Marketing Management / Marketing Practices

Chapter 01

Definition of Marketing

“Marketing is a social and managerial process whereby individuals or groups obtain what
they need and want through creating and exchanging product and values with others (Philip
Kotler).”
The American Marketing Association offers the following formal definition: Marketing is an
organizational function and a set of process for creating, communicating and delivering value
to customers and for managing customer’s relationship in ways that benefit the organization
and its stakeholders
Actually marketing is about identifying and meeting human and social needs. One of the
shorter definitions of marketing is “meeting needs profitably.”

Core Concept of Marketing

Needs, Wants, and Demands

a) Human needs are the most basic concept underlying marketing. A human need is a
state of felt deprivation. Humans have many complex needs. (a) Basic, physical needs
for food, clothing, warmth, and safety (b) Social needs for belonging and affection’s)
Individual needs for knowledge and self-expression. These needs are part of the basic
human makeup.

b) Another concept in marketing is human wants. A human want is the form that a
human need takes as shaped by culture and individual personality.

c) Demands are human wants that are backed by buying power. Consumers view
products as bundles of benefits and choose products that give. Them the best bundle
for their money. People demand products with the benefits that add up to the most
satisfaction. Outstanding marketing companies go to great lengths to learn about and
understand their customer’s needs, wants, and demands. The outstanding company
strives to stay close to the customer.

Products and Services

a) A product is anything that can be offered to a market for attention, acquisition, use
and consumption that might satisfy a want and need.
 b) A service is an activity or benefit offered for sale that is essentially intangible and
does not result in the ownership of anything. The concept of product is not limited to
physical objects and can include persons, places, organizations, activities, and ideas.
Be careful of paying attention to the product and not the benefit being satisfied.
“Marketing myopia” is caused by shortsightedness or losing sight of underlying
customer needs by only focusing on existing wants.

Value, Satisfaction, and Quality

a) Customer value is the difference between the values that the customer gains from
owning and using a product and the costs of obtaining the product. Customers do
usually judge product values and costs accurately or objectively--they act on
perceived value.

b) Customer satisfaction depends on a product’s perceived performance in delivering

value relative to a buyer’s expectations. If performance exceeds expectations, the
buyer is delighted (certainly a worthy goal of the marketing company). Smart
companies aim to delight customers by promising only what they can deliver, then
delivering more than they promise. The aim of successful companies today is total
customer satisfaction. Customer delight creates an emotional affinity for a product or
service, not just a rational preference, and this creates high customer loyalty.

c) Quality has a direct impact on product or service performance. Quality is defined in

terms of customer satisfaction. The term total quality management (TQM) is an
approach in which all the company’s people are involved in constantly improving the
quality of products, services, and business processes. Marketers have two major
responsibilities in a quality-centered company: (a) they must participate in forming
strategies that will help the company win through total quality excellence--they must
be the customer’s watchdog. (b) Marketers must deliver marketing quality as well as
production quality.

Exchanges, Transactions, and Relationships

a) Marketing occurs when people decide to satisfy needs and wants through exchange.
Exchange is the act of obtaining a desired object from someone by offering some-
thing in return. (1) Exchange is only one of many ways to obtain a desired object. (2)
Exchange allows a society to produce much more than it would with any alternative
system.

b) Whereas exchange is a core concept of marketing, a transaction (a trade of values

between two parties) is marketing’s unit of measurement. A transaction usually
involves at least two things of value, agreed-upon conditions, a time of agreement,
and a place of agreement. Most involve money, a response, and action.
 c) Transactions in marketing are part of a larger idea of relationship marketing. Beyond
creating short-term transactions, marketers need to build long-term relationships with
valued customers, distributors, dealers, and suppliers. Ultimately, a company wants to
build a unique company asset called a marketing network (the company and all its
supporting stakeholders). The goal of relationship marketing is to deliver long-term
value to the customer and thereby secure customer satisfaction and retention of
patronage. To build this relationship (beyond offering consistently high value and
satisfaction), the marketer can: (1) Add financial benefits. (2) Add social benefits. (3)
Add structural ties. (4) Seek profitable customers.

Markets

The concepts of exchange and relationships lead to the concept of a market. A market is the
set of actual and potential buyers of a product. Originally a market was a place where buyers
and sellers gathered to exchange goods (such as a village square). Economists use the term to
designate a collection of buyers and sellers who transact in a particular product class (as in
the housing market). Marketers see buyers as constituting a market. Modern economies
operate on the principle of division of labor, where each person specializes in producing
something, receives payment, and buys needed things with this money. Thus, modern
economies abound in markets.

Scope of Marketing

Scope of Marketing is to influence buyer's decision directly or indirectly for generating

business to make the flow of goods from producer to consume or user. Marketing people
market 10 types of entities that are called scope of marketing which are discussed below:

a) Goods: Goods is a tangible attributes assembled in an identifiable form to provide

want- satisfaction to customers. Physical goods constitute the bulk of most countries
production and marketing efforts. Cars, truck, television sets, machine tools etc. are
the example of goods.
b) Service: Service is any activity or benefit that is essentially intangible and does not
result in the ownership of thing. Service includes the work of airlines, hotels, car
rental firms, barber and beautician, maintenance and repair people, accounts, bankers,
lawyers, engineers, doctors, software programmers, and management consultant.
Many market offering consists of a variable mix of goods and services. At fast food
restaurant, for example, the customers consume both a product and service.
c) Experience: Experience is knowledge or skill which is obtained from doing, seeing
and feeling thing. By orchestrating several services and goods, a firm can create,
stage, and market experience. An amusement park or a water park represent
experimental marketing: customers, by taking different rides in the amusement park
or water park enjoy the thrill provided by these experiences.
d) Events: Events are occurrence designed to communicate particular message to target
audience. Marketers promote time based events, such as major trade show, artistic
performance and company anniversaries.
e) Person: Person marketing consists of activities undertaken to create, maintain and
change attitude of behavior towards a particular people. Celebrity marketing is a
major business. Artists, musicians, physician, high profile lawyers, and others
professional all get help from celebrity marketing.
f) Place: Place marketing consists of activities undertaken to create, maintain and
change attitude of behavior towards a particular Place. Cities, states, regions, and
whole nation compete actively to attract tourists, factories, company headquarters,
and new residents. Place marketers include economic development specialist, real
estate agents, commercial banks, local business association, and advertising and
public relations agencies.
g) Properties: Properties marketing consists of activities undertaken to create, maintain
and change attitude of behavior towards a particular Properties. Properties are
intangible rights of ownership of either real property (real estate) or financial property
(stock & bonds). Properties are bought and sold and these exchanges require
marketing. Real estate agent work for property owners or seller, or they buy and sell
residential or commercial real estates. Investment companies and banks market
securities to both industrial and individual investors.
h) Organization: Organization marketing consists of activities undertaken to create,
maintain and change attitude of behavior towards a particular Organization.
Organization actively works to build strong favorable, unique image in the mind of
their target publics. Universities, museums, performing art organization, and non
profit all use marketing to boost their public images and to compete for audiences and
funds.
i) Information: Information is essentially what books, schools, universities produce,
market and distribute at a price to parents, students and communities. The production,
packaging and distribution of information are some of our major industries. Even
companies that sell physical products attempt to add value through the use of
information. Information marketing is nothing new. Magazines use information in the
form of articles to sell advertising. Web sites use information of all kinds—
checklists, directories, statistics, and so on—to attract readers. But information
marketing is not often used in conventional, print marketing pieces such as brochures,
fliers, and direct mail.
j) Idea: Every market offering includes a basic idea. Charles Revson of Revlon once
observed: “In the factory we make cosmetics; in the store we sell hope.” Products and
services are platforms for delivering some ideas or benefits. Social Marketers are
busy promoting such ideas by creating awareness about AIDS, encouraging family
planning and discouraging smoking which fall in the realm of social marketing.
Market, Marketplaces, Marketspaces and Metamarkets

Market

The concepts of exchange and relationships lead to the concept of a market. A market is the
set of actual and potential buyers of a product. Originally a market was a place where buyers
and sellers gathered to exchange goods (such as a village square).

