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Title: Marketing management
Description: Marketing management is the organizational discipline which focuses on the practical application of marketing orientation , techniques and methods inside enterprises and organisations and on the management of a firm's marketing resources and activities.
Description: Marketing management is the organizational discipline which focuses on the practical application of marketing orientation , techniques and methods inside enterprises and organisations and on the management of a firm's marketing resources and activities.
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LESSON-1
MARKETING: NATURE, SCOPE AND CORPORATE
ORIENTATION TOWARDS MARKET PLACE
STRUCTURE
1
...
1
Introduction
1
...
3
Corporate orientations towards market place
1
...
1 The Production Concept
1
...
2 The Product Concept
1
...
3 The selling concept/sales concept
1
...
4 The marketing concept
1
...
5 The societal marketing concept
1
...
5
Nature of Marketing
1
...
7
Summary
1
...
9
Self Assessment questions
1
...
0
OBJECTIVE
After reading this chapter, you will be able to understand the
meaning of marketing, its nature, scope and different philosophies
...
It is essentially a foundation chapter and many
issues discussed here will be addressed in more details in later chapters
...
1
INTRODUCTION
In the present day world ‘marketing’ is all pervasive
...
The study of marketing is very interesting in the sense that every body of
us have performed marketing activities in one form or other
...
When a sales person engaged in selling a T
...
, a doctor treats a
patient or the district administration asks its people to get their vehicles
checked for pollution, everybody is marketing something to the target
audience
...
Although each of these examples are different,
they all have something in common; they consist a variety of marketing
activities
...
1
...
Ramaswamy and Namakumari defines marketing “It is the total
system of interacting business activities designed to plan, promote and
distribute need satisfying products and services to existing and potential
consumers”
...
This definition of marketing is the most widely accepted by marketing
2
educators and practitioners
...
So, we can conclude that marketing is the process of identifying
the needs of the target audience and provide the products accordingly in
exchange of some value
...
On
the one side, marketers are there
who go to resource markets (raw
material markets, labour markets, money market, and so on) to buy
these resources and shape them into goods and services for their target
consumers
...
This simple process can be understood by the figure given
below:
Communication
Goods & Services
Industry (a
collection of
Money
Market (a
collection of
Informatio
Source: Marketing Management by Philip Kotler
Therefore, marketing highlights the satisfaction of consumers
needs and wants and it has become evident that knowing consumer
needs and desires is a road to success for the marketers
...
Therefore,
it is imperative to go through the various orientations of marketing
...
1
...
The modern concept of
marketing highlights satisfaction of consumer needs and wants whereas
the societal concept cares for the well being of the consumer as well as
that of society
...
1
...
1 The Production Concept
It is one of the oldest philosophies in business
...
The organizations are production-oriented in nature and
try to achieve high production efficiency and emphasize on wider supply
of goods and services
...
In those
days, primary motive of the organizations was to make the product
available to consumers and to kept the price low
...
In this particular situation consumers were more interested in obtaining
the products rather than its quality and features
...
Henry Ford was the pioneer in the 1900s to
expand the automobile market on the basis of production concept by
providing his consumers only a single version of car i
...
T-model in black
colour
...
The reason was that the consumers were
motivated to seek varieties while purchasing
...
1
...
2 The Product Concept
The product concept assumes that consumers will buy the product
that offers them the highest quality, the best performance, and the most
features
...
Under this concept, it is believed by
the managers that consumers prefer well-made products and can
appreciate better quality and performance
...
The managers of
these organizations spend considerable energy, time and money on
research and development to introduce quality and variations in
products
...
This particular situation is described as
‘marketing myopia’ by the great philosopher of marketing Professor
Theodore Levitt
...
It is in
form of excessive attention to the quality of the product thereby leaving
other aspects without any due care
...
The marketers can add any kind of attribute to their products but if the
consumers are not aware of regarding the availability, how can they go
for purchasing that particular product
...
e
...
5
1
...
3 The selling concept/sales concept
The selling concept is based on the assumption that consumers are
unlikely to buy a product unless and until they are actively and
aggressively convinced to do so
...
This
philosophy maintains the view that an organization can not expect its
products to get picked up automatically by the customers
...
In this concept, the firm makes the product first and then
spells out how to sell it and make profit
...
are normally employed by the organizations to rely on this concept
...
In this situation, when consumers are
compelled to buy products that they don’t need and consequently
unhappiness is likely to be communicated through negative word-ofmouth that may dissuade other potential consumers from making a
similar purchase
...
1
...
4 The marketing concept
In the 1950s, some marketers started realising that they could sell
more products with more ease and comfort, if they produced only those
products which already had a place in the minds of the consumers
...
The
marketing concept emphasis that an organization should strive to satisfy
the needs of the consumers by identifying them and then produce the
products accordingly through a co-ordinated set of activities
...
Here instead of focusing on quality or sale, consumer’s need
and desired satisfaction become the premise which is a must delivered
phenomenon to be successful in the era of competition
...
While doing so, it was discovered that consumers
were highly complex individuals, possessing a wide variety of innate and
acquired needs
...
e
...
1
...
5 The societal marketing concept
As our society moves through the 1990s, the marketing concept
continues to take on new meanings
...
But the ever changing scenario in the field of marketing brought in a
third consideration and that is the welfare of society
...
This philosophy puts a question
mark whether satisfying consumers’ need serve the long term intervals of
the society or not
...
The marketers have to adopt social and ethical considerations
into their marketing practices
...
7
This section has dealt with the various philosophies of marketing
which describes how the field of marketing evolved through the periods
...
Now let’s discuss certain issues related to marketing management
...
4
MARKETING MANAGEMENT
When marketers engage themselves in the exchange process with
the other parties, they have to go for a considerable amount of work
which require paramount skills on the part of the marketers
...
Many authors have strived
to define marketing management but the definition given by American
Marketing Association is widely recognised
...
From the given definition, it can be observed that marketing
management encompasses a set of diverse activities
...
Even wide range of individual activities are also considered
as the activities of marketing management
...
This marketing management involves
analysis, planning, implementation and control which covers the
activities related to goods, ideas and services
...
e
...
As
8
far as product is concerned it may any good, service or idea that satisfies
a need or want
...
Idea
can be defined as concept or philosophy
...
, can be described as marketing ideas
...
But actually his task is more
than this popular perception of the people
...
Through this discussion, it
can be seen that marketing management is eventually demand
management
...
They
also decide about target markets, pricing, physical distribution and
promotion of the product
...
Let’s discuss there different states of demand one by
one
...
Product
like vaccinations, heart surgery and dental work etc
...
The marketers task is to
redesign the promotional programme and is to reposition the products in
the mind of the consumers so that they are able to change their beliefs
and attitude of the target market
...
For
example, an industrial house may not be aware about the new
9
technology, and college students of Haryana may not prefer English
language course
...
(C)
Latent Demand: There may be a kind of hidden demand for
certain products which is not satisfied with the existing available
products
...
are some
of the examples of the strong latent demand
...
(D)
Declining Demand: Every product in its life-span faces
declining demand
...
e
...
In these kind
of circumstances, the marketer has to look into the causes of decline in
demand and should see whether the same product can be carried on in
the same market with little modification or should the marketer diversify
in the other market to retain the aspect of profitability
...
For example, zoos remain vacant during the
examination days of the students and overfull in the days of their
summer vacations
...
Here, the marketer’s job is to maintain the
demand at the same pattern
...
(F)
Full Demand: It is the happiest position for the marketers
because at this juncture their volume of business face full demand
...
Persisting with the
quality standards and investment in R & D should be the objectives at
this level
...
For example, traffic is sometimes overcrowded on a particular
place
...
The marketer’s job in this situation is to reduce
the demand on the temporary basis by adopting the measure of
increasing the prices
...
e
...
(H)
Unwholesome Demand: This demand relates to a particular
category of products like cigarettes, alcohol, drugs, and blue movies etc
...
1
...
The job of the marketing is not only to satisfy
the consumer but even to delight him/her
...
The
organisations
can
not
ignore
emerging
technologies,
materials,
instruments and new ways of organizing the things but with the
considerations of consumers
...
This job can only be performed if consumers’ needs are
continuously monitored
...
The consumers today make a trade-off between cost and
benefit of the product and they consider the product’s value and price
before making a decision
...
Thus,
he will choose the product that gives him more value per rupee
...
Thus, the
organisations’ strategies must be aimed at delivering greater customer
value than that of their competitors
...
From 1990s
onwards the focus is not only to identify the needs and delivers it to
customers but is shifting towards relationships marketing
...
The marketers who are smart enough to maintain their relationships by
delivering high quality products in time, better services and fair prices in
comparison with their counterparts
...
But now it is
recognised as a full-fledged separate discipline
...
With the emergence of modern marketing concept, the issue of
green marketing and environmental protection have come up and
regarding that various laws have been framed
...
Why a particular product is preferred by a consumer and
other declines it to use? The answer has in the study of culture
...
(e)
Marketing is business: When it is said that marketing is
business, the contention is that the all activities starts from marketing
i
...
through knowing consumer and end up on the consumers i
...
knowing consumer dissonance
...
According to Peter F
...
It is the whole
business seen from the point of view of its final result, that is, from the
customer’s point of view
...
So, business seeks customers because
they are the business providers and ultimately marketing is business
...
6
SCOPE OF MARKETING
Marketing management has become the subject of growing interest
for everybody in today’s scenario
...
It can be understood in terms of
functions that a marketing manager performs
...
(a)
Marketing Research: While sitting in a company’s office, no
one can identify the needs and wants of the consumers
...
These are the major areas of
research where a marketing manager requires information to be
13
successful in market because by knowing these information, he takes
timely, accurate and better decision
...
(b)
Product Planning and Development: A product is a bundle
of utility offered to consumers to satisfy their needs
...
Product must be according to the requirement and
must also be according to the paying capacity of the consumers
...
(c)
Pricing: One of the important functions of a marketing
manager is to determine the price of a product
...
A good pricing policy is a
significant factor to attract the consumers because price is the only ‘p’ of
marketing mix which generates revenue for the organisations
...
The marketing manager plays an
important
role
in
the
finance
department
in
this
regard
and
consequences thereto
...
Since the interest rates has come down significantly,
financing facilities have taken the shape of lubricants that facilitates the
operation of the marketing machine
...
(e)
Insurance: When goods and services are exchanged from one
hand to another, from one place to another place, a large number of risk
factors are involved
...
National calamities like flood and
earthquake or damage of goods and services due to fire, theft or accident,
may cause big losses and can hamper the entire business
...
(f)
Advertising: In this era of competitive world, advertising has
become an important instrument in the hands of marketers
...
According to American Marketing Association “Advertising is a paid form
of non-personal presentation by an identified sponsor”
...
Through
advertising marketers are able to position their products in the minds of
the consumer through various media like newspapers, magazines,
television, radio, hoardings, window display and internet etc
...
A student who tries to occupy the front seat is also engrossed in
doing marketing
...
15
activities
are
seriously
1
...
We are
exposed to marketing of products, services and ideas almost every day
...
Philip Kotler
defines marketing “It is a social and managerial process by which
individuals and groups obtain what they need and want through
creating, offering and exchanging products of value with others”
...
Therefore,
marketing
highlights
the
satisfaction of consumers needs and wants and it has become evident
that knowing consumer needs and desires is a road to success for the
marketers
...
It is one of the oldest
philosophies in business
...
The
organisations are production-oriented in nature and try to achieve high
production efficiency and emphasize on wider supply of goods and
services
...
A product orientation leads a company to try constantly to
improve the quality of its product under the concept, it believed by the
managers that consumers prefer well-made products and can appreciate
better quality and performance
...
16
The marketing concept emphasises that an organization should
strive to satisfy the needs of the consumers by identifying them and then
produce products accordingly through a co-ordinated set of activities
...
Marketing management is the process of planning and executing
the conception, pricing, promotion and distribution of ideas, goods, and
services to create exchanges that satisfy individual and organizational
goals
...
In the nature of marketing we include
differentiations like, Marketing is customer oriented, Marketing is the
delivery of value, Marketing is a net-work of relationships, Marketing as a
separate discipline, Marketing is business when it comes to scope of
marketing various issues are taken up like- Marketing Research, Product
Planning and Development, Pricing, Financing, Insurance, Advertising
...
1
...
How individuals go
about satisfying a particular need is conditioned by the cultural values of
that society which he/she belongs to
...
For example, transportation is a need and a car is a satisfier
...
Value can be added by better specifying a product offer in
accordance with consumer’s expectations
...
Earlier people used to describe it as a
place only
...
1
...
What do you mean by marketing? Describe the feature of
marketing
...
Describe in detail the various philosophies of marketing
...
Define marketing management? Also discuss the various
levels of demand and the task of a marketing manager
thereto
...
Do all companies need to practice the marketing concept?
Could you cite companies that do not need this orientation?
5
...
6
...
1
...
Kotler, Philip, “Marketing Management– Analysis, Planning,
Implementation and Control”, PHI, New Delhi, 1997
...
Skinner, J
...
3
...
J
...
4
...
S
...
, “Marketing Management
—Planning, Implementation and Control”, MacMillan India
Limited, New Delhi, 1995
...
0
Objective
2
...
2
Definitions and meanings
2
...
3
...
3
...
0
2
...
5
Responding to Environmental Forces
2
...
7
Keywords
2
...
9
References/Suggested Readings
OBJECTIVE
The objective of this lesson is to acquaint the students about the
marketing environment and its various constituents
...
2
...
A global
economy in which world-class quality is the ticket to ride, increased
diversity in the work force, and calls for more ethical conduct promise to
keep things interesting
...
The world is shrinking rapidly where cross-cultural skills
are a must
...
Diversity among consumers has also increased by
leaps and bounds where managers are challenged to manage this
diversity by keeping themselves abreast of the latest happenings
...
Those who can value people, communicate well, solve problems, see the
big picture and work hard are the precious human material wanted by
the organisations
...
2
...
According to Barry M
...
These are essentially the ‘givers’ within which firms
and their management must operate in a specific country and they vary,
often greatly, from country to country”
...
Glucck defines marketing environment “as the process
by which strategists monitor the economic, governmental, market,
supplier, technological, geographic, and social settings to determine
opportunities and threats to their firms”
...
2
From the above definitions we can extract that marketing
environment consists of factors that are internal and external which may
pose threats to a firm or provide opportunities for exploitation
...
In other words, it is an activity carried out by the people
for the people which mean people occupy a central place around which
all the activities revolve
...
It poses a huge challenge for
today and especially tomorrow’s businessmen and managers to be aware
of specific changes so as to keep themselves abreast of the latest
happenings in the field of business to ensure their survival and
sustainability
in
the
market
...
2
...
The following figure gives a more
clear and comprehensive picture about the different factors
...
Factors
• Management Structure
• Competitors
• Demographic Factors
• Physical Assets
• Middlemen
• Socio-cultural Factors
• R & D & Technological
• Publics
• International Factors
Capabilities
• Natural Factors
• Marketing Resources
• Financial Factors
3
2
...
1 Internal Environment
There are number of factors which influence various strategies and
decisions within the organisation’s boundaries
...
It
points out that people are valuable resources requiring careful attention
and nurturing
...
The organisation’s strengths
and weaknesses are also determined by the skill, quality, morale,
commitment
and
attitudes
of
the
employees
...
So, the issues related to morale and
attitudes should seriously be considered by the management
...
The support from different
levels of employees helps the management in making decisions and
implementing them
...
This
difference underlines the distinction between the images of the two
companies
...
Therefore, building
company image should also be a major consideration for the managers
...
Now it has reshaped itself into the formation of company
where it is run and controlled by the board of directors who influence
almost every decision
...
The extent of professionalisation is also a
crucial factor while taking business decisions
...
These factors should always be kept in mind by
the managers because these play a vital role in determining the
competitive status of a firm or an organisation
...
The organisations which are using appropriate technologies enjoy a
competitive advantage over their competitors
...
Therefore, R & D and technological capabilities of an
organisation determine a firm’s ability to innovate and compete
...
The companies which are strong on above-mentioned counts can also
enjoy the fruits of brand extension, form extension and new product
introduction etc
...
5
(g)
Financial Factors: The performance of the organisation is
also affected by the certain financial factors like capital structure,
financial position etc
...
The ultimate survival of organisations in both
the public and private sectors is dictated largely by how proficiently
available funds are managed
...
These factors are generally regarded as controllable
factors because the organisation commands a fair amount of control over
these factors and can modify or alter as per the requirement of the
organisation
...
3
...
These forces represent
“uncontrollable”, which the company must monitor and respond to
...
The external business
environment consists of macro environment and micro environment
...
Suppliers, marketing intermediaries,
competitors, customers and the publics operate within this environment
...
Some of the
factors may affect a particular firm and do not disturb the other ones
...
Now let’s discuss
in brief some of the micro environmental factors
...
These can be raw material suppliers,
energy suppliers, suppliers of labour and capital
...
This equation is based on the industry conditions and the extent to
which each of them is dependent on the other
...
If any
kind of uncertainties prevail regarding the supply of the raw materials, it
often compels a firm to maintain a high inventory which ultimately leads
to the higher cost of production
...
Because of the sensitivity of the issue,
firm should develop relations with different suppliers otherwise it could
lead to a chaotic situation
...
(b)
Customers: According to Peter F
...
Successful companies recognise and respond to the unmet
needs of the consumers profitably and in continuous manner
...
For example it is the era when we could witness the
increasing participation of women in the different jobs which has already
given birth to the child care business, increased consumption of different
household utilities like microwave ovens, washing machines and food
processors etc
...
So, monitoring the customer sensitivity is a pre
condition for the success of business
...
A firm should
extend its competitive analysis to include substitutes also besides
7
scanning direct competitors
...
This kind of analysis not only ensures
the firm’s competitive position in the market but also enables it to
identify its major rival in the industry
...
Thus an analysis of competition is critical for not only evolving
competitive strategy but also for strengthening a firm’s capabilities
...
These people
include middlemen such as agents or brokers who help the firm to reach
out to its customers
...
There are certain
marketing research agencies which assist the organisation in finding out
the consumers so that they can target and promote their products to the
right consumers
...
A firm
should ensure that the link between organisation and intermediaries is
appropriate and smooth because a wrong choice of the link may cost the
organisation
heavily
...
(e)
Publics: an organisation has an interface with many publics
during its life time
...
The public includes local publics, media
and action groups etc
...
For example if a
business unit is establishment in a particular locality then it has to
8
provide employment to the localites at least to the unskilled labour
otherwise local group may harm that very business or they may interrupt
the functioning of the business
...
Simultaneously media may disseminate vital
information to the target audiences
...
The business suffers due to their activities
...
Albeit, it is
wrong to think that all publics are threats to the business yet their
concerns should be considered up to a certain level
...
The business must pay attention to their
casual interactions since these factors set the stage for certain
opportunities as well as threats
...
A brief discussion on the
important macro environmental factors is given below:
(a)
Demographic Environment: The first macro environmental
factor that businessmen monitor is population because business is
people and they create markets
...
For ensuring the success of
the business incessant watching of these demographic factors is a
prerequisite
...
For
example, if the youth form a large proportion of the population, it is but
natural for firms to develop their products according to the requirement
of this group
...
Today we can observe
that more and more women have taken to work and professions and
hence it can be seen that many time saving appliances are available in
the market
...
There is yet another dimension of population changes which a
businessman needs to address
...
The higher literacy level will imply a more
demanding consumer as he is in the touch of the various media which
acquaint him with information, and on the other hand low literacy make
the marketers look for other method of communication
...
Any significant irrigation of the population from one area to
another, rural to urban, is another important environmental factor which
calls for the marketer’s attention
...
So, the companies that carefully
analyse their markets can find major opportunities
...
The economic environment affects
the demand structure of any industry or product
...
10
(i)
Per capita income
(ii)
Gross national product
(iii)
Fiscal and monitory policies
(iv)
Ratio of interest changed by different financial institutions
(v)
Industry life cycle and current phase
(vi)
Trends of inflation or deflation
Each of the above factors can pose an opportunity as well as threat
to a firm
...
In such a
situation a firm or company can not generate the purchasing power of
the people so as to generate the demand of the products
...
Similarly, an industry gets a number
of incentives and support from the government if it comes under the
purview of priority sector whereas some industries face tough task if they
are regarded as belonging to non-essential or low priority sectors
...
The managers need to make
appropriate cutbacks prior to the onslaught of recession because at that
time sales are bound to decline which leads to increasing inventories and
idle resources and that is costly
...
This
is where accurate economic forecasts are a necessity and therefore, a
manager must pay careful attention to the major economic changes
...
According to some people
technology have been instrumental in environmental destruction and
cultural fragmentation whereas some others view that it has effected
economic and social progress
...
It has also been responsible for hydrogen bomb and nerve
gas
...
For example, in India, cars like Ambassador and
Premier had to go from the scene because of obsolete technology
...
have affected the operations of all firms including those
involved in seafood industry
...
Explosion in information
technology has made the position of some firms vulnerable
...
To cope up with this kind of scenario, a continuous vigil of the
happenings and adequate investment in R & D needs to be earmarked by
the marketer
...
(d)
Political/Legal Environment: Business decisions are strongly
affected by developments in the political and legal environment
...
Sometimes these laws create opportunities
for the business but these may also pose certain threats
...
Regulations in advertising, like a
ban on advertisement of certain products like liquor, cigarettes and pan
masalas and hoarding of food products, gas and kerosene are the reality
of today’s business
...
In India
business is regulated through certain laws like Monopolies and
Restrictive Trade Practices Act, 1969 (MRTP Act), Foreign Exchange and
Regulation Act, 1973 (FERA), Partnership Act 1932, Consumer Protection
Act, 1986 (CPA), and Companies Act, 1956 etc
...
(e)
Social-cultural
Environment:
Society
shapes
the
beliefs,
values, norms, attitudes, education and ethics of the people in which
they grow up and these factors exercise a great influence on the
businesses which by far are beyond the company’s control
...
The
buying and consumption pattern of the people are very much determined
by these factors and cost of ignoring the customs, tastes and preferences
etc
...
Consumers depend
on cultural prescriptions to guide their behaviour, and they assume that
others will behave in ways that are consistent with their culture
...
As consumers, people expect that businessman will deliver according to
the values, customs and rituals of the existing culture
...
Therefore, the marketers who wish to be the part of the ongoing
process need to understand the process of acculturation so that they can
develop ways to handle the consumers of different cultures
...
‘What is
right and what is wrong’ are basic to all businesses and for doing or not
doing a particular work is judged on the basis of prevalent culture and
also determines ethical code of conduct
...
Every society has subculturesgroup of people who share certain values but exhibit them in different
ways
...
Like a Punjabi has altogether
different preferences then that of a South Indian in the name of certain
products like food and clothing, and the shrewd marketers have always
capitalised
on
this
kind
of
opportunities
...
2
...
After
going
through
the
various
factors,
marketers
must
engage
in
environmental scanning so as to capitalise on opportunities and
minimise adverse conditions
...
Then such
collected information is reconciled and assessed so as to interpret the
findings
...
By these marketing efforts,
marketing strategies could be developed for the coming time
...
5
RESPONDING TO ENVIRONMENTAL FORCES
Generally,
environmental
two
forces
...
But a well-managed organisation can go for reactive approach in the
sense that it adapt itself quickly to counter the negative effects
...
A second approach regarding the marketing environment is to take
proactive, or aggressive stance towards environmental forces
...
so as to alter
some environmental forces
...
But
neither of the approaches is superior in this connection
...
2
...
Every business firm
encounters a set of internal and external factors
...
These
factors
include
structure,
human
physical
resources,
assets,
company
technological
image,
management
capabilities,
marketing
resources, and financial factors
...
Micro environment is immediate
environment
of
the
firm
which
include
suppliers,
consumers,
competitors, intermediaries and publics
...
15
The businessmen must monitor the major macro environmental
factors
which
technological
include
and
demographic,
social/cultural
economic,
factors
...
In the economic arena, they need to focus on per capita
income, distribution of income, saving pattern and credit availability etc
...
In
the political/legal factors, businessmen must work within the laws and
regulations so as to protect their as well as society’s interest
...
A continuous and vibrant monitoring of the
environment is indispensable for business growth
...
7
KEYWORDS
Demography: The study of population features i
...
relating to
broad population statistics, such as age, sex, household composition etc
...
Culture: The whole set of beliefs, attitudes and ways of behaving
by a group of people
...
Micro-environment: The general business environment factors
which are controllable in nature
...
Technology: The application of science for its practical purposes
...
2
...
What is marketing environment? Write down its main
ingredients
...
Define marketing environment? Discuss in brief the factors
that constitute marketing environment
...
“Firms which systematically analyse and diagnose the
environment are more effective than those which don’t”
...
4
...
2
...
K
...
2
...
3
...
K
...
K
...
4
...
B
...
K
...
17
5
...
6
...
S
...
7
...
,
S
...
18
“Marketing”,
Houghton
Miami
LESSON-3
UNDERSTANDING CONSUMER AND
INDUSTRIAL MARKETS
STRUCTURE
3
...
1
Introduction
3
...
3
Consumers’ Buying Dynamics
3
...
1 Psychological Factors
3
...
2 Personal Factors
3
...
3 Cultural Factors
3
...
5
Difference between business market and the consumer
market
3
...
7
Participants in Business Decisions
3
...
9
Summary
3
...
11 Self Assessment Questions
3
...
0
OBJECTIVE
This chapter will enable the students to understand the various
factors that affect consumer and industrial behaviour
...
It is
important for the marketers that how consumers choose between the
alternatives
...
1
INTRODUCTION
It is quite evident that knowing consumer needs and desires is a
road to success for the marketers, but the question is how? It is not a
simple task
...
They may respond to your message but may be influenced at the last
moment by their friends, family members or by their other reference
groups
...
They may not be in touch with their deeper
motivational level and may not exactly know as to what they really need
...
A marketer, for the convenience of the
consumers may try to make the goods available at their doorstep, while
they actually may prefer going to marketplace
...
So, there are hundreds of
questions, which come in the way of conducting research on consumers
for knowing their deep-rooted needs and desires, but nevertheless
marketers must study their target customers’ needs, wants, perceptions,
preferences and buying behaviour
...
Although it needs a full life-span to study and understand a person’s
consumption decisions but for practical reasons marketers have to study
consumer behaviour
...
Therefore, a marketer’s
task is varied and complicated than it actually seems to be
...
Rather, their real task
2
is looking for various satisfiers for these needs
...
3
...
Only the identification of needs is of no value unless and
until this is transformed in to a meaningful and appropriate satisfiers
...
Let’s also discuss some of the
definitions of consumer behaviour
...
Wells and Prensky defines that Consumer behaviour is the study of
consumers as they exchange something of value for a product or service
that satisfies their needs
...
On the basis of above definitions, it can be concluded that
consumer behaviour is the study of consumers regarding what they buy,
3
when do they buy, from where they buy, how frequently they buy, and
how they use certain products
...
So, it addresses all the issues related from pre-purchase to
post purchase behaviour of the consumers
...
e
...
3
...
Figure 1 summarizes the various factors that influence
consumers’ buying behaviour
...
I
Cultural
Social
Personal
Psychological
Culture
Reference Group life cycle
Age & Stage Motivation
in
Subculture
Family
Occupation
Perception
Social Class
Roles & Status
Economic
Personality
circumstances
Source: Marketing Management by Kotler, p
...
3
...
1 Psychological Factors
A person’s acquired needs are influenced by certain psychological
factors such as motivation, perception, learning and personality, etc
...
This deprivation may be
the cause of simple reaction in human biological system causing hunger,
thirst, security and desire for sex etc
...
So, its very important for the marketers to have a close
eye on this dynamic process of motivation
...
Perception poses powerful implications for marketers
...
Accordingly,
marketers
must
understand
how
perception
works
in
order
to
communicate successfully a product’s benefits
...
(c)
Learning: Learning is a continuous process by which
individual acquires knowledge so that it causes a permanent change in
behaviour
...
When a person perceives new stimuli in the
environment, it is related with the existing pond of knowledge
...
Learning is essential to the consumption process
...
We acquire most of our attitudes,
values, tastes, preferences, symbolic meanings and feeling through
learning
...
Marketers spend
considerable effort to ensure that consumers learn of their existence as
well as about their products
...
5
(d)
Personality:
Personality
is
defined
as
those
inner
psychological characteristics that both determine and reflect how a
person responds to his environmental stimuli
...
But
personality can not be considered as a unified whole, for that purpose
different personality traits are to be studied by the marketers
...
If a person is highly dogmatic, it’s very
difficult to convenience him regarding the innovative products and
brands
...
Rather these kinds
of people are influenced by the authoritative appeals
...
They are prone to newer
experiments
...
So, on the basis of
these personality traits, the process of segmentation can effectively be
performed
...
3
...
(a)
Age and stage in the life cycle: The first factor influencing
a consumer’s decision is his age
...
Milk powder, toys, baby foods
are special preference of the babies and children
...
Girls and women require different products
than that of their male counterparts
...
With the different stages in the family cycle, different
products are attached with each
...
They also enjoy leisure
time and spend money on items like colour TV or stereo systems
...
So, life-cycle stage
does effect a buyer’s decision
...
Education has always been associated with
the purchase of books, healthier foods, and entertainment
...
