MARKETING MANAGEMENT

Alok Kumar Rai

Professor
FMS BHU
 BUSINESS

• Business is an enterprise that makes or distributes, goods or services,

that society needs or wants and is ready to pay for.

• Functional areas of Business is

– Marketing Management
– Financial Management
– Operations Management
– Human Resource Management
– Information Technology Management
• The Purpose of Business is creation of customers.
• Customer creation is an important function of Marketing.
• This makes Marketing as a central function of business.
MARKET: Which of the following is a Market???????
• Market: “An arena of potential buyers”.

Earlier market used to be “a physical place where buyers and sellers gathered to buy and sell
goods.” Modern market is a physical or virtual platform facilitating transaction.

There are five types of markets:

• Resource Market: where business go to purchase resources to produce their products and
services.
• Manufacturer market
• Government market: A government market is a market where the consumers are
federal, state, and local governments. Governments purchase both goods and
services from the private sector.
• Intermediary market: Distribution of goods takes place by means of channels, and
the intermediaries are the independent groups or organizations within the channel
that make the product available for consumption. There are four main types
of intermediary: agents, wholesalers, distributors, and retailers.
• Customer market : portion of available customers who currently patronize a business,
usually for a product or service.
Concept of Marketing

• Marketing is “Creating and Satisfying Demand”.

• Marketing is “Creating, Communicating and Delivering Value”

• Demand is said to be a state when following three conditions are
fulfilled:
– Desire to Buy: Desire could be need based or want based.
Majority of modern marketing is want based.
– Ability to pay: It plays an important role in customer
segmentation.
– Willingness to pay: A state to sacrifice with the resource in lieu of
the product.
Following are some of the marketing definitions available.

American Marketing Association defines marketing as:

Marketing is the activity, set of institutions, and processes for creating,
communicating, delivering, and exchanging offerings that have value for
customers, clients, partners, and society at large. (Approved October 2007)

The Chartered Institute of Marketing (CIM) says: The management process

responsible for identifying, anticipating and satisfying customer requirements
profitability.

Philip Kotler defines marketing as: Marketing is the social process by which
individuals and groups obtain what they need and want through creating and
exchanging products and value with others.
• Palmer’s marketing definition is as: Marketing is essentially about
marshalling the resources of an organization so that they meet the
changing needs of the customer on whom the organization depends.

• Dennis Adcock defines marketing as: The right product, in the right
place, at the right time, at the right price.
 The Concepts of Marketing:

The Production Concept (Industrial revolution – 1920′s)

• The basic idea behind production concept was: The firms will
produce what they can produce efficiently. This will ensure enough
supply of the products at low-cost and demand will be created by
itself.
• Production concept prevailed into late 1920s because most of the
products being produced were addressing the basic necessities and
there was a huge unfulfilled demand for them.
• The Product Concept:
This concept emphasised upon the need for producing superior product
in order to move up in the customers recall ladder.
This theory said that “consumers will hold those products that offer the
most quality, performance or innovative features.
This also brought forth the reason for deriving economies of scale in order
to establish the superiority of the product.
The Sales Concept (1930s)
• By early 1930s, competition had increased in production and on the
other hand there was less unfulfilled demand. So, all the firms turned
towards sales concept. Now the companies were not only producing
the product but also selling it to customers through personal selling
and advertisement.
• The premise of this concept said that consumers, if left alone, will
ordinarily not buy enough. The organisation must, therefore,
undertake an aggressive selling and promotional efforts.
• There was no concept of need identification, firms were just interested
in beating competition by selling more but neglecting customers’
satisfaction. We can call it hard selling.
The Marketing Concept

• After World War II, there was a variety of products available in the market
and customers having discretionary income could make choices and
purchase what really fulfill their needs. In that situation, firms were forced to
think about what their customers need, when they need it and how to keep
them satisfied which is the Marketing Concept.
• The fundamental premise of this concept has been that
“People hate to be sold to. However, they love to buy”
• The main focus of all the firms turned from hard selling towards
Identification of customer needs, making decision to fulfill those need and
maintaining long-term relation with customers by satisfying their changing
needs. The Marketing concept resulted in a separate marketing department
in organization and today we can see many organization have structured
themselves as marketing organization where every employee is contributing
towards customer satisfaction whether or not he’s a marketing person.
• So, The marketing concept totally relies upon marketing research that helps
in identification of segments, their sizes, needs, target market and then by
using the right marketing mix.
 Holistic Marketing
Holistic Marketing is a marketing strategy that is developed by thinking about the
business as a whole, its place in the broader economy and society, and in the lives
of its customers. It attempts to develop and maintain multiple perspectives on the
company’s commercial activities.

A holistic marketing concept is based on the development, design, and

implementation of marketing programs, processes, and activities that recognize
their breadth and interdependencies. Holistic marketing recognizes that ‘everything
matters’ with marketing and that a broad, integrated perspective is necessary to
attain the best solution. This has following components:

1. Relationship Marketing
2. Integrated Marketing
3. Internal Marketing
4. Socially responsible Marketing
• Holistic marketing concept is a part of the series on concepts of marketing and it can be defined as a marketing strategy which considers the
business as a whole and not as an entity with various different parts. According to holistic marketing concept, even if a business is made of
various departments, the departments have to come together to project a positive & united business image in the minds of the customer.
Holistic marketing concept involves interconnected marketing activities to ensure that the customer is likely to purchase their product rather
than competition.
• Example of Holistic marketing concept – An organization will have different departments like sales and marketing, accounting and finance,
R&D and product development and finally HR and operations. Thus, if you want to implement a holistic marketing concept in your organization,
you need to ensure that R&D and product development take the feedback from marketing and sales to launch the product which is most likely
to attract customers. On the other hand they need to work closely with accounting and finance to find out the exact budget for the project.
Sales and marketing need to communicate to the HR the right kind of people that they need, and finally, admin and operations need to devise a
plan to retain these people.
• Thus, in the above manner, you get the right product at a right price with the right profits. Along with this you get the right people who will
market your product in the right manner. If you do all these things, you are sure to get the right customer to your doorstep. This is the
complete essence of holistic marketing concept. By doing the right things together as an organization, your product and brand stands a far
better chance in being successful than compared to these elements working individually without any holistic vision.
• Today, customer mindset is changing. Wealth is becoming lesser and debt is high. Thus customer purchases are being made after lots of
thinking. Customers search offline as well as online for the right product and have good knowledge of the product before they purchase. It is
likely that the customer has already made a purchase decision even before he enters the showroom. Thus holistic marketing concept is needed
at this hour to ensure that the customer chooses your product over everyone else.
• A key driver of Holistic marketing is marketing communications. The job of marketing communications is to send the right message to the
target group. By approaching various customer contact points, a uniform message can be sent to the customer. This consistency is likely to
raise confidence in the customer for your company thereby raising the brand image.
• Samsung is an example of Holistic marketing where the products are developed keeping the customer in mind, The showrooms are branded in
the proper manner, the customer service is polite and the service is fast. Thus Samsung is an excellent example of Holistic marketing.
• Some key concepts which are important in Holistic marketing are
• Internal marketing – Marketing between all the departments in an organization
Relationship marketing – Building a better relationship with your customers, internal as well as end customers is beneficial for holistic
marketing.
Performance marketing – Driving the sales and revenue growth of an organization holistically by reducing costs and increasing sales.
Integrated marketing – Products, services and marketing should work hand in hand towards to growth of the organization.
• Thus Holistic marketing is a concept which is organization wide and helps the growth of the organization with the right marketing of the
product. With the rise in competition and the limits placed on customers with finite financial resources, decisions will be scarce and as an
organization we have to implement holistic marketing so that decisions are made by customers in our favour.
• Socially responsible marketing is a marketing philosophy that a company should take into consideration; "What is in the best interest of
society in the present and long term?"
 Holistic Marketing Orientation

The holistic Marketing Framework is designed to address three key

management questions:

• Value Exploration: “How can a company identify new value opportunities?”

Developing such a strategy requires an understanding of the relationships
and interaction among three spaces:
– The customers cognitive space

– The company’s competence space

– The collaborator’s resource space

• Value Creation: “How can a company efficiently create more
promising value opportunities?”

• Value Delivery: “How can a company use its capabilities and

infrastructure to deliver the new value offerings more efficiently?”

For, Company must become proficient at

o Customer Relationship Management,

o Internal Resource Management, and

o Business Partnership Management

 MARKETING MYOPIA

• Marketing Myopia is the mistake committed by the marketer of

paying more attention to the specific products they offer than to the
benefits and experiences produced by these products.
• Customers needs may remain the same but the want depends on the
options. The options change and hence changes the product the
customer uses to address the need.
• Marketing myopia hence may put the company in a difficult situation
if persists.
• The marketing myopia theory was originally proposed by Theodore Levitt. The theory states that
marketers should look towards the market and modify the company and products accordingly rather
than looking towards your own company, its potential and then catering the market. The needs of the
market should receive first priority.
• Theodore levitt asks a very interesting question as an example for marketing myopia. His question is, if
Hollywood were into television rather than movies, wouldnt it have profited more? This is true because
as we know the major crowd of hollywood is concentrating into making movies and actually money is
more into television.
• Thus, if hollywood would have catered to the television market, they would have earned more. And
Theodore levitt’s marketing myopia theory has turned right as hollywood has entered television with
renowned movie maker twentieth century fox as well as sony televisions and other channels.
• According to the marketing myopia theory, to cater a market – a company not only needs to be
technically sound and product oriented but it also needs to be customer oriented. It needs to know
what are the needs of the customer and what further innovations can the company bring to
maintain customer interest or how it can adapt to the changing business market.
• Implications of the Marketing Myopia theory – Marketing myopia can be used by marketers as well as
advertisers to determine whether or not they are catering the right market. Should they adapt their
products to cater a larger market. What kind of advertising strategies should they use. How can they
bring about synchronization between the production capabilities of companies and the demand in the
market.
• In Summary, Marketing myopia asks the companies to do the following
• Be more customer focused
• Innovate
• Be in control
• Understand customer desires
• Conduct marketing research programs
CUSTOMER SATISFACTION
 SATISFACTION:

• Satisfaction stands for gratification, pleasure or fulfillment of desire.

Satisfaction is a feeling that emanates from fulfillment of needs and
wants. Satisfaction is evaluated based on what is received against
what was expected. Various theorists attempted to clarify the
concept of satisfaction.
• Day (1980) said that "while everyone knows what satisfaction means,
it clearly does not mean the same thing to everyone”.
• Westbrook and Oliver (1991) defined Satisfaction as “a post choice
evaluative judgment concerning a specific selection”.