Marketplaces

The marketplace is physical, such as a store you shop in. A marketplace is the space, actual,
virtual or metaphorical, in which a market operates. The term is also used in a trademark law
context to denote the actual consumer environment, i.e. the 'real world' in which products and
services are provided and consumed. Marketplace is a location where goods and services are
exchanged. The traditional market square is a city square where traders set up stalls and
buyers browse the merchandise. This kind of market is very old, and countless such markets
are still in operation around the whole world
Marketspaces

Marketspace is digital as when we shop on the internet. It is an information and

communication based electronic exchange environment - is a relatively new concept in
marketing. Since physical boundaries no longer interfere with buy/sell decisions, the world
has grown into several industries specific marketspaces which are integration of
marketplaces through sophisticated computer and telecommunication technologies. The term
marketspace was introduced by Rayport and Sviokla in 1994. "Managing in the
Marketspace," to distinguish between electronic and conventional markets. In a marketspace,
information and /or physical goods are exchanged, and transactions take place through
computers and networks.

Metamarkets

Metamarket is to describe a cluster of complementary products and services that are closely
related in the mind of consumers, but spread across a diverse set of industries. The
automobile metamarket consist of automobile manufacturers, new cars and used car dealers,
financing companies, insurance companies, mechanics, spares parts dealers, service shops,
auto magazines, classified auto ads in newspapers, and auto sites on the internet.

Meta Market is a web-based market centered on an event or an industry, rather than a single
product. The web allows us to match producers' desire for economies of scale, and
consumers' desire for variety of choice to satisfy a set of needs. Thus we can have a
Metamarket for a wedding (event) that includes honeymoon recommendations, sources for
engagement rings and wedding gowns. Equally we can have a metamarket for an entire
industry (for example chemical industry) where the industry can trade excess inventory,
source new suppliers and find new vendors. These types of markets are easier to establish in
the web world, than they were before the web, and can prove very effective.

Different Types of Customers Markets

Traditionally, a “market” was a physical place where buyers and sellers gathered to buy and
sell goods. Economist describes a market as a collection of buyers and sellers who transact
over a particular product or product classes. Marketers use the term market to cover various
grouping of customers. There are some key customers market is described below:
a) Consumer market: Companies selling mass consumers goods and services such soft
drinks, cosmetics, air travel, and athletic shoes and equipment spend a great deal of
time trying to establish a superior brand image. Much of brand’s image depends on
developing s superior products and packaging.
b) Business market: Companies selling business goods and services often face well-
trained and well-informed professional buyers who are skilled at evaluating
competitive offerings. Business buyers buy goods in order to make or resell a product
to others at a profit.
c) Global market: Companies selling goods and services in the global marketplace face
additional decision and challenges. They must decide which countries to enter; how to
enter each; how to adapt their product and services features to each country; how to
price their products in different countries; and how to adapt their communication to fit
different culture.
d) Nonprofit and government market: Companies selling their goods to nonprofit
organization such as churches, universities, charitable organizations and government
agencies need to price carefully, because these buyers have limited purchasing power.

Marketing Management

Marketing management is defined as the analysis, planning, implementation, and control of

programs designed to create, build, and maintain beneficial exchanges with target buyers for
the purpose of achieving organizational objectives.

Demand Management
Marketing management is concerned not only with finding and increasing demand, but also
with changing or even reducing it.
a) Demarkting’s aim is to reduce demand temporarily or permanently (move
traffic away from a popular tourist attraction during peak demand times).
b) In reality, marketing management is really demand management.

Building Profitable Customer Relationships

Managing demand means managing customers.
c) Demand comes from new customers and repeat customers.
 d) Today, besides making efforts to attract new customers, marketers are going all
out to retain and build relationships with existing customers. It costs five
times as much to attract a new customer as it does to keep a current customer
satisfied.
Because of changing demographics, a slow-growth economy, more sophisticated
competitors, and overcapacity in many industries, many markets and market shares are
shrinking. The key to successful customer retention is superior customer value and
satisfaction.

Different Level of Marketing Demand

Marketing management is demand management. Marketers are indeed at stimulating demand

for their company’s products, but that’s too limited a view of the tasks they perform. Just as
production and logistic professionals are responsible for supply management, marketers are
responsible for demand management. Marketing managers seek to influence the level,
timing, and composition of demand to meet the organization’s objectives. Eight demand
states and their remedies are discussed below:
a) Negative demand: Consumers dislike the products and may even pay a price to
avoid it. Here marketers can adopt conversional marketing.
b) No demand: Consumers may be unaware of or uninterested in the products. Hence,
marketers can apply stimulation marketing.
c) Latent demand: Consumers may share a strong need that can not be satisfied by an
existing product. Marketers can adopt development marketing.
d) Declining demand: Consumers begin to buy the product less frequently or not at all.
Marketers can apply remarketing activities.
e) Irregular demand: Consumers purchases vary on a seasonal, monthly, weekly,
daily, or even hourly basis. Marketers can adopt synchro marketing.
f) Full Demand: Consumers are adequately buying all products put into the marketplace.
Here, marketers can conduct maintenance marketing.
g) Overfull demand: More consumers would like to buy the product than can be
satisfied. Marketers can operate de-marketing activities.
h) Unwholesome demand: Consumers may be attracted to products that have
undesirable social consequence. In this case, marketers can apply counter marketing.

Marketing Management Philosophies

There are five alternative concepts under which organizations conduct their marketing
activities: the production, product, selling, marketing, and societal marketing concepts.

The Production Concept

The production concept holds that consumers will favor products that are available and
highly affordable and that management should, therefore, focus on improving production and
distribution efficiency. This is one of the oldest philosophies that guide sellers. The
production concept is useful when:
a) Demand for a product exceeds the supply.
 b) The product’s cost is too high and improved productivity is needed to bring it down.
The risk with this concept is in focusing company operations too narrowly. Do not ignore the
desires of the market.

The Product Concept

The product concept states that consumers will favor products that offer the most quality,
performance, and features. The organization should, therefore, devote its energy to making
continuous product improvements.
a) Some manufacturers mistakenly believe that if they “build a better mousetrap,”
Consumers will beat a path to their door just for their product.
b) The product concept can also lead to “marketing myopia,” the failure to see the
Challenges being presented by other products.

The Selling Concept

Many organizations follow the selling concept. The selling concept is the idea that
consumers will not buy enough of the organization’s products unless the organization
undertakes a large-scale selling and promotion effort.
a) This concept is typically practiced with unsought goods (those that buyers do not
normally think of buying).
b) To be successful with this concept, the organization must be good at tracking down
the interested buyer and selling them on product benefits.
c) Industries that use this concept usually have overcapacity. Their aim is to sell what
they make rather than make what will sell in the market.
d) There are not only high risks with this approach but low satisfaction by customers.

The Marketing Concept

The marketing concept holds that achieving organizational goals depends on determining the
needs and wants of target markets and delivering the desired satisfactions more effectively
and efficiently than competitors. The marketing and selling concepts are often confused. The
primary differences are:
a) The selling concept takes an “inside-out” perspective (focuses on existing products
and uses heavy promotion and selling efforts).
b) The marketing concept takes an “outside-in” perspective (focuses on customer needs,
values, and satisfactions).
c) Many companies claim to adopt the marketing concept but really do not unless they
commit to market-focused and customer-driven philosophies.

The Societal Marketing Concept

The societal marketing concept holds that the organization should determine the needs,
wants, and interests of target markets. It should then deliver the desired satisfactions more
effectively and efficiently than competitors in a way that maintains or improves the
consumer’s and the society’s well-being.
a) The societal marketing concept is the newest of the marketing philosophies.
b) It questions whether the pure marketing concept is adequate given the wide variety of
societal problems and ills.
c) According to the societal marketing concept, the pure marketing concept overlooks
possible conflicts between short-run consumer wants and long- run consumer welfare
d) The societal concept calls upon marketers to balance three considerations in setting
their marketing policies: (1) Company profits. (2) Customer wants. (3) Society’s
interests.
e) It has become good business to consider and think of society’s interests when the
organization makes marketing decisions.

