Assignment No.

MARKETING
MANAGEMENT
(5565)

Executive MBA/MPA

ZAHID NAZIR
Roll.No. AB523655
Semester:Autumn2008
 Question 1

Marketing emphasis consumer orientation as well

satisfaction in order to maximize profit. However
marketing concept is taken in terms of selling and
advertising? Distinguish marketing with selling and
advertising within the context of Pakistan environment.

Marks: 20

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 MARKETING
When a question is asked from managers that what is marketing, most of
them answered that marketing is selling and advertising. Although this is
true but it is important to understand that marketing is much more than
selling and advertising. The American Marketing Association define the
marketing as:

“ Marketing is the performance of business activities that directs the

flow of goods and services from producer to consumer or user”

There are some more definition of marketing. The better definitions are
focused upon customer orientation and satisfaction of customer needs.

“ A human activity directed at satisfying needs and wants through

exchange processes.”

Kotler.

“Marketing is the management process that identifies, anticipates

and satisfies customer requirements profitably”

The Chartered Institute of Marketing (CIM).

The CIM definition looks not only at identifying customer needs, but also
satisfying them (short-term) and anticipating them in the future (long-term
retention).
“The right product, in the right place, at the right time, at the right
price”
Adcock.

MARKETING CONCEPT :
It is a fundamental idea of marketing that organizations survive and prosper
through meeting the needs and wants of customers. This customer focused
philosophy is known as the 'marketing concept'.
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The marketing concept is a philosophy, not a system of marketing or an
organizational structure. It is founded on the belief that profitable sales and
satisfactory returns on investment can only be achieved by identifying,
anticipating and satisfying customer needs and desires.

Businesses do not undertake marketing activities alone. They face threats

from competitors, and changes in the political, economic, social and
technological environment. All these factors have to be taken into account
as a business tries to match its capabilities with the needs and wants of its
target customers.

An organization that adopts the marketing concept accepts the needs of

potential customers as the basis for its operations. Success is dependent on
satisfying customer needs.

“A need is a basic requirement that an individual wishes to satisfy.”

People have basic needs for food, shelter, affection, esteem and self-
development. Many of these needs are created from human biology and
the nature of social relationships. Customer needs are, therefore, very
broad.

While customer needs are broad, customer wants are usually quite narrow.

“A want is a desire for a specific product or service to satisfy the need.”

Consider this example:

Consumers need to eat when they are hungry.

What they want to eat and in what kind of environment will vary greatly.
For some, eating at McDonalds satisfies the need to meet hunger. For
others fast food (tikka boti) meets the need. Some consumers are never
satisfied unless they have drink (Coke or Pepsi) with food.

Consumer wants are shaped by social and cultural forces, the media and
marketing activities of businesses. This leads to another important concept
- that of customer demand:
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“Consumer demand is a want for a specific product supported by an ability
and willingness to pay for it”.

For example, many consumers around the globe want a Mercedes. But
relatively few are able and willing to buy one.

Businesses therefore have not only to make products that consumers want,
but they also have to make them affordable to a sufficient number to
create profitable demand.

Businesses do not create customer needs or the social status in which

customer needs are influenced. It is not McDonalds that makes people
hungry. However, businesses do try to influence demand by designing
products and services that are

• Attractive
• Work well
• Are affordable
• Are available

Businesses also try to communicate the relevant features of their products

through advertising and other marketing promotion.

MARKETING , SELLING & ADVERTISING:

One of the most misunderstood aspect of the marketing process is the

distinction between marketing, advertising and selling.

Marketing: is the overall collection of tools to build your product.

Marketing has one overall objective i.e. identifying, anticipating and
satisfying customer requirements profitably and building long term relation
with customers. Some of the tools of marketing are:
• Advertising
• Public Relations
• Direct Mail
• Personal Sales
• Internet
• Print Promotions
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 • Education
In Pakistan companies or organization like Shaukat Khanam, Edhi Welfare,
DHL, Gourmet Bakers, Fazal Din Pharma etc are the good example of
marketing focused companies. They use all the marketing tools to build
their products or services.

Advertising: can be defined as,

“Advertising is paid form of non-personal presentation and promotion

of ideas, goods and services through mass media such as newspapers,
magazines, television or radio by an identified sponsor".

