Principal of Marketing

SYLLABUS

Introduction To Marketing, Definition Of Marketing, Marketing Concepts, Selling And Marketing, Marketing
Process, Marketing Environment & Marketing Audit.

Marketing Mix-Introduction, Marketing Mix, Product, Price, Promotion, Place, Use Of An Advertising
Agency, Personal Selling, Procedure Of Personal Selling, Linkages Between Marketing Effort, Marketing
Mix And Marketing Budget, Assembling The Marketing Mix-The Main Task In Marketing, Selecting An
Optimum Combination, Marketing Mix To Be Jugled Constantly, Changes In Environmental Variables,
Changes Within The Firm.

The Marketing Environment:Introduction, Why Analyze The Marketing Environment? Strategic Response
To Environment Is Possible Only With Proper Environmental Analysis, The Opportunities And Threats,
Environment Factors Specific To The Business Concern

Consumer And Organisational Buying Behaviour:Importance Of The Consumer Behaviour, Production

Policies, Price Policies, Distribution Policies, Sales Promotion Policies, Exploiting Marketing Opportunities,
Consumers Do Not Always Act Or React Authorised Signatory Changing Consumer Preference,
Implementing Marketing Concepts, Factors Influencing Consumer Behaviour.

Market Segmentation :Definition, Why Segment The Market, Bases For Segmentation Market Segmentation
Strategies, Market Positioning & Positioning Strategies

Marketing Strategy-Meaning Of Marketing Strategy, Formulation Of Marketing Strategy, Conditions For

Success Of Marketing Strategy & Case Study.

The Indian Consumer- A Broad Profile Of The Indian Consumer, Classification Of Indian Consumers Based
On Economic Status, Potential Of The Middle Class Market & A Broad Profile Of The Indian Consumer.

Sales Promotion & Advertising, Sales Promotion, Promotion Strategy, Customer Attitudes, Brand Strategy,
Coperative Strategy, Advertising Strategy, Trade Environment, Other External Factors, Promotion Tactics,
Consumer Tactics, Business To Bussiness Tactics, Consumer Tactics, Business To Business Tactics,
Methods Of Sales Promotion, Advertising Five Stages In Advertising, Advertising Why And What,
Advertising Effectiveness.

Buyer Behaviour, Buyer Behaviour, Buyer Behaviour-Cultural Factors, Buyer Behaviour - Social Factors,
Buyer Behaviour Decision-Making Process, How Information Is Used By The Customers, Buyer Behaviuor-
New Products, What Is The Role Of Marketing In The Process Of New Product Adoption, Buyer Behaviour –
Stimulus Response Model, Buyer-Behaviour & Case Study-Influence Of Children On Buyer Behaviour

Distribution: Distribution –Introduction, Functions Of A Distribution Channel, Number Of Distribution

Levels, Distribution Intensity, Distribution –Types Of Distribution Intermediary, Product Life Cycle,
Introduction To Product Development, Differences Between Goods And Services, Classifying Products,
Elements Of The Product
Elements Of The Product

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Mxproduct Positioning And Repositioning, Positioning Existing Products, Developing And Managing New
Products, Developing New Products, Why New Products Fail, Seven Phases To New Product Development,
New Product Strategy Development, Idea Generation, Product Screening And Evaluation, Business
Analysis, Product Development, Test Marketing, Commercializ Ation, Buyers' Production Adoption
Process,Diffusion Process, Product Life Cycle Branding Branding-Introduction,What Is Brand, Brand
Equity, Brand Image, Brand Extension, Brands And Products, Brand Building, Quality, Positioning,
Repositioning, Communications, Mover Advantage, Long Term Perspective, Internal Marketing, Brand
Extension And Stretching & Types Of Brands.

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TABLE OF CONTENTS

UNIT –I
INTRODUCTION TO MARKETING
1.1DEFINITION OF MARKETING
1.2MARKETING CONCEPTS
1.2.1EXCHANGE CONCEPTS
1.2.2 PRODUCTION CONCEPTS
1.2.3THE PRODUCT CONCEPT
1.2.4 THE SALES CONCEPT
1.2.5 THE MARKETING CONCEPT
1.3SELLING AND MARKETING
1.4MARKETING PROCESS
1.5MARKETING ENVIRONMENT
1.5.1 ENVIRONMENTAL IMPORTANCE
1.5.2 CHARACTERISTICS OF THEMARKETING ENVIRONMENT
1.6MARKETING AUDIT
1.6.1PURPOSE OF MARKETING AUDIT
1.6.2 MARKETING AUDIT DEFINATION

UNIT 2
Marketing Mix
2.1INTRODUCTION
2.2MARKETING MIX
2.3 PRODUCT,PRICE,PROMOTION,PLACE
2.4USE OF AN ADVERTISING AGENCY
2.5PERSONAL SELLING
2.6PROCEDURE OF PERSONAL SELLING
2.7LINKAGES BETWEEN MARKETING EFFORT,MARKETING MIX AND MARKETING BUDGET
2.8ASSEMBLING THE MARKETING MIX-THE MAIN TASK IN MARKETING
2.9SELECTING AN OPTIMUM COMBINATION
2.10 MARKETING MIX TO BE JUGLED CONSTANTLY
2.11CHANGES IN ENVIRONMENTAL VARIABLES
2.12 CHANGES WITHIN THE FIRM

UNIT 3
THE MARKETING ENVIRONMENT
3.1INTRODUCTION
3.2 WHY ANALYZE THE MARKETING ENVIRONMENT?
3.2.1KNOWLEDGE OF MARKETING ENVIRONMENT IS CENTRAL TO
MARKETING MANAGEMENT.
3.2.2 STRATEGIC RESPONSES TO ENVIRONMENT IS POSSIBLE ONLY WITH
PROPER ENVIRONMENTAL ANALYSIS.
3.2.3 SPOTTING THE OPPORTUNITIES AND THREATS.
3.3 STRATEGIC RESPONSE TO ENVIRONMENT IS POSSIBLE ONLY WITH
PROPER ENVIRONMENTAL ANALYSIS
3.4 THE OPPORTUNITIES AND THREATS
3.4.1.1 A MACRO ENVIRONMENT FACTORS
3.4.1.2 SOCIO-CULTURAL ENVIRONMENT
3.4.1.3ECONOMIC ENVIRONMENT
3.4.1.4 POLITICAL ENVIRONMENT
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3.4.1.5 NATURAL ENVIRONMENT
3.4.1.6 TECHNOLOGICAL ENVIRONMENT
3.4.1.7 LEGAL ENVIRONMENT
3.5 PURPOSE OF MARKETING ANALYSIS
3.5.1.1MARKET DEMAND
3.5.1.2 CONSUMER
3.5.1.3 INDUSTRY &COMPETITION
3.5.1.4 GOVERNMENT POLICIES
3.5.1.5SUPPLIERS RELATED PROBLEMS
3.5.1.6 ENVIRONMENT ANALYSIS A CONTINOUS AFFAIR

UNIT 4
CONSUMER AND ORGANISATIONAL BUYING BEHAVIOUR
4.1IMPORTANCE OF THE CONSUMER BEHAVIOUR
4.2 IMPORTANCE FOR THE
4.2.1.1PRODUCTION POLICIES
4.2.1.2PRICE POLICIES
4.2.1.3DISTRIBUTION POLICIES
4.2.1.4SALES PROMOTION POLICIES
4.2.1.5EXPLOITING MARKETING OPPORTUNITIES
4.2.1.6CONSUMERS DO NOT ALWAYS ACT OR REACT AUTHORISED
SIGNATORY
4.2.1.7CHANGING CONSUMER PREFERENCE
4.2.1.8IMPLEMENTING MARKETING CONCEPTS
4.3.FACTORS INFLUENCING CONSUMER BEHAVIOUR
4.3.1.1INTERNAL OR PSYCHOLOGICAL FACTORS
4.3.1.2SOCIAL FACTORS
4.3.1.3CULTURAL FACTORS
4.4 ECONOMIC FACTORS
4.4.1.1PERSONAL INCOME
4.4.1.2FAMILY INCOME
4.5 PERSONAL FACTORS
4.5.1.1AGE
4.5.1.2OCCUPATION
4.5.1.3 INCOME
4.5.1.4LIFE STYLES
4.6 OTHER FACTORS

UNIT 5
MARKET SEGMENTATION
5.1DEFINITION
5.2WHY SEGMENT THE MARKET
5.3 BASES FOR SEGMENTATION
5.3.1.1.GEOGRAPHIC
5.3.1.2 DEMOGRAPHIC
5.3.1.3 PSYCHOGRAPHICS SEGMENTATION
5.3.1.4 BEHAVIOURAL SEGMENTATION
5.4MARKET SEGMENTATION STRATEGIES
5.4.1.1UNDIFFERENTIAL MARKETING
5.4.1.2 DIFFERENTIAL MARKETING
5.5MARKET POSITIONING
5.5.1.1 UNDER POSITIONING
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5.5.1.2 OVER POSITIONING
5.5.1.3CONFUSED POSITIONING
5.6POSITIONING STRATEGIES

UNIT –6
MARKETING STRATEGY
6.1MEANING OF MARKETING STRATEGY
6.2FORMULATION OF MARKETING STRATEGY
6.2.1.1SELECTING THE TARGET MARKET
6.2.1.2POSITIONING
6.2.1.3 ASSEMBLING THE MARKETING MIX
6.3CONDITIONS FOR SUCCESS OF MARKETING STRATEGY
6.3.1.1 SIZING OU THE COMPETITIVE FORCES
6.4 CASE STUDY

UNIT – 7

THE INDIAN CONSUMER

7.1 A BROAD PROFILE OF THE INDIAN CONSUMER
7.2CLASSIFICATION OF INDIAN CONSUMERS BASED ON ECONOMIC STATUS
7.3 POTENTIAL OF THE MIDDLE CLASS MARKET
7.3.1.1THE MIDDLE CLASS WOMEN
7.3.1.2 MIDDLE CLASS TEENAGER
7.3.1.3 THE IMMENSE POTENTIAL OF THE MIDDLE CLASS MARKET

UNIT-8
SALES PROMOTION & ADVERTISING
8.1SALES PROMOTION
8.2 PROMOTION STRATEGY
8.3 PROMOTION TACTICS:CONSUMER TACTICS,BUSINESS TO BUSSINESS TACTICS
8.4METHODS OF SALES PROMOTION
8.5ADVERTISING
8.6 FIVE STAGES IN ADVERTISING
8.7 ADVERTISING WHY AND WHAT
8.7ADVERTISING EFFECTIVENESS

UNIT-9
BUYER BEHAVIOUR
9.1BUYER BEHAVIOUR
9.2BUYER BEHAVIOUR-CULTURAL FACTORS
9.3. B U Y E R B E H A V I O U R - S O C I A L F A C T O R S
9.4BUYER BEHAVIOUR - DECISION-MAKING PROCESS`
9.5HOW INFORMATION IS USED BY THE CUSTOMERS
9.6BUYER BEHAVIUOR-NEW PRODUCTS
9.7WHAT IS THE ROLE OF MARKETING IN THE PROCESS OF
NEW PRODUCT ADOPTION.
9.8BUYER BEHAVIOUR –STIMULUS RESPONSE MODEL
9.9BUYER-BEHAVIOUR –CASE STUDY:INFLUENCE OF
CHILDREN ON BUYER BEHAVIOUR

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UNIT-10
DISTRIBUTION
10.1 DISTRIBUTION –INTRODUCTION
10.2 FUNCTIONS OF A DISTRIBUTION CHANNEL
10.3NUMBER OF DISTRIBUTION LEVELS
10.4 DISTRIBUTION CHANNEL STRATEGY
10.5 DISTRIBUTION INTENSITY
10.5.1.1 INTESIVE DISTRIBUTION
10.5.1.2 SELECTIVE DISTRIBUTION
10.6 DISTRIBUTION TYPES
10.6.1.1 RETAILS
10.6.1.2 WHOLESALERS
10.6.1.3DISTRIBUTORS &DEALERS
10.6.1.4 AGENTS
10.7 DISTRIBUTION –TYPES OF DISTRIBUTION INTERMEDIARY

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UNIT-11

PRODUCT LIFE CYCLE

11.1INTRODUCTION TO PRODUCT DEVELOPMENT
11.2 DIFFERENCES BETWEEN GOODS AND SERVICES
11.3CLASSIFYING PRODUCTS
11.4ELEMENTS OF THE PRODUCT MIX
11.5PRODUCT POSITIONING AND REPOSITIONING
11.6POSITIONING EXISTING PRODUCTS
11.7DEVELOPING AND MANAGING NEW PRODUCTS
11.8DEVELOPING NEW PRODUCTS
11.9 WHY NEW PRODUCTS FAIL
11.10SEVEN PHASES TO NEW PRODUCT DEVELOPMENT
11.11NEW PRODUCT STRATEGY DEVELOPMENT
11.12IDEA GENERATION
11.13PRODUCT SCREENING AND EVALUATION
11.14BUSINESS ANALYSIS
11.15PRODUCT DEVELOPMENT
11.16TEST MARKETING
11.17COMMERCIALIZATION
11.18BUYERS' PRODUCTION ADOPTION PROCESS
11.19DIFFUSION PROCESS
11.20PRODUCT LIFE CYCLE

UNIT-12
BRANDING
12.1 BRANDING-INTRODUCTION
12.2WHAT IS BRAND
12,3BRAND EQUITY
12.4BRAND IMAGE
12.5BRAND EXTENSION
12.6BRANDS AND PRODUCTS
12,7BRAND BUILDING
12.8 QUALITY
12.9POSITIONING
12.10 REPOSITIONING
12.11COMMUNICATIONS
12.12 1ST MOVER ADVANTAGE
12.13 LONG TERM PERSPECTIVE
12.14INTERNAL MARKETING
12.15 BRAND EXTENSION AND STRETCHING
12.16 TYPES OF BRANDS

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 UNIT-1

INTRODUCTION TO MARKETING
UNIT –I
INTRODUCTION TO MARKETING
1.1DEFINITION OF MARKETING
1.2MARKETING CONCEPTS
1.3SELLING AND MARKETING
1.4MARKETING PROCESS
1.5MARKETING ENVIRONMENT
1.6MARKETING AUDIT

1.1WHAT IS MARKETING

What is marketing?

There are many different definitions of marketing. Consider some of the following alternative
definitions:

“The all-embracing function that links the business with customer needs and wants in order to get
the right product to the right place at the right time”

“The achievement of corporate goals through meeting and exceeding customer needs better than the
competition”

“The management process that identifies, anticipates and supplies customer requirements
efficiently and profitably”

“Marketing may be defined as a set of human activities directed at facilitating and consummating
exchanges”

Which definition is right? In short, they all are. They all try to embody the essence of marketing:

• Marketing is about meeting the needs and wants of customers;

• Marketing is a business-wide function – it is not something that operates alone from other
business activities;
• Marketing is about understanding customers and finding ways to provide products or services
which customers demand

To help put things into context, you may find it helpful to often refer to the following diagram
which summarises the key elements of marketing and their relationships:

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and executing the conception, pricing, promotion, and distribution of goods, services, and ideas
to create exchanges that satisfy individual and organisation objectives.

2-this is the process of planning and executing the conception, pricing, promotion and
distribution of ideas, goods and services to satisfy customers.
3- 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
objectives.
4- the activities associated with buying and selling a product or service. The 4 Ps (product, place,
price and promotion).
5- is the many ways that products are sold. It includes advertising, selling and delivering
products to people. Marketers (people who work in marketing) try to get the attention of target
audiences by using slogans, packaging design, celebrity endorsements and general exposure in
the media world.

6-The process of identifying and reaching specific segments of a population for the purposes of
selling them a product or service.
7- Process of planning and executing conception, pricing, promotion and distribution of ideas,
goods and services in order to create exchanges that satisfy individual and organizational
objectives.
8- The process of identifying and communicating with qualified prospects.
9- The process of organizing and directing all the company activities which relate to determining
the market demand and converting the customers buying power into an effective demand for a
service and bringing that service to the customer.
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10- The activities of listening to customer needs, assessing the competitive landscape and then
designing and creating products and services accompanied by messages that shape audience
perceptions, leading to opportunities for revenue. The primary objective of marketing is to deliver
products and services to the right audience at the right price and right time, thereby increasing
brand loyalty.

11-the process of planning and executing the conception, pricing, promotion, and distribution of
ideas, goods, services, and people to create exchanges that will satisfy individual and
organizational goals.

12The process of planning and executing the conception, pricing, promotion,

The art and science of discovering and understanding specific consumer wants and desires with
an ultimate goal of delivering goods and services that fulfill unmet needs.
13- Individual and organisational activities that facilitate and expedite satisfying exchange
relationships in a dynamic environment through the creation, distribution, promotion and pricing
of goods, services and ideas.

14-One of the three essential business disciplines that studies the demographics and
psychographics of target consumers, as well as the development of positioning strategy and
messages. Marketing strategy affects everything that touches customers, prospects, employees,
investors, vendors, and essential business processes.
15- A process designed to bring about the voluntary exchange of values between a not-for-profit
organization and its target market, such as the transfer of a donation in exchange for addressing
a social need, recognition or a feeling of good will. The process or act of fostering such an
exchange in a market.

16-Group of related business activities aimed at satisfying the demand for goods and services.
providing goods and services to satisfy customer needs, at a profit. .
17- the department in a publishing house with responsibility for promoting titles published; this
may include the creation of point of sale display material, press and other advertising, and
securing free coverage through PR and publicity.
18- The act or process of offering goods or services for sale.
means to make a communication about a product or service a purpose of which is to encourage
recipients of the communication to purchase or use the product or service.
19- The process of matching the abilities of an organization with the existing and future needs of
its customers, to the greatest benefit of both parties. The result is an exchange in which the
organization receives income through the meeting of customers' needs and customers receive
benefits that satisfy their expectations.
20- the process of making customers aware of products and services, attracting new customers to
a product or service, keeping existing customers interested in a product or service, building and
maintaining a customer base for a product or service. Advertisements play a large part in
marketing
21- The process of developing, promoting, and distributing products to satisfy customers' needs
and wants.
22- selling: the exchange of goods for an agreed sum of money
the commercial processes involved in promoting and selling and distributing a product or
service;
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Marketing is in indeed an art; it has been practiced in one form or the other since the days after
Adam and Eve. Today, it has become the most vital function in the world of business. The current
millennium has unfolded business rules, the most significant of them being the past history or
experience in a given product market is no indicator of future success.

Market leadership cannot be taken for granted, because customer loyalty does not exist. Today,
customer has much wider choice. He does not have to adhere with the locally available
brands/services. Given the plethora of television channels, some specifically devoted to television
shopping, Internet marketing and tele shopping, this millenniums customer wants and being
wooed by the marketers. Today, marketers have pulled out almost every weapon from the armory
to retain and expand their brand value and share in consumers mind.

Marketing has been defined in various ways. A few of such definitions commonly used are: -

“------- The system of value exchange” KOTLER

“------- The process of discovering and translating consumer needs and wants into product and
service specifications creating demand for these products and services and then in turn
expanding this demand”.
HANSEN

“The management function which organizes and directs all those business activities involved in
assessing and converting customer purchasing power into effective demand for a specific product
or service and in moving the product or service to the final consumer or user so as to achieve the
profit target or other objectives set by a company”.
“The Institute of Marketing USA”

“ Marketing is a view point, which looks at the entire business process as a highly integrated
effort to discover, create, arouse and satisfy consumer needs”.

“Marketing is the delivery of a standard of living to society”.

“Marketing is the function that adjusts an organization’s offering to the changing needs of the
market place.”

1.2

CONCEPTS OF MARKETING:

Marketing concept is the evolution of the orientation of organizations from production to

marketing ,societal issues,customer competitor orientation,marketing principles,customers buy
benefits and not products.
Marketing Concepts

Firms vary in their perceptions about business and their orientations to the market place this led
to the emergence of various concepts of marketing. The five important concepts are discussed
below: -

1.2.1 Exchange Concept:

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The exchange concept holds that the exchange of a product between the seller and the buyer is
the central idea of marketing. Exchange forms an integral part in marketing but viewing
marketing as mere exchange will tunnalize the essence of marketing. Marketing is much broader
than exchange. Exchange covers the distribution aspect and the mechanism of pricing only.
Following conditions should be there for successful exchange
1-minimum two parties
2-each party must have something that interests the other party
3-both parties must be able to communicate and deliver
4-bath parties must be free to accept or reject any offer from the other party
5-both parties must consider desirable/acceptable to deal with the other party.
1.2.2 The Production Concept

According to this concept Marketing is addition to production. Accordingly marketing could be

managed by managing production. The concept holds that consumers would, as a rule, support
those products that are produced in great volume at a low unit cost. Naturally, in such
organization, all efforts are focused on production. They do achieve cost reduction through
maximization of output. They assume that the lower cost will automatically bring all customers to
their doors.

1.2.3The Product Concept

The product concept is different from the production concept. Whereas the production concept
seeks to win markets and profits via high volume of production and low unit cost, the product
concept seeks to achieve the same result via product excellence improved products, new products
and ideally designed and engineered products. It also places emphasis on quality assurance.

Organisations that subscribe to the product concept assume that consumer would automatically
vote for the products of high quality. They concentrate on product excellence; they spend their
time and more on R&D and bring out many new products. They do not bother to study the
market and consumer in depth.

1.2.4The Sales Concept

The sales concept maintains that the company has to aggressively promote and push its
products; it cannot expect its products to be picked up automatically by the customers. Heavy
advertising, high power personal selling, large-scale sales promotion, heavy price discounts and
strong publicity and public relations are the normal tools used by the organizations that rely on
this concept.

1.2.5 The Marketing Concept

The marketing concept was born out of the awareness that a business should start with the
determination of consumer wants and ends with the satisfaction of those wants. The concept
puts the consumer at both the beginning and end of the business cycle. It stipulates that any
business should be organized around the marketing function. In a company practicing this
concept, all deportments will recognize that their actions have a profound impact on the
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company’s ability to create and retain customer. Every department and every worker and
manager will think customer and act customer.

These concepts had developed over the years:the production era lasted until the 1930s,the sales
era from 1930s to 1950,the marketing era from the 1950s till date.
The shift in orientation can be seen as under:
1.change from production orientiation to marketing orientation.
2.change from product orientation to customer orientation.
3.change from supply orientation to demand orientation.
4.change from sales orientation to satisfaction orientation.
5.change from internal orientation to external orientation.

1.3 Distinction between selling and marketing

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selling Marketing

Selling starts with the seller, and is Marketing starts with the buyer and
preoccupied with the needs of the focuses constantly on the needs of the
seller. buyer.