Marketing Management Tasks

With the holistic marketing philosophy as a backdrop, we can identify a specific set of tasks
that make up successful marketing management marketing leadership. So a marketer should
perform some important managerial task for accelerating the business and achieving its long
term organizational goal are as follows:

a) Developing marketing strategies and plans: The first task of marketing manager is
to identify its potential long-term opportunities, gives its market experience and core
competencies, then company can design its cameras with better features. It can make
a line of video cameras, or it can use core competencies in optics to design a line of
binoculars and telescope. Whichever direction it chooses, it must develop concrete
marketing plans that the marketing strategy and tactics going forward.
b) Capturing marketing insight: Marketing managers need a reliable marketing
information system to closely monitor its marketing environment. Its
microenvironment consists of all the players who affect its ability to produce and sell
products –suppliers, marketing intermediaries, customers and competitors. Its
microenvironment includes demographic, economic, physical, technological,
political-legal, and social-cultural factors that affects sales and profits. Organization
needs a dependable marketing research system. To transform marketing strategy into
marketing program, marketing managers must measure market potential, forecast
demand, and market basic decision about marketing expenditure, marketing activities,
and marketing allocation.
c) Connecting with customers: Organization must consider how to best create value
for it chosen target markets and developing strong, profitable, long-term relationship
with customers. To do so, it needs to understand customers markets. Who buys and
why do they buy? What are they looking for in the way of features and price, and
where do they shop? Manager also needs to gain a full understanding of how
organizational buyers buy. It needs a sale force that is well trained in presenting
products benefits.
d) Building strong brand: Organization must pay close attention to competitors,
anticipating its competitor’s moves and knowing how to react quickly and decisively.
It may also want to initiate some surprise moves, in which case it needs to anticipate
 how its competitors will respond. Considering all thing company should establish
strong brand image of its products by offering a reasonable price with excellent
service and strong advertising.
e) Shaping the market offerings: At the heart of the marketing program is the product-
the firm’s tangible offering to the market, which includes the product quality, design,
features, and packaging. To gain a competitive advantage, company may provide
leasing, delivery, repair and training as part of its product offerings. A critical
marketing decision relates to price. Company must decide on wholesale and retail
price, discount, and allowance and credit terms. Its price should match well with the
offer’s perceived value; otherwise buyers will turn to competitors’ product.
 Chapter-02

Marketing and Customer Value

Marketing involves satisfying consumer’s need and wants. The task of any business is to
deliver customer value at a profit while being socially responsible. In a hypercompetitive
economy with increasingly rational buyers faced with abundant choice, a company can win
only by fine- tuning the value delivery process and choosing, providing and communicating
superior value.

The value delivery process The traditional view of marketing is that the firm makes
something and then sells it. In this view, marketing takes place in the second half of the
process. Companies that subscribe to this view have best chance of succeeding in economies
marked by goods shortage where consumers are not fussy about quality, features or style.

This traditional view of the business process, however will not work in economies where
people face abundant choice. There, the ‘mass market’ is actually splintering into numerous
micromarkets, each with its own wants, performance, preference, and buying criteria. The
smart competitors must design and deliver offerings for well-defined target markets. This
realization inspired a new view of business processes that places marketing at the beginning
of the planning. Instead of emphasizing making and selling, companies now see them as part
of a value delivery process. The value creation and delivery sequence can be divided into
three phases:
a) Choosing the value: Choosing the value represents the ‘homework’ marketing must
do before any product exists. The marketing staffs must segment the market, select
the appropriate market target, and develop the offering’s value positioning. Once
company chooses the value then it is engaged in providing the value.
b) Providing the value: Marketing must determine specific product features, prices and
distribution. After this, the business unit is engaged in communication the value.
c) Communicating the value: The task in third phase of value delivery process is
communicating the value by utilizing the sales force, sales promotion, advertising and
other communications tools to announce and promote the product.

Each of these value phases has cost implication. It is also the case that the value delivery
process begins before there is a product and continues while it is being developed and after it
becomes available.
The value chain Michael Porter of Harvard has proposed the value chain as a tool for
identifying ways to create more customer value. According to this model, every firm is a
synthesis activities performed to design, produce, and market, deliver and support its product.
The value chain identifies nine strategically relevant activities-five primary and four
supportive activities-that create value and cost in a specific business:
a) Primary activities: The primary activities are inbound logistic or bringing materials
into the business; operations or converting them into final products; outbound logistic
or shipping out final products; marketing them, which include sales and servicing
them.
b) Support activities: The support activities include procurement, technology
development, human resources management, and firm infrastructure-are handled in
specialized department. This firm’s infrastructure covers the cost of general
management, planning, finance, accounting, and legal and government affairs.

The firm’s task is to examine its cost and performance in each value-creating activities look
for ways to improve it. Managers should estimate their competitor’s cost and performances
as benchmark against which to compare their own cost and performance.

Corporate and Division Strategic Planning

Some companies give their business units a lot of freedom to set their own sales and profit
goals and strategies. Others set goals for their business units but let them develop their own
strategies. Still others set the goals and participate in developing individual’s business unit
strategies. All corporate headquarters undertake four planning activities:

a) Defining the corporate mission: An organization exists to accomplish: to make cars,

lend money, provides a night’s lodging, and so on. Over time the mission may
change, to take advantages of new opportunities or respond to new market conditions.
To define its mission statements, a company should address Peter Drucker’s classic
questions: What is our business? Who is the customer? What is of value to the
customers? What will our business be? What should our business be? These simple
sounding questions are among the most difficult a company will ever have to answer.
Successful companies continuously raise them and answer them thoughtfully and
thoroughly. Organization develops mission statement to share with managers,
employees and customers. A clear, thoughtful mission statement provides employees
with a shared sense of purpose, direction, and opportunity.
b) Establishing Strategic Business Units: Strategic business unit is a unit of the
company that has a separate mission and objective and that can be planned
independently from other company business. “SBU is an organization unit within a
corporation that performs all of the basic business functions in meeting the needs of a
 particular market with a product, a product line, or a mix of related line-Cravens.”
Large companies normally manage quite different business, each requiring its own
strategy. A strategic business unit has three characteristics: (1) It is a single business,
or a collection of related business, that can be planned separately from the rest of the
company. (2) It has its own set of competitors. (3)It has a manager responsible for
strategic planning and profit performance, who controls most of the factors affecting
profit. The purpose of identifying the companies Subs is to develop separate strategies
and design appropriate funding.

c) Assessing resources in each SBU

Strategic Business Unit (SBU)

Strategic business unit is a significant organization segment that is analyzed to develop

organizational strategy aimed at generating future business or revenue. Philip Kotler defined
“Strategic Business Unit as the unit of the company that has a separate mission and objective
and that can be planned independently from other company business”. Cravens defines “SBU
as an organizational unit within the corporation that perform all of the basic business
functions in meeting the needs of the particular market with a product, product line, or a mix
of related lines”.
Exactly what constitutes an SBU varies from organization to organization. In larger
organizations, an SBU could be a company division, a single product, or a complete product
line. In smaller organizations, it might be the entire company. Although SBUs vary
drastically in form, they have some common characteristics. All SBUs are a single business
(or collection of businesses), have their own competitors and a manager accountable for
operations, and can be independently planned for.

Growth-Share Matrix under BCG Approach

Companies that are large enough to be organized into strategic business units face the
challenge of allocating resources among those units. In the early 1970's the Boston
Consulting Group developed a model for managing a portfolio of different business units (or
major product lines). The BCG growth-share matrix displays the various business units on a
graph of the market growth rate vs. market share relative to competitors:
 BCG Growth-Share Matrix

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

The BCG matrix provides a framework for allocating resources among different business
units and allows one to compare many business units at a glance.

