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PRI
NCIPLES
OF
MARKETING

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WhatisPr i
maryData?
PrimaryDat aisresearchthathasbeenconduct edbyyouror ganizat
ion,fi
rsthand.ItisalsoknownasFi el
d
Resear ch.Itisusuallymorereli
ablethansecondar ydata,
becausei ti
susuallymor eaccuratesinceyou
col
lectedityourself
.Primarydataisspeci f
icandrelevanttoyourproductsandser vi
ces.However ,Pri
maryData
i
sof t
enver yti
meconsumi ngtocollect
,andusual lycost
smor etocreatethanpurchasi ngsecondarydata
report
s.Youmustt akespecialcarewhencol l
ectingprimarydat
a.Itneedst ober elevant,
current
,andas
unbi
asedaspossi ble.

Primar yDataisr
elevantwhenitdirect
lyappliest oyourcompany'spr
oductsandser vi
ces.Iti
srelevantwhenit
r
el at
est othepr
oblemsyouar etryingtosolve, andthemarket
inggoalsofyourorganizat
ion.Pri
mar yDatai
s
currentwhenitisrecent
,anddirectl
ycorrespondst otheprof
il
eofyourcustomer sTODAY.Pr i
mar yDatais
unbiasedwhenyoursubj ect
shavebeenhonestandopendur i
ngdatacoll
ect
ion.Whenconst ructi
ngyour
Pr i
mar yDatacol
lecti
onplan,youmustconsi derresear
chmethods,contactmethods,thesampli
ngpl an,
and
yourr esearchinst
ruments.

Resear
chMet hodsconsistofobser
vati
on,surveys, andexperi
ment at
ion.Cont actMethodst ypicall
yconsi stof
mail,
phone,personalint
eracti
on,
andvariousonlinemet hods.Sampl ingPlanst akeint
oaccountuni t
s,size,and
procedures.ResearchInstr
umentstypi
call
yconsi stofquesti
onnairesandot hermechani calinstr
ument s.Let '
s
startwit
haqui ckdiscussi
onofResearchMethods.Ther earethreetypicalwayst hatPri
mar yDat aiscollected
i
nmarketi
ng:observation,sur
veys,andexper iments.

Observat
ion
Observat
ioni
sthecoll
ecti
onofPrimaryDatathroughobservingpeople, t
heiracti
onsandt hesit
uati
onstheyar
e
i
n.Observat
ionmaybet heeasiestr
esearchtodo.Typical l
y,observati
oni sal
sothemostcostef f
ecti
ve
method.Observat
ioncanalsogiveyoudatathatpeoplearen'tusuall
ywi ll
ingtotel
lyouthemselves,
suchas
t
hei
rfeel
ings,emoti
ons,at
ti
tudesorthemot ivesbehindt hei
rbuyingdecisions.

Howdoesobser vationwork?I t'

sext remel ysimple.Takear estaurantf
ranchi
seowner.Hemaybepl anningon
openi nganotherlocati
on.Hemayal sohavel it
tl
eornomoneyt opayformarketi
ngresearch.Howeveral otof
t
hedat aheneedshecancol lecthimsel f.Hecangeti ntohiscaranddr i
vearoundtown,observi
ngthetraff
ic
patterns.Hecanseewher ehi sclient el
egoest oshop.Hecanseewhatt imethetr
affi
cappears.Hecancal l
realestateagentsandaskt hem f orleasepr icesfordi
ff
erentproperti
es.Hecandr i
vearoundandl ookforareas
t
hatdon' thavehistypeofrestaurant ,lookingforareasofli
tt
lecompet it
ion.Hecandoal lofthi
sforj
ustthecost
ofthegasi nhiscar.Youcandot hisyoursel
f.

Surveys
Surveysarethemostcommonmet hodofcollectingPrimaryDat a.Surveysarethebestwayt ogett
he
descri
pti
veinformationt
hatyouneedforyourmar keti
ngi nt
ell
igence.Simplyput,surveyscoll
ectdat
abyasking
otherpeopleaser i
esofquest
ionsaboutthei
rpersonalknowl edge, emot
ions,at
ti
tudes,pref
erences,
andbuying
behaviors.Surveyscanprovi
deyouaweal thofdata.Ther eisalwaysagol dennugget ,api
eceofdatathatcan
giveyoutheinsi
ghtyouneedtofigureoutt hedirecti
onofyournextcampai gn.

However,ther
ear edrawbackst othedatayoucol l
ectviasurveys.Oft
enpeoplejustdon'trecal
lsomeoft he
i
nfor
mat i
onthatyouar easkingfor,andasar esult
,theyar
eunabl etoanswerthequest i
ons.Ther ef
orethe
r
esponsethattheygi vewil
lnotbethecompl etetruth,i
tmaybesomet hingthatt
heyf eelyouwantt ohear.
Sometimespeopl eareunwill
ingtoprovi
dei nf
or mati
onthattheymightdeem "pri
vate".Thisprevents
completel
ytrut
hfulresponses,anditskewsthedat athatyouareanalyzi
ng.Iftheresponsesseem t oogoodto
bet
rue...
theyjustmaybe.

Experimentati
on
Pri
mar yDatacanalsobecoll
ectedviaexperimentation.Exper i
mentati
oni sthepracti
ceofgatheringdataby
sel
ecti
ngmat chedgroupsofpeople,
givi
ngt hem diff
erenttreatmentsorscenar i
os,contr
oll
ingr
elatedfactor
sin
t
heirenvir
onments,andchecki
ngfordif
ferencesint heirr
esponses.Exper imentati
ongivesuswhatwecal l
"causal"dat
a.Causaldatahel
psusexpl aincauseandef fectrel
ati
onships.Experimenti
nghel psustryto
answer"why"someoneisdoingsomet hing,andwhati nfl
uencest hei
rbuyingbehavior.

Acommonexampl eofexperiment ati

oni spri
cet esti
ng.Tot hebuyer,pr
icewillbethefi
nalemotionalf
actorthat
det
ermineswhetherornott heywi l
lgiveust heirhardearnedmoney.Dependi ngontheproductandmar ket
segment ,pr
icemaybet hemosti mportantfactor.Howdoyouknowwhatpr i
cei sther
ightpri
ce?Youhavet o
testi
t.Manycompani eswi lltestcert
ainpriceswhencol lecti
ngprimarydataonanewmenui t
em thatisbeing
developed.Howdoyout hinkMcDonal dsknowshowmucht ochargeforaBi gMac?Theyt estedhowmuch
t
heycanchar gef
orthatBi gMac, l
ookingforthatmagi cnumbert hatwil
lprovidethemostsalesandthemost
prof
it
.

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Inthisart
icl
e,wewi l
ldeepdi vei
ntothetopicofMar ketResearchTechniques.Wewil
l
startwit
h1)ani nt
roductiontomarketresearch,explor
ethen2)primary
and3)secondar ymar ketresear
ch,aswellasfinishwith4)themistakestoavoidwhen
doingmar ketr
esearch.

MARKETRESEARCH:
ANINTRODUCTI
ON
Mar ketResearchisat er
mt hatisusedt oref
ertoapr ocessofgat heri
ngorcol l
ecting
informationabouttargetaudi
enceort argetmarket.Themai nr ol
eoft heconceptof
mar ketresear
chist oprovi
deacompanyorabusi nessor ganizati
onwi thanin-dept h
viewoft hecustomer sorconsumer sinordertobeabl etosatisfythei
rneedsbet ter.The
processofmar ketresearchisintegr
altobeabl etocompet ewi thotherplayer
sint he
samei ndustryandhel pstoanalyzethingsli
kemar ketsize,compet i
ti
onandmar ket
needs.

Mar ketresearchmakesuseofanal yt
icalandstati
sti
caltechni
quesandmet hodsto
gatherandi nter
preti
nfor
mat i
oni nanor ganizedfashi
on.Thisprocessalsoinvolves
opinionandsoci alr
esear
chandi simpor t
antintoday’
sincreasi
nglycompl exbusiness
environment .I
nsuchascenar i
o, businessescannotjustrel
yont hei
r‘gut-
feeli
ng’ t
orun
thi
ngs, andthisiswhymar ketresearchisneeded.

Factor
stobei
nvest
igat
edt
hroughmar
ket
resear
ch
Mar ketr
esearchcanbeconsi
deredasamet hodofgetti
nganideaoft
heneedsofthe
customers,andsomeofthefact
orsthatcanbeinvest
igatedt
hrought
hispr
ocessare
givenasfoll
ows:

1.Tr
endsinthemarket–Markett
rendsort
rendsi
nthemar
ketar
ethemovement
sofa
marketi
nagivenperi
odoft
ime.

2.Segment at
ionofthemar ket–Thisi
sthedi
visi
onofamar keti
ntosubgroupswith
si
milarfeatur
es.Thisi
sneededt ocr
eateadi
stinct
ionbet
weendemogr aphics,
choices,
genders,andpersonal
it
ies,et
c.

3.I
nfor
mati
onavail
abl
e–Mar keti
nfor
mat
ioni
sthei
nfor
mat
ionaboutpr
icesofdi
ff
erent
pr
oduct
savai
labl
einthemarket
.

4.SWOTanal
ysi
s–Thi
sanal
ysi
sisananal
ysi
soft
heSt
rengt
hs,
weaknesses,

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oppor
tuni
ti
esandt
hreat
stoabusi
nessorcompany.

5.Ef
fect
ivenessofmarketi
ng–Mar keti
ngeff
ecti
venesstakesintoaccountr
iskanal
ysi
s,
pr
oductresearch,
customeranal
ysis,andcompeti
toranalysi
s,et
c.

Benef
it
sofmar
ketr
esear
ch
 Tappi
ngoppor
tuni
ti
es–Oneoft
hebi
ggestbenef
it
sofconduct
ingmar
ketr
esear
chi
s
thati tenabl
esyout ofi
ndoutthevariousmarketoppor
tunit
iesandmakesi tpossibleto
tapi ntothem eff
ecti
vel
y.Forexample,itmayhel
pyoutof i
ndwhet heryourpr oductis
suitablefortheaudienceyouhavetargetedornot,
andifi
tisn’t
,thenmar ketresearch
helpst oidenti
fythesuit
ableaudi
ence.

 Encour
agi
ngcommuni
cat
ion–Mar
ketr
esear
chhel
psyout
ofi
ndoutt
hebestwayt
o
communi catewithyourcustomers.Afterobt
ai ni
ngresear
chresul
ts,
onet endstoknow
theaudiencenature,
personali
ti
es,l
ikes,disl
ikes,et
c.andthi
smakesi teasi
erto
connectwiththem andreachouttot hem.

 Mi
nimi
zat
ionoft
her
isks–Anot
hermaj
orbenef
itofmar
ketr
esear
chi
sthati
thel
ps
busi
nessesminimizeri
sksbytakingact
ionsoncer
tainsubj
ect
s.Forexample,
itmay
hel
ptoaddcer t
ainqual
iti
est
opr oduct
sthatmayreachouttonumberofpeople,
thus
decr
easingchancesofthepr
oductgoingnotused.

 Est
abl
isht
rendsandmar
ketst
andi
ng–Themar
ketchangescont
inuousl
yand
const
antl
y.Insuchascenari
o,onl
ythor
oughmar ketresear
chcanhelptoest
abl
isht
he
ongoingt
rendsandthenfor
mulatepl
ansaccor
dingt othecurr
entcust
omerneedsand
requi
rements.

 Fi
ndoutpossi
blepr
obl
ems–Si
ncemar
ketr
esear
chbr
ingsoutt
hecust
omerr
eact
ions,
choices,andpref
erences,abusinesscanalt
erthepr
oductwhil
eiti
sst
il
lint
he
manuf actur
ingordesi
gningprocess.Iti
seasiert
ofi
ndprobl
emsandthenworkon
them ifonehasresearchresul
tsinhand.

TypesOfMarketResear
ch
Techni
ques
PrimaryMar ketResearch.Pr i
mar ymar ketresear chisaki ndofmar ketresear chwhich
i
sdonebyt hebusinessorcompanyi tselfwiththeobj ectiveofgat heri
ngi nformation
thatcanbeusedt oimpr ovethepr oducts,servi
ces, andf unctions.Primarymar ket
researchisal soknownasf iel
dr esearchsincei tisresearchdonef rom scr atch,wit
hout
usinganyi nfor mat
ionthati salr
eadymadeavai lablethroughot hersour ces.Onecan
gatherpr i
mar ydataorinf or
mat i
ont hroughqual itati
veresear chmet hodsaswel las
quant i
tati
ver esear
chmet hods.Primar ymar ketresearchi sthemostcommont ypeofa
mar ketresear chmethodandi salsothemostval uabl
et ype.Itisamet hodt hatonly
answer sspeci fi
cquestionsandnoti r
relevantissues.

Secondarymarketr
esear
ch.Asopposedtoprimar
ymar ketresearch,
secondarymar ket
resear
chisaresear
chtechni
quethatdoesnotai
mt ogatherinfor
mationfrom scrat
ch
butrel
iesonal
readyavai
labl
einf
ormati
onfrom mul
ti
plesources.Thisresearchfocuses

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ondataorinformationthatwascol l
ectedbyot herpeopleandisavail
abl
eforeit
herf
ree
orpai
dusef orothers.Secondarymar ketresearchtakesint
oaccountmanydi f
fer
ent
sour
cesforcol l
ecti
onofi nfor
mati
oni ncludi
nggover nmentdata,of
fi
cedata,
newspaper
s, magazi nes,thei
nter
net,etc.Oneofthebenef i
tsofdoi
ngsecondary
marketr
esear chisthatitismostl
yfreeandt akesal otl
esstime.