Seller is the centre of the business Buyer is the centre of the business
universe, activities start with the activities follows the buyer and his
seller. needs.

Seeks to quickly convert products into Seeks to convert customer’s needs into
cash. products.

Concerns itself with the tricks and Emphasis on fulfilling the needs of the
techniques of getting the customers to customer.
part with their cash for the products
available Concerns itself primarily and truly
with the ‘value satisfaction’ that
Overemphasizes the ‘exchange’ aspect, should flow to the customer for the
without caring for the ‘value exchange.
satisfactions’, inherent in exchange.
Emphasis on innovation in every
Emphasis on staying with the existing sphere, on providing better value to
technology and reducing the costs. the customer by adopting better
technology.
Cost determines price
Consumer determines price, price
Transportation, storage, other determines cost.
distribution functions are perceived as
mere extention of the production They are seen as vital services to be
function. provided to the customer, keeping
customers convenience in focus.
Emphasis on somehow selling there is
no coordination among the different Emphasis on integrated marketing, an
functions of the total marketing task. integrated strongly covering product
promotion, pricing and distribution.
A different department of business
operates as separate watertight All departments of business operate in
compartments. a highly integrated manner, the sole
purpose being generation of consumer
Selling views the customer as the last satisfaction.
Link in the business.
Marketing views customer as the first
link and the very purpose of the
business sees the business from the
point of view of customer, customer
consciousness permeates the entire
organization.

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1.4 Marketing As Process

Let us examine marketing as process.

The process of marketing involves an exchange of transaction between the buyer and seller. We
can trace the origin of marketing in this form as Barter System ‘Today’ in this system, money has
replaced commodity. Today the exchange has to result in mutual satisfaction to both the buyer
and seller.

We see that marketing process involves

(a) Understanding the customers interest, as he will be satisfied only if his interests are
secured.
(b) Serving them in such a way that it helps the selling organization to fulfill its objectives
profit maximization.

Marketing As A Managerial Function

Marketing as a managerial activity involves analyzing the market opportunities, planning the
marketing activities, implementing marketing plans and setting control mechanism, in such a
way that the organizational objectives are accomplished at the minimum cost. In simple words
marketing is:

(a) Understanding consumer needs

(b) Environmental scanning and market opportunity analysis
(c) Development of competitive market plans and strategies such than an organization is able
to satisfy not only the consumer needs but also achieve its own objectives.
(d) Implementation of marketing plan and development of tactical plans to overcome
problems at the market place.
(e) Development of control mechanism.

1.5 The Marketing Environment

Environmental scanning is an essential part of marketing management the correct understanding

of the marketing environmental change is of utmost importance in order to make accurate
marketing decisions.

1.5.1Environmental Importance

The marketing environment is more important to management today than eve before. This is both
because the rate of environmental change has increased and because there are more teases of
important environmental changes.

First, consider the rate of environmental change. It should be remembered that all of the
development experienced by human kind has occurred with in a mere moment of history. If we
were to equate the earth’s history to the distance around the world, the last 50 years, the period
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of most-rapid development, would equal only one foot. Yet an unprecedented acceleration in
environmental change occurred during that brief period and the people today are experiencing a
unique chapter in human history.

In addition, new types of environmental change have come to the forefront. Economic factors go
to the core of business activity, and historically they have always been important to marketing
Management until around 1900, such factors effectively represented the firm’s entire macro
environment. At the twin of the centaury, however, governmental and legal forces became more
significant, as evidenced by antitrust legislation. The significance of government has grown
greatly over the past few decades. Even the recent deregulation of selected industries has meant
turbulent times for the companies involved.

During 1930’s the growth of labour organizations further affected the decision realm of
management. More recently, consumer group have used tactics similar to those of labour. Labour
and consumer groups highlight a movement toward a pluralistic and independent society of
interest groups, with business no longer the dominant element. Demands on businesses also
arise from their stockholders and from citizens in the communities where they are located. The
net result of these developments is several more types of important external changes than existed
a few decades ago. This has forced management to invest more time and energy in monitoring the
environment.

1.5.2 Characteristics Of The Marketing Environment

The environment of anything is as large or small, and as simple or complex, as ones definition of
it. Changing consumer incomes, technological innovation, charging government agencies and
shifting consumer values are examples of the marketing Environment. This environment includes
those things that are external, largely uncontrollable, changing, constraining and potentially
relevant. The marketing environment includes non-marketing departments with in the firms, as
well as markets, competitors and macro environment.

Marketers are primarily adapters. They adopt their products, prices, promotion and distribution
to fit the market place, as was true for the auto industry during the energy crisis. Certain
environmental forces are partially controllable, but most are largely uncontrollable. Some
changes in environmental factors, such as shifting population characteristics, represent a key
source of Global Environment uncertainty.

Marketing

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1.6 Marketing Audit
An organization’s performance in market place is largely implemented & governed by three
factors:
The current market position
Nature of environmental threats & opportunities
The organization’s ability to cope with marts and weaknesses

1.6.1Purpose Of Marketing Audit

Marketing audit is designed to provide the understanding of following questions

Where the company is?

Where does it want to go?
How should the company organize its resources to reach there?

1.6.2Marketing Audit Defined

An audit is a systematic, critical and vanished review and appraisal of the organization, its
operations & systems and the whole environment in which it operates. A marketing audit is a
part of the larger corporate analysis and is chiefly concerned with the marketing environment,
marketing functions, objectives, policies and operations.

This audit is a starting point for a strategic marketing planning process and gives a clear picture
of environmental threats & opportunities and marketing capabilities.

The audit is also seen as a means by which an organization can identify its strength strong and
the weaknesses as they relate to external opportunities & threats.

On the whole, major elements & benefits of a marketing audit are:

 The analysis of external environment & internal capabilities

 The evaluation of past performance and present activities

 The identification of future opportunities and threats

1.6.3 Structure Of Marketing Audit

The structure of the audit consists of mainly three elements;

 The organizations environment
 Its marketing activity
 Its marketing activities

The first phase of audit is designed to establish the different dimensions of environment the way
it changes and how these changes may have a direct impact on business. The second stage is
concerned with assessing the capabilities of internal system, i.e. to what extent these systems
can handle the changes and demands of environment. The third stage deals with individual
components of marketing mix and review the present activities.
MARKETING MYOPIA:
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This concept was given by Prof.Theodore Levitt.Marketing myopia means crooked perception of
marketing and a short-sightedness about business.Excessive attention to production or the
production or the product or selling aspects at the cost of the customer and his actual needs
creates this myopia.This myopia leads to a wrong or inadequate understanding of the very
nature of the business in which the organization is engaged.This is also known as the
shortsightedness of the marketer.
What is a Marketing Audit?

A marketing audit helps a business identify its most urgent marketing communications
challenge.

It begins with a review of the business' marketing, creative, and media platforms.
Recommendations can then be made to improve current strategies or introduce more effective
activities.

A marketing audit includes the following steps:

STEP ONE: Identify your areas of need.

The following items are important needs for my business (check all that apply):

Research
 Determine which vertical industries or narrow target markets to pursue.
 Learn more about the customer's needs.
 Learn more about the customer's perceptions of my product/service: how is my
product/service positioned in the customer's mind?
 Learn more about what motivates the customer to purchase my product/service and/or my
competitor's product/service.
 Research internal attitudes towards products and service vs. the market's perception.
 Conduct internal and/or external research using the Internet.

Marketing
 Create a marketing plan.
 Create a media schedule.
 How to promote our product/service using free or paid seminars.
 Determine how to market our product/service or business at trade shows.
 Train staff with an in-house seminar on:........................
 Learn strategies for marketing our product/service during a recession.

Advertising
 Develop a new creative platform for our corporate image or advertising campaign.
 Improve overall effectiveness and persuasiveness of print ads.
 Determine how to effectively promote product/service on a limited advertising budget.
 Generate more inquiries from our print advertising.

Design: Corporate Image

 Create a new corporate image.
 Produce effective sales brochures, catalogues and other marketing literature.

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 Design, write and produce a company newsletter.
 Create an effective company brochure or capability report.
 Produce and use a video or audio tape to promote our product/service.
 Write and publish a book, booklet, or special tape to promote our product/service.

Public Relations
 Publish more press releases.
 Get articles by company personnel written and published in industry trade journals.
 Determine how to get good case histories and user stories written and published.

Direct/Database Marketing
 Plan and implement a direct mail campaign or program.
 Increase direct mail response rates.
 Generate more qualified leads.

Follow-up
 Determine how to make all our marketing communications more responsive and accountable.
 Develop strategies for responding to and following up on inquiries.
 Create effective inquiry fulfilment packages.

New Media
 Create a multi-media presentation.
 Marketing through the Internet.

STEP TWO: Provide a rough estimate of your budget for marketing, creative and media.

Have the following items (either previous or current) ready for review:

 Marketing and advertising budget

 Advertising ratios (advertising expenses as a percentage of revenue)
 Strategic plans
 Research reports
 Trade information
 Trade associations
 Staff experience
 Corporate philosophy and mission statement
 Advertising and promotions used in the past
 Use of colours

1. Category sale:
By total category for the last three to five years.
By month January to December for each year.
By weekly total for each year.

2. Advertising and promotional expenditures:

By total category for the last three to five years.
By month January to December for each year.
By yearly total to date.

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3. Average sales:
By month, for as many months as possible.

4. Samples of all past promotions and advertising (last two years minimum).

5. Dollar amount, quantities and timing of co-op programs.

6. List your top competitors.

7. List your second and third-ranked competitors.

8. Samples of past competitors' promotions.

9. Other economic, environmental or trend issues that may affect your business.

10. Which promotional mediums have given you the best returns?

11. Reasonable and probable growth for this year and the next four years (i.e. as a percentage
increase/decrease from the previous year).

12. The issues or tasks you do now that you would be prepared to hand off to an agency like Tri-
Media.

13. Future plans and goals for expansion, revenue growth, and timing for these goals.

Tri-Media Tip: Help Yourself Become a Better Marketer

Marketing intelligence alerts you to competitive developments, helps you identify key issues
faster, and reveals internal weaknesses.

You can gain valuable insights into marketing by:

 Reading unsolicited letters from customers to gauge their real likes and dislikes.
 Reading newspapers, trade journals, financial and economic reports (of yours and related
industries) .
 Asking receptionists, sales reps and other staff what they know.
 Putting together a marketing intelligence file, filling it with articles, and using it for future
reference in business plans.
 Spending a few hours tracking down free sources of information from governments,
associations, universities, libraries and databases and the Internet.
 Visiting competitors' outlets. Read their promotional and corporate material to find out what
key messages they are giving customers and why.
 Investigating your own business practices by interviewing your current staff, reviewing your
past financial statements and performing a marketing audit.

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TO SUM UP: A marketing audit reviews your marketing, creative and media efforts, puts them in
perspective with your current target market and shows opportunities to realign your strategies so
you can get more effective results from your marketing dollars.

PRELIMINARY CORPORATE REVIEW

Purpose of Audit:

Marketing Strategy:

Creative Strategy:

Third Party Suppliers (Agency, Printer, Sep House, Photographer, Copywriter, Other):

Marketing Budget:

Media Budget:

Communication Material Budget:

Other Budget: (specify)

Billing for this audit: (please circle)      Retainer      /       Monthly       /       Upon Completion  /  
3rd Party

Details:

Part One: The Marketing Environment Review A. Markets

 What are your organization's major markets and public?
 What are the major market segments in each market?
 What are the present and expected future size and characteristics of each market or market
segment?

B. Customers
 How do customers and the public rate your company in relation to its competition?
 How do different classes of customers make their purchase decisions? Influences?
 What are the evolving needs and satisfaction levels of customers?

C. Competitors
 Who are your organization's major competitors?
 Who are the second and third-ranked competitors?
 What trends can be foreseen in competition?

D. Macro-environment
GENERAL:

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What are the main developments with respect to demographics, economy, technology,
government and culture that will affect your organization's situation?
SPECIFIC:
a. Economic-Demographic
 What does your company expect in the way of inflation, material shortages, unemployment
and credit availability in the short and long-run?
 What effect will forecasted trends in the size, age distribution, and regional distribution of
population have on your business?
b. Technology
 What major changes are occurring in product/process technology that will affect you? How?
 What are the major generic substitutes that might replace this product?
c. Political-Legal
 What laws are being proposed that may affect marketing strategy?
 What federal, provincial and local agency actions should be watched?
d. Social-Cultural
 What attitude does the public have about businesses like yours and products such as the ones
your company makes?
 What changes are occurring in consumer lifestyles and values that affect your company's
target markets and marketing methods?

Part Two: The Marketing System Review A. Objectives

 What are your organization's overall long-term and short-term objectives?
 What are your marketing objectives?
 Are these objectives stated in a clear order of priority and in a form that allows planning and
measurement of achievement?
 Are the marketing objectives reasonable for your organization, given its competitive position,
resources and opportunities?

B. Program/Strategy
 What is your organization's core strategy for achieving its objectives? Is it likely to succeed?
 Is your organization allocating enough (or too many) resources to accomplish the marketing
tasks?
 Are your marketing resources allocated to various markets, territories and products of your
organization in the best way possible?
 Are your marketing resources allocated to the major elements of the marketing mix (i.e.
product quality, personal selling/contact, promotion and distribution) in the best way possible?

C. Implementation
 Does your organization develop an annual marketing plan? Is it effective?
 Does your organization implement control procedures (monthly, quarterly, yearly) to ensure
your annual objectives are being achieved?
 Does your organization carry out periodic studies to determine the contribution and
effectiveness of various marketing activities?
 Does your organization have an adequate marketing information system to service the needs of
managers for planning and controlling operations in various markets?

D. Organization
 Does your organization have a high-level marketing officer to analyze, plan and implement the
marketing work of your organization?
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 Are others directly involved in marketing activity? Does your staff need more training,
incentives, supervision or evaluation?
 Are the marketing responsibilities structured to serve the needs of different marketing
activities, products, markets and territories in the best way possible?

4. Does staff understand and practice the marketing concept?

Part Three: Detailed Marketing Activity Review A. Products

 What are your main products? What are the generic products?
 Should any products be phased out?
 Should any products be added to the line?
 What is the general state of health of each product and the product mix as a whole?
 Does the product line meet the demands of the market?

B. Prices
 To what extent are prices set on cost, demand, and/or competitive criteria?
 What would be the likely response of demand to higher or lower prices?
 Does your organization use temporary price promotions and, if so, how effective are they?

C. Distribution
 Are there alternative methods of distributing your product that would result in more service or
less cost?
 Does your organization give adequate service, along with the product, to customers?
 What are the main trade channels bringing products to customers?
 What are the efficiency levels and growth potentials of the different trade channels?

D. Personal Selling
 Is your sales force large enough?
 Is it organized along the best lines of specialization (territory, market, product)?
 Does the sales force show high morale, ability, and effectiveness? Are they sufficiently trained?
Do they have enough incentives?
 Are the procedures adequate for setting quotas and evaluating performance?

E. Advertising
 Does your organization clearly state its advertising objectives?
 Does your advertising get its messages across?
 Are the themes, graphics and copy effective?
 Are the chosen media adequate?

F. Publicity
 Does your organization have a carefully formulated program of publicity?

G. Sales Promotion
 Does your organization use sales promotions and, if so, are they well conceived?

UNIT 2

Marketing Mix
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2.1INTRODUCTION
2.2MARKETING MIX
2.3 PRODUCT,PRICE,PROMOTION,PLACE
2.4USE OF AN ADVERTISING AGENCY
2.5PERSONAL SELLING
2.6PROCEDURE OF PERSONAL SELLING
2.7LINKAGES BETWEEN MARKETING EFFORT,MARKETING MIX AND MARKETING
BUDGET
2.8ASSEMBLING THE MARKETING MIX-THE MAIN TASK IN MARKETING
2.9SELECTING AN OPTIMUM COMBINATION
2.10 MARKETING MIX TO BE JUGLED CONSTANTLY
2.11CHANGES IN ENVIRONMENTAL VARIABLES
2.12 CHANGES WITHIN THE FIRM

2.1 Introduction

The marketing mix is probably the most famous phrase in marketing. The elements are
marketing ‘tactics’. Also known as four P’s. The marketing mix elements are Price, product place
and promotion. The four P’s were given by Mc McCarthy in 1965.

Some commentators will increase the mix to the five ‘P’, to include people. Other will increase the
mix to ‘seven P’s, to include physical evidence (such as uniforms, facilities etc.) and processes (i.e.
the whole customer experience)

2.2Marketing Mix

Product Price Promotion Place

Product Price Promotion Place
Product Variety List Price Sales Promotion Channels
Quality Discounts Advertising Coverage
Design Allowances Sales force Assortments
Features Payment Period Public Relation Locations
Brand name Credit Terms Direct Marketing Inventory
Packaging Transport
Sizes
Services
Warranties
Returns

Marketing Mix: The sole vehicle for creating and delivering customer value

The four elements mentioned above product, price, place and promotion constitute the marketing
mix of a firm. The marketing mix is the sole vehicle for creating and delivering customer value.

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It can be easily observed and noted easily that all activities and programmes, which a marketer
designs and carries out in his effort at winning customers relate to one or the other of the above
four elements.

2.3 PRODUCT:
The term product refers to tangible physical products as well as services.Here are some examples
of the product decisions to be made:
-brand name
-functionality
-styling
-quality
-safety
-packaging
-repairs and support
-warranty
-acessories and services

A product is any thing that satisfies a need or want, and can be offered in an exchange. A
product can be a good, service or idea.

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 Product
You need firstly to identified who will be Product Phases (life-cycle)
interested in buying your products and
services, this should be identified once Products also go through what is known as
you have analysed the results of the a life cycle or phase.  When exploring what
mix is best suited to your product, you
should also consider where in the life-cycle
 your products lie:

market research.  Your market research Introductory Phase

data will be able to look more closely at If you are releasing a brand new product or
what your market want and then look at service then it will be a baby in the market
your products to see if they are satisfying and will need to be introduced to your
your customer's needs. Examine your market.  How you price, promote and place
packaging design, materials used, size this into the market place will need careful
and quantity. By analysing the market consideration.
and its requirements, you will be able to
change the product or develop the Growth Phase
product in order to match that If your product or service has been enjoying
requirements of the people you are being the only one on the market, you may
aiming at. have noticed that others are also joining in
and entering a competitive product or
 You also need to remember that your service and this will have an affect of the
customer's needs are likely to change healthy sales you might be enjoying at the
and therefore your products should moment.  How you react to this will have
constantly change to reflect each market an impact on the survival of your product -
change, if you ignore these changes your Will you drop the price to compete, will you
products will no longer be needed or change the way in which you promote it,
desired by your target customers. The will you change the distribution method? 
only way you will be able to do this is to
track your products and track how your Maturity Phase
customers are still receiving your If you product is one of many competing
products and services, balancing the products, then you can consider that your
subtle changes as they occur. product is a mature one.  If this is the case
then you have to take care that interest for
your product is not lost.  Maturity of a
product is a dangerous time and it could
get swallowed up by your competitors. As
with a product in the growth part of the
life-cycle - Will you drop the price to
compete, will you change the way in which
you promote it, will you change the
distribution method? 

Decline Phase
Perhaps you have noticed that one of your
products is losing its appeal; sales or
interest might have dropped.  If this is the
case, your product may be in decline and if
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PRICE:
Price is the value placed on the something of value in an exchange. Consumers exchange
something of value normally purchasing power (money) for the satisfaction or ability they expect
a product to provide.Some examples of pricing decisions:
-pricing strategy
-suggested retailprice
-volume discounts and wholesale pricing
-cash and early payment discounts
-seasonal pricing
-bundeling
-price flexibility
-price discrimination

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2.   Price
Changing the product to reflect the
product's life cycle is only part of the
essence of a well balanced marketing mix, Price Skimming
and so PRICE enters the second important Where Penetration Pricing keeps the
consideration of the marketing mix. When pricing below the real market price,
setting a price on a range for your products, price skimming raises the price
you need to ensure that you can recoup any artificially to enable it to quickly
overheads, compete with rival companies recoup costs and for immediate profit.
and charge a price your customers are This type of pricing structure works
willing to pay.   To do this you need to fine very well for products that are in
tune your pricing policy and you could demand or where there are few
achieve this in a number of ways: competitors - electronic equipment for
example. Caution has to be used when
 Loss Leader Pricing employing this strategy as competitors
This involves lowering prices on a number of may well take advantage of these high
key products in order to attract a customer prices and enter the market quickly
to purchase the products. Customers with a realistic price thus stealing the
obviously like a bargain and like may be market. Again this type of pricing
attracted to buy this item even if they had strategy might be used when the
never considered purchasing this item product is in its growth stage in the
before. Price reductions could be used to product life cycle as demand is high
entice customers to look at your other and sales are high.
products, and any profit lost might well be
made up should the customer be persuaded Differential Pricing
to shop around and purchase other This involves allowing the same
produces not reduced in price. Loss leader product to be priced differently; this
pricing might be used to sell off or stimulate can be justified when the product is
interest in products considered to be in the sold in areas with differing economic
maturity or decline stage of their life cycle. climates, when sold through differing
distribution channels, to appeal to a
Penetration Pricing different market segment. For
This type of pricing is used for products example, you could choose to charge a
identified as being in the "introductory" wholesaler less for buying in bulk than
stage of the product life cycle to enable the for an individual who only bought on
product to get a foothold in the market. single card. you could also decide to
Prices are artificially reduced to attract the charge more for your card designs in
largest possible audience. It is often used to London than you would in the North of
prevent or discourage competitors from England simply because the economy
capturing the market and used for products is more stable in London than in the
that are mass-produced. North of England.

   

PROMOTION:
Promotion refers to marketing activities used to communicate positive persuasive information
about an organization, its production and activities to directly or indirectly expedite exchanges in
a target market.

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Promotion

The fourth part of the marketing mix refers to process of informing your customers of your
company's products. Marketing promotion decisions

-Promotional strategy

-advertising

-personal selling and sales force

-sales promotion

public relations and publicity

-marketing communications budget

To make your customers aware that your products exist, there are a number of methods you may
choose to use, they include:

 Media Advertising (television, magazines, Internet, radio)

 Personal selling (involving a sales person) 
 Non-personal communication (persuasion advertising - competitions, free samples.
 Other promotional types include public relation exercises and free publicity.

Promotion needs to be carefully planned, and it is usual to decide on a new promotional plan
each year. There should be one main objective to the promotion campaign and that particular
emphasis should be projected during a certain time to a certain market segment.