SWOT Analysis

SWOT analysis is a basic, straightforward model that provides direction and serves as a basis
for the development of marketing plans. It accomplishes this by assessing an organizations
strengths (what an organization can do) and weaknesses (what an organization cannot do) in
addition to opportunities (potential favorable conditions for an organization) and threats
(potential unfavorable conditions for an organization). SWOT analysis is an important step in
planning and its value is often underestimated despite the simplicity in creation. The role of
SWOT analysis is to take the information from the environmental analysis and separate it
into internal issues (strengths and weaknesses) and external issues (opportunities and
threats). Once this is completed, SWOT analysis determines if the information indicates
something that will assist the firm in accomplishing its objectives (a strength or opportunity),
or if it indicates an obstacle that must be overcome or minimized to achieve desired results
(weakness or threat).

Elements of SWOT Analysis

Strengths and Weaknesses: Relative to market needs and competitors’ characteristics, a

manager must begin to think in terms of what the firm can do well and where it may have
deficiencies. Strengths and weaknesses exist internally within a firm, or in key relationships
between the firm and its customers. SWOT analysis must be customer focused to gain
maximum benefit; strength is really meaningful only when it is useful in satisfying the needs
of a customer. At this point, the strength becomes a capability.

When writing down strengths, it is imperative that they be considered from both the view of
the firm as well as from the customers that are dealt with. These strengths should be realistic
and not modest. A well-developed listing of strengths should be able to answer a couple of
questions. What are the firm’s advantages? What does the firm do well?

A customer-focused SWOT may also uncover a firm’s potential weaknesses. Although some
weaknesses may be harmless, those that relate to specific customer needs should be
minimized if at all possible. In addition, a focus on a firm’s strengths in advertising is
promotion is important to increase awareness in areas that a firm excels in. This method not
only evokes a positive response within the minds of the consumer, but pushes the weaknesses
further from the decision making process.

Weaknesses should also be considered from an internal and external viewpoint. It is

important that listing of a firm’s weaknesses is truthful so that they may be overcome as
quickly as possible. Delaying the discovery of weaknesses that already exist within a
company will only further hurt the firm. A well-developed listing of weaknesses should be
able to answer a few questions. What can be improved? What is done poorly? What should
be avoided?

The role of the internal portion of SWOT is to determine where resources are available or
lacking so that strengths and weaknesses can be identified. From this, the marketing manager
can then develop marketing strategies that match these strengths with opportunities and
thereby create new capabilities, which will then be part of subsequent SWOT analysis. At the
same time, the manager can develop strategies to overcome the firm’s weaknesses, or find
ways to minimize the negative effects of these weaknesses.

Opportunities and Threats: Managers who are caught up in developing strengths and
capabilities may ignore the external environment. A mistake of this magnitude could lead to
an efficient organization that is no longer effective when changes in the external environment
prohibit the firm’s ability to deliver value to its targeted customer segments. These changes
can occur in the rate of overall market growth and in the competitive, economic,
political/legal, technological, or sociocultural environments.

Changes in the Competitive Environment

One of the largest trends in the U.S. economy in recent years has been the rapid decline in the
number of small, independently owned retail businesses. Small mom-and-pop supermarkets
and locally owned bookstores are fading away quickly and will soon be extinct. Likewise,
many locally owned restaurants around the country are experiencing difficulties due to the
growth of large, national restaurant chains. The most recent businesses to face extinction are
neighborhood hardware stores, which have lost customers to retail giants such as Home
Depot and Lowes. Although they cannot be competitive with pricing, hardware retailers such
as Ace Hardware and True Value expect to survive by offering outstanding service and
convenient locations.

Changes in the Sociocultural Environment

Social and cultural influences cause changes in attitudes, beliefs, norms, customs, and
lifestyles. A firm’s ability to foresee changes in these areas can prove beneficial while failure
to react to these changes can be devastating. For example, the sales of Mexican-food
products have increased at an annual rate of approximately 12 percent. The trend went
unnoticed by major food producers for a long time. However, Heinz Company recognized the
existence of a viable opportunity and responded by introducing two versions of salsa-style
ketchup. Although Heinz’s strategy was sound, its salsa ketchup eventually failed due to poor
distribution during the implementation phase.

Product modifications are often used to take advantage of market opportunities. However,
these changes can also create potential new competitive threats. When Heinz introduced
salsa-flavored ketchup, it added Old El Paso and Pace to its set of brand competitors that
previously included Hunt’s and Del Monte. Likewise, the action of other companies can also
change the competitive set. Failure to re-evaluate and realign the threats and opportunities in
the sociocultural environment can hurt a firm.

Changes in the Political/Legal Environment

Regulatory actions by government agencies often restrict the activities of companies in

affected industries. The American Disabilities Act of 1990 placed restrictions on the way
firms construct their places of business and design jobs. Companies with significant
investment facilities that did not comply with the law viewed its implementation as a major
threat. On the other hand, companies that market products designed to assist disabled
shoppers and employees saw the act as a key opportunity.

Lawsuits against the tobacco industry have lead to dramatic changes in the way cigarette
companies market their product. Today, companies such as Phillip Morris are airing
advertisements illustrating the negative effects of their products. In addition, a proposed
settlement agreement between the industry and the attorney general of several states
represent a threat that could result in a ban on some types of cigarette advertising and the
regulation of nicotine by the FDA. As can be seen, it is important to identify political/legal
threats and opportunities in order to keep an edge on the market.

Changes in the Internal Organizational Environment

Various elements within an organization’s internal environment can also have an impact on
marketing activities. Changes in the structuring of departments, lines of authority, top
management, or internal political climate can all create internal weaknesses that must be
considered during the SWOT analysis as well as in the development of the marketing plan.
McDonald’s has recently been feeling increased competitive pressure from Wendy’s and
Burger King. In order to increase market share, McDonald’s created new marketing
campaigns and new sandwiches. However, McDonald’s failed to get the cooperation of all its
franchisees. When store sales began to fall, individual franchisees started to band together to
gain power to protect their investments. The increased power of the franchisees forced
McDonald’s to pull several advertisement campaigns due to lack of support. Prior to this
McDonald’s was used to getting their way with franchisees. Now, the shift in power from
McDonald’s to its franchisees has created an internal weakness that the company must
address as it develops and implements new marketing strategies. Again, it is necessary to
emphasize the importance of evaluating specific opportunities and threats within your
company.

It is not simply enough to identify the strengths, weaknesses, opportunities, and threats of a
company. In applying the SWOT analysis it is necessary to minimize or avoid both
weaknesses and threats. Weaknesses should be looked at in order to convert them into
strengths. Likewise, threats should be converted into opportunities. Lastly, strengths and
opportunities should be matched to optimize the potential of a firm. Applying SWOT in this
fashion can obtain leverage for a company.

As can be seen, SWOT analysis can be extremely beneficial to those who objectively analyze
their company. The marketing manager should have rough outline of potential marketing
activities that can be used to take advantage of capabilities and convert weaknesses and
threats. However, at this stage, there will likely be many potential directions for the managers
to pursue. Due to the limited resources that most firms have, it is difficult to accomplish
everything at once. The manager must prioritize all marketing activities and develop specific
goals and objectives for the marketing plan.

d) Assessing Growth Opportunity

Product/Market Expansion Grid

Marketing has the main responsibility for achieving profitable growth for the company.
Marketing needs to identify evaluate and select markets opportunities and lay down strategies
for capturing them. One useful device for identifying growth opportunities is the product/
market expansion grid which is discussed below graphically:
 1. Market Penetration: A strategy for company growth by increasing sales of current
product to current market segment without changing the product.
2. Market Development: A strategy for company growth by identifying and developing
new market segments for current company products.
3. Product Development: A strategy for company growth by offering modified or new
products to current market segment.
4. Diversification: A strategy for company growth through starting up or acquiring
business out side the company’s current products and markets.