Qualit
ati
ver esearch.Qualit
ativeresearchorqualitati
vemar ketresear chisaki ndofa
resear
chmet hodwhi chmai nlytakesintoaccountt heopinionsandf eel
ingsofa
customerasf arasabusi ness’ sproductsandser vicesareconcer ned.Thi stypeof
resear
cht r
iestogetbehi ndt hecustomer ’
smi ndtof athom whatt heyseel ackingor
whethertheyt r
ulyl i
ketheproductornot .Somecommonexampl esofqual it
ative
resear
chwor kincludedoingf acetofaceinter
views, beingpartoff ocusgroups, et
c.

Quant i
tativeresearch.Quant i
tat
ivemar ketresear chisakindofmar ketresearchwork
thatisbasedonhar dfactsandst at
ist
icaldat aratherthanthefeeli
ngsandopi nionsof
thecust omer sorconsumer s.Thist
ypeofr esear chcanpr oveusefulbothintermsof
primarymar ketresearchandsecondar ymar ketresearch.Someoft hecommon
exampl esofquant i
tati
veresearchincl
udeexi tsurveys,questi
onnair
es,on- si
te
fi
eldwor kandt heshoppingbagsur vey.Infact ,anotherexampleofquant i
tati
ve
researchi ncludesresearchingofthepr evi
ousl yexisti
ngfinanci
alreport
s,research
papers.Thi st ypeofresearchcomesoutwi thawi derangeofst at
ist
icsandhel pstof
ind
outthesi zeoft hemar ketaswel l
.

PRIMARYMARKET
RESEARCH
Thefol
lowi
ngarethef
ivePr
imar
ymar
ketr
esear
cht
echni
quest
hatar
emostcommonl
y
usedandappl
ied:

Focusgr oups.Oneoft hemai nwaysusedt oconductpr i

mar ymar ketr esear chis
throughf ocusgr oups.Thi smet hodinvolvesget t
ingagr oupofpeopl einar oom ora
placeandaski ngt hem i nsi
ght f
ulquest i
onsregardingt hepr oduct ,i
tsdevel opment , t
heir
preferences, andf eedback, etc.Theset ypesoffocusgr oupscanber unorconduct edat
anyl ocationf easi bl
ef orthecompanyorbusi ness.Thesedays, withadvancement sin
technol ogyandt hei nternet,i
tispossi bletoconductt hem vi rt
uallyaswel l
,throught he
met hodofvi deoconf erencing.Butthemai nthi
ngher eist hatthegr oupofpeopl e
broughtt oget herhavesomet hingincommon, forexampl e,ei
thertheyshoul dbel ongt o
thesameagegr oup, t
hesamegenderandsoon.Thi sdi visi
onoft hegr ouport he
selectionpr ocessmustdependont heaudi encet argetedort hepr oductofser viceofthe
company.Par ticipantsi nsuchf ocusgr oupsaret hencompensat edbyei t
herf ree
coupons, voucher s,gift
sormoney, etc.Focusgr oupsf allundert hequal it
ativer esearch
met hodandhel pbusi nessesknowal otaboutcust omerormar kettrends.

Surveysandquestionnai
res.Anothersuper
bandhighl
yeffecti
vewaytoconduct
pri
mar ymarketr
esearchisthroughsurveysandquest
ionnair
es.Theter
m‘ surveys’
isa
broadter
mt hatcoversalotofthi
ngssuchassurveyquestionnai
res,
surveyforms,

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surveyinterviewsandcust omersat isfacti

oncar ds,
etc.Oneoft hemostcommon
exampl esoft hisr esearchmet hodi sthef eedbackform givent
ocust omer satt
heti
me
ofbill
ingatar estaur ant
.Itisastraight f
orwardmet hodofknowi ngwhet herornott
he
customeri ssat isfiedwiththebusi ness’sexistingservi
cesandpr oductsorwhatkindof
changeswoul dt heconsumerl iketosee.Sur veysarealsoconductedint hefor
m ofweb
questionnairest hesedayst hatenabl ebusinessestocol l
ectalotoffeedbackandthen
analyzeitforf urtheradmi nist
rati
on.

Observati
on.Therearet womaj orobservati
ont echni quesorresearchmethodsusedi
n
pri
mar ymarketresearch,andtheyareobser vationt hroughint
eractionand
communi cat
ionwi t
hthesubj ectandobser vat
iont hroughnoi nteracti
onand
communi cat
ionwi t
hthesubj ect.Thi
sform ofresear chmet hodcomesundert he
quanti
tati
vepri
mar yresearchsincethroughi t
;resear chersevaluateormeasuret
he
behavioroft
herespondent sortheusersi ngener al.Thisismor eofapersonal
approachincompar i
sont osurveysandquest ionnai res,et
c.

Trial
sandexper i
mentati
on.Thi smet hodofpr imaryr esearchinvolvesscienti
fictest
s
wher ehypothesesandvar iables,
etc.ar eused.Thisi saquant it
ati
vet ypeofmar ket
researchwhi chmayei t
herbecont r
olledouti nthefieldorwithincontroll
ed
environment s.I
nordertounder standt hisfor
m ofresear ch,hereisanexampl ethatyou
canr efert
o:Af oodproductcompanycr eated3differentfoodpackagi ngstylesandt hen
soldthepr oductstodif
fer
entconsumer s.Aft
eral i
mi tedperi
odoft ime, i
tanalyzedthe
salesandcamet oaconcl usionaboutt heprefer
redpackagi ngstyleordesi gn.

In-depthInter
views.Onemayt hi
nkofani n- depthi nter
viewt obeaquant itati
ve
approacht oprimar ymar ketresearch, butthismet hod, i
nfact,i
saqual itat i
veresear
ch
thattakesintoconsi derati
ont hekindsofchoi cesandpr eferencesacust omerbasehas.
Inter
views,unli
kef ocusgr oups, i
nvol vei nteractionbet weenonemoder atorandone
respondentandsever altypesofmodesandmet hodsmaybeusedt oconductt hem.
Inter
viewsmaynotal waysber estr
ictedt oasetpat ternofquestionsbutcanal sobein
theform ofaconver sat
ionwi ththet argetcust omerbaseoraudi ence.Thi skindofa
researchmet hodhel pst odigfurtheri ntowhatt hecust omerwant s,andt heanswer s
canl at
erbeanal yzedt ocomet oaconcl usionf orthef i
nalproductdeliver y.

SECONDARYMARKET
RESEARCH
Secondarymarketresearchismainl
ybasedoncol l
ecti
ngi
nformati
onf
rom di
ff
erent
sourcesandthencomi ngtoaconclusion.Thef
oll
owingar
et het
womaintypesof
SourcesofSecondarymar ketr
esearchdata:

Int
ernalsources.Inter
nalsourcesar et hoseki
ndsofsecondar ymarketr esearch
sourcesthatalr
eadyexi standar ecollectedi
nthebusiness’sdatabaseorf il
esystem.
Int
ernalsourcesincludeinfor
mat ionthathasalreadybeencol l
ectedbyt hecompany
andpr ovesusefulforfut
ureprojects,etc.Formostbusinesses,i
nternalsour cesmay
proveenought odevelopnewpr oductsandser vi
ces,andthismaynotr equirethem t
o

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l
ookout
side.

Exampl
es:

 Bal
ancesheet
s–Pr
evi
ousbal
ancesheet
soft
hebusi
nesscanber
efer
redt
oinor
dert
o
f
indst
atsandf
igur
est
hatmaypr
oveusef
ulf
oreval
uat
ion.

 Pr
ofi
tandl
ossst
atement
s–Pr
ofi
tandl
ossst
atement
scanbeconsul
tedt
ofi
ndout
whatki
ndsofpr
oduct
sandser
vicesr
esul
tedi
npr
ofi
tspr
evi
ousl
y.

 I
nvent
oryr
ecor
ds–Thi
sisanot
herpi
eceofdat
awhi
chcanbeusedasasour
cef
or
secondar
ymar
ketr
esear
chandput
sint
ofocusmanyst
atsandf
igur
es.

 Sal
esf
igur
es–Compani
esst
oret
hei
rpr
evi
oussal
esf
igur
essot
hatt
heycanbe
analyzedandusedf orfurt
herr esearch.
Externalsour
ces.Incaset heinternalsourcesdon’ tfetchenoughorsuf fi
cient
i
nformat i
on,ext
ernalsourcescanbeuse.Ext er
nalsour cesaret hosesourcest hat
presentdatathatiscol
lectedbyot herbusinessesorpeopl e.Thesear ecollect
edfrom
outsidethebusiness’
senvi r
onmentandi ncl udemultiplesour ces.Ext
ernalsourcescan
bewi deandvar i
edandhenceonemustf ollowacont r
ol l
edappr oachtoassessi ngthem.

Exampl
es:

 Gover
nmentsour
ces–Sever
algover
nmentsour
cescanbeusedt
ocol
lectal
otof
usef
uli
nfor
mat
ionaboutmul
ti
plesubj
ect
s.

 Uni
ver
sit
iesandcol
leges–Sever
alcol
legest
udent
sandr
esear
cher
scol
lectandf
il
e
i
nfor
mat
iont
hatcanbef
urt
herusedbybusi
nesses.

 Thei
nter
net–Thei
nter
neti
sthemostusedsecondar
ymar
ketr
esear
chsour
cebuthas
t
hedi
sadvant
ageofsever
alnon-
credi
blesour
ceswi
thi
ncompl
etei
nfor
mat
ion.

 Compet
it
ordat
a–Of
ten,
busi
nessesuset
hei
nfor
mat
ioncol
lect
edandf
il
edbyot
her
busi
nessor
gani
zat
ionsi
ncl
udi
ngt
hatgat
her
edbyt
hei
rcompet
it
ors.

MI
STAKESTOAVOID
WHENDOING
MARKETRESEARCH
 Doi
ngonl
ysecondar
ymar
ketr
esear
ch–Whi
ledoi
ngmar
ketr
esear
ch,
onemustavoi
d
maki
ngthemist
akeofdoi
ngonlysecondar
yresear
chandneglect
ingpr
imar
ymarket
r
esear
ch.I
tist
ruet
hatsecondar
yresear
chisimport
antandt
ime-savi
ngbutpr
imary

Page7of7
 PRI
NCI
PLESOFMARKETI
NGMODULE

researchmaybr ingaboutafreshper
specti
ve,
updat
edandl atestresult
sandof fersa
bettertakeatthemarket.Thi
ngsli
kecustomer’
sval
ues,psychology,atti
tudes,l
ifest
yle
andi nt
erestscanonlybeknownwhenoneconduct spri
mar ymar ketresearch.

 Doi
ngonl
ypr
imar
ymar
ketr
esear
ch–Anot
hercommonmi
staket
hatmustbeavoi
ded
whendoingmar ketresearchisdoi
ngonl ypri
mar ymar ketr esear
ch.Businessesof ten
makethemi st
akeofspendi ngsomucht i
meonpr i
mar yr esearchthatt
heyf orgetthat
usi
ngsecondarysour cesfordatacouldalsoproveusef ulandal otmoret ime-saving.
Secondar
yresearchmayof f
ersomedat aandst atsforfreeandmayel i
mi natetheneed
togoanextrami l
eforthesamei nfor
mat i
on.Hence, al
lbusi nessesmustmakei tapoint
todoalit
tl
ebitofbot htheresear
chwor ks.

 Usi
ngonl
ythewebf
orr
esear
ch–I
tist
ruet
hatt
hei
nter
netort
hewebi
sthegr
eat
est
databaseforawidevariet
yofinformationanddat abutjustrel
yingoni tandnotusi ng
anyothersourcecoul
dpr ovetobeabi gmi stakeasf
arasmar ketr esearchis
concerned.Onemustremembert hattheinternetmaynotalwaysof f
erreli
abl
esour ces
andcompl et
einfor
mation.And,ast heysay, i
ncomplet
ei nf
ormat i
oni sdangerous.Thus,
onemustal waysmakei tapointtotryoutot hermorecredi
blesour cesaswel lsuchas
governmentsources,
previousbusinessfiles,etc.

 Li
mit
edvi
sion–I
tiscommonf
orpeopl
etoseewhatt
heywi
sht
osee,
butyouj
ust
cannotaf for
dt ohavet unnelvisioni
fyouar ehandlingandr unningabusiness.A
mi staket hatbusinessesoftent endtomakei storemai nwithinacertai
nenclosureand
notseei ngwhati soutsideit.Theymustr at
hermaket heeff
ort,nomat t
erhowl ongi
t
takest opeepout si
deandt akeagl i
mpseatt helargerpict
ure.Businessesmustextend
theirvision,learnmor eandt henappl yt
heirfuncti
onst oatt
ractmaximum peopl eof
differentdemogr aphics.

 Notbei
ngabl
etoi
dent
if
yyourt
argetaudi
ence–Oneoft
hemostcommonr
easonsor
causesf orthefail
ureofproducts,servi
ces, andbusi nessistheinabili
tytoidenti
fythe
targetaudience.Whi l
ewithsomepr oducts,iti
seasiert otapthepot enti
alcustomers
butwi t
hsomeot hers,fi
ndingwhoyourr ealaudiencei scanbet ough.Forexampl e–
foodpr oducts.Butjustbecauseitisdiff
icultdoesn’tmeani tisimpossible.Iti
shighly
i
mpor t
antforallbusinesscompani estoknowexact lywhot heirtargetaudienceisand
thenfocust heirmarketi
ngandot hereffortstowardst hem inparticul
ar.