They seek more
information and better quality products than the other ones
...
People belonging to
different occupation need different products
...
For example, occupation can affect
the type of clothing a person buys, transportation choice, food purchases,
and the need for time-saving products
...
For that reason, considerable attention is being devoted to
understand the word life style, how it is measured and how it is used by
the marketers
...
These are based on consumers’ motivations,
learning, social class, demographics and other varieties
...
7
In nutshell, life-style addresses the way consumers express their
personalities in their social and cultural environment
...
This measurement
technique is known as psychographic
...
(d)
Economic circumstances: The choice regarding product is
greatly affected by person’s economic circumstances
...
Marketers
have to pay a continuous and constant attention towards personal
income, saving and interest rates in the market because their marketing
efforts largely depend on these issues
...
So, these were some of the personal factors that
affect consumer behaviour
...
The
consumer purchase process can be difficult and confusing one, and for
that matter, the consumer might need information from others to make
his or her way through the steps in his purchase process
...
Their friends’ travel experiences and knowledge enabled this
couple to gather information, evaluate alternatives, and reach a purchase
decision more quickly than they would have been able to do alone
...
For
example, a student wears a cap with the name of his college or school to
demonstrate his identification with his institution
...
Each potential reference group offers certain advantages to a
consumer
...
In doing so, the
consumer must have some knowledge of how the members of the group
out and the values they held
...
Family, close
friends and co-workers are in the primary groups whereas secondary
groups consist of those people to whom an individual interacts only
occasionally and does not consider their opinion very strongly
...
Rotary club, Lions Club, Labour Unions are name of the
examples of formal groups
...
Having a meeting with
the neighbours over a cup of tea to discuss some happenings, is an
instance of an informal group
...
For example, a doctor qualifies to be a member of
9
medical association or all workers in a factory qualify for membership to
the labour union
...
For example, a clerk may act as if he belongs to
executive class by adopting their life styles, attitudes, values and wearing
style etc
...
Therefore, a
marketer has to keep a constant track of group behaviour so as to be a
successful marketer
...
Although, now a days, women’s roles are changing fast but still they
make buying decisions related to household items like healthcare
products, foods, landing supplies and kitchen wares etc
...
Today, children also play a bigger role in family purchase
decisions
...
The
husbands decide specifically about the saving instruments, life insurance
and house building materials etc
...
(f)
Roles and Status: A role is a set of functions and activities
that a person in a particular position is expected to perform
...
For example, your
10
roles may include student, son or daughter, friend, employee and spouse
or parent etc
...
Being
parents, you buy books for your children, toys clothing etc
...
As a manager, you would like to
buy clothes which reflect your status in the organisation, such as safari
suit, three-piece suit, tie, leather shoes etc
...
It is the degree of influence that an
individual exerts on the behaviour of others
...
The CEO of an MNC may
drive a BMW to communicate his status in the society
...
3
...
3 Cultural Factors
Cultural factors exert the greatest impact on buying behaviour of a
consumer
...
So, let’s have a brief discussion on these topics
...
In the process they
have come together and have formed common action and reaction
patterns, common ways of doing things, forming common values and
beliefs to help one decide what to do or what not to do and this is a
dynamic process in which something is added up and subtracted over
the time as per the requirement of the situation
...
So, marketers have to take a
concentrated note of this phenomenon
...
However, most individuals
also belong to several subcultures
...
An
array
of
ethnic,
nationality,
religious,
regionality,
and
even
age
characterize subcultures
...
A Punjabi is having different tastes and preferences for food
and dresses against his counterpart who is a Gujarati or a Tamil
...
So, understanding individual consumer should be fascinating for
you
...
Such curiosity is essential for success in this field
...
This particular
section was devoted to individual consumer
...
3
...
They also
buy certain kind of things like materials, manufactured parts, plant &
equipments and different services etc
...
So, in
this section we will examine few questions like-what is business market
and how it differs from consumer market, what kind of buying situations
12
occur and who involves in the buying business forecast etc
...
According to Webster and Wihel “Organisational buying is the
decision-making process by which formal organisations establish the
need for purchased products and services and identify, evaluate, and
choose among alternative brands and suppliers”
...
J
...
So, on the basis of above definitions it can be concluded that
organisational buying is the decision-making process in which one
organisation receives the resources from the other organisation and the
providers identify the need for products and services and the receivers
identify, evaluate, and choose among alternative brands and suppliers
...
5
DIFFERENCE BETWEEN BUSINESS MARKET AND THE
CONSUMER MARKET
The business market consists of all the organisations that acquire
goods and services which are used for further production so that these
are sold or supplied to others and also involve many activities like
banking, finance, insurance, distribution and services etc
...
On the contrary, in
the consumer market, products and services are ultimately delivered to
final consumers and lesser amount of money is involved
...
(a)
Fewer buyers: In case of business market, buyers are fewer
in number as compared to consumer market
...
(b)
Close supplier-customer relationship: There is a smaller
customer base but having important power, we can observe that there is
a close relationship between the two parties because customer is heavily
dependant upon supplier
...
If it is the
case of a technical product, he would make special efforts to impart the
technical know-how to the customer
...
This kind of concentration
helps producers to reduce certain amount of selling costs
...
For example
more than half of the textile industries in India are concentrated in two
states only i
...
Gujarat and Maharashtra
...
(d)
Derived Demand: The demand for organisational product is
called derived demand because organisations purchase products to be
used directly or indirectly in the production of goods and services to
satisfy consumers’ demand
...
For
example, as long as consumers continue to purchase pencils, there will
be an organisational demand for graphite and wood to manufacture
pencils
...
As a result, organisations
like wood manufacturers often target marketing efforts at the ultimate
consumers, even though the firms don’t sell to them directly
...
It means that fluctuations in price of a product will
not significantly affect demand for the product
...
However a sizeable price increase for a particular component
that represent a large proportion of a product’s cost may cause demand
to become more elastic if the price increase of the component part causes
the price of the consumer product to rise sharply
...
(f)
Professional
Purchasing:
The
business
products
are
generally purchased by highly trained and professional people
...
(g)
Direct purchasing: When it comes to consumer buying,
many intermediaries are involved but in case of business buying, buyers
generally buy directly from the manufacturers
...
So, there are
some of the examples of differentiation between a business purchase and
a consumer purchase
...
6
TYPES OF BUYING SITUATIONS/TRANSACTION
A business buyer has to take number of decisions in making a
purchase
...
These situations fall into one of three purchase categories - new task,
modified rebuy and straight rebuy
...
In a new task purchase, the
organisational buyer needs much information
...
(b)
A modified rebuy purchase: It is a type of buying situation
in which the buyer wants to modify product specifications, prices,
delivery requirements, and other terms and conditions
...
A modified rebuy situation
may cause regular suppliers to become more aggressive and competitive
to keep an eye on customers’ business
...
(c)
A straight rebuy purchase: It is a routine purchase of the
same products under approximately the same terms of sale
...
He requires little information for
straight rebuy purchase decisions
...
These purchase decisions are extremely important to
business buyers
...
Simultaneously, they must strive to keep their costs down
...
7
PARTICIPANTS IN BUSINESS DECISIONS
Business purchase decisions are hardly made by just one person
...
These people consist of users, influencers,
buyers, deciders, and gate helpers
...
They frequently initiate the purchase
process, establish the criteria or specifications for the purchase, and
evaluate the performance of the product in comparison to established
criteria
...
(c)
Buyers: These people are also called as purchasing agents
who help in selecting suppliers and negotiating the terms and conditions
of purchase
...
For routine items, deciders and buyers may be
the same but if the price of a product exceeds a certain limit then higher
management personnel generally make the purchase decisions
...
3
...
There
are different stages in the decision-making process from problem
recognition to post purchase performance evaluation
...
1
...
It may occur under a variety of circumstances
...
Recognition of this
problem, however, can come up in several ways
...
The continuation of these sources of influence
eventually leads to an increased level of importance and the subsequent
stage of information search
...
Information Search: Information search can be both formal
and informal
...
Informal information
search can occur during discussions with sales representatives, while
attending trade shows, or reading industry specific journals
...
3
...
The first stage is making the buyer’s approved suppliers list
...
Using this kind
of process, the organisations screen out potential suppliers that do not
meet all its criteria
...
In the
disjunctive decision rule, a minimum level of performance for each
important
attribute
is
established
...
The
18
lexicographic decision rule requires the business buyer to rank the
criteria
in
order
of
importance
...
If
two or more brands tie on this attribute, they are evaluated on the
second most important attribute
...
4
...
From the seller’s point of view, it means
how and when they will get paid
...
Others involve progress payments
...
On
international basis, purchase implementation and method of payment
are even more critical
...
Post purchase performance evaluation: In the final stage of
business buying division process, the new product’s performance is
evaluated
...
At the same time, the supplier’s performance is also
evaluated
...
3
...
Section I deals
with the consumer behaviour and section II deals with organisational
buyer behaviour
...
Consumer decision making is influenced by social,
19
psychological, and personal factors
...
A social class is a relatively
homogeneous and stable group of people with similar values, attitudes,
and behaviours
...
Culture is learned values,
behaviours, and meaningful symbols shared by members of a society
...
Psychological factors are internal forces with in people that affect
buying decisions
...
Motivation research involves analysing the major motives
that influence buying behaviour
...
An attitude is a person’s overall feeling towards some object
...
Demographic factors are personal characteristics such as age,
sex, race, and background
...
In
some
instances,
these
buying
decisions
are
routine
replacement
decisions, at other times, they involve new and complex purchase
decisions
...
Purchase implementation
is more complex
...
Finally,
use and post purchase evaluation are often quite formal
...
10 KEYWORDS
Problem recognition: The awareness that there is a discrepancy
between an actual and a desired condition
...
Motive: An aroused need that directs the behaviour toward a goal
...
Psychological and social need: A need which emerges from a
person’s interactions with the social environment
...
Learning: It is relatively a permanent change in behaviour that
results from experience
...
11 SELF ASSESSMENT QUESTIONS
1
...
2
...
Elaborate in detail the different psychological factors that
influence consumer decision-making process
...
What are the different purchase situations commonly
encountered
by
organisations?
How
do
organisations
typically respond to each situation?
5
...
Write short notes on the following:
(a)
A straight rebuy purchase
(b)
Derived demand
(c)
Professional purchasing
3
...
Kotler, Philip, “Marketing Management Analysis, Planning,
Implementation and Control”, PHI, New Delhi, 1997
...
Schiffman G
...
3
...
and
Ramaswamy,
V
...
,
“Marketing
Management”, MacMillan Publishers, New Delhi, 1995
...
Engel, James, & Blackwell, Roger “Consumer Behaviour”,
The Orydon Press, Orlando, 1990
...
0
Objectives
4
...
1
...
1
...
2
Why the companies use marketing research
4
...
4
Limitations of marketing research
4
...
6
Marketing research process
4
...
8
Keywords
4
...
10 References/Suggested readings
4
...
•
To learn why marketing managers use marketing research
...
•
To describe the term ‘marketing information system’
...
1
4
...
Research always starts with a question or a problem
...
It is a systematic and intensive study directed towards a more
complete knowledge of the subject studied
...
Basic research is sometimes called
‘fundamental’ research, ‘theoretical research or ‘pure’ research
...
The essence of basic research is that it addresses
itself to more fundamental questions and not to the problems with
immediate commercial potential
...
Unlike basic research, it is prompted by commercial
considerations
...
Several firms may be engaged in basic research
which does not have any immediate commercial use
...
Applied research can be divided into two categories: (i) problemsolving research, and (ii) problem-oriented research
...
The latter characteristic
indicates that such a research is undertaken within a firm or by an
outside consultant on its behalf
...
Research of this type is usually concerned with
conceptual aspects but is oriented towards applied problems
...
1
...
It may be emphasised
that it is not restricted to any particular area of marketing, but is
applicable to all its phases and aspects
...
We may also say that marketing
research is of both types– problem-solving and problem-oriented
...
Marketing research specifies the information required to address
these issues; designs the” method for collecting information; manages and
implements the data collection process; analyses the results; and
communicates the findings and their implications
...
The AMA’s definition of marketing research also indicates
the scope and process of marketing research
...
3
4
...
2 What Kinds of Research are undertaken?
The research studies show the following usage of marketing
research:
1
...
2
...
3
...
4
...
2
To help companies make better advertising decision
...
But why is it even necessary for companies to
use something called “marketing research”?· The answer to this inquiry
will
help
beginning
marketing
research
students
have
a
better
understanding of why marketing research has evolved and is continuing
to grow
...
First, the suppliers of products and
services need to have information about final consumers in order to
market their products and services more effectively
...
I
...
In their normal
4
course of business many manufacturers have little direct contact with
the retailers of their products and no contact at all with the final
consumers of their products
...
Although retailers and service organizations have direct contact
with their customers, managers of retail operations often have little
knowledge of their customer’s attitudes, opinions and preferences
because sales clerks and other store personnel do not relay customers’
comments to their managers
...
II
...
At least five such
information topics are of great interest to marketing managers
...
e
...
Obtaining answers to many of these questions
requires contact with final consumers
...
4
...
They clearly bring out how marketing research has been helpful
in resolving marketing problems or in identifying opportunities for the
development of new products
...
A pharmaceutical company carried out a study on the
prescription behaviour for a major brand on account of its declining
sales
...
On the basis of findings of the study, the
company changed its marketing strategy
...
2
...
While launching this magazine, the management observed that it
was convinced through market research that there was a huge vacuum
in the Hindi magazine segment
...
The first print run of Vanita was one lakh copies
...
3
...
It is wrapped in vibrant colours
of red, blue and yellow in conformity with its international packaging
...
The results of this study were encouraging and showed
that the Indian youth is always interested in experimenting with new food
options
...
Procter
and
Gamble
(P&G)
launched
Menthol,
an
international vibrant of Head & Shoulders
...
The company
conducted a market research study prior to its launch
...
The
study showed that in hot and humid conditions as in India, consumers
prefer a shampoo which not only removes dandruff but also provides a
cool and tingling sensation to the scalp
...
Another example from P&G shows how marketing research is
used to identify new opportunities in the marketplace
...
The analysis of such data revealed
that the most common symptom of cold was a headache and that
majority of adults typically take a pill to cure it
...
The company thus launched Action 500
...
Marketing research can
therefore lead to the development of a new product
...
Pepsi Foods has assigned great importance to marketing
research
...
All its research is done by the IMRB
...
(ii)
Studies are from time to time as per the requirement of the
company such as a study to ascertain the effectiveness of an
ad campaign
...
It feels the pulse of the
market and is always in touch with the latest developments in the
market
...
Another
mu1tinational
company
Whirlpool
Asia
lays
considerable emphasis on marketing research
...
It believes in planning research in advance though it is
rather difficult
...
Information thus received proves to be quite useful to the company in
modifying its products or in evolving new ones
...
In India, it has segmented the market on the basis of the
different stages of the product life cycle
...
Marketing and Research Group (MARG) has been the main
marketing research agency for Whirlpool
...
4
LIMITATIONS OF MARKETING RESEARCH
The preceding discussion on the different applications of marketing
research should not lead anyone to assume that marketing research can
solve all the problems of marketing
...
One
must be aware of these limitations in advance so that one is clear about
what marketing research can and cannot do
...
Second, marketing research is criticised on the ground that it
becomes too superficial and faulty in industry
...
Such persons avoid using detailed investigations
and sophisticated techniques which require both time and patience on
the part of marketing researchers
...
As a result,
marketing researchers get divorced from the main stream of marketing
...
Marketing researchers tend to think that “research
is the be all and end all”
...
Fourth, marketing research is not an exact science
...
For
example, consumer behaviour is an area which is rather elusive and the
theory does not go very far in disclosing it very precisely
...
Apart from these limitations of marketing research, one finds that
it is sometimes misused
...
Another misuse of marketing research is found in deliberately
delaying decision-making
...
Finally, it is used to grab power and authority in an organisation
...
4
...
The latter has been defined as:
A structured, interacting complex of persons, machines, and
procedures designed to generate an orderly flow of pertinent information,
collected from both intra-and extra-firm sources, for use as the basis for
decision-making in specified areas of marketing management
...
It also shows that such information is collected to
facilitate decision-making in different areas of marketing management
...
A comparison of
the two concepts shows that while marketing research generates
information, marketing information system concentrates on the storage
and flow of information to marketing managers
...
A good marketing information system should determine the
information needs of the organisation and generate and” process such
information on a continuing basis
...
11
Types of Information Supplied by MIS
Marketing information system usually supplies three types of
information to marketing managers
...
Recurrent information is that information
which is provided on a periodic basis
...
may be supplied on weekly or monthly basis
...
For example, official publications, journals,
annual reports of companies constitute common sources of monitoring
information
...
In addition, such information can be
helpful in identifying new market segments, new uses,)f the existing
product as also possibilities of improving the product by introducing new
features
...
Such information could involve a wide
range of activities such as cost and price analysis of competitive
products, cash flow position of competitive companies, quality testing of
competitive products, etc
...
Once a request is made for specific information, then a series can be built
up over time provided such information is useful and marketing
managers need it frequently
...
Such marketing information
systems are beginning to evolve, as the following example illustrate
...
The five projects were designed to provide the
managers a complete picture of the razor and blade market, including
detailed descriptions of consumers, competition, and distribution
...
Each year a large number of people are selected in a
nationwide sample and are personally interviewed in their
own homes
...
2
...
These
projects are able to measure brand loyalty and brand
switching because the same individuals are studied year
after year
...
Annual telephone surveys provide the company with brand
awareness and advertising awareness information
...
4
...
The tests
ensure that the company’s products are up to standard and
that no claims are made that cannot be substantiated
...
Inventory audits are taken regularly at both the retail and
wholesale
levels
...
These five projects provide Gillette marketing managers with
information on market shares, brand loyalty and brand switching,
consumer
attitudes,
brand
and
advertising
awareness,
product
advantages versus competition, inventory levels, out-of-stock, retail
prices and display, local advertising, and more
...
All of
these items of information provide the Gillette managers an excellent
historical record on which to base the development of their new
marketing plans
...
The
role of marketing research appears to be headed research that may
expose their new product to competitors
...
What Information Sources Are Used?
Where do marketing managers and marketing researchers get the
information they need? All marketing management information comes
14
either from sources internal to the firm or from external sources
...
Thus marketing management information comes
from (1) sources internal to the firm, (2) primary sources external to the
firm, and (3) secondary sources external to the firm (see table 1)
...
Their normal operating responsibilities require that they compile some of
the sales and cost data needed by management
...
Secondary data are those that have been collected by other
organizations; for example, government agencies such as the Commerce
and
Labour
departments
of
the
federal
government,
financial
organizations such as Reserve Bank of India, IMF and IBRD; newspapers
and magazines such as the Economic Times and Finance India, trade
associations such as the CCI
...
Users of such data are limited to what is presented in the summary
tables and charts; the original data are not available to them
...
15
TABLE L: SOURCES OF MARKETING MANAGEMENT INFORMATION
Internal to Firm
External to Firm
Sales and costs broken down by
Primary sources:
products, markets, and types of
Consumers
marketing activities (advertising,
Retailers and wholesalers
promotion, personal selling, etc
...
There is no intervening party to summarize the original data
...
Most important, however, is that the data collected are specified
in advance by managers who will use the data; this assures managers
that the data will be tailored to their needs
...
For example, the “share of
market” and “percent distribution” may be derived from either primary or
secondary sources
...
In effect, there may
be numerous management information needs that can be satisfied only
by a systematic integration of external primary and secondary data with
the firm’s internal data
...
6
MARKETING RESEARCH PROCESS
In planning and designing a specific research project, it is
necessary to anticipate all the steps that must be undertaken if the
16
project is to be successful in collecting valid and reliable information
...
On the other
hand, if we cluster the various steps according to major activities, we can
view the marketing research process as consisting of the following eight
steps:
•
Formulating the Research Problem
•
Choice of Research Design
•
Determining Sources of Data
•
Designing Data Collection Forms
•
Determining Sampling Design and Sampling Size
•
Organising and Conducting the Field Survey
•
Processing and Analysing the Collected Data
•
Preparing the Research Report
These steps are not a contrived sequence of independent steps;
they consist of a number of interrelated activities
...
For example, one
must have a good understanding of the research objectives in order to
identify the information needed to achieve the research objectives
...
Formulating the Research Problem
The first step in research is formulating a research problem
...
It is rightly said that “a problem well defined is
half-solved”
...
17
It is difficult to lay down any concise prescription for recognising
problems
...
Once the researcher has
identified two or more problems or opportunities, the next question he
should be concerned with is- which of the problems is to be selected?
This is necessary as he will not be in a position to take up all the
problems on account of limited finances and time constraints
...
Choosing a relatively less important problem would
amount wasting limited resources
...
He should then select that problem which gives the maximum
net value of research
...
This too needs a good deal of care on the part of marketing
researchers
...
A complete problem definition must specify each of the following:
(i)
Population to be analysed
(ii)
Time and geographical boundaries
(iii)
Characteristics of interest- both the ‘results’ that are of
concern to management and the ‘variables’ that are to be
tested for their relationship to the results
...
Taken together these four aspects, identify who, when, where and
what of the research
...
18
Population to be Analysed
The individuals or objects whose characteristics are to be
measured are called the population or units of analysis
...
It is necessary that the universe is well
defined
...
This specifies a particular universe,
provided that clear definitions are given for ‘Women’s dress buyers’, and
‘Delhi stores’
...
The difference in the two statements is that whereas the units of
the universe are ‘buyers’ in the former, in the latter they are ‘shoppers’
...
In the first case,
the universe indicates ‘Buyers of women dresses’, implying that the buyer
may be either male or female
...
Time and geographical boundaries
As regards time and geographical boundaries, we find that the two
universes are again different
...
30th
July, 2002 is given while in the second instance the entire month of
January is given Similarly, the two universes are different’ in terms of
space- the ‘buyers’ universe specifies stores located in Delhi while the
‘shoppers’ universe specifies the Delhi Metropolitan area which should be
a larger territory than the former
...
The ‘buyers’ universe specifies that
buying takes place in stores located in Delhi
...
It says that women
shoppers living in the Delhi metropolitan area in July, 2002 are
shopping
...
Thus in the
19
second case the area in which shopping occurs is unlimited
...
E
...
Opportunities are transient, the marketing
executive who assumes a static environment is doomed to failure
...
Characteristic of Interest
This aspect identifies the focus of the problem
...
Again, the
researcher may be interested in only one characteristic
...
Thus, we may like to know more specifically as to what
dresses are liked by educated women or those who are employed
...
Environmental Conditions
This aspect indicates the uniqueness or generality of the problem
...
The management is sometimes interested in
knowing the behaviour of certain types of firms under specific economic
conditions
...
In other words, the problem definition must specify
20
the environment for which the company wants research results
...
It may be emphasised that the problem definition in marketing
research is a step towards identification and structuring of the
management’s question
...
Hypothesis Development
Before we pass on to the next stage, it is worthwhile to briefly
mention the development of hypotheses
...
Often there may be several
competing hypotheses, either specified or implied
...
One objective of research is
to select among the possible hypotheses and to test them empirically with
the help of statistical tools in order to ascertain whether they are true or
false
...
In some studies we are only interested in knowing
factual information and hence there is no need for formulating a
hypothesis
...
Further, problem formulation, by setting out
assumptions, would avoid any confusion to the reader
...
Finally, problem formulation would also
indicate the limitations of research itself so that one can see it in a proper
perspective
...
The researcher should specify the
approach he intends to use with respect to the proposed study
...
A exploratory research focuses on the discovery of ideas and is
generally based on secondary data
...
This is because a researcher engaged in an
exploratory study may have to change his focus as a result of new ideas
and relationship among the variables
...
the characteristics of certain groups such as age, sex, educational
level, income, occupation, etc
...
A causal research is undertaken when the researcher is interested
in knowing the cause and effect relationship between two or more
variables
...
It may be emphasised that the main criterion of a good research
design is that it must answer the questions posed earlier
...
A point worth emphasising here is
that there is not one ‘best’ research design
...
Therefore the research should
22
not be deferred in the quest for the ‘ideal’ research design
...
Determining Sources of Data
The next step is to determine the sources of data to be used
...
Sometimes, the research
study is based on both secondary and primary data
...
It is also advisable to evaluate
secondary data in detail to avoid possible sources of error
...
A sincere effort must be made
to look into the existing data with a view to examining their suitability for
the research
...
Designing Data Collection Forms
Once the decision in favour of collection of primary data is taken,
one has to decide the mode of collection
...
Observation: This method suggests that data are collected through
one’s observation
...
While the observation method may be suitable in case of
some studies, several things of interest such as attitudes, opinions,
23
motivations and other intangible states of mind cannot be observed
...
This is a major advantage as the behaviour can be recorded without
relying on reports from the respondents
...
Surveys can be (i) personal
(ii) telephonic (iii) by diary
...
A choice has to be made regarding the type of
survey for collecting data
...
Broadly speaking, telephonic survey is suitable when
very limited information is sought in a short period of time
...
In
contrast, surveys based on personal interviews are suitable when detailed
information is to be collected
...
It is a common practice to use structured questionnaires prepared
in advance, to elicit the necessary information from the respondents
...
It is a mail survey if the information is sought by sending
the questionnaire by post
...
The pre-testing will enable
the researcher to realise the shortcomings of his questionnaire
...
Determining Sampling Design and Sampling Size
Almost
all
marketing
research
projects
are
interested
in
information about a large population such as all families with children at
24
home or all retail grocery stores
...
Various
types of sampling techniques are possible, but they can be classified into
two general categories- non-probability and probability
...
For example, if the study
calls for collecting data from appliance dealers, it is necessary to define
what is meant by an appliance dealer (are discount stores selling
appliances to be included?)
...
g
...
The researcher must then decide on the type of sample which is to
be selected
...
Non-probability samples can be selected in a variety of ways, but
none of them assures that each member of the population has a known
probability of being selected for the sample
...
Determining Sample Size
The researcher must also decide how large a sample to select
...
The researcher must consider the problem at hand, the budget, and the
accuracy needed in the data before the question of sample size can be
answered
...
Example: If 20 percent of a sample of Delhi’s households reports
that they regularly view a certain television program, a manager can ask:
“How close is this sample estimate to the true percentage that exists
among all Delhi households?” The sample size will be a factor in
determining the answer to this question
...
If only 50 households were sampled, and
10 households (20 percent) indicated they were regular viewers, the
actual percentage of households viewing the program might be as low as
10 or as high as 30
...
That theory can help researchers determine what sample size is
needed for a given degree of accuracy
...
Organising and Conducting the Field Survey
Having prepared the questionnaires and selected the sample design
and size of sample, the next step is to organise and conduct the field
survey
...
The task of interviewing seems to be simple but, in reality, it is one
of the most different tasks in marketing research
...
Supervision of field work
is equally important to ensure timely and proper completion of the field
survey
...
Marketing research interviewing in the field may not be the most
highly regarded of jobs, but it is a vital one, the base on which rests all
MR analysis and the marketing decisions which flow from that
...
Yet for all its importance, the field force has rarely
been accorded any more respect within the MR profession that it has got
outside
...
Sarang Panchal, executive director,
customised research, AC Nelsen India is of the opinion that the client
(company) should not totally depend on research agency for field
operations and due to that the data collected are many a time not
satisfactory
...
They should attend first
one or two interviews to know that the questions asked by the field force
are adequate for the research objective
...
A number of tables are prepared to bring out the main characteristics of
the data
...
It is advisable to prepare dummy tables, as such an exercise
27
would
indicate-the-nature
and
extent
of
tabulation
as
also
the
comparisons of data that can be undertaken
...
The second is to
cross-tabulate the data to ascertain some useful relationships
...
The fourth is to undertake a multivariate
analysis
...
While designing a research study, the researcher should give
adequate thought to the use of particular analytical techniques
...
The researcher now has access to an
increasing assortment of techniques and it is desirable to know well in
advance as to what analytical techniques are going to be used, so that
the data can be collected accordingly
...
In
the absence of proper analysis, data may be rendered useless resulting in
a waste of time and money
...
As a poor report
on an otherwise good research will considerably undermine its utility, it
28
is necessary that the researcher gives sufficient thought and care to its
preparation
...
Some of these principles are objectivity, coherence, clarity in the
presentation of ideas and use of charts and diagrams
...
As management is generally not interested in detail of the
research design and statistical findings, the research report should not
be loaded with such details, otherwise, there is a strong likelihood of its
remaining unattended on the manager’s desk
...
Sometimes, a detailed marketing research study throws up one or
more areas where further investigation is needed
...
Sometimes, a detailed marketing research study throws up one or
more areas where further investigation is needed
...
Conclusion
The marketing research process, as described above, involves
various steps, though strict adherence to each of these steps may not be
necessary
...
It should be remembered that as
research proceeds from the selection of the theme through the collection
and analysis of data to the preparation of a report, the focus of attention
29
will move from one activity to the other
...
Further, while it is beneficial to draw a detailed plan and sequence
of various activities in marketing research, it is hardly so if it requires
such financial backing as the firm cannot afford
...
Another point worth emphasising is that howsoever elaborate a
research design may be, its successful implementation depends in on
small measure on its management
...
4
...