Advertising is a method of mass promotion i.e. a single message can reach

to large number of peoples. Advertising promotes the distinguishing
features, benefits and advantages of product or service to a wide market.
The goal of the advertising is to bring in the valuable leads for the selling
process to take place.
In Pakistan companies like Pepsi Cola, Lever Brothers, Mobile operators
have more focus on advertising, covering large segments of people.

Selling: can be defined as,

“Selling is oral communication with potential buyers of a product with

the intention of making a sale. The personal selling may focus initially
on developing a relationship with the potential buyer, but will always
ultimately end with an attempt to "close the sale"

Once the advertising has attracted the potential buyer, the selling process
begins. This is done either by personal sales or the use of point of purchase
materials (i.e. store display, video demonstration etc). Selling should come
into play after a prospect has been established to be right for the product
or service.

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 Start Focus Means Ends

Profit
Factory Products Selling & through
Promotion Sales
Volume
(A)THE SELLING CONCEPT

Profit
Target Customer Integrated Through
market needs marketing Customer
satisfaction

(B) THE MARKETING CONCEPT

References:

http://www.scribd.com
http://tutor2u.net/business/marketing/marketing_concept.asp
http://ezinearticles.com
Marketing Management (AIOU)

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 Question 2

Discuss the significance of marketing at macro and micro

level for developing countries like Pakistan, Bangladesh
and Sri Lanka?

Marks: 20

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MICROMARKETING:

The practice of tailoring products, brands (micro brands), and

promotions to meet the needs and wants of micro segments within a
market is called micromarketing. Micromarketing contrasts with
mass marketing and targets the specific interests and needs of
individuals by offering customized products or services.

MACROMARKETING:

When the involvement of government in the marketing and

distribution of ideas, essential goods and services is significant, it is
called macro marketing.
It is the study of marketing processes, activities, institutions, and
results from a broad perspective such as a nation, in which cultural,
political, and social, as well as economic interaction are investigated.
It is marketing in a larger context than any one firm.

SIGNIFICANCE OF MACRO AND MICRO-MARKETING FOR DEVELOPING

COUNTRIES:

Marketing effort both on the part of the firm as well as state i.e. both
at macro and micro level is relevant to the planned economic growth
of the developing countries. Economic situation in a developing
country is characterized by a scarcity of essential goods, services and
ideas, price inflation and excessive unemployment. So marketing
effort is needed at a minimal level in a developing economy so that
most of the economic resources can be mobilized for additional
production of ideas, goods and services resulting in greater
employment.
Governments in developing countries like Pakistan, Bangladesh and
SriLanka are involved in the marketing activities like setting prices of
food grains and industrial raw materials, setting maximum wholesale
and retail prices of scarce goods, regulating the physical movement
to ensure the smooth flow of essential goods and even influencing
the decisions related to distribution and advertisement.
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 Marketing has major role in the planned economic growth of
developing countries.

GENERAL ROLE OF MARKETING IN DEVELOPING COUNTRIES

• The first and most important role of marketing is that it stimulates

potential aggregate demand resulting in enlarged market size. It
helps in the economic growth of the country through stimulation of
demand, people are motivated to work harder and earn additional
money to buy various ideas, goods and services being marketed. An
additional advantage is the utilization of maximum resources.
• Another important role of marketing is that it helps in the discovery
of persons who organizes, operates, and assumes the risk for a
business venture because marketing is a multiplier of managers and
entrepreneurs. In Pakistan most of the industrialists began their
business career as distributors and wholesalers, by the time they
gained the experience and ventured into the more risk field of
manufacturing and production activities.
• Marketing at both levels also helps in sustaining and improving the
existing level of employment. When a country advances economically,
it requires more and more people to distribute goods and relatively
less people to produce them. From the employment point of view,
production is relatively less significant than marketing as marketing
also have associated services like transportation, finance,
communication, insurance etc.

One of the excellent example how the macro marketing helps in improving
the economy of a country is Grameen Bank Bangladesh. Grameen Bank is
launched by Prof. M. Younas at national level and its objectives are:
• extend banking facilities to poor men and women
• eliminate the exploitation of the poor by money lenders
• create opportunities for self-employment for the vast
multitude of unemployed people in rural Bangladesh
Today Grameen Bank is owned by the rural poor whom it serves. Borrowers
of the Bank own 90% of its shares, while the remaining 10% is owned by
the government.
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Sri Lanka's population has a literacy rate of 92%, higher than that expected
for a third world country. Sri Lanka has one of the highest literacy rates of
South Asia. This becomes possible due to the macro marketing about
education at national level.