 Notgi
vingconsumer
sani
ncent
ivet
ocommuni
cat
ewi
thyou–Consumer
sar
esmar
t
andneedt obegivenbenefi
tsi
nor dertogett hem att
ract
ed.Askingconsumerst
o
respondtoasurveyquesti
onnai
r ewithoutgivingthem anyincenti
vecanbeabig
mistake.But
,ontheotherhand,off
eringtheconsumer safr
eecouponoraf r
eevoucher
i
nr etur
nforthei
rti
mecouldsuddenl yturnthet i
deinyourdirect
ion.

Page8of8
 PRI
NCI
PLESOFMARKETI
NGMODULE

Aut
hor
’sNot
e
Thi sPr i
nciplesofMar keti
ngt extbooki smyf irsteffortatwr i
ti
ngat ext book.Ihave
triedt ogatherandr ecordt hear easofmar ketingt hatmeett wogoal s.Fi rst,
I
havei ncludedthei nformat i
ont hatismostl ikelytobeusedbyat ypi calmar ket ing
student .Second, Ihavewr ittenaboutpr inciplesofmar keti
ngt hatar et rue
princi pl
es,thatis, thatarel essl ikelytochangef undament allyint hef oreseeabl e
fut ure.I
nchoosi ngmat eri
alt ocover ,Ihavet riedt oconsi dert hefactt hatmost
peopl ewhol earnt hismat erialdonothavet hei rprimar ypr ofessional
responsi bili
tyinmar ket
ing.Ther efore,Ihaveat tempt edt ofocusonmat eri
alt hat
wi llbemosthel pfult othosewhowi llnotwor kpr i
mar ilyint hemar ketingar ea.I f
youl earnthismat erialandar enotamar ketingper sonatl eastitwi llhel pyou
wor kmor eeffectivelywi tht hosewhoar einmar ketingandi mpr oveyourabi li
tyt o
beabet t
erconsumer .
Ihopeyouenj oyyourexper i
encewi ththist extbook.Aswi thanypr oject ,Iwillbe
tryingt ocont i
nuousl ychanget hi sbookt omeett heneedsofi tsuser s, sopl ease
letmeknowofanysuggest i
ons, r
ecommendat i
onsyoumayhavepar ticularlyas
theyappl ytoyourabi l
it
ytol earnandappl yt hemat er
ialpresent ed.
MSF.MawadzeGazah
funmaw@gmai l.com
0772431239

Page9of9
 PRI
NCI
PLESOFMARKETI
NGMODULE

Cont
ent
s
DEFI
NITI
ONOFMARKETI
NG 155
Typeofor
gani
zat
ionst
hatusemar
ket
ing. 15
Basi
c/cor
econcept
sofmar
ket
ing 15
Need,
Want
sandDemand 15
Pr
oduct
s(Goods,
Ser
vicesandI
deas)
: 15
Val
ue,
CostandSat
isf
act
ion: 15
ExchangeandTr
ansact
ion: 15
Mar
ket
ingEnvi
ronment
: 16
Compet
it
ion: 16
Suppl
yChai
n: 16
Reasonsf
orSt
udyi
ngMar
ket
ing: 16
1.I
mpor
tanceofmar
ket
ingt
oconsumer
s Er
ror
!Bookmar
knotdef
ined.
2.I
mpor
tanceofmar
ket
ingt
othef
ir
ms/
Busi
ness 16
3.I
mpor
tanceofmar
ket
ingt
othesoci
ety 16
GOALSOFMARKETI
NGSYSTEM 17
Typesofut
il
it
y: 17
Pl
aceut
il
it
y 17
Ti
meut
il
it
y 17
Possessi
onut
il
it
y 17
MARKETI
NGFUNCTI
ONS 18
(
1)Resear
chf
unct
ion 18
(
2)Buyi
ngf
unct
ion 18
(
3)Pr
oductdevel
opmentandmanagement 18
(
4)Pr
oduct
ionf
unct
ion 18
(
5)Pr
omot
ionf
unct
ion 18
(
6)St
andar
dizat
ionandgr
adi
ng 18
(
7)Pr
ici
ngf
unct
ion 19
(
8)Di
str
ibut
ionf
unct
ion: 19

Page10of10
 PRI
NCI
PLESOFMARKETI
NGMODULE
(
9)Ri
skbear
ingf
unct
ion: 19
(
10)
Financi
ngf
unct
ion: 19
(
11)Af
tersal
es-
ser
vice 19
EVOLUTI
ONOFMARKETI
NGCONCEPT 19
1.ThePr
oduct
ionConcept
. 19
2.ThePr
oductConcept 20
3.TheSel
li
ngConcept 20
4.TheMar
ket
ingConcept 20
Di
sti
nct
ionsbet
weent
heSal
esConceptandt
heMar
ket
ingConcept
: 20
5.TheSoci
etalMar
ket
ingConcept 21
STEPSI
NMARKETI
NGPROCESS 22
1.Anal
ysi
s 23
2.Mar
ket
ingPl
anni
ng 23
3.I
mpl
ement
ati
on 23
4.Cont
rol 23
MI
CROENVI
RONMENT 24
TheCompany 25
Suppl
ier
s- 25
Mar
ket
ingi
nter
medi
ari
es 25
Cust
omer 26
Compet
it
ors 26
Publ
ics 26
MACROENVI
ROMENT 26
Demogr
aphy 26
Economi
cenvi
ronment 27
Nat
uralenvi
ronment 27
Technol
ogi
calenvi
ronment 27
Pol
it
icalenvi
ronment 28
Soci
etyandcul
tur
e 28
MARKETI
NGI
NFORMATI
ONSYSTEMS 29
(
a)I
nter
nalCompanyRecor
ds 30
(
b)Mar
ket
ingI
ntel
li
gence 31
(
c)Mar
ket
ingResear
ch 31

Page11of11
 PRI
NCI
PLESOFMARKETI
NGMODULE
(
d)Mar
ket
ingDeci
sionSuppor
tSyst
ems 37
CONSUMERBUYI
NGBEHAVI
OUR 38
Bl
ackbox 39
Consumerbuyi
ngr
oles 39
St
agesoft
heConsumerBuyi
ngPr
ocess 40
St
agesoft
heConsumerBuyi
ngPr
ocess 40
1.Pr
obl
em Recogni
ti
on 40
2.I
nfor
mat
ionsear
ch 41
3.Eval
uat
ionofAl
ter
nat
ives 41
4.Pur
chasedeci
sion 41
5.Post
-Pur
chaseEval
uat
ion 41
Typesofconsumerbuyi
ngbehavi
ourar
edet
ermi
nedby: 41
Fact
orst
hatAf
fectt
heConsumerBuyi
ngDeci
sionPr
ocess 42
I
.Cul
tur
alf
act
ors 42
Psychol
ogi
calf
act
ors 45
Masl
owHi
erar
chyofNeeds. 46
Per
cept
ion-
- 46
Lear
ning- 47
At
ti
tudes- 47
FACTORSAFFECTI
NGTHEPURCHASEOFI
NDUSTRI
ALGOODS 49
BUSI
NESSBUYERBEHAVI
OUR 50
Pr
obl
em Recogni
ti
on 51
Gener
alNeedDescr
ipt
ion 51
Pr
oductSpeci
fi
cat
ion 51
Suppl
ierSear
ch 51
Pr
oposalSol
ici
tat
ion 51
Suppl
ierSel
ect
ion 52
Or
der
-Rout
ineSpeci
fi
cat
ion 52
Per
for
manceRevi
ew 52
SEGMENTATI
ON,
TARGETI
NG,
ANDPOSI
TIONI
NG 53
Reasonsf
orsegment
ingmar
ket
s 54
Cr
it
eri
aneededf
orsegment
ati
on 55
Var
iabl
est
hatcanbeusedt
osegmentmar
ket
s. 55

Page12of12
 PRI
NCI
PLESOFMARKETI
NGMODULE
Eval
uat
ingMar
ketSegment
s 56
2.Concent
rat
edTar
get
ing 57
Basesf
orBusi
nessMar
ketSegment
ati
on 59
STRATEGI
CPLANNI
NG 60
1.Def
ini
ngt
heCor
por
ateMi
ssi
on 61
2.Set
ti
ngcompanyobj
ect
ives 61
3.Anal
ysi
ngt
hecur
rentbusi
nesspor
tf
oli
o 61
TheBost
onConsul
ti
ngGr
oupAppr
oach 62
4.Pl
anni
ngmar
ket
ingandf
unct
ionalst
rat
egi
es 63
Gener
alEl
ect
ri
c(GE) 63
Ansof
fMat
ri
x 64
Cont
ent
sofaMar
ket
ingPl
an 66
PRODUCT 68
Di
ff
erencesbet
weenGoodsandSer
vices 68
Maj
ordi
sti
ngui
shi
ngchar
act
eri
sti
csofSer
vices: 68
Thr
eel
evel
sofapr
oduct
/tot
alpr
oductconcept 68
Cl
assi
fyi
ngPr
oduct
s 69
Consumerpr
oduct
s: 69
Cl
assi
fi
cat
ionsf
orBusi
nesst
oBusi
nesspr
oduct
s: 70
NewPr
oductDevel
opmentPr
ocess 71
Pr
oductLi
feCycl
e(PLC) 73
Li
mit
ati
onsofPr
oductLi
feCycl
e(PLC) 76
Pr
otect
ingaBr
and 79
PRI
CING 83
Fact
orsAf
fect
ingPr
ici
ngDeci
sions 83
I
nter
nalf
act
orsaf
fect
ingpr
ici
ng 84
Ext
ernalf
act
orsaf
fect
ingpr
ici
ng. 85
DI
STRI
BUTI
ON 91
Typesofut
il
it
ydi
str
ibut
ionof
fer
s: 91
Funct
ionsofI
nter
medi
ari
es 92
TypesofChannel
sofDi
str
ibut
ion 92
Sel
ect
ionofDi
str
ibut
ionChannel
s 92
PROMOTI
ON 95

Page13of13
 PRI
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PLESOFMARKETI
NGMODULE
Mar
ket
ingCommuni
cat
ionsPr
ocess 96
Basi
cModelofCommuni
cat
ion 96
Pr
omot
ionalMi
x 97
SERVI
CESMARKETI
NG 110
Desi
gni
ngandmanagi
ngser
vices 110
Char
act
eri
sti
csofSer
vicesandThei
rMar
ket
ingI
mpl
icat
ions 110
Mar
ket
ingst
rat
egi
esf
orser
vicef
ir
ms 111
I
NTERNATI
ONALMARKETI
NG 113
Reasonsf
orgoi
ngi
nter
nat
ional 113
Concept
sofi
nter
nat
ionalmar
ket
ing 114
Waysofent
eri
ngt
hei
nter
nat
ionalmar
ket 114
Tar
if
fs 115

Page14of14
 PRI
NCI
PLESOFMARKETI
NGMODULE

Def
ini
ti
onofMar
ket
ing
Marketi
ngistheprocessofplanni
ngandexecut
ingt
heconcepti
on,pr
ici
ng,
promot
ion,and
di
stri
buti
on(4Ps)ofideas,goodsandservi
cest
ocreat
eexchanges(wit
hcust
omers)t
hatsat
isf
y
i
ndivi
dualandorganizat
ionalobj
ecti
ves.

Mar keti
ngi sdefinedbyt heAMAas" anorganizati
onalfuncti
onandasetofpr ocessesf orcr
eati
ng,
communi cating,anddeliver
ingval
uetocust omersandf ormanagingcustomerr elati
onshipsinways
thatbenef i
ttheor gani
zationandit
sstakeholders.
"I
tgeneratesthestr
ategythatunder li
essales
techniques, businesscommuni cat
ion,andbusinessdevelopments.I
tisanintegrat edprocess
throughwhi chcompani esbuil
dstrongcustomerrelat
ionshipsandcreatevaluefort hei
rcustomers
andf orthemsel ves.

Marketingi
susedt oident
if
ythecust omer,satisfythecustomer,andkeept hecustomer.Withthe
customerasthefocusofitsacti
vit
ies,marketingmanagementi soneoft hemaj orcomponentsof
businessmanagement .Theterm marketi
ngconcepthol dsthatachievingor gani
zati
onalgoals
dependsonknowi ngtheneedsandwant soft argetmarketsanddel i
ver i
ngt hedesir
edsati
sfactons.
i
Itpr
oposesthatinordertosati
sfyit
sor ganizati
onalobjecti
ves,anor ganizationshouldant
ici
patethe
needsandwant sofconsumer sandsat i
sfythesemor eeff
ecti
velythancompet it
ors.

TheChar teredInsti
tuteofMar keti
ngdef inesmarketngas"
i t
hemanagementpr ocessresponsi
blefor
identi
fyi
ng, ant
ici
patingandsat isf
yingcust omerrequir
ementsprofi
tably.
"Adi f
ferentconceptist
he
value-basedmar ketingwhichst atesther ol
eofmar ket
ingtocontr
ibutetoincreasingsharehol
der
value.Inthiscontext,market
ingi sdefinedas"themanagementpr ocesst hatseekstomaxi mize
retur
nst oshareholdersbydevel opingr el
ati
onshi
pswi thval
uedcustomer sandcr eati
nga
compet it
iveadvantage."

Typeofor
gani
zat
ionst
hatusemar
ket
ing.
 Corporati
ons:
 Government :pr
omot i
ngt hehealthpl
an,pol
it
ici
ansdur i
ngelecti
ons
 Hospital
s:Schools:Universi
tyofDelawareMBApr ogram
 Churches:Manychur chesar eredesi
gni
ngtheirservi
ceoffer
ingtobet
termeett
heneedsof
thei
rtargetaudiencesoast okeepmember sandf i
nancialsupport
.