According to
empirical studies, the vast majority of companies engage in advertising
research, product research, forecasting research, and research to
measure the size and characteristics of their markets
...
Some companies are now
beginning to coordinate and integrate their marketing research activities
into marketing information systems designed to provide managers the
information they need for recurring problems and decisions
...
The steps represent eight interrelated activities that
30
frequently overlap one another
...
4
...
Marketing
includes
the
research:
monitoring
besides
of
the
including
effectiveness
market
of
its
research,
it
advertising,
intermediaries, financing policies and identifying the needs of the
consumers
...
Hypothesis: It is a tentative solution to a problem
...
Research design: A master plan that specifically identifies what
techniques and procedures will be used to collect and analyse data about
a problem
...
4
...
What is “research”? What are the two broad categories in
which it can be divided?
31
2
...
3
...
Discuss the definition of marketing research as suggested by
the American Marketing Association
...
“Marketing research is undertaken to guide managers in the
analysis of marketing problems
...
6
...
“Many a time management is not convinced about the utility
of marketing research and regards it as an unnecessary
activity over which no funds should be spent”, comment
...
What factors have contributed to the growth of marketing
research in the western countries?
9
...
Marketing research is generally conceded to be essential for
manufacturers, but is it of any real value of retailers and
service organizations? Why?
11
...
” Discuss
...
How is marketing research directed toward setting goals arid
establishing strategies likely to be different from marketing
research directed toward the development of a marketing
plan? Explain
...
“The Marketing research process involves a number of
inter-related activities which overlap and do not rigidly follow
a particular sequence”, comment
...
What is the sequence of steps involved in a marketing
research project?
15
...
What is hypothesis? Should every research project have a
hypothesis?
4
...
G
...
Beri: Marketing Research, Tata McGraw Hill, 3rd edition
...
Boyd, Westfall and Stasch: Marketing Research, Richard D
...
3
...
Green and Tull: Tata McGraw Hill, 6th Ed
...
Englewood Cliffs, Research for Marketing Decision, New
Jersers, PHI
...
Emory, C
...
Irwin, Inc
...
7
...
Quoted from ‘Marketing Research’ by G
...
Beri
...
8
...
9
...
41-44
...
Mature Products Remain as the Mainstays in the Gillette Co
...
17
...
Brown, F
...
, Marketing Research, Addison Wesley, Chapter
2, p
...
12
...
34
LESSON-5
MARKET SEGMENTATION, TARGETING
AND POSITIONING
STRUCTURE
5
...
1
Introduction
5
...
3
Levels of market segmentation
5
...
5
Criteria for effective targeting of market segments
5
...
7
Product positioning
5
...
9
Summary
5
...
11 Self assessment Questions
5
...
0
OBJECTIVE
This chapter explores the bases of segmentation and criteria for
segmentation
...
The chapter also stresses that how a company’s
products must be positioned against competitors’ products
...
1
INTRODUCTION
Marketers can not be all things to all consumers
...
It happens because
customers are too numerous and diverse in their buying requirements
...
In such a case it would be
difficult for one company to meet the needs of each and every consumer
...
In order to develop a successful marketing strategy,
marketers must group consumers into segments that each can be
satisfied by a specific product
...
Marketers such as P&G and HLL offer many products in the same
category, each of which is designed to appeal to a specific consumer
segment, so that the company can profit from sales to many diverse
segments
...
In doing so, marketers must adopt
three steps of target marketing:
(a)
Identify and profile different group of consumers who differ in
their preferences (segmentation)
...
2
MARKET SEGMENTATION: MEANING AND DEFINITIONS
Market segmentation can be defined as the process of dividing a
market into distinct subsets of consumers with common needs or
2
characteristics and selecting one or more segments to target with a
distinct marketing mix
...
J
...
Rajan Saxena defines segmentation as the process of dividing a
heterogeneous market into homogenous sub units
...
When
this is done, the company is in a position to answer “What are our target
markets
...
3
LEVELS OF MARKET SEGMENTATION
The number of possible segments that will result from a
segmentation analysis can be as few as one or as many as the total
number of consumers that are in the total market
...
Typically, various kinds of markets can result from a
segmentation analysis
...
Here the seller engages in
the mass production, mass distribution, and mass promotion of one
product for all buyers
...
Mass
3
marketing would be a logical strategy if all consumers were alike
regarding their needs, wants and demands with same background,
education and experience
...
But
in the diversified market, this strategy does not seem logical and
ultimately marketers end up with the strategy of ‘segmented market’
...
Here the segment consists of a group of customers who share
a similar set of wants
...
(c) Niche Marketing: Nowadays marketers are increasingly using
highly focused marketing programmes to target small consumer niches
with products and services that fit their interests and life-styles
...
Marketers usually
identify niches by dividing a segment into sub-segments
...
The niche is not likely
to attract competition from the other marketers
...
(d) Local Marketing: When marketing programmes are designed to
cater the needs and wants of local customer groups (trading areas,
neighbourhoods, individual stores)
...
4
You can always find a vegetable shop near to your locality and in
the same manner a drug store or a retail store so that needs and wants of
local customer groups can be fulfilled
...
This results when the marketer
believes that no two consumers will respond the same way to its
marketing efforts
...
Health and exercise marketers
provide examples of customized marketing
...
Today the information
revolution is enabling a growing number of companies to mass-customize
their offerings
...
It is a
strategy that mobilizes the combined power of mass production
technologies and computers to make varied, customized products for
individual customers
...
4
BASES FOR SEGMENTATION
The first step in developing a segmentation strategy is to select the
most appropriate bases on which to segment the market
...
They include geographic factors, demographic
factors, psychological factors, socio-cultural variables, and use related
factors etc
...
5
(a) Geographical Segmentation: In geographic segmentation, the
market is divided by location
...
For example, certain food products sell better in one region than in
others
...
Other marketers, have, for a number of years,
been moving in the opposite direction and developing highly regionalised
marketing strategies
...
It is relatively easy to find geographically
based differences for many products
...
(b)
Demographic
Segmentation: Demographic characteristic,
such as age, sex, martial status, income, occupation and education are
most often used as the basis for market segmentation
...
Demographic information is the most accessible and costeffective - Way to identify a target market
...
Demographics are easier to measure than other segmentation variables
...
Demographic variable reveal
ongoing trends, such as shifts in age, sex (gender), and income
distributions, that signal business opportunities
...
Consumer segmentation strategies are often based on specific
psychological variables
...
For example Colgate Palmolive, AT &
T services, Kentucky fried Chicken and Nescafe Coffee
...
(d)
Socio-cultural Segmentation: Sociology and anthropological
variables- that is, socio-cultural variables- provide further bases for
market segmentation
...
Family Life Cycle: Family life cycle segmentation is based on the
premise that many families pass through similar phases in their
formation, growth and final dissolution
...
Family life cycle is a composite
variable based explicitly on marital and family status, but implicity
including relative age, income, and employment status
...
bachelorhood,
honeymooners, parenthood, past parenthood, and dissolution) represents
an important target segment to a variety of marketers
...
It is traditionally “measured” by a
weighted index of several demographic variables, such as education,
occupation, and income
...
Marketers regularly have used their knowledge of social class differences
to appeal up specific segments
...
(e
...
private banking services to the upper classes)
...
Marketers who use cultural
segmentation stress specific, widely held cultural values with which they
hope consumers will identify
...
(e) Use-Related Segmentation: An extremely popular and effective
form of segmentation categories consumers in terms of product, service,
or brand usage characteristics, such as usage rate, awareness status,
and degree of brand loyalty
...
Marketers of a host of other products
have also found that a relatively small group of heavy users account for a
disproportionately large percentage of product usage and that targeting
these heavy users has become the basis of their marketing strategy
...
Awareness status
encompasses the notion of consumer awareness, interval, level, on buyer
readiness
...
Sometimes, branch loyalty is used as the basis for
segmentation
...
5
...
The next
challenge for the marketer is to select one or more segment to target with
an appropriate marketing mix
...
Identification: To divide the market into separate segments on the
basis of a common need or characteristics that is relevant to the product
or service, marketers must be able to identify the relevant characteristic
...
Others, such as education, income, or marital
status,
can
be
determined
through
questionnaires
...
The knowledge of consumer behaviour is especially useful to
marketers who use such intangible consumer characteristics as the basis
for market segmentation
...
9
Stability: Most marketers prefer to target consumer segments that
are relatively stable in terms of demographic and psychological factors
and needs and that are likely to grow larger over time
...
For
example, teens are a sizeable and easily available market segment, eager
to buy, able to spend, and easily reached
...
Accessibility: A fourth requirement for effective targeting is
accessibility, which means that marketers must be able to reach the
market segments they want to target in an economical way
...
5
...
There are three different approaches for selecting target
markets: the undifferentiated approach, the concentration approach;
approach, and the multi segment approach
...
This approach is
used when an organisation defines the total market for a particular
product as its target market
...
Therefore, the firm creates a
single marketing mix that it hopes will satisfy most of those customers
...
Products
that
can
be
marketed
successfully
with
the
undifferentiated approach include staple food items such as sugar and
salt, certain kinds of farm produce, and other goods that most customers
think of as identical to competing products
...
When a company tries to convince consumers that
its products are superior and preferable to competing brands, it is
utilizing product differentiation
...
For instance, if a gasoline company
marketed unloaded gasoline to the total market without product
differentiation, it would be difficult for consumers to select one type of
gasoline over another
...
(b)
Concentration Approach: When an organisation directs its
marketing efforts toward a single market segment through a single
marketing mix, it is using a concentration approach
...
The
company can analyse the characteristics and needs of distinct customer
11
group and then direct all its efforts toward satisfying that groups needs
...
The concentration approach also enables a firm with limited resources to
compete with larger organizations, in the same market
...
Moreover, when a firm dominates one segment of
a market, its popularity and reputation may keep it from moving into
other segments
...
A firm may use the multi segment approach after successfully
using the concentration approach on one market segment and expanding
to other segments
...
A firm with excess
production capacity may find the multi segment approach practical
because the development of products for additional market segments
may use up the excess capacity
...
5
...
Product Positioning: Product positioning is the creation of a clear
image in the minds of consumers within the targeted segment about the
nature of the product and the benefits to be gained from purchasing the
product
...
That is,
segmentation identifies those segments of the population that will act
similarly and develops products to meet each segment’s needs, whereas,
positioning in conveys information about the products back to the
segments for which they are appropriate
...
For example, Mercedes Benz
advertises in magazines that reach upscale audiences and situates
dealership in areas frequented by high income consumers
...
The level of motivation,
through its influence the effort consumers will exert in perceiving and
learning about the product as well as the strength of the attitudes they
hold about the product
...
13
5
...
The following illustrate some of these approaches
...
(i)
positioned
Position on Product Features: The product may be
on
the
basis
of
product
features
...
Although this may be a successful way to indicate
product superiority, consumers are generally more interested in what
such features mean to them, that is, how they can benefit by the
product
...
Toothpaste advertising often features the benefit
approach, as the examples of crest (decay prevention), close-up (sex
appeal through white teeth and fresh breath), and Aquafresh (a
combination of these benefits) illustrate
...
Many products are sold on the basis of their consumer usage situation
...
Campbells soup for many years was
positioned for use at lunch time and advertised extensively over noon
time radio
...
(iv)
Position on User: This approach associates the product with
a user or a class of users
...
Other brands may pick a lesser known model to portray a certain
lifestyle in its ads
...
(v)
Position
Against
Competition:
Often,
success
for
a
company involves looking for weak points in the positions of its
competitors and them launching marketing attacks· against those weak
points
...
For example, the famous
“Uncola” campaign successfully positioned up as an alternative to coke,
Pepsi and other colas
...
9
SUMMARY
In this chapter, many consumer characteristics were presented
...
Whereas
market segmentation seeks to carve a large, heterogeneous market into
smaller, more uniform subdivision, at the other end of the strategy
spectrum market aggregation no subdivision of the market is applied
...
Furthermore, it
was shown that in order for market segmentation to be effective, the
target
group
must
be
identifiable
and
measurable;
accessible;
substantial; and responsive
...
Some newer approaches to market segmentation were also
presented
...
The close interrelationship between market
segmentation and product positioning was also discussed
...
5
...
Benefit segmentation: A kind of market segmentation by which
consumers are grouped according to the specific benefits they seek from
a product
...
Differentiated marketing: A marketing approach in which a
marketer selects more than one target market and then develops a
separate marketing mix for each market
...
5
...
Define Segmentation
...
2
...
In your
opinion which base(s) in more relevant than others and why?
3
...
Write a detailed note on various approaches for selecting
target markets
...
What do you understand by product positioning? Describe in
detail various positioning strategies
...
Write short notes on the following:
(a)
Mass Marketing
(b)
Niche Marketing
(c)
Concentration approach
(d)
Position against competition
5
...
(2)
Marketing by Stanton
...
(4)
Marketing by Skinner
...
0
Objective
6
...
2
Product classification
6
...
1 Consumer goods
6
...
2 Industrial Goods
6
...
3
...
3
...
4
Product mix
6
...
5
...
0
6
...
7
Keywords
6
...
9
References/Suggested readings
OBJECTIVE
After reading this lesson, you must be able to discuss
•
the concept of product and the importance of product
decisions in the overall business strategy of the enterprise;
•
how the products are classified;
•
to focus attention on product life cycle and the strategies
that the firms adopt at each stage of the life cycle; and
•
the concept of product line and product mix and strategies to
manage them
...
1
PRODUCT DEFINED
(i)
A product is anything that can be offered to a market to
satisfy a want or need
...
It may be emphasized, as brought out in these definitions, that
customers buy a product not only for “what it is” but also for “what it
means” to them
...
People buy things which agree with their self-image and selfconcept
...
Products that are marketed include physical goods, services,
experiences,
events,
persons,
places,
properties,
organizations,
information, and ideas
...
Each level adds more customer value,
and the five levels constitute a customer value hierarchy
...
A hotel guest is buying “rest and
sleep”
...
Marketers must see
themselves as benefit providers
...
Thus a hotel room includes a bed, bathroom, towels, desk,
etc
...
Hotel guests expect a clean bed, fresh towels, working
lamps, and a relative degree of quiet
...
At the fourth level, the marketer prepares an augmented product
that exceeds customer expectations
...
Today’s
competition
essentially
takes
place
at
the
product
augmentation level
...
First, each augmentation adds cost
...
Second, augmented benefits soon become expected benefits
...
This means that competitors will have to search for still other
features and benefits
...
At the fifth level stands the potential product, which encompasses
all the possible augmentations and transformations the product might
undergo in the future
...
All-suite hotels where the
guest occupies a set of rooms represent an innovative transformation of
the traditional hotel product
...
Delighting is a
matter of exceeding expectations
...
1: Five Product Levels
Importance of Product in Marketing-Mix
Product is the most powerful competitive tool in the hands of a
marketing manager
...
Product types, quality, features and
design
largely
determine
production
and
marketing
cost,
and
consequently exercise a major influence on price
...
If a manufacturer’s product cannot be differentiated from that of
his competitors, he may have to take recourse to price competition in
order to attain the targeted sales volume or market share
...
, a
marketing manager may put his major trust in non-price competition
...
, in the product
...
If the product is a complex industrial machine or
component part used by other manufacturers, it is likely to be sold
directly by the manufacturer without using any middlemen
...
Speciality goods such as fans and transistors need a different kind ~f
distribution channel than shopping goods
...
Whether major thrust in promotion will be on personal selling,
advertising or sales promotion significantly depends on the product type
...
Mass
consumption products need major emphasis on advertising and sales
promotion
...
If a company is unable to perform this basic function
efficiently and effectively, it will be driven out of business by competition
...
In the final analysis its ability to meet customers’ need depends on
the product which it supplies to the market
...
It
5
should, therefore, devotes considerable attention to the determination of
its product objectives and formulation of its product strategy
...
2
PRODUCT CLASSIFICATION
We are aware that a product has many intangible as well as
tangible attributes
...
This can be done
formally using a classification system which aids market planning
...
2: Classification System for Consumer Goods
6
...
1 Consumer goods
Figure 2 shows different sub-categorizations for consumer goods
...
Convenience
Goods:
These
are
usually
relatively
inexpensive items whose purchase requires very little effort on the part of
the consumer
...
The decision process is complicated by the existence
of brands which force the consumer to make comparison and choices
...
Convenience goods can be further classified into (i) staple and (ii)
impulse items
...
g
...
Product differentiation for staple items tends to be minimal
...
(ii)
Impulse convenience goods: As the name implies, there is no
pre-planning involved with the purchase of impulse convenience goods
...
2
...
Because shopping goods are generally more
expensive than convenience goods and the purchases are less frequent,
shopping goods purchase are characterized by pre-planning, information
search and price comparisons
...
In addition to product features the consumer will consider price,
place of purchase, purchase (credit) terms, delivery arrangements, aftersales service and guarantees
...
7
Shopping goods can be further classified as homogeneous or
heterogeneous items
...
are homogeneous in nature
...
Heterogeneous goods: Heterogeneous shopping goods are stylized
and non-standard
...
Behavioural factors play an important role in the
purchase decision
...
Speciality Goods: The purchase of speciality goods is
characterized by extensive search and extreme reluctance to accept
substitutes once the purchase choice has been made
...
Consumers of
speciality goods pay for prestige as well as the product itself
...
If the marketing is successful, the
customer’s search period can be reduced or almost eliminated in some
cases
...
4
...
By definition, the customers have not considered their purchase before
being made aware of them, and could often do without them
...
The consumer may also be suspicious of any
8
‘offer’
...
The methods of marketing usually employed are direct mail,
telephone campaigns, door-to-door canvassing and the dubious practice
of ‘sagging’ (selling under the guise of market research)
...
Naturally, a company is likely to segment its market within a given
product
class,
but
the
classification
system
allows
for
a
basic
understanding of buyer behaviour as a function of the product
...
2
...
INDUSTRIAL GOODS
INSTALLATIONS
ACCESSORIES
COMPONENTS
RAW MATERIALS
SUPPLIES
Fig
...
For
example, any company needs office furniture and equipment, stationery
9
and cleaning materials which are all ancillary to the manufacturing
process
...
Installations: These are the most expensive and critical
purchases a company has to make
...
If a company makes a mistake in its choice of office equipment or
building maintenance services this can be costly, but it is unlikely to
seriously threaten the company’s future
...
The purchase of
installations is, therefore, the result of a very extensive search process
...
Much emphasis is placed on the quality of sales
support and advice and subsequent technical support & after-sales
service
...
Accessories: Like installations, these are considered as
capital items, but they are usually less expensive and are depreciated
over fewer years
...
Accessories include ancillary plant
and machinery, office equipment and office furniture
...
3
...
There is a direct relationship between raw material quality
and the quality of the company’s own finished product
...
10
Price is particularly important because these goods are purchased
throughout the year and have a direct and continuous effect on costs
...
Component Parts and Materials: The supply considerations
for these items are similar to those for raw materials
...
In this sense they should not be confused
with ‘accessories’
...
g
...
5
...
They are probably taken for granted by most company
employees and include such goods as office stationery, cleaning materials
and goods required for general maintenance and repairs
...
Most
supplies are relatively homogeneous in nature and thus price is likely to
be a major factor in the purchasing decision
...
It is a common misconception to regard
all industrial purchasing as being rigid routinely in its logic
...
This means that the consequences of error are far graver
...
Industrial buyers are, nevertheless,
human beings, and they base decisions upon a variety of criteria in
addition to those of price, quality and delivery
...
3
THE PRODUCT LIFE CYCLE
The idea of a product life cycle (PLC) is central to product strategy
...
The product has a ‘birth’ and a ‘death’- its
introduction and decline
...
By considering a product’s course through the
market in this way, it is possible to design marketing strategies
appropriate to the relevant stage in the product’s life
...
Fig
...
Because the marketing environment is essentially
dynamic, even basically similar products are likely to react differently
during their life span
...
The intrinsic nature of the product itself
2
...
Changes in consumer preferences, which are affected by the
macro-and microen-vironment
4
...
Estimate the likely shape of the total curve
2
...
Identify the product’s movement from one stage to another
The last task is perhaps the most difficult, because the designation
of each stage is somewhat arbitrary
...
6
...
1 Life Cycle Stages and their Associated Strategies
1
...
The period ends
when awareness of the product is high enough to attract wider user
groups so that sales are correspondingly increased
...
The prime goal at this stage is to create awareness
...
Clearly, this must be regarded as an investment in the
product’s future
...
The company may wish
to achieve high sales levels in a short span of time or slowly establish a
profitable niche in the market place
...
1
...
While the product remains
distinctive, growth can be encouraged by a planned series of
progres-sive price reductions
...
A penetration pricing strategy is employed to attract the
largest possible number of new buyers early in the product’s
life
...
In both cases, the role of pricing at this stage of the life cycle is to
establish the product in such a way as to permit further strategy to be
implemented in the subsequent stages
...
While profits are not necessarily forthcoming
during introduction, the introductory pricing strategy should prepare for
profitability in the future
...
In all cases, it is of paramount importance that the product
is available to the intended market
...
Out-of-stock
situations
provide
competitors
with
opportunities to take market share and it can be costly to win it back
...
Growth Stage: During growth stage the product is still
vulnerable to failure (although most failures occur early in the product’s
life)
...
These may pose a threat sufficient to
cause some firms to withdraw from the market
...
It should, however, be at a level which does not drain
profits, although it is not unusual for very high levels of expenditure to
continue throughout growth in order to achieve profitable market
dominance during the maturity stage
...
In consumer
markets, in particular success will depend on finding shelf space in retail
outlets, which now tends to be controlled by a small number of powerful
mu1tiple operators
...
Distribution will be a key factor in such decisions,
because retailers will wish to keep their stock levels to a minimum
...
15
A company must attempt to optimize the product’s price during
growth and it is likely that towards the end of this period, there is the
opportunity to maximize profits
...
This is because the full effect of economies of scale is often
passed on to customers
...
3
...
Much
marketing
activity
is
devoted
to
this
stage
...
Profits begin to fall correspondingly
•
Increasing brand and inventory rationalization amongst
retailers and distributors
•
Marginal manufacturers retiring from the market when faced
with severe com-petition and reduced margins
It should be emphasized that market growth has ceased by this
stage
...
There is, therefore, a need for sustained promotional activity, even if only
to
retain
existing
customers
...
In line with the aims of promotion, distribution strategy should be
designed to retain outlets
...
To this
16
end, the major thrust of promotional effort may move from the consumer
to the distributor
...
The aim of price cutting should be to increase purchases
sufficiently to offset any revenue loss
...
Decline Stage: While the shape of the PLC curve is
theoretical and should never be regarded as inevitable, persistently
falling sales signify the decline stage of the product
...
Consumer
preferences may have changed or innovative product may have displaced
the existing product
...
On the other
hand, it may be worth extending the product’s life well into decline while
the number of competitors is falling
...
Cost
control and cost reduction is, of course, always an important element of
management activity, but during decline this may be the only method of
maintaining profitability
...
3
...
This requires
the company to be highly marketing-oriented and marketing-motivated,
17
making extensive use of relatively sophisticated marketing research and
marketing intelligence techniques
...
In particular, use of the PLC provides two valuable benefits
...
A predictable course of product development for which
appropriate strategies can be planned and budgeted
...
The scope to plan beyond the life of the existing product
...
Mass consumption
products which are repeatedly purchased time and again generally have
much longer periods of growth and maturity than durable consumption
goods
...
Secondly, a firm may, through effective
product strategy, prolong the growth and maturity stages in the life cycle
of its products
...
Stimulating new uses and new users and product
modification to increase sales is called product re-launch
...
Product modification may be aimed at
improving its functional utility, quality, style, etc
...
For example, redesigning of
sofas into sofas convertible into beds gave a tremendous boost to their
18
sales in cities like Bombay where lots of people have only a limited living
space available to them
...
The real problem with functional modification is that it may add to the
cost of production, and consequent increase in price may have an
adverse effect on its sales
...
Nevertheless, expansion in the primary demand of the modi-fied product
is going to benefit it if it can maintain or increase its market share
...
This change in quality
may affect its durability, performance, operational cost, operation time,
etc
...
Negative change in quality may be made when it is intended to
position the product in the lower income group mar-ket by reducing its
price
...
Style changes play an important role in expanding the market of a
product
...
S
...
In India, style
changes in products are most common in textiles and shoes
...
, have
undergone so much style modification during the last one decade or so
that it is hard to conceive what will be the style at the end of the next
decade
...
This is often done by making changes in
packag-ing and advertising appeal
...
6
...
This
requires consideration of not only the functional aspects of the product
but also its features, design, colour, style, price, distribution channels,
after-sales services, etc
...
For example, the marketing
manager of a fan manufacturing company has to decide whether he
should sell all kinds of fans including table, ceiling and pedestal fans, of
all standard sizes, and in various price ranges to suit the pocket of
customers of all income groups
...
Many companies produce a number of product lines now-a-days
...
produces pharmaceuticals and
toothpaste
...
A company may diversify by broadening its product line in
related products or unrelated products or both in related as well as
20
unrelated products
...
This is called scramble
diversification
...
This is called
related product diversification
...
It may do so by abandoning a
product line, or reducing the variety of models in a product line, called
product line simplification
...
S
...
, a trend of trimming the product
line was witnessed in the 1970s
...
, dropped certain product
lines altogether and also thinned certain fat product lines
...
Product-Mix Defined
“A product mix (also called product assortment) is the set of all
products and items that a particular seller offers for sale”
...
The width of a product mix refers to how many
different product lines a company carries
...
The depth of a product mix refers to how many variants of each
product are offered in the line, e
...
Colgate-Palmolive’s Halo shampoo
comes in three formulations and three sizes and hence has a product mix
depth of nine
...
21
The consistency of a product mix refers to how closely related the
various product lines are intend use
...
The width, depth and consistency of product mix enables a
company to define its product portfolio, appeal to different consumer
needs/segments and encourage one-stop buying
...
A consistent mix is generally easier to manage than diversified mix
...
However,
excessive consistency may leave the marketer to a narrow range of
business
...
On the
other extreme, companies like Philips, Videocon, BPL, etc
...
The following discussion will
highlight the various considerations taken in deciding the product line
...
5
PRODUCT LINE
It is a group of products that is closely related because they
perform a similar function, targeted at the same customer groups, and
marketed
through
the
same
channels
...
Line stretching: Decisions pertaining to line stretching are
taken whenever the marketer feels he can increase his profits by either
adding or dropping items from the line
...
22
Downward stretch takes place when the company finds that its
offerings are at the high price end of the market and then stretch their
line downwards
...
Conversely, upward stretch occurs when a company enters the
upper end through a line extension
...
An
example of a successful upward stretch would be that of Lifebuoy, which
started from hygienic bath soap for the masses to a premium quality
liquid hand wash for the higher strata of society
...
2
...
There are several reasons
for line filling
...
•
Trying to satisfy dealers who complain about lost sales
because of missing items on the line
...
•
Trying to offer a full line of the product
...
The launch of Cinthol, in different variants is an example of line
filling
...
There is
also a Cinthol International, packed in a red pack with a picture of
mountains depicting freshness
...
For this, each item must possess a difference which sets it apart
from the others
...
Line modernization: Even when the product line length is
adequate, the line might need to be modernized
...
A piecemeal approach
allows the company to see how customers and dealers react to the new
style
...
A major disadvantage of piecemeal modernization is that it allows
competitors to see changes and start redesigning their own line
...
Because competitors are constantly upgrading their
options, each company must redesign their own offering
...
A
major issue is the timing of the product line improvements so that they
do not happen too early and damage the sales of their current product
line, or come out too late so that the competitors can establish a strong
foothold
...
Line featuring: In the case of durable products, marketers
at times select one or a few items to “feature”
...
At times, the marketer will feature a high end item to lend
prestige to the product line
...
Sometimes a company finds one end of its line selling well
and the other poorly
...
24
6
...
1 Managing Line Extensions
There are several factors which can explain why so many
companies have pursued line extensions as their marketing strategies
...
Customer segmentation: Managers perceive line extensions
as a low-cost, low-risk way to meet the needs of various customer
segments and by using more sophisticated and lower-cost market
research and direct marketing techniques, they can identify and target
finer segments more effectively than ever before
...
2
...
Line extensions try to
satisfy the desire for “something different” by providing a wide variety of
products under a single umbrella
...
The Gujarat Milk Marketing Federation launched a host of milk-based
products under the brand name Amul
...
Line extensions can help a brand increase its share of shelf space,
thus gaining higher visibility and attracting consumer attention
...
However, building enough volumes to offset the additional costs required
for such extension is also necessary
...
Pricing breadth: Marketers often extend the line on superior
quality platform and set higher prices for the new offering than their core
items
...
In this way a marketer also lends “prestige” to its
product-line
...
For example, American Express offers its Optima card for a
lower annual fee than its standard card
...
4
...
In fact, excess capacity encourages
the introduction of line extension that requires only minor adaptations to
current products
...
Short-term gain: Line extensions offer the most inexpensive
and least imaginative way to increase sales quickly
...
In fact, few brand managers are willing to
spend the time or assume the career risk of introducing new products in
this crossed market
...
