Department of Commerce

University of Calcutta

Study Material

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Lecture Notes

For the Students of M.Com. (Semester II)-2020

University of Calcutta

(Internal Circulation)
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 Paper: CC 201

Marketing Management (MKTG)

Marketing Management CC201. Module I (Dr. A. Dan and Dr. S. Banerjee Portion)

Marketing Concept
Marketing, more than any other business function, deals with customers. Marketing is managing profitable
customer relationships. The twofold goal of marketing is to attract new customers by promising superior
value and keep and grow current customers by delivering satisfaction.
(Learn Few Definitions of Marketing and Marketing Management)
Customer Needs, Wants, and Demands
The most basic concept underlying marketing is that of human needs. Human needs are states of felt
deprivation. They include basic physical needs for food, clothing, warmth, and safety; social needs for
belonging and affection; and individual needs for knowledge and self-expression. Marketers did not create
these needs; they are a basic part of the human makeup. Wants are the form human needs take as they are
shaped by culture and individual personality. Wants are shaped by one’s society and are described in terms
of objects that will satisfy those needs. When backed by buying power, wants become demands. Given their
wants and resources, people demand products with benefits that add up to the most value and satisfaction.
Marketing Management Orientations
There are five alternative concepts under which organizations design and carry out their marketing
strategies: the production, product, selling, marketing, and societal marketing concepts.
The production concept holds that consumers will favour products that are available and highly affordable.
Therefore, management should focus on improving production and distribution efficiency. This concept is
one of the oldest orientations that guide sellers.
The product concept holds that consumers will favour products that offer the most in quality, performance,
and innovative features. Under this concept, marketing strategy focuses on making continuous product
improvements.
The selling concept is typically practiced with unsought goods—those that buyers do not normally think of
buying, such as insurance or blood donations. These industries must be good at tracking down prospects and
selling them on a product’s benefits.
The marketing concept holds that achieving organizational goals depends on knowing the needs and wants
of target markets and delivering the desired satisfactions better than competitors do. Under the marketing
concept, customer focus and value are the paths to sales and profits. Instead of a product-centered “make
and sell” philosophy, the marketing concept is a customer-centered “sense and respond” philosophy.
The societal marketing concept questions whether the pure marketing concept overlooks possible conflicts
between consumer short-run wants and consumer long-run welfare. Is a firm that satisfies the immediate
needs and wants of target markets always doing what’s best for its consumers in the long run? The societal
marketing concept holds that marketing strategy should deliver value to customers in a way that maintains or
improves both the consumer’s and society’s well-being. It calls for sustainable marketing, socially and
environmentally responsible marketing that meets the present needs of consumers and businesses while also
preserving or enhancing the ability of future generations to meet their needs.
Sustainable marketing: Sustainable marketing calls for socially and environmentally responsible actions that
meet the present needs of consumers and businesses while also preserving or enhancing the ability of future
generations to meet their needs.

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Sustainable marketing calls for products that are not only pleasing but also beneficial. Products can be
classified according to their degree of immediate consumer satisfaction and long-run consumer benefit.
Deficient products: Products that have neither immediate appeal nor long-run benefits.
Pleasing products: Products that give high immediate satisfaction but may hurt consumers in the long run.
Salutary products: Products that have low appeal but may benefit consumers in the long run.
Desirable products: Products that give both high immediate satisfaction and high long-run benefits.
Customer Relationship Management
CRM involves managing detailed information about individual customers and carefully managing customer
touch points to maximize customer loyalty. CRM is the overall process of building and maintaining
profitable customer relationships by delivering superior customer value and satisfaction. It deals with all
aspects of acquiring, keeping, and growing customers.
Most companies are awash in information about their customers. In fact, smart companies capture
information at every possible customer touch point. These touch points include customer purchases, sales
force contacts, service and support calls, Web site visits, satisfaction surveys, credit and payment
interactions, market research studies, every contact between a customer and a company.
The key to building lasting customer relationships is to create superior customer value and satisfaction.
Satisfied customers are more likely to be loyal customers and give the company a larger share of their
business.
Customer-perceived value: The customer’s evaluation of the difference between all the benefits and all the
costs of a marketing offer relative to those of competing offers.
Customer satisfaction: The extent to which a product’s perceived performance matches a buyer’s
expectations. If the product’s performance falls short of expectations, the customer is dissatisfied. If
performance matches expectations, the customer is satisfied. If performance exceeds expectations, the
customer is highly satisfied or delighted. Outstanding marketing companies go out of their way to keep
important customers satisfied. Most studies show that higher levels of customer satisfaction lead to greater
customer loyalty, which in turn results in better company performance. Smart companies aim to delight
customers by promising only what they can deliver and then delivering more than they promise. Delighted
customers not only make repeat purchases but also become willing marketing partners and “customer
evangelists” who spread the word about their good experiences to others.
Sustainable Marketing
Sustainable marketing calls for more responsible actions by both businesses and consumers. Because some
people view businesses as the cause of many economic and social ills, grassroots movements have arisen
from time to time to keep businesses in line. Two major movements have been consumerism and
environmentalism.
Consumerism
Consumerism is an organized movement of citizens and government agencies to improve the rights and
power of buyers in relation to sellers. Traditional sellers’ rights include the following:
• The right to introduce any product in any size and style, provided it is not hazardous to personal
health or safety, or, if it is, to include proper warnings and controls
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 • The right to charge any price for the product, provided no discrimination exists among similar kinds
of buyers
• The right to spend any amount to promote the product, provided it is not defined as unfair
competition
• The right to use any product message, provided it is not misleading or dishonest in content or
execution
• The right to use buying incentive programs, provided they are not unfair or misleading
Traditional buyers’ rights include the following:
• The right not to buy a product that is offered for sale
• The right to expect the product to be safe
• The right to expect the product to perform as claimed
Comparing these rights, many believe that the balance of power lies on the seller’s side. True, the buyer can
refuse to buy. But critics feel that the buyer has too little information, education, and protection to make
wise decisions when facing sophisticated sellers. Consumer advocates call for the following additional
consumer rights:
• The right to be well informed about important aspects of the product
• The right to be protected against questionable products and marketing practices
• The right to influence products and marketing practices in ways that will improve “quality of life”
• The right to consume now in a way that will preserve the world for future generations of consumers
Environmentalism
Whereas consumerists consider whether the marketing system is efficiently serving consumer wants,
environmentalists are concerned with marketing’s effects on the environment and the environmental costs of
serving consumer needs and wants. Environmentalism is an organized movement of concerned citizens,
businesses, and government agencies to protect and improve people’s current and future living environment.