Marketing Mix 4P’s model 5P’s

4P’s 5P’s

The Marketing Mix model (also known as the 4P’s) can be used by marketers as a tool to assist in
implementing the M. strategy. M. managers use the attempt to generate the optimal response in
the target market by blending 4(or 5, or 7) variables in an optimal way. It is important to
understand that the principles are controllable variables. The MM can be adjusted on a frequent
basis to meet the changing needs of the target group and the other dynamic environment.

Product Historically, the thinking was: a Functionality, Quality, Appearance,

good product will sell itself. Packaging, Brand, Service, Supplier
However there are no bad products Warranty.
anymore in today’s highly
competitive markets. Plus there are
many laws giving customers the
right to return products that he
perceives as bad. Therefore the
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 question on product has become:
does the organization create what
its intended customers want?
Define the characteristics of your
product or service that meets the
needs of your customers.
Price How much are the intended List Price, Discounts, Financing,
customers willing to pay? Here we Leasing Options, allowances.
decide on a pricing strategy-do not
let it just happen! Even if you
decide not to charge for a service (a
loss leader), you must realize that
this is a conscious decision and
forms part of the pricing strategy.
Although competing on price is as
old as mankind, the consumer is
often still sensitive for price
discounts and special offers. Price
has also an irrational side:
something that is expensive must
be good. Permanently competing on
price is for many companies not a
very sensible approach.
Place Available at the right place, at the Locations, Logistics, Channel
right time, in the right quantities? Members, Channel Motivation,
Some of the revolutions in business Market Coverage, Service Levels,
have come about by changing Place. Internet, Mobile
Think of the internet and mobile
telephones.
Promotion (How) are the chosen target groups Advertising, Public Relations,
informed or educated about the Message, Direct Sales, Sales, Media,
organization and its products? This Budget
includes all the weapons in the
marketing armory – advertising,
selling, sales promotions, Public
Relations, etc. While the other
three P’s have lost much of there
meaning in today’s markets,
Promotion has become the most
important P to focus on.

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Using market research establishes who are the best market segments to aim your campaign
towards. The message of your campaign must be focused towards the market segment and it
must relate to the promotional objectives. Time your promotion, when and where is the optimum
impact likely to be. Which promotional technique you decide to employ must have a bearing on
how best you can reach this segment and which technique would best put your message across
favourably.  Here are a few techniques you might consider employing: 0

2.4 USE OF AN ADVERTISING AGENCY

The advertising agency consists of specialised people who are able to promote your campaign
more effectively and can be called upon when needed to assist the operation without the
necessity of having to employ full time staff dedicated to advertising within the business.

2.5PERSONAL SELLING
Sales men selling to the customer on a one to one basis. Advantages being that questions can be
answered straight away, problems can be sorted out at a personal level. The sales man remains
with the customers case through to the completion of the sale.

2.6THE PROCEDURE OF PERSONAL SELLING

 Determine what is to be sold

 Plan a programme
 Prepare a sales call (making appointments etc.)
 Record the interview

PLACE:
Place refers to marketing activities that make products available to consumers at the right time
and in a convenient location.Some examples of distribution decisions include
-distribution channels
-market coverage
-specific channel members
-inventory management
-wharehousing
-distribution centers
-order processing
-transportation
-reverse logistics

2.7Linkages Between Marketing Effort, Marketing Mix And Marketing Budget

Marketing mix in effect signifies the manner in which the marketing effort or marketing budget of
the firm is distributed over the different components of the marketing job. The marketing effort
required for achieving the targeted sales, translates itself into the marketing budget, and the
distribution of the budget over the four P’s indicates the marketing mix position.
When the marketing manager has completed assembling the marketing mix, it means he has on
his hands the marketing budget. He had decided the marketing effort/marketing expenditure. He
has decided how it should be allocated over four P’s. Marketing mix expressed in rupee terms
becomes the marketing budget.

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A multi product firm goes through the above exercise several times over and develops a
marketing mix and marketing budget for each of its product/brand.
2.8
Assembling The Marketing Mix-The Main Task In Marketing
Marketing is essentially an interaction between the marketing mix and the environmental
variables and service the latter is not controllable, marketing becomes synonymous with
assembling and managing marketing mix.

It is by assembling and operating its marketing mix that a firm executes its marketing strategy.
Assembling the marketing mix involves a number of decisions relating to each of the marketing
mix elements. Decisions are also required on the linkages among the elements. Following
decisions form an integral part of the marketing strategy.

 What is the best combination of the four P’s in a given situation?

 Which line of products or which individual products should be offered to an identified
target market?
 What should be the price structure?
 Which channel has to be selected?
 What is the right promotion strategy?
 How should the total marketing effort and resources of the firm be apportioned between
the four P’s?
 How to balance the impact of an increase or decrease in the allocations to a particular
element on the other elements?

2.9 Selecting An Optimum Combination:

From the above discussion, it is evident that it is possible to combine the four P’s in countless
ways. And these combinations vary from one another, in the impact on the market and costs. The
focus is to select a combination, which will have the desired impact on the market and will also
be cost effective. The task is basically one of giving correct weightage to the different elements of
the mix and ensuring that all the elements are integrated.

Infact, the effectiveness of any marketing program depends directly on the extent to which the
marketing mix is able to harmonies and synthesis the different elements into a unified entity.

2.10 Marketing Mix To Be Juggled Constantly:

Assembling the marketing mix is a continuous task and not a one shot assignment. No marketing
manager can assume that his job is over once the marketing mix is assembled. The mix will
require periodical changes and constantly in some cases. In fact no marketing mix is valid
forever. The marketing manager has to carefully monitor the conditions and keep juggling the
mix.

2.11Changes In Environmental Variables:

The environmental variables are constantly in flux or charge. This makes the juggling of
marketing mix imperative, without which the firm will not be in a position to respond to the
changes. Environmental variables like competition, economic conditions, government policies and
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climatic conditions shall be closely monitored. And the firm shall respond to them through
appropriate modifications of the marketing.

2.12 Changes With In The Firm

There is yet another reason why the marketing mix needs to be juggled frequently. Besides the
changes in the external environment changes taking place with in the firm too, necessitate
modifications in the marketing mix. For example, changes in the corporate/competitive strategy
of the firm, changes in the product lines of the firm, changes in the organization or resource level
of the firm, will all lead to changes in the marketing mix for a given firm.

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 UNIT 3

The Marketing Environment

3.1Introduction,
3.2 Why Analyze The Marketing Environment?
3.3 Strategic response to environment is possible only with proper environmental analysis
3.4 the opportunities and threats
3.5 Purpose Of Marketing Analysis
3.6 Factors To Be Covered In Environmental Analysis, General Economic Condition &
Environmental Factors Specific To The Business Concerned.

3.1Introduction

The marketing environment consists of external forces that directly or indirectly influence an
organization’s acquisition of inputs and generation of outputs.

The marketing environment consists of five categories of forces viz. political, legal, social,
economic and competitive.

3.2 Why Analyze The Marketing Environment?

3.2.1(i) Knowledge of Marketing Environment is central to marketing management:

Marketing management rests squarely on the knowledge of marketing environment. The

environment plays a crucial role in marketing and that securing the right fit between the
environment and the firm, using the marketing mix as the tool, is the crux of marketing. The firm
has to know where the environment is heading, what trends are emerging there in and what
should be its response to the environmental changes.

3.2.2(ii) Strategic response to environment is possible only with proper environmental analysis:

Facilitating the corporation’s strategic response to the changes taking place in the environmental
factors is the ultimate purpose of environmental analysis. The firm has to come up with
alternative programmes and strategies in the line with environmental realities.

Environmental analysis helps strategic response by high lighting opportunities, the pursuit of
which will help the firm attain its objectives.

3.2.3(iii) Spotting the opportunities and threats

Spotting of opportunities and threats is very important firm. It is in the environment that firm
finds opportunities and threats, which it has to encounter. By tapping the opportunities present
and countering the threats embedded therein, the firm achieves its growth objectives.

3.3Purpose Of Marketing Analysis

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To know where the environment is heading; to observe and size up the relevant events and trends
in the environment.
 To understand which events and trends are favorable from the stand point of the firm and
which are unfavorable; to figure out the opportunities and threats hidden in the
environmental events and trends
 To project how the environment- each factor of the environment-will be at a future point of
time.
 To access the scope of various opportunities and short-list those that can favorably impact
the business.
 To help secure the right fit between the environment and the business unit, which is the
crux of marketing, to help business unit respond with matching product-market
strategies; to facilitate formulation of a marketing strategy in the right way-in line with the
trends in the environment and the opportunities emerging therein.
3.4 Factors To Be Covered In Environmental Analysis

A) Mega/Macro Environmental factors

B) Environmental factors specific to business concerned

3.4.1 A. Macro Environmental Factors

3.4.1.1(1) Demographic Environment

Since business depends on people/consumers, it is obvious that demographics is a major
element in environmental analysis several factors relating to population, such as size, growth
rate, age, distribution, religions composition and literacy levels, need to be studied. Aspects such
as composition of workforce, household patterns, regional characteristics, population shifts, etc.,
also need to be studied, as they are all parts if the demographic environment.

3.4.1.2(2) Socio-Cultural Environment

Socio-cultural environment is another important component of the mega environment. Culture,
traditions, beliefs, values and life styles of the people in a given society constitute the socio-
cultural environment. These elements decide to a large extent, what the people will consume and
how they will buy.

3.4.1.3(3) Economic Environment

Economic environment is a vital component of mega environment. Factors to be covered under
Economic environment.

General Economic Condition

 Economic conditions of different segments of the population, their disposable income,
purchasing power etc.
 Rate of growth of the economy, rate of growth of each sector of the economy
 Income, prices and consumption expenditure (Size and pattern)
 Credit availability and interest rates
 Savings rate/capital formation
 Inflation rate
 Behaviour of capital market
 Foreign exchange reserves
 Tax rates
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  Prices of import materials
 Energy scene (cost, availability etc.)
 Labour scene (cost, skill availability etc.)

3.4.1.4(4) Political Environment

Infact, economic environment is often a by-product of the political environment, since economic
and industrial polices followed by a nation greatly depends on its political environment.

Political environment has several aspects form of government adopted by the country is the first.
Political stability as such is another, for, whatever be the form of government adopted, stability of
the government is an essential requisite of economic growth. Elements like social and religions
organisations, media and pressure groups and lobbies of various kinds are also part of the
political environment.

3.4.1.5(5) Natural Environment

The analysis of the mega environment must also cover aspects like extent of endowment of
natural resources in the country, ecology and climate etc.

3.4.1.6(6) Technological Environment

Today, technology is a major force which industry and business have to reckon with technology
leads practically all the forces that shape peoples lives. For business firms, technology affects not
only its final products but also its raw materials, processes and operations as well as its
customer segments. And at present times, rapid changes are taking place in the realm of
technology.

The firm has to analyze carefully the overall technology environment and the technology options
available in the given industry. The level of technology prevailing in the country is also a concern
for the firm.

It is possible that several levels of technologies are floating at the same time in an industry. Firms
have to scan the technology environment and select technologies that will be appropriate for the
firm and the given product market situation.

3.4.1.7(7) Legal Environment

Business has to operate within the framework of the prevailing legal environment. They have to
understand the implications of all the legal provisions relating to their business. In recent times
the world over legislation regulating business has been steadily increasing. In order to survive the
firms have to consider the legal environment also.

3.5. Environmental Factors Specific To The Business Concerned

3.5.1.1. Market/Demand

The note able aspects are

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 (a) Nature of demand

(b) Size of demand, present and potential

(c) Changes taking place in demand

(d) Invasion of substitute products

(e) Changes taking place in consumption patterns/buying patterns and habits.

A firm must monitor demand in its industry. Demand details indicate the attractiveness of the
industry. All entrepreneurial decisions such as entry into the industry, expansions, divestment,
etc, and decisions on marketing strategy will need information pertaining to demand.

3.5.1.2. The Consumer

A successful business strategy involves designing products and marketing programmes those
incorporate attributes, which provide value to consumers according to their perception.

By studying, demand and consumer-related factors confirms carry out their business/marketing
planning effectively. If customers taste and preferences if properly monitored, they often end up
as attractive business opportunities or else may sound the death knell of a business. Only be
keeping track of what the customer’s want a firm can grab the opportunities emerging in the
environment.

3.5.1.3 Industry And Competition

Industry and competition constitutes the other major component of the environment that is
specific to a firm. Knowledge about industry and competition is a fundamental requirement for
developing marketing strategy. Competitive advantage building too depends on a proper grasp of
the position of the industry and competition.

3.5.1.4. Government Policies

Government policies significantly affect the way business operates. Besides influencing the mega
environment, government policies profoundly affect the specific environment of any
industry/business. This is particularly true of economies that are regulated to a significant
degree. Even in market economies, government police are an important factor, though their
restraining influence is relatively less.

Government plays roles, which have a bearing on the functioning of firms e.g.-

 Governments are often large purchasers of goods and services.

 Governments subsidies select firms and industries
 Government protect home producers against foreign competition
 Governments ban fresh entry in select industries.
 Government off and on ban certain technologies and products
 In some cases, governments happen to be producers, and therefore, function as
competitors.
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3.5.1.5 Supplier Related Problems

Suppliers from another important component of the primate environment of a firm. Suppliers
constitute are of the five forces shaping competition in any industry. They have their own
bargaining power in the industry, they influence the costs of raw materials and other inputs to a
firm, and hence the profits a firm can take home. It is in this context that the trade off between
integrating vs. outsourcing of supplies assumes importance for a firm because this has
implications on the cost as well as quality fronts. Suppliers also keep introducing frequent
changes in their products, processes and business practices. Sometimes, suppliers suddenly
become direct competitors to a firm, by themselves becoming end product manufacturers.
Obviously, firms have to closely monitor the supplier environment.

3.5.1.6 Environment Analysis Has To Be A Continuous Affair

It is obvious that environmental components, those relating to mega environment as well as those
that are specific to the given industry such as, consumer, industry, and competition are
constantly in flux. This reality compels the firm to keep analyzing the environment. The firm has
to treat environment analysis as a continuous process.

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 UNIT 4

CONSUMER AND ORGANISATIONAL BUYING BEHAVIOUR

4.1IMPORTANCE OF THE CONSUMER BEHAVIOUR

4.2 IMPORTANCE FOR THE
PRODUCTION POLICIES
PRICE POLICIES
DISTRIBUTION POLICIES
SALES PROMOTION POLICIES
EXPLOITING MARKETING OPPORTUNITIES
4.3CONSUMERS DO NOT ALWAYS ACT OR REACT AUTHORISED SIGNATORY
4.4CHANGING CONSUMER PREFERENCE
4.5IMPLEMENTING MARKETING CONCEPTS
4.6FACTORS INFLUENCING CONSUMER BEHAVIOUR

“Consumer behaviour is the process whereby individuals decide what, when, where, how and
from whom to purchase goods and services”.
Walter & Paul

“Buyer behaviour is all psychological, social and physical behaviour of potential customers as
they became aware of evaluate, purchase, consume and tell other people about products and
services”.
Webster

4.`1Importance Of The Study Of Consumer Behaviour

What motivates the buyer? What induces him to buy? Why does he buy a specific brand from a
particular shop? Why does he shift his preference from one shop to another or from one brand to
another? How does he react to new products introduced in the market or apiece of information
addressed to him? These are some questions which are of perennial interest to the marketing
management, as product and promotion strategies revolve around these questions. In all his
marketing strategies and plans, he makes assumptions as to how the buyers would behave and
respond his marketing programme. Knowledge of the buyer and his buying motive and buying
habbits, is thus a fundamental necessity for the marketing man.

4.2The study of consumer behaviour is of vital importance for the following purposes:

1.Production Policies:

A study of Consumer Behaviour gives an insight into the various factors or attributes in a
particular product, which prompt a consumer to purchase that product. Such knowledge will
help the producer to pay special attention to those attributes in his product to attract the
customers. Thus it helps in formulating the production polices.

2.Price Policies:

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The study of consumer behaviour enables the marketer to know why a customer purchases the
product, because of law cost or social status. This information can be utilized for deciding the
price of such products. Thus it helps in deciding pricing policy.

3.Distribution Policies:

Knowledge of consumer behaviour is helpful in taking decisions regarding the channels of

distribution as it depends on the characteristics of buyer.

4.Sales Promotion Policies:

It helps the marketers to know the buying motives of the consumers to make purchases and to
use the information gathered about buying motives in advertising media to awaken the
consumers desire to purchase. Thus, it helps in formulating sales promotion policies.

5.Exploiting Marketing Opportunities:

A study of consumer behaviour helps the marketers to understand the consumer’s needs,
aspiration, expectations, problems etc. This knowledge will be useful to the marketers in
exploiting marketing opportunities and meeting the challenges of the market.

6.Consumers Do Not Always Act Or React Authorized Signatory The Theory Would Suggest:

For example consumer of the past reacted to price levels as if price and quality positive relation.
Today, consumer seeks value for money, fewer prices but with superior features. The consumer’s
response indicates that the shift has occurred.

7.Consumer Preferences Are Changing And Becoming Highly Diversified:

Rapid introduction of new products with technological advancement has made the job of studying
consumer behaviour more imperative. For e.g. The Information Technology is changing very fast
in personal component industry.

8.Implementing The “Marketing Concept”

This calls for studying the consumer behaviour, as customer needs have to be given priority. This
identification of target market before production becomes essential to deliver the desired
customer satisfaction and delight.

4.3 FACTORS INFLUENCING CONSUMER BEHAVIOUR

The consumer behaviour or buyer behaviour is influenced by several factors or forces. They are:

1. Internal or Psychological factors

2. Social factors
3. Cultural forces
4. Economic factors
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 5. Personal factors
6. Other factors

4.3.1.1.Internal or psychological factors:

The buying behaviour of consumers is influenced by a number of internal or psychological

factors. They are:

(a) Motivation
(b) Perception
(c) Learning
(d) Beliefs and attitudes
(e) Personality

Motivation

Motivation is the force that activates goal-oriented behaviour. Motivation acts as a driving force
that impels an individual to take action to satisfy his needs. So it becomes of the internal factors
influencing consumer behaviour.

Man is a perpetual wanting animal. Therefore, when one need is satisfied, a new need at a higher
level emerges. These needs have been classified by Abraham H. Malsow and called it hierarchy of
needs.

Self-Actualization

Esteem needs

Socio cultural needs

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 Safety or security needs

Physiological needs

PERCEPTION

A motivated person is ready to act. How the person acts is influenced by his perception of the
situation. People perceive differently because of selective exposure, selective distortion and
selective retention.

Selective exposure

A person may be exposed to a number of stimuli every day. But it is not possible for him to give
attention to all these stimuli. He will pay attention only to a few selected stimuli after screening.
It is found out by research that people are likely to notice only those stimuli, which relate to their
current needs. So marketers must try to find out which stimuli people will notice.

Selective distortion

People who notice the same stimuli may not interpret them in the same way as intended by the
marketers. They may interpret them to fit their own beliefs and attitudes, which differ from
person to person. It explains the tendency of the people to adopt information in a way that will
support what they already believe. It suggests that the marketers must try to understand the
mindset of the consumers.

Selective retention

People tend to forget a number of stimuli or information, which support their beliefs and
attitudes. They remember only that information in which they are interested and have strong
buying motives. Therefore, the marketers must make an appeal to the buyer’s strong motives.

Learning

It is defined as the changes in the behaviour of an individual arising from the past practice or
previous experience. The learning process occurs through the interplay of drivers. Stimuli, was
responses and re-enforcement. A drive is a strong internal stimulus, which calls for action. This
becomes a motive when it is directed towards a particular stimulus object. It motivates a person
to act towards the satisfaction of needs. The objects are stimuli, which satisfy the drives. Cues
are minor stimuli, which determine when, where and how the buyer responds. It may be seeing
the object in the television every day, hearing about discount in price etc. This puts him into
action. The response of satisfaction or dissatisfaction is re-unforced. This learning process results

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in habits, attitudes and beliefs. A marketing manager can build a demand for their products by
associating it with strong drives, using motivating cues and providing positive reinforcement.

Beliefs and Attitudes

People through acting and learning, develop their beliefs and attitudes, which, in turn, influence
their buying behaviour. Beliefs refer to a descriptive thought, which a person has about
something. Marketing managers are generally interested in the beliefs that the people formulate
about specific products and services.

An attitude is a state of mind or feeling. It may be described as person’s emotional feelings,

action, and tendencies towards some idea or object. It explains a persons relatively consistent
evaluations, feeling and tendencies towards an object or idea.

Attitudes cannot be changed easily, because person’s attitudes settle into a consistent pattern.
So the marketing managers should usually try to fit firms products into existing attitudes rather
than try may to change the attitudes them selves.

Personality

It refers to the personal traits and qualities that determine his behaviour such dominance,
adventurousness, sociability, friendliness, responsibility etc.

The primary features of personality are self-concept, roles to be played, levels of consciousness.

The self-concept of self-image indicates how a person sees himself and how he believes other to
see him at a particular time.

4.3.1.2Social factors

The social factors influencing consumer behaviour are a) Family, b) Reference Groups, c) Role
and Status

A family

There are two types of families in buyers via Nuclear family and joint family. Family members can
strongly influence the buyer behaviour, particularly in the Indian context. The tastes like,
dislikes, life styles etc. of the members are rooted in the family buying behaviour.

The family influence on the buying behaviour of a member may be found in two ways
1) The family influence on the individual personality, characteristics, attitudes and evaluation
criteria
2) The influence on the decision making process involved in the purchase of goods and services.
In India, the head of family may alone or jointly with his wife decide the purchase. So
marketers should study the role and relative influence of the husband, wife and children in
the purchase of goods and services.

Reference group

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A reference group is a group of people with whom an individual associates. It is a group of people
who influence a person’s attitudes, values and behaviour directly or indirectly. The various
reference groups are:

Membership group

They are those groups to which the person belongs and interacts. These groups have a direct
influence on their members’ behaviour.

Primary group

They refer to the groups of friends, family members, neighbors, co-workers etc. In this case, there
is fairly continuous or regular but informal interaction.

Secondary group

They include religious groups, professional groups etc. Here there is less continuous interaction.

Aspirational group

These are groups to which a person would like to join as member. People are also influenced by
these groups.

The reference groups, exert strong influence on the behaviour. Therefore, knowledge of reference
groups is quite essential for marketers for successful marketing.

In a reference group, there may be a group leader who acts as an opinion leader and whose life
style is most likely to be adopted by others in the group. So marketers must try to contact and
impress upon the opinion leader to popularize their products.