Competitive intensity: Mindful of the link between market
share and profitability, managers often see extensions as a short-term
competitive device that increases a brand’s control over limited retail
shelf space and, if overall demand for the category can be expanded, also
increases the space available to the entire category
...
Trade pressure: The proliferation of retail channels for
consumer products compels marketers to offer broad and varied product
lines
...
They,
instead, demand special package sizes to meet their specific customer
demand (for example, bulk packages or multi-packs of low-price variety)
or derivative models that impede comparison shopping by consumers
...
Energizing a brand: A line extension can be an effective way
to make a brand more relevant, interesting, and visible
...
This would give new as well as old customers sufficient
reason to buy the brand
...
Exploitation of variety fulfilment: A brand may be
stretched across multiple product categories to take advantage of a
common and important consumer benefit existing in both, the products
and the consumer perceptions
...
Line extensions can also increase a brand’s consumer
share of requirements within a given product category
...
Expanding a brand’s core promise to new users: A brand
may have a strong image that promotes loyalty and exclusiveness
...
In fact, line extensions can perform
the role of continually improving the core brand
...
11
...
12
...
Line extensions have the
potential of inhibiting or neutralizing moves by competitor
...
who permitted new companies to gain a toehold in their
respective industries
...
Managing a dynamic environment: Line extensions provide
a way to survive in an environment full of ambiguities and transitory
signals and forces
...
14
...
Thus, logic
seems to be on the rise for any new launch to assess the pulse of the
market in a competitive environment
...
6
SUMMARY
A product is “a set of tangible and intangible attributes, including
packaging, colour, price, manufacturer’s prestige, retailer’s prestige,
manufacturer’s and retailer’s services, which the buyer may accept as
offering satisfaction of wants or needs
...
The most fundamental is the core benefit or service followed by a basic
28
version of the product
...
At the fourth level, the marketer
prepares an augmented product that exceeds customers’ expectations
...
There can be two broader classification of the product i
...
consumer
goods
and
industrial
goods
...
In industrial goods installations, components, accessories,
supplies and raw materials are included
...
The value of this concept is that once the stage is identified
marketer can adept his strategies accordingly
...
6
...
Non durable good: A tangible, physical item that is quickly
consumed and lasts for a shorter span
...
Shopping product: A product for which consumers feel the need to
make comparisons and seek out more information
...
Industrial product: A product or service that is used to produce
other product for further use
...
6
...
Describe each of the main stages of the product life cycle
...
What do you understand by product line? Discuss the
attributes associated with product line management
...
6
...
REFERENCES/SUGGESTED READINGS
1
...
2
...
, New Delhi
...
Marketing
Management-
Planning,
Implementation
and
Control, The Indian Context By Ramaswamy V
...
and
Namakumari S
...
, New Delhi
...
Product Management in India by Majumdar
...
5
...
D
...
, New Delhi
...
0
Objective
7
...
2
Improving Existing Products
7
...
4
Stages in New Product Development
7
...
5
...
5
...
6
Product elimination
7
...
8
Keywords
7
...
10 References/Suggested Readings
7
...
A number of aspects relating to new product
development, such as, significance of new product development, the
typical stages in the new product development, the problems in new
product development, and new product failures have been examined in
this chapter
...
1
INTRODUCTION
To compete effectively and achieve their goals, organisations must
be able to adjust their product mixes in response to changes in
customers and customers’ needs
...
To provide products that satisfy
target markets and achieve the organisation’s objective, a marketer must
develop, alter, and maintain an effect product mix
...
Because customers’
attitude and product preferences changes over time, their desire for
certain products may wane
...
A marketer may have to delete a product from the
mix because a competitor dominates the market for that product
...
A marketer may expand a firm’s
product mix to take advantage of excess marketing and production
capacity
...
In strategic market planning, many marketers
rely on the portfolio approach for managing the product mix
...
This chapter examines several ways to improve an organisation’s
product mix, including managing existing products, developing new
products from idea generation to commercialization, and eliminating
weak products from the product mix
...
2
IMPROVING EXISTING PRODUCTS
An organisation can benefit by capitalizing on its existing products
...
This
analysis
can
then
lead
to
improvement of a product mix through line extension and through
product modification
...
For
example, the maker of comet cleanser has extended this line to include
Liquid Comet and Comet Gel
...
Line
extensions are more common than new products because they are a less
expensive, lower risk alternative for increasing sales
...
Product Modifications
Product modification means changing one or more characteristics
of a firm’s product
...
For
example, automakers use product modifications annually when they
create new models of the same brand
...
Like
line extensions, however, product modifications entail less risk than
developing new products
...
First, the product must be
modifiable
...
Third, the modification should make the
product more consistent with customer’s desires so that it provides
greater satisfaction
...
Quality Modifications
Quality modifications “are changes that relate to a product’s
dependability and durability
...
Increasing the quality of
a product may give a firm an advantage over competing brands
...
Some
firms, such as Caterpillar, are finding ways to both increase quality and
reduce costs
...
Typical product categories that
have undergone considerable functional modifications include office and
farm equipment, appliances, and cleaning products
...
Functional modifications can make a product
useful to more people and thus enlarge its market
...
4
Aesthetic Modifications
Aesthetic modifications change the sensory appeal of a product by
altering its taste, texture, sound, smell or appearance
...
Thus, an aesthetic modification may strongly affect purchase
...
7
...
New Products
can be broadly classified into two groups: (i) new products arising out of
technological innovations, and (ii) new products arising out of marketing
oriented modifications
...
The
second group involves mere marketing oriented innovations in existing
products; it gives rise to new versions of the existing products; the
newness may be due to a change in the colour of the product, its design,
the addition of a new feature, a change of package or a change of brand
name
...
This
subject has been already dealt within the preceding section on improving
existing product
...
7
...
New product development in respect of altogether: New products,
goes through several important stages as shown below:
5
•
Product Strategy Development
•
Generating New Product Ideas Idea Screening
•
Concept Testing
•
Business Analysis and Market Analysis Product Development
•
Test Marketing
•
Commercialisation
Each of these stages involves considerable study and analysis and
at each stage, a management decision is called for before proceeding to
the next stage
...
The companies formally treat strategy as the first step in
new product planning
...
Based on corporate objectives and strategy,
the corporate role for new products is determined, the external
environment is scrutinized to identify emerging product threats and
opportunities, industries are evaluated to determine the growth potential
of existing markets, previous new product experience in various markets
are considered, internal capabilities are evaluated to identify relevant
company strengths and weaknesses, the existing management style is
weighed, and the position of existing products in the product life cycles
considered
...
Developing a new product strategy, the first step, provides a
focus for the second, idea generation step in that the ideas generated are
intended to meet strategic objectives
...
6
Idea Generation
Businesses and other organisations seek product ideas that will
help them achieve their objectives
...
The
fact- only few ideas are good enough to be commercially successful,
underscores the difficulty of the task
...
At the heart of innovation is a purposeful,
focused effort to identify new ways to serve a market
...
New product ideas can come from several sources
...
Brainstorming
and incentives or rewards for good ideas are typical intrafirm devices for
stimulating the development of ideas
...
As a church choir
member, he used slips of paper for marking songs in his hymnal
...
New product ideas may also arise from sources
outside
the
firm-
customers,
competitors,
advertising
agencies,
management consultants, and private research organisations
...
Direct observation of competitors’ products, customers’ evaluations
of their product features, and the grapevine of suppliers and others who
serve competitors often contributes ideas
...
Disassembly and intensive analysis of competitors’ product is common
...
Inventors
and
other
“creators”
represent
a
key
source
of
technological innovation and product ideas from outside the company
...
To make sure
that ideas received in this way are appropriately screened, not just
quickly rejected or lost, it is essential that those in the company most
likely to be contacted by creators be identified and trained
...
One way to accomplish this is
to offer employees rewards for ideas that are later deemed marketable
...
Another approach is to use brainstorming sessions in which small
groups of customers (and others) toss out new product ideas
...
Leadership
keeps
the
interchange
moving
and
the
discussion on the desired track
...
Since the objective is to have the
participants advance as many ideas as possible, no criticism or
evaluation of the ideas presented is allowed
...
Focus group interviewing is a technique similar to brainstorming
...
8
Idea Screening
In the process of screening, the ideas with the greatest potential
are selected for further review
...
If a product idea results in a product that is similar to the
firm’s existing products, marketers must assess the degree to which the
new product could cannibalize the sales of current products
...
Other aspects of an idea that should be weighed are the nature
and wants of buyers and possible environmental changes
...
It encourages evaluators to be systematic and so reduces the
chances of their overlooking some pertinent fact
...
Concept Testing
To evaluate ideas properly, it may be necessary to test product
concepts
...
For a single product idea,
an organization can test one or several concepts of the same product
...
The results of
concept testing can be used by product development personnel to better
understand which product attributes and benefits are most important to
potential customers:
9
Notice that the concept is briefly described; then a series of
questions is presented
...
The typical questions are these: IN
general, do you find this proposed product attractive? Which benefits are
especially attractive to you? Which features are of little or no interest to
you? Do you feel that this proposed product would work better for you
than the product that you currently use? Compared with your current
product, what are the primary advantages of the proposed product? If
this product were available at an appropriate price, would you buy it?
How often would you buy this product? How could this proposed product
be improved?
Product Description
(Concept Test for a Tick and Flea Control Product)
An insecticide company is considering the development and introduction
of a new tick and flea control product for pets
...
The insecticide is in a cartridge that is
installed in the handle of the brush
...
The actual dispensing works very much
like a felt-tip pen
...
Thus the
amount of insecticide that is placed on your pet is minimal compared to
conventional methods of applying a tick and flea control product
...
Please answer the following questions:
1
...
What are the major advantage of this product compared with the
existing product that you are currently using to control ticks and
fleas on your pet?
3
...
What suggestions do you have for improving this product?
5
...
Semi-likely
Not likely
Assuming that a single purchase would provide 30 applications for
an average-size dog or 48 applications for an average-size cat,
approximately how much would you pay for this product?
Business Analysis and Market Share Analysis
This stage is crucial in the total process of new product
development because several vital decisions regarding the project are
taken based on the analysis done at this· stage
...
Investment and profitability analyses of the
project under different assumptions are made at this stage
...
The financial estimates
would be reliable only if they are based on a fairly accurate demand
forecast and related market factors
...
They have to come up with information on the following aspects,
in particular:
•
Estimate of demand for the proposed product
...
Demand estimation for
intrinsically new products is being discussed in a separate
section
...
•
Seasonal patterns in consumption, if any
...
•
Major competitors, their market shares, the dominant
market segments held by them
...
•
Price elasticity of demand
...
The
nature of channel required the nature of channels available,
comparative costs/advantages of alternative channel types
...
If so, what would it cost?
Only when information on the above aspects is complete,
meaningful estimates of overall profitability of the project can be made
...
Product Development
The product ideas that pass the screening and business analysis
stages are not usually “concrete” enough for extensive testing of customer
acceptance
...
Product development is often a scientific and engineering task, leading to
the design and building of prototype working models
...
For technical products such as
sound speakers or robots, this may be a complex and lengthy task
...
Alternative
designs may vary the product’s safety and its cost
...
Others take years to develop and test
...
To determine which design is best,
information on customer preferences is often needed in addition to
comparative costs
...
Or marketing research may sample customers’
preferences when the target markets comprise many, widely dispersed
customers
...
Suppose that a firm
has screened a few food product and is now trying to determine specific
ingredients to create desired product characteristics and benefits
...
Yet development personnel are unsure of the
degree of sweetness to build into the product
...
Consumers choose the preferred version in a paired-comparison
test, after testing and comparing several pairs of products
...
Sweetness
level A, which corresponds to a particular sugar content, is preferred by a
majority of the consumers
...
If there are competitive products with a
sweetness level at or near A, then the best strategy might be to build in a
lower or higher level of sweetness
...
13
Interaction between marketing and product development personnel
is by Gillette’s experience with its roll-on antiperspirant, Dry Idea
...
Chemists
at Gillette’s laboratory in Boston were told to develop a roll-on that would
not go on wet
...
Then, one was selected
...
Because the development stage is yet another decision point in
the new product decision process, the product idea may be dropped if
building is not technically feasible; if the product can only be built with
substantial, undesirable modifications; or if the costs of development or
production
are
prohibitive
...
Eventually, 3 M
rejected the idea because a small scale test showed that it was not
possible to cultivate enough oysters to make the project financial
attractive
...
Planning
supporting strategies at this stage can significantly reduce the total lead
time between idea screening and product introduction
...
Management learned that customers wanted to see the
product before making a buying decision
...
Small-scale tests of supporting strategies should not be confused
with marketing research intended to forecast sales
...
Test Marketing
During this stage, the product is actually tried out in selected
market segments
...
Test marketing is a form of risk control and ensures
avoidance of costly business errors
...
If
totally new products are introduced into the market on a commercial
scale without resorting to test marketing, it may so come to light that the
product was not the right one for the chosen market
...
Test marketing in such a case may indicate
that the sales prospect for the product is bound to be poor; and the firm
may opt to drop the new product idea and save the investment
...
Test marketing is an experiment that has to be carefully
conducted
...
In many cases, test marketing is also a time consuming
process; it has to be carried out for long duration in order to obtain
15
reliable and meaningful indications
...
Test Marketing Technique Takes Roots in India
In India, test marketing as a marketing technique is becoming
popular in recent times
...
Now, more and more
firms with the help of advertising and marketing research agencies are
going in for test marketing before a new product is commercially
launched
...
Mc-Dowells test marketed Sprint in Bombay before
going national
...
A decision must finally be made on whether or not deciding on to
introduce the new product into target markets
...
If the decision is to go ahead, resources are committed to
implementing the new product strategy
...
Typically, very large commitments of money and personnel are
involved
...
16
Crash Introduction (Commercialization)
A crash introduction is the full-scale commercialization of a new
product as quickly as possible
...
In this way, competitors are given
little time to prepare their responses to the product
...
A crash introduction
tends to maximise other risks because substantial resources are
committed quickly
...
areas
...
A rollout
offers the advantage of giving management time to monitor and adjust
the new product strategy before all resources are committed
...
When the resources
needed for a crash program are not available, as is the case with smaller
companies, the rollout procedure may be the only feasible alternative
...
Introductions occur when their
time often fail
...
There is often a window of
opportunity
that
gradually
closes
17
due
to
changing
preferences,
competitive entries, and a changing environment
...
Product Adoption Process
The acceptance of new products- especially new to the world
products -usually doesn’t happen overnight and it can take a very long
time
...
Customers who eventually accept a new product do so through an
adoption process
...
1
...
2
...
3
...
4
...
5
...
The buyer purchases the product and can be
expected to use it when the need for this general type of
product arises again
...
For example, one might be aware that Polaroid offers a
talking camera that has built-in recorded comic messages to evoke
smiles, but have no plans to gather more information about it
...
During the evaluation stage, individuals
18
consider whether the product will satisfy certain criteria that are crucial
for meeting their specific needs
...
Supermarkets, for instance, frequently offer
special promotions to encourage consumers to taste products
...
TABLE 7
...
The device is inherently of no value to us”
...
Who would
pay for a message sent to nobody in particular?
- David Sarnoffs associates in response to his
urgings for investment in the radio in the 1920s
“Who the hell wants to hear actors talk?”
- H
...
Warner, Warmer Brothers, 1927
“A cookie store is bad idea
...
- Banker’s response to Debbie Field’s Idea of starting
Mrs
...
- Decca Recording Co
...
However, because
a person enters the adoption process does not mean that she or he will
eventually adopt the new product
...
Both product adoption and product rejection can be
temporary or permanent
...
First, the company must promote the product
to create widespread awareness of its existence and its benefits: Samples
or simulated trials should be arranged to help buyers make initial
purchase decisions
...
Finally, production and physical distribution
must be linked to patterns of adoption and repeat purchases
...
Of those who eventually adopt the
product, some enter the adoption process rather quickly, whereas others
start considerably later
...
Depending on the length of time it takes them to adopt a new
product, people can be divided into five major adopter categories:
innovators, early adopters, early majority, late majority, and laggards
...
1 illustrates each adopter category and the percentage of total
adopters that it typically represents
...
Early adopters choose new products carefully and are
viewed as “the people to check with” by persons in the remaining adopter
categories
...
Late
majority people, who are quite sceptical of new products, eventually
adopt new products because of economic necessity or social pressure
...
20
They are suspicious of new products, and when they finally adopt the
innovation, it may already have been replaced by a new product
...
7
...
Roger
...
5
NEW PRODUCT FAILURE
•
New product development is a highly expensive; time
consuming and risk laden affair
...
Such organisations invest heavily in
research and development and they often have several new
product ideas in the queue, each in different stages of
formulation
...
Majority of the firms shy away from the
task of new product development for the following reasons
...
Many new
product ideas, after years of caring, do not reach the market
at all
...
•
New products suffer from a high rate of market failure
...
•
Even in the case of successful new products, success is short
lived
...
Now wonder, new product development has mostly remained the
forte of big companies who can absorb the cost and fatigue of such
failures
...
5
...
Such a situation arises
because the firm has not answered and solved certain basic questions at
the product idea stage itself
...
5
...
If a medium size firm with only moderate
resources on hand is planning to introduce a new product, it should
check whether it is going to provoke a mighty competitor
...
So, a firm trying to introduce a new product has to do a lot
of preplanning
...
7
...
Product elimination is the process of deleting a product from
the product mix when it no longer satisfies a sufficient number of
customers
...
A marginal product may require shorter production
runs, which can increase per-unit production costs
...
Most
23
organizations find it difficult to eliminate a product
...
Salespeople who still have
some loyal customers are especially upset when a product is dropped
...
7
...
A product mix can be
improved through line extension and through product modification
...
Product modification is the changing of one or more characteristics
of a firm’s product
...
Quality
modifications are changes that relate to a product’s dependability and
durability
...
Aesthetic
modifications change the sensory appeal of product
...
A new product may be an
innovation that has never been sold by any organization; a product that a
given firm has not marketed previously, although similar products may
have been available from other organizations; or a product brought from
one market to a new market
...
In the idea generation phase, new
product ideas may come from internal or external sources
...
There are several key questions a company should ask when
reviewing an idea for a new product
...
During the business analysis stage, the product idea is
evaluated to determine its potential contribution to the firm’s sales, costs,
and profits
...
Test
marketing is a limited introduction of a product in areas chosen to
represent
the
intended
market
...
The process that buyers go through in accepting a product
includes awareness, interest, evaluation, trial, and adoption
...
25
Product elimination is the process of deleting a product that no
longer satisfies a sufficient number of customers
...
A product mix should be systematically reviewed to
determine when to delete products
...
7
...
Go error: An error of selecting a poor idea that should have been
dropped at the time of screening the ideas
...
Concept testing: Research procedures used to learn consumers’
reactions to new product ideas
...
Test marketing: A controlled experimental process where a new
product
is
tested
under
realistic
market
conditions
in
limited
geographical areas
...
Laggard: A member of the group of final adopters in the diffusion
process
...
9
SELF ASSESSMENT QUESTIONS
1
...
2
...
3
...
What is the major purpose of concept testing, and how is it
accomplished?
5
...
Why does the process of commercialisation sometimes take a
considerable amount of time?
7
...
When developing a new product, a company often test
markets the proposed product in a specific area or location
...
Suppose
you wish to test-market your new revolutionary Super Wax
car wax, which requires only one application for a lifetime
finish
...
Generally, buyers go through a product adoption process
before becoming a loyal consumer
...
Did you go
through all the stages?
27
10
...
Identify a
familiar product that recently has been modified, categorize
the modification (quality, functional, or aesthetic), and
describe how you would have modified it differently
...
10 REFERENCES/SUGGESTED READINGS
1
...
Pride O
...
Ferrel: Marketing Concepts and
Strategies,
Tenth
Edition,
All
India
Publishers
and
Distributors Regd
...
2
...
Cravens, Gerald E
...
Woodruff:
Marketing
Management,
A
...
T
...
S
...
) Delhi- 110 051 (India)
...
V
...
Ramaswamy, S
...
28
LESSON-8
BRANDING, PACKAGING AND LABELLING
STRUCTURE
8
...
1
Understanding the Term Marketing
8
...
3
Product
8
...
5
Brand equity
8
...
7
Brand name decisions
8
...
9
Packaging strategies
8
...
11 Summary
8
...
13 References/Suggested readings
8
...
8
...
Yet- the product failed!”
Won’t it surprise you? Despite all this a product could fail!
Yes! We can see plenty of examples in our day to day life
...
To find an answer just remember your recent few purchases and
try to answer the following questions:
1
...
Was it the product that you bought or you actually bought a
benefit or as a set of benefits that would satisfy some of your
need(s) which were troubling you
...
So you would buy the product that would offer you the most
desirable set of benefits at most lucrative offer
...
Now it is clear that a product is bought because it has the ability to
satisfy our need(s) which we may be well aware of or even may be
unaware and are guided by our subconscious or hidden desires
...
2
But it is not that simple
...
In this process a marketer first of all has to know the needs and
desires of consumers, then to make goods and services (products) that
would fulfil them And not just this, a consumer would have to be
communicated about their needs and desires and about the products
that would fulfil them
...
By now you might have got a little feel of what marketing is! Now
we can try to define marketing
...
The American Marketing Association offers the following definition:
“Marketing
is
the
process
of
planning
and
executing
the
conception, pricing, promotion, and distribution of ideas, goods and
services to create exchanges that satisfy individual and organisational
objectives”
...
8
...
1)
...
1
Now it is amply clear as what marketing is
...
Because changing
environment not only affects our efforts to market the products but also
the human needs and wants
...
(i)
Needs: Need is a state of felt deprivation
...
e
...
(ii)
Wants: When we assign our need a meaning according to the
culture, society and the personality of the person it becomes want i
...
a
4
hungry person in north India will want chapati to eat and in south India
he will like rice
...
One may have
unlimited wants, but these remains desires if not backed by adequate
money and willingness to depart with money for a given product
...
Now let’s understand the entire marketing process
...
Identifying needs: As discussed earlier it is not the product
as such that marketers sell, rather a set of benefits that can satisfy
consumers’ needs
...
This is not an easy task as such
and requires an in-depth study of what is going on in the minds of people
and what factors in their environment are affecting them
...
Which of the needs, a marketer will decide to
cater, depend on the core strength, expertise and earlier experience of the
marketer on one hand and lucrative ness of the market on the other
...
Transforming needs and wants into Products: On the
basis of factors discussed above a marketer’s in next step is to decide
what types, styles, forms and variety of products can fulfil these needs
...
Not only this all decisions regarding
5
products like their colours, shapes, sizes, packing are also made keeping
in mind again the kind of buyers the marketer is catering to, for example,
an insurance marketer will have to offer different types of insurance
products for rich classes, low income group, business community,
servicemen etc
...
Communicating with target Consumers: Making a product
that will satisfy the needs of consumer doesn’t end the job of a marketer
...
The marketers also
have to decide about media to communicate through and the contents of
the message
...
4
...
) he will be
using to make products available at nearest possible places to the
ultimate consumer and keeping the cost minimum possible at the same
time
...
5
...
If consumer is not
satisfied then, reasons have to be sought out and removed
...
So a
marketer must watch the consumer’s satisfaction level and changing
needs and wants, so as to be able to incorporate the desired attributes in
the product before it becomes obsolete or overtaken by competitors
...
Before gaining in depth of the branding we must
know that what is product because it is the product to which we give any
name or identity
...
3
PRODUCT
Product can be anything that is offered to the market to satisfy
need and wants
...
Product is not just limited to the tangible goods
...
Soaps, insurance, hamburgers, museum etc
...
Product can be classified as durable goods and non durable goods
on the basis of durability and as a convenience goods (that the customer
purchases frequently, immediately e
...
soaps, toothpastes etc
...
car, scooter, banking services); Speciality
goods (that which are purchased because of unique characteristics e
...
audio, video system etc
...
Industrial products are those which are purchased for further processing
...
g
...
We can further
divide industrial product into three parts i
...
materials and parts (that
enter the manufacturer’s production or operations) and supplies and
services (that facilitate development of finish product)
...
4
BRAND
What is brand? It is nothing but a way of creating an identity for a
product, somewhat like quick example comes to mind is that of Amitabh
7
Bachan whose name evokes a certain identity
...
Similarly, when we want to sell or buy a product
we don’t think in terms of product in general but we are required to
identify the particular brand within entire product range which we like
e
...
when we go to purchase shaving cream we do not ask for any
shaving cream, we ask for specific brand, i
...
old spice, Denim etc
...
It takes lot of time to become
the Big B
...
We relate to brands in many ways
...
g
...
The American Marketing Association defines a brand as:
“A brand is a name, term, sign, symbol, design, or a combination of
these, intended to identify the goods and services of one seller or group of
sellers and to differentiate them from those of competitors”
...
Consumer view a brand as an important
part of a product and branding can add a value to a product
...
When a
consumer becomes loyal to any brand he or she start saying that I want
Godrej, I want Bajaj etc
...
8
Thus, we can say that brand gives identity to the product
...
Brand loyal as know very well the features and
benefits of the product each time they buy
...
It provides legal protection for unique
product feature
...
Marketers must know at which level to anchor
the brand identity
...
Firstly, because the buyers are not as mature and interested in the
attributes of the product as the benefits
...
Third, current attributes may become less desirable
tomorrow
...
5
BRAND EQUITY
Brand Equity encompasses a set of assets linked to a brand’s name
and symbol that adds to the value provided by a product or service to the
consumers
...
A consumer expects a certain
standard of quality and satisfaction which the manufacturer has to make
sure and that the product lines up to that expectations, otherwise the
consumer will stop buying that product
...
A brand is his or
her evaluation of performance of that brand
...
This is the strength of Brand Equity
...
From a
consumers’ perspective, brand equity is the added value bestowed on the
product
...
Because of the escalation of new
9
product costs and high rate of new product failures, many companies
prefer to leverage their brand equity through brand extensions rather
than risk launching a new brand
...
g
...
A brand with strong brand equity is very valuable asset
...
The worlds’ top brands
include Coca-cola, Campbell, Disney, Kodak, Sony, Mercedes-Benz,
McDonalds
...
The basis of co-branding is in which two brand names are featured on a
single product
...
Brand equity ensures a high level of consumer brand awareness
and loyalty
...
g
...
Customers are ready to pay a premium because of perceived reliability,
trust worthiness, as well as the positive image of superior quality that the
brand commands
...
Awareness is measured according
to the recognition and the recall of brand
...
(ii) Brand Loyalty: A brand’s value to the company is a measure of
customers’ loyalty towards a brand
...
Brand Personality: In totality brands holds more meaning and
...
This is a highly promised concept, both in theory and practical
relevance, when it comes to positioning brands with non functional
values, in form of feeling it arouse in consumer: Raymond- a complete
man, Cadbury’s– a gift of love
...
However, brand managers
using these statements often tend to define character for several brands
in the company’s line in more or less identical terms e
...
for many OTC
(over the counter) remedies, the Brand character is monotonously
described as caring and efficient
...
The purpose of positioning by brand personality is lost if we are
unable to define a desired personality for our brand which is clearly
distinct from the personalities of competing brands and sister brands in
our own product line
...
“The manufacturer who dedicates his
advertising to building the most favourable image, the most sharply
defined personality, is the one who will get the largest market share at
the highest profit in the long run”
...
“Brand image refers to rational measurements like quality,
strength, flavour
...
It would seem that Restall considers brand personality as being
made up of the emotional association of brands and brand image, of its
physical features and benefits
...
It includes impression about the physical features and performance;
impression about functional benefits from using it; imagery and symbolic
meaning it evokes in the consumer’s mind
...
Brand personality is that aspect of the brands totality which bring
up in the mind of the consumers its emotional overtones and it
symbolisms its characterisations, if you will
...
It makes his task simpler
in judging whether it is his kind of product or not
...
It embraces
the brands physical and functional aspects and also it symbolic
meanings
...
It must match the target prospect’s self concept
“I see the brand in myself’
...
6
BRANDING STRATEGIES
Brand Extension
A successful brand is like a powerhouse containing enough energy
to illuminate distant territories
...
It has stood the test of time and competition
...
This is what explains the extension from Ivory soap to Ivory
shampoo, from Dettol antiseptic to Dettol soap, from P&G Dreamflower
talc to Dreamflower soap
...
The brand name may lose its special positioning in consumer’s mind
through over extension Brand dilution occur when consumers no longer
associate a brand with a specific product or highly similar product The
best result would occur when the brand name build the sale of both the
new product and the existing product
...
Thus, Marvel was
addition to the Godrej toilet soap line which already included Cinthol and
Fresca Wheel was a line extension to Hindustan Livers line of detergent
bars which already had Rin
...
Can you imagine the present Cinthol, a Cinthol Shikakai
soap and a cinthol with its beauty cream all fighting far a place in the
13
consumer’s mind
...
But there too, the dangers of cannibaliation are
high
...
Multi-branding offers a way to establish different features and appeal to
different buying motives
...
Finally, companies may develop separate brand
names for different regions or countries, perhaps to suit different
cultures or languages e
...
P&G dominates the U
...
laundry detergent
market with Tide, which in all form captures more than 40% market
share
...
New Brands
A company may create a new brand name when it enters a new
brand category for which none of the company’s current brand names are
appropriate like Japan’s Matsuishita uses separate brand name-for its
different families of product
...
