & Revising sales forecasting techniques from time to time.


While planning for the future, the Sales Manager has to develop a baseline sales figure. The baseline sales figure is a forecast of future sales, and is derived from available past and present sales data or records.
Certain assumptions are also incorporated in the forecast. Typical assumptions are that sales will follow historical trends, business cycles (booms or recessions), or rising & falling market shares.

1. Sales Forecasting Techniques:
Some of the important & popularly used techniques of Sales Forecasting are :
a) Time Series Analysis : uses historical sales data
to predict future sales.

b) Quantitative or Statistical Methods :

Least Squares Method; Correlation Analysis; Regression Analysis; Statistical Demand Analysis

c) Test Marketing : short-term forecast for the markets

covered based on sample size

d) Composite Sales Force Opinion e) Experts Opinion : Delphi Method

The Sales Budget is a statement of projected sales revenue & selling expenses.
The budget section on planned sales volume is presented in considerable detail. It shows total unit sales, unit sales of each product, unit sales by sales territory or region, unit sales by months or quarters, and unit sales by class of account. A systematic break-up of total unit sales by regions, quarter-wise, and by class of account is depicted in the figures.


1. Mechanism of Control : The Sales Budget is a composite of sales, expenses, and profit goals for various sales units. It also measures the progress & performance of individual sales personnel, sales regions, products, marketing channels, and customers. These evaluations identify variances and weaknesses, thus enabling Sales Management to make revisions to correct and improve performance. The Sales Budget, therefore, acts as a control for sales volume, selling expenses & net profit.


2. Instrument of planning : The Budgeting

process requires a complex sequence of planning decisions by determining ways and means for the business to get from where it is, to where it wants to go.

It involves calculation of expenses for converting forecasted sales into actual sales. The sales budget further indicates how the targeted sales volume can be reached while keeping selling expenses at a level that permits achieving the targeted profits.

TRAINING THE SALES FORCE Sales programs have several goals. For sales persons the most important are: They need to know and identify with the company. They need to know the companys products. They need to know customers and competitors characteristics. They need to know how to make effective sales presentations They need to understand field procedures and responsibilities.


The Sales Force Strategy has implications for the sales force structure.
1. Territorial: Each sales representative is assigned an exclusive territory. The allocation of territory could be according to (a) Size & (b) Shape 2. Product: The importance of sales reps knowing their products, developing product divisions, and product management, has led many companies to structure their sales force along product lines 3. Market: Companies often specialize their sales force along industry or customer lines 4. Complex: Combinations of various sales force structures

Organization of the Sales Department

ORGANIZING is a management function which involves grouping tasks, assigning duties, delegating authority / responsibility and allocating resources so that the Organization can carry out its plans in a logical & efficient way. DEPARTMENTATION is the process of dividing the Organization into manageable sub-units.

The Marketing Department may be organized according to Function, Geographic Area, Products & Customer Markets. Global Organization is another consideration for rms that market goods / services in other countries.

Key Elements of Organizational Designs

Work Specialization Chain of Command Span of Control

Authority and Responsibility Centralization vs. Decentralization Departmentalization

IMPORTANCE OF DEPARTMENTATION : 1. Advantages of Specialization 2. Fixation of Responsibility 3. Development of Managers 4. Facility in Appraisal 5. Feeling of Autonomy BASES OF DEPARTMENTATION :

The most commonly used bases are: 1. Function 2. Product 3. Territory 4. Process 5. Customer

Geographic Organization
Geographic Organization : A company selling in a national market often organizes its sales force & marketing functions along geographic lines. The National Sales Manager may supervise four Regional Sales Managers, who each supervise six Zonal Managers, who in turn supervise eight District Sales Managers, who supervise 10 Sales People.

Geographic Organization
VP Marketing

National Sales Manager

Divisional Manager (East)

Divisional Manager (West)

Divisional Manager (North)

Regional Sales Manager

Regional Sales Manager

Regional Sales Manager

District Sales Manager

District Sales Manager

District Sales Manager

Sales Staff (City wise)

Sales Staff (City wise)

Sales Staff (City wise) 550

Organisation by Geographic Area

Serve local needs better Positive competition More effective communication between firm and local customers

Conflict between Local & Central Management Duplication of resources and functions

Sales Force Organization:

Product Specialists

National Sales Manager Eastern Regional Sales Manager Northeast District Sales Manager Western District Sales Manager Southern District Sales Manager

Dictation Equipment Salesperson

Typewriter Salesperson

Minicomputer Salesperson

Programmable Calculator Salesperson

Copier Salesperson

Large Computer Salesperson

Product Specialist Organization: Advantages :

Allows focusing of sales effort
Expertise developed in limited number of products

Disadvantages :
More expensive to operate
May result in duplication of sales calls to clients

Sales Force Organization : Customer


National Sales Manager National Accounts Manager

Eastern Regional Sales Manager

Western District Sales Manager

Manager of Export Sales

Northeast District Sales Manager

Southern District Sales Manager

Salesperson For Educational Institutions

Salesperson for Retail Customers

Salesperson for Government Agencies

Salesperson for Bank Customers

Salesperson for Manufacturers

Salesperson for Wholesale Customers

Customer Specialist Organization Advantages :

Consistent with market driven strategy Salespeople become customer experts

Customer segments receive appropriate resources

Disadvantages :
May conflict with marketing organization
Product expertise may be lacking More expensive

Sales Force Organization:

Functional Specialists

Division Marketing Manager

Industry Sales Manager

Systems Manager

Administrative Manager

Account Executives

(Technical Support)

System Reps

(Training & Installation)

Market Administrative

Organization would seem desirable in a multiproduct, multimarket company. It is a combination of the Product & Functional Organization & is also known as HYBRID form of Organization. This system is costly and often creates conicts because of its system of dual authority / responsibility. It is most suitable for Project Management which requires the skilled services of a Functional Manager as well as the specialized knowledge of the Product Manager.

Matrix Structure :
Vice President Engineering
Vice President Sales and Marketing


Vice President Finance

Vice President Research and Development

Vice President Purchasing

Product A Manager

Product B Manager

Product Team

Product C Manager

Product D Manager

6/14/2011 Two-boss employee


Matrix ( or Project-based) Organisations

A Matrix structure Organisation contains teams of people created from various sections of the business. These teams will be created for the purposes of a specific project and will be led by a project manager. Often the team will only exist for the duration of the project and matrix structures are usually deployed to develop new products and services.