Another example of macro marketing from SriLanka is Environmental

Foundation Limited. EFL is a non-profit public interest law group, whose
mission is the conservation and enhancement of the natural environment
through legal means. EFL has established itself as a driving force in
promoting environmental justice for the people of Sri Lanka, particularly
poor and disadvantaged communities through the provision of mediation,
representation and advocacy services, and legal and scientific support, in
environmental matters.

In Pakistan, significance of macro marketing is evident especially in health

and agriculture sector. Vaccination programs, AIDS awareness, guidance for
farmers at national level are examples. Now a days promotion of energy
saver lights to conserve the energy is also part of macro marketing.

So it is evident from the above examples that marketing has major role in
the planned economic growth of developing countries.

Reference:

Marketing Management (AIOU)

http://www.grameen-info.org/index
http://en.wikipedia.org/wiki/Education_in_Sri_Lanka

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 Question 3

a). What are the 7 Ps of service marketing? Explain each

element with the help of example?
Marks: 10

b). Discuss image building features of products in detail?

Marks: 10

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(a)

SERVICE MARKETING
A service is the action of doing something for someone. It is largely
intangible (i.e. not material). A product is tangible (i.e. material) since you
can touch it and own it. A service tends to be an experience that is
consumed at the point where it is purchased, and cannot be owned since is
quickly perishes. For example a person goes to a restaurant one day and
has excellent service, and then returns the next day and have a poor
experience. So marketers talk about the nature of a service as:

Inseparable - It can not be separated from the provider of service and point
where it is consumed. For example, you cannot take a live theatre
performance home to consume it. (a DVD of the same performance is a
product, not a service).
Intangible – It does not have a real, physical presence like products. For
example, motor insurance may have a certificate, but the financial service
itself cannot be touched i.e. it is intangible.
Perishable - in that once it has occurred it cannot be repeated exactly in the
same way.
Variability- As humans are involved in service provision, two services can
not be completely identical, there must be variation in it. For example,
returning to the same garage time and time again for a service on your car
might see different levels of customer satisfaction, or speediness of work.
Right of ownership - You cannot sell a service once it has been consumed,
and do not take ownership of it. For example, an mechanic may service your
air-conditioning, but you do not own the service, the engineer or his
equipment.

MARKETING MIX
The “Marketing Mix” is a term used to describe the combination of tactics
used by a business to achieve its objectives by marketing its products or
services effectively to a particular target customer group. It is also referred

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to as the “4 Ps” i.e. Product, Price, Promotion and Place, or the “7 Ps” , the
4 Ps with the addition of People, Process and Physical Evidence.

Why it is Important

Basic objective of the marketing is to ensure that they are delivering:

• The right product / service to
• The right person at
• The right price in
• The right place and at
• The right time

• A real example is the launch of Wateen’s broadband service. We will

discuss this example with each element of 7 Ps given below:

PRODUCT:

Marketing is about identifying, anticipating and satisfying customer

needs. There is no point in developing a product or service which
nobody wants to buy. A successful company will find out what are
the needs or wants of customer and then they will develop the right
product with right quality to meet the customer’s present and future
needs.
• The perfect product must have value in the eyes of customer. We
must give our customer what they want, not what we think they
want.
• A product does not have to be intangible - an insurance policy can be
a product.
• There should be a system in place to have regular feedbacks from the
customers about their product, supporting services etc to evaluate
the changing needs of customer.
• Do not go too far with product quality i.e. don’t try to sell a BMV
when the customer wants a Suzuki Mehran.

Example: Due to the day by day increasing use of internet and

cable TV, Wateen has decided to launch its broadband
service including internet, telephone and TV service.
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 Initially this service was launched in Defence Lahore by
identifying and anticipating the needs of customers living
there. They are regularly getting feedback from the
customers to improve the quality of their services.
Before launching their service, they were very well aware
of the same services provided by other companies.
PRICE:

Only those products or services have worth for which a customer is

prepared to pay. The price also needs to be competitive but this does
not mean the cheapest. It is the only element of marketing mix that
generates revenue, everything else represents a cost.
• Think the price as a “cost” for customer; this will help to understand
why it is so important.
• Price positions you in the market – the more you charge, more will
be the expectations of customer.
• What your competitors charge. Look at your competitor’s web sites,
or simply phone them and ask for a price list or quotation.