If Timer decides to make toothpaste, it is not likely to call them Timex
tooth-brushes
...
Thus P&G and other large consumer product marketers
are new pursuing megabrand strategies- weeding out weaker brands and
focusing their marketing skills only and brands that can achieve number
one or two market share positions
...
7
BRAND NAME DECISIONS
Marketers have to decide, while branding the product, which brand
names to use
...
1
...
So if the
product fails or appears to have law quality, the company’s name is not
hurt e
...
sprite by Coca-cola
...
Blanket Family Names
In this case company gives corporate name to the product
...
Furthermore, sale
of product is likely to be more if the corporate image is good e
...
Bajaj,
Godrej, IBM
...
Separate Family Names for All Products
Here company after inventing different family names for different
quality lines within the same product class e
...
HLL has different brand
names within soap category ego Liril, Lux, etc
...
Company trade name combined with individual Product
Names
Some manufactures tie their company name to an individual brand
name for each product, e
...
Kellogg’s Rice Krispies, Kallog’s Raissin Bron
and Kallog’s Corn Flakes
...
It should
suggest something about the products benefits
...
It should suggest about product qualities e
...
5star
chocolates, milk maid, Lazer blades
...
g
...
It should not carry poor meanings in other countries
and languages e
...
Nova is a poor name for a car to be sold in Spanish
speaking; it means ‘doesn’t go’
...
8
PACKAGING
Even after the development of product and branding that product,
needs arise to fulfil the other aspects of the marketing mix
...
One such product feature,
and a critical one for some products, is packaging which consists of all
the activities of designing and producing the container or wrapper for a
product
...
The above definition shows that package is the actual container or
wrapper
...
It has become a potent marketing tool
...
Packaging and the resulting packages are intended to serve several
vital purchases
...
(ii)
It provides protection to the product after it is purchased
...
(iv)
It helps to identify a product and this may prevent
substitution of competitive products
...
Moreover,
customers are ready to pay a little more for convenience, appearance,
dependability and the prestige of better packages
...
Thus,
innovative packaging can bring large benefits to the customers and profit
to producers
...
Despite of having various benefits of the packaging, there are
certain limitations; which are as follows:
1
...
Packaging is too expensive
3
...
4
...
8
...
Packaging the product line: A company must decide whether to
develop a family resemblance when packaging related products
...
For example,
compbell soup uses virtually identical packaging on all its condensed
soup products
...
17
Multiple Packaging: It is a practice of placing several units of the
same product in one container
...
Changing the package: A firm may need to correct a poor feature
in an existing package
...
However, this farm of packaging might be slowed
because it is not biodegradable
...
However, they fear consumer resistance
...
8
...
A label is a part of the
product that carries information about the product and the seller
...
The
seller must label products
...
Labels are of three types:
1
...
Some clothes carry the brand label like Mc wear
...
Descriptive label: It gives the information about the product
use, care, performance, and other features
...
3
...
Corn and wheat are grade-labelled 1 and 2
...
Descriptive labels
provide more information about the product but not necessarily all that
is needed or desired by a consumer
...
The public’s complaints about false or deceptive labelling
and packaging have led to a number of Federal Labelling Laws
...
Even with this
legislation, consumer discontent with labelling and packaging did not
disappear
...
Congress responded
with the Fair Packaging and Labelling act (1966)
...
The Food and Drug Administration
has required processed food producers to include nutritional labelling
that clearly state the amount of protein, fat, carbohydrates, and calories
contained in the products, as well as there vitamin and mineral content
as a percentage of the recommended daily allowances
...
19
8
...
Branding, packaging and labelling are the tools that help
marketers in their endeavour
...
Packaging products a containment function, a protection-in-transit
function, a promotion function, and an ecological function
...
8
...
Individual brand: A brand that is individually named and do not
match with other items in the same product line
...
Label: The sticker attached to a container to carry product
information
...
Profit margins
and market share are much more because of goodwill associated with the
brand
...
20
instructions,
graphic
design,
8
...
Marketing Management: Philip Kotler
...
Fundamentals of Marketing: W
...
Stanton
...
Marketing: E
...
4
...
Sengupta
...
0
Objective
9
...
2
Importance of pricing decisions
9
...
4
Pricing methods
9
...
1 Cost-Based Pricing Method
9
...
2 Demand-Oriented Pricing Method
9
...
3 Price Elasticity Method
9
...
5
...
5
...
5
...
Price leadership
9
...
4 Pricing new products
9
...
5 Skimming pricing strategy
9
...
6 Penetration price strategy
9
...
7 Product line pricing
9
...
8 Price Bundling
9
...
9 Premium pricing
9
...
10 Image pricing
9
...
7
Keywords
9
...
9
References/Suggested readings
1
9
...
9
...
When
products are undifferentiated and competitors numerous, the firm has no
market power and must take the price level imposed by the market
...
Until
recently, pricing decisions were considered from a purely financial
viewpoint, and largely determined by costs and profitability dimensions
...
All
these factors play an important part in making pricing decisions of
strategic importance
...
From the firm’s point of view, the question of price has two aspects:
the price is an instrument to stimulate demand, much like advertising,
and at the same time price is a determinant factor of the firm’s long-term
profitability
...
e
...
e
...
Furthermore, pricing
decisions must remain coherent with other elements of marketing mix
especially brand positioning and distribution strategy, advertising etc
...
Purchasing behaviour can be seen
as a system of exchange in which searching for satisfaction and monetary
sacrifices compensate each other
...
From the buyer’s point of view, the price he or
she is willing to pay measures the intensity of the need and the quantity
and nature of satisfaction that is expected; from the seller’s point of view,
the price at which he or she is willing to sell measures the value of inputs
incorporated in the product, to which the seller adds the profit that is
hoped to be achieved
...
Typically, for example, if the buyer gets 5
kilograms of basmati rice for Rs
...
125 and to the buyer it is 5 kilograms of basmati rice
...
25 for 1h:g basmati rice in different ways as
mentioned below
...
He also decides to provide a recipe of different pulaos and
biryanis and get the true basmati flavour
...
He may charge premium of a
rupee or two per kilogram, but will the customer pay this differential?
The answer to that will be in knowing how the customer perceives these
changes in the product
...
For example, the buyer
has to pay Rs
...
50 per one kilogram of a well-known brand of
sunflower edible oil
...
160,
thus giving a saving of 50 paise per kilogram
...
(c)
Change the quality of goods and services offered: If the
quantity ratio does not change but the quality of the goods and services
has declined, then for the buyer, the real price has increased and viceversa
...
So does a discount
...
(e)
Changes in any of the following:
(i)
Time and place of transfer of ownership
(ii)
Place and time of payment
(iii)
Acceptable form of payment-like accepting credit cards
as a mode of payment
...
The customer also, has the option to pay over
ten months
...
To arrive at a good price strategy, the
marketer should be able to decide on the price objectives
...
2
IMPORTANCE OF PRICING DECISIONS
The following points highlight the importance of pricing strategies
in the current marketing environment:
•
The chosen price directly influences demand level and
determines the level of activity
...
•
The selling price directly determines the profitability of the
operation, not only by the profit margin allowed, but also
through quantities sold by fixing the conditions under which
fixed costs can be recovered over the appropriate time·
horizon
...
•
The price set by the firm influences the product or the
brand’s general perception and helps in shaping brand’s
image
...
•
More than any other marketing variable, the price is an easy
means of comparison between competing products or brands
especially when there is hardly any brand differentiation
...
•
Pricing
strategy
must
be
compatible
with
the
other
components of strategic marketing
...
•
Acceleration of technological progress and shortening of
product life cycles means that a new activity must be made
to pay over a much shorter time span than previously
...
•
Proliferation of brands or products which are weakly
differentiated, the regular appearance of new products and
the range of products all reinforce the importance of correct
price positioning; yet small differences can sometimes modify
the market’s perception of a brand quite significantly
...
•
Legal
constraints,
as
well
as
regulatory
and
social
constraints, such as price controls, setting maximum
margins, authorization for increases etc
...
•
Reduced purchasing power in most economies makes buyers’
more aware of price differences, and this increased price
sensitivity reinforces the role of price as an instrument for
stimulating sales and market share
...
9
...
This broad objective can in practice take
7
different forms and it is in the firm’s interest to clarify from the outset its
strategic priorities in setting prices
...
Profit-oriented
achievement
of
a
objectives
are
either
sufficient
return
on
profit
maximization
invested
capital
...
In practice, it is
difficult to apply this model
...
The objective of target return rate on investment (ROI) is
widespread
...
This approach, often adopted by
large enterprises, has the merit of simplicity, but is incorrect
...
Volume-oriented objectives aim to maximize current revenue or
market share, or simply to ensure sufficient sales growth
...
e
...
Once a dominant
position is reached, the objective changes to one f ‘satisfactory’ rate of
return
...
A totally different strategy is that of skimming
pricing
...
The objective here is
to achieve the highest possible turnover with a high price rather than
high volume
...
In a number of industries dominated by a:
leading firm, the objective is to establish a stable relationship between
prices of various competing products and to avoid wide fluctuations in
prices that would undermine buyers’ confidence
...
In this case, the firm prefers to concentrate its efforts on
competing over features other than price
...
9
...
9
...
1 Cost-Based Pricing Method
Starting with costs analysis is certainly the most natural way to
approach the pricing problem, and it is also the one most familiar to
firms
...
Figure 2 shows a
...
Prices which are based on costs and make no explicit reference to
market factors are called ‘cost-based prices’
...
Figure 2: The elements of price
The floor price, or the minimum price, corresponds to direct
variable costs (C), also known as ‘out-of-pocket costs’
...
Floor price = Direct variable costs
This price concept is useful for negotiating exceptional orders or for
second marketing discounting, when the firm has unused capacity and
has the possibility to sell in a new market such that there will be a
negligible loss of sales in its main market
...
Any price above the floor price can allow a firm to use its
production capacity to a maximum and still generate extra funds to cover
overhead or improve profits
...
The break-even price (BEP) corresponds to the price where fixed
costs and direct costs are recovered, given the sales volume assumed
...
The BEP
corresponds to the full cost concept, where the level of activity is used as
criterion for allocating the fixed costs
...
Assuming that the firm wants to earn a 20 per cent
mark-up on sales, the mark-up price is given by
Mark-up price = BEP/(l–desired mark-up)
This pricing method, popular for its simplicity, ignores demand and
competition
...
The target price, or sufficient price, includes, apart from direct
costs and fixed costs, a profit constraint, which is normally determined
by reference to a ‘normal’ rate of return (r) on invested capital (K)
...
Target price = C + F / E(Q) + rK/E(Q)
where K denotes invested capital and r the rate of return
considered as sufficient or normal
...
The same criticism must be formulated here
...
11
Usefulness or cost-based pricing: Cost-oriented prices constitute
a starting point for setting a price
...
However, they do have a real
usefulness, because they provide answers to ‘the following types of
questions:
•
What is the sales volume or sales revenue required to cover
all costs?
•
How does the target price or the mark-up price compare with
prices of direct competition?
•
To what level of market share does the level of sales at the
break-even point correspond?
•
In the case of a price change, what is the necessary volume
change to maintain the present level of profitability?
•
If prices go down, what is the minimum volume increases
required to offset the price decrease?
•
If prices go up, what is the permissible volume decrease to
offset the price increase?
•
What is the implied price elasticity necessary to enhance or
maintain profitability?
•
What is the rate of return on Invested capital for different
price levels?
Cost analysis is a necessary step which helps to identify the
problem by focussing attention on the financial implications of various
pricing strategies
...
12
9
...
2 Demand-Oriented Pricing Method
Pricing based exclusively on the firm’s own financial needs is
inappropriate
...
Consequently, in a
...
cost
...
Nagle (1987) has identified nine
factors affecting buyers’ price sensitivity:
•
Unique-value effect: buyers are less price-sensitive when the
product is more unique
...
•
Difficult comparison effect: buyers are less price-sensitive
when they cannot easily compare the quality of substitutes
...
•
End benefit effect: buyers are less price-sensitive the lower
the expenditure is compared with the total cost of the end
product
...
•
Sunk investment effect: buyers are less price-sensitive when
the product is used in conjunction with assets previously
bought
...
•
Inventory effect: buyers are less price-sensitive when they
cannot store the product
...
4
...
Price elasticity of demand refers to the changes in
demand in response to price changes
...
In assessing the price elasticity of demand, the marketer has to
consider the following factors
...
It is important to note that the customers’ perception of compatibility of
competing products to satisfy the need is more relevant here than the
compatibility on tangible features
...
The other side of this coin is that lack of substitutes or
competitor products will mean low price elasticity of demand
...
is lower
than manufactured product like soft drinks, television, etc
...
order and tele-shopping today is built around this assumption and its
communication is directed to motivate customers against price shopping
...
The thumb rule is that customers’ perceive
premium quality in the product if it is priced at a higher level
...
Many marketers seek to change a
customer’s attitude towards this direction
...
Thus the nature of the product, competition and buyers’ value
perception play an important role in shaping the elasticity of demand for
the product at different price levels
...
5
PRICING STRATEGIES
The different types of pricing strategies are discussed as under:
9
...
1 Value Pricing
Value pricing is a customer-based pricing procedure which is an
outgrowth of the multi-attribute product concept
...
Therefore, the customer- oriented company should set
its price according to customers’ perceptions of product benefits and
15
costs
...
Customers balance the benefits of a purchase
against its costs
...
This customer-based pricing procedure can
be implemented in different ways
...
5
...
To evaluate what the customer is prepared to pay, the procedure followed
is to identify and evaluate the different satisfactions or services provided
by the product as well as all the costs (other than price) it implies
...
•
Analyse the benefits generated by the product
...
•
Make cost-benefit trade-offs and determine the maximum
acceptable price
...
Similarly, the costs implied other than
prices are just as diverse, acquisition costs, installation, risk of failure,
custom modification etc
...
5
...
Price leadership
Price leadership strategy prevails in oligopolistic markets
...
The leading company then makes pricing moves which are duly
acknowledged by other members of the reference market
...
The presence of a leader helps to regulate the market and avoid
too many price changes
...
Other firms then recognize the leader’s role and become followers by
accepting prices
...
There are different types of leadership
...
The dominant firm establishes a price and the
other producers sell their products at this price
...
•
Barometric leadership which consists of initiating desirable
price cuts or price increases, taking into account changes in
production costs or demand growth
...
•
Leadership by common accord, where one firm is tacitly
recognized
as
leader,
without
there
being
a
formal
understanding or accord
...
Such a leader could be the most visible firm in the sector, for
example the firm that leads in technology
...
According to Corey (1991) the effective exercise of leadership
depends on several factors:
The leader must have a superior market information system for
understanding what is going on in the market and reacting in a timely
way
...
•
The price leader should use long-term measures to assess
managerial performance
...
•
It should have a broad concern for the health of the industry
...
On the whole, the presence of a leader acts as a market stabilizer
and reduces the risk of a price war
...
5
...
This
price is a fundamental choice upon which depends the commercial and
financial success of the operation
...
9
...
5 Skimming pricing strategy
This strategy consists of selling the new product at a high price
and thus limiting oneself to the upper end of the demand curve
...
Many
considerations·
support
this
strategy;
furthermore,
a
number
of
conditions need to be met for this strategy to prove successful
...
•
When a product is so innovative that the market is expected
to mature slowly and the buyer has no elements on which to
compare it with other products, demand is inelastic
...
•
Launching a new product at a high price is one way of
segmenting the mar-ket
...
The launching price skims the customers who are
insensitive to price
...
This is a form of
time dis-criminatory pricing
...
This is particu-larly true when the
19
manufacturing process is not yet stabilized and costs are
likely to be underestimated
...
When the
firm does not have the financial means necessary for a
successful introduction, charging high prices is one way of
generating the resources
...
Its main advantage is that it leaves the
door open for a progressive price adjustment, depending on how the
market and competition develop
...
9
...
6 Penetration price strategy
Penetration strategy, on the other hand, consists of setting low
prices in order to capture a larger share of the market right from the
start
...
In this case the
outlook is more commercial than financial
...
•
Demand must be price elastic over the entire demand curve;
there are no upper segments to be given priority and the only
strategy is to address the whole market at a price low enough
to satisfy the greatest number
...
•
Soon after its introduction, the new product is threatened by
strong competition
...
The penetration strategy is
used here to discourage competitors from entering the
market
...
•
The top range of the market is already satisfied; in this case,
penetration policy is the only valid policy to develop the
market
...
A penetration price strategy is therefore more risky than a
skimming price strategy
...
9
...
7 Product line pricing
Strategic marketing has led firms to adopt segmentation and
diversification strategies which have result in the multiplication of the
number of products sold by the same firm or under the same brand
...
This strategy of
product development brings about an interdependence between products,
which is reflected either by a substitution effect (or cannibalism) or by a
complementarily effect
...
When a firm is selling a set of related products, the price of each
product must be set in such a way as to maximize the profit of the entire
21
product line rather than the profit of a single product
...
9
...
8 Price Bundling
When the products are related but are non-substitutes i
...
complementary or independent, one strategic option for the firm is
optional price bundling, where the products can be bought separately,
but also as a package offered at a much lower price than the sum of the
parts
...
This pricing strategy is common practice, for instance, in the’ automobile
and audiovisual markets, where packages of options are offered with the
purchase of a car or of stereo equipment
...
5
...
Potential
buyers for the standard model are very price sensitive, while buyers of
the superior model are not
...
The
best solution is to exploit jointly economies of scale and heterogeneity of
demand by covering the two segments, the lower end of the market with a
low price and the high end with a premium price
...
For example, airlines have used this
pricing strategy very successfully
...
Business people place a high value on flexible scheduling
...
22
Capitalizing on these differences, airlines set regular ticket prices
high and offer discounts only to buyers who purchase their tickets well
before departure
...
9
...
10
Image pricing
A variant of premium pricing is ‘image pricing’
...
The difference is that there is no real difference between
products or brands; it is only in image or perceptual positioning
...
, where
the emotional and/ or social value of a product or a brand is important
for the consumer
...
6
SUMMARY
Marketing always involves the exchange of products, ideas, and
services of some value
...
Price plays an important role in the marketing mix
to attain marketing objectives because it is the only ‘P’ of the marketing
mix which generates revenue for a firm
...
In a
good marketing-mix, all the four Ps must be consistent with each other
...
23
In setting prices, it is important to determine the pricing objectives,
knowing the importance of pricing for target market, calculating the
approximate
demand,
and
determining
the
pricing
strategy
...
The
price must suit to the target audience
...
Cost provides the basis on which to build a strategy
...
9
...
Barter: The exchange of products without the use of money
...
It is especially in those kinds of products which are similar in
nature and are not distinctive on the basis of their features, such as raw
materials
...
Pricing objectives: The desired result associated with a particular
pricing strategy
...
Product line pricing: When a firm is selling a set of related
products, the price of each product must be set in such a way as to
maximize the profit of the entire product line rather than the profit of a
single product
...
8
SELF ASSESSMENT QUESTIONS
1
...
2
...
3
...
4
...
9
Write a detailed note on ‘price elasticity’
...
Marketing Management, Analysis, Planning and Control By
Philip Kotler, Prentice Hall of India, New Delhi
...
Marketing Management By Rajan Saxena, Tata McGraw Hill
Publishing Company Ltd
...
3
...
S
...
, Macmillan India Ltd
...
25
LESSON-10
PROMOTION DECISION: PROMOTION MIX AND
ADVERTISING
STRUCTURE
10
...
1 Introduction promotion mix
10
...
3 Factors affecting promotion mix
10
...
4
...
4
...
4
...
5 Developing and managing an advertising program
10
...
7 Keywords
10
...
9 References/Suggested readings
10
...
1
10
...
It has been defined as “the coordination of all
seller-initiated efforts to set up channels of information and persuasion
to facilitate the sale of a good or service, or acceptance of an idea”
...
The role
of promotion in marketing mix may be seen in Fig
...
It shows that
promotion is in tandem with other elements of marketing strategy, viz
...
The marketing manager
cannot design his promotion strategy unless it is decided what products
are to be sold, what is their price and what distribution channels are to
be used· for selling
...
Promotion programmes
aimed at present and potential customers result in sales
...
Fig
...
Each of these promotion tools has its own characteristics
...
Usually
it is designed to create a favourable attitude toward the
company or product
...
•
Public relations involve a variety of actions aimed at
establishing a positive corporate image and a climate of
understanding and mutual trust between a firm and its
various publics
...
•
Personal selling has the objective of organizing a verbal
dialogue with potential and current customers and to deliver
a tailor-made message with the short-term objective of
making a sale
...
•
Publicity, like advertising, is an impersonal method of
promotion and it is also addressed to groups of audience
...
It is the coverage of commercially significant
information regarding the company and/ or its products is
form of a news item or popular article by the media on its
own
...
3
Although these means of promotion are very different, they are also
highly complementary
...
10
...
It achieves this purpose through
promotional
communication
...
The marketer also uses his
communication to convince the potential customers about the product so
as to induce them to purchase it
...
2
...
2: Promotional Communication System
It shows that promotional communication may originate from the
marketing
manager
of
the
company
manufacturing
the
product,
wholesaler or dealers, or a combination of them
...
The customer reaction to promotional message is
4
considerably influenced by their perceived credibility of the source
...
The
communication
source
sends
promotional
messages
to
customer audience
...
For example, Lipton Tea
Co
...
It
thus aims at convincing its customers that tea, though a hot drink is
good not only in winter but also in summer
...
The marketer has a number of communication channels available
to him
...
Word-of-mouth communication
among consumers is also an effective promotional tool although it is riot
controllable by the marketer
...
The marketer generally uses a number of these
communication modes in combination so as to reinforce each other
...
The message intended by the marketer may be distorted or not fully
understood by the media with the result that the actual message
communicated to the audience differs from the intended message
...
The audience is often subjected to conflicting promotional
5
messages by competing marketers
...
Another example of noise is distraction of the client due to
worry, anxiety or busy schedule when the salesman is trying to promote
the product, or when he is listening the commercial on the radio
...
A positive customer response results in present or
future sales
...
Conditions for effective communication: Four conditions can be
identified:
•
Communication
objectives:
Sender
must
know
what
audiences they want to reach and what type of response they
want from them
...
These tasks are typically the responsibilities of strategic
marketing people
...
This involves designing
communication messages and ensuring, through testing,
that they are processed by the target group in the intended
manner to produce the desired communication effect
...
First, media
selection, i
...
‘where’ to reach the target audience most
efficiently; second, media scheduling, i
...
‘how often’ the
target audience needs to be reached to produce the intended
communication objective
...
•
Communication effectiveness: The advertiser must identify
the audience’s response to the message and verify as to what
extent the communication objectives have been achieved
...
These
four
conditions
for
efficient
communication determine the various decisions to be taken in any
marketing communication programme
...
,
electronic communication is at present in full development
...
The development of electronic communication not only modifies the
respective roles of personal selling and of advertising, but also changes
the objectives and the content of advertising communication
...
•
To begin with, the new means of communication tend to be
more interactive, i
...
two-way rather than one-way as in the
past
...
We
are
moving
in
fact
towards
demanded advertising
...
The firm will,
therefore, face a more and better informed public
...
•
Another consequence of the development of electronic
communication is its greater selectivity
...
We are, therefore,
moving towards personalized electronic mail systems which
would improve communication effectiveness and favour the
development of interactive marketing
...
The introduction of
local channels will allow local firms and local advertisers to
have access to radio and television
...
•
Finally, another consequence is that the considerable
increase in geographic zones covered by a transmitting
station, thanks to the use of satellites and cable, will
reinforce the internationalization of brands and advertising
campaigns
...
Welladdressed direct mail, the telephone, a catalogue that can be consulted
8
on a TV screen or a computer can all bring more extensive and more
precise information faster than a sales person’s sales speech
...
A personal contact will always be
necessary
...
10
...
For example, industrial goods need a
different kind of promotion than consumer goods
...
Advertising and direct mail may
perform the informational role
...
Sales of these speciality
items also require a considerable amount of after-sales services
...
Convenience
goods differ from shopping goods and speciality goods
...
The customer has full knowledge of these goods and
devotes minimum effort in buying them
...
Personal selling plays a minor role in promoting
the sale of such ·goods
...
Shopping goods differ from convenience goods in that the customer
does not possess full knowledge about the product features and uses
9
before he embarks on buying it
...
Examples of shopping goods are textiles, furniture, radio, etc
...
Speciality
goods
are
those
goods
which
possess
“unique
characteristics and/or brand identifying effort”
...
In this respect, speciality goods resemble convenience
goods and differ from shopping goods
...
For
example, a customer of cigarettes wants to buy pot any cigarette but a
particular brand of cigarette, say Gold Flake
...
They,
therefore, need heavy emphasis on advertising for promoting selective
demand
...
A firm operating in a
small local market generally prefers to concentrate heavily on personal
selling
...
Another market characteristic influencing the promotion mix
decision is the density of customers
...
Moreover, even if a firm has nationwide market, most
of its customers maybe concentrated in a limited number of geographical
areas
...
As a general rule, it may be held that
greater the density of customers, greater is the scope for personal selling;
more dispersed the customers, more a firm has to rely on advertising
...
e
...
The “push” refers to
selling the product aggressively to the marketing network
...
But in “the
“pull” strategy the firm creates con1umer demand for its product or
brand such that the customer demands the brand at the retail outlet
...
(d)
Buyer readiness stage: The choice of different elements of
promotion mix is also dependant on the buyer’s readiness and awareness
of the brand
...
Like advertising will
play a major role in creating awareness, demonstration and samples will
help bring about a change at the affective and behavioural levels while
personal selling
...
For example, in the introduction stage, advertising
and publicity have a significant role and prove to be cost effective in
creating awareness, desire and finally the trial
...
But in the maturity stage, sales
promotion and personal selling help make the product steer through the
competition maze
...
11
10
...
In today’s
marketing scenario, it can be easily said that “No advertising, No
business”
...
When a firm resorts to advertising, it is effectively following a
pull communication strategy
...
Just as the sales force is the best tool for a push strategy, advertising is
the best means for a pull strategy
...
4
...
•
For consumers, advertising allows them to learn about the
distinctive characteristics claimed by the manufacturer
...
10
...
2
Types of Advertising
Since the advent of the early form of advertising, advertising
communication objectives have diversified considerably, and different
forms of advertising can be identified while using the same media
...
Its role can be summed up as “The
creative efforts of many national advertisers are designed, not to induce
immediate action, but to build favourable attitudes that will lead to
12
eventual
action
i
...
purchase
...
The notion of attitude holds a central position here
...
(ii)
Promotional advertising: This is a media advertising
message with a mainly ‘behavioural’ communication objective: to
influence buyers’ purchasing behaviour rather than their attitudes
...
Its effectiveness is evaluated
directly in terms of actual sales
...
However, its immediate purpose is to achieve short-term results
...
This type of advertising tries to
reconcile the characteristics of the two previous ones: building an image,
but also encouraging a measurable response allowing an immediate
appraisal of the effectiveness of the communication
...
Institutional advertising does not talk about the product, but
aims to create or reinforce a positive attitude towards the firm
...
The
purpose
is
to
communicate
differently in a saturated advertising world and to fight against the
fatigue of product advertising with a sorter approach, by drawing
attention to the firm itself, its merits, its values and talents
...
10
...
3
Prerequisites of Effective Advertising
There are many firms that tend to assimilate advertising with
marketing and to approach marketing by advertising
...
For advertising to
be effective, a number of prerequisites should ideally prevail:
Advertising is one element of the marketing mix and its role cannot
be separated from the roles’ of the other marketing instruments
...
Advertising is useful to the consumer for complex products having
internal qualities that cannot be discovered by inspection
...
To
be
effective,
advertising
should
promote
a
distinctive
characteristic to clearly position the brand in the minds of consumers as
being different from competing brands
...
Advertising is particularly effective in markets or segments where
primary demand is expansible
...
In non-expansible markets, the main
14
role of advertising is to stimulate selective demand and to create
communication effects at the brand level
...
Thus, the advertising communication platform is the complement
of a strategic marketing programme
...
10
...
Then they can make the
five major decisions in developing an advertising program, known as the
five Ms: (i) Mission: What are the advertising objectives? (ii) Money: How
much can be spent? (iii) Message: What message sh6bld be sent? (iv)
Media: What media should be used? (v) Measurement: How should the
results be evaluated? These decisions are described in the following
sections
...
At this level, the
advertiser
can
set
objectives
of
information,
recall,
recognition or familiarity
...
The objectives will be to
influence attitude and to create purchase intention
...
Creating Brand Awareness: This is the first level of cognitive
response
...
Three kinds
of advertising objective, based on awareness, can be identified:
•
To create or maintain brand recognition so that buyers
identify the brand at the point of sale and are induced to
check the existence of a category need
...
•
These
To emphasize both brand recognition and brand recall
...
For brand recognition, the advertising content will emphasize
the visual elements (logo, colours, packaging), while for brand recall the
advertising will seek to repeat the brand name in audio and visual media
and in headlines and to associate the brand name with the core service
...
It is,
therefore, affective response which intervenes here
...
•
To convince the target audience of the firm’s technological
superiority in the product category
...
•
To reposition the brand by associating its use with another
set of needs or purchase motives
...