Advantages of a Matrix Structure

1. Uses cross-functional teams. 2. Better communication between functional specialists, opportunity for learning, progress, innovation. 3. Enables organization to maximize its use of skilled professionals, who move from product to product as needed. 4. The dual functional and product focus promotes concern for both cost and quality.


Disadvantages of a Matrix Structure

1. Lacks the advantages of bureaucratic structure role ambiguity, role conflict 2. Conflict between function and product teams over the use of resources, power. 3. Lack of coordination, stress, uncertainty. 4. Over a time, people experience a vacuum of authority and responsibility.

Unit - V
Identifying & analysing competitors; Designing competitive strategies for Leaders, Challengers, Followers & Nichers. Customer Relationship Marketing : Customer -Database, Data Warehousing & Data Mining. Attracting & Retaining Customers; Customerism in India, Controlling of Marketing Efforts. Global Target market selection, Standardization vs Adaptation, Product, Pricing, Distribution & Promotional Policy.


Planning at the corporate, division and business levels is an integral part of planning for the marketing process.
The Marketing Process consists of 1. Analyzing Market Opportunities. 2. Researching & Selecting Target Markets, 3. Designing Marketing Strategies 4. Planning Marketing Programs 5. Organizing & Implementing 6. Controlling the Marketing Effort.


The four steps in the marketing process are:

1. Analyzing Market Opportunities : The marketers initial task is to identify potential long-run opportunities given the companys market experience and core competencies. a) To evaluate its various opportunities, assess buyer wants and needs, and gauge market size, the rm needs a marketing research and information system. b) To study the markets to nd out about buying behavior, perceptions, wants, and needs. Smart rms also pay close attention to competitors and look for major segments within each market that they can protably serve. 2. Developing Marketing Strategies : The marketer prepares a positioning strategy for each new and existing products progress through the life cycle, makes decisions about product lines / branding / designs / services.

3. Planning Marketing Programs : To transform marketing strategy into marketing programs, marketing managers must make basic decisions on marketing expenditures, marketing mix, and marketing allocation. 4. Managing the Marketing Effort : In this step marketers organize the firms marketing resources to implement and control the marketing plan. Because of surprises and disappointments as marketing plans are implemented, the company also needs feedback and control.

Marketing Strategy
Demographic Economic Environment Marketing Channels Technological Natural Environment

Product Suppliers Place Target Price Consumers Promotion Publics

Political Legal Environment


Social Cultural Environment

Marketing Strategies for Competitive Advantage

Market Leader Market Challenger


Market Nicher

Market Follower

Depending upon their market shares in a particular market, companies can be classified as : 1. Leaders 2. Challengers & 3. Followers 4. Nichers
The Challenger companies have to attack the Leader, other comparable firms & smaller firms in their bid to gain market share. Attack has a greater probability of success when there is customer dissatisfaction with the current leader.

DESIGNING COMPETITIVE STRATEGIES Market Leader : the firm with the largest
market share.

Market Challenger : a runner-up firm that

is fighting hard for an increased market share.

Market Follower : another runner-up firm

that is willing to maintain its market share and not rock the boat.

Market Nicher : firms that serve small

market segments not being served by larger firms.

Marketing Firepower
[ Strategies followed in Marketing Warfare: ]
1. Price Discounts: The challenger can sell a comparable product at a lower price. 2. Cheaper Goods: The challenger can come out with economy goods with lesser number of features. The strategy will succeed when there is significant number of buyers in need of lower priced product. 3. Prestige Goods: A challenger can launch a higher quality product with more features.

4. Product Proliferation: The challenger can offer a

greater product variety. 5. Product Innovation: The challenger can come out with an improve product. 6. Service Innovation: Improvement in service offered to the buyers. 7. Distribution Innovation: a new distribution outlet that offers additional convenience to buyers. 8. Process Innovations: The challenger may have done a process innovation that gives better quality or lower cost and it is passed on to buyers. 9. Advertising Innovation: The challenger may have innovative communications strategy that reaches & motivates larger number of potential customers 571 resulting in higher sales.

Marketing Warfare Strategies

Fight for Survival

Marketing Warfare Strategies are a type of strategies used in marketing with a military metaphor to craft a businesses strategy.
They try to draw parallels between Business & Warfare, and then apply the principles of military strategy to business situations. Competing firms considered as analogous to sides in a military conflict, and market share considered as analogous to the territory which is being fought over.
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Sustainable Competitive Advantage

A good Strategist seeks not only to win the hill, but hold on to it. Sustaining Competitive Advantage (SCA) requires erecting barriers against the competition. Competing Firms consider the following:
How you compete ? Basis of competition ? Where you compete ? Whom you are competing against ?

Do not assume the enemy will not come but be prepared for his coming Do not presume he will not attack, but instead make your own position unassailable.

Examples of SCA

For many years, Singapore Airlines were riding on its SCA of having the best in-flight service As more airlines improved their service and narrowed the gap, SIA sought other competitive advantages among which are The most modern fleet Outstanding Service on the Ground A super entertainment system in its cabins Comfort in its First Class cabins at an unparallel level

Which strategy to use?

Depends on your answer to the following: Is it worth fighting? Are you strong enough to fight? How strong is your defense? Do you have any choice but to fight?

Hypothetical Market Structure

& Strategies
Market Nicher Market Leader Market Challenger Market follower

1.Expand Market 2. Defend Market Share 3.Expand Market Share

1. Attack Leader 2. Status Quo



Specific Attack Strategies

Price Discount Cheaper Goods Prestige Goods Product Proliferation Product Innovation Improved Services Distribution Innovation Manufacturing Cost Reduction Intensive Advertising Promotion

Fundamental Principles
Assess the strength of the target competitor. Consider

the amount of support that the target might muster from allies. Choose only one target at a time. Find a weakness in the targets position. Attack at this point. Consider how long it will take for the target to realign their resources so as to reinforce this weak spot. Launch the attack on as narrow a front as possible. Whereas a defender must defend all their borders, an attacker has the advantage of being able to concentrate their forces at one place. Launch the attack quickly. The element of surprise is worth more than a thousand tanks.