Example: Continuing the above example, Wateen has set very

competitive price for their services keeping in view the
target group of customers and looking at the prices of
their competitors. Prices are neither too high nor too low
but are very competitive with great quality.
PLACE:

The place where customer buy a product and the means of

distributing your product to that must be appropriate and convenient
for the customer. The product must be available at the right place, at
right time and in the right quantity while keeping the inventory to a
acceptable level.
• Customers survey has shown that delivery performance is one of the
most important criteria is supplier’s approval.
• Place also means the way you display your product for customers.
This can be a shop window or via the internet.

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 Example: Wateen has opened their franchise outlets at prominent
places like famous markets where the flow of target
customers is excessive.

PROMOTION:

Promotion is the way of communication that what they are offering

to customers. It includes activities like branding, advertising, PR, sales
management, special offers and exhibitions. Promotion must gain
attention, be appealing and should give consistent message
emphasizing why the customer should buy their product rather than
someone else.
• Promotion should communicate the benefits of product or services
that a customer can obtain and not just the features of that product
or service.
• Whether your promotional material is a sheet or a complex brochure,
folder or catalogue, it must grab the attention of customer. Should
be easy to read and enable the customer to decide why he should
buy that product or service.

Example: Wateen has promoted their service effectively through

advertisements in print media and electronic media.
They have also provided their free internet service at
airports so that people can experience their service. In
addition to this they also used direct marketing and
personal selling to different companies and offices.

PEOPLE:

Anyone who comes in contact with the customer will make an

impression which is of great significance. The reputation of product
or service rests in people’s hand. Therefore they must be properly
trained, well motivated with positive attitude.
• There should be right people for the right job.
• Many customer can not separate the product or services from the
staff members who provides it. This shows the importance of people.

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 • The level of after sale service add value in the service provided. It is
sometimes more important than the price for customers once they
started using the service.

Example: Wateen has a highly trained pool of engineers for after

sale service. They are always a phone call away from the
customers. They have chosen the right people for their
job. This adds a great value in their service and earns
reputation for the company.

PROCESS:

The process of giving the service and people dealing with are very
crucial for customer satisfaction. Issues such as waiting, quality of
information given and helping behavior are vial to keep the customer
happy.
• Customers are not interested how the business runs. What matters
to them is how the system works.
• Do customers have to wait? Are they kept informed? Are your people
helpful? Is your service efficiently carried out? These are some
important points which keep the customer happy.

Example: Wateen’s Process of giving the service is very simple and

convenient. On a single phone call, the company’s
engineer visits your site. All the process for getting the
service is completed in a single visit.

PHYSICAL EVIDENCE:

A service can not be experienced until it is delivered. It means that it

is always a risk to buy a product which is intangible. This fear of
customers can be reduced by providing the experience of their
service before they buy it. Case studies and testimonials can also be
helpful. Facilities such as clean, tidy and decorated reception area
can also help to build customer confidence in the service.

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Example: Wateen provides the opportunity to customers to feel
the quality of their service before they buy it. Company
has very well furnished offices and franchises which also
help in building the customer’s confidence.

Each of the “elements” of marketing mix is key to the success. No

one element can be considered in isolation. For example it is not
possible to develop a product or service with out considering its price
or how it will reach the customer. This process is called marketing
planning.

Reference:

www.cim.co.uk
http://ezinearticles.com
http://www.marketingteacher.com

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(b)

PRODUCT
Product can be defined as:

"Anything that is capable of satisfying customer needs"

This definition includes both physical products (e.g. cars, Electronics,

Households, etc) as well as services (e.g. insurance, banking, private health
care). Products can be classified into two types i.e.

i) Consumer Products: these are used by ultimate consumers or

households and can be used without further commercial
processing.
ii) Industrial Products: these are sold primarily for use in
manufacturing other products or for rendering some service.