22
• Geise and Cote (2000) identified three general components of
satisfaction. They opined that

i) satisfaction is a response (emotional or cognitive);

ii) the response pertains to a particular focus (expectations,

product, consumption experience, etc.); and

iii) the response occurs at a particular time (after consumption,

after choice, based on accumulated experience, etc)

23
 Customer Satisfaction: Meaning and Definition

Understanding the satisfaction of buyer’s in reference to a business

transaction is Customer Satisfaction. Following views of Customer
Satisfaction has emerged.
• Howard and Sheth (1969) defined Customer Satisfaction as “the
buyer’s cognitive state of being adequately or inadequately rewarded
for the sacrifice he has undergone”.
• Day and Landon (1977) “Satisfaction is important to the individual
consumer because it reflects a positive outcome from the outlay of
scarce resources and/or the fulfillment of unmet needs”

24
 Customer Satisfaction . . . Contd.

• Hunt (1977b) stated that "… Satisfaction is a kind of stepping away

from an experience and evaluating it… One could have a pleasurable
experience that caused dissatisfaction because even though it was
pleasurable, it wasn't as pleasurable as it was supposed to be. So
satisfaction/dissatisfaction isn't an emotion, it's the evaluation of the
emotion”.
• Churchill and Suprenant (1982) defined Customer Satisfaction as “an
outcome of purchase and use resulting from the buyer’s comparison of
the rewards and costs of the purchase relative to anticipated
consequences”.
• Oliver (1997) said “Customer Satisfaction is the consumer’s fulfilment
response. It is a judgment that a product or service feature, or the
product of service itself, provided (or is providing) a pleasurable level of
consumption-related fulfilment, including levels of under- or over-
fulfilment…”.
25
26
 Customer Satisfaction Comprehension:
Input

feedback

Perceived
Customer Repeat Purchase
Performance(PP)
Satisfaction Lower marketing efforts
Product
Cross selling and upselliing
Price Charge Premium
Place
Company’s When PP>CE
Promotion
Marketing Customer
Cognitive
Program Physical evidence
Ability
People When PP<CE
Process
Customer
Customer Customer Negative Publicity
Expectation(CE) Dissatisfaction Loss in Sale
Customer Dissonance
feedback
Customer Evaluation Process
Input

Rai Alok Kumar (2013), Customer Relationship Management: Concepts and Cases, PHI
27
Rationale of Customer Satisfaction
Application of concept of Customer Satisfaction provides numerous
benefits to the organizations viz Customer Retention, Customer Loyalty,
Repurchase Intentions, and Business Performance.

1. Customer Satisfaction Building Customer Loyalty:

2. Customer Satisfaction Helping in Customer Retention
3. Customer Satisfaction Strengthening Customer’s Repurchase
Intentions:
4. Customer Satisfaction Leading to Superior Business
Performance

28
 Project Assignment:

1. Identify the Customer Satisfaction practice initiatives of two organised

Retail china stores of your city.
2. Find out the customer feedback form of domestic airline companies
intended towards obtaining the issues affecting customer satisfaction.
Make a comparative study of the feedback form and devise the most
ideal one for airline passengers.
3. Prepare a Questionnaire for Satisfaction Survey of Students with
Teaching of a Business School. Conduct the survey and find out their
satisfaction with the Teaching.
4. Conduct a Customer Satisfaction Survey of a Multiplex in your city
and appraise the management about the level of satisfaction of its
customers. Also inform them about the areas they need to improve
upon for superior customer experience.

29
 CUSTOMER VALUE
• Customer Value refers to the difference between the benefits he derives
from the goods and services against the cost of acquiring the product.
The wider the gap derived between the benefit and the cost, the happier
is the customer.
• The cost includes economic as well as non economic costs.
Illustration: Godrej encouraged its customers to give feedback on adding
value to its products. One such addition done by the company was addition
introduction of an inbuilt curd maker in 400 ltr refrigerator.
• Tools like buyer analysis, market research and market planning are
helpful in identifying and measuring the value customers expect.
• Companies have been attempting every possible bit to make the
customer feel that they are valued more by the company and the same
product offers greater value than the rivals.
– Courier companies provide the option of tracking the courier status
and also know who has actually take the delivery.
– Indian Railways is introducing the facility of offering food even
diabetic food free of cost if the train gets delayed by over 2 hours.
– Samsung is offering one time screen replacement free with its latest
high end smart phones.
• These additional facilities are offered at no extra costs. This value
addition is largely aimed at creating “CUSTOMER LOYALTY”,
because customers compare the value- cost gaps of the competing
offers and select the products that deliver the maximum value to
them.
 Generic Value Chain: The chain of activities from raw
material procurement to after sales service is called the value chain.

FIRM INFRASTRUCTURE
SUPPORT ACTIVITIES

HUMAN RESOURCE MANAGEMENT

TECHNOLOGY DEVELOPMENT

PROCUREMENT

INBOUND OPERATIONS OUTBOUND MARKETING SERVICE

LOGISTICS LOGISTICS AND SALES

PRIMARY ACTIVITIES

Adapted with the permission of the Free Press, an imprint of Simon & Schuster Inc.. from
COMPETITIVE ADVANTAGE: Creating and Sustaining Superior Performance by Michael Porter. Copyright
© 1985 by Michael E. Porter.
• Porters Value Chain model identifies nine strategic activities classified
in two parts:
1. Primary Activities: Consists of Inbound logistics, Operations,
Outbound logistics, Marketing and Sales and Service. These
activities are involved in creating, distributing, selling and providing
after sales assistance.
2. Support Activities: Support activities assist primary activities by
providing infrastructure that allows them to take place on an ongoing
basis. Support activities include procurement, hiring, R&Dand
infrastructure.
The value chain includes a profit margin, creating value that exceeds
costs so as to generate a return for the effort.
• Primary Activities
• Inbound logistics : Refers to goods being obtained from the organisation's suppliers and to be used for producing the end
product.
• Operations : Raw materials and goods are manufactured into the final product. Value is added to the product at this stage
as it moves through the production line.
• Outbound logistics : Once the products have been manufactured they are ready to be distributed to distribution centres,
wholesalers, retailers or customers. Distribution of finished goods is known as outbound logistics.
• Marketing and Sales: Marketing must make sure that the product is targeted towards the correct customer group. The
marketing mix is used to establish an effective strategy, any competitive advantage is clearly communicated to the target
group through the promotional mix.
• Services: After the product/service has been sold what support services does the organisation offer customers?. This may
come in the form of after sales training, guarantees and warranties.
• With the above activities, any or a combination of them are essential if the firm are to develop the "competitive
advantage" which Porter talks about in his book.
• Support Activities
• Support activities assist the primary activities in helping the organisation achieve its competitive advantage. They include:
• Procurement: This department must source raw materials for the business and obtain the best price for doing so. The
challenge for procurement is to obtain the best possible quality available (on the market) for their budget.
• Technology development: The use of technology to obtain a competitive advantage is very important in today’s
technological driven environment. Technology can be used in many ways including production to reduce cost thus add
value, research and development to develop new products and the internet so customers have 24/7 access to the firm.
• Human resource management: The organisation will have to recruit, train and develop the correct people for the
organisation to be successful. Staff will have to be motivated and paid the ‘market rate’ if they are to stay with the
organisation and add value. Within the service sector such as the airline industry, employees are the competitive
advantage as customers are purchasing a service, which is provided by employees; there isn't a product for the customer
to take away with them.
• Firm infrastructure: Every organisations needs to ensure that their finances, legal structure and management structure
work efficiently and helps drive the organisation forward. Inefficient infrastructures waste resources, could affect the
firm's reputation and even leave it open to fines and sanctions.
• To identify and understand your company's value chain, follow these steps.
• Step 1 – Identify subactivities for each primary activity
• For each primary activity, determine which specific subactivities create value. There are three different types of
subactivities:
• Direct activities create value by themselves. For example, in a book publisher's marketing and sales activity, direct
subactivities include making sales calls to bookstores, advertising, and selling online.
• Indirect activities allow direct activities to run smoothly. For the book publisher's sales and marketing activity,
indirect subactivities include managing the sales force and keeping customer records.
• Quality assurance activities ensure that direct and indirect activities meet the necessary standards. For the book
publisher's sales and marketing activity, this might include proofreading and editing advertisements.
• Step 2 – Identify subactivities for each support activity.
• For each of the Human Resource Management, Technology Development and Procurement support activities,
determine the subactivities that create value within each primary activity. For example, consider how human
resource management adds value to inbound logistics, operations, outbound logistics, and so on. As in Step 1,
look for direct, indirect, and quality assurance subactivities.
• Then identify the various value-creating subactivities in your company's infrastructure. These will generally be
cross-functional in nature, rather than specific to each primary activity. Again, look for direct, indirect, and quality
assurance activities.
• Step 3 – Identify links
• Find the connections between all of the value activities you've identified. This will take time, but the links are key
to increasing competitive advantage from the value chain framework. For example, there's a link between
developing the sales force (an HR investment) and sales volumes. There's another link between order turnaround
times, and service phone calls from frustrated customers waiting for deliveries.
• Step 4 – Look for opportunities to increase value
• Review each of the subactivities and links that you've identified, and think about how you can change or enhance
it to maximize the value you offer to customers (customers of support activities can internal as well as external).
 Value Delivery System

• Every firm has its unique value creating and value delivering network.
A firm tries to influence the value chain of its suppliers, distributors
etc. because if the value chain of suppliers and distributors is
optimized, its own cost structure will also be optimized.
The Marketing Environment
Marke Internal Environment
ting

Enviro
nment
External Environment
There are two classification of Marketing
environment:
I. Internal Environment: This consists of
i) Human Resources
ii) Production facility
iii) R & D
iv) Financial Capability
v) Company Image
II. External Environment: This has following
components
i) Micro Environment: This consists of
a) Suppliers
b) Marketing Intermediaries
c) Customers
ii) Macro Environment:
Important Principles:

• SWOT analysis

• PEST analysis

• Five forces analysis

SWOT analysis

• Strengths (internal)

• Weaknesses (internal)

• Opportunities (external)

• Threats (external)
PEST analysis
• Political factors:
– Monopolies legislation
– Environmental protection laws
– Taxation policy
– Employment laws
– Government policy
– Legislation
• Economic factors:
– Inflation
– Employment
– Disposable income
– Business cycles
– Energy availability and cost
Contd.......