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Market Challengers Attack Strategies

1. Frontal Attack : Head on attack. Attacks the opponents strengths rather than its weaknesses. 2. Flanking Attack : Attacking the Leaders weaknesses & unguarded territories. 3. Encirclement Attack : Attempt to capture a wide slice of the enemys territory through a comprehensive Blitz attack. 4. Bypass Attack : Bypassing the main enemy and attacking easier markets (diversifying into unrelated products, new geographical markets, new technologies). 5. Guerrilla Attack : Attacking on different territories of the opponent, with the aim of harassing and demoralize the opponent.

Market Challengers Attack Strategies

(4) Bypass attack (2) Flank attack

(1) Frontal attack Attacker

(3) Encirclement attack

(5) Guerilla attack

With each attack, the Challenger may hope to gain a reasonable increase in its market share. The following attack strategies are possible. 1. Frontal Attack : An attack is called a Frontal
Attack when the opponents strength is challenged head on. In marketing, the fight is done all fronts in market segments and areas where the opponent is currently strong. The general idea is that to win in a frontal attack, the challenger requires three times the fire power of the opposite side. The challenger must be able to deploy superior fire power, such as Price of the product, quality of the product, sales effort, advertising effort, service effort etc. in the markets they are challenging.

Frontal Attack
This is a direct head-on assault. It usually involves

marshaling all the resources including a substantial financial commitment. All parts of the company must be geared up for the assault from marketing to production. It usually involves intensive advertising assaults and often entails developing a new product that is able to attack the target competitors line where it is strong. It often involves an attempt to liberate a sizable portion of the targets customer base.
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Frontal Attacks are Rare

In actuality, Frontal Attacks are rare. There are two reasons for this. Firstly, they are expensive. Many valuable resources will be used and lost in the assault. Secondly, Frontal Attacks are often unsuccessful. If defenders are able to re-deploy their resources in time, the attackers strategic advantage is lost. You will be confronting strength rather than weakness. Also, there are many examples (in both business & warfare) of a dedicated defender being able to hold-off a larger attacker.
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The Frontal Attack Strategy is suitable when : The market is relatively homogeneous Brand Equity is low Customer Loyalty is low Products are poorly differentiated The target competitor has relatively limited resources The attacker has relatively strong resources Egs of Frontal Attack :
a. COKE vs PEPSI b. HLL vs NIRMA c. AMUL vs HLL ( Quality Walls Ice Creams )


2. Flank Attack : Attacking a weak position in the opponents force is known as Flank Attack. Challenger identifies the weak areas in the offering as well as marketing territories of the opponent and attacks those areas. Market share gain in weak territories is the objective, but the opponent is forced to defend his share even in his strong territories and products.

Advantages of Flanking Attack :

The target competitor will not be as concerned about your activities if they occur in market niches that it considers peripheral. It usually involves subtle advertising campaigns & other discrete promotional measures, like personal selling & public relations. It often entails customizing a product for that particular niche. Rather than finding uncontested market niches, the attacker could also look for uncontested geographical areas.



Strategy is designed to pressure the flank of the enemy line so the flank turns inward. You make gains while the enemy line is in chaos. In doing so, you avoid a head-on confrontation with the main force. Flanking Strategies are a type of marketing warfare strategy designed to minimize confrontational losses. Egs of Flanking Attack : a.Woodland Shoes vs Bata b.T-Series vs HMV c.Cannon vs Xerox

3. Envelopment Strategy
Envelopment Strategy, also known as Encirclement Strategy, is a much broader but subtle offensive strategy. It involves encircling the target competitor. This can be done in two ways. a) You could introduce a range of products that are similar to the target product. b) Alternatively, the encirclement can be based on market niches rather than products.
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3. Encirclement

Attack or Envelopment Attack : In this attack both strong areas and weak areas attacked simultaneously. This type of attack is more often done by a Leader when challenged.

Egs of Encirclement Attack : a.Titan vs HMT Watches b. Seiko attacked on fashion, features, user preferences & anything that might interest the consumer c.Sun vs Microsoft ( Java SW )

The Envelopment Strategy is suitable when:

The market is loosely segmented Some segments are relatively free of well endowed competitors The attacker has strong product development resources The attacker has enough resources to operate in multiple segments simultaneously The attacker has a decentralized organizational structure


Envelopment Strategy
Similar Product Strategy:
Each product will liberate some market share from the target competitors product, leaving it weakened, demoralized, and in a state of siege. If it is done stealthily, a full scale confrontation can be avoided.

Market Niche Strategy:

The attacker expands the market niches that surround and encroach on the target competitors market. This encroachment liberates market share from the target.

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4. Guerilla Attack : Guerilla attacks consist of waging small, intermittent attacks on different marketing territories of the opposing firm. The aim is to harass and demoralize the opponent initially before launching the main attack. The concept of Guerrilla Marketing was invented as an unconventional system of promotions that relies on time, energy and imagination rather than a big marketing budget. Egs of Guerilla Attack : a. Big Bazaar Vs Shoppers Stop / Westside / Lifestyle b.Whirlpool vs Godrej (Refrigerators)



Public Service Ad (Dont Speed)


Guerrilla Marketing campaigns are unexpected & unconventional; potentially interactive. Consumers are targeted in unexpected places. The objective of Guerrilla attack is to create a unique, engaging & thought-provoking concept to generate Buzz, consequently turn Viral. Guerrilla Marketing involves unusual approaches such as intercept encounters in public places, street giveaways of products, PR stunts, any unconventional marketing intended to get maximum results from minimal resources.

The term was coined & defined by Jay ConradLevinson in his book Guerrilla Marketing
Guerrilla Marketing is specifically geared for the small business & entrepreneur. It should be based on human psychology rather than experience, judgment & guesswork. Instead of money, the primary investments of marketing should be time, energy, and imagination. The primary statistic to measure your business is the amount of profits, not sales.


5. Bypass Attack : In order to gain market

share, a firm identifies segments not served by the existing firms & makes efforts to gain market share.
Egs of Bypass Attack : a.Pepsi launching Aquafina Mineral Water before Kinley & purchasing Tropicana before Cokes Minute Maid - Pulpy Orange. b.Google vs Yahoo.

Technological Leapfrogging is a Bypass Strategy followed in Hightech Industries. Hence this strategy is also known as Leapfrog Strategy.