Features that build the image of products in the eyes of customer are very
critical and must be considered while introducing a new product. These
features are:

i). Branding

ii). Quality

iii). Packaging

iv). Labeling

v). Positioning

vi). People

vii). Process

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i). BRANDING
One of the most important features which a product should have is
its brand name. brand can be defined as:

“Name, term, sign, symbol or design, or a combination of them

intended to identify the products and services of one business
or group of businesses and to differentiate them from those of
other competitors”

For example:
The Nike brand name is known throughout the world, people can
identify the name and logo even if they have never bought any of
their products.

This is an important feature of product because the objectives that a

good brand will achieve are:
a). Delivers the message clearly

b). Confirms your credibility

c). Connects your target prospects emotionally

d). Motivates the buyer

e). Concretes User Loyalty

To succeed in branding one must understand the needs and wants

of their customers and prospects. Some examples of brand are
Nokia, Bata, Service, Nike, Gourmet, KFC, McDonalds, Pepsi, Coke,
Macleans, Pentene shampoo etc.

ii). PACKAGING
Packaging is the art, science and technology of preparing goods for
distribution, storage, sale and use. Packaging is an important feature
of product as it performs the following functions.

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 a). Protection: Packaging gives protection to the enclosed
object against temperature, moisture, compression,
vibration etc.

b). Appeal: Packaging should be good looking as it enhance

the overall image of product in the eyes of customers. It
plays major role in the product growth.

c). Performance: Packaging must be able to perform the

intended task for which it is designed. This aspect
becomes very important in case of some packaging. For
example in case of respiratory inhalers is not only a
package but also an engineering device. If the package
does not function, the product itself becomes totally
useless.

d). Convenience: Packages should have features which add

convenience in distribution, handling, stacking, display,
sale, opening, reclosing, use, and reuse.

e). Cost Effectiveness: Packaging should be cost effective i.e.

its cost should not be too high as this will increase the
price of product nor it is too low that it doesn’t add any
value in the final product.

iii). LABELING
Labeling is any written, electronic, or graphic communications /
instructions on the separate but associated label. This is an important
feature as labels have instructions about usage and storage of
product.

iv). POSITIONING
Positioning is how a product appears in relation to other products in
the market. This reflects the value of brand in the mind of customer.
Therefore each brand should be “positioned” in a particular class or
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 segment. For example Honda Accord positioned as a luxury brand
whereas Suzuki Mehran positioned as economic brand. The position
of the brand has to be carefully maintained. Rolex watches are
positioned as luxury items and becomes a symbol of accomplishment
in life. If Rolex reduces its prices, it will reduce its brand cachet and
sales.

v). QUALITY
The quality of product is very critical for some products. Failure in
maintaining the quality will lead to customer dissatisfaction. In the
manufacturing industry it is commonly stated that “Quality drives
productivity.” Improved productivity is a source of greater revenues,
employment opportunities and technological advances.

vi). PEOPLE
Anyone who comes in contact with the customer will make an
impression of product which is of great significance. The reputation
of product or service rests in people’s hand. Therefore they must be
properly trained, well motivated with positive attitude and there
should be right people on the right job.

vii). PROCESS

The process starts from the manufacturing to delivery to the

customers. There must be assurance of continuity of supply.

References:

http://www.tutor2u.net/marketing/default.html

http://marketing.about.com/cs/brandmktg/a/whatisbranding.htm

http://en.wikipedia.org/wiki/Packaging_and_labelling

Marketing Management (AIOU)

Page 22 of 33
 Question 4
A product passes through specific sequences of stages
corresponding to the life phases of infancy, growth,
maturity and decline. Explain each stage of product life
cycle by quoting an example of a product that you think
has passed through different stages of PLC?

Marks: 20

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 THE PRODUCT LIFE CYCLE (PLC)
Product is defined as

“Anything that is capable of satisfying customer needs”

This definition includes both physical products (e.g. cars, mobiles,

electronics etc) as well as services (e.g. insurance, banking, doctors,
telecommunication services).

The Product Life Cycle (PLC) is based upon the biological life cycle. For
example, a seed is planted (Introduction), it begins to sprout/grow (growth),
it shoot outs leaves and puts down roots as growing to adult (maturity),
after an long time the adult plant begins to shrink and die out (decline).
Same is true in case of products as after product development it is
introduced or launched into the market, it gains more and more customers
as it grows, eventually market stabilizes and product becomes mature, then
after a period of time the product is overtaken by development and the
introduction of superior competitors, its goes into decline and eventually
withdrawn.