Developing Integrated Marketing Mix

The marketing mix is the set of tactical marketing tools that the firm blends to produce the response it wants
in the target market. The marketing mix consists of everything the firm can do to influence the demand for
its product. The many possibilities can be collected into four groups of variables; the four Ps.
Product Mix Decisions
An organization with several product lines has a product mix. A product mix (or product portfolio) consists
of all the product lines and items that a particular seller offers for sale.
A company’s product mix has four important dimensions: width, length, depth, and consistency. Product
mix width refers to the number of different product lines the company carries. Product mix length refers to
the total number of items a company carries within its product lines. Product mix depth refers to the number
of versions offered for each product in the line. Finally, the consistency of the product mix refers to how
closely relate the various product lines are in end use, production requirements, distribution channels, or
some other way.
These product mix dimensions provide the handles for defining the company’s product strategy. The
company can increase its business in four ways. (1) It can add new product lines, widening its product mix.
In this way, its new lines build on the company’s reputation in its other lines. (2) The company can lengthen
its existing product lines to become a more full-line company. (3) It can add more versions of each product
and thus deepen its product mix. (4) The company can pursue more product line consistency, or less,
depending on whether it wants to have a strong reputation in a single field or in several fields. [Learn
examples of product portfolio]
Product Life-Cycle Strategies

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After launching the new product, management wants that product to enjoy a long and happy life. Although it
does not expect that product to sell forever, the company wants to earn a decent profit to cover all the effort
and risk that went into launching it. Management is aware that each product will have a life cycle, although
its exact shape and length is not known in advance.
1. Product development begins when the company finds and develops a new-product idea. During
product development, sales are zero, and the company’s investment costs mount.
2. Introduction is a period of slow sales growth as the product is introduced in the market. Profits are
non-existent in this stage because of the heavy expenses of product introduction.
3. Growth is a period of rapid market acceptance and increasing profits.
4. Maturity is a period of slowdown in sales growth because the product has achieved acceptance by
most potential buyers. Profits level off or decline because of increased marketing outlays to defend
the product against competition.
5. Decline is the period when sales fall off and profits drop.
Summary of Product Life-Cycle Characteristics, Objectives, and Strategies

Introduction Growth Maturity Decline

Characteristics
Sales Low sales Rapidly rising Peak sales Declining sales
sales
Costs per customer High Average Low Low
Profits Negative Rising High Declining
Customers Innovators Early adopters Middle majority Laggards
Competitors Few Growing Stable (to decline) Declining
Marketing Create product Maximize market Maximize profit & Reduce
Objectives awareness and trial share defend market expenditure
share and milk the brand
Strategies
Product Basic Product Diversify brand Phase out weak
extensions, and models items
service, warranty
Price Cost-plus Price to penetrate Match or beat Cut
competitors
Distribution Build selective Build intensive Build more Go selective: phase
distribution distribution intensive out
distribution unprofitable outlets
Advertising Build product Build awareness Stress brand Reduce to level
awareness among and interest in the differences and needed
early adopters and mass market benefits to retain hard-core
dealers loyals

Sales Promotion Use heavy sales Reduce to take Increase to Reduce to minimal
promotion to entice advantage of heavy encourage level
trial consumer demand brand switching

New-Product Development Process

Companies face a problem: They must develop new products, but the odds weigh heavily against success.
To create successful new products, a company must understand its consumers, markets, and competitors and
develop products that deliver superior value to customers. It must carry out strong new-product planning and

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set up a systematic, customer-driven new product development process for finding and growing new
products.
New-product development starts with idea generation, the systematic search for new product ideas. A
company typically generates hundreds of ideas, even thousands, to find a few good ones. Major sources of
new-product ideas include internal sources and external sources such as customers, competitors, distributors
and suppliers, and others.
Internal Idea Sources
Using internal sources, the company can find new ideas through formal R&D. However, in one survey, 750
global CEOs reported that only 14 per cent of their innovation ideas came from traditional R&D. Instead, 41
per cent came from employees, and 36 per cent came from customers beyond its internal R&D process,
companies can pick the brains of its employees, from executives to scientists, engineers, and manufacturing
staff to salespeople. Many companies have developed successful “intrapreneurial” programs that encourage
employees to envision and develop new-product ideas.