Roles and status

A person participates in many groups-family, clubs and organisations. The person’s position in
each group can be defined in terms of role and status. A role consists of the activities that a
person is expected to perform. Each role carries a status. People choose products that
communicate their role and status in the society. Marketers must be aware of the status symbol
potential of the products and brands.

4.3.1.3Cultural factors

Cultural factors consists of

a) Culture
b) Sub culture
c) Social class

a) Culture

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Cultural is the most fundamental determinants of person’s want and behaviour. The growing
child acquires a set of values, perceptions, preferences, and behaviours through his or his family
and other key institutions.
Culture influences considerably the pattern of consumption and the pattern of decision-making.
Marketers have to explore the cultural forces and have to frame marketing strategies for each
category of culture separately to push up the sales of their products and services.

b) Sub-culture

Each culture consists of smaller sub-cultures that provide more specific identification and
socialization for their members; subcultures include nationalities, religions, racial groups and
geographic regions. Many sub cultures make up important market segments and marketers have
to design products and marketing programs tailored to their needs.

c) Social class

Consumer behaviour is determined, by the social class to which they belong social class is
relatively a permanent and ordered division in a society whose members share similar value,
interest a behaviour.

Social class is not determined by a single factor, such as income but it is measured as a
combination of various factors, such as income, occupation, education, authority, power,
property, ownership, life styles, consumption pattern etc.

4.4.Economic factors

Consumer behaviour is influenced largely by economic factors. The various economic factors that
influence consumer behaviour are:

a. Personal Income
b. Family Income
c. Income Expectations
d. Savings
e. Liquid Assets Of The Consumer
f. Consumer Credit
g. Other Economic Factors

4.4.1.1Personal Income
The personal income of a consumer is an important determinant of his buying behaviour.
The gross personal income of a person consists of disposable income and discretionary income.
The disposable income refers to the actual income remaining at the disposal of a person after
deducting taxes and compulsory deduct able items from the gross income. A fall in the disposable
income, leads to a fall in the expenditure on various items. The discretionary personal income
refers to the balance remaining after meeting basic necessacities of life. This income is available
for the purchase of shopping goods, durables and luxuries. An increase in the discretionary
income leads to an increase in the discretionary income leads to an increase in the expenditure
on shopping goods, luxuries etc, which improves the standard of living of a person.

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 4.4.1.2Family Income

Family income refers to the aggregate income of all the members of the family. The surplus family
income, remaining after the expenditure on the basic needs of the family is made available for
buying shopping goods, durables and luxuries.

a. Income Expectations

Income expectations are one of the important determinants of the buying behaviour of an
individual. If he expects any increase in his income, he is templed to spend more on shopping
goods, durable goods and luxuries on the other hand, if he expects any fall in his future income,
he will curtail his expenditure on comforts and luxuries and restrict his expenditure to bare
necessities.

b. Savings

Savings also influence the buying behaviour of an individual. A change in the amount of savings
leads to a change in the expenditure of an individual. If a person decides to save more out of his
present income, he will spend less on comforts and luxuries.

c. Liquid assets

Liquid assets refer to those assets, which can be converted into cash quickly without any loss.
Liquid assets include cash-in-hand, bank balance, marketable securities etc. If an individual has
more liquid assets, he goes in for buying comforts and luxuries. On the other hand he has less
liquid assets, he cannot spend more on buying comforts and luxuries.

d. Consumer credits

Consumer credit refers to the credit facility available to the consumers desirous of purchasing
durable comforts and luxuries. It is made available by the sellers either directly or indirectly
through banks and other financial institutions. Hire Purchase, installment purchase, direct bank
loans etc. are the ways by which credit is made available to the consumers.

Consumers credit influences consumer behaviour. If more consumer credit is available on liberal
terms, expenditure on comforts and luxuries increases, as it induces consumers to purchase
these goods, and raise their living standards.

4.5. Personal factors

Personal factors also influence buyer behaviour. The important personal factors, which influence
buyer behaviour, are:

a) Age
b) Occupation
c) Income
d) Life style

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4.5.1.1 Age - Age of a person is one of the important personal factors influencing buyer
behaviour. People buy different products at their different styles of life cycle. Their taste,
preference, etc also change with change in life cycle.

4.5.1.2) Occupation – Occupation or profession of a person influences his buying behaviour. The
life styles and buying considerations and decisions differ widely according to the nature of the
occupation. The marketing managers have to design different marketing strategies to suit the
buying motives of different occupational groups.

4.5.1.3 Income - Income level of people is another factor which exertent influence in shaping the
consumption pattern. Income is an important source of purchasing power. So, buying pattern of
people differs with different levels of income.

4.5.1.4 Life-Styles – Life style of person’s pattern or way of living as expressed in his activities,
interests and opinions.
Life style of a person determines his interaction with the society in which he lives.
Marketing Managers have to design different marketing strategies to suit the life styles of the
consumers.
.
4.6Other Factors

Other factors which influences the consumer in their consumptions patterns one:-

1) Political Factors
2) Legal factors
3) Technology
4) Ethical considerations

Buying Roles

Often we find that in a consumer decision process several individual are involved. Each of them
plays an influencing role. At times more than are role can be played by individual. These roles
are:

Initiator:
This is a person who sows the seed in a customers mind to buy the product. This person may be
a part of the customer’s family like a child, spouse or parents.

Influencer:
Is a person within or outside the immediate family of the customer who influences the decision
process? The individual perceived as an influencer is also perceived as an expert. In consumer
durable sale the dealer plays an influencing role.

Decider:
Is the person who actually takes the decision? In a joint family often it is the head of the family or
the elders in the family who takes the decision. But in nuclear and single families and with the
increase in the literacy among women and number of working couples, one finds that more often
than not, decisions are joint. Husband, wife and even the entire family taking the decision,

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particularly on major purchases, is quite common in urban and metro areas. The deciders
consider both economic and non- economic parameters before selecting a brand.

User:
Is the person who actually consumers the product. This could be entire family or just one person
with in the customer family.
It is important to note that people who play these roles seek different values in the product
services. The perception of the values is to a large extent influenced by their prior experience or
that of the experience of others, media reports and the making cues created by the firms. These
values, which may also be referred to as, market value is the potential of a product or service to
satisfy customers needs and wants.

The Buying Process:

Stages in buying process

* Problem recognition (need recognition)
* Awareness
* Comprehension (evaluation)
* Attitudes
* Legitimization
* Trial
* Adoption
* Post purchase behaviour

1. Problem Recognition (Need Recognition)

The process of buying normally starts with the recognition of a need by the consumer. He
recognizes a problem and develops a perception of the problem. Then he seeks the information
for solving the problem.

2. Awareness:
The customer turns to the environment of information around him. It makes him aware of the
existence of the product that would solve his problem.

3. Comprehension (evaluation)
Comprehension comes out of his stability to reason with the information. The awareness and
comprehension stage represent the information processing stage.

4. Attitude:
It is the sum total of the individuals faith and feelings towards a product. As a result of his
awareness and comprehension. The consumer develops an attitude favorable or unfavorable
towards the product. The purchase process will continue only if he develops a favorable
attitude or linking for the product.

5. Legitimization:
The buyer must be convinced that the purchase of the product is the legitimate course of
action. This stage often stands as barriers between a favorable attitude towards the product
and actual purchase. Only if the buyer is convinced of the correctness of his decision, he will
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 proceed. At this stage, he may seek further information regarding the product or attempt to
access the information already available.

6. Trial:
Conviction leads the consumer to try the product on a small scale, he may buy a sample. He
tries to evaluate the product from his own experience.

7. Adoption:
A successful trial leads him to buy/adopt the product.

8. Post-purchase Behaviour:
The purchase leads to a specific post- purchase behaviour. Usually it creates some restless
ness in the mind of the individual. He is not sure about the product. He may feel that the
other brand would have been better. He may also feel that the sales man has taken him for a
side. As this dissonance is uncomfortable, the individual, by himself will seek all the means to
recover his conviction and poise. He will seek reassuring advertisements of the products or he
may deliberately avoid positive stories about the competition brand.

How Does Organisation Buyers Make Their Buying Decisions?

Business buyers do not buy goods and services for personal consumption utility. They buy
goods and services to make money or to reduce operating costs or to satisfy a social or legal
obligation. A steel company will add another finance. If, it see a chance to make more money.
It will computerize its accounting system to reduce the cost of doing business. Today firms are
looking for opportunities to drastically cut down their costs, stream living their operations and
connect better to their customers. In several researches at various corporate, it was found
that industrial buyers today consider following factors in their decision-making.

Continuous and reliable product performance:

Here the emphasis is on the product performing to the customer’s satisfaction every time that
it is used. Here the customers concern is to maximize his benefits from the product, or in
other words optional utilization of the product, through its life. Today industrial buyers are
looking at parameters like MTBF (mean time between two failures) and MTR (Mean time to
restore) in the case of a breakdown. Customers today demand conformance to national and
global standards.

(b) Generated delivery:

Organizational buyers today demand that suppliers manage their deliveries. In specific terms,
organisational buyers are expecting suppliers to deliver the right product mix, in the right
quantity, as per the committed schedule. Increasing Indian buyers are realizing that if they do
not manage their supply chain, they will be out of business.

(c) Technology fit:

Most Indian buyers firms work on old plants and equipment. This posses a significant
challenge to their suppliers who may want to introduce new technology products.
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 (d) Price:

Price is an important component of decision-making. Organisational buyers are now price

sensitive and hence look for suppliers who offer then the above three values at the lowest
price, supplier cost, credit terms, payment terms, mode and even financial arrangements
offered by them go a long way in buyers decision to place an order with the supplier.

(e) Service:

Industrial buyers now demand more quality after sales services; service has come to have a
new meaning. It is not just repairs and maintaince of equipment in the shortest time, but also
includes complaint management, being continuously with the customer, or time availability to
the consumer and even guidance to the customer and even guidance to the customer in his
operations.

(f) Company sales force:

Last but not the least, Indian buyer firms expect the supplier sales force to be knowledgeable,
available and willing to help him resolve his problems. It is in this context that one has keep
in mind the dynamic character of the values sought by organizational customers.
Thus, we see that Indian corporate buyers are value seekers. It is important to note that
competition; technology and complexity in the customer’s environment are constantly
changing the customer’s value sets.

What is sold to an organisation customer?

The organisational buyer purchases several products. These be categorized into three major
groups:
(a) Capital goods like plant and machinery and office products.
(b) Spare pants and components.
(c) Consumables like raw material, packaging material, lubricants and so forth.

We need to appreciate that the cost and risk involved varies across these product groups. It is the
maximum in capital goods and minimum in consumables. Besides, consumable are repeat
purchases and are often brought at regular intervals. But spare parts and components are
bought less regularly and are generally ordered only when the minimum re-orders level has been
reached in the store. Capital goods are brought even less frequently and are generally purchased
following an expansion, diversification, or upgrading decisions. Following this pattern of
purchases, one may anticipate a higher degree of vendor loyalty in the case of consumables
rather than in capital goods, where vendor credibility in completing a project in specified time
period becomes a determining factor. The marketers needs to be aware of the fact that, in
consumable purchases, the customer will always look for substitutes that can help him reduce
costs. Briefly speaking the marketer today has dual role.

(a) Help the customer reduce his costs and make him competitive, and

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 (b) Maintain excellent relations so as to know the substitutes with which the client firm is
experimenting n.

Buying Motives

A sale is usually made in the minds of the buyers, but not in the minds of the salesman. The
customer is motivated or induced by some reason. Therefore it is essential for marketers to
know what induces the buyer to buy and how he can be induced.

Meaning:
Buying motive is the urge or motive to satisfy a desire that makes people buy goods or
services. Behind every purchase there is a buying motive. It refers to the thoughts, feelings,
emotions and instincts, which arouse in the buyer a desire to buy an article. A buyer does not
buys because he has been persuaded by the salesman but he buys for the around desire in
him.

Definition:
According to Prof. D.J Duncan “ Buying motives are those influences or considerations which
provide the impulse to buy purchase to buy induce action and determine choice in the
purchase of goods and services.
Thus every action of an individual has a motive behind it. Motives are present in the minds of
the buyer but not in the product. The study of buying motives would help the salesman to
arouse favorable attention of the consumer and finally sell the product. Buying motives are
broadly divided into product motives and patronage motives. Further we can classify the
motives as follows:
(a) Emotional buying motives and (b) Rational buying motives.

Product buying motives:

Product buying motives refer to those influences and reasons which prompt (i.e. induce) a
buyer choose a particular product in preference to other products. They include the physical
attraction of the product i.e. the design, shape dimension, size, color, package, performance,
price etc. of the product or the Psychological attraction of the product (i.e. the enhancement of
the social prestige or status of the purchaser through into procession), desire to remove or
reduce the danger or damage the life or body of the possessor, etc. In short they refer to all
those characteristics of a product, which induce a buyer to buy it in preference to other
products.

Product buying motives can be as follows.

(A) Emotional product buying motives:
When a buyer decides to purchases a product without thinking over the matter
logically and (i.e. without much reasoning), he is said to have been influenced by
emotional product buying motives. Emotional product buying motives include the
following.

1. Pride and prestige:

Pride is the most common and strongest emotional buying motive. Many buyers are proud
of possessing some product (i.e. They feel that possession of the product increases their social

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prestige or status) in fact; many products are sold by the sellers by appealing to the pride or
prestige of the buyers.

2. Emulation or Imitation:
Emulation, i.e., the desire to imitate others, is one of the desire to imitate others, is one of
the important emotional buying motives. For instance, a housewife may like to have a silk sarree
for the simple reason that all the neighboring house moves have silk sarees.

3. Affection:
Affection or love for others is one of the stronger emotional buying motives influencing the
purchasing decisions of the buyers; many goods are purchased by the buyers because of their
affection or love for others. For instance, a husband may buy a costly silk saree for his wife or a
father may buy a costly watch for his son or daughter out of his affection or love.

4 Comfort or desire for comfort:

Desire for comfort is comfortable living is one of the most important emotional buying
motives. Infact, many products are bought because the desire for comfort. For instance fans
refrigerators, washing machines, cushion beds etc. are bought by the people just because of this
particular motives.

5 Sex appeal or sex attraction:

Sex appeal is one of the important emotional buying motives of the buyers. Buyers buy
and use certain things, as they want to be attractive to the members of the opposite sex. Men and
women buy cosmetics, costly diseases etc, because of this emotional motive i.e. sex appeal.

6 Ambition:
Ambition is one of the emotional buying motives. Ambition refers to the desire to achieve a
definite goal. It is because of this buying motive that, sometimes, customer buys certain things.
For instance, it is the ambition that makes many people, who do not have facilities to purse their
college education through regular colleges, pursue their education through distance learning.

7 Desire for distinctiveness or individually

Desire for distinctiveness, i.e., desire to be distinct from others, is one of the important
emotional buying motives. Sometimes, customers buy certain things, because they want to be in
possession of things, which are not processed by others. Purchasing and wearing a particular
type of dress by some people is because of their desire for distinctiveness and individuality.

8 Desire for recreation or pleasure:

Desire for recreation or pleasure is also one of the emotional buying motives. For instance,
radios, musical instruments etc, are brought by people because or their desire for recreation or
pleasure.
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9 Hunger and thirst:
Hunger and thirst are also one of the important emotional buying motives. Food stuffs,
drinks, etc, are bought by the people because of this motive.

10 Habit:
Habit is one of the emotional considerations influencing the purchasing decision of the
customers. Many customers buy a particular thing because of habit, (i.e. because they are used
to the consumption of the product) for instance, many people purchase cigarettes, liquors etc,
because of sheer habit.

Rationale product buying motives:

When a buyer decides to buy a certain thing after careful consideration (i.e. After thinking
over the matter consciously and logically), he is said to have been influenced by rational product
buying motives. Rational buying motives include the following.

1. Safety or security:
Desire for safety or security is an important rational buying motive influencing many
purchases. For instance, the people because of this motive buy iron safes or safety lockers.
i.e. because they want to safeguard their cash etc against theft.

2. Economy:
Economy is saving operating costs, is one of the important rational buying motives. For
instance Bajaj caliber bikes are preferred by the people because of the economy or saving in
the operating cost i.e., petrol costs.

3. Relatively low price:

Relatively low price is one of the rational buying motives. Most of the buyers compare the
prices of competing products and buy things, which are relatively cheaper.

4. Suitability:
Suitability of the products for the needs is one of the rational buying motives. Intelligent
buyers consider the suitability of the products before buying then. For example a buyer, who
has a small dinning room, naturally goes in for a small dining table that is suitable.

5. Utility or versatility:
Versatility or the utility of a product refers to that quality of the product, which makes it
suitable for a variety of uses. Utility of the product is one of the important rational buying
motives.

6. Durability of the product:

Durability of the product is one of the most important rational buying motives. The people
only on the basis of their durability bring many products.

7. Convenience of the product:

The convenience of the project (i.e. the convenience the product offers to the buyers) is one of
the important rational product buying motives. Many products are bought by the customer
become of convinces for instance washing machines, gas staves etc.
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(c) Patronage Buying Motives:
Patronage buying motives refer to those considerations or reasons, which prompt a buyer to
buy the product wanted by him from a particular shop in preference to other shops. In other
words they are those consideration or reasons, which make a buyer patronize a particular
shop in preference to other shops while buying a product.
Patronage buying motives maybe classified as follows:
(I) Emotional Patronage buying motives.
(II) Rational Patronage buying motives

(A) Emotional patronage buying motives:

When a buyer patronizes a shop with out applying his mind or without reasoning he is
said to have been influenced by emotional patronage buying motives. Following is
classification.

1 Application of the shop

Appearance of the shop is one of the important emotional patronage buying motives.
Some people make their purchases from a particular shop because of good or
attractive appearance of the shop.

2 Display of goods in the shop:

Attractive display of goods in the shop also makes the buyers patronize a particular
shop.

3 Recommendation of others:
Recommendation of others also constitutes on of the important emotional patronage
buying motives. Some people purchase their requirements form a particular shop
because others have recommended that shop to them, i.e., by their friends and
relatives.

4 Limitation:
Limitation also is one of the emotional patronage buying motives influencing the
purchases of buyers. Some people make their purchases from a particular shop just
because other people make their purchases from that shop.

5 Prestige:
Prestige is one of the emotional patronage buying motives of the buyer. For instance
some people consider it a prestige to take coffee from a five-star hold.

6 Habit:
Habit is also one of the important emotional patronage buying motives. Some people
make their purchase from a particular shop for the simple reason that they have been
from that shop.

(b) Rational patronage buying motives:

When a buyer patronizes a shop after careful consideration (i.e., after much logical
reasoning, and careful thinking), he said to have been influenced by national
patronage buying motives. Rational patronage buying motives include the following:
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1 Convenience:
Convenient location proximity of a shop is one the consideration influencing the
purchases of many buyers, usually, buy their requirements from a near by shop as it
is convenient working hours of the shop also influence the purchase of good many
buyers.
2 Low price charged by the shop:
Price charged by the shop also influences the buyer to patronize a particular shop. If
the price charged by a shop for a particular product is relatively cheaper, naturally,
many people will make their purchases from a shop, which offers credit facilities.

3 Credit facilities offered:

The credit facilities offered by a store also influence the buying of some people from a
particular shop. People who do not have enough money to make cash purchases every
time prefer to make their purchases from a shop which offers credit facilities.

4 Services offered:
The various sales and after sales services, such as acceptance of order through phone
some delivery of goods, repair services, etc offered by a shop also induce the buyers to
buy their requirements from that shop. Rational buyers are often influenced by the
various services or facilities offered by the sloop.

5 Efficiency of salesman:
The efficiency of the salesman employed by a shop also influences the people in
patronizing a particular shop. If the employees are efficient and are capable of helping
the buyer in making their purchases, people, naturally, would block to such a shop.

6 Wide choice:
Wide choice of goods offered by a shop is one of the rational considerations making the
buyers patronize a particular shop, people, generally, prefer to make their purchases
from a shop which offers wide choice (i.e. Wide variety if goods)

7 Treatment:
The treatment meted out by a shop to the customers is one of the rational
considerations influencing the buyers to patronize a particular shop. Usually, people
would like to purchase their requirement from a shop where they get customs
treatment.

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 UNIT 5

MARKET SEGMENTATION
5.1DEFINITION
5.2WHY SEGMENT THE MARKET
5.3 BASES FOR SEGMENTATION
5.4MARKET SEGMENTATION STRATEGIES
5.5MARKET POSITIONING
5.6POSITIONING STRATEGIES

5.1Segmentation Defined

Market segmentation is the process of dividing a heterogeneous market into homogeneous

sub-unit. A market is an aggregate of consumers of a given product. And,
Consumers, who make a market, are seldom are homogenous lot; they vary in their
characteristics and buying behaviors. It is therefore national to segments market.

Marketers usually divide the heterogeneous market for any product into segments with
relatively more homogenous characteristics, since this help is tapping it. And this process of
disaggregating a market into a number of sub-markets/segments is known as market
segmentation.

5.2 Why Segment The Market

Let us see how segmentation benefits the marketer.
1. Facilities proper choice of target market
Segmentation helps the marketers to distinguish one customer group from another with in
a given market and thereby enables him to decide which segment should form his target
market.

2. Facilities tapping of the Market, adapting the offer to the target.

Segmentation also enables the marketers to crystallize the needs of the target buyers. It
also helps him to generate an accurate prediction of the likely responses from each
segment of the target buyers. This, in turn, will help the marketer develop marketing
offers/programmes that are most suited to each group. He can achieve the specialization
that is required in product, distribution, promotion and pricing for matching the particular
customer-group, and develop marketing offers and appeals that match the requirements of
that particular group.

3. Makes marketing effort more efficient and Economic

Segmentation also makes the marketing effort more efficient and economic. It ensures that
the marketing effort is concentrated on well-defined and carefully chosen segments. After all the
resources of the firm are limited and no firm can normally afford to attack and tap the entire
market without any delimitation what so ever. It would benefit the firm if the efforts were
concentrated on segments that are the most productive and profitable.

4. Benefits the customer as well

Segmentation brings benefits not only to the marketer, but to the customer as well. When
segmentation attains higher levels of sophistication and perfection, customers and companies
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can conveniently settle down with each other as at such a stage they can safely rely on each
other’s discrimination. The firm can anticipate the wants of the customers and the customers can
anticipate the capabilities of the firm.