•
To call attention to neglected attributes by consumers in
their decision-making process
...
It is important to identify clearly the implicit assumptions of a
communication
strategy
based
on
brand
attitude
...
•
It is useless to try to modify buyers’ perceptions when the
brand does not really have the claimed characteristic
...
In other words, a market-driven communication strategy is based
on the idea that advertising is mainly designed to help the buyer buy and
not simply praise the advertiser
...
DAGMAR Approach: Many specific communication and sales
objectives can be assigned to advertising
...
He outlines a method called DAGMAR (after the
book’s title) for turning objectives into specific measurable goals
...
Advertising objectives can be classified according to whether their
aim is to inform, persuade, or remind
...
•
Persuasive advertising becomes important in the competitive
stage, where a company’s objective is to build selective
demand for its brands
...
•
Reminder advertising is important with mature products
...
Automobile ads often depict satisfied customers
enjoying special features of their new car
...
If the product class is mature, the
company is the market leader, and brand usage is low, the proper
objective should be to stimulate more usage
...
(b)
Advertising Message
Advertisers go through four steps to develop a creative message:
message
generation,
message
evaluation
execution, and social responsibility review
...
So the ‘solution’ or the
benefit has to be the pivot of the message
...
Yet
there is usually latitude for a number of possible messages
...
Creative
people
use
several
methods
to
generate
possible
advertising appeals
...
Some creative people
use a deductive framework for generating advertising messages
...
Buyers might visualize these
rewards from results-of-use experience, product-in-use experience, or
incidental-to-use experience
...
For example, the ·appeal “gets clothes cleaner” is a rational-reward
promise following results-of-use experience
...
Twedt suggested that messages
be rated on desirability, exclusiveness, and believability
...
•
Exclusiveness: the message must say something exclusive
that does not apply to every brand in the product category
...
19
The advertiser should conduct market research to determine which
appeal works best with its target audience
...
Some ads aim for rational
positioning and others for emotional positioning
...
Creative people must also find a cohesive style, tone, words, and format
for
executing
the
message
...
Memorable and attention-getting words must
be found
...
There are six basic
types of headlines: news (“New Boom and More inflation Ahead
...
Format elements such as ad size, colour, and illustration will affect
an ad’s impact as well as its cost
...
Larger-size ads gain more
attention, though not necessarily by as much as their difference in cost
...
By
planning the relative dominance of different elements, better- delivery can
be achieved
...
A number of researchers into print advertisements report that the
picture, headline, and copy are important, in that order
...
Then
20
the headline must propel the person to read the copy
...
Social responsibility Review: Advertisers and their agencies must
ensure that their advertising message doesn’t overstep social and legal
norms
...
Still, abuses occur, and public policy makers have
developed a substantial body of laws and regulations to govern
advertising
...
Advertisers must not make false claims, such as stating that a product
cures something when it does not
...
To be socially
responsible, advertisers must be careful not to offend ethnic groups,
racial minorities, or special-interest groups
...
Table 1
shows the definition of the important terms used in the field of media
planning
...
TABLE 1: DEFINITION OF THE PARAMETERS USED
IN MEDIA PLANNING
Target
The specific group of prospects to be reached
...
Audience
The number of people who are exposed to a particular
vehicle
...
21
Exposure
The ‘opportunity to see’ (OTS) or opportunity to hear
(OTH) the message, which does not imply that the
person actually sees or hears the advertisement
...
Frequency
The number of times within a specified period of time
that a prospect is exposed to the message
...
Impact
The qualitative value of an exposure through a given
medium
...
Generally, a higher degree of reach is necessary when launching a
new product or starting an ambitious programme of promotion
...
However,
too much repetition is useless, as it may cause irritation or boredom
...
, or, on the contrary, seeking intermittence
(pulsing) so as to optimize consumer learning or reinforcement, or to
‘stretch budgets’ to coincide with consumption patterns
...
It is important to take into account the nature of
the product, its purchase frequency, seasonality in sales, rivals’
strategies and the distribution of memory overtime
...
Finally, the third strategic choice is between media ‘concentration’
or media ‘diversification’ seeking diversification in various types of media
so as to enjoy complementarities between them, obtain a better net
reach, a better geographical allocation etc
...
All depends on the adopted segmentation strategy
...
Criteria for Media Selection: Media selection is guided by
quantitative and qualitative criteria which are listed below
...
e
...
an auto manufacturer having strong acceleration would
have to go in for TV advertising
...
e
...
•
The stability of the reach over time, for instance from one
week to another or from one season to another
...
23
•
The medium selectivity in terms of socio-demographic or life
style profiles
...
Qualitative criteria of media selection must complement the
quantitative ones
...
•
The duration of the message’s life, i
...
the period during
which the message can be perceived
...
e
...
•
The technical quality of the medium, for instance, the use of
colour, the quality of sound or of images etc
...
The final choice is concretized in a media plan describing budget
allocation between the different media
...
Although the choices are complex and numerous, a number of
paid research services in media and vehicles selection provide data to
help the decision-maker
...
(d)
Advertising Budget Decisions
Conceptually, advertising budget decisions can be analyzed using
marginal rules of economic theory
...
Similarly, the allocation of total budget between different methods is such
24
that each instrument is used to the level where all marginal revenues are
equal
...
There are three
types of cost-oriented budget: affordable, break-even and percentage of
sales budgeting methods
...
Advertising will be appropriated
after all other unavoidable investments and expenses have been
allocated
...
The fiscal system also
encourages this type of practice, since increased advertising expenditure
reduces taxable profit
...
(ii) Break-even Budget: The break-even budget method is based on
the analysis of advertising’s profitability threshold
...
60, or 30 per cent of
the unit price, the absolute increase in unit sales to recoup a Rs
...
5
million advertising budget will be
15,00,000/60 = 25000 units
and the break-even turnover
15,00,000/0
...
50,00,000
(iii) The percentage of sales budget: The percentage of sales budget
method is used frequently and” treats advertising as a cost
...
One advantage of this procedure is that expenditures are
directly related to funds available
...
Although this method is quite popular, it can easi1y be criticized as
it inverts the direction of causality between advertising and sales
...
Moreover, this approach can lead to absurd situations: reducing the
advertising budget when a downturn in sales is predicted, and increasing
it when turnover is growing, with the risk of overshooting the saturation
threshold
...
More
refined methods are used when deciding on advertising at the brand
level
...
They enable the firm to
define the problem in terms of financial resources, production capacity
and profitability
...
(II)
Communication-oriented
advertising
budgets:
This
approach, also called the ‘task and objective’ method, is the one most
widely used
...
Two methods can~ adopted: one based on
26
‘contact’, defined in terms of reach and frequency, and one based on
‘perception’
...
By trying to maximize
exposure, this approach places the emphasis on the first level of
advertising effectiveness, i
...
communication effectiveness, while clearly
linking the communication objectives to costs
...
To achieve these
objectives, conditions are defined in terms of the means used (media,
reach, repetitions, perceptions etc
...
What is sought here is an impact on one of the three components of
attitude (cognitive, affective or behavioural)
...
Communication-oriented advertising budgets constitute the second
stage of the process of determining the advertising budget
...
Because it is mainly based on intermediary objectives of communication,
the advantage of the method is the emphasis it places on results directly
attributable to advertising, and the fact that it allows the advertiser to
control the advertising agency’s effectiveness
...
One cannot therefore view
measures of communicational effectiveness as substitutes for direct
measures linking advertising to sale or market share
...
He needs to
evaluate the effectiveness of advertising for three purposes: (i) To improve
the effectiveness of advertising by making changes in advertising
message, media, timing, etc
...
(ii) To convince
management about the instrumentality of advertising in improving the
firm’s profitability so as to get the required level of budget appropriation
for advertising
...
Measurement of advertising effectiveness has turned out to be an
extremely complex and challenging task
...
, that it is impossible to
determine what proportion of it is due to effective advertising
...
Measures used for measuring advertising effectiveness: A
number of tests have been developed for measuring the communication
effectiveness of advertising
...
28
effect
of
Recall tests: Recall tests of measuring advertising effectiveness are
aimed at determining how many people saw or heard the advertisement
and how many of them remember it
...
The assumption
underlying this test is that larger the number of people who remember
the advertisement, the larger the number of people who will buy the
product
...
Response
Tests:
Both
consumer
and
industrial
product
advertisements sometimes include a response coupon urging the reader
to
place
order
or
seek
more
information
...
Effectiveness
of
such
advertisements is measured in terms of responses received
...
Axelord has listed the following tests of this
nature
...
The Rating Scale: The respondents are given a rating scale for
indicating the degree of their like or dislike for the advertiser’s brand
...
These statements read something like this: I will surely
buy X brand; I will never buy X brand
...
There is a pocket beside
each brand name
...
A respondent may put several or no cards in front of any
brand
...
They have to indicate
their preferred brand from each pair until they arrive at their most
preferred brand
...
Advertising Recall: The respondents are asked to recall what
advertisements they have read, seen, or heard during the past three
months
...
Then they
are asked that if their preferred brand was not available, what other
brand they would buy
...
Buying Game: The respondents are given a number of cards with
each card describing a unique shopping situation they might possibly
encounter if they went out shopping
...
30
Measurement or Sales Effectiveness of Advertising: Advertising
effectiveness measures discussed above focus on its communication
effectiveness, and not on sales effectiveness
...
It is possible that an advertisement may succeed in creating
brand awareness and recognition, yet fail to stimulate sales
...
However, two approaches are often used to
measure the sales generation effect of advertising
...
Experimental approach involves field testing
...
This is, however, a crude
measure as the regions selected for study may differ in sales potential,
competitors’ marketing strategy, etc
...
10
...
It has been defined as “the coordination of all
seller-initiated efforts to set up channels of information and persuasion
to facilitate the sale of a good or service, or acceptance of an idea”
...
The
marketing manager cannot design his promotion strategy unless it is
decided what products are to be sold, what is their price and what
distribution channels are to be used· for selling
...
There are five major promotion tools known as the promotion mix
which include advertising, personal selling, sales promotion, publicity
and public relations
...
Advertising is a unilateral and paid form of non-personal mass
communication by a clearly identified sponsor
...
Sales
promotion includes all short-term incentives, generally organized on a
temporary and for local basis, and designed to stimulate immediate
purchase and to move sales forward more rapidly than would otherwise
occur, and to effect higher demand
...
Here, the promotion objective is less to gain moral support from public
opinion for the firm’s economic activities, which ultimately would help
the company in accomplishing its objectives
...
Its role is also to gather information for the
firm
...
It differs from advertising
in the sense that it is not sponsored by the seller
...
32
10
...
Cover
or reach, is the percentage of a particular target audience reached by a
medium and the frequency is the number of times a particular target
audience has an opportunity to see/hear a message
...
e
...
Advertising appeal: The central idea or theme of an advertising
message
...
Media selection strategy: Plan for determining which media are
most appropriate for an advertising campaign
...
10
...
What are the different tools of promotion mix? Describe the
factors affecting promotion mix decisions
...
Explain the different types of advertisements
...
Discuss
the
key
stages
of
measuring
advertising
effectiveness
...
Explain the different methods of making advertising budget
decisions
...
8 REFERENCES/SUGGESTED READINGS
1
...
2
...
, New Delhi
...
Marketing
Management-
Planning,
Implementation
and
Control, The Indian Context By Ramaswamy V
...
and
Namakumari S
...
, New Delhi
...
Advertising Management By Aakar, David & A
...
5
...
Roberts, University of Illinois’s
Press
...
0 Objective
11
...
2 Nature of each promotional tool
11
...
3
...
3
...
3
...
3
...
3
...
4 Sales Promotion
11
...
1 Objectives of Sales Promotion
11
...
5
...
5
...
6 Developing the sales-promotion program
11
...
8 Evaluating the sales-promotion program
11
...
9
...
9
...
9
...
10 Summary
11
...
12 Self assessment questions
11
...
0 OBJECTIVE
This chapter focuses on the different elements that make up the
promotion mix- sales promotion, present selling and publicity
...
1 MEANING AND DEFINITIONS
Modem marketing calls for more than developing a good product,
pricing it attractively, and making it available to target customers
...
Promotion is the element in an organisation’s marketing
mix that serves to inform, persuade, and remind the market of a product
and/or the organisation selling it, in the hope of influencing the
recipients’ feelings, beliefs, or behaviour
...
To
communicate effectively, companies hire advertising agencies to develop
effective advertisements; sales-promotion specialists to design buyingincentive programs; direct marketing specialists to build databases and
interact with customers and prospects by mail and telephone; and public
relations firms to do product publicity and develop the corporate image
...
For most
companies, the question is not whether to communicate but rather what
to communicate, how to say, to whom, and how often
...
In marketing, promotion means
all those tools that a marketer uses to make his product known to the
customers and hence, involves advertising, sales promotion, personal
selling, and publicity etc
...
(ii)
Direct Marketing: Use of mail, telephone, net, and other nonpersonal contact tools to communicate with customers and
prospects so as to solicit a specific response
...
(iv)
Public Relations and Publicity: A variety of programmes
designed to promote and/or protect a company’s image or its
individual products
...
TABLE 1: COMMON COMMUNICATION/PROMOTION TOOLS
Advertising
Sales promotion
Public relations
Personal
selling
Direct marketing
•
Print &
broadcast
•
Contests,
games lotteries
•
Press kits
•
•
Catalogue
•
•
•
Speeches
•
Mailings
Outer
packaging
Premiums &
gifts
•
Seminars
•
•
Telemarketing
Packaging
insertions
•
Samples
•
Annual
reports
Sales
meetings
•
•
Incentive
programs
Electronic
shopping
•
TV shopping
Samples
Fairs &
trade shows
•
•
•
•
Motion
pictures
Brochures
booklets
Posters &
leaflets
•
Director-es
•
Billboards
•
Display
signs
•
Point of
purchase
displays
•
Symbols &
logos
•
Exhibits
•
Demonstrations
•
Coupons
•
Rebates
•
Tie-ins
•
Low interest
financing
•
Trade-in
allowance
•
Donations
•
Sponsorships
•
•
Publications
•
•
Lobbying
•
Events
•
Company
magazines
3
Sales
presentatio
ns
Table 1 lists numerous specific tools that fall within these
categories
...
The product’s styling, its price, the package’s shape and
colour, the salesperson’s manner and dress, the place of business, the
company’s stationery– all communicate something to the buyers
...
11
...
Marketers have to understand these characteristics in order to
utilise these effectively
...
Yet the following
qualities can be noticed:
Public Presentation: Advertising is a highly public mode of
communication
...
Because many
persons receive the same message, buyers know that their motives for
purchasing the product will be publicly understood
...
No
nook and comer of the world go untouched by advertising
...
Moreover a single exposure is not enough to create the
desired impact
...
Sometimes, however, the tool’s very success at
expressiveness may dilute or distract from the message
...
The audience does not feel obligated to pay
attention or respond
...
Advertising can be used to build up a long-term image for a
product and on the· other hand it is used to trigger quick sales
...
(b)
Sales Promotion: Although sales promotion tools- coupons,
contests, premiums, and the like- are highly diverse, they have three
distinctive characters:
Communications:
They
gain
attention
and
usually
provide
information that may lead the consumer to the product
...
Invitation: They include a distinct invitation to engage in the
transaction now
...
Sales promotion can be used to dramatize product
offers and to boost sagging sales
...
5
(c)
Direct Marketing: Although direct marketing has several
forms- direct mail, telemarketing, electronic marketing, and so on- it has
a few distinctive characteristics:
Non-public: The message is normally addressed to a specific person
and does not reach others
...
Up-to-date: A message can be prepared very quickly for delivery to
an individual
...
Off guard: Publicity can reach many prospects who might avoid
salespeople and’ advertisements
...
Dramatization: Public relations has, like advertising, a potential for
dramatizing a company or product
...
Yet, a well thought out public relations programme
integrated with the other promotion-mix elements can be extremely
effective
...
6
(e)
Personal Selling: Personal selling is the most cost-effective
tool at the later stages of the buying process, particularly in translating
buyers’ preference and conviction into action
...
Each party is able to observe each other’s needs and characteristics
closely and make immediate adjustments
...
Effective sales representatives will normally keep
their customers’ interests at heart if they want long-term relationship
...
The buyer has a greater
need to attend and respond, even if the response is a polite ‘thank you
...
A sales-force represents
a greater long-term cost commitment than advertising
...
11
...
Some consumer marketers play down the role of the salesforce, using them mainly to collect weekly orders from dealers and to see
that sufficient stock is on the shelf
...
”
Although personal selling is useful for almost every product or service, it
is particularly important when:
•
The market is concentrated either geographically or in a few
industries, or in a few large customers
...
•
The product requires to be customised for each individual
customer, as in the case of securities or insurance
...
•
The organization does not have enough money for an
adequate advertising campaign
...
•
The goal of personal selling is to actually make a sale
...
11
...
1 Hurdles for personal selling
Although personal selling is very essential for any company but
there are certain limitations like:
•
A high cost involvement is a major limitation even though
personal selling can minimise wasted effort, the cost of
developing and operating a sales force is high
...
At the retail level, many firms have
abandoned their sales forces and shifted to self-service
selling for this very reason
...
3
...
Across the counter selling
...
Outside sales force
...
It primarily involves retail-store selling
...
The other kind of personal selling is
where sales people go to the customers
...
11
...
3 Types of sales jobs
The types of selling jobs and the activities involved in them cover a
wide range
...
Given below is the classification of sales jobs by Robert
Mcmurry:
(a)
Driver sales person (Deliverer)- In this, the sales person
primarily delivers the product
...
In these types of jobs selling responsibilities are secondary
...
(b)
Inside order taker- This is a position in which the sales
person takes orders at the seller’s place of business
...
(c)
Outside order taker- In this position the sales person goes to
the customer in the field and accepts an order
...
(d)
Missionary sales person- This type of sales job is extended to
build goodwill, perform promotional activities, and provide information
9
and other services for the customers
...
Medical representatives calling on doctors fall in this
category
...
The products involved here typically are complex,
technically sophisticated items
...
(f)
Creative sales person- an order getter- This involves the
creative selling of goods and intangibles- primarily services, but also
social causes and ideas (do not use drugs, stop smoking, obeys speed
limits)
...
11
...
4 The personal selling process
The basic philosophy underlying the approach to personal selling
should be an extension of the marketing concept
...
10
Many persons have developed models for personal selling
...
However, in order to develop personal selling skills we
will distinguish six phases of the selling process
...
Objections may be raised during presentation or during negotiation, or a
trial close may be attempted at any point during the presentation if buyer
interest is high
...
(a)
The Opening- Initial impressions can cloud later perceptions,
and so it is important to consider the ways in which a favourable initial
response can be achieved
...
Buyers expect sales people to be business-like in
their personal appearance and behaviour
...
Further the sales
person who do not respect the fact that the buyer is likely to be a busy
person, may cause irritation on the part of the buyer
...
Common courtesies should
be followed
...
This can generate close rapport with the
buyer, but the sales person must be aware of the reason for being there,
am not be excessively diverted from talking business
...
A car salesman has many models ranging from
small economy cars to super luxury top-of-the range models
...
In each case, the seller’s first
objective should be to discover the problems and needs of the customer
...
What size of car is required? Is the customer
looking for high fuel economy or performance? What kind of price range
being considered? Having obtained this information the salesperson is in
a position to sell the model which best suits the needs of the buyer
...
A given product may have a range of potential
features that confers benefits to customers, but different customers·
place different priorities on them
...
There is a Chinese proverb- “Tell me and I’ll forget; show me and I
may remember; involve me and I shall understand
...
Demonstrations reduce risk because they prove
the benefits of the product
...
For all but the most simple of products it is advisable to divide the
demonstration into two stages
...
The second stage entails the actual demonstration itself
...
They add realism
to the sales routine in that they utilize more human senses than mere
verbal descriptions or visual presentation
...
Customer objections
can be more easily overcome if they can be persuaded to take part in the
12
demonstration process
...
Purchasing
inhibitions are quickly overcome arid buyers; declare their purchasing
interest sooner than in face-to-face selling/buying situations
...
e
...
(d)
Dealing with objections- Objections should not always be
viewed with dismay by salespeople
...
The problem is that the-buyer is not yet convinced
...
The effective
approach for dealing with objections involves two areas: tile preparation
of convincing answer, and the development of a range of techniques for
answering objection in a manner which permits the acceptance of these
answers without loss of face on the part of the buyer
...
Negotiation may, therefore, enter into the sales process
...
The deal that is arrived at, will be
dependent upon the balance of power and the negotiating skills of the
respective parties
...
(f)
Closing the sales- The skills and techniques discussed so far
are not in themselves sufficient for consistent sales success
...
A major consideration at the closing is the timing
...
Salespeople should look out
for such buying signals and respond accordingly
...
The
salesperson should attempt to close at a peak and which peak is to be
chosen comes with experience
...
Salespeople may put-off the follow up call because it
does not result in an immediate order
...
The follow-up call can
also be used to provide reassurance that the purchase was right one
...
3
...
This situation existed both
in retail sales involving ultimate consumers and also in business-tobusiness transactions
...
These new patterns reflect a growing purchasing
expertise among consumers and business buyers, which, in turn, has
fostered a growing professionalism in personal selling
...
This is sometimes called a sales team or team selling
...
’1ddevelopment (R&D)
...
Each team is assigned to cover
large retailers
...
Team selling is expensive and is used only when there is
a potential for high sales volume and profit
...
The idea is that the system- the total package of
goods and services- will satisfy the buyer’s needs more effectively than
selling individual products separately
...
Today
using
a
systems-selling
approach,
Xerox
studies
at
customer’s office information and operating problems then Xerox
provides a total automated system of machines and accompanying
services to solve that customer’s office problems
...
It
may bean extension of team selling, or it may be developed by individual
sales representatives in their dealings with customers
...
Instead
seller
attempts
to
develop
a
deeper,
longer-lasting relationship built on trust with key customers- usually
15
influential
customers,
opinion-makers,
and
larger
accounts
...
Many large companies- Procter & Gamble, Hyatt Hotels, RJR
Nabisco, Kraft General Goods, and ABB (Asea Brown Boveri, a Swissbased manufacturer of industrial equipment), to name just few- are
realigning their sales forces to engage in relationship selling
...
4 SALES PROMOTION
Sales Promotion is an activity or material (or both) that acts as a
direct inducement and offers added value to or incentive to buy the
product to resellers, sales persons or consumers
...
Sales promotion has grown dramatically in the last ten years,
largely because of focus of business on short term profits
...
Today, in many
consumer-packaged-goods companies, sales promotion accounts for 65%
to 75% of the combined budget
...
Several factors
have contributed to the rapid growth of sales promotion, particularly in
consumer markets
...
External factors include the following:
•
The number of brands have increased;
•
Competitors use promotions frequently;
•
Many brands are seen as similar;
•
Consumers are more price-oriented;
•
Advertising efficiency has declined because of rising costs,
media clutter, and legal restraints
...
(b) Trade Promotion: These are aimed at distribution channel
members and include Price offs, Advertising and Display allowances, and
Free goods
...
11
...
1 Objectives of Sales Promotion
Sales promotion objectives are derived from broader promotion
objectives, which are derived from more basic marketing objectives
...
In relation to consumers, objectives of sales promotion include:
•
Encouraging purchase of large size units
...
•
Attracting switchers away from competitors’ brands
...
In relation to the sales force, objectives include:
•
Encouraging support of a new product or model,
•
Encouraging more prospecting, and
•
Stimulating off-season sales
...
5 MAJOR CONSUMER PROMOTION TOOLS
(a) SAMPLES: Offer of a free amount of a product or service
...
Sampling is the most effective and most
expensive way to introduce a new product
...
These can be mailed or enclosed in
other products or inserted in magazines and newspaper ads
...
(c) CASH REFUND OFFERS: Provide a price reduction after the
purchase rather than at the retail shop
...
(d) PRICE PACKS: They can take the form of a reduced-price pack
(such as two for the price of one) or banded pack, which is two related
products banded together
...
(e) PREMIUMS: Merchandise offered at a relatively low cost or free
as an incentive to purchase a particular product
...
(f) PRIZES: Offer a chance to win cash, trips or merchandise as a
result of purchasing something
...
(g) FREE TRIALS: Invite prospective purchasers to try the product
without cost, in the hope that they will buy the product
...
(i) TIE-IN-PROMOTIONS: Involves two or more companies or
brands that team up on coupons, refunds and contests to increase their
pulling power
...
(j) POINT-OF-PURCHASE DISPLAYS AND DEMONSTRATION: Take
place at the point of purchase or sale
...
5
...
The offer encourages dealers to
buy a quantity that they might not ordinarily buy
...
(b) ALLOWANCE: An amount offered in return for the retailers
agreeing to feature the manufacturer’s product in some way
...
A display allowance compensates them for
carrying a special product display
...
Manufacturers might offer
push money or free specialty advertising items to the retailers that carry
the company’s name, such as pens, pencils, calendars, paperweights,
memo pads, and ashtrays
...
5
...
Firms selling products
and services to a particular industry buy space and set up booths and
displays to demonstrate their products at the trade shows
...
(b) SALES CONTESTS: It is a contest involving the sales force or
dealers, aimed at inducing them to increase their sales over a stated
20
period, with prizes going to those who succeed
...
(c) SPECIALITY ADVERTISING: Specialty advertising consists of
useful, low cost items given by salespeople to prospects and consumers
without obligation and which bear the company’s name and address and
sometimes an advertising message
...
11
...
Ascertaining minimum incentive is necessary if the
promotion is to succeed
...
A
premium might be offered only to those who turn in with the
proof of purchase
...
If the
sales promotion period is too short, many prospects will not
be able to take advantage of it
...
(iv)
The marketer must choose a distribution cycle
...
(v)
The timing of promotion must be established
...
(vii)
Although sales promotion program are designed on the basis
of experience, pretests should be conducted to determine if
the tools are appropriate; the incentive size is optimal; the
presentation method is efficient
...
7 IMPLEMENTING AND CONTROLLING THE PROGRAM
Implementation and control plans should be prepared for each
individual promotion
...
Lead time is the time necessary to prepare the program prior to
launching it
...
It covers initial planning, design and approval of package
modifications or material to be mailed or distributed to the home,
preparation
of
conjunctive
notification
of
field
advertising
personnel,
and
point-of-sale
establishment
and
material,
allocations
for
individual distributors, purchasing and printing of special premiums and
packages, production of advanced inventories and staging at distribution
centres in preparation for release at a specific date, and finally, the
distribution to the retailer
...
8 EVALUATING THE SALES-PROMOTION PROGRAM
Evaluation is a crucial requirement
...
Sales promotion works best, in general, when they attract
competitors’ customers to try a superior product and as a result
customers switch permanently
...
(c) Consumer surveys can be conducted to gain more information,
learn how many recall the promotion, what they thought of it, how many
22
took advantage of it, and how the promotion affected their subsequent
brand-choice behaviour
...
Beyond these methods of evaluating the results of specific
promotions, management must recognize other potential costs and
problems:
•
Promotions might decrease long-run brand loyalty by making
more consumers deal prone rather than advertising prone
...
•
Certain promotions irritate retailers and they demand extra
trade allowances or refuse to co-operate in the operation
...
9 PUBLIC RELATIONS
Public relation (PR) is another important marketing tool
...
PR department perform the following five activities, not all of which
directly support marketing objectives:
(i)
Press relations: The aim of press relations is to place
newsworthy information into the news media to attract attention to a
person, product, service, or organization
...
23
(iii)
external
Corporate communication: This activity covers internal and
communications
and
promotes
understanding
of
the
organization
...
(v)
Counselling:
Counselling
involves
advising
management
about public issues and company positions and image
...
9
...
But MPR goes beyond simple publicity by contributing to the
following tasks:
(a)
Assist in the launch of new products
...
(c)
Build up interest in a product category
...
(e)
Defend products that have encountered public problems
...
11
...
2 Objectives of Public Relations and Publicity
(a) Build awareness: PR can place stories in the media to bring
attention to a product, service, person, organization or idea
...
24
(c) Stimulate the sales-force and dealers: PR can help boost salesforce and dealer enthusiasm
...
(d) Hold down promotion costs: PR costs less than direct mail and
media advertising
...
11
...
3 Major tools of Public Relations and Publicity
(a) PUBLICATIONS: Companies rely extensively on communication
materials to reach and influence target markets
...
Company newsletters, and magazines can
help build up the company’s image and convey important news to target
markets
...
The
cost of audio-visual material is usually greater than the cost of printed
material, but so is the impact
...
These include news
conferences, seminars, outings, exhibits, contests and competitions,
anniversaries, and Sport and culture sponsorships that will reach the
target publics
...
News generation require skills in developing a story concept, researching
it, and writing a press release
...
Getting the media to’ accept press releases and
press conferences calls for marketing and interpersonal skills
...
The media director needs to build favourable
relations with editors and reporters
...
(d) SPEECHES: Speeches are another tool for creating product and
company publicity
...
These appearances can build the company’s image
...
A large
company may typically ask executives to support community affairs
where their offices are situated
...
(f) IDENTITY MEDIA: Normally, a company’s materials acquire
separate looks, which creates confusions and misses an opportunity tocreate and reinforce a corporate identity
...