External Idea Sources

Companies can also obtain good new-product ideas from any of a number of external sources. For example,
distributors and suppliers can contribute ideas. Distributors are close to
the market and can pass along information about consumer problems and new-product possibilities.
Suppliers can tell the company about new concepts, techniques, and materials that can be used to develop
new products. Competitors are another important source. Companies watch competitors’ ads to get clues
about their new products. They buy competing new products, take them apart to see how they work, analyse
their sales, and decide whether they should bring out a new product of their own. Other idea sources include
trade magazines, shows, and seminars; government agencies; advertising agencies; marketing research
firms; university and commercial laboratories; and inventors. Perhaps the most important source of new-
product ideas is customers themselves. The company can analyse customer questions and complaints to find
new products that better solve consumer problems.
Crowdsourcing
More broadly, many companies are now developing crowdsourcing or open-innovation new product idea
programs. Crowdsourcing throws the innovation doors wide open, inviting broad communities of people,
customers, employees, independent scientists and researchers, and even the public at large, into the new-
product innovation process.
Idea screening
Screening new-product ideas to spot good ideas and drop poor ones as soon as possible.
Concept Development and Testing
An attractive idea must be developed into a product concept. It is important to distinguish between a product
idea, a product concept, and a product image. A product idea is an idea for a possible product that the
company can see itself offering to the market. A product concept is a detailed version of the idea stated in
meaningful consumer terms. A product image is the way consumers perceive an actual or potential product.
Concept testing
Testing new-product concepts is carried out with a group of target consumers to find out if the concepts have
strong consumer appeal.
Marketing strategy development

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Designing an initial marketing strategy for a new product based on the product concept. The marketing
strategy statement consists of three parts. The first part describes the target market; the planned value
proposition; and the sales, market share, and profit goals for the first few years.
Business analysis: It is a review of the sales, costs, and profit projections for a new product to find out
whether these factors satisfy the company’s objectives.
Product development: It is to develop the product concept into a physical product to ensure that the product
idea can be turned into a workable market offering.
Test marketing: The stage of new-product development in which the product and its proposed marketing
program are tested in realistic market settings.
Commercialization: Introducing a new product into the market.

RURAL MARKETING

Rural marketing is now a two-way marketing process. There is inflow of products into rural markets for
production or consumption and there is also outflow of products to urban areas. The urban to rural flow
consists of agricultural inputs, fast-moving consumer goods (FMCG) such as soaps, detergents, cosmetics,
textiles, and so on. The rural to urban flow consists of agricultural produce such as rice, wheat, sugar, and
cotton. There is also a movement of rural products within rural areas for consumption.

The rural market has been growing steadily over the past few years and is now even bigger than the urban
market. About 70 per cent of India’s population lives in villages. More than 800 million people live in
villages of India. ‘Go rural’ is the marketer’s new slogan. Indian marketers as well as multina-tionals, such
as Colgate-Palmolive, Godrej and Hindustan Lever have focused on rural markets. Thus, looking at the
opportunities, which rural markets offer to the marketers, it can be said that the future is very promising for
those who can understand the dynamics of rural markets and exploit them to their best advantage.

Since ancient times, Indian villages had the concept of village markets popularly known as the vil-lage
haats. The haats are basically a gathering of the local buyers and sellers. The barter system was quite
prevalent, which still continues in a number of places even today. Haats are basically a weekly event, and
are central to the village economy.

Features of Rural Market in India

1. Large and scattered market: According to 2001 census rural population is 72% of total population
and it is scattered over a wide range of geographical area.
2. Diverse socio-economic background: This is different in different parts of the country and brings
diversity in rural markets.
3. Changing demand pattern: Demand pattern of rural customer is fast changing due to increasing in
income and credit facilities offered by banks like ‘kisan credit card’.
4. Major income comes from agriculture: About 60% of the rural income is from agriculture and hence
the demand for consumer goods is high during harvesting season.
5. Saving habits: Rural consumer is now having saving habits due to the efforts of co-operative and
commercial banks.
6. Traditional outlook: Rural customer values old customs and traditions.
7. Low standard of living: Rural consumer have low standard of living because of low literacy, low per
capita income and social backwardness.

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 8. Poor infrastructure facilities: Facilities like roads, warehouses, communication system, etc. are
inadequate in rural areas. Hence physical distribution becomes costly.
9. Media reach: The reach of pint media is 10% followed by TV 31%, radio 31% and cinema 33%.
10. Communication: As per Indian Express report about 6 lakhs villages are without telephone facilities.
11. Electrification: About 88% of villages have been electrified and rest will soon get electricity by
“Rural Electricity Corporation”.

Potential of Rural Market

With urban market showing signs of saturation, companies are excited about the potential of rural India.
Some major companies that have focused in the rural sector are Philips, Parle, Proctor & Gamble, Colgate-
Palmolive, Godrej Soap, Bajaj Auto, TVS, Atlas Cycle and HUL.

Following points indicate the potential of rural markets:

• Large Population: According to 2001 census rural population is 72% of total population and it is
scattered over a wide range of geographical area
• Rising Rural Prosperity: Average income level has improved due to modern farming practices, contract
farming, industrialisation, migration to urban areas and remittance of money by family members settled
abroad.
• Growth in Consumption: There is a growth in purchasing power of or rural consumers. The average per
capita household expenditure is Rs. 382.
• Changing Lifestyle: Lifestyle of rural consumer changed considerably.
• Life Cycle Advantage: The products, which have attained the maturity stage in urban market, is still in
growth stage in rural market. E.g. popular soaps, skin cream, talcum powder, etc.
• Market Growth Rate Higher than Urban: As per the survey made by NCAER the growth rate of FMCG
market and durables market is higher in rural areas. The rural market share is more than 50% for
products like body talcum powder, toilet soaps cooking oil, hair oil etc.
• Rural Marketing is not Expensive: To promote consumer durables inside a state costs Rs one crore
while in urban areas it will costs in millions.

Constraints in Rural Marketing

Vastness and Uneven Growth: India has about 5 lakhs villages, which are scattered over a wide range of
geographical area, and also they are not uniform in size.

Transport Problem: Transportation infrastructure is very poor in rural India. Though India has the fourth
largest railway system in the world, many villages remain outside the railway network. Many villages have
only kaccha roads while many of rural interiors are totally unconnected by roads. Because of this the
physical distribution is difficult in rural areas.

Communication Problems: Communication infrastructure consisting of posts, telegraphs and telephones is

inadequate.

Warehousing Problems: Central Warehousing Corporation and State Warehousing Corporation do not
extend their services to the rural parts. The warehouses at mandi level are managed by co-operative societies
who provide services to members only.