Basi
c/cor
econcept
sofmar
ket
ing

Need,Want
sandDemand:Market
ingbegi
nswi
thhumanneedsandwant
s.Needsar
e
feel
ingsofdepri
vat
ionofsomesat isf
act
ion.Peopleneedfood,ai
r,water
,shel
tert
osurvi
ve.Want
s
aredesir
eforsat
isf
iesofneeds.Wantswhicharebackedbythepurchasi
ngpowerbecomedemand

Pr
oduct
s(Goods,Ser
vicesandI
deas)
:Apr
oducti
sanyt
hingt
hatcanbeof
fer
edt
o
sat
isf
yaneedorwant
.Apr
oductmayconsi
stoft
hreecomponent
s-physi
calgoods,ser
vicesand
i
deas.

Val
ue,
CostandSat
isf
act
ion:
Val
uemeanst
hecust
omer
'sest
imat
eoft
hepr
oduct
'sover
all
capaci
tyt
osat
isf
yhi
s/herneeds.Costi
sthepr
icewhi
chacust
omerpayst
hepr
oduct
s.Sat
isf
act
ion

Page15of15
 PRI
NCI
PLESOFMARKETI
NGMODULE
i
sinnerf
ell
ing.

ExchangeandTr
ansact
ion:
Exchangei
sthepr
ocessofobt
aini
ngadesi
redpr
oductf
rom
someonebyof
fer
ingsomet
hingi
nret
urn.Exchangel
eadst
otr
ansact
ions.

Mar
ket
ing Envi
ronment
:Mar
ket
ing envi
ronment
s ar
e di
vided i
ntot
wo par
ts.I
nter
nal
envi
ronmentincl
udescust
omer,suppl
ier
s,managements,empl
oyees,producti
ons,etc.Ontheother
handexter
nalenvir
onmentincl
udessocio-
cult
uralenvi
ronment
,polit
ical
,technological
,economic
envi
ronment,
etc.

Compet
it
ion:
Compet
it
ioni
sther
ival
ryamongsel
ler
str
yingt
oachi
evesuchgoal
sasi
ncr
easi
ng
pr
ofi
ts,marketshare,
andsal
esvol
umebyvar
yingt
heel
ement
soft
hemar
ket
ingmi
x:pr
ice,
product
,
di
str
ibut
ion,andpromoti
on.

Suppl yChai n:Suppl

ychai nisal ongerchanneli
ncl
udesbackwar
dandf orwar
dlogist
ic.I
t
str
etchesf
rom r
awmateri
alstodel
iver
yoffini
shedgoodst
otheul
ti
mateconsumer
.Captur
inghi
gher
val
ueofsupplychai
ngi
vesfir
m competit
iveadvant
age

Reasonsf
orSt
udyi
ngMar
ket
ing:
Marketi
ngispar tofallofourli
vesandtouchesusinsomewayever yday,
soforanor
ganisati
ont o
besuccessfuleachcompanyt hatdeal
swithcustomersonadail
ybasismustbecust
omer -
drivenor
cust
omer -
obsessed.Thebestwayt oachievethi
sobject
ivei
stodevel
opasoundmarketi
ng
depart
mentwi thintheorganizat
ion.

1.
Mar
ket
ingpr
ovi
desdi
ff
erenti
nfor
mat
ionaboutt
hepr
oductandser
vicest
otheconsumer
s.
 I
thelpst
hem t
oknowandunder st
andthedif
fer
entbenef
it
sandt
echni
quesofpr
oduct
s
t
hroughadver
ti
sing,
publ
ici
tyandpubl
icrel
ati
on.

2.Market
ingcaneasi
lydi
str
ibut
ethepr
oduct
sbyappl
yingpr
operandef
fect
ivechannel
sof
di
str
ibut
ion.

Itsuggestsmanagingthetr
ansport
ati
onandware-housi
ngsyst
emswhichhelpthef
ir
mt odeli
ver
t
hepr oductf
rom ori
ginofpr
oducti
ontothesi
teofconsumpt
ion.
I
tprovidesval
uableinf
ormati
onwhichhelpst
hem tomakeeff
ect
ivepl
anforf
utur
eandrightdeci
sion.

3.Market
ingcr
eat
esempl
oymentoppor
tuni
ti
esi
nthesoci
ety.

Manypeoplemayinvol
vei
ndif
fer
entact
ivi
ti
esofmar
ket
ingsuchaspr
oduct
ion,
di
str
ibut
ion,
promot
ionandsel
li
ng.

Mar ketinghel
psinef fi
cientallocati
onofr esourcesbyimprovingthelivi
ngstandar
dofthe
customer sinthesociety.
Itprovidesgoodsandser vicesaccor di
ngt othedemandandpr efer
encesofthecustomerswhi
ch
thenpr ovi
dessati
sfactiontot hecust omers.
Mar ketinghel
pstout il
izethedi ff
erentresourcessuchasnat ural
,fi
nancial
,physi
calandhuman
resourcesinthesocietywhi chhel pstheeconomi cdevel
opmentoft hecountr
y.

Page16of16
 PRI
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PLESOFMARKETI
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GOALSOFMARKETI
NGSYSTEM

I
ncr
easeConsumpt
ion
Manybusinessi
ndi
vidualsbel
ievet
hatmar ket
ing’
sjobshouldbetosti
mulat
emaxi mum possi
ble
ut
il
izat
ion,
whichwi
llcreatemaximum possibl
etechnol
ogy,prof
essi
on,andvar
iet
y.

I
ncr
easeConsumerSat
isf
act
ion
Thegoalofthemar keti
ngsyst
em i
stoincr
easecl
ientsuppor
t,notsi
mplyt
hequali
tyofut
il
izat
ion.
Buyinganewcarorhavi ngmoreoutf
it
snumberonlyifthi
spl
aysar ol
eint
hecl
ient'
sful
fi
lment.
Unfort
unat
ely,cl
ientsuppor
tiscompl
icat
edtoassess.

I
ncr
easeChoi
ce
Somepr omotersbeli
evethattheobj
ect
iveofasystem shouldbetoi ncreaseproductslargevari
ety
andcli
entchoice.Ihi
ssystem wouldal
lowcli
entstofi
ndpr oduct
st hatpleasetheirchoicesexactl
y.
Customerswouldbeabl etoreal
izet
hei
rwayoflifeful
lyand,ther
efore,couldincreasetheirover
all
ful
fi
lment.

I
mpr
oveLi
feQual
it
y
Manypeopl ebel
ievethatthepurposeofamar keti
ngsystem shoul
dbetoboostt
hewayofli
fe.Thi
s
containsnotonl
yt hef
antasti
c,quant
it
y,avai
lableness,
andcostofitems,
butal
sothef
ant
asticoft
he
realandpubli
ccircumstances.

Typesofut
il
it
y:
Ut
il
it
yist
hesati
sfact
ion,
val
ue,
orusef
ulnessauserr
ecei
vesf
rom agoodoraser
vice.Theyar
efour
ypesofu
t ti
li
ti
es

For
m ut
il
it
yinvol
vest
hei
deat
hatt
hepr
oducti
smadeavai
labl
etot
heconsumeri
nsomef
orm
thati
smor eusefult
hananycommodi t
iesthatar
eusedtocreatei
t.Acustomerbuysachair,
for
example,rat
herthanthewoodandot hercomponentsusedtocreatet
hechair
.Thus,thecust
omer
benefi
tsfr
om thespecial
izat
iont
hatall
owst hemanufact
urertomoreeff
ici
ent
lycreat
eachairthan
thecustomercoulddohim orhersel
f.

Placeut il
it
yrefer
stotheideathataproductmadeavail
abl
etothecust
omeratapref
err
ed
l
ocationi
swort
hmor ethanoneattheplaceofmanufact
ure.I
tismuchmoreconveni
entf
orthe
customert
obeabletobuyfooditemsinasupermarketi
nhisorhernei
ghbour
hoodthani
tistopi
ck
upthesefr
om t
hefarmer.
Ti meut il
ityinvol
vest
heideaofhavi
ngthepr oductmadeavail
ablewhenneededbythecust
omer
.
Thecustomermaybuyachickenafewdaysbef oreChri
stmaswithouthavi
ngt
opl ant
ohaveit
avai
labl
e.I
nter
mediari
est
akecareofthel
ogist
icstohavet hechi
ckenswhencustomersdemand

Page17of17
 PRI
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PLESOFMARKETI
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t
hem.
Possessionut i
li
tyinvolvestheideathattheconsumercangot oonestor
eandobt ai
nalarge
assor
tmentofgoodsfrom diff
erentmanufacturer
sduringoneshoppingoccasion.Supermar
kets
combinef
oodandotherhouseholdit
emsf r
om anumberofdiff
erentsuppl
ier
sinoneplace

MARKETI
NGFUNCTI
ONS

Toachievesuccessinyourmarketi
ngef fortyouneedt oknowtheacti
vit
iesyouneedtoperformin
achievi
ngyoursetmarketi
ngobj
ectives,theseacti
vit
iesisref
err
edtoasthefunct
ionofmarketi
ng.I
t
ref
erstothosespeciali
zedacti
vit
iest hatamar ketermustper for
minor dertoachieveyourset
marketi
ngobject
ives.

(
1)Resear
chf
unct
ion:t
her
esear
chf
unct
ionofmar
ket
ingi
sthatf
unct
ionofmar
ket
ingt
hat
enablesyout ogenerateadequatei nf
ormat
ionr egardi
ngyourparticularmarketoftarget
.Youmust
carr
youtadequat er esearchtoi dent
ifyt
hesi ze,behavi
our,cul
tur e,bel
ieve,gendersetc.ofyour
tar
getmar ketsegment,theirneedsandwant ,andt hendevel
opeffectiveproductthatcanmeetand
sati
sfythesemarketneedsandwant .

(
2)Buyi
ngf
unct
ion:t
hef
unct
ionofbuyi
ngi
sper
for
medi
nor
dert
oacqui
requal
it
ymat
eri
alsf
or
product
ion.Whenyoudesignagoodpr oductconcept,youshouldalsoensur eyou'
rebuyingthe
essenti
almateri
alsforthe pr
oduct.Thisfuncti
on is car
ri
ed outbyt he purchase and suppl
y
depart
ment,butyourspecifi
cati
onsofmat eri
alsgoesal ong wayi n assi
sti
ng t
hepur chasi
ng
depart
menttoacquir
ethenecessarymat
erial
sneededforproduct
ion.

(
3)Pr
oductdevel :
opmentand managementpr
oductdevel
opmenti
s an essent
ial
functi
onofmarket
ingsi
nceitwast heduti
esofthemar ket
ingdepar
tmenttoi
dentif
ywhatthemar ket
needorwantandt hendesi
gneffecti
veproductbasedontheidenti
fi
edneedandwantofthemar ket.
Productdevel
opmentpassesthroughsomebasi cstagescarri
edoutbythemar ket
erst
odevel opa
target
ed marketspeci
fi
ed product.And you can also manage yourproductby evaluat
ing i t
perfor
manceandchangingthem tofi
tthecurr
entmarkettr
end.

(
4)Pr
oduct
ionf
unct
ion:
pr
oduct
ioni
sthef
unct
ionper
for
msbyt
hepr
oduct
iondepar
tment
.
Though,thi
sisinter
rel
atedtothedepar
tmentofmarketi
ng,becauseyourpr
oductmustpossessthe
essent
ialchar
acteri
sti
csthatcanmeett het
argetmarketneedsandwantasidenti
fi
edduringyour

Page18of18
 PRI
NCI
PLESOFMARKETI
NGMODULE

mar
ketr
esear
ch,
suchchar
act
eri
sti
csasi
nyourpr
oductTest
,For
m,Packagi
nget
c.

(
5)Pr
omot
ionf
unct
ion:
pr
omot
ioni
soneoft
hecor
efunct
ionsofmar
ket
ingsi
nceyourf
ini
sh
productmustnotremaininthepl aceofpr oducti
on,hence,youasamar ketermustdesi gneffecti
ve
communi cat
ionstr
ategi
est oinf
or mingtheavai l
abil
it
yofyourpr oducttoyourt argetmarket.You
mustbeabl etodesi
gneffecti
vest r
ategi
est ocommuni cateyourpr oductavailabil
it
yandf eaturesto
yourtar
getmarket,
suchstrategi
esasi n;adverti
sement,personalsell
ing,publi
cr el
ationetc.

(
6)St
andar
dizat
ionandgr ng:
adi thef
unct
ionofst
andar
dizat
ioni
stoest
abl
ishspeci
fi
ed
characteri
sti
cst hatyourproductmustconform to,suchst andardasinhavingaspecif
yt est
,
ingredi
entet c.Thatmakesyourpr oductbr
andsouni que.Gr adi
ngcomesi nwhenyousor tand
classif
yyourpr oducti
ntodef
erentsi
zesorquant
it
iesfordi
ff
erentmarketsegmentwhi
lemai
ntaining
yourpr oductstandar
d.

(
7)Pr
ici
ngf
unct
ion:
youper
for
mthef
unct
ionofpr
ici
ngonyourpr
oductof
fer
ingsbydesi
gni
ng
eff
ecti
veprici
ngsystemsbaseonyourpr
oductstageandper f
ormanceint
hepr oductl
if
ecycl
e.Pr
ice
istheactualvalueconsumersper
cei
veonyourpr oduct,soyouasamar ketershouldensur
ethat
yourvalueofyourproducti
snott
oohi
ghortoolowt othatofyourcost
umers.