Leapfrog Strategy involves bypassing the enemys forces altogether. In the business arena, this involves either developing new technologies or creating new business models. This is a revolutionary strategy that re-writes the rules of the game. This strategy is very effective when it can be realized.
Eg : The introduction of compact disc technology bypassed the established magnetic tape based defenders. The attackers won the war without a single costly battle. 600


Dominant firms want to remain number one. This calls for action on three fronts :
(1) The firm must find ways to expand its total market demand. (2) The firm must protect its current market share through good defensive and offensive actions. (3) The firm can try to increase its market share further, even if market size remains constant.

Offensive & Defensive Strategies :

Offensive Strategies are more important than defensive ones. Market gains are made only by Offensive Strategies. Defensive Strategies are used when needed, but they could at best keep you from falling too far behind.

Market Leader Strategies

Offensive Strategies :
1. Expanding the Total Market : New Users / Uses , More Usage,

2. Protecting Market Share : Innovation / Confrontation 3. Expanding Market Share : Product Innovation, Distribution /
Promotion Innovation, etc

Defensive Strategies : 1. Pre-emptive ( SBI opening several new branches & ATMs )
2. Counteroffensive ( Bajaj vs TVS Motorcycles ) 3. Mobile ( Market Broadening & Diversification ) 4. Contraction ( Strategic withdrawal : Hamam / Akai )

MARKET LEADER STRATEGIES The company can search for new users Market penetration strategy ( who might use it but do not ) New market segment strategy ( those who have never used it ) Geographical expansion strategy ( those who live somewhere else)


Market Broadening: Company shifts its
focus from current product to the underlying generic need. Eg : Petroleum companies sought to recast
themselves into energy companies. They are into coal, power, oil, nuclear, and chemical industries

Market Diversification : Diversification into unrelated industries. Contraction Defense : It is strategic withdrawal. Give up weaker territories and reassign resources to stronger territories


3) Expanding Market Share : Market leaders can improve their profitability by expanding their market share .
Identify the most important variables affecting profits (pursue new marketing strategies) Higher shares tend to produce higher profits under two conditions : (a) unit costs fall with increased market share (b) company offers a superior quality product & charges a premium price, that more than covers the cost of offering higher quality Share gaining companies typically develop and add more new products to their line


Co. increase their product quality relative to competitors Increases in sales force expenditures Increased advertising may also produce share gains Co. that cut their prices more deeply than competitors do not achieve significant market-share gains generally. Presumably, enough rivals may meet the price cuts partly, and others may offer other values to the buyers, so that buyers do not switch to the price cutter.

Market Leaders Defense Strategies

(2) Flank defense


(3) Preemptive defense (4) Counteroffensive defense

(1) Position defense

(6) Contraction defense


(5) Mobile defense


The Market Leader has to use Defensive strategies to reduce the probability of attack, or divert the attacks.

Position Defense: building superior brand power Flank Defense: build outposts to protect a weak front .( bring out new products or products with less price )


Pre emptive Defense: attack before the

enemy starts its offense. i.e. have products of all price types & categories.(Eg: Seiko Watches)

Counter-Offensive Defense: attack the competitor with same strategy as the competitor. Mobile Defense: Leader stretches his domain over new territories it spreads through market broadening and market diversification

Market Follower Strategies

Strategy of Conscious Parallelism Found Where :

Homogeneous Product High Capital Intensity Low Differentiation Options High Price Sensitivity Highly Competitive Industry


A strategy of product imitation might be as profitable as a strategy of product innovation (Innovative Imitation) A market follower must know how to hold current customers and win a fair share of new customers. Each follower tries to bring distinctive advantages to its target market location, services, financing etc. The follower is a major target of attack by challengers. Therefore, the market follower must keep its manufacturing costs low and its product quality and services high. It must also enter new markets as they open up.


Three broad followership strategies can be distinguished : Cloner : emulates the leaders products,

distribution, advertising and so on; (it doesnt originate anything). Imitator : copies some things from the leader but maintains differentiation in terms of packing, advertising, pricing and so on. Adapter : takes the leaders products and adapts and often improves them.


An alternative to being a follower in a large market is to be a leader in a small market or Niche. Smaller firms normally avoid competing with larger firms by targeting small markets of little or no interest to the larger firms. But increasingly, even large firms are setting up Strategic Business Units, or Companies, to serve Niches.

MARKET NICHER STRATEGIES The main point is, that firms with low shares of the total market can be highly profitable through smart niching. Niching is profitable, because the market nicher ends up knowing the target customer group so well that it meets their needs better than other firms that are casually selling to this niche. As a result, the nicher can charge a substantial markup over costs because of the added value. The nicher achieves high margin, whereas the mass marketer achieves high volume.


An ideal Market Niche would have the following characteristics : The Niche is of sufficient size and purchasing power to be profitable The Niche has growth potential The Niche is of negligible interest to major competitors The firm has the required skills and resources to serve the niche in a superior fashion The firm can defend itself against an attacking major competitor through the customer goodwill it has built up


Nichers have three tasks : Creating Niches (e.g. Nike, the athletic
shoe manufacturers)

Expanding Niches
Protecting Niches (Multiple Niching is
preferable to Single Niching)

Market Nicher Strategies

End-user specialist Vertical-level specialist Customer-size specialist Specific-customer specialist Geographic specialist Product or product-line specialist Product-feature specialist Job-shop specialist Quality-price specialist Service specialist Channel specialist


Customer Relationship Management (CRM) is the process of carefully managing detailed information about individual customers and all customer touch points to maximize customer loyalty. It costs a company dramatically less to retain and grow an existing client, than it does to court new ones. It has been found that It is seven times more expensive to acquire a new customer than to keep an existing one.

A Customer Database is an organised collection of comprehensive information about individual customers or prospects that is current, accessible, and actionable for such marketing purposes as lead generations, lead qualifications, sale of a product or service, or maintenance of customer relationship. Database Marketing is the process of building, maintaining, and using customer databases and other databases (products, suppliers, resellers) to contact, transact, and build customer relationship.


Data Mining is the principle of sorting through large amounts of data & picking out relevant information. Customer Relationship Management forms a learning relationship with the customers by noticing their needs & preferences with the use of Data Warehouses and learn how to serve them with the use of Data Mining.

What should be in the Database ?

Demographics : How do you get people

to provide this?

History of contacts Transaction history or summary Response to Marketing Communications : How did you hear
about us (this offer?)