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Many Languages and Dialects: The number of language and dialects vary widely from state to state, region
to region and even from district to district. Though the recognized languages are only 16 the number of
dialects is around 850.

Market Organisation & Staff: Rural marketing needs large marketing organisation and staff to have an
effective control, which requires huge investment.

Non-Availability of Dealers: It is not possible to have direct outlets in each rural market; firms have to have
service of dealers, which is not easily available.

Hierarchy of Market: Rural consumers have identified market places for different items of their
requirements. Thus depending upon the purchase habit of rural people, the distribution network of different
commodities has to be different.

Factors Contributing to the Growth of Rural Markets

Employment Opportunities: The income from new employment and rural development efforts has increased
the purchasing power of rural people.

Green Revolution: Due to green revolution a technological break through has taken place in rural India,
which results into substantial wealth generation in these areas.

Favourable Government Policies: Tax exemption in backward areas, subsidy, concession, incentives and
heavy investment in rural development programmes in has brought rapid growth of rural markets.

Literacy Growth: Literacy rate is increasing in rural areas, nearly 45% of rural Indians are literate. This
brings social and cultural changes in buying behaviour of the rural customers.

Rising Disposable Income: Good monsoons, green revolution and Administered Pricing Mechanism have
raised disposable income in rural areas.

Attraction of Higher Standard of Living: Rural people have been motivated to change their lifestyles and
have higher standard of living.

Spread of Cable Television: The growth of satellite TV channels has made a major impact on villages. This
has led to a change in lifestyle and consumption pattern.

Marketing Management. Module I / (Prof. R. Dasgupta portion)

Market Segmentation is a process of dividing a market into distinct groups of buyers who have different
needs, characteristics, or behaviours and who might require separate marketing strategies or mixes.
Market segment refer to a group of consumers who respond in a similar way to a given set of marketing
efforts.
Market Targeting: Evaluating each market segment’s attractiveness and selecting one or more segments to
serve.
Positioning: Arranging for a product to occupy a clear, distinctive, and desirable place relative to competing
products in the minds of target consumers.

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Geographic Segmentation: Dividing a market into different geographical units, such as nations, states,
regions, countries, cities, or even neighborhoods.
Demographic Segmentation: Dividing the market into segments based on variables such as age, life-cycle
stage, gender, income, occupation, education, religion, ethnicity and generation.
Psychographic Segmentation: Dividing a market into different segments based on lifestyle or personality
characteristics.
Behavioral Segmentation: Dividing a market into segments based on consumer knowledge, attitude and uses
of a product, or responses to a product.
Occasion Segmentation: Dividing the market into segments according to occasions when buyers get the idea
to buy, actually make their purchase, or use the purchased item.
Benefit Segmentation: Dividing the market into segments according to the different benefits that consumers
seek from the product.
Through Product differentiation, brands can be differentiated on features, performance, style or design.

Marketing Environment: The actors and forces outside marketing that affect marketing management’s
ability to build and maintain successful relationships with target customers.
Marketing environment – Macro and Micro components and their impact on marketing decisions:
Macro environment refers to the larger societal forces that affect the micro environment-demographic,
economic, natural, technological, political and cultural forces.

• Demographic environment: Gender, Age, Income, Changing family system

• Economic: Spending patterns
• Natural: Geographical impacts, sustainability
• Technological: Modernisation
• Political: Stability
• Cultural forces: Cultural values
Micro environment refers to the actors close to the company that affects its ability to serve its customers-the
company, suppliers, marketing intermediaries, customer markets, competitors and publics.

• Company: Harmonising all departments towards consumer service.

• Suppliers: Helps to ensure prompt delivery
• Marketing Intermediaries: Their role
• Customer Markets: Consumer, Business, Reseller, Government and International
• Competitors: Competitiveness
• Public: Financial, Media, Government, Citizen-action, Local, General
and Internal

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Adopting Competitive Strategies:
Analyse SWOT

Competitive Advantage: Advantage over competitors gained by offering consumers greater value
Competitor analysis: Identifying key competitors; assessing their objectives, strategies, strengths and
weaknesses, and reaction patterns and selecting which competitor to attack or avoid.
Competitive Marketing Strategies: Strategies that strongly position the company against competitors and
give it the greatest possible competitive advantage.
(Discuss the competition diaspora to explain the horizon of competition; Nature/Category/Generic/Budget)
Identifying: Marketers must avoid ‘Competitor Myopia’. A broader perspective or horizon of analysis helps.
Assessing: Identifying competitors objectives, strategic group in which the competitor belong, analyse
competitors strengths and weaknesses, estimate and gauge competitor’s reaction.
Selecting competitors to attack and avoid: Customer value analysis (An analysis conducted to determine
what benefits target customers value and how they rate the relative value of various competitors’ offers) is a
useful tool to analyse competitor; strong or weak; good or bad. Identifying uncontested market spaces is also
relevant in this context.
Competitive strategies:
Basic:

• Overall Cost Leadership

• Differentiation
• Focus

Problem lies with ‘middle-of-the-roaders’. They find it very difficult to get a foothold in the market.
Companies need to concentrate on any of the value disciplines to enhance the overall customer value:

• Operational Excellence
• Customer Intimacy
• Product Leadership

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Competitive Positions:
Market Leader: The firm in the industry with largest market share.
Market Challenger: The runner up firm that is fighting hard to increase its market share in an industry.
Market Follower: A runner-up firm that wants to hold its share in an industry without rocking the boat.

Market Nicher: A firm that serves small segments that other firms in an industry overlook or ignore.