The Marketing Mix

Marketing Mix is the set of controllable, tactical, marketing tool- product, price, place and
promotion that the firm blend to produce the response it wants in the target market. The
major marketing management decisions can be classified in one of the following four
categories:

 Product
 Price
 Place (distribution)
 Promotion

These variables are known as the marketing mix or the 4 P's of marketing. They are the
variables that marketing managers can control in order to best satisfy customers in the target
market. The marketing mix is portrayed in the following diagram:
 The Marketing Mix

Product Place

Target
Market

Price Promotion

The firm attempts to generate a positive response in the target market by blending these four
marketing mix variables in an optimal manner.

Product

The product is the physical product or service offered to the consumer. In the case of physical
products, it also refers to any services or conveniences that are part of the offering.

Product decisions include aspects such as function, appearance, packaging, service, warranty,
etc.

Price

Pricing decisions should take into account profit margins and the probable pricing response
of competitors. Pricing includes not only the list price, but also discounts, financing, and
other options such as leasing.

Place
Place (or placement) decisions are those associated with channels of distribution that serve as
the means for getting the product to the target customers. The distribution system performs
transactional, logistical, and facilitating functions.

Distribution decisions include market coverage, channel member selection, logistics, and
levels of service.

Promotion

Promotion decisions are those related to communicating and selling to potential consumers.
Since these costs can be large in proportion to the product price, a break-even analysis should
be performed when making promotion decisions. It is useful to know the value of a customer
in order to determine whether additional customers are worth the cost of acquiring them.
Promotion decisions involve advertising, public relations, media types, etc. The following
table summarizes the marketing mix decisions, including a list of some of the aspects of each
of the 4Ps.

Summary of Marketing Mix Decisions

Product Price Place Promotion

Functionality List price Channel members Advertising

Appearance Discounts Channel motivation Personal selling

Quality Allowances Market coverage Public relations

Packaging Financing Locations Message

Brand Leasing options Logistics Media

Warranty Service levels Budget

Service/Support
 Chapter- 3

Definition of Marketing Information System (MIS)

Marketing Information System (MkIS) simply put, an MkIS is a computerized system that is
designed to provide an organized flow of information to enable and support the marketing
activities of an organization. The MkIS serves collaborative, analytical and operational
needs. In the collaborative mode, the MkIS enables managers to share information and work
together virtually. In addition, the MkIS can enable marketers to collaborate with customers
on product designs and customer requirements. The analytical function is addressed by
decision support applications that enable marketers to analyze market data on customers,
competitors, technology and general market conditions. These insights are becoming the
foundation for the development of marketing strategies and plans. The MkIS addresses
operational needs through customer management systems that focus on the day-to-day
processing of customer transactions from the initial sale through customer service. MkIS
systems are designed to be comprehensive and flexible in nature and to integrate with each
other functionally. They are formal, forward looking and essential to the organization’s
ability to create competitive advantage. The MkIS is the firm’s “window on the world” and,
increasingly, it is the primary customer interface. Marketing information systems provide the
information technology backbone for the marketing organization’s strategic operations. In a
broader sense, the MkIS creates an organized and timely flow of information required by
marketing decision makers. It involves the equipment, software, databases, and also the
procedures, methodologies and people necessary for the system to meet its organizational
objectives. MkIS encompasses a broad spectrum of activities from simple transaction
processing complex marketing strategy decision making. Benefits of the Marketing
Information System: the MkIS increases the number of options available to decision-makers
and supports every element of marketing strategy. MkIS affects marketing’s interfaces with
customers, suppliers and other partners. The primary benefits of the MkIS impact in the areas
of functional integration, market monitoring, strategy development, and strategy
implementation.

Marketing Environment

A company’s marketing environment consists of the actors and forces outside marketing that
affect marketing management’s ability to build and maintain successful relationships with
target customer. The marketing environment is made up of a microenvironment and a macro
environment. We look first the company’s microenvironment.
.
Micro Environmental Factors
The microenvironment consists of the factors close to the company that affects its ability to
serve its customers-the company, employees, suppliers, share holders, media, and
competitors are discussed below:

Customers

Organizations survive on the basis of meeting the needs, wants and providing benefits for
their customers. Failure to do so will result in a failed business strategy.

Employees

Employing the correct staff and keeping these staff motivated is an essential part of the
strategic planning process of an organization. Training and development plays an essential
role particular in service sector marketing in-order to gain a competitive edge. This is clearly
apparent in the airline industry

Suppliers

Increase in raw material prices will have a knock on affect on the marketing mix strategy of
an organization. Prices may be forced up as a result. Closer supplier relationships are one
way of ensuring competitive and quality products for an organization.

Shareholders

As organization requires greater inward investment for growth they face increasing pressure
to move from private ownership to public. However this movement unleashes the forces of
shareholder pressure on the strategy of organizations. Satisfying shareholder needs may
result in a change in tactics employed by an organization. Many internet companies who
share prices rocketed in 1999 and early 2000 have seen the share price tumble as they face
pressures from shareholders to turn in a profit. In a market which has very quickly become
overcrowded many have failed.

Media

Positive or adverse media attention on an organizations product or service can in some cases
make or break an organization.. Consumer program with a wider and more direct audience
can also have a very powerful and positive impact, forcing organizations to change their
tactics.

Competitors

The name of the game in marketing is differentiation. What benefit can the organization offer
which is better then their competitors? Can they sustain this differentiation over a period of
time from their competitors? Competitor analysis and monitoring is crucial if an organization
is to maintain its position within the market.
Macro Environmental Factors

Conceptually, the forces that comprise the marketing environment are viewed as existing at
two levels. They are categorized as micro and macro influences. The microenvironment
consists of those forces that directly affect the marketing programs of a particular firm. The
activities of marketing intermediaries, company, customers, suppliers, and competitors are all
examples of external forces that influence the marketing actions of a specific organization.
The macro environment encompasses the broad environmental system within which all
organizations must conduct business. In one sense, it defines or creates the structure of the
marketplace for all organizations. The particular elements that make up the macro-
environment are demographic trends, economic, natural, socio and cultural influences,
political and legal issues, and technological advances.

The company and all of the others factors operate in a large macro environment of forces that
shapes opportunities and pose threats to the company. We examine these forces and show
how they affect marketing plan.
.

Political/Legal Environment

Marketing decisions are strongly affected by developments in the political and legal
environment. This environment is composed of laws, government agencies and pressure
groups that influence and limit various organizations and individuals. Sometimes these laws
also create opportunities for business.

"There are a number of reasons why the legal environment is important to managers,
particularly those involved with the marketing function. First and most obvious, managers
themselves may be convicted for certain legal violations such as price fixing and mail or wire
fraud. Second, product design considerations, often in conjunction with promotional and
warranty materials, may lead to expensive product liability exposure, leading to high
insurance rates and even bankruptcy. Similarly, private antitrust lawsuits by rivals or dealers
may lead to treble damage awards that may be equally staggering

Marketing decisions are strongly affected by developments in the political and legal
environment. This environment is composed of laws, government agencies and pressure
groups that influence and limit various organizations and individuals. However, sometimes
these laws also create opportunities for business. The followings are some ways interpreting
how the marketing functions of businesses are impinged:

At the most general level, the stability of the political system affects the attractiveness of a
particular national market. While radical change rarely results from political upheaval in
most Western countries, the instability of many Eastern European governments leads to
uncertainty about the economic and legislative framework in which goods and services will
be provided.

At a national level, government passes legislation that directly affects the relationship
between the firm and its customers and between itself and other firms. Sometimes legislation
has a direct effect on marketers, for example a law giving consumers rights against the seller
of faulty goods. At other times, the effect is less direct, as where legislation requiring local
authorities to put out to tender some of their duties has the effect of creating more
competitive relationships between firms in a market

The government is additionally responsible for protecting the public interest at large,
imposing further constraints on the activities of firms, for example where the government
lays down design standards for cars to protect the public against pollution or road safety risks

The government is additionally responsible for protecting the public interest at large,
imposing further constraints on the activities of firms, for example where the government
lays down design standards for cars to protect the public against pollution or road safety
risks.

Even the most liberal advocates of free market economies agree that the system works best
with at least some regulation. Well-conceived regulation can encourage competition and
ensure fair markets for goods and services. Thus, governments develop public policy to guide
commerce--sets of laws and regulations that limit business for the good of society as a whole.
Almost every marketing activity is subject to a wide range of laws and regulations.