(
8)Di
str
ibut
ionf
unct
ion:
thef
unct
ionofdi
str
ibut
ioni
stoensur
ethatyourpr
oducti
seasi
ly
andef fecti
velymovedf rom t
hepointofpr oductiontothetargetmar ket
,thekindoftranspor
tat
ion
system toempl oye.g.Road,r
ail
,waterorair,andensuresthattheproductcanbeeasil
yaccessedby
customer s.Youasamar ket
ershoul
dal sodesi gnthekindofmi ddl
ement oengageinthechannelof
dist
ributi
on, t
heiri
ncenti
vesandmot i
vationsetc.

(
9)Ri
skbear
ingf
unct
ion:
the pr
ocess ofmovi
ng a f
ini
shed pr
oductf
rom t
he poi
ntof
product
iontothepointofconsumpti
onsi scharacter
izedwit
hlotsofri
sks,suchri
sksasinproduct
damaging,pil
fer
ageanddef aul
tsetc.Soyoumustpr ovi
deeffect
ivepackagi
ngsystem t
opr ot
ect
yourproduct,goodwar ehouseforthest orageofyourpr oductunti
ltheyar eneeded,ef
fect
ive
tr
ansportat
ionsyst
em tospeedi
lydel
iveryourproductonti
me.

(
10)
Financi
ngf
unct
ion:
fi
nanci
ngdeal
swi
tht
hepar
tofmar
ket
ingt
opr
ovi
dingi
ncomesf
or
yourbusi
ness.I
tref
erst
ohow youcanrai
secapi
taltostar
toperati
onandr emaini
nbusiness.I
t
ref
erst
oyourmodesofpaymentf
ort
hegoodsandser
vicestr
ansf
erredtoyourcost
umers.

(
11)Af
tersal
es-
ser
vice:i
namor
ecompl
exandt
echni
calpr
oduct
,youasamar
ket
ershoul
d
makepr ovisi
oni nordert
oassistyourcust omersaf tertheyhavepur chasedyourproduct.I
nt er
msof
machi nesorheavyequi pmentpr oductthatrequi resinstall
ati
onormai nt
enance,mostmar keti
ng
organizationr enderssuchservicesl i
keinstal
li
ngt hemachi neormai nt
aini
ngitforst
ipul
atedper i
ods
ont i
mef orfreeorbyal i
tt
leservicecharge.Aftersal esservicesisaneffect
ivemarketi
ngstrategyto
buil
dingal ongl asti
ngcustomerr el
ati
onship,stayingaheadofyourcompet i
tor
swhilemaki ngprofit
foryouror gani zati
on.

Adequateunderst
andingofthesefunct
ionsenablesyouasamar ket
ert
oknowwhatisrequi
redt
obe
donetohavinganef f
ect
ivetransf
erofownershipbetweenyouandyourcost
umers,creat
ingabi
g
pi
ctureofyourbusiness,
whilealsomakingprof
itforyouror
gani
zati
on.

Page19of19
 PRI
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Evol
uti
onofMar
ket
ingConcept
Fi
veor
ient
ati
ons(phil
osophi
calconcept
stot
hemar
ket
placehavegui
dedandcont
inuet
ogui
de
or
gani
zati
onalact
ivi
ti
es:

1. TheProducti
onConcept
2. TheProductConcept
3. TheSell
ingConcept
4. TheMarketi
ngConcept
5. TheSociet
alMarketi
ngConcept

1.ThePr
oduct
ionConcept
.Thi
sconcepti
stheol
destoft
heconcept
sinbusi
ness.I
thol
ds
thatconsumer swil
lpref
erproductsthatarewi delyavail
ableandinexpensi
ve.Manager sfocusi
ng
ont hisconceptconcentrat
eonachi evi
nghi ghpr oducti
onef f
ici
ency,l
owcost s,
andmass
distri
bution.Theyassumet hatconsumer sar eprimaril
yinter
estedinproductavail
abil
it
yandl ow
prices.Thi sori
entat
ionmakessensewhenconsumer sar emoreinter
estedinobtaini
ngt heproduct
thani nitsfeat
uresandwhendemandofapr oductisgreaterthansupply.I
tisalsousefulconcept
wheni ncreasi
ngproducti
onraiseseconomi esofscal eetc.

2.ThePr
oductConcept
.Thi
sor
ient
ati
onhol
dst
hatconsumer
swi
llf
avourt
hosepr
oduct
s
thatoff
erthemostquali
ty,performance,orinnovat
ivef eatur
es.Manager sfocusingonthi
sconcept
concentrat
eonmaki ngsuperiorproductsandi mprovingthem overtime.Theyassumet hatbuyer
s
admirewell-madeproductsandcanappr ai
sequalityandper formance.However ,t
hesemanagers
aresomet i
mescaughtupi nal oveaffai
rwit
ht hei
rpr oductanddonotr eali
zewhatt hemarket
needs.Managementmi ghtcommi tthe“better
-mouset rap”fal
lacy,
beli
evingthatabett
ermousetrap
willl
eadpeopletobeatapat htoitsdoor.

3.TheSel lingConcept .Thisi

sanothercommonbusi nessori
entati
on.Itholdsthat
consumer sandbusi nesses, i
flef
talone,wil
lordinar i
lynotbuyenoughoft hesellingcompany’ s
products.Theor ganizationmust ,t
heref
ore,under takeanaggr essi
veselli
ngandpr omot i
on
eff
ort.Thisconceptassumest hatconsumerst ypicallyshowsbuyinginerti
aorr esi
stanceandmust
becoaxedi ntobuying.I talsoassumest hatthecompanyhasawhol ebatteryofeffect
ivesell
ingand
promotionaltoolstostimulatemor ebuying.Mostf irmspr act
icethesell
ingconceptwhent heyhave
overcapacit
y.Theirai mi stosellwhattheymaker atherthanmakewhatt hemar ketwant s.Sell
ing
conceptisusefulforselli
ngunsoughtgoods, i.
e.,encyclopaedias,f
uneralplot
s.

4.TheMar
ket
ingConcept
.Mar
ket
ingconcepti
sabusi
nessphi
losophyt
hatchal
lengest
he
abovethreebusi nessor i
entati
ons.I t
scentralt
enetscryst
all
izedi
nthe1950s.I thol
dsthatthekey
toachievi
ngitsor ganizati
onalgoals( goal
softheselli
ngcompany)consi stsofthecompanybei ng
mor eeff
ecti
vet hancompet itor
sincr eati
ng,del
iveri
ng,andcommuni cati
ngcust omervaluetoits
select
edtargetcust omers.Themar keti
ngconceptrestsonfourpi
ll
ars:t ar
getmar ket
,customer
needs,int
egratedmar ketingandpr ofit
abil
it
y.Supplyforaproductisgreaterthandemand, creat
ing
i
ntensecompet i
tionamongsuppl i
ers.Companyf ir
stdeter
mineswhatt heconsumerwant s,t
hen
produceswhatt heconsumerwant s,andthensellstheconsumerwhati twants.

Di
sti
nct
ionsbet
weent
heSal
esConceptandt
heMar
ket
ingConcept
:

Page20of20
 PRI
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5.TheSoci etalMar ket ingConcept .Thisconcepthol dsthatt heorganizati

on’staskisto
determinetheneeds, want s,andi nter
est
softargetmar ketsandt odeliverthedesiredsatisfacti
ons
mor eeffect
ivelyandeffi
cientlythancompet i
tors(thi
si stheor igi
nalMar ketingConcept )
.Addi ti
onal
ly,
i
thol dsthatt hi
sallmustbedonei nawaythatpr eservesorenhancest heconsumer ’
sandt he
society’
swel l-bei
ng.Thisor ientati
onaroseassomequest ionedwhet hert heMar keti
ngConcepti s
anappr opri
at ephil
osophyi nanageofenvi ronment aldet eri
orati
on, r
esour ceshortages,explosi
ve
popul at
iongr owth,wor
ldhungerandpover ty,andnegl ectedsoci alservices.
SocietalMar keti
ngConceptf ocusesonot herstakeholder s,aswel lasthebusi nessandi ts
customer s.

Companypr
ofi
ts

Cust
omerwant
s

Soci
ety'
sint
erest
s

Thedif
fer
encebet
weenshortt
erm consumerswantsandlongt
erm consumerwel
far
e.
Anexampleofacompanyadopti
ngthesociet
alconcept

MARKETI
NGPROCESS
TheMar ket
ingProcessofacompanyt ypi
call
yinvolvesi
dent
if
yingtheviabl
eandpotent
ialmar keti
ng
opport
uniti
esintheenvir
onment,devel
opingstrat
egiest
oeff
ectiveut
ili
setheopport
uni
ties,evolvi
ng
sui
tabl
emar keti
ngstrat
egies,
andsupervi
singtheimplement
ati
onoft hesemarket
ingef
forts.

Mar
ket
ingpr
ocessi
nvol
veswaysthatval
uecanbecreat
edforthecustomer
stosati
sfyt
hei
rneeds.
Mar
ket
ingpr
ocessi
sacontinualser
iesofact
ionsandreact
ionsbetweenthecust
omersandthe

Page21of21
 PRI
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PLESOFMARKETI
NGMODULE
organisati
onswhichar emaki ngattempttocreateval
ueforandsat i
sfyneedsofcust omers.In
mar keti
ngprocessthesit
uationisanal
ysedtoident
if
yoppor
tuni
ti
es,thestrat
egyisf
ormulatedfora
valueproposit
ion,
tact
icaldecisi
onsaret
aken,plani
simpl
emented,andresult
saremonit
ored.

St
epsi
nMar
ket
ingPr
ocess
Fol
lowi
ngaret
hest
epsi
nvol
vedi
ntheMar
ket
ingPr
ocess:
-
 Anal
ysi
s
 Mar
ket
ingPl
anni
ng
 Mar
ket
ingI
mpl
ement
ati
on
 Mar
ket
ingCont
rol

1.Anal
ysi
s

Analysisofsi t
uati
on in which t
heor gani
zat
ion fi
ndsitsel
fservesast hebasi sforidenti
fyi
ng
opportunit
iestosat
isf
yunfulfi
ll
edcustomerneeds.Sit
uati
onalandenvi
ronmentalanal
ysi
sisdonet o
i
dentifythemar ket
ingoppor t
unit
ies,t
ounderstandfir
msowncapabi li
ti
es,andt ounderstandthe
envi
ronmenti nwhichthefir
mi soperat
ing.

2.Mar
ket
ingPl
anni
ng

Aft
eri dent
ifyi
ngthemar keti
ngoppor t
unit
iesast r
ategi
cplani sdevel
opedt opursuet
hei denti
fi
ed
opportunit
ies.
Atthisstepdetai
ledtact
icaldeci
sionsaremadef ort
hecontrol
labl
eparametersofthemarketi
ngmi x.
I
ti ncludes - productdevelopmentdeci sions,productpri
cing deci
sions,productdistr
ibuti
on
decisi
ons,andproductpr omoti
onaldecisi
ons.

Page22of22
 PRI
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PLESOFMARKETI
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3.I
mpl
ement
ati
on
Themar ket
ingpl
anisimplemented.Theheartoftheimpl
ement at
ionofamar keti
ngplanisthe
executi
on,t
heactual"
doi
ng"ofthepl annedmarketi
ngacti
vit
ies.I
nit
iat
ivesdon'tgetcomplet
edby
stat
ingthem onpaper
--t
heyrequireacti
on,managementandf oll
owup.

Successf
ulmar
ket
ingi
mpl
ement
ati
onr
equi
res:

 Ef
fect
iveandef
fi
cientcoor
dinat
ionofact
ivi
ti
es-
-who'
sdoi
ngwhatandbywhen

 At
tent
iont
odet
ail
.

 St
ayi
ngont
opof"
who'
sdoi
ngwhat
.Neverassumesomeoneel
sei
sdoi
ngsomet
hing

 El
imi
nat
ionofpr
ocr
ast
inat
ionandnowai
ti
ngshoul
dbeal
lowed.

4.Cont
rol
Tomaxi mizetheret urnonamar ket
ingplan,thereneedtobecontrolsi
npl acet omonitortheplan's
progr
ess.Asamar ketingplanmovesal ong,thecontrol
sareconstantl
yanal yzedt odeter
minehow
theplan'
sact ualper f
ormancecompar est othepr oj
ecti
ons.Anychangest hatneedt obemadear e
donebasedont heanal ysi
sofmar ket
ingcont r
ols.Underst
andi
ngwhatt hecont r
olsinamar keti
ng
planarewillhel
pyoudevel opeff
ecti
veperformancemeasur ementindi
cator
s.
Theresult
sofmar ketingeffor
tsaremoni tor
edt oadjustthemarketi
ngmi xaccor dingtothemar ket
changes.

MARKETI
NGENVI
ROMENT

Page23of23
 PRI
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Themarketenvi
ronmentisamar keti
ngterm andref
erst
ofact
orsandf
orcest
hataf
fectaf
ir
m’s
abi
li
tyt
obuildandmaintainsuccessfulr
elat
ionshi
pswit
hcustomer
s.

Mi
croenvi
ronment/i
nter
nalenvi
ronment

Themi croenvironmentrefer
stothebusi nessitsel
fandtoallthechal
lengesthatcomef rom i
nsi
de
thebusiness.Businessescanthereforetakecont r
oloveral
lthechall
engesandinfluencesinthe
microenvironment .Themicroenvir
onmentr ef
erstothefor
cesthatareclosetothecompanyand
aff
ecti
t sabili
tytoserveit
scustomer s.I
tincludesthecompanyi t
sel
f,i
tssuppli
ers,marketi
ng
i
ntermediaries,customermarketsandpubl ic.