Strategies for each category

BALANCING CUSTOMER AND COMPETITOR ORIENTATION

Marketing of Services:

Service mix: Additional P’s (Taking into account the features of a service like, Intangibility, inseparability,
heterogeneity, perishability and non-ownership). These are in Addition to the usual Marketing Mix
components
Marketing Mix of a service however includes three additional P. They are; People, Process and Physical
evidence (Essential and Peripheral). People are one of the most important variables in a service since in a
large number of situations the service is inseparable from the service provider. The delivery system or the
process is equally important since it is an important parameter that influences standardisation and uniformity
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in customer service. Finally, physical evidence adds to the tangibility that is very much in wanting in a
service. Service as a product is very much complex mainly because of the fact that a service is intangible,
inseparable, heterogeneous, perishable and that which cannot be owned. For example ATMs in banks help in
standardisation while freebies given by various airlines help in improving the tangibility factor.
Various Innovative Pricing strategies are used in Service Marketing:

• Differential/Flexible Pricing: Ability/Time/Place

• Discount Pricing: Happy hour
• Diversionary Pricing/Offset Pricing
• Guaranteed Pricing
• High Price Maintenance Pricing
• Loss Leader Pricing

Brand Management:
Brand Equity: The differential effect that knowing the brand name has on customer response to the product
or its marketing. It is a measure to capture consumer preference and loyalty.
Brand Value: Total financial value of a brand.
Brand Positioning:
To have a clear, distinctive, and desirable place relative to competing products in the minds of target
consumers.

• Attributes
• Benefits
• Beliefs or Values.

Brand name selection:

Desirable qualities:

• Communicate product quality or benefits.

• Easy to pronounce, recognize and remember.
• Should be distinctive.
• Allow expansion to other categories
• Should be translated easily into foreign languages
• Should be capable of registration and legal protection

Brand Sponsorship

• National Brand
• Store Brand
• Licensing
• Co-branding

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 Brand Development Strategies

• Line Extension
• Brand extension
• Multibrands
• New Brands

MODULE II (Portion of Mr. Sharique Imroze)

BUYER BEHAVIOUR
CONSUMER BEHAVIOUR
Consumer Behaviour refers to the process of studying how various stimuli affect the decision making
process of consumers in choosing a particular brand.

THE ENVIRONMENT BUYER’S BLACK BOX BUYER RESPONSES

Marketing & Other Buyer Choice & Buyers Response

Stimuli Decision Process

√ Marketing Stimuli – 4Ps √ Buyer’s Characteristics √ Buying Attitudes &

√ Other Stimuli – Political, Cultural, √ Buyer’s Decision Process preferences

Social etc. √ Brand Perceptions etc.

Marketing and other stimuli includes the marketing mix and other elements like economic, political,
technological and cultural forces.
The Consumer Behaviour Model shows how various stimuli affect the mental process of the consumers which
gets reflected in the Buying Choice and Decision Process of consumers and ultimately finds expression in the
Buyer Response. The two sets of stimuli that affect consumer behaviour are marketing stimuli and other stimuli.
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The marketing stimuli refer to the marketing mix consisting of the 4Ps and 7Ps and the other stimuli includes all
the other factors apart from the marketing mix like economic, political, technological and cultural forces. As a
marketer, one has to understand these forces and how they interact with one another to understand the Buyer
Choice and Decision Process which will ultimately lead to a Buyer Response. But since the human mind works in
various ways and is many a times very subjective, a universal cause effect relationship cannot be established
which will prevail in all circumstances .Therefore, the Buyer Choice and Decision Process is also called the
Buyer’s Black Box because it is quite difficult to peep or look inside the mind of the consumer and understand the
various reasons behind their buying choices. Still the marketer must continuously make an effort to understand the
various factors that affect consumers so that he is able to elicit a positive Buyer Response in the form of a
purchase decision in favour of his products.
FACTORS INFLUENCING INDIVIDUAL BUYING BEHAVIOUR
The major forces that work at individual level may be categorised as:
Cultural

• Culture(Broad): Country specific or racial

• Sub-culture(Ethnic Diversity): Religion specific
• Social class: Based upon castes and other economic criteria
Social

• Reference group mainly refers to associations

• Family
• Roles and Status: Role refers to a set of expected behaviour patterns attributed to a person in a given
situation.
Personal

• Age and Life cycle stage: Family life cycle and family structure
• Occupation: Specific occupational demands
• Economic situation: Income criteria
• Lifestyle: Tastes and preferences
• Personality and Self Concept: Personality refers to the sum total of ways in which an individual
reacts and interacts with others.
Psychological

• Motivation(Stages)
• Perception: A process by which individuals organise and interpret their sensory impressions in order
to give meaning to their environment.
• Learning: Any relatively permanent change in behaviour that occurs as a result of experience.
• Beliefs and Attitudes: Attitudes are evaluative statements and judgements concerning objects, people
or events.
TYPES OF BUYING BEHAVIOUR
Four types of buying behaviour based on combinations of two factors—ability to differentiate between
brands (X) and degree of involvement (Y):
Variety Seeking Buying Behavior (X-YES; Y-LOW)
Complex Buying Behavior (X-YES; Y-HIGH)
Dissonance Reducing Buying Behavior (X-NO; Y-HIGH)

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 Habitual Buying Behavior (X-NO; Y-LOW)
BUYING DECISION PROCESS (STAGES)
Need recognition—Information search—Evaluation of alternatives—Purchase decision—Post purchase
behaviour
NEW PRODUCT ADOPTION (STAGES)
Awareness—Interest—Evaluation—Trial—Adoption
CATEGORIES OF ADOPTERS OF NEW PRODUCTS: MARKET DIFFUSION STAGES
Five categories of adopters--Innovators, Early Adopters, Early Majority, Late Majority and Laggards.
PRICE AND PRICING STRATEGIES
PRICE AND PRICING FACTORS
Any product in the market, whether tangible or intangible, signifies some kind of value or utility being attached to
it and is usually marketed with an objective to provide this utility or value to the target customer. This value or
utility, when translated into monetary terms is known as price. In other words price is the amount of money
charged for a product or service, or the sum of the values that customers exchange for the benefits of having or
using the product or service. And the method by which the value of a particular product is translated into monetary
terms is known as pricing. However, in this context one must consider that the value or utility of a product is not
the sole determinant of the product price. It is simply because of the fact that all the homogeneous range of
product items carrying similar use value would then have been made available at one and uniform price in the
market. Therefore, the factors which affect the pricing decision may be broadly divided into two major categories:
(a) Internal factors (b) External factors

Internal factors refer to those factors which are under the control of the marketer. This includes firstly, the basic
objective of the firm. A firm which may be a profit maximiser would have a different approach towards pricing
the products as against that adopted by a firm which operates for social cause.