5.3 Bases For Segmentation

Basis for segmenting

Consumer market

Consumer Characteristics Consumer

response

Geographic Demographic Psychographics Occasions Benefits Loyal

Buyer
Status Readiness

User Status Uses Sale Attitudes

Under Characteristics there are three main bases of segmentation. They are:

5.3.1.1 Geographic

This calls for dividing the market into different geographical units such as nations, stats,
regions, countries, cities or neighborhoods. The company can operate in one or fees geographic
areas or operate in all but pay attention to local variations.
5.3.1.2 Demographic Segmentation

In demographic segmentation the market is divided into groups on the basis of variable
such as age, family size, family life-cycle, gender, income, occupation, education, religion, race
generation nationality and social class. Demographic variables are the most popular basis for
distinguishing customer groups. One reason is that consumer wants, preferences and usage
rates are often associated with demographic variables. Another is that demographic variables are
easier to measure. Some of the demographic variables used are: -

a) Age and life-cycle

Consumer’s want and abilities change with age. On the basis of age, a market can be
divided into fair parts viz, children young, adults and old. For consumers of different age groups,
different products are produced. For example different types of ready-made garments are
produced for consumers of different age groups. A successful marketing manager should

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understand the age groups for which the product would be most suited and determine his
marketing policy pricing policy, advertising policy etc; accordingly.

b) Gender
Gender segmentation has long been applied in clothing, hairstyling, cosmetics and
magazines; occasionally other marketers notice an opportunity for gender segmentation.

c) Income
Income segmentation is a long-standing practice in such product and service categories as
automobiles, clothing, cosmetics and travel. However, income does not always predict the best
customers for a given product.

d) Generation
Many researchers are not turning to generation segmentation. Each generation is
profoundly influenced by the times in which it grows up – the music, movies, politics and events
of that period.

e) Social Class
It has a strong influence on preference in cars, clothing, home furnishings, leisure
activities, reading habits etc. Many companies design products and services for specific social
classes.

5.3.1.3 Psychographics Segmentation:

In psychographics segmentation buyers are divided into different groups on the basis of
life-style or personality and values people within the same demographic group can exhibit very
different psycho graphic profiles.

a) Life-style: People exhibit different life-styles and goods they consume, express
their life-styles. Many companies seek opportunities in life-style segmentation. But
life-style segmentation does not work always.

b) Personality: Marketers have used personality variables to segment markets. They

endow their products with brand personality that correspond the consumer
personality.

c) Values: Some marketers segment by core values, i.e. belief systems that underlie
consumer attitudes and behaviour. Core values go much deeper than behaviour or
attitude and determine, at a basic level people’s choices and desires over the long
term. Marketers who segment by values believe that by appealing to people inner
selves it is possible to influence their outer-selves their purchase behaviour.

5.3.1.4Behavioural Segmentation or Consumer Response Segmentation

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 In behavioural segmentation, buyers are divided into groups on the basis of the knowledge
and attitude toward, use of or response to a product. Some marketers believe that
behavioural variables are the best starting points for constructing market segments.

a) Occasions

According to the occasions buyers develop a need, purchase a product or use a product. It
can help firm expand product usage. A company can consider critical life events to see
whether they are accompanied by certain needs.

b) Benefits: Buyers can be classified according to the benefits they seek.

c) User Status: Markets can be segmented into non-user, potential users, first time users
and regular users of a product. Each market segment requires a different marketing
strategy. The companies’ market position will also influence its focus. Market share
leader will focus on attracting potential users, whereas smaller firm will try to attract
current users away from the market leader.
d) Usage Rate: Marketers can be segmented into light medium and heavy product users.
Heavy users are often a small percentage of the market but account for a high percentage
of total consumption. Marketers prefer to attract one heavy user rather than several light
users and they vary their promotional efforts accordingly.
e) Loyal Status: Have varying degrees of loyalty to specific brands stores and other entities.
Buyer can be divided into four groups according to brand loyalty status.

(i) Hand core loyal: Consumers who buy one brand all the time
(ii) Split loyal: Consumers who are loyal to two or three brands
(iii) Shifting loyal: Consumers who shift from one brand to another
(iv) Switchers: Consumers who show no loyalty to any brand

Each market consists of different number of the four types of buyers. Companies selling
in a brand loyal market have a hand time gaining more market share and companies that enter
such a market have a hard time getting in.

A company can identify its products strengths its split loyal, the company can pinpoint
which brands are more competitive with its own. By looking at customers who are shifting away
from its brand, the company can learn about its marketing weaknesses 4 attempts to correct.

f) Buyer readiness stage:

A market consists of people in different stages of readiness to by a product. Some are

unaware of the product, some are aware, some are informed, some are interested some
desire the product and some intend to buy. The relative number makes a big difference in
designing the marketing program.

g) Attitude

Five attitude groups can be found in a market. They are enthusiastic, positive, indifferent,
negative and hostel.

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5.4 Market Segmentation Strategies

Depending upon the emerging patterns of market segmentation, homogeneous preference

(showing no natural segments) as in case of soft drinks sale by pepsi and coca-cola) diffused
preference (showing clear preferences as in case of automobile market) and clustered preference
(market showing natural segments as in case of occupation having impact on the types of clothes
wearing) a company choose its market segmentation strategy.

5.4.1.1 Undifferentiated Marketing

It is a market coverage strategy in which the company treats the target market as one and
does not consider that there are market segments that exhibit uncommon needs. The company
focuses on the center of the target market to get maximum advantage. The feature of one
product all segments call for presenting one marketing-mix for the target market. For example,
the Coca-cola company sells Coke, Limca, Thums-up etc., and does not distinguish the target
audiences.

5.4.1.2Differentiated Marketing

It is a market coverage strategy in which the company goes for proper market
segmentation as depicted by its analysis of the total market. The company therefore goes for
several products or several segment approach, which calls for preparing different marketing
mixes for each of the market segment. This strategy is followed by Hindustan Lever which sells
different soaps (lifebuoy, Lux, Rexona, Liril, Pears etc.) and each of them has its own market.
Thus the company creates segments in the soap market and not in toiletries market including
soaps, detergents, toothpaste etc.

c) It’s a market coverage strategy in which company follows one product-one segment
principle. The company tries to position its product in the middle of the segment to attract
maximum clientele. For example, Ashok Leyland produces large chassis of machine, which can
be used for buses and trucks. The manufacturer gets maximum knowledge about the segments
needs and therefore acquires special reputation. This strategy can also help the small company
to stand against a large cooperation because the small company can create riches in its one-
product one segment.

5.5 Market Positioning:

Each firm needs to develop a distinctive positioning for its market offering

Positioning

Positioning is the act of designing the company’s offering and image to occupy a distinctive
place in the target markets mind. The end result of positioning is the successful creation of a
market focused value proposition a cogent reason why the target market should buy the product.

Each company must decide how many differences to promote to its target customers.
Many marketers advocate promoting only one central benefit. Number one positioning include
“best quality,” best service, lowest price ‘best value”, “safest”, more advanced technology etc. of a
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company hammers away at one of these positioning and delivers on it, it will probably be best
known and recalled for its strength.

Not everyone agrees that single-benefits positioning is always best. Double benefit
positioning may be necessary of two or more firms claim to be best on the same attribute. There
are even cases of successful triple benefit positioning.

As the company increases the number of claims for their brand, they risk disbelief and a
loss of clear positioning. In general a company must avoid four major positioning errors.

5.5.1.1 Under Positioning

Some companies discover that buyers have only a vague idea of the brand. The brand is
seen as just another entry in a crowded market place.

5.5.1.2 Over-positioning

Buyers may have to narrow image of the brand.

5.5.1.3 Confused Positioning

Buyers right have a confused image of the brand resulting from the company’s making too
many claims or changing the brands positioning too frequently.

5.5.1.4 Doubtful Positioning

Buyers may find it hard to believe the brand resulting from the company’s making to many
claims or changing the brands positioning too frequently.

5.6 Positioning Strategies

The different positioning strategies that are available are:

1) Attribute Positioning: A company positions itself on an attribute such as size or

number of years in existence.
2) Benefit Positioning: The product is positioned as the leader in a certain benefit.]
3) Use or application positioning: Positioning the product as best for some user group
and application.
4) User positioning: Positioning the product as best for some user group.
5) Competitor Positioning: The product claims to be letter in some way than a named
competitor.
6) Product Category positioning: The product is positioned as the leader in a certain
product category.
7) Quality or Price Positioning: The product is positioned as offering the best value.

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 UNIT –6

Marketing Strategy

6.1 MEANING OF MARKETING STRATEGY

6.2 ORMULATION OF MARKETING STRATEGY
6.3 CONDITIONS FOR SUCCESS OF MARKETING STRATEGY

6.1The Meaning Of Marketing Strategy:

Marketing strategy is the complete and unbeatable plan, designed specifically for attaining the
marketing objectives of the firm/business unit. The marketing objectives indicate what the firm
wants to achieve, the marketing strategy, provides the design for achieving them.

6.2 Formulation Of Marketing Strategy:

Formulation of marketing strategy consists of three main tasks:

1) Selecting the target market

2) Positioning the offer
3) Assembling the marketing mix

This implies that the essence of the marketing strategy of a firm for a given product brand can
be grasped from the target market chosen, the way it is positioned and how the marketing mix
is organized. The target market shows to whom the unit intends to sell the products,
positioning and marketing mix together show how and using what uniqueness or distinction,
the unit intends to sell.

6.2.1.1 Selecting the Target Market:

The process of market segmentation throws up not one but several market segments, with
varying potential, profitability and risks. The firm may not be interested in all the segments.
There may be segments that are sizeable and the ones that are not sizable. There may be
segments assuring immediate profits and the ones that call for heavy investment in market
development. There may also be segments that show great potential, but display tough barriers
to entry. As such the question, which segment/segments, the firm should select as its target
market, assumes crucial importance.

6.2.1.2 Positioning

The next major dimension of marketing strategy relates to positioning of the offer. The
firm has already selected the target market and decided its basic offer. No the major exercise is
where to position its products. The firm has to clarify what it proposes to do with its offering,
how it wants the offer to be perceived by the customer, what position it seeks and what image it
proposes to build for its offer.

6.2.1.3. Assembling the marketing mix

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 Assembling of marketing mix means assembling the four Ps of marketing in the best
possible combination. Involved in the process are the choice of the appropriate marketing
effort/resources to each one of them. The firm has to find out how it can generate the targeted
sales and profit. It then chooses the combination/mix of product price place and promotion that
is best according to its judgment.

6.3 Conditions For Success Of Marketing Strategy

6.3.1.1Sizing up the Competitive forces:

Sizing up competition and the forces that shape competition in the industry, is a
component task of marketing strategy formulation. Sizing of competitive forces in the industry is
fundamental to strategy formulation. Because in competitive strategy, the basic requirement is
to find a position in the industry wherefrom a firm can defend it against competitive forces, and
wherever possible influences these forces in its favour.

The firm should have relevant competitive Advantages and the strategy should be woven around
them.

For marketing strategy whatever be the strategy to work the firm must have relevant
competitive advantage and the strategy must be woven around it. Any strategy gains meaning
only when it is executed and yields the intended resulted. And to execute strategies, the firm
should have relevant capabilities/expertise. Since marketing strategies have to operate in the
competitive context, the capabilities/expertise have to be superior compared to the competition.
In other words, they must amount to competitive advantage.

6.4marketing strategies - case study:Indian snack food market

Changing lifestyles create growth opportunities in the snack food market

Introduction

The decline of formal lunchtime eating is creating new market segments and strong growth in the
snack food market.

Research suggests that more of us eat lunch at our desks and spend all night playing computer
games. The snack market is enjoying strong growth due to a range of new products that are
positioned to exploit these changing lifestyles.

It has been apparent for some years that increasing time pressures on consumers have been the
main force behind a shift away from traditional mealtimes. Meal consumption is now fragmented
into:

• More frequent and smaller "meals" (the term “grazing” is often used to describe this behaviour)
• Taken in more diverse locations
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Datamonitor's new report, “Hand-held Snacks”, examines the UK hand-held savoury snacks
sector. It reveals that "on-the-go" eating and snacking are on the increase.

On-the-go consumption can be split into three key categories:

• On-the-move
• Multitasking (for example, eating while working), and
• Leisure

Hand-held snacks are well suited for consumption in all three situations and there is high
consumer demand. As more consumers take to eating while engaged in other activities, such as
office work, playing computer games or commuting, hand-held snacks are ideally poised to
exploit this trend.

Datamonitor's research finds that consumer choice in the hand-held snack sector has increased,
with a proliferation of flavours and variety, and more substantial snacks.

Segmentation

The report examines product launches across six segments of retail hand-held snacks: filled
bread; pastry-wrapped; unwrapped; pizza snacks; snack kits and others.

The filled bread segment has experienced a very high level of new product development over the
past 18 months, as sandwich-type snacks continue to enjoy high popularity. The main
innovation trends are exotic alternatives and "big eat" options.

Exotic alternatives to traditional sandwiches - wraps, , and fold-overs - have become increasingly
popular in recent years. Traditional sliced bread is making way for more "exciting" breads, in
order to raise the profile of the sandwich and appeal to consumers' adventurous tastes. Many of
these new breads are stronger, both structurally and in flavour, than sliced bread and allow for
more filling and the combination of unusual ingredients.

There has been strong innovation in more substantial filled bread products, aimed at people with
heartier appetites. Many of these "big eat" sandwiches are aimed at the male population, which
has a higher level of sandwich consumption than females. Such products include deep-fill
sandwiches and thick-cut sandwiches, such as Sainsbury's "The Big One", which makes a bold
claim to be "the UK's biggest pre-packed supermarket sandwich". Many big eat innovations
contain bacon, egg, sausage or other meats, and some have specific lunch themes.

Pastry-wrapped snacks witnessed the second highest levels of innovation, according to the report.
Ginsters have been prominent in developing the pastry slice, and other manufacturers in the UK
have been attempting to benefit from its success.

Unwrapped snacks, usually meat or cheese sticks such as Peperami, and "other" snacks, which
fit into none of the other sectors and include products such as scotch eggs and filled potato
skins, have also diversified (it is now possible to buy scotch egg bars among other things).

Emerging trend for healthy eating

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A significant emerging trend in the pizza snack market has been the introduction of "low-fat" and
"healthier" versions. These snacks appeal both to parents concerned about children's health and
to weight-conscious adults.

Datamonitor's analysis of new product trends finds that snack kits have changed comparatively
little recently. However, as an emerging sector it is dynamic and the fast growth of certain
brands, such as Kraft's Lunchables, demonstrates its growth potential. Snack kit trends have
focused on two main product types - lunchbox packs for children and dipping products.

The success of Lunchables can be attributed to the high interactivity of the product for its mainly
young consumers. Such interaction allows children to be responsible for their own meal, while
parents feel satisfied that their children are eating nutritious food. The fact that packs include
games or puzzles ensures that the concept is a firm favourite with children.

Dipping is the other main trend in the snack kit sector, with a variety of products available. The
element of fun has been central to the popularity of the dipping snacks, especially among
children. The idea of dipping food and mixing flavours is more interesting than a simple home-
made sandwich or a piece of fruit.

Analysis of hand-held snack product development has shown this sector to be very dynamic and
as more food manufacturers enter the market it is no longer simply enough to launch "convenient
savoury snacks". Consumers demand additional benefits - such as health and interesting tastes
and textures - beyond fulfilling basic nutritional needs. By offering these extra benefits
manufacturers will be able to expand the appeal of hand-held snacks to a broader consumer
base.

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 UNIT – 7

THE INDIAN CONSUMER

7.1 A BROAD PROFILE OF THE INDIAN CONSUMER

7.2CLASSIFICATION OF INDIAN CONSUMERS BASED ON ECONOMIC STATUS
7.3 THE MIDDLE CLASS MARKET

7.1A Broad Profile Of The Indian Consumer

No comprehensive study of Indian consumer has been undertaken so far. We have to rely
on the fragmented studies that have been conducted by different agencies.

India being very vast geographically consumers here are naturally scattered over a vast
territory. As the country is also marked by great diversity in climate, religion, language, literacy
level, customs and calendars, life styles and an economic status, here consumer presents a
complex and bizarre group. The heterogeneity holds many implications for a marketer, especially
to those going in for national marketing.

7.1.1.1Demography’s

Size of Population

According to the census 2001, the nations average literacy rate is 65.4 percent. The
literacy rate has been continuously going up and it was increased substantially in the last
decade.

On the other hand, India has the highest concentration of illiterates in the world, and on
the other, it has the second highest concentration of illiterates and literates and the third largest
pool of educated and technically trained manpower in the world. India has a strong pool of
engineers, scientists and technically trained manpower in the world. In modern field like
information technology, India has been displaying its strength very clearly in recent years.

Diversity, the Hallmark

Indian consumers are not homogenous lot. They are marked by diversity. It is this
diversity that strikes us first when we look at Indian consumers diversity in religion, language,
culture, tradition, social customs, dress and food habits.

Religion Diversity

The one billion plus people of India belong to seven different religions groups – Hindu,
Muslims, Christians, Sikh, Buddhists, Jains and Zoroastrians. In addition there are other
persuasions and there are sects, sub-sects, castes and sub caste. Each religion has its own
hierarchical structure, concretized through centuries of practices. Each caste has its own
customs and traditions established over generations. In birth and death, in marriage and family
life, the individual is entangled in the chores of his religion or caste.

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Linguistic Diversity

The same diversity is seen in the matter of language. Sixteen languages have been
specified in the constitution as national languages. In addition there are hundred of dialects. To
a marketing man who has to approach the entire national market of India, this linguistic diversity
is a big challenge.

Diversity in dress and food habits

As far as dress is concerned, India holds out the picture of widely varying styles. Almost
every state, or religions community, has its own traditional styles of dress. The same is the case
with ornaments and jewellery. As regards food, rice is the staple food in the south and wheat in
the north.

Geographic Spread

Out of 1,027 million population of India as per may 2001 census; 742 million people live
rural areas and 285 million in urban areas. In terms of percentage 73% of the population is in
rural areas and 27% in urban areas.

Within the urban segment there is great concentration of consumers in the metros. The six
cities Kolkata, Mumbai, Delhi, Chennai, Bangalore and Hyderabad are large by global standards.
The second tier of cities Ahmedabad, Kanpur, Pune, Nagpur, Lucknow and Jaipur also has high
consumer concentration. Large cities are concentrated in the south and west zones. Only eight
of the top ‘23’million plus cities are located in the north and east zones. There are about 3,750
towns in India. Sixty four percent of the urban population lives in 309 towns. The rest is
scattered across the remaining 3,400 odd terms. The rural consumers are spread over the five-
lakh villages.

7.2CLASSIFICATION OF INDIAN CONSUMER BASED ON ECONOMIC STATUS

 The affluent group

 The middle class
 The relatively poorer section
 The BPL section

7.2.1.1The Affluent Group

Numerically speaking, this group is small. It does not form a large enough demand base
in itself for most products. Yet, it has good deal of marketing significance. This is because
firstly, it is useful segment for luxury products. Secondly, in respect of other products too, super
premium brands depend on it. That is why it’s called image-segment.

7.2.1.2The middle class

It is the middle class that constitutes the largest segment of consumers for manufactured
goods in the country. It constitutes the real consuming populace. Accordingly, it has great
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marketing significance marketers must have good grasp of the evolution of this class, its
expansion in recent years and the growing buying potential of the class.

The third category, viz, the relatively poorer sections, also account for a good-sized demand
base for certain products. Through their purchase power is low, their size is very large.
According to one survey 75 percent of purchase of categories like cooking oil, tea, detergent cake,
bath soap, tooth powder, transistor radios and certain kinds of footwear, came from people with
income levels below Rs.25,000/- per annum.

7.2.1.3The BPL section

The below the poverty line section is the fourth category. It is also large in size. It does not
form part The relatively poorer section

of the demand base for most branded consumer products. The category is, however projected to
shrink substantially in the coming years, meaning that a part of this section will advance and
emerge as consumers for some branded consumer products.

The New Middle Class

 The most striking feature of contemporary India is the rise of a confident new middle
class. It is full of energy and drive, and it is making things happen.
 The middle class is at the centre of the socio economic upheaval now taking place in
India.
 India is passing from an inward-looking, predominantly rural society to an increasingly
integrated and important player in the world economy. Opportunities are opening up to
the middle class never before. Whether in the workplace or in their personal live, the
young have more chance to shape their future than their parents ever had.
 Indian entrepreneurs from the middle class are seizing key slots in the global
information and media industries.
 They demonstrate that there is a way up from the bottom to the top a message that has
been the driving from behind the dynamism of the US and which could have the same
impact here.
 The middle class is by far the fastest growing segment of Indian society.
 The new middle class is street smart and focused on increasing their income. It is non-
ideological, pragmatic and result oriented. It is here to stay.
7.3 THE MIDDLE CLASS

7.3.1.1The Middle Class women

The women are a crucial part of the middle class home. In recent times, the profile and
role of the middle class women has been undergoing significant changes. Today, she is educated,
and in many cases employed. The percentage of workingwomen has actually been growing at a
steady pace; it is now 7 percent in the north, 12 percent in the east, 16 percent in the west and
20 percent in the south. Their newfound purchasing power has fuelled the demand for product
categories like cosmetics, toiletries, packaged foods and leverages. Cosmetics for instance, grew
substantially during the 1990’s. Even product categories like expensive durables, two -wheelers,
and holiday packages are of great appeal to him.
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 Today particularly in the urban parts, the middle class women is an active partner in the
family. She is no longer confined to the four walls of the kitchen. She has acquired a place in
society by virtue of her education and employment. She is major factor in all purchase decisions
of the family; in fact, in respect of a majority of purchases, she is practically the sole decision-
maker and in the rest a powerful influencer. She is actually the family’s purchasing agent for
most products, she is the cashier and budgeter, and she is also image builder. In buying home
interior accessories and household appliances, she is often the sole decision-maker.

Cautions but not averse to change

The middle class women are generally cautious buyer. But she is not averse to change.
Her education and social background makes her a discriminating buyer. Whether cosmetic or
appliances, food items or dress materials, she is willing to try new things. But she does not
adopt any product instantly. She may do sample purchases, she may check with somebody who
has known the product for quite sometime, she may listen to more advertisements about the
product, she will adopt them only if is she is fully satisfied.

Quality Concerns as well as cost –conscious

The middle class women are a quality conscious as well as cost-conscious buyer. She
often cross checks the price details with other stores, she bargains, she compares one brand with
another on price as well as quality. She has a tight family budget to follow and within this
budget, she develops her own preference whether it is a baby food, cooking medium, tea or coffee,
cosmetics or readymade garments. She usually tries to get maximum mileage out of every rupee
that she spends. Sales promotional incentives like freebies, bonuses, prize coupons and rebates
definitely attract her features like reusable containers also influence her purchase decision. She
also relies heavily on word-of-month communication. She finds out what product/brand her
neighbor or friend is using. She will try to get direct information from an existing user about the
qualities and performance of the product when the investment is substantial, the ‘information
seeking is on a larger scale.