TheCompany-ref
erst
othei
nter
nalenvi
ronmentoft
hecompanywhi
chi
ncl
udes
alldepartment s,suchasmanagement ,f
inance, researchand
development ,
pur chasing,operationsandaccount i
ng..Al
ldepar t
mentswi t
hinanor ganizationhave
thepotentialtoposi tivelyornegat i
vel
yimpactcust omersat i
sfacti
on.Asar esult
,amar keti
ng
departmentwor kscl oselywi t
hthef i
nance, purchasing,researchanddevelopment ,and
manuf acturingdepar tment s,amongot hers, t
oident i
fywayst hateachdepar t
mentcancont r i
but
eto
theprovisionofexcept ionalcustomervalue, whichl eadstosuper i
orcustomersat i
sfaction.For
exampl e,researchanddevel opmenthavei nputast othefeaturesaproductcanper form and
account i
ngappr ovest hefinanci
alsideofmar ketingplansandbudgeti ncust omerdi ssati
sfacti
on.

Suppl
ier
s-Suppl
ier
sar
ethef
ir
msandi
ndi
vidual
sthatpr
ovi
det
her
esour
cesneededbyt
he
companyanditscompeti
torstopr
oducegoodsandser vi
ces.Suppli
ersprovidebusi
nesseswit
hthe
mater
ial
stheyneedtocarryoutt
heirbusi
nessact
ivi
ti
es.Asupplier
'sbehaviourwil
ldi
rectl
yimpact

Page24of24
 PRI
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thebusinessitsupplies.Forexampl eifasupplierprovidesapoorservicethiscouldincrease
ti
mescalesorpr oductqual i
ty.Anincreaseinrawmat erialpri
ceswil
laf
fectanor ganisat
ion's
Marketi
ngMi xstrategyandmayevenf orcepri
cei ncreases.Closesuppli
errelat
ionshipsarean
eff
ecti
vewayt or emaincompet i
ti
veandsecur equal i
typr oducts.Marketi
ngmanager smustwat ch
supplyavail
abil
ityandot hertrendsdealingwithsuppl i
er stoensur
ethatproductwi l
lbedeliver
edto
customersinthet i
mef ramer equir
edi nordertomai ntainast r
ongcustomerr el
ati
onship.

Mar
ket
ingi
nter
medi
ari
esref
erst
oresel
ler
s,physi
caldi
str
ibut
ionf
ir
ms,
mar
ket
ingser
vices
agencies, andf i
nanci alintermediari
es.Thesear ethepeoplethathelpt hecompanypr omote,sel
l,
anddi st
ribut eitspr oduct st of
inalbuyers.Resell
ersarethosethathol dandsel lthecompany’ s
product.Physi caldistributionfi
rmsar eplacessuchaswar ehousest hatstoreandt ransportthe
company’ spr oductf rom itsorigintoit
sdest i
nation.Marketi
ngservicesagenci esarecompani esthat
off
erser vi
cessuchasconduct i
ngmar ketingresearch,adver
ti
sing,andconsul ting.Financi
al
i
ntermedi ariesar einstit
utionssuchasbanks, creditcompaniesandi nsurancecompani es.The
mar keti
ngst rat egyi sdef i
nedinpar tonthedegr eetowhi cheachintermedi ar
ycanpot enti
all
y
i
ncreaseordecr easecust omersat isf
action.

Cust
omer
-Asal
lbusi
nessesneedcust
omer
s,t
heyshoul
dbeCent
red(
Ori
ent
ated)ar
ound
customers.Thefi
rm'smarket
ingplanshoul
daimt oatt
ractandr
etaincust
omerst
hroughproduct
s
thatmeetsthei
r"wantsandneeds"andexcel
lentcust
omerservi
ce.TheCompany’
scustomerscan
i
ncludethefoll
owing:

 consumermar kets:indivi
dualspurchasingforprivatef
inalconsumpti
on
 businessmarkets:or gani
sati
onspur chasingforuseorassistanti
nfurtherpr
ocessi
ng
 resel
lermarket
:pur chasetor esel
latapr ofi
t
 governmentmar kets:agenciesthatpurchaset ooproducepublicser
vices
 Inter
nati
onalmar kets:over
seasbuyer s,i
ncludingalloftheabove.

Compet i
tor
s-i ncl
udecompanieswit
hsimil
aroffer
ingsf
orgoodsandservi
ces.Toremai
n
competi
ti
veacompanymustconsiderwhothei
rbiggestcompeti
tor
sbyconsi
deri
ngitsownsizeand
posi
ti
oninthei
ndustr
yandthencompanyshoulddevelopastrat
egi
cadvant
ageovertheir
competi
tor
s.

Publ
ics-i
sanygr
oupt
hathasani
nter
esti
nori
mpactont
heor
gani
zat
ion’
sabi
li
tyt
omeeti
ts
goal
s.Forexample,
financi
alpubl
icscanhi
nderacompany’
sabi
li
tyt
oobt
ainf
undsaf
fect
ingt
he
l
evelofcr
editacompanyhas.
 Medi
apubl
icsi
ncl
udenewspapersandmagazinesthatcanpubl
ishart
iclesofint
erest
r
egar
dingt
hecompanyandedit
orial
sthatmayinf
luencecust
omers’opinions.
 Governmentpubl
icscanaf
fectt
hecompanybypassi
ngl
egi
slat
ionandl
awst
hatput
rest
ri
cti
onsonthecompany’sacti
ons.
 Cit
izen-
acti
onpubl
icsi
ncl
udeenvi
ronment
algr
oupsandmi nor
it
ygr
oupsandcanquest
ion
theacti
onsofacompanyandputt
hem i
nthepubl
icspot
li
ght.
 Localpubl
icsar
eneighbourhoodandcommunityorganizat
ionsandwillal
soquesti
ona
company’simpactonthelocalar
eaandthel
evelofresponsibi
li
tyoft
heiract
ions.
 Thegeneralpubli
ccanaff
ectthecompanyasanychangeinthei
rat
ti
tude,
whetherposi
ti
ve
ornegat
ive,cancausesalest
ogoupordownbecauset hegener
alpubl
ici
soft
ent he
company’scustomerbase.

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MACROENVI
ROMENT
Themacro-envi
ronmentr ef
erstoal
lfor
cest
hatar
epar tofthel
argersociet
yandaffectt
hemicro-
envi
ronment.I
tincludesconcept
ssuchasdemography,economy,naturalf
orces,
technol
ogy,
poli
ti
cs,
andculture.
Factor
saffecti
ngorgani
zati
oni
nMacroenvir
onmentareknownasPESTEL,
thati
s:Pol
it
ical
,
Economical,Soci
al,
Technol
ogi
cal
,Envi
ronment
alandLegal.

Demogr
aphyref
erst
ost
udyi
nghumanpopul
ati
onsi
nter
msofsi
ze,
densi
ty,
locat
ion,
age,
gender,race,andoccupat i
on.Demogr aphyisaveryimpor t
antfact
ortost udyf ormarket ersand
helpstodividethepopul at
ionint
omar ketsegmentsandt argetmarkets.Eachcl assif
icat i
onhas
dif
ferentcharacter
isti
csandcausest heyfi
ndimportant.Thiscanbebenef i
cialtoamar keterast
hey
candeci dewhot heirproductwouldbenefi
tmostandt ail
ortheirmarketi
ngpl ant oattractthat
segment .Demogr aphycoversmanyaspect sthatareimportanttomar keter
si ncludi
ngf amil
y
dynami cs,geographicshif
ts,wor
kf or
cechanges,andlevelsofdiversi
tyinanygi venar ea.

Economi
cenvi
ronment
.Thi
sref
erst
othepur
chasi
ngpowerofpot
ent
ialcust
omer
sandt
he
waysi
nwhichpeoplespendthei
rmoney.Peopl
ealonedonotmakeamar
ket
.Theymusthave
moneyandwil
li
ngnesstospenditf
oranexchangetooccur
.

Fact
orst
hatcanaf
fectt
heavai
labi
li
tyandwi
ll
ingnesst
ospendmoneyi
ncl
ude:

 changesi ndisposabl
eincome
 Int
erestrates
 Consumerconf i
dence
 Employment
 Inf
lati
on
 Businesscycle

Changesi
nDi
sposabl
eIncome-Theaver
ageconsumer
'spur
chasi
ngpoweri
sdi
rect
lyr
elat
ed
t
odisposablei
ncome.Economi cfactor
sthatincreaseordecreasedi
sposableincomer esulti
neit
her
aposit
iveoranegat i
veeffectonmanypur chasingdecisi
ons.Forexample,
ani ncreaseinthetaxrate
r
educesdisposableincome, thusreducingpur chasi
ngpowerandl i
miti
ngnonessent i
alpurchasesfor
manyconsumer s.Thisfactorwi l
ldir
ectl
yaffectthemarketi
ngstrat
egyofbusinessesthatspecial
ize
i
ndiscret
ionar
ypr oductsorser vi
ces.
I
nter
estr
ates-Ani
nter
estr
atei
stheamountt
hatal
enderchar
gesani
ndi
vidualorbusi
nesst
o
borr
owmoney.Somesmal lbusinessesr el
yonloansfr
om banksorot herf
inanci
alinst
it
uti
onsasa
sourceoff
inanci
ng.Higheri
nter
estr atesresul
tinhi
ghert
otalbusinessexpensesforcompani
eswit
h
debt.Hi
ghinter
estrat
escanalsor educeconsumerspending,becausehighratesmakei tmor
e
expensi
veforconsumerstotakeoutl oanstobuythi
ngsli
kecarsandhomes.

ConsumerConf
idence-Consumerconf
idencei
saneconomi
cindi
cat
ort
hatmeasur
esover
all
consumeropt i
mi sm aboutt
hestateoftheeconomy.Conf i
dentconsumerstendtobemorewi l
li
ngt
o
spendmoneyt hanconsumer swithl
owconf i
dence,whichmeansbusinessesaremoreli
kelyto
prosperwhenconsumerconf i
denceishigh.Per
iodsofhighconsumerconfidencecanpr
esent
opportunit
iesf
ornewbusi nessestoenterthemarket,
whileperi
odoflowconf i
dencemayforce
compani estocutcoststomai nt
ainprof
it
s.

Empl
oyment
-Theeconomyt
endst
ofol
lowabusi
nesscycl
eofeconomi
cboomsf
oll
owedby
peri
odsofst agnat
ionordecli
ne.Duri
ngboom periods,j
obstendtobepl ent
if
ul,
sincecompanies
needwor kerstokeepupwi t
hdemand.Whenunempl oymentislow,consumerspendingtendstobe
hi
ghbecausemostpeopl ehaveincomet ospend,
whi chi
sgoodf orbusi
nessesandhelpsdr i
ve
growth.Whenunempl oymentishigh,consumerspendingtendstobelowbecauseunempl oyed
peopledon'thaveexcessincometospend.

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I
nfl
ati
on-
Inf
lat
ioni
sther
ateatwhi
chpr
icesi
ntheeconomyar
eincr
easi
ng.I
nfl
ati
oncauses
i
ncr easesi
nbusinessexpensessuchasr ent
,util
it
ies,andcostofmat er
ialsusedinpr
oducti
on.
Risingcost
sarelikel
ytofor
cebusinessestoraisepr i
cesontheirownpr oductsandser
vicest
okeep
pacewi thi
nfl
ati
onandmai ntai
nprof
its.I
nfl
ati
oncanr educethepurchasingpowerofconsumers
unlessemployersincr
easewagesbasedont hel evelofinf
lat
ion.

Nat
uralenvi
ronmenti
ncl
udest
henat
uralr
esour
cest
hatacompanyusesasi
nput
sthataf
fect
thei
rmarketi
ngact i
vit
ies.Theconcerni
nt hi
sareaistheincreasedpoll
uti
on,
shortagesofraw
materi
alsandincreasedgovernmentalinter
vent
ion.Asrawmat er
ial
sbecomeincreasi
nglyscar
cer
,
theabi
li
tytocreateacompany’ sproductgetsmuchhar der.Poll
uti
oncannegati
velyaff
ecta
company’sreputati
oni ft
heyareknownf ordamagingtheenvironment.
.