Price elasticity of demand is another issue which affects the pricing decision. A product whether elastic or
inelastic will certainly affect the strategy of a firm towards bringing any change in the price of the product.

Another very important factor in this context is the manufacturing policy adopted by the firm. It is important to
know that the final price of a product depends to a large extent on the cost of manufacturing the product, which
again is related to the scale of operation as well as choice of techniques adopted by the firm. Economies of scale
and a choice between labour intensive and capital intensive technology taking into account whether the firm is
operating in an environment of cheap labour, affects pricing decision.

The stage in the lifecycle of a product carries enormous significance in terms of pricing strategy. In other words
this refers to the strategies relating to the changes in price with the change in the lifecycle of a product. It is not
static and universal for all stages and therefore the pricing strategy responds to the requirements of the situation
with respect to a particular stage in life.

And finally the target customers also play an important role in determining the pricing of a product. The pricing
strategy will be different if the target customers are the super elite segment as compared to the common masses.

The external factors which are beyond the control of the marketer, start with understanding the demographic
parameters of the market in which the product is being offered. In a consumer oriented environment, price of a
product takes into account the purchasing power or the needs and requirements of the consumer. Therefore the
demographic parameters relating to consumers income and cultural factors gain importance in this context.
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Consumer buying pattern is another very important external factor which is beyond the control of the firm. In a
consumer oriented environment, a firm has no other option but to respond the requirements of the consumer. How,
in what quantity and in what quality the consumer wants to buy gets reflected in the price.

Formation of price cartel is another very important factor which forces the marketer towards adopting a strategy
which is a unanimous outcome of the cartel members. The marketer has very little to do but to accept the
conditions in this context.

Competitor’s pricing strategy is also another area where the marketer needs to pay attention while determining
the price of the product. A choice between price-based competition and non price-based competition is definitely
an outcome of competitor’s pricing strategy and marketer’s objective.

Finally, government control is an issue which no marketer can ignore. If a particular industry is under price
control or the changes in price are always subject to government clearances and approvals, independence with
respect to pricing strategy is substantially curtailed. Industries which manufacture lifesaving drugs and also
essential commodities fall under this category.

At the end giving due respect to all the above mentioned factors, one cannot ignore that social accountability is an
important issue for all business organisations and pricing being an important activity cannot evade social
responsibility associated with it. A business organisation or a firm should therefore consider all the above factors
with due respect and importance before taking any pricing decision because it is needless to say that pricing being
an important component of the marketing mix, has enormous importance in encouraging consumer’s purchase
decision from the point of view of marketer.

PRICING STRATEGIES

The price the company charges will fall somewhere between one that is too low to produce a profit and one that is
too high to produce any demand.

Product Costs Consumer perceptions of value

Price Floor Price Ceiling

No profits below this price No demand above this price

Customer perceptions of the product’s value set the ceiling for its price. If customers perceive that the product’s
price is greater than its value, they will not buy the product. Likewise, product costs set the floor for a product’s
price. If the company prices the product below its costs, the company’s profits will suffer. In setting its price
between these two extremes, the company must consider several external and internal factors as discussed earlier
to arrive at a pricing strategy. Here we shall be considering three pricing strategies or methods:

(i) Customer Value- Based Pricing

(ii) Cost-Based Pricing
(iii) Competition-Based Pricing

(i) CUSTOMER VALUE-BASED PRICING

In the end, the customer will decide whether a product’s price is right. Pricing decisions, like other marketing mix
decisions, must start with customer value. When customers buy a product, they exchange something of value (the
price) to get something of value (the benefits of having or using the product). Effective customer-oriented pricing

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involves understanding how much value consumers place on the benefits they receive from the product and setting
a price that captures that value.

Customer value-based pricing uses buyer’s perceptions of value as the key to pricing. Value on the other hand
refers to the relative importance of the product with respect to a target customer. This value or relative importance
depends on a number of factors like the availability of substitutes, qualitative superiority of the product,
company’s own goodwill, frequency of use and the basic characteristics of the product. Value-based pricing
means that the marketer cannot design a product and marketing program and then set the price. Price is considered
along with all other marketing mix variables before the marketing program is set. In the following diagram, a
comparison is made between value-based pricing and cost-based pricing:

Cost-based pricing

Convince buyers
Design a good Determine Set price based
of product's
product product costs on cost
value
Value-based
pricing

Assess customer Set target price Determine costs Design product

needs and value to match that can be to deliver
perceptions customer incurred desired value at
perceived value target price