• Socio-cultural factors:
– Demographics
– Distribution of income
– Social mobility
– Lifestyle changes
– Consumerism
– Levels of education

• Technological factors:
– New discoveries and innovations
– Speed of technology transfer
– Rates of obsolescence
– Information technology
 Five forces analysis
Potential
entrants

Threat of
entrants

Suppliers COMPETITIVE Buyers

RIVALRY
Bargaining Bargaining
power power

Threat of
substitutes

Substitutes
Source: Adapted from M. E. Porter,
Competitive Strategy, Free Press,
1980, p. 4.
 Five Forces Analysis: Key
Questions and Implications
• What are the key forces at work in the competitive environment?
• Are there underlying forces driving competitive forces?
• Will competitive forces change?
• What are the strengths and weaknesses of competitors in relation to
the competitive forces?
• Can competitive strategy influence competitive forces (eg by building
barriers to entry or reducing competitive rivalry)?
• MARKET CHARACTERISTICS

– CONSUMER MARKET

– ORGANISATIONAL MARKET
 Consumer Market Characteristics
• Demographic Characteristics: include differences in gender, age,
ethnic background, income, occupation, education, household size,
religion, generation, nationality and even social class. Most of these
demographic categories are further defined by a certain range. For
example, companies may identify the age of their consumers in the 18
to 24, 25 to 34, 35 to 54, 55 to 65, and 65+ age groups. Companies
often identify these demographic characteristics through market
research surveys used to discover which demographic groups
comprise the majority of their customer base. Companies can then
target their advertising towards these demographic groups. For
example, a new cell phone may be targeted toward 18 to 24-year-olds
with incomes between Rs 10,000 and Rs 15,000.
Psychographic Characteristics: Consumer market
characteristics can also be psychographic in nature. Psychographic
characteristics of consumers include interests, activities, opinions,
values and attitudes. Obviously, many magazines are geared toward a
consumer's interest.
For example, prenatal magazines target expectant mothers who are
interested in learning more about caring for a baby. Additionally,
consumer activities can include participation in martial arts or basket
weaving. Opinions and attitudes can be both specific or general. A
company may better understand consumer opinions and attitudes after
conducting a focus group, and can use that information to tailor
advertising or marketing campaigns. Consumer values can pertain to
how a group of individuals feels about certain social issues, which can
be of interest to non-profit or charitable organizations.
Behavioralistic Characteristics: Behavioralistic
characteristics can also be garnered through marketing research.
Behavioralistic characteristics of consumer markets include product
usage rates, brand loyalty, user status or how long they have been a
customer, and even benefits that consumers seek. Companies like to
know how often their consumers visit their restaurants, stores or use
their products. Company marketing departments usually try to
distinguish between heavy, medium and light users, whom they can
then target with advertising. Marketers like to know which customers
are brand loyalists, as those consumers usually only buy the
company's brand.
Geographic Characteristics: Consumer markets also have
different geographic characteristics. These geographic characteristics
are often based on market size, region, population density and even
climate, according to the article "Market Segmentation" at
netmba.com, a online business reference site. A small retailer may
find opportunities in a small market in which larger competitors have
no interest. Companies that sell beachwear will likely sell more
products in warmer climates. Consumers in different regions of the
country also have different tastes in food and style.
• Organizational Markets: Organizations that buy products
and services for
– either their own use or

– to use in a product that they make; or

– to resell to individuals, or

– other organizations; or

– to provide a public good.

 There are three types of Organisational Market

• Industrial Market: Industrial marketing,

also known as business-to-
business (B2B) marketing, is a branch of communications and
sales that specializes in providing goods and services to other
businesses, rather than to individual customers
• Reseller Market: buyers who purchase with the intent of selling
those products to others. The reseller market includes
wholesalers, retailers, and distributors. Resellers may restrict
their purchases to one product or brand or offer a variety of
products and brands.
• Government Market: A government market is a market where the
consumers are federal, state, and
local governments. Governments purchase both goods and
services from the private sector.
CHARACTERISTICS OF ORGANIZATIONAL BUYING

• Market Characteristics

• Product Characteristics

• Buying Process Characteristics

• Marketing Mix Characteristics

 5 Step Buyer Decision Process
This attempts to answer who, what , when where, how and
why of buying decision.
The 5 stages of this decision is as follows:
1. Problem/ Need Recognition: Need being triggered by an
internal or external stimuli becomes a drive.
2. Information Search: There may be following different
sources of information:
Personal: Family, Friends, Neighbour etc.
Commercial: Advertising, web, sales persons.
Public: Mass media, consumer rating organisations
Experiential: Handling, examining, using etc.
3. Evaluation of alternatives: No single process is used by all
consumers. Some basic concepts help understand customer
evaluation process:
i) Consumer tries to satisfy a need
ii) Consumer looks for certain benefits
iii) The consumer sees each product as a bundle of attributes
4. Purchase Decision: In the evaluation stage, consumer may form
an intention of purchase. In executing a purchase intention, the
consumer may make five sub- decisions viz. brand, dealer,
quantity, timing, payment method.
5. Post Purchase Behaviour: This may be,
i) Post Purchase Satisfaction
ii) Post Purchase Actions
iii) Post purchase use and Disposal
 Understanding Consumer Buying
Behavior
• Consumer buying behavior is affected by various factors that determine the
product and brand preferences.
1. It depends upon various factors like marketing factors, psychological factors,
social factors, situational factors, personal factors and cultural factors.
2. Varies from customer to customer, product to product, region to region and
country to country.
3. Information of consumer behavior is imp to marketer
4. Improves standard of living and
5. Makes reputation in the market.
SEGMENTATION, TARGETING
AND POSITIONING
IN MARKETING
 The STP Process

• Segmentation is the process of classifying customers into groups which

share some common characteristic
• Targeting involves the process of evaluating each segment’s
attractiveness and selecting one or more segments to enter
• Positioning is arranging for a product to occupy a clear, distinctive and
desirable place relative to competing products in the mind of the
consumer
 Market Segmentation
• Segmentation refers to a process of bifurcating or dividing a large unit into various small
units which have more or less similar or related characteristics.
• Market segmentation is a process of dividing a heterogeneous market into homogeneous sub
units.
• Market segmentation is a marketing concept which divides the complete market set up
into smaller subsets comprising of consumers with a similar taste, demand and preference.
• A market segment is a small unit within a large market comprising of like minded
individuals.
• One market segment is totally distinct from the other segment.
• A market segment comprises of individuals who think on the same lines and have similar
interests.
• The individuals from the same segment respond in a similar way to the fluctuations in the
market.
• Eg: Nokia offers wide range of handsets for both males as well as females. The handset for
females would be sleeker and more colourful as compared to sturdy handsets for males.
Males generally do not prefer stylish handsets. The organizations can’t have similar
products for all individuals. Perfumes and deodorants for females have a sweet fragrance
whereas perfumes for males have a strong fragrance.
 Need for segmentation
“The competitive advantage of a firm lies in being everything to a select few. To be everything to every one is a sure recipe
for a strategic failure”.
Michael Porter
• Not all individuals have similar needs. A male and a female would have varied interests and liking towards different
products. A kid would not require something which an adult needs. A school kid would have a different requirement
than an office goer. Market Segmentation helps the marketers to bring together individuals with similar choices and
interests on a common platform.
• Market Segmentation helps the marketers to devise appropriate marketing strategies and promotional schemes
according to the tastes of the individuals of a particular market segment. A male model would look out of place in an
advertisement promoting female products. The marketers must be able to relate their products to the target
segments.
• Market segmentation helps the marketers to understand the needs of the target audience and adopt specific
marketing plans accordingly. Organizations can adopt a more focussed approach as a result of market segmentation.
• Market segmentation also gives the customers a clear view of what to buy and what not to buy. A Rado or Omega
watch would have no takers amongst the lower income group as they cater to the premium segment. College students
seldom go to a Zodiac or Van Heusen store as the merchandise offered by these stores are meant mostly for the
professionals. Individuals from the lower income group never use a Blackberry. In simpler words, the segmentation
process goes a long way in influencing the buying decision of the consumers.
• An individual with low income would obviously prefer a Nano or Alto instead of Mercedes or BMW.
• Market segmentation helps the organizations to target the right product to the right customers at the right time.
Geographical segmentation classifies consumers according to their locations. A grocery store in colder states of the
country would stock coffee all through the year as compared to places which have defined winter and summer
seasons.
• Segmentation helps the organizations to know and understand their customers better. Organizations can now reach a
wider audience and promote their products more effectively. It helps the organizations to concentrate their hard work
on the target audience and get suitable results.
 Bases for Market Segmentation

Bases for Market segmentation can broadly be divided into three major groups:

A) Customer based Segmentation

i) Geographical Location of Customers:
Rural, Semi Urban and Urban Customers, Tier 1, Tier 2 and Tier 3 cities, Hilly and Plane
regions,
The biggest role of this basis for segmentation is in planning distribution decision.
• Nestle promotes Nescafe all through the year in cold states of the country as
compared to places which have well defined summer and winter season.
• McDonald’s in India does not sell beef products as it is strictly against the
religious beliefs of the countrymen, whereas McDonald’s in US freely sells and
promotes beef products.
ii) Psychographic Variables:
Customers differing attitude towards product, store, brand, promotion etc
leads to differing impact on purchase.
There are different categories
i) Innovator
ii) Thinker
iii) Achiever
iv) Experiencer
Example:
1. The Titan watch company, has three product range Timex and Titan
Quartz based on differing lifestyle.
2. Femina Magazine, earlier used to target more older, traditional middle
class women later shifted its focus to “Woman of Substance”
 iii) Buyer Readiness:
There are different readiness stages of buyer:
a) Unaware buyer
b) Aware but not interested
c) Interested and desirous buyer
d) Positive buying
Buyer readiness stages:
1. Awareness.
• Before you can sell, you must make contact with those who want to purchase. Your agency should
create advertisingand promotional programs that’ll make your name conspicuous and will attract serious buyers.
2. Knowledge.
• Once prospective clients know your name, they begin the process of acquiring knowledge about what you can offer.
Therefore, your advertising efforts should establish you as an expert — perhaps even a specialist in one or more
niche areas.
3. Liking.
• We all tend to buy from people or companies we feel positive about. Entertaining ads, for example, will convey
warmth and the “humanity” of your agency. Direct your creative efforts toward making your agency seem joyful,
inviting and approachable.
4. Preference.
• Benefits statements are the key to making prospective clients prefer your agency over another. Provide target
customers with reasons to do business with you.
5. Conviction.
• Your advertising should build the customers’ certainty that you’re the agency to call first. Client testimonials, for
example, provide just the right reinforcement for the preference you’ve created.
6. Purchase.
• Once prospective clients have decided to seek you out, expert sales skills are critical to helping them make the right
purchase.
 B) Product Related Segmentation:
• Segmentation Strategy
The core theory of product segmentation is that a company can produce a single product with relatively minor
variations, market it to different customer groups -- sometimes under different brand names -- and thereby
increase market share while reducing the cost of developing radically different products. Segmentation relies
on market research to identify the product characteristics that resonate with target markets. Product
development engineers then provide different iterations of the same basic model that meet the preferred
traits for each market segment.
• Purpose
Product segmentation provides a mechanism for a company to distribute the risk of selling a high-cost
product across different target markets. Instead of having one product with one market and one supply-and-
demand curve -- essentially putting all of the manufacturer's eggs in a single basket -- the manufacturer can
sell sister models of the product at different prices to different market segments. Even if one segment reacts
poorly, another segment may respond better than expected. In addition, segmentation allows for economies
of scale. Although there are differences associated with manufacturing toasters, for example, it's easier for a
company to sell five different types of toasters than to sell one type of toaster, one type of dishwasher and
one type of foam-rubber action figure.