Customer Types
Platinum : Heavy, reliable users, not price-sensitive, try new products, Loyal Gold : Large users who push for price breaks, shop around & not so loyal Iron : Low volume or intermittent users; cost to serve them is quite high Lead : Demanding, want special attention but dont buy much & show no loyalty

Benefits of Implementing CRM

Attracting new customers Quicker and more efficient response to customer leads & customer information Simplification of marketing & sales processes Understanding customer needs Better customer service Building customer loyalty

Drawbacks Of CRM
Organizational wise change of priority to customers Significant investment of time and money Threatens managements control/power struggle Heightens peoples resistance to change Inappropriate integration leads to disaster

CRM : Business Strategy Perspective

Three Key Phases :

1. Customer Acquisition
2. Customer Retention

3. Customer Extension

Three Contextual Factors :

a. Marketing Orientation
b. Value Creation

c. Innovative IT.

CRM as Business Strategy


1. Customer Acquisition

Attracting our Customer :

For the first purchase We have acquired our customer

orientation, innovative IT & value creation is to increase the number of customers that purchase from us for the 627 FIRST TIME

Growth :


2. Customer Retention

Re-purchase :

Our customer returns & buys for a second time This is most likely to be the purchase of a similar product or service, or the next level of product or service.

Growth :
Market orientation, innovative IT & value creation
Aim is to increase the number of customers that purchase from us REGULARLY

3. Customer Extension

Additional, Supplementary Purchases :

Our customers are regularly purchasing We introduce products and services to our loyal customers different from original purchase

Once purchased, our goal is to retain them as customers for the extended products or services

Growth :
Market orientation, innovative IT & value creation

Aim is to increase the number of customers that purchase ADDITIONAL products 629

4. Marketing Orientation
Focused upon the three levels of needs of customers :

Actual, tangible product

Core product and its benefit

Also the augmented product such as a warranty and customer service


Levels of a Product


Levels of Products and Services:

Product Planners need to think on three levels : 1. Core Product (Benefit) : This addresses the
question What the buyer is really buying?. At this level, marketers must define the core: problem-solving benefits or services that consumer seek. Eg: Buyers dont buy Sony Handycam rather they are buying a way to capture moments and memories.

2. Actual Product : At this level, the core benefits

must be turned into actual products. Product planners need to develop product and service features, design, quality level, brand name and packaging.

3. Augmented Product : Finally at this level, the

product planners must bundle the products with services. They must build an augmented product by offering additional consumer services and benefits. Eg: Sony must 632 provide a warranty along with its Handycam.

Three Key Elements

1. Validation : (Correct Data ) Ensuring that the data
you have on your customers is not only correct. Also, in a suitable state for targeting communications programs

2. Discovery : (Use of Data Mining Techniques) :

To find relationships that you did not know existed. Sometimes conventional analysis is impaired by your own natural assumptions and prejudices. Discovery techniques help to solve these issues by starting from ground zero .They simply search for relationships in the database against a set of objectives

3. Action : (Right Communication) : Your customers and

prospects need to have the right messages communicated to them This is done with a Campaign Management tool that can automatically select the right targets and the right messages via the right channels. The responses are then fed back into the Validation process for evaluation and refinement 633

CRM : Processes & Systems


CRM : Processes & Systems

Business starts with the acquisition of customers However, any successful CRM initiative is highly dependent on a solid understanding of customers

1. Understand & Differentiate

Understand :

Demographics, purchase patterns & channels

Segmentation to identify logical unique groups

Primary research to capture needs and attitudes Customer valuation to understand profitability

Differentiate : Based on the value customers are expected to deliver

2. Develop & Customize

Develop : Products, services, channels and media can be customized

based on the needs of quantitative customer segments

Customize : Based on the potential value


delivered by customer

3. Interact & Deliver

Interact :
Not just through marketing, sales & media Distribution, shipping, customer service & online

Deliver :
Delivering value is a cornerstone

Factors including quality, convenience, speed, ease of use, responsiveness & service excellence

4. Acquire & Retain Acquire : Learning about customers

makes it easy to identify those producing the greatest value

Maintain interaction;

Deliver on value
Customers change as they move through differing life stages Modify the service

Pizza Example
Subconscious Expectations :
Pizza with specified toppings Take 10 minutes

Come in a packed box

Remain warm till you reach home

Charges standard and acceptable price

Pizza will taste reasonably good

You will come back is all the above are met !!!

Pizza Example.
If you go regularly :
Rapport with employees Youll forgive if they mess up with one or two expectations

Degree of confidence determines tolerance :

If its your first time & even one expectation is not met, you will never go again

Exceeded Expectations :
Deliver on all expectations Give you a garlic bread FREE !

You will tell everyone about it !!!

Marketing Control
Tool for ensuring that the marketing programmes of the firm are always directed towards its marketing objectives It involves gathering information on marketing performance and comparing it with the planned / budgeted performance. It provides feedback and exercises a restraining or redirecting influence.

Marketing Control
Speedy Feedback & speedy corrective action are the two important factors towards better marketing control. It should monitor all Key Result Areas of Marketing, such as :
1. 2. 3. 4. 5. Sales Volume Market Share Marketing Costs Profitability Productivity wrt channel / promotion / sales force

Tools for Marketing Control

Marketing Audit Market Share Analysis Marketing Cost Analysis Credit Control Profitability Analysis Sales Force productivity Analysis Sales Analysis

Marketing Audit
Marketing Audit is a comprehensive, systematic, independent & periodic examination of the total marketing environment, objectives, strategies and activities of the firm with a view to determining the problem areas and recommending a plan of action to improve the companys marketing performance. What business are we in? Do we understand our business correctly? What business are we getting into? What change is required in our current direction? What are our marketing strategies & plans? Are they effective? Are they correct ? What are the emerging trends in competition and general business environment? What is its effect on us? 643 Are the marketing activities measured periodically?