They should strive to
create a visual identity that the public immediately recognizes
...
11
...
Although each element of the mix is separate and different role to play,
they are very much interdependent
...
All elements share
a similar process of setting objectives, developing a strategic plan,
implementing the plan, and then evaluating the results
...
Public
relation is used to establish and enhance a positive image of an
organisation and its products among its various publics
...
Personal
selling involves interpersonal dialogue
...
Personal
selling requires grate amount of skills on the part of the salesperson
...
11
...
Cooperative advertising: Advertising which is done by a local
intermediary especially at the time of opening up of a new outlet
...
Press releases: This is the most frequent tool of public relations
which is done at the time of a new product launch, new appointments, or
significant achievements
...
11
...
What do you understand by promotion mix? Discuss the
advantages of promotion mix tools
...
Write short notes on the following:
(a) Sales Promotion (b) Personal selling
3
...
4
...
11
...
Frank G
...
, “Business marketing management”,
NTC business books, Lincolnwood, Illinois, USA, 1998
...
William J
...
Etzel, and Bruce J
...
3
...
Ltd
...
750-785
...
Philip Kotler, “Marketing Management- Analysis, Planning,
Implementation, and Control”, 6th edition, Prentice Hall of
India Pvt
...
, New Delhi, 1988
...
Ramaswamy,
V
...
and
Namakumari,
S
...
6
...
Cravens,
and
Gerald
E
...
28
7
...
Cundiff, and Norman A
...
Govoni, “Sales Management- Decisions, Strategies, and
Cases”, 5th edition, Prentice Hall of India Pvt
...
New
Delhi, 1988,pp
...
8
...
, New Delhi,
1994
...
0 Objectives
12
...
2 Understanding Channels of Distribution
12
...
4 Functions and Flows in Marketing Channels
12
...
6 Designing Distribution Channels
12
...
8 Vertical Marketing System
12
...
10 Summary
12
...
12 Self Assessment questions
12
...
0
OBJECTIVES
•
Discuss the role of marketing channel in the exchange
process
...
•
Describe the functions to be performed in distribution
system
...
•
The causes of channel conflict and managing it
...
1
INTRODUCTION
Exchange is the core aspect of marketing
...
Goods also must be
physically transported from where they are produced to where they are
needed
...
Distribution’s role within
marketing mix is getting the product to its target market
...
Other common activities are promoting
the product, storing it, and assuming some of the financial risk during
the distribution process
...
Typically, however, firms called
middlemen perform some of these activities on behalf of the producer
...
Between them and the final users stand a host of
marketing intermediaries performing a variety of functions and bearing a
variety of names
...
Others, such as brokers, manufacturer’s representatives,
and sales agents, search for customers and may negotiate on behalf of
the producer but do not take title to the goods; they are called agent
middlemen
...
Marketing-channel decisions are among the most critical decisions
faced by management
...
A distribution system is a key external
2
resource
...
It
ranks in importance with key internal resources such as manufacturing,
research, engineering, and field sales personnel
...
It represents as well, a commitment to a set of policies and
practices that constitute the basic fabric on which is woven an extensive
set of long term relationships
...
What they might not be well aware of
is the fact that the channel structure, or the set of institutions, agencies,
and establishments through which the product must move to get to
them, can be amazingly complex
...
2
UNDERSTANDING CHANNELS OF DISTRIBUTION
Even before a product is ready for market, management should
determine what methods and routes will be used to get it there
...
A distribution channel consists of the set of people
and firms involved in the transfer of title to a product as the product
moves from producer to ultimate consumer or business user
...
When a manufacturer in order to deliver his
goods and services to his final consumers utilizes a set of extra-corporate
institutions to affect this distribution, that is called, a channel of
distribution
...
From the outset, it should be recognised that not only marketing
channels satisfy demand by supplying goods and services at the right
place, quantity, quality and price; but they also stimulate demand
through the promotional activities of the channel members, e
...
, retailers,
manufacturers’
representatives,
sales
offices,
wholesalers
etc
...
A channel of distribution, therefore, should be viewed
as a network that creates value for end-users by generating form,
possession, time, and place utilities
...
Producers of goods and services specialise in
generating structural or form utility for their products, in the sense that
they create a unique set of demand satisfiers in the form of their offering
...
In fact, the four types of utility (form, time,
place, and possession) are inseparable, there can be no complete product
without incorporating all four into any given object idea or service
...
Rarely are the producers or manufacturers in a
position to do all these tasks by themselves
...
As marketers
continue to face hostile, unstable, and competitive environment,
distribution will play an increasingly important role
...
Executives will pay more
attention in the future to the distribution channels they select to gain a
competitive advantage over other companies or competitors
...
3
REASONS FOR EMERGENCE OF CHANNELS
In order to understand the marketing channel, it is important to
know the reasons for emergence of distribution channels
...
There is nothing to prevent a
producer from distributing his goods or services by himself
...
Why then, do they use intermediaries? The
answer lies in the economy and efficiency generated through division of
labour and specialisation
...
Marketing activities revolve around
the satisfaction of needs and wants through the exchange process
...
The first barrier for smooth exchange results from the fact that
sources of supply and centres for demand are located at widely dispersed
location
...
This need for physical movement is further complicated by
the fact that consumers, at varying distance from the manufacturers,
require
intermittently
only
small
quantities
of
product
which
if
transported to individual consumers would make the transportation cost
5
prohibitive
...
The second barrier to smooth exchange process arises because of
time of production and the time at which the goods are needed for
consumption or use may differ widely
...
This
discrepancy, referred to as temporal discrepancy between time of
production of output and its consumption, creates requirement of
inventory stocking
...
Manufacturers typically produce large quantities
of an item or a class of items while the consumers purchase only a
limited quantity of a wide variety of items at a time
...
Therefore, facilitate
the exchange task, specific quantities and unique assortments must be
built up from the range of products produced
...
The last barrier to exchange process comes from the intention to
buy
...
This situation necessitates that the suppliers
of product offerings and utilities try to influence the exchange process
towards their own market offerings
...
6
(b)
Discrepancy of Assortment and Sorting
Channel
intermediaries
arise
to
adjust
the
discrepancy
of
assortment through the performance of the sorting process
...
These utilities enhance the potency of the consumer’s assortment
...
The sorting function is performed by intermediaries that
include the following activities:
•
Sorting out: This involves breaking down a heterogeneous
supply into separate stocks that are relatively homogeneous
...
Wholesalers accumulate varied goods for retailers,
and retailers accumulate goods for their customers
...
Goods received in truck loads
are sold in case lots
...
The allocation process generally coincides
with geographical dispersal and successive movement of
products from origin to end consumer
...
Wholesalers built assortment of goods for retailers, and
retailers build assortment for their customers
...
Each transaction involves
ordering, valuating of, and paying for goods and services
...
The cost
of distribution can be minimised if the transactions are routinised;
otherwise,
every
transaction
is
subject
to
bargaining,
with
an
accompanying loss of efficiency
...
It leads to standardization of goods and services whose
performance characteristics can be easily compared and assessed
...
In fact,
exchange relationships between buyers and sellers are standardized so
that lot size, frequency of delivery and payment, and communication are
routinised
...
(d)
Searching
Buyers
and
sellers
are
constantly
engaged
in
search
for
consummation of desired exchanges
...
The
process of search involves uncertainty because producers are not certain
of consumers’ needs and consumers are not certain that they will be able
to find what they want
...
For example, products such as over the counter drugs are
widely available through a wide variety of outlets like general stores, drug
stores, super markets and provisional stores
...
4
FUNCTIONS AND FLOWS IN MARKETING CHANNELS
Manufacturers, wholesalers, and retailers as well as the other
channel members exist in channel arrangements to perform one or more of
the functions such as, order processing, carrying of inventory, demand
generation, physical distribution, etc
...
Therefore, while channel institutions can be eliminated or
substituted, the functions performed by them cannot
...
The same function in a given channel system may be performed
at more than one level of the marketing channel, the work load for the
function is shared by the members at all levels
...
This duplication and
redundancy in the channel may increase the distribution cost
...
Flow in channels is referred as a set of functions performed in
sequence by channel members
...
Figure 1 depicts important marketing flows
...
Each of these moves down the distribution channel- a
manufacturer promotes its product to a wholesaler, which in turn promotes
it to a retailer, and so on
...
Figure 1
...
Stern, Adel I
...
Coughlan
“Marketing Channels”, Prentice Hall of India Pvt
...
)
12
...
The primary
participants in the channels of distribution are the manufacturer, the
middlemen i
...
the wholesalers, manufacturers’ agents and retailers
...
(a)
Primary participants
Wholesalers: Wholesalers are defined as all establishment or places
of business primarily engaged in selling merchandise to retailers to
industrial commercial, industrial institutional or professional users, or to
other wholesalers or acting as agents in buying or selling merchandise to
such companies
...
These
are
the
merchant
wholesaler
and
the
manufacturers’ agents
...
Manufacturer’s agents buy and sell
on behalf of the manufacturer and nowhere in the exchange process take
title to goods
...
Retailers: Retailers are all the establishments engaged in selling
merchandise
for
personal
or
household
consumption
...
Although wholesalers may also sell to ultimate consumers,
this selling activity does not form the bulk of their operation
...
(b)
Facilitating Participants
Financial Institutions: Financial institutions provide the essential
finances needed to finance primary participants of the channel system
...
Public warehouses: The public warehouses rent space to owners of
inventory thereby eliminating the need to invest in storage facilities
...
Public carriers or transport carriers: Transportation forms a cost
centre in distribution management
...
The
efficiency of the transportation system influences the size of inventories
which must be maintained channel system
...
Advertising agencies: These facilitating agencies help in facilitating
negotiation, by creating awareness of products and stimulating demand
...
Without the kind of information given through these agencies at
various levels, seeking and selecting product sources would become a
tedious task for buyers
...
11
12
...
Some firms
gain a differential advantage with their channels
...
(a)
Specifying the role of distribution
A channel strategy should be designed within the context of the
entire marketing mix
...
Next the roles assigned regarding product, price, and promotion are
specified
...
A company must decide whether distribution will be used
defensively or offensively
...
With an offensive strategy, a firm uses distribution to
gain an advantage over competitors
...
At this point in the sequence, a firm needs
to decide whether middlemen will be used in its channel and, if so, which
types of middlemen
...
The target market’s buying behaviour and the product’s nature
have a direct bearing on this decision
...
When selecting specific firms to be part of a channel, a producer
should assess factors related to the market, the product, its own
company, and middlemen
...
12
...
The company’s chosen channels intimately affect
all the other marketing decisions
...
Likewise
sales force and advertising decisions depends on how much training and
motivation the intermediaries need
...
It is seen that each manufacturer selects its intermediaries in the context
of constraints stemming from market, product, customer, company, etc
...
If a customer is used to buying a
particular thing from a particular place, it is difficult to change his
mindset
...
If the buyers are
concentrated in a particular area, then distribution can be achieved with
13
few middlemen, but if buyers are scattered, then many middlemen are
needed to cover up the area
...
The products which physically
deteriorate fast and those which experience rapid fashion obsolescence
are considered to be highly perishable and require more direct marketing
because of the possibilities of delay and repeated handling of the product,
which may lead to its deterioration
...
It is seen that higher the cost
per unit of the product larger the investment to keep the inventories in
the market
...
In
case of low unit value products, companies choose indirect channels,
unless value is high enough involving high profit margin to support direct
channels
...
Brand loyalty is highest in speciality goods and lowest in
convenience goods
...
In order
to provide support for such products, the company offers more than
normal margins to its intermediaries
...
Customer service is an important ingredient of the physical distribution
system
...
Product information means company’s ability to provide
14
different types of information to the customers
...
The
company should provide these product related information to the
customer
...
It refers to the time required from
placement of orders to the receipt of the same by the customer and the
ability of the supplier to meet consistently the targeted order cycle time
...
Company’s Characteristics: Company’s characteristics are the
important element affecting channel selection decisions
...
Often it
is stated that the greater the financial resources available to company,
the lower is its dependence on intermediaries
...
Even
small firms with limited market coverage also sell the products directly
...
In some cases manufacturer may want to compete
in or near the same distributive outlets selling the competitors products
...
But in some industries manufacturers want to
avoid the channels used by competitors because of scarcity of display
place, unhealthy competitions etc
...
In other words, economic environment has direct
effect on channel selection
...
Since the functionality of the intermediaries is influenced by the
performance of non-member participants, the company should analyse
the impact of economic, competitive, technical and legal environmental
factors especially since each of them is dynamic in nature
...
8
VERTICAL MARKETING SYSTEM
One of the most significant recent channel developments consists
of
vertical
marketing
system,
which
has
emerged
to
challenge
conventional marketing channels
...
Each is a
separate business entity seeking to maximize its own profits, even if it
reduces for the system as a whole
...
Conventional channels are
highly fragmented networks in which loosely aligned manufacturers,
wholesalers, and retailers bargain with each other at arm’s length,
negotiate aggressively over terms of sale, and otherwise behaved
autonomously
...
Any one
channel member owns the others or franchises them or has so much
power that they all cooperate
...
VMSs are
professionally managed and centrally programmed networks, preengineered to achieve operating economies and maximum market impact
...
They achieve economies through their size, bargaining
power, and elimination of duplicated services
...
These are briefly described below:
(i)
Corporate Vertical Marketing System (VMS): In the corporate
vertical
marketing
system,
successive
stages
from
production
to
distribution are under single ownership of any of the channel members
...
For example, Bata and Woodlands own their shoe shops across the
country while also manufacturing footwear
...
(ii)
Administered VMS: Unlike the corporate VMS, administered
VMS seeks to control successive stages from production to distribution
not through ownership but through the size and power of one of the
channel members
...
Firms like Hindustan Lever, Lipton,
Proctor and Gamble, Nestle, TELCO, Maruti and others are able to get
shelf space, promotional support and also support for price policies from
the trade, mainly because their brands are market leaders
...
Some are wholesaler
sponsored voluntary chains like the ones in vegetable and food markets,
others,
retailer
sponsored
like
Apna
Bazaar
in
Mumbai
(retail
cooperatives) and still others are franchises like Pepsi or Coke franchising
17
a firm to produce and market their range of soft drinks in different areas
...
12
...
To manage channel conflict
marketer must understand- the type; nature or the cause; and
magnitude of the conflict
...
It can only be minimized
...
(i)
The Vertical Level Conflict: Vertical level conflict occurs when
the channel member at one level is in conflict with another member at
the next higher or lower level
...
(ii)
Horizontal Level Conflict: Conflict at the same level between
channel members is called horizontal level conflict
...
(iii)
Multichannel Level Conflict: Sometimes the middlemen come
in conflict with the manufacturer, using both direct and indirect means
of distribution
...
For
example, the firm may have its own franchise outlet or its own shop in an
area, where, it may also be distributing the product through established
18
middlemen
...
The conflict may occur when the franchise prices its
products lower than the middlemen, wholesaler or dealer, or when the
firm retails a larger range of products through its own outlet than the
wholesaler or stockists
...
(b)
Nature or Causes of Conflict
Channel conflict occurs largely due to financial and non-financial
reasons
...
For example, while the manufacturer perceives his goals
to be market share and profit maximization in the long run, wholesalers
perceive their goal to be sales maximization and thereby profit
maximization
...
This makes the manufacturer accuse the
wholesaler of being “fair weather partners” and the wholesaler accuses
the manufacturer of squeezing his margins
...
(ii)
Role ambiguity: Many a time conflict has occurred because of
role ambiguity
...
For example, the role of the manufacturer’s sales force and
dealer in selling products to major accounts or institutional customers in
the territory is often unclear in some companies
...
A well known automobiles component manufacturer had such a
conflict when one of its distributors started directly selling to retailers,
through his mobile van bypassing large wholesalers in the territory
...
Lack
of role clarity of any of the channel members can be a source of potential
conflict
...
For example, a manufacturer may
perceive an opportunity in the booming Indian middle class market and,
hence introduce new products, multiple brands and even appoint
wholesalers in distant areas
...
(c)
Magnitude of the Conflict
This refers to the seriousness of conflicts
...
For
example, inter-dealer conflicts in the territory over prices or territory
jumping
...
For, ultimately it is the manufacturer who is the
leader of the channel
...
(d)
Managing the Conflict
To minimize the conflict, the manufacturer may take the following
steps:
(i)
Communication: An effective way to minimize channel conflict
is to have regular communication between the manufacturers and the
channel members
...
These meetings are also used to resolve
channel member’s problems
...
This newsletter informs channel members of
happenings in the market place and also the company’s perspective of
the products and markets
...
Such council can resolve issues in
horizontal level conflicts and even vertical conflicts
...
Often the criticism or
fear voiced in this regard is that such councils can provide a platform for
dealers to jointly voice their grievance against the manufacturer
...
But, if the manufacturer can keep the councils
focussed on market leadership and maximization of returns on
investment, and is also willing to accept constructive suggestion, the
dealer council can become an effective tool for intervening in the market
place
...
If the
channel members can be motivated to perceive customer satisfaction as
the ultimate goal of all members in the channel and this in turn leading
to profit maximization of all concerned, then much of the conflict can be
resolved
...
(iv)
Arbitration and mediation: Often, the conflict among channel
members may be resolved only through arbitration and mediation
...
But,
21
when it is between the manufacturer and dealers, arbitration or
mediation may be done by independent individuals or institutions like a
court or government agency like the drug controller mediating between
pharmaceutical companies and their stockists
...
10
SUMMARY
The role of distribution is getting a product to its target market
...
A middleman is a business firm that renders
services directly related to the purchase and/or sale of a product as it
flows from producer to consumer
...
A
distribution channel is the set of people and firms involved in the flow of
title to a product as it moves from producer to ultimate consumer or
business user
...
Designing a channel of distribution for a product occurs through a
sequence of four decisions: delineating the role of distribution within the
marketing mix; selecting the proper type of distribution channel;
determining the appropriate intensity of distribution; and choosing
specific channel members
...
Numerous factors need to
be
considered
in
selecting
a
distribution
channel
...
Others relate to the
product, the middlemen, and the company itself
...
Firms that distribute goods and services sometimes clash
...
The firms comprising a particular channel are served best if
they all view their channel as a partnership requiring coordination of
distribution activities
...
11
KEYWORDS
Channel of distribution: The complete sequence of marketing
organisations involved in bringing a product from the manufacturer to
the ultimate consumer
...
Agent intermediary: An intermediary who does not owns a title
...
Vertical marketing system: A network of vertically aligned
organisations that are professionally managed and all the activities of all
the intermediaries move in the same direction
...
Channel conflict: When there is a kind of dispute between
distribution channel members
...
12
SELF ASSESSMENT QUESTIONS
1
...
2
...
23
3
...
4
...
5
...
Elaborate
...
13
REFERENCES/SUGGESTED READINGS
1
...
Stern, Adel I
...
Coughlan
2
...
Stanton, Michael J
...
Walker
3
...
Marketing Management (Tata McGraw Hill)
— Rajan Saxena
5
...
0 Objective
13
...
1
...
1
...
2 Marketing Control
13
...
1
Marketing Control Process
13
...
2
Significance of marketing control
13
...
3
Problems in controlling marketing activities
13
...
3
...
3
...
3
...
3
...
4 Summary
13
...
6 Self Assessment Questions
13
...
0 OBJECTIVE
Marketing management process has three major phases, namely
planning, implementation, and control
...
1
Planning
Implementation
Control
Analyse Situation
Organise
Compare
Set Goals
Staff
performance
Select Strategies & Tactics
Operate with goals
There is a close relationship among planning, implementation, and
control
...
This lesson
focuses on organisation and control, the two vital tasks of marketing
management
...
1 ORGANISING MARKETING DEPARTMENT
After setting a company’s marketing plans, an early activity is to
organise the people who will be implementing it
...
Then, within the marketing department, management must design
an organisation that will implement the plans
...
Organisational structures are receiving attention increasingly in
the companies now-a-days, as companies have started recognising that
yesterday’s structures may not be suitable for smooth operations in
today’s
dynamic
environment
...
To stimulate innovation, to reduce office
bureaucracy, and to generate faster responses to market changes, firms
are granting more authority to middle level executives in decentralised
locations
...
Undoubtedly, new organisation structures will continue to
emerge in response to changing environments
...
1
...
Marketing can help production by providing
accurate sales forecasts
...
Similarly, marketing and finance people
can work together to establish pricing and credit policies
...
All these areas
are equal in importance and each one is headed by a vice-president who
report to the President/CEO/Managing director of the company
...
13
...
2
Organisation within marketing department
Within the marketing department, especially in medium-sized or
large firms, three forms of specialisation: geographic, product, or
customer types are used-
3
(i) Geographic spread- Probably the most widely used method of
organising marketing activities is on the basis of geographic spread
...
Several sales people
representing contiguous territories are placed under a territorial sales
executive, who reports directly to the regional sales manager
...
A geographical organisation usually ensures better implementation
of marketing and sales strategies in each local market and better· control
over the sales force
...
As its major drawback, a geographic organisation does not
4
provide the product expertise or other specialised knowledge that some
customers may want
...
Control and coordination also becomes difficult sometimes
...
In this kind of structure the company may divide its products into
separate product lines
...
This type of organisation is
best suited for the companies that are marketing:
•
Complex technical products
...
•
Thousands of items
...
A
drawback is that more than one sales representative from the same
5
company may call on the same customer
...
(iii)
marketing
Customer specialisation- Many companies organise their
departments
on
the
basis
of
customer
specialisation
...
As more companies fully implement the marketing concept, the
customer specialisation type of organisation is likely to increase
...
Here the organisational emphasis is on customers and markets rather
than on products
...
Many companies are adopting this structure as a better
way to deal with large, important customers
...
In this kind of arrangement, a
selling team consisting perhaps of a sales representative, a sales
engineer, a financial executive, and a manufacturing person will
negotiate with a buying team from the customers’ organisation
...
2 MARKETING CONTROL
In order to achieve marketing objectives as well as organisational
objectives, marketing managers must effectively control marketing
efforts
...
It is the process of taking steps to bring actual results & desired results
closer together
...
2
...
both
The
formal
formal
and
marketing
informal
control
systems
in
control
process
consists
of
establishing performance standards; evaluating actual performance by
comparing it with established standards and reducing the difference
between-the desired and actual performance
...
Given below
are the steps involved in a formal marketing control process:
(1)
Establishing
performance
standards-The
performance
standards are parameters of expected performance against which the
actual marketing performance is gauged and evaluated
...
Quantitative standards could be
sales volume, profit or expenses per product etc
...
Most common types of marketing performance parameters are:
(a)
Sales oriented performance
(b)
Contribution to profits
(c)
Budgeted costs
(d)
Market support performance
7
(a)
Sales
Oriented
Performance-
These
standards
specify
performance in term of sales volume and market share
...
(c) Budgeted costs- Budgets are developed to anticipate the
amounts needed
...
(d) Market Support- The advertising communication objectivesawareness,
attitude
change,
purchase
intentions
and
customer
satisfaction- are kinds of market SUPP0l1 objectives
...
Such appraisal may be continuous
or periodic
...
These deviations can be favourable or
unfavourable
...
Unfavourable deviations, on
the other hand, are unacceptable deviations as they indicate bitter
performance, i
...
, less than desired
...
For instance, if every time there is
favourable or unfavourable variances; it means that standards are too
8
low or too high where equalisation has not been brought about in terms
of zero deviations
...
13
...
2
Significance of marketing control
Marketing control means monitoring and realigning the marketing
effort
...
It monitors the
variations- favourable or unfavourable- and redress, the mechanism
before it gets too late
...
(2)
It helps in locating responsibility for deeds- Marketing
control helps the marketing manager in particular and the top
management in general, in locating the responsibility for the deeds of
subordinates- both good and bad
...
(4)
It absorbs organizational complexity- The outstanding
feature of modern business enterprises is that it is going mammoth in
size and more complex in nature
...
9
(5)
It brings about realistic reformulation of plans- A well
developed and effectively operated marketing system is capable of turning
the intelligent management wiser than ever before through the acid tests
of cold facts
...
2
...
Often the information required
to control the marketing activities is unavailable or is available only at a
high cost
...
If the flow of
information is not rapid enough or the processing is faulty, marketing
manager will not be able to quickly detect the difference between the
actual and the planned level of performances
...
3 TYPES OF MARKETING CONTROL
Types of
control
Annual Plan
control
Prime
responsibility
Top
management,
Middle
management
Purpose of
Control
To examine
whether the
planned results
are being
achieved
Profitability
control
Marketing
controller
Efficiency
control
Line and staff
management,
Marketing
controller
To examine
where the
company is
making and
losing money
To evaluate and
improve the
spending
efficiency and
impact of
marketing
expenditures
10
Approaches
• Sales analysis
• Market share analysis
• Expense-to-sales
analysis
• Financial analysis
• Market-based score
card analysis
Profitability by:
Product, Territory,
Customer, Segment,
Trade channels, order
size
Efficiency of:
• Sales force
• Advertising
• Sales promotion
• Distribution
Strategic
control
13
...
1
Top
management,
Marketing
auditor
To examine
whether the
company is
pursuing its best
opportunities
with respect to
markets,
products and
channels
• Marketing
effectiveness rating
instrument
• Marketing audit
• Marketing excellence
review
• Company ethical and
social responsibility
review
Annual-Plan Control
The purpose of annual-plan control is to ensure that the company
achieves the sales, profits and other goals established in its annual plan
...
Four
steps are involved in annual plan control
...
Second,
management
monitors
its
performance in the marketplace
...
Fourth, management takes
corrective action to close the gaps between its goals and performance
...
Managers use five tools to check on plan performance, sales
analysis, market share analysis, marketing expense-to-sales analysis,
financial analysis, and market-based scorecard analysis
...
It is probably the most common method of
evaluation
...
However, that information alone is not enough
...
So, sales analysis consists of
measuring and evaluating actual sales in relation to sales goals
...
11
Sales-variance analysis measures the relative contribution of
different factors to a gap in sales performance
...
1
...
5000
...
80 per unit, or Rs
...
The sales performance variance is Rs
...
The question arises, how much of this
underperformance is due to the price decline and how much to the
volume decline? The following calculation answers the question:
Variance due to price decline= (1
...
80)(4000)=Rs
...
4%
Variance due to volume decline= (1
...
1000
= 55
...
1800 = 100
...
The company should look closely at why it failed to
achieve its expected sales volume
...
Suppose, in the above
example, the company sells in 3 territories and expected sales are 2000
units, 2500 units, and 500 units respectively adding upto 5000 units
...
Territory I shows a 25% shortfall in terms of expected sales,
territory 2 shows a 4% shortfall, and territory 3 shows a 80% shortfall
...
(B) Market share analysis- Company sales do not reveal how well
the company is performing relative to competitors
...
Managers must carefully
interpret market share movements by product line, customer type, region
12
and other breakdowns
...
Overall Market Share= Customer penetration × Customer loyalty
× Customer selectivity × Price selectivity
Where:
•
Customer penetration is the percentage of an the customers
who buy from the company
...
•
Customer selectivity is the size of the average customer
purchase from the company expressed as a percentage of the
size of the average customer purchase from an average
company
...
Now suppose the company’s market share falls during the period,
above equation provide four possible explanations
...
Existing customers
are buying a smaller share of their total supplies from this company
(lower customer loyalty)
...
The company’s price has slipped
relative to competition (lower price selectivity)
...
Suppose at the begging of the period, customer penetration was
60%; customer loyalty, 50%; customer selectivity, 80%; and price
selectivity, 125%; and company’s market share was 30%
...
In checking,
the company finds customer penetration at $5%, customer loyalty at
50%, customer selectivity at 75%, and price selectivity at 130%
...
The manager can now investigate why these
customers were lost
...
The key is to watch marketing expense-to-sales ratio
...
Management needs to monitor these marketing expenses to sales
ratios
...
Small fluctuations in these ratios are ignored but
fluctuations outside of the normal range are a cause for concern
...
Marketers are increasingly using
financial analysis to find profitable strategies and not just sales-building
strategies
...
(E)
Market-based score card analysis- Companies would do
well to prepare two market-based scorecards that reflect company
performance and provide possible early warning, signals
...
Companies need to track the satisfaction of various constituencies who
have a critical interest in and impact on the company’s performance:
employees, suppliers, banks, distributors, retailers, stockholders etc
...
3
...
A marketing strategy that successfully generates sales
may also be extremely costly
...
Clearly, companies need to measure the profitability of their
various products; territories, customer groups, trade channels, and order
sizes
...
In general, marketing-profitability analysis indicates the
relative profitability of different channels, products, territories or other
marketing entities
...
It
breaks down and classifies costs to determine which are associated with
specific marketing activities
...
Marketing cost analysis lets a
company evaluate the effectiveness of an ongoing or recent marketing
strategy by comparing· sales achieved and costs incurred
...
15
In some organisations, personnel in other functional areas, such as
production ‘or accounting, see marketers as primarily concerned with
generating sales, regardless of the costs incurred
...
The task of determining marketing costs is often complex and
difficult
...
Marketers must usually determine the
marketing costs of serving specific geographical areas, market segments
or even specific customers
...
Most accounting systems classify costs into
natural accounts- such as rent, salaries, office supplies, and utilitieswhich are based on how the money was actually spent
...