i) Product Use Situations: Same product may be used differently by different consumers.
Example: Bicycle, Mobile Phone, Rasna

ii) Benefit segmentation: Here, the marketer identifies benefits that a customer looks for when buying the product.
Example: Watches whether bought for office use, sports use, gift use, status use, accessory use
iii) Consumption: Frequency of consumption is another factor used
for segmentation as Heavy, moderate or light user
Example: Cigarette, Mobile calls, Air travel

iv) Decision Criteria: There are following four parameter identified

a) Price
b) Perceived Quality
c) Service Offered by the firm
d) Technology
 C) Competition Based Segmentation:

Customer Loyalty is an important indicator in determining

segmentation
i) Hard Core Loyals: Same brand is used over and over again.
Newspaper reading, cigarette, tea drinking
ii) Soft-Core Loyals: Those use 2-3 brands. Largely prevalent in
toiletteries and low involvement purchases.
iii) Switchers: Those who do not stick to a brand.
 D) Demographic Factors:

There are certain other factors that act as basis for segmentation:
i) Income
ii) Occupation
iii) Gender
iv) Age and life cycle
v) Life stage
vi) Education
vii) Social Class
 Stages of Market Segmentation:

There are three important stages:

1. Survey Stage: The objective is to get an insight into customers
motivation, attitudes and behaviour. This is divided into two parts:
i) Focus group discussions
ii) In depth interviews
Based on the finding, a questionnaire is prepared to collect data on
securing relevant information.
2. Analysis Stage: Data obtained using factor analysis to identify
factors that differentiate customer groups. Cluster analysis is then
used to cluster(group of similar things or liking, thinking) customers
into maximally different groups.

3. Profiling Stage: These clusters then are profiled in terms of

demographics, psychographics, media habits, consumption habits,
attitude and behaviour
• Steps in Market Segmentation
• Identify the target market
• The first and foremost step is to identify the target market. The marketers must be very clear about who all should be included in a common segment. Make sure
the individuals have something in common. A male and a female can’t be included in one segment as they have different needs and expectations.
• Burberry stocks separate merchandise for both men and women. The management is very clear on the target market and has separate strategies for product
promotion amongst both the segments.
• A Garnier men’s deodorant would obviously not sell if the company uses a female model to create awareness.
• Segmentation helps the organizations decide on the marketing strategies and promotional schemes.
• Maruti Suzuki has adopted a focused approach and wisely created segments within a large market to promote their cars.
• Lower Income Group - Maruti 800, Alto
Middle Income Group - Wagon R, Swift, Swift Dzire, Ritz
High Income Group - Maruti Suzuki Kizashi, Suzuki Grand Vitara
• Suzuki Grand Vitara would obviously have no takers amongst the lower income group.
• The target market for Rado, Omega or Tag Heuer is the premium segment as compared to Maxima or a Sonata watch.
• Identify expectations of Target Audience
• Once the target market is decided, it is essential to find out the needs of the target audience. The product must meet the expectations of the individuals. The
marketer must interact with the target audience to know more about their interests and demands.
• Kellogg’s K special was launched specifically for the individuals who wanted to cut down on their calorie intake.
• Marketing professionals or individuals exposed to sun rays for a long duration need something which would protect their skin from the harmful effects of sun rays.
Keeping this in mind, many organizations came with the concept of sunscreen lotions and creams with a sun protection factor especially for men.
• Create Subgroups
• The organizations should ensure their target market is well defined. Create subgroups within groups for effective results.
• Cosmetics for females now come in various categories.
– Creams and Lotions for girls between 20-25 years would focus more on fairness.
– Creams and lotions for girls between 25 to 35 years promise to reduce the signs of ageing.
• Review the needs of the target audience
• It is essential for the marketer to review the needs and preferences of individuals belonging to each segment and sub-segment. The consumers of a particular
segment must respond to similar fluctuations in the market and similar marketing strategies.
• Name your market Segment
• Give an appropriate name to each segment. It makes implementation of strategies easier.
• A kids section can have various segments namely new born, infants, toddlers and so on.
• Marketing Strategies
• Devise relevant strategies to promote brands amongst each segment. Remember you can’t afford to have same strategies for all the segments. Make sure there is
a connect between the product and the target audience. Advertisements promoting female toiletries can’t afford to have a male model, else the purpose gets
nullified.
• A model promoting a sunscreen lotion has to be shown roaming or working in sun for the desired impact.
• Review the behavior
• Review the behavior of the target audience frequently. It is not necessary individuals would have the same requirement (demand) all through the year. Demands
 Effective Segmentation Criteria
Not all types of segments are useful. It is important to recognize that a
marketer needs to use variables to segment a market. Market
segments must rate favourably on following five criteria:
Essentials for Effective Segmentation

Measurable • Size, purchasing power, profiles

of segments can be measured.

Accessible • Segments can be effectively

reached and served.

Substantial • Segments are large or profitable

enough to serve.

Differential • Segments must respond

differently to different marketing
mix elements & programs.

Actionable • Effective programs can be

designed to attract and serve
the segments.
• A market segment should be:
• Measurable: Market segments are usually measured in terms of sales value or volume
(i.e. the number of customers within the segment). Reliable market research should be
able to identify the size of a market segment to a reasonable degree of accuracy, so that
strategists can then decide whether, how, and to what extent they should focus their
efforts on marketing to this segment.
• Substantial: Simply put, there would be no point in wasting marketing budget on a market
segment that is insufficiently large, or has negligible spending power. A viable market
segment is usually a homogenous group with clearly defined characteristics such as age
group, socio-economic background and brand perception. Longevity is also important
here: no market segmentation expert would recommend focussing on an unstable
customer group that is likely to disperse, or change beyond recognition within a year or
two.
• Accessible: When demarcating a market segment, it is important to consider how the
group might be accessed and, crucially, whether this falls within the strengths and abilities
of the company’s marketing department. Different segments might respond better to
outdoor advertising, social media campaigns, television infomercials, or any number of
other approaches.
• Differentiable: An ideal market segment should be internally homogeneous (i.e. all
customers within the segment have similar preferences and characteristics), but externally
heterogeneous. Differences between market segments should be clearly defined, so that
the campaigns, products and marketing tools applied to them can be implemented
without overlap.
• Actionable: The market segment must have practical value – its characteristics must
provide supporting data for a marketing position or sales approach, and this in turn must
have outcomes that are easily quantified, ideally in relation to the existing measurements
of the market segment as defined by initial market research.
 Levels of Market Segmentation
Mass Marketing
Same product to all consumers
(no segmentation)

Segment Marketing
Different products to one or more segments
(some segmentation)

Niche Marketing
Different products to subgroups within segments
(more segmentation)

Micromarketing
Products to suit the tastes of individuals and locations
(complete segmentation)

Local Marketing Individual Marketing

Tailoring brands/ promotions Tailoring products/ programs
to local customer groups to individual customers
• Mass Marketing
• In mass marketing the seller or the marketer of the product targets the mass market or the entire consumer base. Here the seller engages in mass production and uses the
mass distribution system to reach all the customers in the market. The promotional and advertisements are very much generic in nature attract the entire consumer base.
• Mass market can be profitable for the seller as it leads to lower cost of production and higher margin due to mass production. For mass marketing, the price is kept low to
attract customers from all income level.
• At the same time, Mass marketing leads to high competition in the market and high advertising and promotional cost to reach to all the potential customers.
• One best example of mass marketing would be Mosquito coil, Toothpaste, Detergent etc.
• Segment Marketing
• In Segment marketing, the seller or marketer divides the market into different segments depending on the consumers’ buying behavior, requirements, purchasing power,
location and age level. Segment marketing helps the marketer to connect to each type of customers in the best possible way. Most company uses different market segments to
market its entire list of products which caters to different market levels.
• The promotional and advertising activities for a particular focus only to the target market for that product only.
• The best example is a passenger car marker which has different range of passenger cars catering to different segment of markets. Its low cost cars cater to comparatively lower
income level consumer group, Mid range cars cater to mid range consumer base, luxury segment caters to high net worth consumer base and SUV segment caters to mainly
tourism segment.
• Niche Marketing
• In Niche marketing, the seller caters to a very specific market segment which requires more attention and very high quality of services. Here the market segment size is very
small which enables the seller to provide the niche area of services. The main requirements or characteristics of Niche marketing are
– Customers have distinct set of needs or requires distinct set of services
– Seller or service provider needs more skill or niche skill to provide niche services
– Niches services come up with some more specialized services
– Comes up with premium prices for higher quality and niche services
• Here in Niche marketing, the competition is usually lower which helps the service providers or sellers to ask for higher prices. Here the customers are either high net worth
individuals (for product) or any organizations needs high end services to improve its competitiveness. Examples would be Harley Davidson which manufacturers very high end
Niche bikes, Mckinsey which provides specialized consulting services. All these have a niche market for themselves.
• Micro Marketing:
• Micro-marketing adopt products and marketing programs to match the taste of specific localities and individuals. it is of two types i.e. local and individual marketing
• Local Marketing
• In Local marketing, the seller or the marketer only concentrates in the local market. The products also have the local appeal or the local usage and the promotional activities are
planned based on the location only with local flavors.
• Here the cost remains high due to lower production and competition is also less. Marketer can concentrate more in the local market to reach to all the customers in the region.
The best example would be marketing of regional TV channels; regional chain of hotels or restaurants, Locally produced food products etc.
• Individual Marketing
• It is almost same as Direct Marketing where the marketers target the individual customers separately either through direct communication channels or salesmen. This is mostly
used for Business-to-Business marketing where more attention is required to market a product or services.
• Sales persons are used to meet each individual prospective customer and provide demo of the product or services. Best example would be specialized IT services or Aquaguard
water purifier. Eureka Forbes uses direct salesmen to visit different houses and sell their famous water purifier product Aquaguard after providing the proper demo and
information about the product.
 Market Targeting
After identifying segment, one or more segment is targeted.

Targeting involves the process of evaluating each segment’s attractiveness and selecting one or
more segments to enter

• Target Marketing refers to a concept in marketing which helps the marketers to divide
the market into small units comprising of like minded people. Such segmentation helps
the marketers to design specific strategies and techniques to promote a product
amongst its target market. A target market refers to a group of individuals who are
inclined towards similar products and respond to similar marketing techniques and
promotional schemes.
• Kellogg’s K Special mainly targets individuals who want to cut down on their calorie
intake. The target market in such a case would be individuals who are obese. The
strategies designed to promote K Special would not be the same in case of any other
brand say Complan or Boost which majorly cater to teenagers and kids to help them in
their overall development. The target market for Kellogg’s K Special would absolutely be
different from Boost or Complan.
 Target Market
• A market is a set of all actual and potential buyers

• A target market is a group of people toward whom a firm markets its

goods, services, or ideas with a strategy designed to satisfy their
specific needs and preferences.