Leisure seeking

The middle class women also seek leisure. Time saving household appliances hold out
great charm for her. She readily opts for gadgets like electric grindes and cleaners as they reduce
the workload and save her time to a great extent. Modern devices evoke interest, in her because
of their potential for saving time and avoiding drudgery.

Aware of new developments

The middle class woman possesses a good awareness of the changes taking place in her
environment. Her growing education level and the growth in media has contributed to this
development. TV and magazines, especially women’s magazines, carry a lot of information
targeted at her. They carry information on social, personal and family issues, and messages on a
variety of products and services. Since manufacturers need of her patronage, they communicate
with her through every possible media.

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Good Sense of Grooming

Since of beauty is a strong motive force behind several of her purchases. That is why
many marketing communications appeal to this motive. Soap or shampoo, face cream or
moisturizer, perfumes or hair oil, in selecting her brand, she is greatly influenced by the
messages that appeal to her sense of grooming. She is generally fashion loving, but seldom
fashion crazy. A current of tradition still runs through her personality. The combination of the
new and the old is an important aspect of her lifestyle.

The younger generation in the group is fast becoming more international in its views, ideas
and lifestyle. Women in their twenties/thirties are more tuned in to international style. Global
influences are affecting then more intensely. Whether its appeal, accessories, cosmetics or shoes,
they opt for what is most modern. Dressing has become bolder, more western and varied. The
tremendous media exposure has taken her close to the fashion trends internationally. The time
lag for trends to peculate to India from the major fashion centers like Paris and London has
decreased temerdonaly.

7.3.1.2Middle Class Teenager

The teenagers from another district and sizable segment within the middle class.
Currently, there are more than 150 million 13 to 19 year olds in India. An IRS study shows that
28 to 32 percent of the every day mainstream products are consumed by this group.

They are certainly more modern and adventurous than their elders. In them we see, the
blend of the western and Indian life styles. They care less for religion and tradition. They value
material comforts and physical well being more they seek novelties and they are after a ‘New’
Look’ ‘Variety’ interests them, and most of them are quick in adopting fashions. They are more
receptive to change than their elders. Their tastes and preferences can be influenced relatively
more easily. It is, of course, not easy to dike them, but it is easy to motivate them. Many
manufactures are now compelled to make distinct offers to suit the teenager target. The teenager
market is of special importance to certain product categories like garments, cosmetics, personal
care products, fast foods and soft drinks.

7.3.1.3The immense potential of the middle class market

The profile of the Indian middle class consumers several one vital point they account for a
lion’s share of the demand based in the country in respect of most branded consumer products.
Their needs are on the increase, as is their disposable income markets of most products and
services will be targeting this class. They have to naturally study the class in depth and properly
assess the buying motives and buying behavior of each segment in the class. Only then they will
be able to develop marketing strategies that will click. And by concentrating on this class, or for
that matter a few select segments of the class depending on the product, they can tap the largest
chunk of the demand in the country.

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 UNIT-8
SALES PROMOTION & ADVERTISING

8.1SALES PROMOTION
8.2 PROMOTION STRATEGY
8.3 PROMOTION TACTICS:CONSUMER TACTICS,BUSINESS TO BUSSINESS TACTICS
8.4METHODS OF SALES PROMOTION
8.5ADVERTISING
8.6 FIVE STAGES IN ADVERTISING
8.7 ADVERTISING WHY AND WHAT
8.7ADVERTISING EFFECTIVENESS

8.1Sales Promotion

The primary objective of sales promotions are to predict and modify customer purchasing
behavior, most often to improve sales. There are many ways to approach and realize this goal.  

8.2 Promotion Strategy 

An analysis of a product’s performance takes into account both surface indications and
underlying problems facing the brand. In-depth situation analyses and strategy development can
help determine the incentive needed, the type of promotion likely to have the greatest appeal, and
the media required to reach the desired audience.
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 Items to consider:

1.     Customer Attitudes and Buying Behaviors

Determine who your customers are demographically and psychographically – personal
characteristics, age group, location, ethnicity, income, etc.  Establish what about your
brand attracts themand how they make their buying decisions.

2.     Brand Strategy
Consider your level of dominance in the product category.  How will sales promotion factor
into performance? What are the strengths and time period before returns are realized?

3.     Competitive Strategy
Evaluate past performance, both yours and your competitors’, and determine what
activities, levels of spending and time periods produced the best results.

4.     Advertising Strategy
How do you currently promote your product in your existing markets? Which media best
suits your needs? 

5.     Trade Environment
What are your distributors’ attitudes towards the brand? Your competitors’? 

6.     Other External Factors

What resources are available and what unpredictable factorsmay influence a product’s
availability or pricing (e.g.: weather, raw materials) 

8.3 Promotion Tactics

The three basic elements of a sales promotion are:

1. The offer 
2. Media for communicating the offer to the target audience
3. The creative “hook,” message or theme that moves the audience toward the desired
response.

Many promotion techniques are currently available and new ones are constantly evolving: In
selecting a technique, a marketer must consider its suitability, compatibility with the brand’s
objectives, and budget parameters.  Promotional tactics that Partners & Levit often recommends
include:

8.4Consumer Tactics

1.     Coupons
These short-term price incentives induce consumers to purchase a product.  They not only
save the consumer money, but they are effective ways of introducing new products to the
public, too.  Thus, coupons stimulate trial and conversion, retain current users, and serve
as a selling device.

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 2.     Sweepstakes
Sweepstakes are promotions wherein winners are determined by a random drawing in
some chance event.  The participants exercise no control.  Sweeps generate awareness and
involvement with a brand.  The most cost effective sweepstakes prize is travel, which has a
substantially higher perceived value than its cost. 

3.     Sampling
Sampling allows the customer to decide for himself or herself whether or not a product
satisfies a need.  If the results are favorable, there are often product inventories available
for purchase.

4.     Mail-in offers/rebates
Mail-in offers are a delayed incentive.  They appear in two general categories:  Cash or
coupon refunds and premium offers.  Consumers purchase a product and send away in
order to receive the reward.    

Refund Offers require the consumer to mail in certain proofs-of-purchase in return

for a set amount of cash or coupons.  This encourages purchase continuity and
brand trial. 

Premium Offers offer free or discounted merchandise as an incentive for the

customer to purchase more.

The genuine benefit to the marketer is a low redemption rate.

5.     Group Promotions
There are usually three elements to group promotions: The offer, the unifying theme and
joint advertising support. When participating in group promotions, overall costs are often
lower. However, more time and planning must go into development. It is important to
develop a logical and unifying theme, preferably one simple and to the point. 

8.5Business to Business Tactics

1.      Merchandising allowances

Think of merchandising allowances as “fees for favoritism”.  There may be monetary or
prize rewards such as travel, gifts, or discounts that are given to retail stores or
wholesalers for featuring a product.  In a way, you are purchasing real estate—shelf space,
displays, features—for your product.  

2.      Contests
B-B contests are geared toward distributors, brokers, retailers, etc.  For example, your
company may establish a contest for its distributors.  These contests help push sales
along by offering personal rewards for added performance.  An example of this can be seen
with salespeople.  The most effective sales person may win cash, prizes, or exciting trips.

3.      Performance allowances  (i.e. advertising allowance)

This monetary fund is set aside to subsidize the advertising initiatives of resellers.  Most
times, these advertisements target a local audience or smaller population.  For example,
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 Xerox may have a national advertising campaign, which includes television commercials
and magazine advertisements.  However, a small-town distributor may advertise Xerox
machines in a weekly flyer on its own.  Xerox would then reward the distributor for their
efforts by offsetting a portion of the distributor’s prior year’s advertising costs based on the
distributor’s total product purchases.

4.      Dealer Incentives

Getting a dealer to sell your product instead of your competitor’s is difficult.  Both you and
your competitor may occupy the same niche and offer similar benefits. Perhaps your
competitor has an edge over you, whether it be in brand popularity, pricing, or customer
loyalty. Offering dealer incentives is one way to help secure your position.  Rewarding the
dealer with bonuses or prizes encourages them to choose your product and sell it
enthusiastically.

A good definition of sales promotion would be as follows:

“An activity designed to boost the sales of a product or service. It may include an advertising
campaign, increased PR activity, a free-sample campaign, offering free gifts or trading stamps,
arranging demonstrations or exhibitions, setting up competitions with attractive prizes, temporary
price reductions, door-to-door calling, telemarketing, personal letters on other methods”.

More than any other element of the promotional mix, sales promotion is about “action”. It is
about stimulating customers to buy a product. It is not designed to be informative – a role which
advertising is much better suited to.

Sales promotion is commonly referred to as “Below the Line” promotion.

Sales promotion can be directed at:

• The ultimate consumer (a “pull strategy” encouraging purchase)

• The distribution channel (a “push strategy” encouraging the channels to stock the product).
This is usually known as “selling into the trade”

8.6 Methods of sales promotion

There are many consumer sales promotional techniques available, summarised in the table
below:

Price promotions

Price promotions are also commonly known as” price discounting”

These offer either (1) a discount to the normal selling price of a product, or (2) more of the
product at the normal price.

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Increased sales gained from price promotions are at the expense of a loss in profit – so these
promotions must be used with care.

A producer must also guard against the possible negative effect of discounting on a brand’s
reputation

Coupons

Coupons are another, very versatile, way of offering a discount. Consider the following examples
of the use of coupons:

- On a pack to encourage repeat purchase

- In coupon books sent out in newspapers allowing customers to redeem the coupon at a retailer
- A cut-out coupon as part of an advert
- On the back of till receipts

The key objective with a coupon promotion is to maximise the redemption rate – this is the
proportion of customers actually using the coupon.

One problem with coupons is that they may simply encourage customers to buy what they would
have bought anyway. Another problem occurs when retailers do not hold sufficient stocks of the
promoted product – causing customer disappointment.

Use of coupon promotions is, therefore, often best for new products or perhaps to encourage
sales of existing products that are slowing down.

Gift with purchase

The “gift with purchase” is a very common promotional technique. It is also known as a “premium
promotion” in that the customer gets something in addition to the main purchase. This type of
promotion is widely used for:

- Subscription-based products (e.g. magazines)

- Consumer luxuries (e.g. perfumes)

Competitions and prizes

Another popular promotion tool with many variants. Most competition and prize promotions are
subject to legal restrictions.

Money refunds

Here, a customer receives a money refund after submitting a proof of purchase to the
manufacturer.
These schemes are often viewed with some suspicion by customers – particularly if the method of
obtaining a refund looks unusual or onerous.

Frequent user / loyalty incentives

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Repeat purchases may be stimulated by frequent user incentives. Perhaps the best examples of
this are the many frequent flyer or user schemes used by airlines, train companies, car hire
companies etc.

Point-of-sale displays

Research into customer buying behaviour in retail stores suggests that a

significant proportion of purchases results from promotions that customers see
in the store. Attractive, informative and well-positioned point-of-sale displays
are, therefore, very important part of the sales promotional activity in retail
outlets.

The Institute of Practitioners in Advertising (IPA), the body which represents advertising agencies,
defines advertising as:

"The means of providing the most persuasive possible selling message to the right prospects at
the lowest possible cost".

Kotler and Armstrong provide an alternative definition:

"Advertising is any 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".

There are five main stages in a well-managed advertising campaign:

Stage 1: Set Advertising Objectives

An advertising objective is a specific communication task to be achieved with a specific target

audience during a specified period of time. Advertising objectives fall into three main categories:

(a) To inform - e.g. tell customers about a new product

(b) To persuade - e.g. encourage customers to switch to a different brand

(c) To remind - e.g. remind buyers where to find a product

Stage 2: Set the Advertising Budget

Marketers should remember that the role of advertising is to create demand for a product. The
amount spent on advertising should be relevant to the potential sales impact of the campaign.
This, in turn will reflect the characteristics of the product being advertised.

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For example, new products tend to need a larger advertising budget to help build awareness and
to encourage consumers to trial the product. A product that is highly differentiated may also need
more advertising to help set it apart from the competition - emphasising the points of difference.

Setting the advertising budget is not easy - how can a business predict the right amount to
spend. Which parts of the advertising campaign will work best and which will have relatively little
effect? Often businesses use "rules-of-thumb" (e.g. advertising/sales ratio) as a guide to set the
budget.

Stage 3: Determine the key Advertising Messages

Spending a lot on advertising does not guarantee success (witness the infamous John Cleese
campaign for Sainsbury). Research suggests that the clarity of the advertising message is often
more important than the amount spent. The advertising message must be carefully targeted to
impact the target customer audience. A successful advertising message should have the following
characteristics:

(a) Meaningful - customers should find the message relevant

(b) Distinctive - capture the customer's attention

(c) Believable - a difficult task, since research suggests most consumers doubt the truth of
advertising in general

Stage 4: Decide which Advertising Media to Use

There are a variety of advertising media from which to chose. A campaign may use one or more of
the media alternatives. The key factors in choosing the right media include:

(a) Reach - what proportion of the target customers will be exposed to the advertising?

(b) Frequency - how many times will the target customer be exposed to the advertising message?

(c) Media Impact - where, if the target customer sees the message - will it have most impact? For
example does an advert promoting holidays for elderly people have more impact on Television (if
so, when and which channels) or in a national newspaper or perhaps a magazine focused on this
segment of the population?

Another key decision in relation to advertising media relates to the timing of the campaign. Some
products are particularly suited to seasonal campaigns on television (e.g. Christmas hampers)
whereas for other products, a regular advertising campaign throughout the year in media such as
newspapers and specialist magazines (e.g. cottage holidays in the Lake District) is more
appropriate.

Stage 5: Evaluate the results of the Advertising Campaign

The evaluation of an advertising campaign should focus on two key areas:

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(1) The Communication Effects - is the intended message being communicated effectively and to
the intended audience?

(2) The Sales Effects - has the campaign generated the intended sales growth. This second area is
much more difficult to measure

8.7 advertising- why and what?

Why and what should a business advertise?

Before undertaking an advertising campaign, marketers should be able to answer two key
questions:

(1) Why are we advertising?

(2) What are we advertising?

On the face of it these seem like two fairly obvious questions. But they are significant. Advertising
can be a very expensive promotional tool. It is widely believed that much advertising spend is
wasted. So careful consideration about “Why” and “What” can pay dividends.

Why advertise?

The following may be good reasons why a business is advertising:

• To create awareness, customer interest or desire

• To boost sales (moving the demand curve to the right)

• To build brand loyalty (or to maintain it at the existing level)

• To launch a new product

• To change customer attitudes – perhaps trying to move a product more “upmarket” or to dispel
some widely held perceptions about the product

• To support the activities of the distribution channel (e.g. supporting a “pull” strategy)

• To build the company or brand image

• To reminds and reassure customers

• To offset competitor advertising – businesses may defend market share by responding to

competitors’ campaigns with their own advertising
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• To boost public standing: companies can boost their public standing with advertisements that
link them with generally approved campaigns such as care for the environment

• To support the sales force – advertising can make the job of the sales force easier and more
effective by attracting leads from potential customers and perhaps motivate them by boosting the
profile of the business

Take a look through any magazine and select a sample of adverts. Which of the above reasons do
you think are behind the adverts you choose? Don’t forget that some adverts aim to achieve
multiple objectives.

What to advertise?

Factors that help answer the “what are we advertising”? focus on what the advertising message
should be. In general, there are really only two kinds of effective advertising message:

Firstly, does the business/product have a Unique Selling Proposition (“USP”)

A unique selling proposition is a customer benefit that no other product can claim

In reality these are rare, although that does not stop marketers from claiming them for their
products.

Secondly, does the thing that is being advertised “add value” and if so, how?

For example, advertising for washing powders will focus on the “added value” created by
whitening agents or the fact that a particular formulation will last longer than the competition
(take a look at the Fairy web site to see if you can spot the other “added value” features claimed
for its products)
Whatever is advertised, it is important that the message is:

• Seen
• Read
• Believed
• Remembered
• Action upon by target customers

8.8 advertising - effectiveness?

Judging the effectiveness of advertising

How can the effectiveness of an advert be judged?

The answer depends on what objectives or tasks were set for the advert.

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The table below sets out some possible objectives/tasks and how the effectiveness of the advert
might be measured:

Advertising objective How success can be measured

- Number of enquiries from advert
Stimulate an increase in sales
- Number of enquiries converted into sales
- Test customer awareness both before and after the
Remind customers of the existence of a
advertising campaign
product
- Number of enquiries
- Test customer awareness
Inform customers
- Number of requests for further information
-Sales
Build a brand image -Test customer awareness of brand recognition and
perceived values
- Levels of repeat purchase
Build customer loyalty and relationship
- Levels of customer retention
- Measure demographic profile of purchases
Change customer attitudes - Measure type of goods ordered by new purchasers
- Compare with previous data

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 UNIT-9
BUYER BEHAVIOUR

9.1BUYER BEHAVIOUR
9.2BUYER BEHAVIOUR-CULTURAL FACTORS
9.39 . 3 B U Y E R B E H A V I O U R - S O C I A L F A C T O R S
9.4BUYER BEHAVIOUR - DECISION-MAKING PROCESS`
9.5HOW INFORMATION IS USED BY THE CUSTOMERS
9.6BUYER BEHAVIUOR-NEW PRODUCTS
9.7WHAT IS THE ROLE OF MARKETING IN THE PROCESS OF NEW
PRODUCT ADOPTION.
9.8BUYER BEHAVIOUR –STIMULUS RESPONSE MODEL
9.9BUYER-BEHAVIOUR –CASE STUDY:INFLUENCE OF CHILDREN ON
BUYER BEHAVIOUR

9.1buyer behaviour - introduction

Introduction

An important part of the marketing process is to understand why a customer or buyer makes a
purchase.

Without such an understanding, businesses find it hard to respond to the customer’s needs and
wants.

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Marketing theory traditionally splits analysis of buyer or customer behaviour into two broad
groups for analysis – Consumer Buyers and Industrial Buyers

Consumer buyers are those who purchase items for their personal consumption

Industrial buyers are those who purchase items on behalf of their business or organisation

Businesses now spend considerable sums trying to learn about what makes “customers tick”.
The questions they try to understand are:

• Who buys?
• How do they buy?
• When do they buy?
• Where do they buy?
• Why do they buy?

For a marketing manager, the challenge is to understand how customers might respond to the
different elements of the marketing mix that are presented to them.

If management can understand these customer responses better than the competition, then it is
a potentially significant source of competitive advantage.

9.2buyer behaviour - cultural factors

Cultural factors have a significant impact on customer behaviour.

Culture is the most basic cause of a person’s wants and behaviour. Growing up, children learn
basic values, perception and wants from the family and other important groups.

Marketing are always trying to spot “cultural shifts” which might point to new products that
might be wanted by customers or to increased demand. For example, the cultural shift towards
greater concern about health and fitness has created opportunities (and now industries) servicing
customers who wish to buy:

• Low calorie foods

• Health club memberships
• Exercise equipment
• Activity or health-related holidays etc.

Similarly the increased desire for “leisure time” has resulted in increased demand for convenience
products and services such as microwave ovens, ready meals and direct marketing service
businesses such as telephone banking and insurance.

Each culture contains “sub-cultures” – groups of people with share values. Sub-cultures can
include nationalities, religions, racial groups, or groups of people sharing the same geographical
location. Sometimes a sub-culture will create a substantial and distinctive market segment of its
own.

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For example, the “youth culture” or “club culture” has quite distinct values and buying
characteristics from the much older “gray generation”

Similarly, differences in social class can create customer groups. In fact, the official six social
classes in the UK are widely used to profile and predict different customer behaviour. In the UK’s
socioeconomic classification scheme, social class is not just determined by income. It is
measured as a combination of occupation, income, education, wealth and other variables:

Class % of UK
Social Status Occupational Head of Household
name Population
Higher managerial, administrative or
A Upper middle 3
professional
Intermediate managerial, administrative or
B Middle 14
professional
Superiors or clerical, junior managerial,
C1 Lower middle 27
administrative or professional
C2 Skilled working Skilled manual workers 25
D Working Semi-skilled and un-skilled manual workers 19
Those at lowest level of State pensioners or widows, casual or lower-
E 12
subsistence grade workers
 

9.3buyer behaviour - social factors

Introduction

A customer’s buying behaviour is also influenced by social factors, such as the groups to which
the customer belongs and social status.

In a group, several individuals may interact to influence the purchase decision. The typical roles
in such a group decision can be summarised as follows:

Initiator

The person who first suggests or thinks of the idea of buying a particular product or service

Influencer

A person whose view or advice influences the buying decision

Decider
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The individual with the power and/or financial authority to make the ultimate choice regarding
which product to buy

Buyer

The person who concludes the transaction

User

The person (or persons) who actually uses the product or service

The family unit is usually considered to be the most important “buying” organisation in society. It
has been researched extensively. Marketers are particularly interested in the roles and relative
influence of the husband, wife and children on the purchase of a large variety of products and
services.

There is evidence that the traditional husband-wife buying roles are changing. Almost everywhere
in the world, the wife is traditionally the main buyer for the family, especially in the areas of food,
household products and clothing. However, with increasing numbers of women in full-time work
and many men becoming “home workers” (or “telecommuting”) the traditional roles are reversing.

The challenge for a marketer is to understand how this might affect demand for products and
services and how the promotional mix needs to be changed to attract male rather than female
buyers.

9.4buyer behaviour - decision-making process

9.4.1.1How do customers buy?

Research suggests that customers go through a five-stage decision-making process in any

purchase. This is summarised in the diagram below:

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This model is important for anyone making marketing decisions. It forces the marketer to
consider the whole buying process rather than just the purchase decision (when it may be too
late for a business to influence the choice!)

The model implies that customers pass through all stages in every purchase. However, in more
routine purchases, customers often skip or reverse some of the stages.

For example, a student buying a favourite hamburger would recognise the need (hunger) and go
right to the purchase decision, skipping information search and evaluation. However, the model
is very useful when it comes to understanding any purchase that requires some thought and
deliberation.

The buying process starts with need recognition. At this stage, the buyer recognises a problem or
need (e.g. I am hungry, we need a new sofa, I have a headache) or responds to a marketing
stimulus (e.g. you pass Starbucks and are attracted by the aroma of coffee and chocolate
muffins).