Marketing Audit - Characteristics

Comprehensive Systematic Independent Periodic & not as a response to a problem situation. Marketing Audit covers :
1. 2. 3. 4. 5. Environment Strategy Systems- MIS Marketing Organization structure & sales force Audit of the 4 Ps

Marketing Cost Analysis

MCA is a tool for Marketing Control Containing marketing costs has become an imperative for optimizing profits. Steps in MCA :
1. Comprehend the components of costs
Distribution costs Channel costs Selling/Administration costs Promotion costs Cost of credit Cost of Marketing information and MR

2. Analyze the costs incurred vs the benefits obtained and wrt to standard costs. Standard costs to be worked out for each marketing function. 3. Determine what corrective action is to be taken. 645

Market Share Analysis

Market Share is the companys sales expressed as a percentage of total market sales. It should be accurately measured Comparison over targeted shares to be made Shares can be worked out at the product level, brand level, national level, regional level. Can be used as a tool for setting targets and sales forecasting.

Credit Control
Firms often extend credit to increase sales. Proper credit policy to be framed else bad debts will increase. Lack of credit control drains away profit. Credit rating of dealers/clients to be done and accordingly only credit is to be extended.

Profitability Analysis
A few products may be profitable while a few others may not be . Products not profitable need to be analyzed and a decision to be taken whether to continue or not. Ratio Analysis :
Gross or Net Profit / Sale Sales / Capital Employed Distribution Expenses / Turnover Promotion Expenses / Turnover Bad Debts / Turnover Ratio

Sales Analysis Measuring actual sales in relation to the goals. Micro sales analysis looks at specific territories, products etc that failed to produce expected results.

Sales force Efficiency

Average No. of calls per sales man per day Sales call time per contact Average revenue per sales call Average cost per sales call Entertainment cost per sales call Percentage of orders per 100 sales calls Number of new customers added in a period Sales force cost as a percentage of sales

Excellence Review
Comparison to best practices Where the company stands relatively. Good / Excellent / Poor rating is assigned.


CSR / Ethics Review

Review of ethical practices Review of CSR objectives Most admired companies abide by a code of serving the customers. Today through internet bad publicity about a company can be spread instantly by an unhappy customer. Microsoft has over 100 anti microsoft sites like Hate Microsoft Boycott microsoft.

Marketing Controller
Expert position Analyses financially the marketing functions


Meaning & Scope of Int. Marketing

International Marketing (IM) or Global Marketing refers to the marketing activities carried out by companies overseas or across national borderlines. This strategy uses an extension of the techniques used in the home country of a firm.
Definition: International Marketing ( IM ) is the performance of business activities that direct the flow of a company's goods & services to consumers or users in more than one nation, profitably.

What is International Trade ?

It is the sum total of the Exports & Imports of all goods and services between countries.
If exports from a country are greater than imports, it results in trade surplus If exports from a country are lower than imports, it results in trade deficit Global linkages bind countries, institutions, and individuals more closely than ever. World trade opens up entirely new business horizons.

Reasons For Marketing Abroad

Financial Gain : Existence of lucrative markets in foreign countries Economies of scale & scope Saturated domestic markets in the home country High R & D costs International Opportunities Less Competition New Trade Agreements

What is Globalization ?
Globalization is a process of interaction & integration among the people, companies & governments of different nations, which is driven by international trade / investment and aided by communication & technology.
This process has effects on the culture, on environment, on political systems, on economic development & prosperity and on human wellbeing in societies around the world.

Difference between Domestic Marketing and International Marketing

The main differences between Domestic Marketing & International Marketing are in the following areas : 1. 2. 3. 4. 5. 6. Different Political System Trade Barriers ( Tariff & Non Tariff ) Different Legal System Different Monetary System & Banking Differences in Economic & Market Conditions Differences in Consumer Behaviour due to differences in Culture, Religion, Language, etc 7. Differences in Mobility Factors of Production & Distribution 8. Differences in Procedures & Documentation, etc

Liberalization, Privatization, Globalization


new economic reforms brought changes in three broad areas, collectively known as Liberalization, Privatization & Globalization.
did away with regulatory hurdles & minimized licensing requirements.



reduced the role of the state and public sector in business. made it easier for the MNCs to operate in India.


Strategic Orientation: EPRG Schema

Generally, four distinctive approaches dominate strategic thinking in International Marketing:
1. Ethnocentric or Domestic Marketing Extension Concept:

Home country marketing practices will succeed elsewhere without adaptation; however, International Marketing is viewed as secondary to domestic operations
2. Polycentric or Multi-Domestic Marketing Concept:

Opposite of Ethnocentrism :
Management of these multinational firms place importance on international operations as a source for profits Management believes that each country is unique & allows each to develop own marketing strategies locally

Strategic Orientation: EPRG Schema

Generally, four distinctive approaches dominate strategic thinking in 3. Regiocentric : International Marketing:

Under Regiocentric view, Company assess markets in terms of regions. A firm treats a region as a uniform market segment & adapts a similar marketing strategy within the region but not across the region.

4. Geocentric:
Under Geocentrism, marketers see the world as one market & develops a standardized marketing strategy for the entire world. The uniform or standardized marketing strategy is used for several countries in the entire world

Mode of Entry into Foreign Markets

After the decision to invest has been made, the exact mode of operation has to be determined. The risks concerning operating in foreign markets is often dependent on the level of control a firm has, coupled with the level of capital expenditure outlaid.
The principal modes of entry into Foreign Markets are :

Exporting ( Direct & Indirect Exporting) Joint Ventures

Direct Investment ( Assembly & Manufacturing )

66 2

Reasons For Exporting

There are many reasons for Exporting :

Economies of Scale Increased Revenue & Profit Increased Productivity Spread Risk-base of Business Smoothing Effect on Order Booking Offset lack of demand for seasonal products New Product Ideas Additional Markets Tax Advantages

Indirect Exports :
Export Houses Buying Offices of Foreign Stores or Governments Complementary Exporting

Direct Exports :
Sales to Final User Overseas Agencies Distributors & Stockists Company Branch Offices Abroad

Direct Exports
Direct Exports involves a firm shipping goods directly to a foreign market. A firm employing Indirect Exports would utilise a export channel or an intermediary, who in turn would disseminate the product in the foreign market. From a company's standpoint, Exporting consists of the least risk. This is so since no capital expenditure, or outlay of company finances on new non-current assets, has necessarily taken place. Thus, the likelihood of sunk costs, or general barriers to exit, is slim. Conversely, a company may possess less control when exporting into a foreign market, due to very little or no control over the supply of the goods within the foreign market.

The Advantages of Exporting are :

manufacturing is home based thus, it is less risky than overseas based gives an opportunity to "learn" overseas markets before making huge investments reduces the potential risks of operating overseas.