• Any marketing strategy must include a detailed (specific)

description of this.
Basis of Target Marketing
• Age
• Gender
• Interests
• Geographic location
• Need
• Occupation
Why target marketing? (Need of Target Marketing)
• Organizations can use similar kind of strategies to promote their products
within a target market.
• They can adopt a more focussed approach in case of target marketing. They
know their customers well and thus can reach out to their target audience in
the most effective way.
How to create Target Market
• The organization must first decide who all individuals would fit into a particular
segment. A male and a female can’t be kept in the same segment. The first and
the foremost step is to decide on the target market.
• The next step is to identify need and preference of the target market. It is
essential to find out what the target market expects from the product.
• Once the target market is decided, organizations can decide on the various
strategies helpful to promote their product.
 Targeting
Company
Marketing Market
Mix

A. Undifferentiated Marketing(Mass Marketing)

Company
Marketing Mix 1 Segment 1
Company
Segment 2
Marketing Mix 2
Company
Segment 3
Marketing Mix 3
B. Differentiated Marketing(Segment Marketing)

Segment 1
Company
Marketing Segment 2
Mix
Segment 3

C. Concentrated Marketing(Niche Marketing)

• Undifferentiated marketing: Undifferentiated marketing refers to an approach when a firm produces only one
product or product line and targets all of its customers with a single marketing mix. The other term used for this
approach is mass marketing. In Mass Marketing, the market coverage strategy essentially ignores the market
segment differences and goes after the whole market with one offer. This marketing approach attempts to sell
through persuading a wide audience. Usually the idea is to broadcast the message with an aim to reach the
largest number of people possible. Mass marketing focuses on media coverage such as radio, television and
newspapers. The idea is to maximize the exposure to the product. Examples of mass marketing products are
toothpastes, which are not made especially for one consumer group or segment and are sold in huge quantities.
Other examples are furniture, artwork, automobiles, residential communities, cola drinks and personal
computers.
• Differentiated Marketing: The differentiated marketing refers to the approach of the firms, which produce
numerous products with different marketing mixes. These products are designed to satisfy the smaller segments.
In this approach, instead of marketing one product with a single marketing program the firm approaches the
different consumer groups with products customized for each group. Most companies do this for specialization
and to remain competitive. The differentiated marketing essentially requires market segmentation and incurs a
higher production cost, inventory cost and marketing costs. For example, a company that manufactures vitamin
supplements might identify gender-based market segments. It could produce one multivitamin formula for
women and another for men. It could further differentiate by segmenting the gender groups by life stage and
creating different marketing mixes around each one. Differentiated marketing is best suited for markets with
readily identifiable segments, each with distinctive needs.
• Concentrated marketing: The popular term for concentrated marketing is niche marketing. Another term for the
same is “Focused Market”. A niche market is a subset of the market on which a specific product is focusing. Each
niche market essentially defines specific product features such as product design, price range, production quality
and the demographics that is intended to impact. In niche marketing, the firm essentially focuses. Niche
marketing chooses a small segment provided it’s a profitable segment. This approach is most suitable to smaller
firms, which have lesser resources. Concentrated marketing (or niche marketing) strategy focuses on going after
a large share of one or a few smaller segments, instead of going after a small share of a larger market. Toyota
Company uses the concentrated marketing strategy to capture the market segment for hybrid vehicles.
 Step 2. Market Targeting
Choosing a Market-Coverage Strategy

Company
Resources

Product
Variability

Product’s Life-Cycle
Stage

Market
Variability

Competitors’
Marketing Strategies
 Evaluating and Selecting the Market Segments

1. Single Segment Concentration: In this case, the marketer prefers to go for single
segment. In our hypothetical example, the company X uses this strategy
when it produces a typical product for a single type of market like
plasma TV. In real life, companies like Allahabad Law Agency (only law
books) and BPB publications (only Computer books) are good examples.
The company may adopt this strategy if it has strong market position,
greater knowledge about segment-specific-needs, specified reputation
and probable leadership position.
2. Selective Segment Specialization:
• This is known as multistage coverage because different segments are sought to be captured by the
company. The company selects a number of segments each of which is attractive, potential and
appropriate. There may be little or no synergy among the segments, but this strategy has the advantage
of diversifying the firm’s risk.
• In our example, if the company X produces plasma TV as well as Walkman, the two different types of
products obviously for two different types of markets, then it can be cited as an example of Selective
Segment Specialisation strategy
3. Market Specialization:
the company takes up a particular market segment for supplying all relevant products to the target group. In
our example, the company X can implement Market Specialisation strategy by producing all sorts of home
appliances like TV, washing machine, refrigerator and micro oven for middle class people.
4. Product Specialization:
Product specialisation occurs when a company sells certain products to several different types of potential
customers. In our example, if the company X produces only a particular type of gizmo like toaster that is
consumed by all type of people, they we can say that the company uses Product Specialisation strategy.
Product specialisation promises strong recognition of customer within the product areas. Super Precision
Components supply small nuts and screws for use in military, industry and daily use.
5. Full Coverage:
The firm attempts to serve all customer groups with all the products they might need. In undifferentiated
marketing , the firm ignores segment differences and goes after the whole market with one offer. In
differentiated marketing , the firm operates in several market segments and designs different products for
each segment. In carbonated soft drink market, Coca-Cola follows Full Market Coverage approach to their
product-market matrix. They have Thums-Up, Coca-Cola, Limca, Sprite, Fanta that are different tastes and
are consumed by different types of people. The company even made its entry into other drinks segments
like mineral water (Kinley) and tea (Georgia).
Market Positioning
 Positioning

• Creating a unique space in the mind of consumer is positioning

• Positioning is arranging for a product to occupy a clear, distinctive and desirable place
relative to competing products in the mind of the consumer
• The process of creating an image of a product in the minds of the consumers is called as
positioning. Positioning helps to create first impression of brands in the minds of target
audience. In simpler words positioning helps in creating a perception of a product or service
amongst the consumers.
Example
• The brand “Bisleri” stands for purity.
• The brand “Ceat Tyre” stands for better grip.
 Market Positioning

6. Develop Marketing
Mix for Each Target Segment Market
5. Develop Positioning Positioning
for Each Target Segment
4. Select Target
Segment(s) Market
3. Develop Selection Criteria
Targeting

2. Develop Profiles
of Resulting Segments
Market Segmentation
1. Identify Bases
for Segmenting the Market
 Positioning for Competitive Advantage

Product’s Position - the way the product is defined by

consumers on important attributes - the place the product
occupies in consumers’ minds relative to competing
products.

Marketers must:
- Plan positions to give their products the greatest advantage in
selected target markets,
- Design marketing mixes to create these planned positions.
Positioning Strategies for Competitive Advantage:

Product Product
Class Attributes

Away from Benefits

Competitors G Offered
H
C

D
Against a E
B
Usage
Competitor F
Occasions

User Class
 Choosing and Implementing
a Positioning Strategy

Step 1: Identifying Possible Competitive Advantages: Competitive

Differentiation.

Step 2: Selecting the Right Competitive Advantage: Unique Selling

Proposition (USP).

Step 3: Communicating and Delivering the Chosen Position.

Step 4: Support the positioning strategy with a unique marketing mix

Step 1: Developing Competitive Differentiation

Product Service

Areas for Competitive

Differentiation

Image People
Step 2: Selecting the Right Competitive Advantages

Important

Profitable Distinctive
Criteria
for
Determining
Which
Differences
Affordable to Superior
Promote

Preemptive Communicable
Step 4 – Supporting the positioning strategy

At this stage the company has decided on its positioning strategy

and must now design a marketing mix to support this strategy. The
next part of the course looks at ‘Developing the Marketing Mix’
 The Buying Decision Process
Consumer Buying Decision involves Five Stage Decision Process:
1. Problem Recognition
2. Information Search: Major Sources are:
i) Personal: Family, Friends, Neighbour, Acquaintances
ii) Commercial: Advertising, Websites, Sales Persons, Dealers, Packaging, Displays
iii) Public: Mass Media, Consumer Rating organisations
iv) Experiential: Handling, Examining, Using the product.
This Information search also moves as :
i) Total Sets
ii) Awareness Sets
iii) Consideration Sets
iv) Choice Sets
v) Decision
Contd…..

3. Evaluation of Alternatives : Following attributes affect consumer

alternative evaluation process:
i) Beliefs and Attitudes
ii) Expectancy-Value Model
4. Purchase Decision:
5. Post Purchase Behaviour: Marketers must monitor following post
purchase behaviour:
i) Post Purchase Satisfaction
ii) Post Purchase Action
iii) Post Purchase Use and Disposal
Product Decisions
Levels of Products: The Customer Value Hierarchy
1. Core Benefit
This is the basic product and the focus is on the purpose for which the product is intended.
For example, a warm coat will protect you from the cold and the rain.
2. Basic Product
This represents all the qualities of the product. For a warm coat this is about fit, material,
rain repellent ability, high-quality fasteners, etc.
3. Expected Product
This is about all aspects the consumer expects to get when they purchase a product. That
coat should be really warm and protect from the weather and the wind and be
comfortable when riding a bicycle.
4. Augmented Product
This refers to all additional factors which sets the product apart from that of the
competition. And this particularly involves brand identity and image. Is that warm coat in
style, its colour trendy and made by a well-known fashion brand? But also factors like
service, warranty and good value for money play a major role in this.
5. Potential Product
This is about augmentations and transformations that the product may undergo in the
future. For example, a warm coat that is made of a fabric that is as thin as paper and
therefore light as a feather that allows rain to automatically slide down.
 Products Classifications:
1. Durability and Tangibility:
Durable Goods
Non Durable Goods
Services
2. Consumer Goods Classification:
 Convenience Goods
 Shopping Goods
 Speciality Goods
 Unsought Goods
3. Industrial Goods Classification:
 Material and Parts
 Capital Items
 Supplies and Business Services
Classification of products on the basis of Durability & tangibility
• Non-durable goods These are tangible goods that are low
priced and normally consumed in one or few uses everyday
or anytime of the day such as soaps, biscuits, shampoos,
deodorants, etc. As these goods are consume quickly and
purchased frequently, the appropriate strategy is to make
them available in many locations, charge only a small mark
up and advertise heavily to induce trial and build preference.
• Durable goods These are also tangible goods that remain in
use months after months and year after year. Normally, they
require more personal selling and service, guarantee, higher
margin, etc. For example: couches or chairs, vacuum
cleaners, washing machines, etc.
• Services These are intangible, inseparable, variable and
perishable products. As a result, they normally require more
quality control, supplier creditability and adaptability.
Example- hair cut, legal advices, appliance repair, financing,
etc.
• Classification of products on the basis of Uses
• In this part, the goods or services can be classified into two broad categories viz. Consumer
goods and Industrial goods.
Consumer goods classification
These are meant for use of consumption by ultimate consumers for the satisfaction of their needs
and wants. According to American Marketing Association (AMA), “Consumer products are those
products which are used by ultimate consumers in their original form without commercial
processing.”
Convenience goods These are those products which a consumer purchases frequently, immediately
and with minimum efforts from convenient locations. For example, tooth paste, bread, newspaper,
cigarette, match box, medicine, soap, cold drinks, grocery items, etc.
Shopping goods These are those goods where consumers devote considerable time in making
selections before they buy. On the basis of durability, suitability, quality price and style, the selection
and purchasing of the goods takes place. For example, household furniture, automobiles,
refrigerators, sewing machines, jewelleries, clothing, used cars; arid major appliance, etc.
Specialty goods These goods possess unique characteristics and brand identification for which a
sufficient number of buyers are willing to make a special purchasing effort. For example, stereo
components, photographic equipment, men’s suits, shoes, goggles, mobile phones, cloth material,
etc.
Unsought goods These are those goods which the consumer does not know about or does not
normally think of buying. These goods require advertising and personal-selling support. For
example, smoke detectors, kitchen exhaust fans like electric chimneys, etc. The classic examples of
known but unsought goods are life insurance, cemetery plots, gravestones and encyclopaedias,
reference books, etc.
Industrial goods classification
• These are those goods that are meant for use in making other products or for
rendering a service in the operation of business organization. According to American
Marketing Association (AMA), “Industrial goods are those goods which are designed
to be sold primarily for use in producing other goods or rendering services.” These
are classified into following ways:
Materials and parts: Raw materials are the basic materials that actually become
part of the product. They are provided form mines, forests, oceans, farms and
recycled solid wastes.
Capital Items: Capital items consist of office accessories and operating materials.
Supplies: Supplies facilitate productions, but they do not become part of he finished
product. Paper, pencils, oils, cleaning agents and paints are examples.
Industrial Services: Industrial services include maintenance and repair services such
as machinery repair and business advisory services such as legal, management,
consulting, advertising, marketing research services. These services can be acquire
internally as well as externally.