Understanding the public policy implications of a particular marketing activity is not a

simple matter. First, there are many laws created at the federal, state, and local levels, and
these regulations often overlap. Second, the regulations are constantly changing--what was
allowed last year may now be prohibited. Marketers must work hard to keep up with these
changes in the regulations and their interpretations.

Growth of Special-Interest Groups

The number and power of special-interest group have increased over the past few decades.
Political-action committees lobby government officials and pressure business executives to
pay more attention to consumer rights, women’s rights, senior citizen rights, minority rights,
gay rights, and so on. Many companies have established public-affairs departments to deal
with these groups and issues.

An important force affecting business is the consumerist movement-an organized movement

of citizens and government to strengthen the rights and powers of buyers in relation to
sellers. Consumerists have advocated and won the right to know the true interest cost of a
loan, and the true benefits of a product. In response to consumerism, several companies have
established consumer-affairs departments to help formulate policies and respond to
consumers’ complaints.
Clearly, new laws and growing numbers of pressure groups have put more restraints on
marketers. Marketers have to clear their plans with the company’s legal, public relations,
public affairs, and consumer-affairs departments.

Economic Environment

The economic environment affects how much we have to spend and how we are likely to
spend it. Therefore it plays a significant role in determining the likely demand for products
and services. Marketing is influenced by local, National and international economic factors.

The local economy of a region is important particularly when exceptional circumstances

create significant variations to national trends. In her book Rosemarie Stefanou (Success in
Marketing, 1993) wrote that the level of domestic unemployment has decreased the effective
demand for many luxury consumer goods, which, in turn, has adversely affected the demand
for the industrial machinery required to produce such goods. In some regions, the local
economy particularly the retail and other service sectors, has been devastated by the bright of
persistent, long-term unemployment.

International economic developments have longer-term significance which are sometimes

more difficult to evaluate. Changing growth rates in other national economies affect exports
and imports, which in turn influence national and local economies.

The points I have narrated above all demonstrate the importance to marketing firms of
continually monitoring the economic environment at both the domestic and world levels. The
complex interaction of economic forces and the political responses made by individual
governments in an attempt to influence and manage their natural economies can have
dramatic effects on individual firm’s business operations.

Technological Environment

The technological environment is perhaps the most dramatic force now shaping our destiny.
Technology has released such wonders as penicillin, organ transplants and computers. It has
also released such horrors as nerve gas and the nuclear bomb. Our attitude towards
technology depends on whether we are more impressed with its wonders or its blunders.
Every new technology is a force for 'creative destruction'; i.e. it replaces an older technology.
When old industries fought or ignored new technologies, their businesses declined. New
technology creates new markets and opportunities. New technology creates major long-run
consequences that are not always foreseeable.

Advances in technology affect Marketing decisions in a number of ways.

The creation of new opportunities for products and services is the most obvious impact of
technological change. Advances in electronic and computer technology have generated large
numbers of new products, from business computers and communication devices, such as the
mobile phones and fax machine, to domestic application in video games, music centers and
microwave ovens. Each successful new product presents opportunities for additions and
refinements to add to the proliferation, e.g. computer games have been a recent growth
market for companies such as Nintendo in the United States. Their success has created
marketing opportunities for the development of new products.

Our consumption patterns and life styles evolve as a result of technological changes. There
have been many recent examples. Developments in transportation systems have changed our
purchasing habits as the spread of car ownership enabled convenient shopping further from
home, culminating in the need for one stop, out of town shopping centers. New technology in
the kitchen, from microwaves to mixers, has reduced meal preparation times allowing our
eating habits to fit in with busy life styles and creating the need for a whole new range of
food products.

“The impact of technological change on marketing activities can also be seen at the retail
level. Electronic point of sale (EPOS) data capture is now being increasingly used by the
larger retail multiples. The so-called ‘laser check’ reads a bar code on the product being
purchased and stores information, which is used to analyze sales and re-order stock, as well
as giving customers a printed readout of what they have purchased and the price charged.
Such a system obviates the tedious task of making every item with the retail price and the
need for the checkout person to key the price of each item into the till machine. Manufactures
of fast moving consumer goods (FMCGs), particularly packaged grocery products have been
forced to respond to these technological innovations by incorporating bar codes on their
product labels or packaging”, (David stokes (2nd edition)

The examples given above illustrates how changes in the technological environment can
affect the products and services that firm’s produce and the way in which firms carry out
their business operations. Technological change, like all other factors in the
Microenvironment, poses both threats and opportunities to the marketing.

However, as an observer of human behavior, I have to ask, "If technology is so wonderful,

why are things like rotary-dial telephones, hand-rolled cigars, and organic foods back in
vogue?" If you've ever tasted fish that you just pulled out of a clear mountain lake and
cooked on a wood fire, you know why the breaded and frozen kind just doesn't measure up.
In spite of all our technology, we can't make food in a factory that tastes as wonderful as it
does when it's cooked outdoors.

Clearly, technology is a both boon and bane. But I'm willing to adapt to it, because I've seen
what happens to those that try to fight it!”

The Demographic Environment

It is of major interest to marketers because it involves people, and people make up markets.
Demography is the study of human populations in terms of their size, density, location, age,
gender, race, occupation, income, education, and other statistics. The world's population is
growing rapidly. Today's population of approximately 6 billion is expected to exceed 7.5
billion by 2025. Obviously, this has a major effect on the entire business environment, and
does not necessarily mean increased market opportunities (if spending power does not
accompany the population growth). The large, diverse world population poses opportunities
and threats, so marketers keep track of demographic trends both at home and abroad.

Geographical distribution

An understanding of the geographical distribution of the population is vital for marketing

planning. Once the areas of highest population density are known, marketers can then
establish where the greatest concentration of buyers is likely to be found.

The migration to the suburbs put pressure on communities to provide needed social services
-- schools, police and fire departments, garbage removal, etc. -- as well increasing the
demand for land that was once used for farming. Arable land became housing developments.
During this period, again for the first time in our history, there were more people living in
cities and suburbs than were farming the land.

Life expectancy for Americans is increasing, too, and also has contributed significantly to the
aging of our population. Senior citizens (those 65 years of age and older) now constitute the
fastest-growing age segment in our population, and this trend will have a major impact on the
demand for social services. As this group makes up the highest percentage of voters, you can
expect major legislation on social security, Medicare and Medicaid, and other senior services
to be forthcoming. The amount of money subtracted from your paycheck for social security
benefits can only increase, as there will be fewer working people to support a growing senior
population. Major medical procedures (such as heart transplants and hip replacements),
which only a few years ago would not have been performed on senior citizens, are now
conducted routinely, improving both longevity and the quality of life. But, such
advancements do not come without cost. After all, there is "no free lunch!"

As mentioned above, over the last century the population has also been moving off the farm
and into metropolitan areas. After WW2, there was a big migration from the cities to the
suburbs, and trend, which continues today. And today, suburbs are becoming so large; they're
eating up the rural areas.

Greater mobility allows the freedom to pursue more lucrative jobs and to more easily
upgrade standard of living. But, such mobility comes at a cost -- again, there's no free lunch
-- as the family unit becomes more fractured, separated by greater distances, and we find
ourselves living in a neighborhood of strangers. Think about the impact this has on our health
care system. Family members that used to be living in the same home, or at least the same
community, are no longer present to provide care to aging parents. Hence, the health care
system must pick up the slack.

The Social/Cultural Environment

It consists of the forces that affect a society's values, perceptions, preferences, and behaviors.
We grow up in a cultural environment that shapes our basic beliefs and values and that
defines our relationship with others.

For marketers, it's important to understand what is going on in the social/cultural

environment, as our perceptions and behaviors are constantly changing. While some cultural
values tend to remain fairly constant (e.g. the principle that all Americans are entitled to "life,
liberty, and the pursuit of happiness" is as strongly believed in today as it was when
Founding Fathers drafted the Constitution), others change as their society changes. Further,
think about various social situations in which you might find yourself everyday. Do you
behave differently in front of your friends than you do your parents, or your work associates,
or even your college professors?