Although costs are an important consideration in setting prices, cost-based pricing is often product driven.
The company designs what it considers to be a good product, adds up the costs of making the product, and
sets a price that covers costs plus a target profit. Marketing must then convince buyers that the product’s
value at that price justifies its purchase. If the price turns out to be too high, the company must settle for
lower markups or lower sales, both resulting in disappointing profits. Value-based pricing reverses this
process. The company first assesses customer needs and value perceptions. It then sets its target price based
on customer perceptions of value. The targeted value and price drive decisions about what costs can be
incurred and the resulting product design. As a result, pricing begins with analysing customer needs and
value perceptions, and the price is set to match perceived value.
A company will often find it hard to measure the value customers attach to its product. For example,
calculating the cost of ingredients in a meal at a fancy restaurant is relatively easy. But assigning value to
other measures of satisfaction such as taste, environment, relaxation, conversation and status is very hard.
Such value is subjective; it varies both for different consumers and different situations. Still consumers will
use these perceived values to evaluate a product’s price, so the company must work to measure them. This is
often done by asking the consumers relevant questions in the form of a questionnaire regarding how much
they will pay for a basic product and for each benefit added to the offer and by getting their feedback
through other methods etc.
We now examine two types of value-based pricing: good-value pricing and value-added pricing.
Good-Value Pricing
The Great Recession of 2008 to 2009 caused a fundamental and lasting shift in consumer attitudes toward
price and quality. In response, many companies have changed their pricing approaches to bring them in line
with changing economic conditions and consumer price perceptions. More and more marketers have adopted
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 the strategy of good-value pricing—offering the right combination of quality and good service at a fair price.
In many cases, this has involved introducing less-expensive versions of established brand name products or
new lower-price lines. For example, Mercedes came out with a lower priced version of their luxury cars in
the form of CLA Class series or recently Samsung came out with a lower priced version of mobile handsets
to compete with Redmi, Oppo etc.
In other cases, good-value pricing involves redesigning existing brands to offer more quality for a given
price or the same quality for less. Some companies even succeed by offering less value but at very low price.
An important type of good-value pricing at the retail level is called everyday low pricing (EDLP). EDLP
involves charging a constant, everyday low price with few or no temporary price discounts and the concept
was practically defined by Walmart in the USA.
Value-Added Pricing
Value-based pricing doesn’t mean simply charging what customers want to pay or setting low prices to meet
competition. Instead many companies adopt value-added pricing strategies. Rather than cutting prices to
match competitors, they add quality, services, and value-added features to differentiate their offer and thus
support higher prices. Some of the common examples of companies following this type of pricing strategy
are premium audio brand Bose and mobile handsets brand Apple. Their prices are always on the higher side
as compared to their competitors but this is supported by always staying one step ahead of the competition
and delivering products which are better than their competitors’.
(ii) COST-BASED PRICING

Cost-based pricing also known as markup pricing is a very traditional approach as far as marketing
management is concerned. Ascertaining the cost first and then applying a profit margin to arrive at the
final selling price is the usual approach under cost based strategies. Consumer oriented marketing
management however relies upon the theory of making a market survey towards determining the
purchasing power of consumer and then arriving at the final sale price as shown earlier.

(iii) COMPETITION-BASED PRICING

Competition-based pricing involves setting prices based on competitors’ strategies, costs, prices, and
market offerings. Consumers will base their judgements of a product’s value on the prices that competitors
charge for similar products.

In assessing competitors’ pricing strategies, a company should ask several questions. First, how does the
company’s market offering compare with competitors’ offerings in terms of customer value? If consumers
perceive that the company’ product or service provides greater value, the company can charge a higher
price. If consumers perceive less value relative to competing product, the company must either charge a
lower price or change customers’ perceptions to justify a higher price.

Next, how strong are current competitors and what are their current pricing strategies? If the company
faces a host of smaller competitors charging higher prices relative to the value they deliver, it might charge
lower prices to drive weaker competitors from the market. If the market is dominated by larger, lower-
price competitors, a company may decide to target unserved niches by offering value-added products and
services at higher prices.

It is important to note here that the goal is not to match or beat competitors’ prices. Rather, the goal is to
set prices according to the relative value created versus competitors. If a company creates greater value for
customers, higher prices are justified.

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 RESALE PRICE MAINTENANCE

Resale price maintenance refers to the practice adopted by the marketer towards specifying the final price
at which the product should be sold to the final consumer. It is with an objective whereby manufacturers
want to implement control over the prices at which the resellers resell their products. Apart from control,
the practice of resale price maintenance also instills some sense of confidence among the consumers and
improves the image of the brand because huge disparity among the prices of the same product is not
experienced by the consumer when buying from different retailers. Resale price maintenance may be
implemented in any of the three forms:
(a) A suggestive maximum price.
(b) A suggestive minimum price.
(c) A suggestive fixed price.

In the Indian context the practice of suggesting minimum price is not allowed, especially in consumer
durable, non-durable and for lifesaving drugs. This is in view of the theory that under monopolistic
situation, suggesting minimum price would amount to giving absolute freedom to the retailer in effecting
consumer exploitation. The other two methods i.e. suggesting maximum price and specifying fixed is
practiced in common for various products. Products usually distributed through government mechanism
are sold at fixed price, while all other commodities in Indian marketing environment follow the rule of
suggesting maximum price.
MARKETING REACH AND COMMUNICATION
DISTRIBUTION MIX
CHANNEL MANAGEMENT: THE NATURE AND IMPORTANCE OF MARKETING
CHANNELS.
Few producers (marketers) sell their goods directly to the final users. Instead, most use intermediaries to
bring their products to market. They try to forge a marketing channel (or distribution channel)---a set of
interdependent organisations involved in the process of making a product or service available for use or
consumption by the consumer or business user.
FUNCTIONS OR VALUE ADDITION MADE BY CHANNEL MEMBERS
INFORMATION: Gathering and distributing marketing research and intelligence Information about actors
and forces in the marketing environment needed for planning and aiding exchange.

PROMOTION: Developing and spreading persuasive communications about an offer.

CONTACT: Finding and communicating with prospective buyers.

MATCHING: Shaping and fitting the offer to the buyer’s needs, including activities
such as manufacturing, grading, assembling, and packaging.

NEGOTIATION: Reaching an agreement on price and other terms of the offer so that ownership or
possession can be transferred.