Technol
ogi
calenvi
ronment-i
soneoft
hef
ast
estchangi
ngf
act
orsi
nthemacr
o-
envir
onment.Technologicaladvanceshaveasi gni
fi
cantimpactonthetypesandqualit
yofpr oducts
avail
ableaswellasthewayt heyar eproduced.Asmarketsdevel
opitcancr eat
enewmar ketsand
newusesf orpr
oducts.Italsorequiresacompanyt ostayaheadofother
sandupdat etheirown
technol
ogyasitbecomesout dated.Theymuststayinf
ormedoft r
endssot heycanbepartoft he
nextbigthi
ng,r
atherthanbecomi ngoutdat
edandsuf f
eri
ngtheconsequencesf i
nanci
all
y.e.
gNoki a

Maj
ort
echnol
ogi
calbr
eakt
hroughscar
ryat
hreef
oldmar
ket
ingi
mpactwhi
char
easf
oll
ows:

 t
heystar
tenti
relynewindustr
ies
 t
heyradi
call
yalterordestr
uctexi
sti
ngindust
ri
es
 t
heysti
muliothermarketsandindust
ri
esnotdir
ect
lyr
elat
edt
othenewt
echnol
ogy

Pol
it
icalenvi
ronmenti
ncl
udesal
llaws,
gover
nmentagenci
es,
andgr
oupst
hati
nfl
uenceor
l
imitotherorganizati
onsandi ndi
vidualswi t
hinasociety.Itisi
mpor tantf
ormarketer
st obeawar eof
theserestri
cti
onsast heycanbecompl ex.Somepr oductsar eregulatedbybothstat
elaws.Ther e
areevenr est
ri
cti
onsf orsomepr oductsast owhot hetargetmar ketmaybe, f
orexampl e,ci
garett
es
shouldnotbemar ket
edt oyoungerchildren.Aslawsandr egul
ationschangeoften,t
hisisaver y
i
mpor tantaspectforamar ket
ertomoni t
or.Governmenti nfl
uenceisgenerall
yintheform ofthe
fol
lowing:

 fi
scalpol
icy( t
axati
on)
 soci
alpolicy(anti
-poll
uti
onlaws)
 speci
ficmar ket
inglegi
slat
ion(Tr
adePr
act
icesAct
)

Soci
etyandcul
tur
e
Culturalenvi
ronment ,whi chconsi stsofinsti
tuti
onsandbasi cval uesandbelief
sofagr oupof
peopl e.Thevaluescanal sobef urthercategori
zedintocorebel i
efs, whi
chpassedonf r
om
gener ati
ontogener at
ionandver ydi ff
icul
ttochange, andsecondar ybel
ief
s,whichtendtobe
easiert oi
nfl
uence.Asamar ket
er,itisimportanttoknowt hedi f
ferencebetweenthetwoand
tofocusyourmar keti
ngcampai gnt orefl
ectthevaluesofat argetaudience.Whendealing
wit
ht hemarketingenvironmenti tisimpor t
antforacompanyt obecomepr oact
ive.Bydoing
so,theycancr eatetheki ndofenvi ronmentt hattheywi l
lprosperinandcanbecomemor e
eff
icientbymar keti
ngi nar easwi ththegr eat
estcustomerpot ential.

Thef
ocusoft
hecur
rentsoci
alandcul
tur
alenvi
ronment
sison:

Page27of27
 PRI
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 thechangi
ngr ol
eofwomen
 thedesi
reforconveni
ence
 growthincul
turaldi
ver
sit
y.

Mar
ket
ingI
nfor
mat
ionSyst
ems

Abusinessneedsanor gani
zedsyst em t
hatall
owsconti
nuousf l
owofi nformationaboutt heir
goods/services.Thissystem canenableabusinesstodevel
opcer tai
nst rat
egiesandmake
deci
sionsforassur ingconti
nuityindemandandexpansi onofthei
rbusi nessint hel
ong-run.This
syst
em isr efer
redt oastheMar ket
ingInfor
mationSyst
em (MIS),whichconsi stsofpeople,
equi
pmentandpr ocedurestogather,sor
t,anal
yze,
eval
uateanddi str
ibuteneeded, t
imely, accur
ate
i
nformationt omar ket
ingdecisionmakers.

Anybusi nessi sexposedt odat athatmayber elevantori rrelevant.Thisdat aisr elatedtot he

busi nessenvi ronmenti nwhi chabusi nessoper atesandcompr i
sesdi f
ferentsetofcondi ti
onsand
circumst ancest hatcanbeeconomi cfactors, socialfactors, poli
ti
calfactors,legalf actors,
technol ogicalfactors,demogr aphicfactor
s, natur alfactors,compet it
ion, marketchannel s,etc.A
busi nessneedst oselectonlyr el
evantinformat ionf rom theabovement ionedf actor sthatcoul d
direct l
yandi ndirectl
yaf f
ectthebusinessi nt hel ong- r
un.Thi sinformat i
oncanbef urt
herut i
li
zedf or
cer t
ai nbusinessdeci sions.AnMI Sassi st
sabusi nesst odet erminespeci fi
ci nf
or mat i
onf rom the
busi nessenvi ronmentt hatenablesbusi nessdeci sions,whi chcoul dbest rategicdeci sions,cont r
ol
decisi onsandoper ati
onaldeci si
ons.Strategicdeci sionsofabusi nessar erelatedt otheover all
envir onmenti nwhi chabusi nessoper atesandcont roldecisionsar erelatedt onecessar ydecisions
per t
ai ni
ngt ospeci f
icmanager ialaspectsofabusi nesswher easoper ationaldeci sionsar erelatedto
planni ngpr oductionandsal esofabusi ness.

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Assessi
ngi
nfor
mat
ionneeds
MISfir
stassessinf
ormati
onneedsbyint
erviewi
ngmarketi
ngmanager sandsur
veyi
ngthei
rdeci
sion
envi
ronment,todeter
minewhati
nfor
mationisdesir
ed,
neededandf easi
blet
oof
fer.
MISnext
devel
opsinfor
mat i
onandhel
psmanagerst ouseitmoreef
fect
ivel
y

MIScanbedevel opedf om f
r ourbasiccomponent
s–
(a)I
nternalCompanyRecor ds;
(
b)Mar keti
ngInt
ell
igenceAct ivi
ti
es
(c)Marketi
ngResear ch
(d)Decisi
onsuppor tsystems

(
a)I
nter
nalCompanyRecor
ds:
Int
ernalcompanyrecordsareinternalrepor
tsderi
vedmainl
yf r
om theaccounti
ngsystem ofa
business.Thesebr
oadlyincl
udei nfor
mat i
onrel
atedtoabusiness’
currentandpot
entialcl
ient
s,
sal
espr oceedsandrel
evantdatabasesmai ntai
nedbyabusinessassummar i
zedbelow:

Or
der
-to-
paymentCycl
e

Or dersforabusi ness’products/ser
vicesar eplacedt oabusi nessthroughei t
hersal es
represent at
ives,dealersorot hercustomer s(othercust omer sleadnewcust omer stoabusi ness’
product/ ser
vi cethroughwor dofmout h).Thepr ocessi nvolvedf r
om pl acingor der
st oactual
translat
ioni ntoapaymentt ransacti
onshoul dber eportedint heinternalr ecordsinacomput eri
zed
syst em.Theser ecordsar emost l
ystudiedtounder standfact orsthatinfluencecust omers’
wi l
li
ngnesst omakef ormalpurchasesofgoods/ ser vi
cesf r
om t hebusi ness.

Page29of29
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SalesI nformat i
onSystems
Mar ketingmanager sneedti
melyandaccur at
ereport
soncur r
entsalesofabusi
ness’goodsand
servicesf rom int
ernalr
ecords.Thisi
nformati
onenablesmanagerstoevaluat
ethetr
endsinsales
acrossdi fferentmarketsandcustomers.Basedonthisinf
ormati
on,marketi
ngmanagerscanalso
for
ecastf uturesal
esgrowthacr ossdi
ffer
entmarket
sandcust omers.

Databases
Businessesshoul dorganizetheirinf
ormationintodatabasessuchascustomers’databases,
productsdat abases,sal
espersondat abases,etc.andthencombinethedatawit
hdi f
ferentdat
abases.
Forexampl e, cust
omerdat abaseswillcontai
ncust omernames,address,
pasttransacti
ons,
demogr aphics, et
c.Thedatabasewi l
lassistinunderstandi
ngthecharact
eri
sti
csofcust omersand
fact
orsthatinf l
uencepast,currentandfuturesales.

(
b)Mar
ket
ingI
ntel
li
gence
Marketingintel
li
genceisasetofprocedur
esandsour
cesmarket
ingmanager
scanusetoobtai
n
everydayinformati
onaboutthedevelopment
sint
hemarket
ingenvi
ronment
.Market
ingmanager
s
coll
ectmar keti
ngintel
li
genceby

 Readingbooks,newspaper sandt r
adepubl icat
ions
 Talki
ngt ocust
omer s,suppli
ersanddi str
ibutor
s
 Meetingwi t
hothercompanymanager s
 Obtaini
ngsocio-economi candfinancialdatafrom governmentdat abasesCentralSt
ati
stical
Organizati
on(CSO),etc.
 Purchasinginf
ormationonconsumer sofvar i
ouspr oducts/ser
vicesfrom i
ndependentresearch
fi
rms
 Obtaini
ngcustomerf eedback
Theint
elli
gencegatheredbyt hemanager scanbeut ilizedforthefoll
owing:

1. Totrai
nandmotivat
eandsalesr epr
esentat
ivestogatheraddit
ionali
nfor
mati
onthattheymay
havemissedwhil
esell
ingabusiness’goods/ser
vices.
2. Tomot i
vat
edist
ri
butor
sandr et
ailer
sandot heri
ntermediar
iestopassalongi
ntel
li
gence.
3. Tosetupacustomeradvisor
ypanel .

(
c)Mar
ket
ingResear
ch

I
nthi
sart
icl
e,wewi
lldeepdi
vei
ntot
het
opi
cofMar
ketResear
chTechni
ques.
Wewil
lst
artwit
h

1)l
ntr
oduct
iont
omar
ketr
esear
ch,

2)Pr
imar
yresear
ch

3)Secondar
ymar
ketr
esear
ch

4)Mi
stakest
oavoi
dwhendoi
ngmar
ketr
esear
ch.

MARKETRESEARCH
MarketResear
chisat er
mt hati
susedtoref
ert
oapr ocessofgather
ingorcoll
ecti
nginf
ormat
ion
abouttar
getaudi
enceort ar
getmarket
.Themai
nr ol
eoftheconceptofmarketresear
chistoprovide
acompanyorabusi nessorgani
zat
ionwithani
n-depthviewofthecustomersorconsumersi
nor der

Page30of30
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tobeablet
osati
sfytheirneedsbet
ter
.Theprocessofmarketr
esearchisi
ntegralt
obeableto
competewit
hotherplayersint
hesameindustr
yandhelpstoanalyzethi
ngslikemarketsi
ze,
competi
ti
onandmar ketneeds.

Marketr esearchmakesuseofanal yt
icalandst at
ist
icaltechniquesandmet hodstogatherand
i
nterpretinfor
mationi
nanor ganizedfashion.Thisprocessal soi nvol
vesopi
nionandsocialresearch
andisi mpor t
anti
ntoday’si
ncreasinglycompl exbusinessenvi ronment.I
nsuchascenar i
o,
businessescannotjustrel
yont heir‘
gut-feel
ing’t
or unthings, andthisi
swhymar ketr
esearchi s
needed.

Fact
orst
obei
nvest
igat
edt
hroughmar
ketr
esear
ch
Marketr
esear
chcanbeconsider
edasamet hodofget
ti
nganideaoftheneedsoft
hecustomer
s,
andsomeofthef
actor
sthatcanbeinvest
igat
edthr
oughthi
sprocessaregi
venasfol
lows:

Tr
endsinthemarket–Mar
kett
rendsort
rendsi
nthemar
ketar
ethemovement
sofamar
keti
na
gi
venperi
odoft
ime.

Segment
ationoft
hemar ket–Thisisthedi
visi
onofamarketi
ntosubgroupswit
hsimil
arf
eat
ur es.
Thi
sisneededtocreat
eadi st
inct
ionbet
weendemographi
cs,choi
ces,gender
s,andper
sonal
it
ies,
et
c.

Inf
ormati
onavai
labl
e–Mar
keti
nfor
mat
ioni
sthei
nfor
mat
ionaboutpr
icesofdi
ff
erentpr
oduct
s
avail
abl
eint
hemar ket
.

SWOTanal
ysis–Thisanal
ysi
sisananal
ysi
soft
heSt
rengt
hs,
weaknesses,
oppor
tuni
ti
esand
thr
eat
stoabusi
nessorcompany.

Effect
ivenessofmar
keti
ng–Mar ket
ingef
fect
ivenesstakesint
oaccountr
iskanal
ysi
s,pr
oduct
research,cust
omeranal
ysi
s,andcompeti
toranalysi
s,etc.

Benef
it
sofmar
ketr
esear
ch

 Tappingopport
uniti
es–Oneoft hebiggestbenefit
sofconduct
ingmar ketresearchisthati
tenabl
es
youtofindoutthevari
ousmar ketoppor t
uniti
esandmakesitpossibletotapintothem eff
ecti
vel
y.
Forexample,i
tmayhel pyoutof i
ndwhet heryourproducti
ssuitabl
efortheaudienceyouhave
tar
getedornot,andifi
tisn’
t,t
henmar ketresear
chhelpstoi
dentif
ythesuitableaudience.

 Encouragi
ngcommuni cation–Marketresearchhelpsyout ofindoutt
hebestwayt ocommuni cat
e
wit
hyourcust omers.Afterobt
aini
ngresearchresults,
onet endstoknowtheaudiencenatur
e,
personal
it
ies,
likes,
disl
ikes,et
c.andthi
smakesi teasiert
oconnectwi t
hthem andreachouttothem.

 Mini
mi zat
ionoftheri
sks–Anot hermaj
orbenef
itofmarketresear
chist
hatithel
psbusi
nesses
mini
mi zeri
sksbytakingact
ionsoncert
ainsubj
ects.Forexample,i
tmayhelptoaddcert
ainquali
ti
es
toproduct
st hatmayreachouttonumberofpeople,t
husdecreasi
ngchancesofthepr
oductgoing
notused.

 Establ
ishtrendsandmar ketstanding–Themar ketchangesconti
nuousl
yandconst
antl
y.I
nsucha
scenario,
onlythoroughmar ketresear
chcanhelptoestabli
shtheongoi
ngtr
endsandthenfor
mulat
e
plansaccordingtothecurrentcustomerneedsandrequir
ement s.

 Fi
ndoutpossibl
eprobl
ems–Si ncemarketresear
chbringsoutt hecust
omerr eact
ions,choices,
and
pr
efer
ences,abusi
nesscanal
terthepr
oductwhi l
eiti
sst i
lli
nthemanuf act
uringordesigning
pr
ocess.I
tiseasi
ertof
indpr
oblemsandt henworkont hem ifonehasresearchresult
sinhand.