Cultural values do, however, change over time and such is particularly evident amongst the
young. Evidence suggests that many young people today question the desirability of a culture
with core values based upon materialization.

Cultural Values are relatively constant

Core beliefs and values have a high degree of persistence. They are those firmly established
within a society and are difficult to change. Such beliefs and values are perpetuated through
the family, the church, education, the government and other institutions of the society. As a
result core cultural values act as relatively fixed parameters within which marketing firms are
forced to operate.

The society in which people grow up shapes their beliefs, values and norms. People absorb,
almost unconsciously, a worldview that defines their relationship to themselves, to others, to
nature, and to the universe. The cultural environment is made up of institutions and other
forces that affect society’s values, perceptions, preferences and behaviors.

The Natural Environment

Involves the natural resources needed as marketing inputs or that are affected by marketing
activities. Environmental concerns have grown steadily during the past twenty years. The
1990's have been called "The Earth Decade" as the natural environment has become a major
issue facing the global marketplace.

In many cities around the world, air and water pollution have reached dangerous levels.
There is growing concern about the "hole" in the ozone layer and the "Greenhouse Effect"
(global warming). The amount of garbage generated every day has some environmentalists
concerned that we may soon be buried in our own trash.

Trends in the Natural Environment

Today's marketing managers should be aware of the following four trends occurring in the
natural environment:

1 -- Shortages of Raw Materials

Air and water may appear to be infinite resources, but even the most casual observer would
say that these resources are under assault from our industrial mechanisms. Water shortages
are prevalent in many parts of the world, including some areas of the United States, and one
has only to look outside the window in most of our major cities and "see" the air to know that
clean air is a very scarce resource indeed

Renewable resources, such as forests and food, must be used wisely. Forestry companies are
required to reforest timberlands to prevent soil erosion and ensure sufficient wood supplies to
meet future demand. Food supply is already a major problem because more and more of the
world's farmland is being converted to residential neighborhoods.

2 -- Increased Cost of Energy

The cost of energy makes long-term growth of high-energy industries and goods difficult to
predict. Much of that energy is used to produce goods and services. But much is used to
distribute them, too.

Oil has created the most serious problem for future economic growth, as the major industrial
economies depend heavily on it. Until economical energy substitutes can be developed, oil
will dominate the world political and economic picture.

Large increases in the price of oil (such as those that resulted from the 1973 OPEC embargo),
and threats to its availability (such as Iraq's invasion of Kuwait that led to Operation Desert
Storm) have spurred the search for alternative forms of energy.

3 -- Increased Pollution

Growth of industry almost always damages the natural environment. The so-called "green
movement" seeks to operate businesses in such a way so as not to damage the natural
environment. Their platform covers two dozen areas from agriculture to water. International
marketers must consider the varying political power of "greens" in different countries.

For example, the All-Russian Society for Environmental Protection/Sverdlovsk Regional

Council - Green Movement Association bills itself as "the oldest non-government ecological
organization in Sverdlovsk Oblast." The Association was founded in 1924 and a wise
marketer might take them into account before penetrating too far into the Middle Urals.

Public concern about pollution has created marketing opportunities for some companies.
There is a large market for pollution control systems, such as recycling centers and landfills,
and consumers are seeking out ecologically responsible companies to give their business to.
4 -- Government Intervention in Natural Resource Management

Governments vary in their concern and efforts to promote a clean environment. For example,
the German government is vigorous in its pursuit of environmental quality because of the
strong green movement in German. In the United States, the Environmental Protection
Agency (EPA) was created in 1970, with the objective of setting and enforcing pollution
standards and to conduct research on the causes and effects of pollution. Foreign companies
doing business in the U.S. are facing stronger controls from government and a more informed
and concerned consumer population.

The role of government in managing natural resources also blends into the legal environment.
Marketers must take care in identifying natural environmental trends and take into account
government regulations. Instead of opposing regulation, marketers should help to develop
solutions to the material and energy problems facing industry today and tomorrow.

Marketers have virtually no control over the elements of the environment. It is essential,
therefore, for marketers to keep abreast of changing trends in the external environment.
Monitoring trends enables firms to anticipate and forecast changes, which are likely to affect
their activities. They can then devise contingency plans to deal with new situations arising
from demographic factors such as the rise of the 55+ age group, technological factors such as
the impact of the silicon chip, social-cultural factors such as the increasing proportion of
married women in the workforce of economic factors such as high interest rates.

All these factors mentioned above form an environment, which affects marketing decisions.
Information about this environment is a crucial input into the marketing process, therefore.
The accelerating pace of technological change makes it harder to keep up, whilst the
increased competitiveness of markets means that it is even more essential to do so.

Other managers keep in touch with their environment in less formal ways. Successful
entrepreneurs often develop informal networks to keep them in touch with what is happening
around them. Some seem to have an instinctive understanding of developments in their
environment. Research studies among a number of entrepreneurs suggest that those who
succeed work hard at developing contacts to give them as much feedback from their
environment as possible.

Whatever way it is gained, an understanding of the likely trends and events in the
environment is a key part of the marketing process.

Stages of marketing research process

Step 1: Problem Definition

The first step in any marketing research project is to define the problem. In defining the
problem, the researcher should take into account the purpose of the study, the relevant
background information, what information is needed, and how it will be used in decision
making. Problem definition involves discussion with the decision makers, interviews with
industry experts, analysis of secondary data, and, perhaps, some qualitative research, such as
focus groups. Once the problem has been precisely defined, the research can be designed and
conducted properly.

Step 2: Development of an Approach to the Problem

Development of an approach to the problem includes formulating an objective or theoretical

framework, analytical models, research questions, hypotheses, and identifying characteristics
or factors that can influence the research design. This process is guided by discussions with
management and industry experts, case studies and simulations, analysis of secondary data,
qualitative research and pragmatic considerations.

'Step 3: Research Design Formulation'

A research design is a framework or blueprint for conducting the marketing research project.
It details the procedures necessary for obtaining the required information, and its purpose is
to design a study that will test the hypotheses of interest, determine possible answers to the
research questions, and provide the information needed for decision making. Conducting
exploratory research, precisely defining the variables, and designing appropriate scales to
measure them are also a part of the research design. The issue of how the data should be
obtained from the respondents (for example, by conducting a survey or an experiment) must
be addressed. It is also necessary to design a questionnaire and a sampling plan to select
respondents for the study.

More formally, formulating the research design involves the following steps.

1. Secondary data analysis

2. Qualitative research
3. Methods of collecting quantitative data (survey, observation, and experimentation)
4. Definition of the information needed
5. Measurement and scaling procedures
6. Questionnaire design
7. Sampling process and sample size
8. Plan of data analysis

Step 4: Field Work or Data Collection

Data collection involves a field force or staff that operates either in the field, as in the case of
personal interviewing (in-home, mall intercept, or computer-assisted personal interviewing),
from an office by telephone (telephone or computer-assisted telephone interviewing), or
through mail (traditional mail and mail panel surveys with prerecruited households). Proper
selection, training, supervision, and evaluation of the field force help minimize data-
collection errors.
Step 5: Data Preparation and Analysis

Data preparation includes the editing, coding, transcription, and verification of data. Each
questionnaire or observation form is inspected, or edited, and, if necessary, corrected.
Number or letter codes are assigned to represent each response to each question in the
questionnaire. The data from the questionnaires are transcribed or key-punched on to
magnetic tape, or disks or input directly into the computer. Verification ensures that the data
from the original questionnaires have been accurately transcribed, while data analysis, guided
by the plan of data analysis, gives meaning to the data that have been collected. Univariate
techniques are used for analyzing data when there is a single measurement of each element or
unit in the sample, or, if there are several measurements of each element, each RCH variable
is analyzed in isolation. On the other hand, multivariate techniques are used for analyzing
data when there are two or more measurements on each element and the variables are
analyzed simultaneously.