NUMBER OF CHANNEL LEVELS

Companies can design their distribution channels to make products and services available to customers in
different ways. The number of intermediary levels indicates the length of a channel. In a direct marketing
channel, there are no intermediary levels—the company sells directly to consumers. Whereas, indirect
marketing channels contain one or more intermediaries.

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TYPES OF INTERMEDIARIES
Intermediaries can be company’s sales force, manufacturer’s agency or industrial distributors.
FROM MARKETING LOGISTICS TO SUPPLY CHAIN MANAGEMENT
Marketing logistics—also called physical distribution—involves planning, implementing and controlling the
physical flow of goods, services and related information from points of origin to points of consumption to
meet customer requirements at a profit. In short, it involves getting the product to the right customer in the
right place at the right time.
In the past, physical distribution typically started with products at the plant and then tried to find low cost
solutions to get to the customers. Managers chose a set of warehouses (stocking points) and transportation
carriers that would deliver the goods to final destinations in the desired time or at the lowest cost. But in the
present times the concept of marketing logistics has undergone a change and it involves not only outbound
distribution (moving products from the factory to resellers and ultimately to consumers) but also inbound
logistics (moving products and materials from suppliers to the factory) and reverse distribution (moving
broken, unwanted or excess products returned by consumers or resellers). In fact, physical distribution has
now been expanded into the broader concept of Supply Chain Management (SCM)---managing upstream
and downstream value added flows of materials, final goods, and related information among suppliers, the
company, resellers and final consumers. A supply chain on the other hand is actually a complex and
dynamic supply and demand network. A supply chain is a network of organisations, people, activities,
information and resources involved in moving a product or service from supplier to customer.

UPSTREAM DOWNSTREAM

INBOUND OUTBOUND
LOGISTICS LOGISTICS
SUPPLIERS COMPANY RESELLERS CUSTOMERS

REVERSE LOGISTICS

SCM starts before physical distribution: it involves procuring the right inputs (raw materials, components
and capital equipments); converting them efficiently into finished products; and dispatching them to the final
destinations. An even broader perspective calls for studying how the company’s suppliers themselves obtain
their inputs. The SCM perspective can help a company identify superior suppliers and distributors and help
improve productivity, which ultimately brings down the company’s costs.
PROMOTION MIX
Promotion mix is also known as marketing communication mix.
MEANING AND COMPONENTS OF PROMOTION MIX
Promotion refers to the ability of the marketer to communicate with the customers regarding the availability
of the product. This is the fourth P of the marketing mix combination. The term promotion in marketing
management comprises of four basic components: advertising, publicity, personal selling and sales

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promotion. It therefore becomes a very important task on the part of the marketing manager to decide upon
an appropriate promotion strategy for the products.
ADVERTISING AND PUBLICITY: Meaning and Differences
The term advertising refers to any form of paid, non-personal presentation and promotion of idea, goods or
services by an identified sponsor. Publicity on the other hand refers to any form of non-paid, commercially
significant news or editorial comment about any idea, product or an institution having an unidentified
sponsor.
In case of an advertisement, while the message is entirely related to the product, publicity on the other hand
focuses on public welfare.
The message of the advertisement since biased towards the positive aspects of a product, it makes the
message less credible and more subjective, concentrating on only one particular issue. Publicity on the other
hand, enjoys more freedom in this respect because the message has got nothing to do with the objective or
goal of the organisation entrusted with the job of delivering the message. It therefore makes the message
more credible and objective oriented.
Finally, in case of an advertisement, the marketer ensures full or maximum control over the theme of the
message, unlike that of the publicity, where the control hardly exists.
PERSONAL SELLING
It refers to the personal presentation by the firm’s sales force for the purpose of making sales and building
customer relationships.
SALES PROMOTION
Advertising often works closely with another promotion tool, sales promotion. Sales promotion consists of
short term incentives to encourage purchases or sales of a product or service. Whereas advertising offers
reasons to buy a product or service, sales promotion offers reasons to buy now. Sales promotion tools are
divided into two categories: consumer promotion tools and business or trade promotion tools. Consumer
promotion tools include sales promotion letters, catalogues, point of purchase promotion, demonstrations in
schools, retail outlets etc., coupons, free samples, price-offs etc. Business or trade promotion tools include
merchandising ie providing space for displaying products, sponsorship of national and international events,
participating in trade fairs and exhibition, dealer level contests etc.
Public Relation / Publicity: Public Relation refers to the management function that determines the attitudes
and opinions of organisations’ publics, identifies its policies with the interests of its publics and formulates
and executes a plan of action to earn the understanding and goodwill of its publics.

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M.Com. Second Semester 2020

Paper CC: 201, Marketing Management

Recommended Text: Principles of Marketing by Philip Kotler, Gary Armstrong and Prafulla
Agnihotri
Publisher: Pearson, 17th. Edition.

Module I: Page Numbers

Consumer and Societal Orientation: 10 / 12 / 580 / 595

Customer Relationships: 13 / 115
Consumerism: 587
Rural Marketing: Features and Rural Consumer behaviour patterns and
Influencers

Market Segmentation: 10 / 49 / 189

Product Differentiation: 208
Marketing Environment: 67 onwards
Adopting Competitive Strategies: 54 / 523 onwards

Marketing Mix: 52
Service: 235
Product Mix Decisions: 233 / 234
New Product Development Process: 257
Product Life Cycle: 270
Brand Management Decisions: 247

Module II
Resale Price maintenance: 328
Pricing factors; Pricing Strategies 294

New Product Adoption: 153

Market Diffusion stages: 154
Individual Buying Behaviour Factors: 131 onwards

Nature, Importance of Channel: 337 onwards

Channel Management: 337
Logistics, Nature and Importance: 356
Sales Promotion: 406 / 422 / 477
Public Relation / Publicity: 406 / 422

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