The Disadvantage is that one can be at the "mercy" of overseas agents and so the lack of control has to be weighed against the advantages. Eg: In the exporting of African horticultural
products, the Agents & Dutch flower auctions are in a position 666 to dictate terms to the producers.

Methods of Overseas Production

Licensing : Companies with strong brand or
know-how, such as P & G, Disney, etc

Franchising : more of a whole package

Eg : Body Shop, KFC, Pizza Hut, etc

Contract Manufacture: Bulk Items, Components Joint Ventures : Eg: TATA-Docomo in India Wholly Owned Overseas Subsidiaries Organic Growth (Organic Growth is that which
comes from a company's existing businesses, as opposed to growth that comes from Mergers & Acquisitions)

Licensing : is defined as The method of

foreign operation whereby a firm in one country agrees to permit a company in another country to use the trademark, manufacturing, processing, know-how or some other skill provided by the Licensor".
Licensing is quite similar to Franchising" operation. Licensing is comparatively less expensive and has lesser involvement. The only cost is signing the agreement and policing its implementation.

Eg : In Bangalore, Hindustan Coca-Cola Beverages (P) Ltd, have the License to bottle Coca Cola.

Advantages of Licensing :
Good way to start foreign operations and open the door to low risk manufacturing relationships. Linkage of parent and receiving partner interests means both get most out of marketing effort not tied up in foreign operation. Options to buy into partner exist or provision to take royalties in stock.

Disadvantages of Licensing :
Limited form of Participation : to length of agreement, specific product, process or trademark. Potential returns from marketing and manufacturing may be lost. Partner develops know-how and so license is short. Licensees become competitors - overcome by having cross technology transfer deals. Requires considerable fact finding, planning, investigation and interpretation.

Difference between Licensing & Franchising

License Agreement is a business arrangement where a licensor via a monopoly right such as a Patent, a Trade Mark, a design or a copyright has to exclusive right which prevents others from exploiting the idea, design, name or logo commercially. The License allows the licensee to use make and sell, the product or name for a fee without censure. In a Trade Mark License, for example, the licensee will be granted full privilege to use the Trade Mark on goods or services provided that the use is in accordance with agreed signage protocols and quality guidelines. There is usually no training component, product development strategy & limited marketing support. 671

Difference between Licensing & Franchising

Franchise Agreement might be considered to be a more robust arrangement for new entrants into a line of business. The Franchise Agreement covers obligations on both parties and includes a training, mentoring & technical advise component for the franchisee.
A Franchise Agreement is a specialised License and will cover all aspects of user obligations and use provisions.

Joint Ventures ( J V ) : can be defined

as An enterprise in which two or more investors share ownership and control over property rights and operation".
A Joint Venture is a Business Agreement in which parties agree to develop, for a finite time, a new entity and new assets by contributing equity. They exercise control over the enterprise and consequently share revenues, expenses & assets. JVs are a more extensive form of participation than either Exporting or Licensing. Eg : Sony-Ericsson, Tata-Docomo, etc

Advantages of Joint Ventures :

Sharing of risk and ability to combine the local in-depth knowledge with a foreign partner with know-how in technology or process. Joint financial strength May be only means of entry and may be the only source of supply for a third country.


Disadvantages of Joint Ventures :


do not have full control of management. May be impossible to recover capital if need be. There may be serious disagreements on crucial issues such as third party markets to serve. Partners may have different & conflicting views on expected benefits. However if the partners carefully map out in advance what they expect to achieve and how, then many problems can be overcome.


A Strategic Alliance is a relationship between two or more parties to pursue a set of agreed upon goals or to meet a critical business need while remaining independent organizations.
Partners may provide the strategic alliance with resources such as products, distribution channels, manufacturing capability, project funding, capital equipment, knowledge, expertise, or intellectual property. The Alliance is co-operation or collaboration which aims for a synergy where each partner hopes that the benefits from the alliance will be greater than those from individual efforts. The alliance often involves technology transfer, economic specialization, 676 shared expenses and shared risk.

Strategic Alliances
Strategic Alliances can range from loose networking relationships to very tight contractual relationships such as Joint Ventures. Eg : Code Share where airlines of
a similar type sell each others tickets. here is no co-ownership.

Types of Strategic Alliances :

Technology Swaps R&D Exchanges Distribution Relationships Driving Forces or Reasons for Strategic Alliance : Insufficient Resources High R&D Costs Concentration of Firms in Mature Markets Market Access

Direct Investment
In this mode of entry, a company would directly construct a fixed asset within a foreign country, with the aim of manufacturing a product within the overseas market. Assembly denotes the literal assembly of completed parts, to build a completed product. Manufacturing concerns the actual forging of a product from scratch. Car manufacturers often construct all parts within their plants. Direct investment has the most control and the most risk attached. As with any capital expenditure, the ROI ( Return on Investment ) has to be ascertained.


International Marketing Research

Product Research and Development

Export Financing Export Production Product Packaging Pricing Branding Advertising

Sales Promotion
Export Risks Management


Problems of Trading Blocs

Three-faced Competition
Trade Barriers

Different Currencies, Weights & Measures

Custom Formalities Documentation Formalities Difficulties of Distance Diverse Languages, Customs & Traditions High Risks & Uncertainties Foreign Exchange Regulations

Designing the Product

Options available are :

Product Standardization Product Adaptation Product Innovation

Product Standardization

Selling an identical product in all counties One Product, One Message Worldwide.
Egs : Coca Cola, Rayban Sunglasses, Rolex Watches

Least expensive method & enables to earn good name. Economies of scale both in production and marketing Possible if more or less same likes, dislikes, preferences, habits and tastes of buyers in different countries

Product Adaptation

in product as per the needs of local conditions, tastes, likes, dislikes May change brand name from market to market . Eg : Nestle has more than 100 varieties of Nescafe Greater costs both in production and marketing May also result in greater profit Suitable when product performs the same function but use conditions are different

Product Innovation
New item introduced for foreign markets Low cost item for developing countries;

high cost item for developed nations

Backward Invention or Forward Invention

Backward Invention is the reintroduction of

earlier product forms and Forward Invention is developing a new product

Standardization vs Customization
A recurrent theme in Global Marketing is whether companies should aim for a Standardized product offer or Customized or country tailored product strategy.
Standardization means: Offering a uniform product on a regional or world wide basis. Minor alternations are usually made to meet local regulations or market conditions A standardized / uniform product capitalizes on the common platform requirements across countries. Customization means Under customization process management focuses on crossborder differences in the needs and wants of the firms target customers. Under customization, appropriate changes are made to match local market conditions.