Product Life cycle can be defined as

“The stages through which individual products develop over a period

of time is called Product Life Cycle”.

The classic product life cycle has four stages i.e.

i). Introduction
ii). Growth
iii). Maturity
iv). Decline

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 Sales and Profit The Product Life Cycle (PLC)

Introduction Growth Maturity Decline

TIME

INTRODUCTION STAGE

In the introduction stage companies try to build awareness and

develop a market for the product / service. The impact on the
marketing mix is a follows:
• Product branding and quality level is established and
intellectual property protection such as patents and
trademarks are obtained.
• Pricing may be low to build market share rapidly or it may be
high to recover the development costs.
• Placing is selective until consumer shows interest in the
product.
• Promotion is targeting innovators and early adopters.
Marketing communication tried to build the product
awareness and to educate potential consumers about the
product.

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GROWTH STAGE

In the growth stage, the companies tried to build brand preference

and increase market share. This stage is characterized rapid growth
in sales and profit.
• Product quality is maintained and additional features and
support services may be added.
• Prices remains constant as company enjoys increasing demand
with little competition.
• Distribution channels are added with increased demand
because of the customer acceptance for the product.
• Promotion is aimed at broader audience.

MATURITY STAGE

At maturity, the strong growth in sales decreases. There will be more

competitions with the same products. The primary objective at this
point is to defend the market share while maximizing profit.
• Product features may be enhanced to differentiate the
product from other competitors.
• Prices may be decreased to stay in the competition.
• Distribution become more intensive and incentives may be
offered to attract the customers.
• Promotion mainly emphasizes product differentiation.

DECLINE STAGE:

As sales decreases the companies have several options.

• Maintain the product by adding more features and by
finding the new uses of product.
• Harvest the product, reducing costs and offering it to
the selective segments.
• Discontinue the product.

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LIMITATIONS OF PRODUCT LIFE CYCLE

• In reality very few products follow such a prescriptive cycle. The

length of each stage varies significantly.
• The decision makers can change the stage, for example from
maturity to decline by price cutting.
• Not all the products go through each stage, some go from
introduction stage to decline. It is not easy to tell which stage the
product is in.

Examples: Below are the some examples of products that are currently at
different stages of Product Life Cycle:

INTRODUCTION GROWTH MATURITY DECLINE

Blue Ray CDs DVDs CDs Tape cassettes

Hard disc movie DVD cameras Digital cameras Film based cameras
cameras
Third generation Portable DVD players Personal Computers Typewriters
mobile phones
E-Conferencing or E. Mails Faxes Hand written letters
Tele Conferencing

References:

http://www.quickmba.com
http://www.netmba.com
http://www.marketingteacher.com

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 Question 5
How market segmentation differs from product
differentiation? What are the factors that a firm should
consider while selecting its segments?

Marks: 20

Page 28 of 33
 MARKET SEGMENTATION AND PRODUCT DIFFERENTIATION

Product Differentiation is the process of describing the differences

between products and services with their competitors and to make it more
attractive to a particular target market. This is done to publicize the unique
features of your product and to create a sense of value. Successful product
differentiation leads to monopolistic competition. The major sources of
product differentiation are:
• Differences in quality, resulting in price difference.
• Difference in the physical features i.e. design and packaging.
• Sales promotion activities specially advertising.
• Differences in availability.

Market Segmentation is the identification of portions of the market that

are different from one another, sharing similar needs and who demonstrate
similar buyer behavior.

The marketing concept is all about understanding and satisfying the

customers need better than the competitors. But different customers have
different needs, and it is rarely possible to satisfy all customers by treating
them alike. Segmentation aims to match groups of customers with the
same set of needs and similar behaviors. Such a group is known as a
'segment'. Market segmentation recognizes the diversity of customers and
does not try to please all of them with the same offering. The first step in
target marketing is to identify different market segment and their needs.