An “aroused” customer then needs to decide how much information (if any) is required. If the
need is strong and there is a product or service that meets the need close to hand, then a
purchase decision is likely to be made there and then. If not, then the process of information
search begins.

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A customer can obtain information from several sources:

• Personal sources: family, friends, neighbours etc

• Commercial sources: advertising; salespeople; retailers; dealers; packaging; point-of-sale
displays
• Public sources: newspapers, radio, television, consumer organisations; specialist magazines
• Experiential sources: handling, examining, using the product

The usefulness and influence of these sources of information will vary by product and by
customer. Research suggests that customers value and respect personal sources more than
commercial sources (the influence of “word of mouth”). The challenge for the marketing team is to
identify which information sources are most influential in their target markets.

In the evaluation stage, the customer must choose between the alternative brands, products and
services.

9.5 How does the customer use the information obtained?

An important determinant of the extent of evaluation is whether the customer feels “involved” in
the product. By involvement, we mean the degree of perceived relevance and personal importance
that accompanies the choice.

Where a purchase is “highly involving”, the customer is likely to carry out extensive evaluation.

High-involvement purchases include those involving high expenditure or personal risk – for
example buying a house, a car or making investments.

Low involvement purchases (e.g. buying a soft drink, choosing some breakfast cereals in the
supermarket) have very simple evaluation processes.

Why should a marketer need to understand the customer evaluation process?

The answer lies in the kind of information that the marketing team needs to provide customers in
different buying situations.

In high-involvement decisions, the marketer needs to provide a good deal of information about
the positive consequences of buying. The sales force may need to stress the important attributes
of the product, the advantages compared with the competition; and maybe even encourage “trial”
or “sampling” of the product in the hope of securing the sale.

Post-purchase evaluation - Cognitive Dissonance

The final stage is the post-purchase evaluation of the decision. It is common for customers to
experience concerns after making a purchase decision. This arises from a concept that is known
as “cognitive dissonance”. The customer, having bought a product, may feel that an alternative
would have been preferable. In these circumstances that customer will not repurchase
immediately, but is likely to switch brands next time.

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To manage the post-purchase stage, it is the job of the marketing team to persuade the potential
customer that the product will satisfy his or her needs. Then after having made a purchase, the
customer should be encouraged that he or she has made the right decision.

9.6 buyer behaviour - new products

Customer buying process for new products

How do customers approach the process of buying a new product? How does this differ from the
process for buying a product which the customer has bought before? What is meant by a “new
product”?

A new product can be defined as:

"A good, service or idea that is “perceived” by some potential customers as new. It may have been
available for some time, but many potential customers have not yet adopted the product nor
decided to become a regular user of the product"

Research suggests that customers go through five stages in the process of adopting a new
product or service: these are summarised below:

(1) Awareness - the customer becomes aware of the new product, but lacks information about it

(2) Interest - the customer seeks information about the new product

(3) Evaluation - the customer considers whether trying the new product makes sense

(4) Trial - the customer tries the new product on a limited or small scale to assess the value of the
product

(5) Adoption - the customer decides to make full and/or regular use of the new product

9.7 What is the role of marketing in the process of new-product adoption?

A marketing team looking to successfully introduce a new product or service should think about
how to help customers move through the five stages.

For example, what kind of advertising or other promotional campaign can be employed to build
customer awareness? If customers show a desire to trial or sample a product, how can this be
arranged effectively?

Research also suggests that customers can be divided into groups according to the speed with
which they adopt new products.

Rogers, in his influential work on the diffusion of innovations, suggested the following
classification:

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The “innovators” (those who adopt new products first) are usually relatively young, lively,
intelligent, socially and geographically mobile. They are often of a high socioeconomic group
(“AB’s”). Conversely, the “laggards” (those who adopt last, if at all) tend to be older, less
intelligent, less well-off and lower on the socioeconomic scale.

It follows from the above model that when a business launches a new product or service, the
customers who buy first are likely to be significantly different from those who buy the product
much later. This needs to be borne in mind when developing the marketing mix.

Late majority
Lifestyle
Problem / need recognition
Purchase decision

9.8 buyer behaviour - stimulus-response model

Introduction

A well-developed and tested model of buyer behaviour is known as the stimulus-response model,
which is summarised in the diagram below:

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In the above model, marketing and other stimuli enter the customers “black box” and produce
certain responses.

Marketing management must try to work out what goes on the in the mind of the customer – the
“black box”.

The Buyer’s characteristics influence how he or she perceives the stimuli; the decision-making
process determines what buying behaviour is undertaken.

Characteristics that affect customer behaviour

The first stage of understanding buyer behaviour is to focus on the factors that determine he
“buyer characteristics” in the “black box”. These can be summarised as follows:

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Each of these factors is discussed in more detail in our other revision notes on buyer behaviour.

9.9buyer behaviour - case study: influence of children on buyer

behaviour

Research suggests that children are exerting more influence over family buying decisions. What
are the implications of this for retailers, brands and marketers?

Children are an important part of the family buying process. But what roles do they play?

Marketing theory suggests five main roles in a family buying process:

- Initiator
- Influencer
- Decider
- Buyer
- User

Which roles do children play in addition to the obvious one – “the user”

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Children certainly influence family buying decisions from cars to holidays. They are also the
buyers of the future. Provide children with Penguin bars and McVitie's may be able to hold on to
the adult due to brand awareness and brand loyalty formed at such an early age.

But how should businesses market to children? Are there conflicts with being seen to specifically
target the child audience – can it alienate parents?

Products have to appeal to the conflicting agendas of child and parent, while fighting off
increasing competition. A marketer of children’s foods was recently quoted as follows:

"Ten years ago children wouldn't have given a damn about cheese. It used to be just Dairylea, but
now children's dairy products encompass everything from cheese to yogurts, and fromage frais.
Our brands also face more intense competition than ever and it's not just from other chocolate
biscuits - it's from products such as Dairylea Dunkers and Fruit Winders. These things didn't exist
before."

Marketers also have to recognise that children are moving into new markets. Children as young
as seven buy DVD's, and no teenage lifestyle is complete without a mobile phone. This has a
knock-on effect. For example, the money children spend on mobile phone cards reduces the
money they spend on snacks.

Marketers also need to be sensitive to the peculiarities of children-related markets. It may be

tempting to use a daring marketing campaign to make a product stand out. But a poorly
thought-through campaign could result in the product and/or brand being attacked by ethical
campaigners, outraged mothers, educationalists, health and safety organisations and others.

A good example of how things can go wrong is Sunny Delight. Sunny Delight enjoyed boom sales
after its initial launch. However, the drink's popularity crashed when the media realised that it
was sold from chiller cabinets purely as a marketing ploy to make it seem fresh and, therefore,
healthy. The actual product formulation was far from healthy.

Retailers face a challenge to display products in a way that attracts children. Promotional
displays have to be able to handle child usage (or abuse) and capture a child’s imagination and
attention.
Disney has a reputation as being particularly good at interactive promotional marketing. Many
children also prefer Woolworth's to supermarkets because of features such as pick 'n' mix sweets.
The Early Learning Centre succeeds by creating a playground which allows children to play with
toys rather than leaving them wrapped in plastic.

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 UNIT-10

DISTRIBUTION

10.1 DISTRIBUTION –INTRODUCTION

10.2 FUNCTIONS OF A DISTRIBUTION CHANNEL

10.3NUMBER OF DISTRIBUTION LEVELS

10.4 DISTRIBUTION INTENSITY

10.5 DISTRIBUTION –TYPES OF DISTRIBUTION INTERMEDIARY

10.1distribution - introduction

Distribution (or "Place") is the fourth traditional element of the marketing mix. The other three
are Product, Price and Promotion.

The Nature of Distribution Channels

Most businesses use third parties or intermediaries to bring their products to market. They try to
forge a "distribution channel" which can be defined as

"all the organisations through which a product must pass between its point of production and
consumption"

Why does a business give the job of selling its products to intermediaries? After all, using
intermediaries means giving up some control over how products are sold and who they are sold
to.

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The answer lies in efficiency of distribution costs. Intermediaries are specialists in selling. They
have the contacts, experience and scale of operation which means that greater sales can be
achieved than if the producing business tried run a sales operation itself.

10.2Functions of a Distribution Channel

The main function of a distribution channel is to provide a link between production and
consumption. Organisations that form any particular distribution channel perform many key
functions:

Information Gathering and distributing market research and intelligence - important

for marketing planning
Promotion Developing and spreading communications about offers
Contact Finding and communicating with prospective buyers
Matching Adjusting the offer to fit a buyer's needs, including grading, assembling
and packaging
Negotiation Reaching agreement on price and other terms of the offer
Physical distribution Transporting and storing goods
Financing Acquiring and using funds to cover the costs of the distribution channel
Risk taking Assuming some commercial risks by operating the channel (e.g. holding
stock)
All of the above functions need to be undertaken in any market. The question is - who performs
them and how many levels there need to be in the distribution channel in order to make it cost
effective.

10.3 Numbers of Distribution Channel Levels

Each layer of marketing intermediaries that performs some work in bringing the product to its
final buyer is a "channel level". The figure below shows some examples of channel levels for
consumer marketing channels:

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In the figure above, Channel 1 is called a "direct-marketing" channel, since it has no intermediary
levels. In this case the manufacturer sells directly to customers. An example of a direct marketing
channel would be a factory outlet store. Many holiday companies also market direct to
consumers, bypassing a traditional retail intermediary - the travel agent.

The remaining channels are "indirect-marketing channels".

Channel 2 contains one intermediary. In consumer markets, this is typically a retailer. The
consumer electrical goods market in the UK is typical of this arrangement whereby producers
such as Sony, Panasonic, Canon etc. sell their goods directly to large retailers such as Comet,
Dixons and Currys which then sell the goods to the final consumers.

Channel 3 contains two intermediary levels - a wholesaler and a retailer. A wholesaler typically
buys and stores large quantities of several producers goods and then breaks into the bulk
deliveries to supply retailers with smaller quantities. For small retailers with limited order
quantities, the use of wholesalers makes economic sense. This arrangement tends to work best
where the retail channel is fragmented - i.e. not dominated by a small number of large, powerful
retailers who have an incentive to cut out the wholesaler. A good example of this channel
arrangement in the UK is the distribution of drugs.
key termsBusiness to business

10.4 distribution - channel strategy

The following table describes the factors that influence the choice of distribution channel by a
business:

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Influence Comments
Market An important market factor is "buyer behaviour"; how do buyer's want to purchase
factors the product? Do they prefer to buy from retailers, locally, via mail order or perhaps
over the Internet? Another important factor is buyer needs for product information,
installation and servicing. Which channels are best served to provide the customer
with the information they need before buying? Does the product need specific
technical assistance either to install or service a product? Intermediaries are often
best placed to provide servicing rather than the original producer - for example in
the case of motor cars.

The willingness of channel intermediaries to market product is also a factor.

Retailers in particular invest heavily in properties, shop fitting etc. They may decide
not to support a particular product if it requires too much investment (e.g.
training, display equipment, warehousing).

Another important factor is intermediary cost. Intermediaries typically charge a

"mark-up" or "commission" for participating in the channel. This might be deemed
unacceptably high for the ultimate producer business.
   
Producer A key question is whether the producer have the resources to perform the
factors functions of the channel? For example a producer may not have the resources to
recruit, train and equip a sales team. If so, the only option may be to use agents
and/or other distributors.

Producers may also feel that they do not possess the customer-based skills to
distribute their products. Many channel intermediaries focus heavily on the
customer interface as a way of creating competitive advantage and cementing the
relationship with their supplying producers.

Another factor is the extent to which producers want to maintain control over how,
to whom and at what price a product is sold. If a manufacturer sells via a retailer,
they effective lose control over the final consumer price, since the retailer sets the
price and any relevant discounts or promotional offers. Similarly, there is no
guarantee for a producer that their product/(s) are actually been stocked by the
retailer. Direct distribution gives a producer much more control over these issues.
   
Product Large complex products are often supplied direct to customers (e.g. complex
factors medical equipment sold to hospitals). By contrast perishable products (such as
frozen food, meat, bread) require relatively short distribution channels - ideally
suited to using intermediaries such as retailers.
10.5 Distribution Intensity

There are three broad options - intensive, selective and exclusive distribution:

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10.5.1.11Intensive distribution aims to provide saturation coverage of the market by using all
available outlets. For many products, total sales are directly linked to the number of outlets used
(e.g. cigarettes, beer). Intensive distribution is usually required where customers have a range of
acceptable brands to chose from. In other words, if one brand is not available, a customer will
simply choose another.

10.5.1.2Selective distribution involves a producer using a limited number of outlets in a geographical area to sell
products. An advantage of this approach is that the producer can choose the most appropriate or best-performing outlets and
focus effort (e.g. training) on them. Selective distribution works best when consumers are prepared to "shop around" - in
other words - they have a preference for a particular brand or price and will search out the outlets that supply.

Exclusive distribution is an extreme form of selective distribution in which only

one wholesaler, retailer or distributor is used in a specific geographical area.

10.6distribution - types of distribution intermediary

Introduction

There is a variety of intermediaries that may get involved before a product gets from the original
producer to the final user. These are described briefly below:

10.6.1.1Retailers

Retailers operate outlets that trade directly with household customers. Retailers can be classified
in several ways:

• Type of goods being sold( e.g. clothes, grocery, furniture)

• Type of service (e.g. self-service, counter-service)
• Size (e.g. corner shop; superstore)
• Ownership (e.g. privately-owned independent; public-quoted retail group
• Location (e.g. rural, city-centre, out-of-town)
• Brand (e.g. nationwide retail brands; local one-shop name)

10.6.1.2Wholesalers

Wholesalers stock a range of products from several producers. The role of the wholesaler is to sell
onto retailers. Wholesalers usually specialise in particular products.

10.6.1.3Distributors and dealers

Distributors or dealers have a similar role to wholesalers – that of taking products from
producers and selling them on. However, they often sell onto the end customer rather than a
retailer. They also usually have a much narrower product range. Distributors and dealers are
often involved in providing after-sales service.

10.6.1.4Franchises
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Franchises are independent businesses that operate a branded product (usually a service) in
exchange for a licence fee and a share of sales.

10.6.1.5Agents

Agents sell the products and services of producers in return for a commission (a percentage of the
sales revenues)

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 UNIT-11

PRODUCT LIFE CYCLE

11.1Introduction TO PRODUCT DEVELOPMENT

11.2 Differences between Goods and Services
11.3 Classifying Products
11.4 Elements of the Product Mix
11.5 Product Positioning and Repositioning
11.6 Positioning Existing Products
11.7 Developing and Managing New Products
11.8 Developing New Products
11.9 Why New Products Fail
11.10Seven Phases to New Product Development
11.11New Product Strategy Development
11.12Idea Generation
11.13 Product Screening and Evaluation
11.14 Business Analysis
11.15Product Development
11.16Test Marketing
11.17Commercialization
11.18Buyers' Production Adoption Process
11.19Diffusion Process
11.20PRoduct Life Cycle

11.1products - introduction

A product is defined as:

"Anything that is capable of satisfying customer needs"

This definition includes both physical products (e.g. cars, washing machines, DVD players) as
well as services (e.g. insurance, banking, private health care).

The process by which companies distinguish their product offerings from the competition is
called branding.

For most companies, brands are not developed in isolation - they are part of a product group.

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A product group (or product line) is a group of brands that are closely related in terms of their
functions and the benefits they provide (e.g. Dell's range of personal computers or Sony's range of
televisions).

There are two main types of product brand:

(1) Manufacturer brands

(2) Own-label brands

Manufacturer brands are created by producers and use their chosen brand name. The producer
has the responsibility for marketing the brand, by building distribution and gaining customer
brand loyalty. Good examples include Microsoft, Panasonic and Mercedes.

Own-label brands are created and owned by distributors. Good examples include Tesco and
Sainsbury's.

The main importance of branding is that, done well, it permits a business to differentiate its
products, adding extra value for consumers who value the brand, and improving profitability for
the company.

Businesses should manage their products carefully over time to ensure that they deliver products
that continue to meet customer wants. The process of managing groups of brands and product
lines is called portfolio planning.

Two models of product portfolio planning are widely known and used in business:

• The Boston Group Growth-Share Matrix, and

• GE Market Attractiveness model

These models are described in more detail in other tutor2u revision notes.

Businesses need to regularly look for new products and markets for future growth. A useful way
of looking at growth opportunities is the Ansoff Growth matrix which suggests that there are four
main ways in which growth can be achieved through a product strategy:

(1) Market penetration - Increase sales of an existing product in an existing market

(2) Product development - Improve present products and/or develop new products for the current
market

(3) Market development - Sell existing products into new markets (e.g. developing export sales)

(4) Diversification - Develop new products for new markets

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Product Planning refers to the systematic decision making related to all aspects of the
development and management of a firms products including branding and packaging.
Each product includes a bundle of attributes capable of exchange and use.
Product definition:
A product is a good, service, or idea consisting of a bundle of tangible and intangible attributes
that satisfies consumers and is received in exchange for money or some other unit of value.

WHAT IS A PRODUCT:Something produced by human or mechanical effort or by a natural

process.

11.2Differences between Goods and Services

Goods are tangible. You can see them, feel them, touch them etc.
Services are intangible. The result of human or mechanical efforts to people or objects.
Major distinguishing characteristics of Services:
 Intangibility-major component of a service is intangible
 Pershibality-many cannot be stored for future sales Airline/Amusement ride
Number of hair cut hours in one week: i.e., if SUNITA employs 3 people, who work forty
hours per week, they have potentially 120 hair cut hours to offer. If they do not have any
customers at a particular period during the day, they will lose the opportunity to cut hair
at that time and therefore the opportunity to generate revenue...the opportunity has
perished...they no longer have the ability to earn revenue from 120 hair cut hours that
week!!
 Inseparability-customer contact is often the integral part of the service...Legal
services/hair dresser, therefore often a direct channel of distribution.
 Variability-in service quality, lack of standardization, because services are labor intensive.
Sales of goods and services are frequently connected, i.e. a product will usually incorporate a
tangible component (good) and an intangible component.
S
Levels of Product
There are 3 levels of products
 Core Product- Marketers must first define what the core BENEFITS the product will provide
the customer.
 Actual Product-Marketer must then build the actual product around the core product. May
have as many as five characteristics:
o Quality level
o Features
o Brand name
o Packaging
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 all combined to carefully deliver the core benefit(s).
 Augmented Product-offer additional consumer benefits and services.
o Warranty
o Customer training
EXAMPLE SONY CAMCORDER:
 Core--the ability to take video pictures conveniently
 Actual--Sony Handycam (brand name), packaged, convenient design so you can hold it,
play back features etc. that provide the desired benefits, high quality etc.
 Augmented--receive more than just the camcorder. Give buyers a warranty on parts and
workmanship, free lessons on how to use the camcorder, quick repair service when needed
and toll free telephone number when needed.
Marketers must first identify the core consumer needs (develop core product), then design the
actual product and find ways to augment it in order to create the bundle of benefits that will best
satisfy the customer.

11.3 Classifying Products

Products can be classified depending on who the final purchaser is.
Components of the marketing mix will need to be changed depending on who the final purchaser
is.
 Consumer products: destined for the final consumer for personal, family and household
use.
 Business to business products: are to satisfy the goals of the organization.
The same product can be purchased by both, for example a computer, for the home or the office.
The following are classifications for consumer products:
 Convenience: Packaging is important to sell the product. Consumers will accept a
substitute. Marketers focus on intense distribution, time utility. Convenience products can
be categorized into staple (milk), impulse (not intended prior to shopping trip).
 Shopping: Consumers expend considerable effort planning and making purchase
decisions. IE appliances, stereos, cameras. Consumers are not particularly brand loyal.
Need producer intermediary cooperation, high margins, less outlets than convenience
goods. Use of sales personnel, communication of competitive advantage, branding,
advertising, customer service etc. Attribute based (Non Price Competition), product with
the best set of attributes is bought. If product attributes are judged to be similar, then
priced based.
 Specialty: Buyer knows what they want and will not accept a substitute, IE Mercedes. Do
not compare alternatives. Brand, store and person loyal. Will pay a premium if necessary.
Need reminder advertising.
 Unsought: Sudden problem to resolve, products to which consumers are unaware,
products that people do not necessary think of purchasing. Umbrellas, Funeral Plots,
Encyclopedia!!
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The following are classifications for Business to Business products:
 Production Goods
o Raw Materials:
o Component parts: becomes part of the physical product
o Process materials: not readily identifiable part of the production of other products
 Support Goods
o Major Equipment:
o Accessory Equipment: Type writers and tools
o Consumable Supplies: IE Paper, pencils or oils
o Business to Business services: Financial, legal marketing research etc.

11.4 Elements of a Product Mix

If an organization is marketing more than one product it has a product mix.
 Product item--a single product
 Product line--all items of the same type
 Product mix--total group of products that an organization markets
Depth measures the # of products that are offered within each product line. Satisfies several
consumer segments for the same product, maximizes shelf space, discourages competitors,
covers a range of prices and sustains dealer support. High cost in inventory etc.
Width measures the # of product lines a company offers. Enables a firm to diversify products,
appeals to different consumer needs and encourages one stop shopping.
Proctor & Gamble example in class.
Why so many different products?
Different needs of different target markets for the same product. Channels of distribution
economies etc.
11.5 Product Positioning and Product Repositioning
Definition:
This refers to a place a product offering occupies in consumers' minds on important attributes,
relative to competing offerings.
How new and current items in the product mix are perceived, in the minds of the consumer,
therefore reemphasizing the importance of perception!!
New Product--need to communicate benefits
Established Products--need to reinforce benefits
Ideal Characteristics
Need to introduce products that possess characteristics that the target market most desires,
ideal. Product positioning is crucial.
Consumers desires refer to the attributes consumers would like the products to possess--IDEAL
POINTS.
Whenever a group of consumers has a distinctive "ideal" for a product category they represent a
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potential target market segment.
A firm does well if its attributes (of the product) are perceived by consumers as being close to
their ideal. The objective is to be "more ideal" than the competitors.
Each product must provide some unique combination of new features desired by the target
market.
Instead of allowing the customer to position products independently, marketers try to influence
and shape consumers concepts and perceptions.
Marketers can use perception maps.