The last category of products mentioned as the industrial goods classification involves
the materials ( raw materials such as wood, cooper, aluminium) and parts (tiers,
computer chips) , capital items such as installations and equipment (cranes, bulldozers),
accessory equipment ( hand tools, computers, calculators), process materials (food
preservatives), operating supplies ( papers, pencils, oil).
 Product Mix
• Product Width: refers to how many different product lines the
company carries

• Product Length: The depth of a product mix refers to the total no. of
items in the mix. This is also called as the average length of a line.

• Product Depth: The depth refers to how many variants are offered of
each product in the line.

• Product Consistency: This refers to how closely related the various

product lines are in end use, production requirements, distribution
channels or some other way.
• Product Line Stretching: It occurs when a company lengthens its
product line beyond its current range.
– Down Market Stretching: When a new range of low price and
attributes are introduced.

– Up Market Stretching: When premium additions are done

– Two Way Stretch: When both are down simultaneously.

• Product mix – Product mix is a combination of total product lines
within a company. A company like HUL has numerous product lines
like Shampoos, detergents, Soaps etc. The combination of all these
product lines is the product mix.
• Product line – The product line is a subset of the product mix. The product line generally refers to a type of product
within an organization. As the organization can have a number of different types of products, it will have similar
number of product lines. Thus, in Nestle, there are milk based products like milkmaid, Food products like Maggi,
chocolate products like Kitkat and other such product lines. Thus, Nestle’s product mix will be a combination of the
all the product lines within the company.
• Length of the product mix – If a company has 4 product lines, and 10 products within the product line, than the
length of the product mix is 40. Thus, the total number of products against the total number of product lines forms
the length of the product mix. This equation is also known as product line length.
• Width of the product mix – Where product line length refers to the total number of product lines and the products
within the product lines, the width of the product mix is equal to the number of product lines within a company.
Thus, taking the above example, if there are 4 product lines within the company, and 10 products within each
product line, than the product line width is 4 only. Thus, product line width is a depiction of the number of product
lines which a company has.
• Depth of the product mix – It is fairly easy to understand what depth of the product mix will mean. Where length
and width were a function of the number of product lines, the depth of the product mix is the total number of
products within a product line. Thus if a company has 4 product lines and 10 products in each product line, than the
product mix depth is 10. It can have any variations within the product for form the product line depth.
• Product line consistency – The lesser the variations between the products, the more is the product line consistency.
For example, Amul has various product lines which are all dairy related. So that product mix consistency is high. But
Samsung as a company has many product lines which are completely independent of each other. Like Air
conditioners, televisions, smart phones, home appliances, so on and so forth. Thus the product mix consistency is
low in Samsung.
• Detergents – Arial, Arial oxyblue, Ariel bar, Tide, Tide naturals, Tide bleach, Tide plus.
Shampoos – Head and shoulders, Head and shoulders anti dandruff, Pantene, Pantene damage repair, Pantene pro-v
• In the above example the following can be learned about the product mix of P&G
Product mix Length – 12
Product mix Width – 2
Product mix Depth – 7 in detergents and 5 in shampoos
Product mix consistency – High as both are bathroom products.
 Product Life Cycle:

Development Growth Maturity Decline

Few:
Growing adopters: Growing selectivity Saturation of Drop-off
trial of
trial of of purchase users in usage
early
product/service Repeat purchase
adopters
reliance
Entry of May be many Fight to maintain Exit of some
competitors share competitors
 Stages of PLC

• Product development - sales are zero, investment costs are high

• Introduction - profits do not exist, heavy expense of product
introduction
• Growth - rapid market acceptance and increasing profits
• Maturity - slowdown in sales growth. Profits level-off. Increase outlay
to compete
• Decline - sales fall-off and profits drop
• Introduction Stage – This stage of the cycle could be the most expensive for a
company launching a new product. The size of the market for the product is small,
which means sales are low, although they will be increasing. On the other hand, the
cost of things like research and development, consumer testing, and the marketing
needed to launch the product can be very high, especially if it’s a competitive sector.
• Growth Stage – The growth stage is typically characterized by a strong growth in sales
and profits, and because the company can start to benefit from economies of scale in
production, the profit margins, as well as the overall amount of profit, will increase.
This makes it possible for businesses to invest more money in the promotional activity
to maximize the potential of this growth stage.
• Maturity Stage – During the maturity stage, the product is established and the aim for
the manufacturer is now to maintain the market share they have built up. This is
probably the most competitive time for most products and businesses need to invest
wisely in any marketing they undertake. They also need to consider any product
modifications or improvements to the production process which might give them a
competitive advantage.
• Decline Stage – Eventually, the market for a product will start to shrink, and this is
what’s known as the decline stage. This shrinkage could be due to the market
becoming saturated (i.e. all the customers who will buy the product have already
purchased it), or because the consumers are switching to a different type of product.
While this decline may be inevitable, it may still be possible for companies to make
some profit by switching to less-expensive production methods and cheaper markets.
 New- Product Development Process

• New product strategy

• Idea generation
• Idea screening
• Concept development and testing
• Marketing strategy
• Business analysis
• Product development
• Test Marketing
• Commercialisation
• Idea generation – in this you are basically involved in the systematic search for new product Ideas. A company has to generate many ideas in order to
find one that is worth pursuing. The Major sources of new product ideas include internal sources, customers, competitors, distributors and suppliers.
Almost 55% of all new product ideas come from internal sources according to one study. Companies like 3M and Toyota have put in special incentive
programs or their employees to come up with workable ideas. Almost 28% of new product ideas come from watching and listening to customers.
Customers: even create new products on their own, and companies can benefit by finding these products and putting them on the market like Pillsbury
gets promising new products from its annual Bake-off. One of Pillsbury’s four cake mix lines and several variations of another came directly from Bake-
Off winners’ recipes.
• Idea Screening: -The second step in New product development is Idea screening. The purpose of idea generation is to create a large pool of ideas. The
purpose of this stage is to pare these down to those that are genuinely worth pursuing. Companies have different methods for doing this from product
review committees to formal market research. It, is helpful at this stage to have a checklist that can be used to rate each idea based on the factors
required for successfully launching the product in the marketplace and their relative importance. Against these, management can assess how well the
idea fits with the company’s marketing skills and experience and other capabilities. Finally, the management can obtain an overall rating of the
company’s ability to launch the product successfully.
• Concept Development and Testing – The third step in New product development is Concept Development and Testing. An attractive idea has to be
developed into a Product concept. As opposed to a product idea that is an idea for a product that the company can see itself marketing to customers, a
product concept is a detailed version of the idea stated in meaningful consumer terms. This is different again from a product image, which is the
consumers’ perception of an actual or potential product. Once the concepts are developed, these need to be tested with consumers either symbolically
or physically. For some concept tests, a word or a picture may be sufficient, however, a physical presentation will increase the reliability of the concept
test. After being exposed to the concept, consumers are asked to respond to it by answering a set of questions designed to help the company decide
which concept has the strongest appeal. The company can then project these findings to the full market to estimate sales volume.
• Marketing Strategy Development – This is the next step in new product development. The strategy statement consists of three parts: the first part
describes the target market, the planned product positioning and the sales, market share and profit goals for the first few years. The second part
outlines the product’s planned price, distribution, and marketing budget for the first year. The third part of the marketing strategy statement describes
the planned long-run sales, profit goals, and the marketing mix strategy.
Business Analysis – Once the management has decided on the marketing strategy, it can evaluate the attractiveness of the business proposal. Business
analysis involves the review of projected sales, costs and profits to find out whether they satisfy a company’s objectives. If they do, the product can
move to the product development stage.
• Product Development – Here, R&D or engineering develops the product concept into a physical product. This step calls for a large investment. It will
show whether the product idea can be developed into a full- fledged workable product. First, R&D will develop prototypes that will satisfy and excite
customers and that can be produced quickly and at budgeted costs. When the prototypes are ready, they must be tested. Functional tests are then
conducted under laboratory and field conditions to ascertain whether the product performs safely and effectively.
• Test Marketing – If the product passes the functional tests, the next step is test marketing: the stage at which the product and the marketing program
are introduced to a more realistic market settings. Test marketing gives the marketer an opportunity to tweak the marketing mix before the going into
the expense of a product launch. The amount of test marketing varies with the type of product. Costs of test marketing can be enormous and it can also
allow competitors to launch a “me-too” product or even sabotage the testing so that the marketer gets skewed results. Hence, at times, management
may decide to do away with this stage and proceed straight to the next one:
• Commercialization – The final step in new product development is Commercialization . Introducing the product to the market-it will face high costs for
manufacturing and advertising and promotion. The company will have to decide on the timing of the launch (seasonality) and the location (whether
regional, national or international). This depends a lot on the ability of the company to bear risk and the reach of its distribution network.
 Branding
“Brand is defined as a name, term, sign, symbol, or design or a combination of them, intended to identify the goods or services of one

seller or group of sellers and to differentiate them from those of competitors.”