SELECTION OF MARKET SEGMENTS

Before selecting market segments, following two types of factors should be

considered:

i). General Factors

ii). Specific Factors

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i). GENERAL FACTORS

Following are some general factors which must be considered by a

company before selecting the segments.
• Company Thrust: Company should have a clear vision that what they
are going o achieve from the selected segment and how to achieve.
• Size and Growth Potential: Present size of the target market as well
as the future growth potential must be considered. It is difficult to
assess potential growth, therefore it requires careful consideration.
• Investment Needed: Investment needed to cover the target market is
another factors to be considered. This includes investment on launch
the product as well as cost to maintain the market share.
• Profitability: Profitability is associated with investment decision i.e.
how much is going to be invested and what will be the profit margin
and how this profitability will be maintained in the target market.
• Competition: Before selecting a segment, present and potential
competitors must also be considered. Segment may be large but it
might be served already by several competitors.

ii). SPECIFIC FACTORS

Specific factors that should be considered are as follows:

• Identifiable: the differentiating attributes of the segments must be

measurable so that they can be identified.
• Accessible: the segments must be reachable through communication
and distribution channels.
• Substantial: the segments should be sufficiently large to justify the
resources required to target them.
• Unique Needs: to justify separate offerings, the segments must
respond differently to the different market mixes.
• Durable: the segments should be relatively stable to minimize the
cost of frequent changes.

Good market segmentation will result in segment members that are

internally homogenous and externally heterogeneous i.e. as similar as
possible within the segment and as different as possible between segments.
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BASES FOR SEGMENTATION IN CONSUMER MARKETS

Customers markets can be segmented on the following customer

characteristics:
• Geographic
• Demographic
• Psychographic
• Behavioralistic

GEOGRAPHIC SEGMENTATION.

The following are some examples of geographic variables often used

in segmentation.
• Region: by continent, country, state, or even neighborhood
• Size of metropolitan area: segmented according to size of
population
• Population density: often classified as urban, suburban, or rural
• Climate: according to weather patterns common to certain
geographic regions

DEMOGRAPHIC SEGMENTATION

Some demographic segmentation variables include:

• Age
• Gender
• Family size
• Family lifecycle
• Generation: baby-boomers, Generation X, etc.
• Income
• Occupation
• Education
• Ethnicity
• Nationality
• Religion
• Social class

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 Many of these variables have standard categories for their values.
For example, family lifecycle often is expressed as bachelor, married
with no children, full-nest or empty-nest. Some of these categories
have several stages, for example, full-nest I, II, or III depending on the
age of the children.

PSYCHOGRAPHIC SEGMENTATION

Psychographic segmentation groups customers according to their

lifestyle, Activities, interests, and opinions. Surveys are one tool for
measuring lifestyle. Some psychographic variables include:
• Activities
• Interests
• Opinions
• Attitudes
• Values

BEHAVIORALISTIC SEGMENTATION

Behavioral segmentation is based on actual customer behavior

toward products. Some behavioralistic variables include:
• Benefits sought
• Usage rate
• Brand loyalty
• User status: potential, first-time, regular, etc.
• Readiness to buy
• Occasions: holidays and events that stimulate purchases

Behavioral segmentation has the advantage of using variables that

are closely related to the product itself. It is a fairly direct starting
point for market segmentation.

BASES FOR SEGMENTATION IN INDUSTRIAL MARKETS

In contrast to consumers, industrial customers tend to be fewer in number

and purchase larger quantities. They evaluate offerings in more detail, and
the decision process usually involves more than one person. These
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characteristics apply to organizations such as manufacturers and service
providers, as well as resellers, governments, and institutions.
Many of the consumer market segmentation variables can be applied to
industrial markets. Industrial markets might be segmented on
characteristics such as:
• Location
• Company type
• Behavioral characteristics

LOCATION

In industrial markets, customer location may be important in some

cases. Shipping costs may be a purchase factor for vendor selection
for products having a high bulk to value ratio, so distance from the
vendor may be critical. In some industries firms tend to cluster
together geographically and therefore may have similar needs within
a region.

COMPANY TYPE

Business customers can be classified according to type as follows:

• Company size
• Industry
• Decision making unit
• Purchase Criteria

BEHAVIORAL CHARACTERISTICS

In industrial markets, patterns of purchase behavior can be a basis

for segmentation. Such behavioral characteristics may include:
• Usage rate
• Buying status: potential, first-time, regular, etc.
• Purchase procedure: sealed bids, negotiations, etc.

References:
en.wikipedia.org
http://www.netmba.com
http://www.marketingteacher.com
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