Standardization vs Customization While the Standardization has a Product Driven Orientation, it can
lower your costs via mass production.

Customization is inspired by a Market Driven Orientation & can increase customer satisfaction by adapting the product to local needs.


Determine Export Marketing Objectives Collection of Information Analysis of Information Short Listing of Markets Detailed Investigation of Short Listed Markets Selection of Markets Entry in Overseas Markets Follow-up

International Marketing Mix: Price

Factors influencing Pricing Decisions for International Marketing :

cost of manufacturing, distributing & marketing The physical location of production plants Fluctuations in foreign currencies affect pricing The price that the international consumer is willing to pay Business objectives The price that competitors in international markets are already charging.

International Marketing Mix: Price

Price Discrimination: demand elasticity Strategic Pricing : Predatory (quick share-ofmarket focus)Start with lower prices to drive competitors out, then raise prices Multipoint Pricing: pricing in one market may have an impact in another market; subsidize low pricing in one market from profits in another Experience Curve: use aggressive pricing to build volume and move firm down experience curve (lower marginal costs) Regulatory Issues: antidumping, monopoly restriction

International Pricing Strategies

Price Discrimination Strategy (to maximize consumer demand) Eg : Coca Cola prices in
Mexico, Brazil & Eastern Europe are lower than prices in Asia even though cost of concentrate is same.

Premium Pricing :Used where there is a uniqueness about the product or service. This approach is used where a a substantial competitive advantage exists. Egs : Apple
Products such as I-Pod, I-Phone, I-Pad, Luxuries such as Cunard Cruises, Savoy Hotel rooms, etc

International Pricing Strategies

Economy Pricing : No frills low price. The cost of marketing and manufacture are kept at a minimum.
Eg : Supermarkets have economy brands for soups, spaghetti, EDLP by Wal-Mart, etc.

Price Skimming : Charge a high price because you have a substantial competitive advantage.
Egs : Manufacturers of Digital Watches used a skimming approach in the 1970s ; Apple Products such as I-Pod, I-Phone, I-Pad, etc

Other Pricing Strategies

Psychological Pricing : respond on an emotional, than on rational basis Eg: Jewellery Product Line Pricing : Basic wash could be $2,
wash and wax $4, and the whole package $5.

Optional Product Pricing : Eg : Airlines will

charge for optional extras such as guaranteeing a window seat or reserving a row of seats next to each other.

Captive Product Pricing : Eg : Razor

manufacturer s charge a low price for the Razor and recoup its margin from the sale of the only design of blades which fit the razor.

Other Pricing Strategies

Product Bundle Pricing : This also serves to move old stock. Eg : Videos & CDs are often sold
using the bundle approach.

Promotional Pricing: BOGOF (Buy One Get One Free). Value Pricing : is used where external factors such as recession or increased competition force companies to provide 'value' products or services to retain sales. Eg : Value Meals at

International Marketing Mix: Promotion

Promotion : success at home leads

to interest from potential importers, licensors, joint venture partners Local knowledge essential on initial entries. Key issues are :
Integrated Market Communications Trade & Consumer Sales Promotions Sales Management Trade Shows

International Marketing Mix: Promotion Its very important as to how the firm communicates the product attributes / benefits to customers.
For Eg :
Citibank was formerly serving only the premium segment in Indian market. Minimum deposit required was Rs 3 Lakhs which was reasonable in Dollar terms The company soon realized that this shall not be a successful strategy in India and hence changed it strategy to serve the Mass Market.

Egs :


Suzuki Markets the same model of A-Star Car under the A Star BrandName in India & as Alto in Europe
When Ford launched Escort in different markets in the world, in some places it was positioned & promoted as sports car and as a luxury car in some other countries.

Barriers to International Communication

Cultural Barriers : Eg :
McDonalds Strategy : In India they can't use Beef-Tallow to fry the fries and burger cutlets. (due to religious beliefs cows are sacred to Hindus). Similarly, no bacon in the middle east (pork is prohibited by Islam)

Design, Symbolism & Aesthetics sometimes are important : Eg : Most of the Japanese small cars seem to have a
smiling face from the front.

Source Effects (country of origin effects like economic developments ) : Eg : In remote regions of Africa there
would be no means of electricity on which to run Radio or TVs

Standardized Advertising Restrictions : (due to Culture or Laws) Eg : Restrictions on Liquor/Cigarette Ads or It is not
acceptable to show naked legs in ads displayed in Muslim countries.

Other Factors such as: Work Ethics, Target Population, etc

International Marketing Mix: Promotion Push vs Pull Strategies

1. Push Strategy: personal selling emphasis Industrial products; complex new products Short distribution channels Few print or electronic media

2. Pull Strategy : mass media advertising emphasis Consumer goods Long distribution channels Marketing message may be carried via print / electronic media

Place or Distribution
Place (Distribution) is one of the most important elements for International Business entry :

determine where title to goods


to international freight carrier, freight, insurance, documentation, customs clearance, local transportation, logistic management in the market, currency risk

Companies use two principle Channels of Distribution when marketing abroad : 1. Direct Distribution 2. Indirect Distribution Types Of Intermediaries: Direct Channel Foreign Distributer Foreign Retailer State-Controlled Trading Company End User

Types of Intermediaries: Indirect Channel


Broker Manufacturer's Export Agent Export Management Company Cooperative Exporter Purchasing / Buying Agents Country Controlled Buying Agents Resident Buyer Export Merchant Export Drop Shipper Export Distributor Trading Company

Channel Decisions
As in any domestic market, the international market requires a marketers to make at least three decision which is: Channel Length Channel Width Number of Distribution Channels

Determinants of Channel Types

There is no single across the board solution for all manufacturers channel decisions. Yet there are certain factors that can assist a manufacturer in making good decision which is as below:

Legal Regulations Product Image Product Characteristics Middlemens Loyality & Conflicts Local Customs Control

Types Of Documents There are major two types of documents which is as below : Shipping Documents Collection Documents


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