Step 6: Report Preparation and Presentation

The entire project should be documented in a written report which addresses the specific
research questions identified, describes the approach, the research design, data collection,
and data analysis procedures adopted, and present the results and the major findings. The
findings should be presented in a comprehensible format so that they can be readily used in
the decision making process. In addition, an oral presentation should be made to management
using tables, figures, and graphs to enhance clarity and impact.

For these reasons, interviews with experts are more useful in conducting marketing research
for industrial firms and for products of a technical nature, where it is relatively easy to
identify and approach the experts. This method is also helpful in situations where little
information is available from other sources, as in the case of radically new products.

Secondary data analysis

Secondary data are data collected for some purpose other than the problem at hand. Primary
data, on the other hand, are originated by the researcher for the specific purpose of
addressing the research problem. Secondary data include information made available by
business and government sources, commercial marketing research firms, and computerized
databases. Secondary data are an economical and quick source of background information.
Analysis of available secondary data is an essential step in the problem definition process:
primary data should not be collected until the available secondary data have been fully
analyzed.

Qualitative research

Information, industry experts, and secondary data may not be sufficient to define the research
problem. Sometimes qualitative research must be undertaken to gain a qualitative
understanding of the problem and its underlying factors. Qualitative research is unstructured,
exploratory in nature, based on small samples, and may utilize popular qualitative techniques
such as focus groups (group interviews), word association (asking respondents to indicate
their first responses to stimulus words), and depth interviews (one-on-one interviews which
probe the respondents' thoughts in detail). Other exploratory research techniques, such as
pilot surveys with small samples of respondents, may also be undertaken.

Chapter-4

Managing Marketing Information & Measuring Market Demand

Marketing Information System

People, equipment, and procedures to gather, sort, analyze, evaluate, and distribute needed,
timely, and accurate information to marketing decision makers

Marketing Intelligence System

This is the set of procedures and sources used by managers to obtain

everyday information about pertinent developments in marketing environment.

There are six steps to improve marketing intelligence

1. Train & motivate sales force to spot and report developments
2. Motivate contacts to report important intelligence
3. Learn about competitors: buy products, read, attend meetings and shows
4. Set up customer advisory panel
5. Purchase outside information
6. Establish marketing information center

Forecasting & Demand Measurement

Marketing research is conducted for identifying the market opportunities. Once the research
is completed, the company must measure and forecast the size, growth, and profit potential of
each market opportunity. Sales forecasts are used by finance to raise the needed cash for
investment and operation; by the manufacturing department to establish capacity and output
levels; by purchasing to acquire the amount of suppliers; and by human resources to hire the
needed number of workers. Marketing is responsible for preparing sales forecast. Sales
forecast are based on estimating demand. Managers need to define what they mean by market
demand.

Measures of Market Demand:

Company can prepare as many as 90 different types of demand estimates for different
product levels; five spaces levels and three time period. The size of the market hinges on the
number of buyers who exist for a particular marketing offer. But there are many productive
ways to break down the market.
Market - set of all actual & potential buyers of product

Potential - set of consumers who express an interest

Available - potential plus income and access
qualified available - available plus qualifications
Target (served) - qualified available the firm decides to pursue
Penetrated - consumers who are buying product

Demand Measurement

Market & company

Market Demand - total volume bought by defined customer group in a defined

geographical area in a defined time period in a defined marketing environment
under a defined marketing program

Company Demand - estimated market share of market demand at different marketing effort
levels

Market demand is function of industry's marketing expenditures

Market forecast - demand associated specific expenditure
Market potential - demand with high expenditure levels

Company demand

Qi = si Q
Qi = company i demand
si = company i market share
Q = total market demand
company sales forecast - sales based on plan and environment

Quota & budget

Company sales potential - sales limit as market effort increases

Estimating Current Demand

Total market potential

Q = n x q x p where

Q = total market potential

n = number of buyers
q = quantity purchased by average buyer
p = price of average unit
Area Market Potential

Two methods

Market-buildup method
Multiple-factor index method

Market-buildup method
identify all potential customers and estimate potential purchases

Multiple-factor index
weight each factor to develop area market potential

Industry Sales and Market Share

Industry Sales - trade Associations, government, etc.

Estimating Future Demand

-survey of buyer intentions
-composite of sales force opinions
- expert opinion
- past-sales analysis
- market test

Chapter 5

Consumer Markets and Consumer buyer behavior

Consumer market: All the individual and households who buy or acquire goods and
services for personal consumption.

Consumer buyer behavior: The buying behavior of final consumers –individuals and
households who buy goods and services for personal consumption.

Characteristics Affecting Consumer Behavior

1. Cultural Factor

a. Culture: The set of basic values, perceptions, wants, and behaviors learned by a
member of society from family and other important institutions.
b. Subculture: A group of people with shared value systems based on common life
experiences and situations.
c. Social Class: Relatively permanent and ordered divisions in a society whose member
shares similar values, interests, and behaviors.

2. Social Factor

a. Groups: Two or more people who interact to accomplish individual or mutual goals.
- Opinion Leader: Person within a references group who, because of special
skills, knowledge, personality, or other characteristics, exerts social influence
or others.
b. Family: Family members can strongly influences buyer behavior.
c. Roles and Status: A person belongs to many groups- family, clubs, and
organizations. The person’s position in each group can be defined in terms of both
rules and status.

3. Personal Factors

a. Age and Life Cycle Stage: People change the goods and services they buy over their
lifetimes. Taste in food, clothes, furniture, and recreation are often age realized.
b. Occupation: A person’s occupation affects the goods and services bought. Blue color
workers tend to buy more rugged work clothes, whereas executives buy more
business shirts.
c. Economic Situation: A person’s economic situation will affect product choice. The
person’s buying behavior depends on his or her personal income, savings, and interest
rates.
d. Lifestyle: A person’s pattern of living as expressed his or her activities, interests, and
opinions.
e. Personality and Self-Concept: Personality refers to the unique physiological
characteristics that lead to relatively consistent and lasting responses to one’s own
environment. A person’s self concept also called self image.

4. Psychological Factors

a. Motivation: A person’s has many needs at any given time. Some are biological,
arising from states of tension such as hunger, thirst, or discomfort. Others are
psychological, arising from the need for recognition, esteem, or belonging. A motive
or drive-a need that is sufficiently pressing to direct the person to seek satisfaction of
the need.

- Maslow’s hierarchy of needs

 Self
Actualization

Esteem Needs
Recognition, Status

Social Needs
Sense of belonging

Safety Needs
Security, Protection

Physiological Need
Hunger, thirst

Maslow’s hierarchy of needs

b. Perception: The processes by which people select, organize, and interpret to form a
meaningful picture of the world.
c. Learning: Changes in an individual’s behavior arising from experience.
d. Beliefs and Attitudes: Belief- a descriptive thought that a person has bought
something. Attitude-a person’s relatively consistent evaluations, feelings, and
tendencies toward an object or idea.

Types of Buying Decision Behavior

1. Complex buying behavior: Consumer buying behavior in situations characterized

high consumer involvement in a purchase and significant perceived difference among
brands.

1. Dissonance-Reducing buying behavior: Consumer buying behavior in situations

characterized buy high involvement but few perceived differences among brands.

2. Habitual buying behavior: Consumer buying behavior in situations characterized by

low consumer involvement and few perceived brand differences.
 3. Variety seeking buying behavior: Consumer buying behavior in situations
characterized by low consumer involvement significant perceived brand differences.

The buyer decision process

1. Need Recognition: The first stage of the buyer decision process, in which the
consumer recognizes a problem or need.

2. Information search: The stage of buyer decision process in which the consumer is
aroused to search for more information, the consumer may simply have heightened
attention or may go into active information search.

3. Evaluation and Alternatives: The stage of buyer decision process in which the
consumer uses information to evaluate alternative brands in the choice set.

4. Purchase decision: The buyer decision about which brand to purchase.

5. Post purchase behavior: The stage of buyer decision process in which the consumer
takes further action after purchase, based on their satisfaction or dissatisfaction.