Branding is “a seller’s promise to deliver a specific set of features, benefits and services consistent to the buyers.”
• Elements of Branding
• Brand includes various elements like - brand names, trade names, brand marks, trade marks, and trade characters. The combination of these elements
form a firm's corporate symbol or name.
• Brand Name - It is also called Product Brand. It can be a word, a group of words, letters, or numbers to represent a product or service. For example -
Pepsi, iPhone 5, and etc.
• Trade Name - It is also called Corporate Brand. It identifies and promotes a company or a division of a particular corporation. For example - Dell, Nike,
Google, and etc.
• Brand Mark - It is a unique symbol, colouring, lettering, or other design element. It is visually recognisable, not necessary to be pronounced. For
example - Apple's apple, or Coca-cola's cursive typeface.
• Trade Mark - It is a word, name, symbol, or combination of these elements. Trade mark is legally protected by government. For example - NBC colourful
peacock, or McDonald's golden arches. No other organisation can use these symbols.
• Trade Characters - Animal, people, animated characters, objects, and the like that are used to advertise a product or service, that come to be associated
with that product or service. For example - Keebler Elves for Keebler cookies
• Branding Strategies
There are various branding strategies on which marketing organisations rely to meet sales and marketing objectives. Some of these strategies are as
following :-
• Brand Extension - According to this strategy, an existing brand name is used to promote a new or an improved product in an organisation's product line.
Marketing organisations uses this strategy to minimise the cost of launching a new product and the risk of failure of new product. There is risk of brand
diluting if a product line is over extended.
• Brand Licensing - According to this strategy, some organisations allow other organisations to use their brand name, trade name, or trade character.
Such authorisation is a legal licensing agreement for which the licensing organisation receives royalty in return for the authorisation. Organisations
follow this strategy to increase revenue sources, enhance organisation image, and sell more of their core products.
• Mixed Branding - This strategy is used by some manufacturers and retailers to sell products. A manufacturer of a national brand can make a product for
sale under another company's brand. Like this a business can maintain brand loyalty through its national brand and increase its product mix through
private brands. It can increase its profits by selling private brands without affecting the reputation and sales of its national brand.
• Co-Branding - According to this strategy one or more brands are combined in the manufacture of a product or in the delivery of a service to capitalise
on other companies' products and services to reach new customers and increase sales for both companies' brands.
 Branding performs following important functions:
i) Brand stands for promise
ii) They simplify product handling and tracing.
iii) Offers the firm legal protection for unique features or aspects of the
product.
iv) Assurance of certain level of quality and service.
 Packaging

Packaging is the set of activity of designing and producing the container

for a product. Packaging might include upto three levels of material.

Various factors have contributed to the growing use of packaging:

i) Self Service:

ii) Consumer affluence:

iii) Company and Brand Image:

iv) Innovation Opportunity:

Packaging must achieve following objectives:

i) Identify the brand

ii) Convey descriptive and persuasive information

iii) Facilitate product transformation and protection

iv) Assist at home storage

v) Aid product consumption

 Labeling

Label might carry only the brand name or a great deal of information.
Label performs several functions as:

i) Identifies the product or brand

ii) Describes the product

iii) Grade the product

iv) Promote the product

Pricing Decisions
 There are three basic fundamentals of prices:

• Cost: Cost is the ruling factor in attracting the customer to buy the
product.

• Existence of Demand/ Elasticity of demand: degree for which

demand of the product or service varies with price.

• Competition: It also rules the pricing and causes the company to

reduce its price without hampering the quality of the product being
offered to the customer.
 Setting the Price

1. Selecting the Pricing Objective: Following are the objectives that a

firm may have to fulfill through pricing:
– Survival
– Maximum Current Profit
– Maximum Market Share
– Maximum Market Skimming
– Product Quality Leadership
– Other Objectives
Contd…..

2. Determining Demand:
Price Sensitivity: Price sensitivity is the degree to which the price of a product affects
consumers' purchasing behaviors.
Estimating Demand Curves:
Price Elasticity of demand:
3. Estimating Costs:
4. Analysing Competitors’ Costs, Prices and Offers:
5. Selecting a Pricing Method: There are following pricing methods:
– Mark up Pricing:
– Target Return Pricing
– Perceived Value Pricing
– Value Pricing
– Going Rate Pricing
– Auction Type Pricing
• English Auction- One seller many buyer. Open bidding is done after
placing the offer and continues till the maximum price is achieved.
• Dutch Auction: Auctioneer announces the prices and gradually lowers
the price till someone agrees to purchase.
• Sealed Bid auction: Would be suppliers can make only one bid and
are not permitted to change.
6. Selecting the final Price:
i) Impact of Other marketing activities
ii) Company’s pricing policy
iii) Gain and Risk Sharing Pricing
iv) Impact of Price on other parties
 Price Adaptation

• Geographical Pricing
• Price Discounts and Allowances
• Promotional Pricing
– Loss Leader Pricing
– Special event pricing
– Cash Rebates
– Low interest financing
– Longer Payment terms
– Warranties and service contracts
– Psychological discounts
• Differentiated Pricing: To accommodate different categories of
customers. There are variety of forms of Differentiated Pricing as
• Price Discrimination
• Differential Pricing

Other different forms of Differentiated Pricing are:

• Customer Segment Pricing
• Product Form Pricing
• Image Pricing
• Channel Pricing
• Location Pricing
• Time Pricing
• Differential pricing is the strategy of selling the same product to different customers
at different prices. Consider the pricing behavior at an auction. Everyone has the same information
and bids on the same item. As prices increase, bidders drop out. Those who drop out are in essence
saying, "I know others are willing to pay higher prices, but I just don't value the item as much as
they do."
• Differential pricing enables companies to profit from their customers' unique valuations by offering
different customers different prices for the same product. At a cinema, customers who paid full
price, used coupons, received discounts (senior, student, under 12, AAA) or purchased prepaid
discount passes from Wal-Mart can all be sitting next to each other watching the same movie.
Offering this spectrum of prices enables cinemas to maximize profits by serving customers with a
variety of different valuations.
• Differential pricing tactics can be grouped as:
• Requiring customers to jump hurdles (coupons, rebates, sales, price match guarantees, time in
sales cycle, distribution outlet).
• Customer characteristics (different prices based on where customer lives, readily available traits
such as age, affiliations, purchasing history).
• Selling characteristics (discounts for volume purchases, bundles, different next best alternatives).
• Selling strategy (negotiation, razor/razor blade pricing, metering, dynamic pricing).
• The range of prices created by differential pricing contributes to the pricing windfall with larger
margins from higher prices and growth by using discounts to sell to more customers.
 Initiating Price Changes

Price change may be in form of

• Increase in Price or

• Decrease in Price

Both the strategies have their own fallouts

 Responding to Price Changes

• Maintain Price

• Maintain price and add value

• Reduce Price

• Increase price and Improve quality

• Launch a low price fighter line

Distribution Decisions
A channel of distribution comprises
of a set of institutions which
perform all of the activities utilised
to move a product and its title from
production to consumption

Bucklin - Theory of Distribution Channel Structure (1966)

 Modern Exchange System

Promotion

Contact

Negotiation

Transporting and storing

Users
Producers

Financing

Packaging

Money

Goods
 Marketing Distribution Channels
• Push Strategy: Is used in case of Low brand equity, brand choice is made in store and product is an impulse purchase item.

• Pull Strategy: For products with high brand equity and high involvement purchase
• Push strategy explained
• The term 'push strategy' describes the work a manufacturer of a product needs to perform to get the product to the customer. This
may involve setting up distribution channels and persuading middle men and retailers to stock your product. The push technique can
work particularly well for lower value items such as fast moving consumer goods (FMCGs), when customers are standing at the shelf
ready to drop an item into their baskets and are ready to make their decision on the spot. This term now broadly encompasses most
direct promotional techniques such as encouraging retailers to stock your product, designing point of sale materials or even selling
face to face. New businesses often adopt a push strategy for their products in order to generate exposure and a retail channel. Once
your brand has been established, this can be integrated with a pull strategy.
• Pull strategy explained
• 'Pull strategy' refers to the customer actively seeking out your product and retailers placing orders for stock due to direct consumer
demand. A pull strategy requires a highly visible brand which can be developed through mass media advertising or similar tactics. If
customers want a product, the retailers will stock it - supply and demand in its purest form, and this is the basis of a pull strategy.
Create the demand, and the supply channels will almost look after themselves.
 Channel Flow

• Zero Level

• One Level

• Two Level

• Three Level
1. Zero-level Channel: (Producer......Consumers)
• This channel is also called direct channel. In this, the producers sell their goods or services directly to the consumers. There is
absence of intermediary or middlemen between the producers and consumers. This channel of distribution is called zero-leve
This is the most common, easy and short channel for sales or distribution of goods. Mostly, if the goods are costly or the
consumers' number is low, the producers themselves sell their products directly to the consumers. The small producers of
perishable products also sell their products directly to the local consumers. Big firms, which want to minimize distribution cos
and eliminate middlemen, use direct level distribution channel to sell their products.
2. One Level Channel: (Producer........Retailer......Consumers)
• In one level channel of distribution, only retailers remain as middlemen between producers and consumers. In this channel
producers sell their products to retailers and the retailers sell them to final consumers. The producers do not seek help of
wholesalers or agents to sell their products. Nowadays, this channel has become very popular. The producers themselves
supply their products to the final consumers through retailers. Big retailing shops such as departmental stores, super markets,
discount houses etc. have begun to appear in markets. They have made easy to sell any goods or services without the presenc
of wholesalers in the distribution channel. This channel is suitable to sell perishable goods and other goods that need prompt
sale.
3. Two-level Channel: (Producer.........Wholesaler.........Retailer............Consumers)
• In this channel of distribution, the producers sell their products to final consumers through wholesalers and retailers. In other
words, the producers sell their products to wholesalers, then wholesalers sell them to retailers and the retailers sell to final
consumers. This is also called 'Traditional channel of distribution'. The producers sell their products to wholesalers in large
quantity. Then wholesalers sell them to retailers in small quantity. then the retailers sell them to final consumers.
• This channel is long in distribution system. This channel is used to sell or distribute foodstuffs, medicines, including many othe
consumer goods. This channel is suitable for the products, which need to be supplied to scattered markets and consumers.
4. Third Level Channel: (Producer....Agent....Wholesalers....Retailers....Consumers)
• This is the longest channel of distribution of consumers goods. In this channel three middlemen are used to supply goods to
the final consumers. In other words, the producers sell their products to final consumers through agents, then agents sell them
to wholesalers and wholesalers sell them to retailers and finally the retailers sell the goods to consumers. Generally, this
channel is needed for selling agro-products, clothes, industrial materials etc. The producers can take help of agents to sell thei
goods.
• This channel is useful to those producers who cannot contact many wholesalers, cannot pay attention to international market
and want to avoid several distribution problems. Mostly, this channel is not used for distribution of most of the goods since it
costly, takes long time and invites several problems.
 Channel Functions