It does little
good; for example, to know that Rs
...
The analyst has no way of knowing whether the money is spent for the
rental of production, storage or sales facilities
...
Common
marketing function accounts are transport, storage, order processing,
selling, advertising, sales promotion, marketing research, and customer
credit
...
Direct costs are directly attributable to the performance of marketing
functions
...
Traceable common costs can be
allocated indirectly, using one or several criteria, to the functions that
they support
...
80000 annually to rent
space for production, storage and selling, the rental costs of storage
could be detem1ined on the basis of cost per square meter used for
storage
...
Interests, taxes
...
The manner of dealing with these three categories of costs depends
on whether the analyst uses a full cost or a direct cost approach
...
Proponents of this
approach claim that if an accurate profit picture is desired, all costs must
be included in the analysis
...
With different criteria, the full
costing approach yields different results
...
Methods of marketing cost Analysis
Marketers can use several methods to analyse costs
...
This section examines three costs analysis
methods- analysis of natural accounts; analysis of functional accounts;
and cost analysis by product, geographic area, and/or customer
...
The precision of this method depends on
how detailed the firm’s accounts are
...
An analysis of natural
accounts is more meaningful, and thus more useful, when current cost
data can be compared with those of previous periods or with average cost
figures for the entire industry
...
In such cases, natural
accounts must be reclassified into marketing function accounts for
analysis
...
Although marketers usually obtain a more detailed picture of
marketing costs by analysing functional accounts than by analysing
natural accounts, some firms need an even more precise cost analysis
...
Activities vary in marketing different products in specific geographic
locations to certain customer groups
...
By analysing the functional costs of specific product
groups, geographic areas or customer groups, a marketer can find out
which of these marketing entities are the most cost effective to serve
...
3
...
18
Some companies have established a marketing controller position
to assist marketing personnel in improving marketing efficiency
...
Specifically, they examine adherence
to profit plans, help prepare brand manager’s budgets, measure the
efficiency of promotions, analyse media production costs, evaluate
customer and geographic profitability, and educate marketing personnel
on the financial implications of marketing activities and decisions
...
•
Average sales call time per contact
...
•
Average cost per sales call
...
•
Percentage of orders per 100 sales calls
...
•
Number of lost customers per period
...
These indicators raise such useful questions as the following:
•
Are sales representatives making too few calls per day?
•
Are they spending too much time per call?
•
Are they spending too much on entertainment?
•
Are they closing enough orders per 100 calls?
•
Are they producing enough new customers and holding onto
the old customers?
Where a company starts investigating sales force efficiency, it often
finds areas for improvement
...
There are different models or techniques that can measure the
communication as well as sales effect of advertising
...
However, managers should try to keep track of at least the following
statistics:
•
Advertising cost per 1000 target buyers reached by media
vehicle
...
•
Consumer opinions on the ad content and effectiveness
...
•
Number of inquiries stimulated by the ad
...
(C)
Sales-promotion
efficiency-
Sales
promotion
includes
dozens of devices for stimulating buyer interest and product trial
...
Management should watch the
following statistics:
•
Display costs per sales rupee
...
•
Number of inquiries resulting from a demonstration
...
20
(D)
Distribution efficiency- Management needs to search for
distribution
economies
...
One
problem that frequently arises is that distribution efficiency decline when
the company experiences strong sales increases
...
13
...
4
Strategic control
From time to time companies need to undertake a critical review of
their overall marketing goals and effectiveness
...
Each company should periodically
reassess its strategic approach to the marketplace
...
Companies can also undertake marketing excellence reviews and
ethical/social responsibility reviews
...
Good results could be due to a division’s being in the right
place at the right time, rather than having effective marketing
management
...
A company’s marketing effectiveness is reflected in the degree to
which it exhibits the five major attributes of a marketing orientation:
customer
philosophy,
integrated
marketing
organization,
adequate
marketing information, strategic orientation and operational efficiency
...
Every company should
prepare a marketing effectiveness rating instrument based on these
attributes
...
The scores then can be used to interpret company’s
exact position
...
Audit is a term more commonly used in financial
management to describe the process of taking stock of an organisation’s
financial strengths, weakness and health, through checking and
analysing changes in its assets and transactions over a given period
...
According to McDonald, “The audit is the means by which a
company can understand how it relates to the environment in which it
operates
...
It is thus a way of helping management to select a position in
that environment based on known factors
...
”
Characteristics of marketing audit
Let us examine a few characteristics of marketing audit
...
22
(ii)
Systematic-
The
marketing
audit
involves
an
orderly
sequence of diagnostic steps covering the organisation’s macro and micro
marketing environment, marketing objectives and strategies, marketing
systems, and specific marketing activities
...
They are incorporated in a corrective action plan
involving both short run and long run steps to improve the organisation’s
overall marketing effectiveness
...
Generally speaking,
the best audits are likely to come from outside consultants who have the
necessary objectivity, broad experience, and time and attention
...
Ironically, companies are thrown into a crisis
partly because they fail to review their marketing operations during good
times
...
Marketing audit process
The marketing audit stats with a meeting between the company
officers and the marketing auditors to work out an agreement on the
audit’s objectives, coverage, depth, data sources, report format, and time
frame
...
Opinions of
managers, dealers, retailers, and customers are taken in data gathering
phase
...
23
The marketing audit examines six major components of the
company’s marketing situation
...
There can be poor, good and
excellent business and marketing practices
...
The resulting profile then exposes the business’s
weaknesses and strengths
...
(D)
The ethical and social responsibility review: Companies
need to evaluate whether they are truly practicing ethical and socially
responsible marketing
...
The most admired companies in the world abide by the code of serving
people’s interests, not only their own
...
To handle
these situations, three pronged attack is needed
...
Second, companies must adopt and
disseminate a written code of ethics, build a company tradition of ethical
behaviour, and hold their people fully responsible for observing the
ethical and legal guidelines
...
13
...
Marketing plans do not develop by accidents, so it is essential that an
organisation has a structure that facilitates the development of a strategy
and
its
implementation
...
25
When it comes to organisation, management must design an
organisation that will implement the plan
...
Main
aim of organisational structure is to establish effective working
relationships between marketing and each one of the other major
functional areas
...
This process involves gathering information on marketing
performance and comparing the achieved performances against the onesusing predetermined yardsticks
...
13
...
Budgeted costs: Budgeted costs are developed to anticipate the
amounts needed
...
Strategic control: To examine whether the company is pursuing
its best opportunities with respect to markets, products and channels
...
13
...
What do you understand by marketing control? Discuss its
role and significance with the help of suitable examples
...
What is marketing control? Discuss the various types of
marketing controls used by the companies
...
Write a detailed note on Annual plan control
...
What is profitability control? Discuss its significance for
marketing department of a company
...
Write a detailed note on the efficiency control
...
What do you understand by strategic control? Discuss the
tools of strategic control with the help of suitable example
...
What do you mean by marketing audit? How it is done?
Discuss with the help of a hypothetical example
...
7 REFERENCES/SUGGESTED READINGS
1
...
Stanton, Michael J
...
Walker,
“Fundamentals of Marketing”, 10th Edition, McGraw Hill
International edition, 1994, pp
...
2
...
Dalrymple, and Leonard J
...
3
...
Buskirk,
“Principles
of
Marketing-
the
management view, 3rd Edition, Holt, Rinchard & Winston,
Inc
...
Ang, SH, Leong, SM, Tan, CT, and Kotler, P
...
Ltd
...
940-972
...
Brassington, F
...
, “Principles of marketing”,
Pitman Publishing, London, 1997,pp
...
6
...
, Simkin, L
...
584-611
...
0 Objective
14
...
2 Globalization
14
...
1 Being International
14
...
2 Determining the Level of International Involvement
14
...
3
...
3
...
3
...
3
...
4 Consumerism
14
...
1 Consumer Protection Act
14
...
2 Scope of the Consumer Protection Act, 1986
(COPRA, 1986)
14
...
3 Consumer Protection Council
14
...
4 Objectives of the Central Council
14
...
5 State Consumer Protection Councils
14
...
6 Consumer Disputes Redressal Agencies
14
...
6 Keywords
14
...
8 References/Suggested Readings
1
14
...
, and its impact on marketing efforts of any
organisation
...
1 INTRODUCTION
You might have studied marketing in earlier chapters and you
might be aware that consumer is the king in modern marketing concept
...
All the marketing efforts are directed toward identifying unmet and new
emerging consumer needs so that a planned effort could be made to meet
those
...
Any change in surroundings will affect the
need and consumption pattern of consumer
...
In order to understand their impact on marketing, any
serious student of marketing needs to understand these changes
...
2 GLOBALIZATION
One such change and challenge is globalization
...
We can study some of
these are:
Staturating markets in developed Economics
Towards the end of 20th century most of the leading economics
were facing the problem of saturating markets as most of the
technological developments except for in software industry, had already
taken place and not many innovative products were willing the markets
...
Inter Connectivity
With the advent of internet, cable television and mobile telephone
the world started getting connected as never before which almost
converted worked into one Global village where cultural social and
economic boundaries were eliminating fast
...
All the nations including the developing one will grow if trade are to be
made free
...
So under changed circumstances where whole world will be one
economy the companies need a fresh thinking as how to operate and
compete in new world under
...
But why would a company at all be willing to go global?
May be because;
(i)
it can outsource the inputs from across the world at much
cheaper rate and of better quality
(ii)
firms wants to get move economics of scale by producing at a
larger scale by attracting much bigger market across the
national boundaries
(iii)
firm are facing staff competition their own markets from
global firms and they wish to compete with them in their
markets
(iv)
firm wants to meet better opportunity offered elsewhere
3
(v)
firm want to earn the reputation of being a global firm
(vi)
to expand and grow is in human nature
But a firm would like to see a few things before thinking of crossing
the national boundaries:
(i)
Consumer’s behaviour of the market it intends to enter
(ii)
Opportunities available and resultant threats
(iii)
Economic conditions and business culture of the countries it
intend to enter into
(iv)
14
...
1
Legal formalities and competition
Being International
Once a company decides to go global, it has to decide the degree of
marketing involvement and commitment
...
Many companies
begin tentatively in international marketing, growing as they gain
experience and gradually changing strategy and tactics as they- become
more committed
...
Stages of International Marketing Involvement
Regardless of the means employed to gain entry into a foreign
market, a company may, from a marketing viewpoint, make no market
investment- that is, its marketing involvement may be limited to selling a
product with little or no thought given to development of market control
...
of
4
the market
...
Although the
stages of international marketing involvement are presented here in a
linear order, the reader should not infer that a firm progresses from one
stage to another; quite to the contrary, a firm may begin its international
involvement
at
anyone
stage
or
be
in
more
than
one
stage
simultaneously
...
Let us discuss these stages one by one
...
Sales may be made to trading companies as well as
other foreign customers who come directly to the firm
...
As companies develop web pages on the Internet, many receive
orders from international “web surfers”
...
Infrequent Foreign Marketing
Temporary surpluses caused by variations in production levels or
demand may result in infrequent marketing overseas
...
As domestic demand
increases and absorbs surpluses, foreign sales activity is withdrawn
...
Few companies today fit this model as customers seek long-term
commitments and there are companies that offer this option
...
A firm may employ foreign or domestic overseas middlemen or it
may have its own sales force or sales subsidiaries in important foreign
markets
...
However, as overseas demand grows, production
is allocated for foreign markets al1d products may be adapted to meet the
needs of individual foreign markets
...
International Marketing
Companies at this stage are fully committed and involved in
international marketing activities
...
This generally entails not only the
marketing but also the production of goods outside the home market: At
this point a company becomes an international or multinational
marketing firm
...
Even though it is the largest manufacturer or airconditioners in the United States, the firm faced constraints in its
domestic market
...
Furthermore, the U
...
market is mature, with most customers buying only replacement units
...
Feeders decided that
the only way to grow was to venture abroad
...
China, India, and Indonesia
were seen as the best prospects
...
The company saw China as a
market with terrific growth potential
...
They immediately found that they needed to redesign their
product for this market
...
S
...
Since Fedders did not
manufacture split models, it designed a new product that is lightweight,
energy-efficient, and packed with features such as a remote control and
an automatic air-sweeping mechanism
...
As
Fedders expands into other markets and makes other commitments
internationally, it continues to evolve as an international or multinational
company
...
7
Global Marketing
At the global marketing level, the most profound change is the
orientation of the company toward markets and its planning
...
In contrast to the multinational or international company that
views the world as a series of country markets (including their home
market) with unique sets of market characteristics for which marketing
strategies must be developed, a global company develops a strategy to
reflect the existing communities of market needs among many countries
to maximize returns through global standardization of its business
activities- whenever it is cost effective and culturally possible
...
Perhaps the former president of Coca-Cola, Roberto Goizueta, put
it most simply and succinctly when he said, “The culture of The CocaCola Co
...
This change is pervasive throughout our
organisation
...
Today, the word foreign
is ‘foreign’ to our corporate language
...
International operations of businesses in global marketing reflect
the heightened competitiveness brought about by the globalization of
markets, interdependence of the world’s economies, and the growing
number of competing firms from developed and developing countries
vying for the world’s markets
...
8
14
...
2
Determining the Level of International Involvement
Consider several options when deciding how to enter a foreign
market
...
Exporting represents the lowest level of
commitments; direct investment represents the highest level
...
Manufacturers often enter foreign markets by exporting
...
Service businesses, such as restaurants, hotels or car rental agencies,
usually enter a foreign market through a licensing arrangement, joint
venture, or direct investment in foreign facilities
...
Exporting: The low-risk approach to international marketing is
exporting that explains why approximately 100,000 companies in the
United States are involved at that level
...
Around 9,900
companies average approximately tt5 shipments a year
...
Two basic approaches can be taken to exporting
...
Indirect exports typically have no contact with
customers in their foreign markets
...
One of the least risky ways to export
indirectly is through an export trading company, which buys everything
9
from manufactured goods to raw materials and then resells these
products in foreign markets
...
However, “to rake in the really big bucks you’ve got to get involved
directly,” says James Yoder, president of Beauty Products International
(BPI), of Malibu, California
...
However, Yoder went directly to the retailers and
successfully arranged a deal with a major retail chain
...
As a result, BPI products are now in over 3,500 Japanese stores,
and the retailer has even launched an extensive advertising campaign
with national TV commercials
...
Although licensing does to
require large capital outlays, it does mean that the licensing company
loses
a
certain
amount
of
control
over
how
its
products
are
manufactured, marketed, and distributed in a foreign market
...
For example, Selma Weiser founded Charivari, a chain of
avant-grade boutiques on Manhattan’s Upper West Side
...
One of the fastest-growing forms of international licensing is
franchising
...
S
...
Although franchising
enables a company to expand quickly in foreign markets, it is not a
trouble
free
way
to
market
internationally
...
Another problem is that it
can also provide the foreign franchisee with an opportunity to gain
valuable expertise that can be used later to compete against the
franchising company in the same market
...
Joint Venture: A joint venture involves shared ownership between
a local and foreign company
...
Even the National
Basketball Association is going international
...
Joint ventures with Japanese and South Korean companies haven’t
always worked to the benefit of the U
...
companies involved
...
S
...
However, experts point out
that these partnerships can work if U
...
companies pay attention to
several important points
...
An overseas partner may still be
a competitor, but both companies can benefit if each pursues its strategic
goals and’ doesn’t forget the strategic reason for being in the partnership
...
Second, harmony doesn’t always indicate a successful joint
venture; the true measure of success is whether both players reach their
goals
...
If that’s not happening, the
partnership isn’t working
...
U
...
corporations spend billions of dollars building and
upgrading factories aboard and foreign concerns put comparable
amounts into their operations in the United States
...
S
...
S
...
Nonetheless, many companies are setting up factories
abroad in order to avoid import quotas and other trade barriers
...
Manufacturing concerns are not the only companies buying into
foreign markets, however
...
Federal Express, for example,
invested in four transport companies in Japan
...
Several companies, including Upjohn,
12
Du Pont, and Eastman Kodak, recently built R&D centers in Japan so
that they can tap the brain power of Japanese scientists
...
3 GREEN MARKETING
Although environmental issues influence all human activities, few
academic disciplines have integrated green issues into their literature
...
As society becomes more concerned
with the natural environment, businesses have begun to modify their
behaviour in an attempt to address society’s “new” concerns
...
Some evidence of
this is the development of journals such as “Business Strategy and the
Environment” and “Greener Management International”, which are
specifically designed to disseminate research relating to business’
environmental behaviour
...
Terms like “Green Marketing” and “Environmental Marketing’
appear frequently in the popular press
...
For example, in the United States
(US) the Federal Trade Commission and the National Association of
Attorneys-General have developed extensive documents examining green
marketing issues
...
While some literature comes exist, it
comes from divergent perspectives
...
3
...
Terms like Phosphate Free, Recyclable;
Refillable, Ozone Friendly, and Environmentally Friendly are some of the
things consumers most often associate with green marketing
...
For example, around the world there are resorts
that are beginning to promote themselves as “ecotourist” facilities, i
...
,
facilities that “specialize” in experiencing nature or operating in a fashion
that minimizes their environmental impact
...
Yet defining green
marketing is not a simple task
...
In
the late 1980s and early 1990s, it was first discussed much earlier
...
The proceeding of this workshop resulted
in one of the first books on green marketing entitled “Ecological
Marketing”
...
The AMA workshop attempted to bring together academics,
practitioners, and public policy makers to examine marketing’s impact on
the natural environment
...
This early definition has three key components, 1) it is a subset of
the overall marketing activity; 2) it examines both the positive and
negative activities; and 3) a narrow range of environmental issues are
examined
...
Before
providing an alternative definition it should be noted that no one
definition or terminology has been universally accepted
...
The following definition is much broader than those of other
researchers
and
it
encompasses
all
major
components
of
other
definitions
...
This definition incorporates much of the traditional components of
the marketing definition, that is, all activities designed to generate and
facilitate any exchanges intended to satisfy human needs or wants
...
The above definition
also includes the protection of the natural environment, by attempting to
minimize the detrimental impact this exchange has on the environment
...
(To be accurate
15
products
making
green
claims
should
state
they
are
“less
environmentally harmful” rather than “Environmentally Friendly”
...
14
...
2
Why is green Marketing Important?
The question of why green marketing has increased in importance
is quite simple and relies on the basic definition of Economics;
Economics is the study of how people use their limited resources to
try to satisfy unlimited wants
...
In
market societies where there is “freedom of choice”, it has generally been
accepted that individuals and organisations have the right to attempt to
have their wants satisfied
...
Ultimately green marketing looks at how marketing activities utilize these
limited resources, while satisfying consumer wants both of individuals
and industry, as well as achieving the selling organisation’s objectives
...
3
...
Five possible reasons
are:
(i)
Organizations perceive environmental marketing to be an
opportunity that can be used to achieve its objectives
...
(iii)
Government bodies are forcing firms to become more
responsible
16
(iv)
Competitors’ environmental activities pressure firms to
change their environmental marketing activities; and
(v)
Cost factors associated with waste disposal or reductions in
material usage forces firms to modify their behaviour
...
3
...
One of the main problems
is that· firms using green marketing must ensure that their activities are
not misleading to consumers or industry, and do not breach any of the
regulations or laws dealing with environmental marketing
...
Take for example
the McDonald’s case where it has replaced its clam shells with plastic
coated paper
...
Some scientific evidence suggests that when
taking a cradle-to-grave approach, polystyrene is less environmentally
harmful
...
When firms attempt to become socially responsible, they may face
the risk that the environmentally responsible action of today will be
17
found to be harmful in the future
...
Some
firms now use DME (dimethyl ether) as an aerosol propellant, which may
also harm the ozone layer
...
This may explain why some
firms, like Coca-Cola and Walt Disney World, are becoming socially
responsible without publicizing the point
...
While governmental regulation is designed to give consumers the
opportunity to make better decisions or to motivate them to be more
environmentally responsible, there is difficulty in establishing policies
that will address all environmental issues
...
e
...
If
governments want to modify consumer behaviour they need to establish
a different set of regulations
...
Reacting to competitive pressures can cause all “followers” to make
the same mistake as the “leader”
...
While technically these bags were biodegradable,
the
conditions
under
which
they
were
disposed
did
not
allow
biodegradation to occur
...
Thus blindly following the competition can
have costly ramifications
...
End-of-pipe
solutions may not actually reduce the waste but rather shift it around
...
Ultimately most waste produced will enter the waste stream, therefore to
be environmentally responsible organizations should attempt to minimize
their waste, rather than find “appropriate” uses for it
...
4 CONSUMERISM
Marketing is highly visible, all pervasive and a very important
activity having great influence on society
...
This calls for a carefully designed legislature ‘that may protect
the interest of society and right of individuals against any sort of wilful or
otherwise exploitation by marketing
...
There have
been various movements on the part of society to safeguard its interest
which is known as consumerism
...
A consumer can call for several rights like
(i)
The right to safety: to be protected against the marketing of
goods which are hazardous
...
(iii)
The right to influence products and marketing practices in
ways that buyers think will help improve the quality of life
...
(v)
The right to legal remedies in case of any injustice being
done to consumer
...
4
...
A number of important changes such as checking of unfair
trade practices, grant of interim injunction and grant of compensation
were enacted in the 1984 Amendment of the Monopolies and Restrictive
Trade Practices Act, 1969 (MRTP Act) however, to make it more effective
and useful, nothing of much importance and use could come out of this
exercise
...
, continued to act as limitations of MRTP Act
...
In this background, the Consumer Protection Act,
1986 was introduced aiming at protection of the interests of consumers
as stated in the preamble of the Act
...
In order to protect the consumers from the unfair trade practices,
the Union Government of India has enacted various legislations
...
Very
prominently, this is because of poor and inadequate implementing
machinery of the government, and rampant corruption and dishonesty
...
It was the year when the Consumer Protection Act
came into force
...
14
...
2 Scope of the Consumer Protection Act, 1986
(COPRA, 1986)
The Consumer Protection Act, 1986 extends to the whole of India
except the State of Jammu and Kashmir
...
This Act applies to all types of goods and services
unless specifically exempted by the central government by notification
...
14
...
3
Consumer Protection Council
The central government is empowered to constitute the Central
Consumer Protection Council which consists of the following 150
members, viz
...
The term of the council shall be of three years
...
Each meeting of the council shall be
called by giving not less than 10 days notices in writing to every member,
specifying the time, place and agenda of the meeting
...
The council is empowered to constitute, from amongst its
members, such working groups as it may seem necessary
...
It seems that such working groups may prove to
be more useful and effective in dealing with the specific problems
allocated to them
...
The resolutions by the
council shall be recommendation in nature
...
4
...
The central council may have a significant role in the formulation
of the Central Government’s Economic Policy
...
Though the decisions of the council are
recommendation, they have a significant impact on several authorities
concerned with the matters of consumer protection
...
4
...
The State Councils shall
consist of such members as may be notified by the state governments by
23
notification from time to time
...
So far, 22 states and Union Territories have set up the consumer
Protection Councils under the Act
...
14
...
6
Consumer Disputes Redressal Agencies
The Consumer Protection Act, 1986 provides for the establishment
of
a
three-tier
quasi-judicial
machinery
for
redressing
consumer
grievances
...
(a)
District Forum: A Consumer Disputes Redressal Forum to
be known as the District Forum is required to be established by the state
government with the prior approval of the central government in each
district of the state
...
It
shall consist of two members, among them one should be a lady social
worker
...
Vacancy occurred by members resignation may be filled by
the state government and it has entire authority about deciding salary or
honorarium to be paid to the members
...
5,00,0000 (earlier it
was
Rs
...
It
can
take
24
the
complaints
where
opposite
party/parties reside/s or carries on business in the district and the
cause of action”, wholly or in part, arises
...
After receiving a complaint
from the complainant, it refers a copy of the complaint to the opposite
party directing him to give his version within 30 days or such extended
period not exceeding 15 days
...
If complaint alleges a defect in the goods which cannot be determined by
proper analysis, then the District Forum shall take a sample and send it
to a laboratory with prescribed fee (from the complainant) and then it has
to send a copy of the laboratory report to the opposite party of the
complainant disputes with the correctness of report of the laboratory,
then they may submit in writing their objections and then the District
Forum gives a reasonable opportunity to the parties of being heard and
issue an appropriate order
...
25
If the District Forum is satisfied that the goods complained against
any of the defects specified in the complaint or that any of the allegations
contained in the complaint about the services are proved, it shall issue
an order to the opposite party directing him to take one or more of the
following things:
•
to remove the defect pointed out by the appropriate
laboratory from the goods in question;
•
to replace the goods with new goods of similar description
which shall be free from any defect;
•
to return to the complainant the price, or as the case may be
the charges paid by the complainant; and
•
to pay such amount as may be awarded by it as
compensation to the consumer for any loss or injury suffered
by the consumer due to the negligence of the opposite party
...
(c)
State Commission: The state commission is the consumer
disputes redressal agency at the state level which is established by the
state government with the prior approval of the central government It
consists of a president who is or has been a Judge of a High Court and
two members- one of them is a woman
...
5,00,000 but does not exceed Rs
...
1,00,000 and Rs
...
It can
entertain appeals against the orders of any District Forum within the
state and it can call for the records and pass appropriate order in any
26
consumer dispute which is pending before or has been decided by any
District Forum within the state, where it appears to the Stet Commission
that such District Forum has exercised a jurisdiction not vested in it by
Law or has failed to exercise a jurisdiction legally or with material
irregularity
...
Procedure: While disposing of the complaints, State Commission
have to follow the Sections 12,13 and 14 and the rules made there under
with such modifications as may necessarily be applicable to it
...
It may,
however, be noted that the
...
It is
submitted that the State Government may adopt the similar rules as laid
down by the central government, viz
...
It will help in maintaining uniformity in law all over the country
...
The National Commission may entertain an appeal after the expiry
of the said period of 30 days if it is within that period
...
Thus, provision exists only for a single appeal to
the State Commission, from the order of the State Commission to the
National Commission
...
It is an independent statutory
body
...
However, no sitting judge of the Supreme Court shall be appointed under
the aforesaid provisions
...
The COPRA and the Rules have laid down many provisions to
rescue the independence of National Commission
...
Jurisdiction of the National Commission: Jurisdiction of National
Commission is original as well as appellate
...
20,00,00 (earlier, it was Rs
...
The
appellate jurisdiction is confined to appeal against the orders of any State
Commission
...
Procedure: The procedure to be followed ion dealing with the
complaints is specified by Section 22 of the COPRA which is similar to
the powers of a civil court
...
Accordingly, the procedure has
been laid down in the Rule 14 of the consumer Protection Rules
...
On receipt of a complaint, the National Commission has to· follow
the same procedure as is to be followed by the District Forum under
Section 13 of the Act
...
Accordingly, a memorandum should be presented by the appellant or his
agent to the National Commission in person or by post addressed to the
commission
...
However, under Section 19 of
the Act, the appeal is to be preferred within a period of 30 days from the
date of the order of the State Commission
...
It is obligatory for the parties or agents to appear before National
Commission on the date of hearing or any other day to which hearing
29
may be adjourned
...
Appeal against the order of the National Commission: A person
dissatisfied with the order made by the National Commission may prefer
an appeal against such order to the Supreme Court within a period of 30
days from the date of the order made by the National Commission and on
an appeal preferred from the orders of the State Commission shall be
final and no further appeal against such orders should be preferred to
the Supreme Court
...
5 SUMMARY
It is imperative for marketing students to understand the new
emerging issues in the field of marketing like globalisation, consumerism,
green marketing, etc
...
Under
changed
circumstances where whole world will be one economy, the companies
need a fresh thinking as how to operative and complete in new world
...
As society has become
more concerned with the natural environment, businesses have begun to
modify their behaviour in an attempt to address society’s new concern
...
This is true in the case of business management in general
and marketing in particular
...
Marketing
is highly visible, all pervasive and a very important activity- having great
influence on society
...
In India Consumer Protection Act (CPA) safeguards the
rights of consumer and provides the remedies
...
The Act
applies to all types of goods and services unless specifically exempted by
the central government by notification
...
14
...
Licensing: It provides a way of selling the rights to a patent, brand
name, or expertise so that the licensee can produce or market the
product in a foreign country
...
FDI (Foreign Direct Investment): It is the situation in which a
foreign company directly invest in a business venture
...
Consumerism: An organised social movement to enhance the
rights and powers of buyers in relation to sellers
...
7 SELF ASSESSMENT QUESTIONS
1
...
2
...
Also write in brief
why companies follow this concept and what are the major
problems faced by them
...
What is globalisation? Discuss in brief stages of international
marketing involvement
...
4
...
5
...
14
...
International Marketing— Cateora (TMH)
2
...
Fundamentals of Marketing— Stanton (TMH)
4
...
Business Environment— A
...
Ashwathapa (HPH)
6
...
Environmental Marketing— Coddington Walter (MCGraw-Hill
Inc
Title: Marketing management
Description: Marketing management is the organizational discipline which focuses on the practical application of marketing orientation , techniques and methods inside enterprises and organisations and on the management of a firm's marketing resources and activities.
Description: Marketing management is the organizational discipline which focuses on the practical application of marketing orientation , techniques and methods inside enterprises and organisations and on the management of a firm's marketing resources and activities.