Existing Products
Handout...Here Comes the Sun to Confound Health-Savvy Lotion Makers

^
|
|
Old Position | New Position
|
|
|
Glamour--------------------------------------------------Health
|
|
|
|
|
|
|
Traditional sun tan lotion positioned as aiding in getting a very glamorous deep tan etc.
Dermatologist reports...skin cancer etc.
Lifestyle needs change, move to more health conscious (previously discussed)
Need to reposition sun tan lotion as a healthy way to be exposed to the sun.
Target market has shifted from the left quartile to the right quartile as far as needs are
concerned.
Sun tan marketers need to do same as far as changing consumers perception for the product.
How?
 Change Promotion: "Tan don't Burn" The St. Tropez Tan vs. Ultra Sweat Proof Serious tan
for...Be Sun Smart
 Change Product: Sunscreen and sunless tanning agent.

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Why did they repositition?
Safety
Affordability
Competitors include Infiniti, Lexus, Mercedes Benz and Aurora
If you already have a brand in the market, must be sure to avoid cannibalization. Attributes and
brand image should give a product distinct appeal.
New Product Positioning
When developing a new product, a company should identify all the features that are offered by all
its major competitors.
Second, identify important features/benefits used in making purchase decisions.
Determine the overall ranking of features by importance and relate the importance of each
feature to its "uniqueness".
but not important.
The feature is in the upper right hand corner then you have probably got a winning feature.
This is known as feature positioning, as opposed to product positioning. One can then see what
type of customer needs the important (and perhaps unique) features.
Developing and Managing Products
To compete effectively and achieve goals of an organization, the organization must be able to
adjust its product mix.
Need to understand competition and customer attitudes and preferences.
Developing New Products
Need to develop new products. A new product can be:
 Continuous Innovation...No new buyer behavior to learn, i.e. -products not previously
marketed by the firm, but by others
 Dynamic Continuous Innovation...minor education needed for consumers to adopt product
 Discontinuous Innovation...entirely new consumption patterns
Handout...In Battle over Video Disk Standard
What will be the winning format?
New Product (Technology)
Need to appeal to:
o Hollywood
o Ultimate consumers
Battle between:
o Sony and Phillips
o Toshiba, Pioneer and Time Warner
Swing voter...Matsushita Electric Industry (Toshiba/Pioneer)
DVD could transform movie business (like CDs for music) Movie studios can resell all
movies in new format therefore very important to them, also sell through market, video
rentals are decreasing, due to competing service.
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 Set of requirements:
o 135 mins on 1 disc
o quality superior to vhs
o cd quality audio
o able to add multiple languages
o parent lockout system
o iron clad copying protection
Sony announced going ahead (Vaporware!)
If 2 systems go to market, best system will win, only one technology can survive, WINNER
WINS BIG...LOSER LOSES BIG (DUE TO INVESTMENT) VHS vs Betamax
For a new product to succeed it must have:
 desirable attributes
 be unique
 have its features communicated to the consumer (mkt support necessary)
Developing new products is expensive and risky.
Failure not to introduce new products is also risky. IE Timex
Firms develop new products in two ways:
 By acquisition,
 Internal development, this is what we are going to focus on.
Launching a new product name along with new product is very risky and expensive
Why New Products Fail
 Lack of differentiating advantage
 Poor marketing plan
 Poor timing
 Target market too small
 Poor product quality
 No access to market
Seven phases to new product development:
1. New Product Strategy Development
Only a few ideas are good enough to reach commercialization. Ideas can be generated by
chance, or by systematic approach. Need a purposeful, focused effort to identify new ways
to serve a market. New opportunities appear from the changes in the environment.
Idea Generation
Continuous systematic search for new product opportunities.
o Marketing oriented sources--identify opportunities based on consumer needs, lab
research is directed to satisfy that research. 1-800#s, research etc.
o Laboratory oriented sources--identify opportunities based on pure research or
applied research.

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 o Intrafirm devises--brain storming, incentives and rewards for ideas. 3Ms Post it,
from choir practice. Hewlett Parkards lab is open 24 hrs. day. Analyzing existing
products, reading trade publications.
Brainstorming for your group project. Ideas should not be criticized, no matter how
off-beat they are.

2. Product Screening and Evaluation

New product check list; list new product attributes considered most important and
compare each with these attributes. Check list is standardized and allows ideas to be
compared.
--General characteristics, Marketing Characteristics and Production Characteristics.
Ideas with the greatest potential are selected for further research.
Do they match the organizations goals (DuPont and ICI have many patents that they have
not exploited for this very reason.)
Look at companies ability to produce and market the product.
Need to look at the nature and wants of the buyers and possible environmental changes.
Concept Testing
Sample of potential buyers is presented with the product idea through a written or oral
description to determine the attitudes and initial buying intentions.
This is done before investing considerable sums of money and resources in Research and
Development.
Can better understand product attributes and the benefits customers feel are most
important.
Would you buy the product?
Would you replace your current brand with the new product?
Would this product meet real needs?

3. Business Analysis
Analyze potential contribution to sales, costs and profits.
Does the product fit into the current product mix?
What kind of environmental and competitive changes can be anticipated?
How will these changes effect sales etc.?
Are the internal resources adequate?
Cost and time line of new facilities etc.?
Is financing available?
Synergies with distribution channel etc.
MIS to determine the market potential sales etc.
Patentability should be determined, last 17 years, 14 years for a pharmaceutical product.
Find out if it is technically feasible to produce the new product.

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 If you can produce the new product at a low enough cost so as to be able to make a profit.
Product Development
Develop a prototype, working model, lab test etc.
Attributes that consumers have identified that they want must be communicated through
the design of the product.
4. Test Marketing
Can observe actual consumer behavior.
Limited introduction in geographical areas chosen to represent intended market.
Aim is to determine the reaction of probable buyers.
It is the sample launch of the Marketing Mix.
Determine to go ahead, modify product, modify marketing plan or drop the product.
PROS are:
o Lessens the risk of product failure.
o Reduces the risk of loss of credibility or undercutting a profitable product.
o Can determine the weaknesses in the MM and make adjustments.
o Can also vary parts of the MM during the test market.
o Need to select the appropriate MM and check the validity.
CONS are:
o Test market is expensive.
o Firm's competitors may interfere.
o Competitors may copy the product and rush it out. IE Clorox detergent with bleach
P&G. "In a live test you've tipped your hand, and believe me, the competition is
going to come after you. Unless you have patented chemistry, they can rip you off
and beat you to a national launch" -Director of Marketing at Gillette's Personnel
division.
Alternatively can use a simulated test market. Free samples offered in the mall, taken
home and interviewed over the telephone later.
5. Commercialization
Corresponds to introduction stage of the Product Life Cycle.
Plans for full-scale marketing and manufacturing must be refined and settled.
Need to analyze the results of the test market to determine any changes in the marketing
mix.
Need to make decisions regarding warranties etc (reduces consumers risk). Warranties can
offer a competitive advantage.
Spend alot of money on advertising, personnel etc. Combined with capital expenditure
makes commercialization very expensive.
Handout...American Express To Try a Credit Card...
All stages above are identified in this article except market testing.
Need to consider:
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  the speed of acceptance among consumers and channel members;
 intensity of distribution,
 production capabilities,
 promotional capabilities,
 prices,
 competition,
 time period to profitability and commercialization costs.
Buyers' Product Adoption Process
1. Awareness
Buyers become aware of the product
2. Interest
Buyers seek information and is receptive to learning about product
3. Evaluation
Buyers consider product benefits and determines whether to try it
4. Trial
Buyers examine, test or try the product to determine usefulness relative to needs
5. Adoption
Buyers purchase the product and can be expected to use it when the need for the general
type of product arises.
Rate of adoption depends on consumer traits as well as the product and the firm's marketing
efforts.

Diffusion Process
The manner in which different members of the target market often accept and purchase a
product (go through the adoption process)
1. Innovators
Techno-savvies first customers to buy a product, 2.5 % of consumers
2. Early Adopters
Tend to be opinion leaders. Adopt new products but use discretion, 13.5%
3. Early Majority
34% of consumers, first part of the mass market to buy the product
4. Late Majority
Less cosmopolitan and responsive to change, 34%
5. Laggards
Price conscious, suspicious of change, 16%, do not adopt until the product has reached
maturity.
Implications to marketers, company must promote product to create widespread awareness of
existence and benefits.

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Product and physical distribution must be linked to patterns of adoption and repeat purchase.

WEB DEFINITIONS OF A PRODUCT LIFECYCLE:

Stages a product goes through from concept and use to eventual withdrawal from the
marketplace. Product life cycle stages include research and development, introduction, market
development, exploitation, maturation, saturation, and finally decline.

A marketing theory in which products or brands follow a sequence of stages including :

introduction, growth, maturity, and sales decline.

The processes, costs and revenues associated with a product from its initial creation to its
abandonment, and often categorized by the stages of introduction, growth, maturity and decline.
Identifying the product life cycle stage is a key factor in the determination of facility and support
investment, marketing efforts, and required reporting measurements and controls.

The four stages that a new product is thought to go through from birth to death: introduction,
growth, maturity and decline. Controversy surrounds whether products go through this cycle in
any predictable way.

The phases of the sales projections or history of a product or service category over time used to
assist with marketing mix decisions and strategic options available. The four stages of the
product life cycle include introduction, growth, maturity, and decline, and typically follow a
predictable pattern based on sales volume over a period of time.

The four major stages for products: introduction, growth, maturity and decline.

The stages that a product goes through during its life: introduction, growth, maturity, and
decline.

The life stage of a product, includes, introduction, growth, maturity and decline.

— the time in which a product is introduced into a market-place and experiences a growth in
sales, before sales mature and begin to decline, possibly leading to the demise of the product

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A product’s progress through introduction, growth, maturity, and decline stages.

The complete history of a product through its concept, definition, production, operation, and
obsolescence or disposal phases.

The predictable term of a product or service, expressed in time and dollars.

the sequence of stages in the marketing of a product; pioneering, growth, maturity, saturation,
decline, and abandonment.

Each product has a "life cycle" roughly analogous to that of human life: conception and birth
through childhood, adolescence, adulthood, maturity, seniority, and death. The business world
uses slightly different terms and organizes the product life cycle into six phases, including 0)
research and development, 1) introduction, 2) early growth, 3) late growth or shake-out, 4)
maturity or saturation, and 5) decline. While most classic business texts include five phase
starting with introduction, the author has added Phase 0 (research and development) because it
is essential for success over the life of the product.

The concept that the profit-producing life of any product goes through a cycle of introduction,
growth, maturity (levelling off), and decline.

The series of events or stages-referred to as "life stages"-that a product or category of products

typically goes through.

time from product selection or conception, design and specification development, purchasing,
manufacturing, packaging, delivery, warehousing, maintenance, repair and overhaul, through to
use and disposal.

a product goes through a number of stages from its introduction to its eventual and inevitable
decline. This life cycle will vary from product to product, but all products have life cycles.

Complete cycle from manufacture, packaging, transportation, use and disposal.

The stages of development and decline through which a successful product typically moves.

A theoretical model of what happens to sales and profits for a product class over time.

the stages a new product idea goes through from beginning to end.

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(from biology) The four stages that a new product is thought to go through from birth to death:
introduction, growth, maturity, and decline. Controversy surrounds whether products do indeed
go through such cycles in any systematic, predictable way. The product life-cycle concept is
primarily applicable to product forms, less to product classes, and very poorly to individual
brands.

a concept which draws an analogy between the span of a human life and that of a product,
suggesting that, typically, a product's life consists of four stages - introductory, growth, maturity
and decline; the concept is used as a tool to formulate marketing strategies appropriate to each of
the stages.
A NEW PRODUCT PROGRESS THROUGH A SEQUENCE OF STAGES FROM INTRODUCTION
TO GROWTH,maturity and decline.This sequence is known as the product life cycle and is
associated with changes in the marketing situation,thus impacting the marketing strategy and
the marketing mix.
Following diagram shows the life cycle of the product:

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 UNIT-12
BRANDING

12.1 BRANDING-INTRODUCTION
12.2 What is brand
12.3 Brand equity
12.4 BRAND IMAGE
12.5 BRAND EXTENSION
12.6 BRANDS AND PRODUCTS
12.7 BRAND BUILDING
12.8 QUALITY
12.9 POSITIONING
12.10 REPOSITIONING
12.11 COMMUNICATIONS
12.12 1ST MOVER ADVANTAGE
12.13 LONG TERM PERSPECTIVE
12.14 INTERNAL MARKETING
12.15 BRAND EXTENSION AND STRETCHING
12.16 TYPES OF BRANDS

12.1 Introduction brands

Take a look at the list below that shows the world’s top 10 brands in 2002 (as measured by
value):
{Rank Brand Value (Rs. billions)}

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1 Coca-Cola (Rs.69.6)
2 Microsoft (Rs.64.1)
3 IBM (Rs.51.2)
4 GE (Rs.41.3)
5 Intel (Rs.30.9)
6 Nokia (Rs.30.0)
7 Disney (Rs.29.3)
8 McDonalds (Rs.26.4)
9 Marlboro (Rs.24.2)
10 Mercedes (Rs.21.0)
Source: Interbrand; JP Morgan Chase, 2002

Why do companies such as Coca-Cola, Microsoft, IBM and Disney seem to achieve global
marketing success so easily? Why does it seem such an effort for others?

Why do we, as consumers, feel loyal to such brands that the mere sight of their logo has us
reaching into our pockets to buy their products?

The meaning of brands

Brands are a means of differentiating a company’s products and services from those of its
competitors.

There is plenty of evidence to prove that customers will pay a substantial price premium for a
good brand and remain loyal to that brand. It is important, therefore, to understand what brands
are and why they are important.

Macdonald sums this up nicely in the following quote emphasising the importance of brands:

“…it is not factories that make profits, but relationships with customers, and it is company and
brand names which secure those relationships”

Businesses that invest in and sustain leading brands prosper whereas those that fail are left to
fight for the lower profits available in commodity markets.

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12.2What is a brand?

One definition of a brand is as follows:

“A name, term, sign, symbol or design, or a combination of these, that is intended to identify the
goods and services of one business or group of businesses and to differentiate them from those of
competitors”.

Interbrand - a leading branding consultancy - define a brand in this way:

“A mixture of tangible and intangible attributes symbolised in a trademark, which, if properly

managed, creates influence and generates value”.

Three other important terms relating to brands should be defined at this stage:

12.3Brand equity

“Brand equity” refers to the value of a brand. Brand equity is based on the extent to which the
brand has high brand loyalty, name awareness, perceived quality and strong product
associations. Brand equity also includes other “intangible” assets such as patents, trademarks
and channel relationships.

12.4Brand images
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“Brand image” refers to the set of beliefs that customers hold about a particular brand. These are
important to develop well since a negative brand image can be very difficult to shake off.

12.5Brand extension

“Brand extension” refers to the use of a successful brand name to launch a new or modified
product in a new market. Virgin is perhaps the best example of how brand extension can be
applied into quite diverse and distinct markets.

TYPES OF BRAND EXTENSION

1.EXTENSION OF OTHER ITEMS IN THE SAME PRODUCT LINE Example can be different types
of coffee by the same manufacturer.Extension of Sunrise coffee viz.sunrise premium,sunrise
extra etc.

2.EXTENSION TO OTHER ITEMS IN A RELATED PRODUCT LINE:Example can be of magi

extended to magi ketchup,magi soup etc

12.6 Brands and products

Brands are rarely developed in isolation. They normally fall within a business’ product line or
product group.

A product line is a group of brands that are closely related in terms of their functions and the
benefits they provide. A good example would be the range of desktop and laptop computers
manufactured by Dell.

A product mix relates to the total set of brands marketed by a business. A product mix could,
therefore, contain several or many product lines. The width of the product mix can be measured
by the number of product lines that a business offers.

For a good example, visit the web site of Hewlett-Packard (“HP”). HP has a broad product mix that
covers many segments of the personal and business computing market. How many separate
product lines can you spot from their web site?

Managing brands is a key part of the product strategy of any business, particularly those
operating in highly competitive consumer markets.

12.7 Br a n d s - b u i l d i n g a b r a n d

What factors are important in building brand value?

Professor David Jobber identifies seven main factors in building successful brands, as illustrated
in the diagram below:

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12.8Quality

Quality is a vital ingredient of a good brand. Remember the “core benefits” – the things
consumers expect. These must be delivered well, consistently. The branded washing machine
that leaks, or the training shoe that often falls apart when wet will never develop brand equity.

Research confirms that, statistically, higher quality brands achieve a higher market share and
higher profitability that their inferior competitors.

12.9 Positioning

Positioning is about the position a brand occupies in a market in the minds of consumers. Strong
brands have a clear, often unique position in the target market.

Positioning can be achieved through several means, including brand name, image, service
standards, product guarantees, packaging and the way in which it is delivered. In fact, successful
positioning usually requires a combination of these things.

12.10 Repositioning

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Repositioning occurs when a brand tries to change its market position to reflect a change in
consumer’s tastes. This is often required when a brand has become tired, perhaps because its
original market has matured or has gone into decline.

The repositioning of the Lucozade brand from a sweet drink for children to a leading sports drink
is one example. Another would be the changing styles of entertainers with above-average
longevity such as Kylie Minogue and Cliff Richard.

12.11 Communications

Communications also play a key role in building a successful brand. We suggested that brand
positioning is essentially about customer perceptions – with the objective to build a clearly
defined position in the minds of the target audience.

All elements of the promotional mix need to be used to develop and sustain customer
perceptions. Initially, the challenge is to build awareness, then to develop the brand personality
and reinforce the perception.

12.12 First-mover advantage

Business strategists often talk about first-mover advantage. In terms of brand development, by
“first-mover” they mean that it is possible for the first successful brand in a market to create a
clear positioning in the minds of target customers before the competition enters the market.
There is plenty of evidence to support this.

Think of some leading consumer product brands like Gillette, Coca Cola and Sellotape that, in
many ways, defined the markets they operate in and continue to lead. However, being first into a
market does not necessarily guarantee long-term success. Competitors – drawn to the high
growth and profit potential demonstrated by the “market-mover” – will enter the market and copy
the best elements of the leader’s brand (a good example is the way that Body Shop developed the
“ethical” personal care market but were soon facing stiff competition from the major high street
cosmetics retailers.

12.13Long-term perspective

This leads onto another important factor in brand-building: the need to invest in the brand over
the long-term. Building customer awareness, communicating the brand’s message and creating
customer loyalty takes time. This means that management must “invest” in a brand, perhaps at
the expense of short-term profitability.

12.14 Internal marketing

Finally, management should ensure that the brand is marketed “internally” as well as externally.
By this we mean that the whole business should understand the brand values and positioning.
This is particularly important in service businesses where a critical part of the brand value is the
type and quality of service that a customer receives.

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Think of the brands that you value in the restaurant, hotel and retail sectors. It is likely that your
favourite brands invest heavily in staff training so that the face-to-face contact that you have with
the brand helps secure your loyalty.

12.15brands - brand extension and stretching

Brand extension and brand stretching

Marketers have long recognised that strong brand names that deliver higher sales and profits (i.e.
those that have brand equity) have the potential to work their magic on other products.

The two options for doing this are usually called “brand extension” and “brand stretching”.

Brand extension

Brand extension refers to the use of a successful brand name to launch a new or modified
product in a same broad market.

A successful brand helps a company enter new product categories more easily.

For example, Fairy (owned by Unilever) was extended from a washing up liquid brand to become
a washing powder brand too.

The Lucozade brand has undergone a very successful brand extension from children’s health
drink to an energy drink and sports drink.

Brand stretching

Brand stretching refers to the use of an established brand name for products in unrelated
markets.

For example the move by Yamaha (originally a Japanese manufacturer of motorbikes) into
branded hi-fi equipment, pianos and sports equipment.

When done successfully, brand extension can have several advantages:

• Distributors may perceive there is less risk with a new product if it carries a familiar brand
name. If a new food product carries the Heinz brand, it is likely that customers will buy it

• Customers will associate the quality of the established brand name with the new product. They
will be more likely to trust the new product.

• The new product will attract quicker customer awareness and willingness to trial or sample the
product

• Promotional launch costs (particularly advertising) are likely to be substantially lower.

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Brand positioning

As we have argued in our other revision notes on branding, it is the “added value” or augmented
elements that determine a brand’s positioning in the market place.

Positioning can be defined as follows:

Positioning is how a product appears in relation to other products in the market

Brands can be positioned against competing brands on a perceptual map.

A perceptual map defines the market in terms of the way buyers perceive key characteristics of
competing products.

The basic perceptual map that buyers use maps products in terms of their price and quality, as
illustrated below:

12.16 Types of brand

There are two main types of brand – manufacturer brands and own-label brands.

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Manufacturer brands

Manufacturer brands are created by producers and bear their chosen brand name. The producer
is responsible for marketing the brand. The brand is owned by the producer.

By building their brand names, manufacturers can gain widespread distribution (for example by
retailers who want to sell the brand) and build customer loyalty (think about the manufacturer
brands that you feel “loyal” to).

Own label brands

Own-label brands are created and owned by businesses that operate in the distribution channel –
often referred to as “distributors”.

Often these distributors are retailers, but not exclusively. Sometimes the retailer’s entire product
range will be own-label. However, more often, the distributor will mix own-label and
manufacturers brands. The major supermarkets (e.g. Tesco, Asda, Sainsbury’s) are excellent
examples of this.

Own-label branding – if well carried out – can often offer the consumer excellent value for money
and provide the distributor with additional bargaining power when it comes to negotiating prices
and terms with manufacturer brands.

Why should businesses try to build their brands?

There are many advantages to businesses that build successful brands. These include:

• Higher prices
• Higher profit margins
• Better distribution
• Customer loyalty

Businesses that operate successful brands are also much more likely to enjoy higher profits.

A brand is created by augmenting a core product with distinctive values that distinguish it from
the competition. This is the process of creating brand value.

All products have a series of “core benefits” – benefits that are delivered to all consumers. For
example:

• Watches tell the time

• CD-players play CD’s
• Toothpaste helps prevent tooth decay
• Garages dispense petrol.

Consumers are rarely prepared to pay a premium for products or services that simply deliver core
benefits – they are the expected elements of that justify a core price.

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Successful brands are those that deliver added value in addition to the core benefits.

These added values enable the brand to differentiate itself from the competition. When done well,
the customer recognises the added value in an augmented product and chooses that brand in
preference.

For example, a consumer may be looking for reassurance or a guarantee of quality in a situation
where he or she is unsure about what to buy. A brand like Mercedes, Sony or Microsoft can offer
this reassurance or guarantee.

Alternatively, the consumer may be looking for the brand to add meaning to his or her life in
terms of lifestyle or personal image. Brands such as Nike, Porsche or Timberland do this.

A brand can usefully be represented in the classic “fried-egg” format shown below, where the
brand is shown to have core features that are surrounded (or “augmented”) by less tangible
features.

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