• Making the product available to the customers

• Breaking the lot

• Sharing the cost

• Easy selling

• Pooling of financial resources

 Six basic Issues in channel management decisions

• Direct or indirect channels: Direct channel is when the producer is in direct contact with the customer in the
sale of product and indirect channel is that which involves a intermediary between the producer and consumer
• Single or multiple channels: Single channel is the channel involving one channel of distribution. In this the
producer is directly in contact with the consumer.Multi-channel distribution involves a business using
more than one type of distribution channel. Multi-channel distribution is increasingly common. For
example, a high street retailer might now also distribute directly to customer using e-commerce
and perhaps also using catalogues sent via direct mail. A manufacturer might use indirect channels
such as retailers and distributors as well as selling directly to customers using e-commerce. Apple is
a great example of multi-channel distribution in action:
• Length of channel: The channel can be zero, one two or three level . As the level of channel increases,
complexity increases.
• Types of intermediaries: it can be agent, wholesaler, distributor and retailer.
• Number of intermediaries at each level: it depends on the level which the company is adopting to provide
product to its customer. There can be 0,1,2 or 3 intermediaries according to the level.
• Which intermediaries?
 CHANNEL DESIGN DECISION
Designing a channel system calls for analysing customer needs, establishing channel objectives, &
identifying & evaluating the major channel alternatives.
ANALYZING CUSTOMERS’ DESIRED SERVICE OUTPUT LEVELS
Channels produce 5 service output levels:
• Lot size: no. of units that the marketing channel permits a typical customer to purchase on a
purchase occasion
• Waiting time: Average time that customers of that channel wait for receipt of the goods.
• Spatial convenience: Degree to which the marketing channel makes it easy for customers to
purchase the product.
• Product variety: assortment breadth.
• Service backup: add-on services provided by the channel (installation, repairs, credit).
ESTABLISHING THE CHANNEL OBJECTIVES & CONSTRAINTS
• Channels objectives vary with product characteristics.
• Channel design must take into account the strengths & weaknesses of different types of
intermediaries.
• Channel design is also influenced by the competitors’ channels.
• Channel design must also adapt to the larger environment.
• Legal regulations & restrictions also affect channel design.
IDENTIFYING THE MAJOR CHANNEL ALTERNATIVES
A channel alternative is described by three elements:
• Types of intermediaries.
Depends on the service outputs desired by the target market & the channel’s transactions costs. The company must search for
the channel alternative that promises the most long-run profitability.
• Number of intermediaries.
Exclusive distribution
Selective distribution
Intensive distribution
• Terms & responsibilities of channel members
The producer must determine the rights & responsibilities of the participating channel members, making sure that each channel
member is treated respectfully & given the opportunity to be profitable.
EVALUATING THE MAJOR CHANNEL ALTERNATIVES
Each alternative needs to be evaluated against three criteria.
• Economic Criteria
– The first step is to determine whether a company sales force or a sales agency will produce more sales.
– The next step is to estimate the costs of selling different volumes through each channel.
– The final step is comparing sales & costs.
Each channel will produce a different level of sales & costs.
• Control Criteria
The agents may concentrate on other customers’ products or they may lack the skills to handle our products.
• Adaptive Criteria
The channel members must make some degree of commitment to each other for a specified period of time.
CHANNEL-MANAGEMENT DECISIONS
• After a company has chosen a channel alternative, individual intermediaries must be selected, motivated & evaluated.
SELECTING CHANNEL MEMBERS
• For some producers this is easy; for others it’s a pain in the ass.
Anyway, in order to select them, producers should determine what characteristics distinguish the better intermediaries
(years in business, other lines carried, solvency, reputation, etc.)
MOTIVATING CHANNEL MEMBERS
• Constant training, supervision & encouragement. Producers can draw on the following types of power
to elicit cooperation:
• Coercive power. Manufacturer threatens to withdraw a resource or terminate a relationship if
intermediaries fail to cooperate. Produces resentment.
• Reward power. Manufacturer offers intermediaries extra benefits for performing specific acts.
• Legitimate power. Manufacturer requests a behavior that is warranted by the contract.
• Expert power. Manufacturer has special knowledge that the intermediaries value.
• Referent power. Intermediaries are proud to be identified with the manufacturer.
EVALUATING CHANNEL MEMBERS
• Underperformers need to be counseled, retrained or re-motivated. If they do no shape up, it might be
best to terminate their services.
MODIFYING CHANNEL ARRANGEMENTS
• Periodic modification to meet new conditions in the marketplace. Modification is necessary when:
• Distribution channel is not working as planned.
• Consumer buying patterns change.
• Market expands.
• New competition arises.
• Innovative channels emerge.
• Product moves into later stages in the product life cycle.
• 3 levels of channel adaptation can be distinguished:
• Adding or dropping individual channel members.
• Adding or dropping particular market channels.
 Selection consideration

• Market segment - must know the specific segment and target

customer

• Changes during PLC - different channels are exploited at various

stages of plc

• Producer-distributor fit - their policies, strategies and image

• Qualification assessment - experience and track record must be

established

• Distributor training and support

 CHANNEL INTEGRATED SYSTEM
• Vertical Marketing System: A conventional marketing system
comprises of an independent producer, wholesaler and retailer. Each is a
separate business seeking to maximize its own profit. “A vertical
marketing system comprises the producer, wholesaler and retailer acting
as a unified system.” One channel member, the channel captain, owns
the others and enjoys so much power so that they all cooperate.
– Corporate VMS: A corporate VMS combines the successive stages of production
and distribution under a single ownership.
– Administered VMS: This coordinates the successive stages of production and
distribution through the size and power of one of the members.
– Contractual VMS: It consists of independent firms at different levels of production
and distribution integrating their programs on a contractual basis to obtain more
economies or sales impact that they could achieve alone.
CHANNEL DYNAMICS
CONVENTIONAL MARKETING CHANNEL
• Comprises an independent producer, wholesaler(s) & retailer(s).
• Each is a separate entity.
• No channel member has complete or substantial control over the other members.
VERTICAL MARKETING SYSTEMS
Producer, wholesaler(s) & retailer(s) act as a unified system.
They all cooperate.
Can be dominated by any of the three members of the system.
It arose as a result of strong channel members’ attempts to control channel behavior & eliminate the conflict that results when independent channel
members pursue their own objectives.
Has become the dominant mode of distribution in the U.S. consumer marketplace.
3 types of VMS:
Corporate VMS
Combines successive stages of production & distribution under single ownership. (Sears).
Administered VMS
Coordinates successive stages of production & distribution through the size & power of one of members (Kodak, Gillete, P&G)
Contractual VMS
Independent firms at different levels of production & distribution integrating their programs on a contractual basis to obtain more economies &/or sales
impact than they could achieve alone. 3 types:
Wholesaler-sponsored voluntary chains
Retailer cooperatives
Franchise organizations
HORIZONTAL MARKETING SYSTEMS
Two or more unrelated companies put together resources or programs to exploit an emerging marketing opportunity.
MULTICHANNEL MARKETING SYSTEMS
A single firm uses two or more marketing channels to reach one or more customer segments. By adding more channels, companies can gain 3 important
benefits: increased market coverage, lower channel cost, more customized selling.
ROLES OF INDIVIDUAL FIRMS IN THE CHANNEL
Insiders. Members of the dominant channel.
Strivers. Firms seeking to become insiders.
Complementers. Not part of the dominant channel
Transients. Outside the dominant channel & do not seek membership. Short-run expectations.
Outside innovators. Real challengers & disrupters of the dominant channels.
 HORIZONTAL MARKETING SYSTEMS

• In this, two or more unrelated companies put together resources or

programs to exploit an emerging marketing opportunity.
As: Mitsubishi being sold through the dealer network of Hindustan
Motors
Post Offices selling insurance and mutual funds
McDonald’s selling CocaCola.
 MULTICHANNEL MARKETING SYSTEMS

• When a single firm uses two or more marketing channels to reach to

one or more customer segments.
 CHANNEL CONFLICTS

• Types of Channel Conflicts:

– Vertical Channel Conflicts
– Horizontal Channel Conflicts
– Multichannel Channel Conflicts

• Causes of Channel Conflicts

– Goal Incompatibility
– Unclear Roles
 Managing Channel Conflicts

• Co-optation

• Mediation

• Arbitration

• Diplomacy
• CHANNEL COOPERATION, CONFLICT & COMPETITION
• Types of conflict & competition
• Vertical channel conflict exists when there is conflict between different levels within the same channel.
• Horizontal channel conflict exists when there is conflict between members at the same level within the
channel.
• Multichannel conflict exists when the manufacturer has established two or more channels that compete with
each other in selling to the same market.
• CAUSES OF CHANNEL CONFLICT
• Goal incompatibility
• Unclear roles & rights
• Differences in perception
• Intermediaries’ great dependence on the manufacturer
• MANAGING CHANNEL CONFLICT
• Some channel conflict can be constructive. It can lead to more dynamic adaptation to a changing environment.
But too much is dysfunctional.
• Perhaps the most important mechanism is the adoption of superordinate goals. Working closely together
might help them eliminate or neutralize the threat.
• Exchange of persons between two or more channel levels is useful.
• Cooptation is an effort by one organization to win support of the leaders of another organization by including
them in advisory councils, boards of directors, etc.
• Encouraging joint membership in & between trade associations.
• When conflict is chronic, the parties may have to resort to diplomacy, mediation or arbitration.
• LEGAL & ETHICAL ISSUES IN CHANNEL RELATIONS
• Exclusive dealing
• Exclusive territories
• Tying agreements
• Dealers’ rights
 PROMOTION MIX
• Four Components
– Advertising
– Publicity
– Personal Selling
– Sales Promotion
 Advertising

• Advertising is any paid form of nonpersonal presentation and

promotion of of ideas, goods or services by an identified sponsor.
 There are five major decisions known as 5 M’s of Advertising. These
are:

i) Mission: What are the advertising objectives?

ii) Money: What should be the ad budget?
iii) Message: What message to be send?
iv) Media: Which media to use?
v) Measurement: How to evaluate the results?
 Personal Selling

• There is a SPIN method to build long term relationships: These are

as follows:
– Situation Questions
– Problem Questions
– Implication Questions
– Need-payoff Questions
 The six steps in Personal Selling

• Prospecting and Qualifying

• Preapproach
• Presentation and demonstration
• Overcoming Objections
• Closing
• Follow-up and maintenance
 Public Relations

• PR includes a variety of programs to promote or protect a

company’s image or individual products.
– Press relations
– Product publicity
– Corporate communications
– Lobbying
– Counseling
 Marketing Audit

A systematic, critical, and impartial review and appraisal of the total

marketing operation, of the basic objectives and policies of the
operation, and the assumptions underlie them as well as of the
methods, procedures, personnel and organisation employed to
implement the policies and achieve the objectives.

Abraham Shuchman
 Characteristics of Marketing Audit

• Comprehensive
• Systematic
• Independent
• Periodic
 Components of Marketing Audit
• Marketing Environment Audit