TypesOfMar
ketResear
chTechni
ques

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Secondarymar ketresearch.Asopposedt oprimarymar ketresearch, secondarymar ketresearchisa
researcht
echniquet hatdoesnotai mt ogatherinfor
mat i
onf rom scratchbutr el
iesonal r
eady
avail
ablei
nfor
mat ionf r
om mul ti
plesources.Thisresearchfocusesondat aorinformati
ont hatwas
coll
ectedbyotherpeopl eandi savail
ableforeitherf
reeorpai dusef orot her
s.Secondar ymar ket
researcht
akesi nt
oaccountmanydi f
ferentsourcesforcoll
ect i
onofi nformati
oni ncludi
ng
governmentdat a,
of f
icedata,newspaper s,magazines,t
hei nternet
,etc.Oneoft hebenef i
tsofdoi ng
secondarymarketr esearchisthatiti
smost l
yfreeandtakesal otl
esst i
me.

Inter
nalsources.Internalsourcesarethoseki ndsofsecondar
ymar ketr
esearchsour cest
hat
alr
eadyexistandar ecol l
ectedinthebusiness’sdatabaseorfi
lesyst
em.Internalsourcesi
nclude
i
nformati
ont hathasal readybeencollectedbyt hecompanyandpr ovesusefulforf
uturepr
ojects,et
c.
Formostbusi nesses, i
nter
nalsourcesmaypr oveenoughtodevelopnewpr oductsandservices,and
thi
smaynotr equir
et hem tolookoutside.

Exampl
es:

 Bal
ancesheet
s–Previ
ousbal
ancesheet
softhebusi
nesscanber
efer
redt
oinor
dert
ofi
ndst
ats
andfi
gur
esthatmaypr
oveusef
ulf
oreval
uat
ion.

 Pr
ofi
tandl
ossst
atements–Profi
tandlossst
atement
scanbeconsul
tedt
ofi
ndoutwhatki
ndsof
pr
oduct
sandser
vicesr
esul
tedinprof
it
sprevi
ousl
y.

 I
nventor
yrecords–Thisisanotherpi
eceofdat
awhichcanbeusedasasour
cef
orsecondar
y
marketr
esearchandputsint
ofocusmanystatsandfi
gur
es.

 Sal
esfi
gures–Compani
esst
oret
hei
rpr
evi
oussal
esf
igur
essot
hatt
heycanbeanal
yzedandused
f
orfur
therresear
ch.


Ext
ernalsour
ces.Incasetheinter
nalsourcesdon’tf
etchenoughorsuf f
ici
entinf
ormat i
on,ext
ernal
sour
cescanbeuse.Ext er
nalsourcesarethosesourcesthatpresentdat
athatiscollect
edbyot her
busi
nessesorpeople.Thesearecoll
ectedfrom out
sidethebusiness’
senvironmentandi ncl
ude
mult
ipl
esources.Exter
nalsourcescanbewi deandvar i
edandhenceonemustf oll
owacont r
oll
ed
appr
oacht oassessi
ngthem.

Exampl
es:

 Governmentsour
ces–Sever
algover
nmentsour
cescanbeusedt
ocol
lectal
otofusef
uli
nfor
mat
ion
aboutmult
ipl
esubject
s.

 Univer
siti
esandcoll
eges–Severalcol
legest
udent
sandr
esear
cher
scol
lectandf
il
einf
ormat
iont
hat
canbef ur
therusedbybusi
nesses.

 Theint
ernet–Thei nt
ernetisthemostusedsecondarymar
ketr
esearchsourcebuthast
he
di
sadvantageofseveralnon-credi
blesour
ceswit
hincompl
etei
nfor
mation.

 Competit
ordat
a–Often,
businessesuset
heinf
ormat
ioncol
lect
edandf
il
edbyot
herbusi
ness
organi
zat
ionsi
ncl
udi
ngthatgatheredbyt
hei
rcompet
itor
s.

Pri
maryDat
a
Pr
imar
yDataisr
esear
cht
hathasbeenconduct
edbyyouror
gani
zat
ion,
fir
sthand.I
tisal
soknown

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asFieldResearch.Itisusuallymor ereli
abl
ethansecondar
ydata,becausei ti
susual
lymore
accuratesinceyoucollectedityourself
.Pri
mar ydatai
sspeci
fi
candr elevantt
oyourproduct
sand
servi
ces.However ,
Pr i
mar yDataisof t
enveryti
meconsumingtocollect,andusual
lycost
smor eto
creat
et hanpurchasingsecondar ydatareport
s.Youmusttakespecialcarewhencoll
ecti
ngprimary
data.Itneedstober elevant,
current,andasunbiasedaspossi
ble.

PrimaryDat aisrel
evantwheni tdirect
lyappl
iestoyourcompany' sproductsandservi
ces.Itis
rel
evantwheni tr
elat
estothepr oblemsyouar etryi
ngtosolve, andthemar ket
inggoalsofyour
organizati
on.Pr i
maryDataiscur r
entwhenitisrecent
,anddirect l
ycor r
espondstotheprofi
leofyour
customer sTODAY.Pr imaryDat aisunbiasedwhenyoursubj ect shavebeenhonestandopendur i
ng
datacollect
ion.Whenconst ructingyourPrimaryDatacoll
ectionpl an,youmustconsiderresear
ch
met hods,contactmethods,t
hesampl i
ngplan,andyourresear chinstruments.

Pr
imar
yMar
ketResear
ch.

Pr i
marymar ketresearchisaki ndofmar ketresearchwhi chi sdonebyt hebusi nessorcompany
i
tselfwi t
ht heobjecti
veofgat heringinf
ormat ionthatcanbeusedt oimpr ovet heproduct
s, services,
andf unctions.Primarymar ketresearchisalsoknownasf iel
dresearchsi nceitisresear
chdone
from scratch, wi
thoutusinganyi nformati
ont hatisalreadymadeavai l
ablet hroughothersour ces.
Onecangat herpri
mar ydataori nformat
iont hroughqualitati
veresearchmet hodsaswel las
quant i
tati
ver esearchmet hods.Pr i
marymar ketresearchist hemostcommont ypeofamar ket
researchmet hodandi salsothemostval uabletype.Iti
samet hodthatonl yanswer sspecific
questionsandnoti rr
elevantissues.

Qual i
tat
iveresearch.Quali
tativeresearchorqual i
tat
ivemar ketresearchi sakindofar esearch
met hodwhichmai nl
ytakesi ntoaccountt heopi ni
onsandf eelingsofacust omerasfarasa
business’sproductsandser vicesar econcer ned.Thistypeofr esearchtriestogetbehindt he
customer ’
smi ndtof at
hom whatt heyseel ackingorwhet hertheytrulyliketheproductornot .Some
commonexampl esofqualitativeresearchwor kincludedoingf acetof aceinter
views,beingpar tof
focusgroups, et
c.

Quantitat
iver esear ch.Quant i
tati
vemar ketresearchi saki ndofmar ketresearchwor kthatisbased
onhar dfact sandst atisti
caldat aratherthant hef eeli
ngsandopi nionsoft hecustomer sor
consumer s.Thi stypeofr esearchcanpr oveusef ulbot hintermsofpr i
mar ymar ketr
esear chand
secondarymar ketr esearch.Someoft hecommonexampl esofquant i
tat
iveresearchincludeexit
surveys,quest ionnai res,on-sitefi
eldwor kandt heshoppi ngbagsur vey.Infact,anotherexampl eof
quantit
ativer esear chi ncl
udesr esear chingoft hepr eviouslyexi
sti
ngf i
nancialreport
s, r
esearch
papers.Thi stypeofr esear chcomesoutwi thawi der angeofstati
sticsandhel pstofindoutt hesize
ofthemar ketaswel l
.

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St
epsf
orMar
ket
ingResear
ch
Marketi
ngresearchisasystemati
cdesign,col
lect
ion,anal
ysisandreporti
ngofdat
aandfindi
ngs
rel
evanttoaspecif
icmar ket
ingsi
tuat
ionthatabusinessfaces.Accor
dingly,
thepr
ocessi
nvol
vedin
conducti
ngmar ket
ingresearchi
sasfoll
ows:

1. Defi
neaprobl
em –Mar
ket
ingmanagersshoul
ddefi
nethepr
obl
em ori
ssuesf
acedbyt
he
busi
nessf
orwhicht
her
esearchneedst
obeconducted.
2. Developt heresearchplan–Mar ket
ingmanagerspr epar
esar esearchplanbasedont he
mar keti
ngintell
igencereport
swhi charealsoknownasecondar ydata.Secondar ydataisdat a
thatalreadyexistshoweveritisincomplet
ebecausei tdoesnotpr ovidespecif
icinformatione.g
i
nt er
naldata=budget s,sal
esfigures,pr
ofi
tandlossst at
ement,allresearchreport
Externaldata=gover nment,mustconsiderdates,censusofpopul ati
on/manuf acturi
ng/retai
l
trade,regul
arpubl i
cati
ons,BusinessWeek, Commer ci
alresear
chhouses
Advantages:I
nexpensi
ve,quicktoobt
ain,
mul t
ipl
esourcesavai
labl
e,obt
aini
nfo.Thatcannotbe
obtai
nedthroughprimar
yr esear
ch,i
ndependentther
efor
ecredi
ble.

Disadvant
ages:Maybeincompl
ete,
dated,obsol
ete,
met
hodol
ogymaybeunknown,
allf
indi
ngsmay
notbepublic,
rel
iabi
li
tymaybeunproven.

Mar ket i
ngmanager scanal soconsi derpr imar ydata,whi chisf r
eshlygatheredi nformat i
ondi rectl
y
from t
heconsumer sfrom ar esear chpr oject.Appr oachest ocol l
ectprimarydat acani nclude–f ocus
groups, surveys,observat i
onalandexper i
ment aldata.Themar ketresearchteam moni torsand
questionsani ndi
vidualorgr oupsofi ndividualsi ndiff
erentlocationsandr egionst hrought heabove
ment i
onedappr oaches.Thet eam pr eparesquest ionnairesorsetofquest i
onst oaskt hei ndivi
duals
consider edforcoll
ectingpr imar ydat a.Thesequest ionnairescanhavequest ionsf orwhi chanswer s
canbedescr ipti
veorcanhavemul t
iplechoi cesf rom whicht heselectindivi
dual schooseanswer s.
Thenumberofi ndi
vidual sconsi deredf orther esearchpr ojectisidenti
fiedbyst atist
icalmet hod
call
edsampl ingthatsel ectst henumberandgr oupsofi ndividualstobeconsi der edforcol l
ecting
primarydat a.Oncet hemar ket i
ngt eam hassel ectedtheappr oach,questi
onnairesandsampl i
ngpl an,
theypr oceedt othefollowingst ep.

Advantages:
Fit
sthepr eci
sepurposeoftheorganizati
on,i
nformati
oniscurr
ent,
methodol
ogyi
s
contr
oll
edandknown, avail
abl
et ofi
rm andsecretfr
om compet i
tor
s,noconf
li
cti
ngdatafr
om
dif
fer
entsour
ces,rel
iabil
it
ycanbedet ermi
ned,onlywaytof i
llagap.

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Di
sadvant
agesTi
meconsumi
ng,
cost
ly,
somei
nfor
mat
ioncannotbecol
lect
ed.

Yourchoi
ceofresearchinstr
umentwi
llbebasedont
henat
ureoft
hedat
ayouar
etr
yingt
ocol
lect
.
Therearethr
eeclassif
icat
ionst
oconsider
:

SECONDARYMARKETRESEARCH
Secondar
ymar ketr
esearchismainl
ybasedoncoll
ect
ingi
nformati
onfr
om di
ff
erentsour
cesand
thencomingtoaconclusion.Thef
oll
owi
ngarethetwomaintypesofSour
cesofSecondarymar
ket
resear
chdata:

PRI
MARYMARKETRESEARCH
Thefoll
owi
ngar
ethef
ivePr
imar
ymar
ketr
esear
cht
echni
quest
hatar
emostcommonl
yusedand
appl
ied:

Focusgr oups.Oneoft hemai nwaysusedt oconductpr imarymar ketr esearchi st hroughf ocus
groups.Thi smethodinvol vesget ti
ngagr oupofpeopl einar oom orapl aceandaski ngt hem
i
nsightfulquesti
onsregar di
ngt hepr oduct,i
tsdevelopment ,theirprefer ences,andf eedback, et
c.
Theset ypesoffocusgr oupscanber unorconduct edatanyl ocationf easi bl
ef orthecompanyor
business.Thesedays, wi thadvancement sint echnologyandt heinternet ,
itispossi bletoconduct
them virt
uallyaswell
,thr ought hemet hodofvi deoconferencing.Butt hemai nt hi
ngher eisthatthe
groupofpeopl ebroughtt oget herhavesomet hingincommon, f
orexampl e,eit
hert heyshoul dbelong
tothesameagegr oup, thesamegenderandsoon.Thi sdivi
sionoft hegr ouport heselection
processmustdependont heaudi encet ar
getedort hepr oductofser viceoft hecompany.
Parti
cipantsinsuchfocusgr oupsaret hencompensat edbyei therfreecoupons, voucher s,gift
sor
money, etc.Focusgroupsf allundert hequali
tat i
veresearchmet hodandhel pbusi nessesknowal ot
aboutcust omerormar kett rends.

Surveysandquest ionnaires.Anothersuperbandhi ghl

yef fecti
vewayt oconductprimarymar ket
researchisthroughsur veysandquest i
onnaires.Thet erm‘ surveys’isabr oadtermthatcoversal ot
ofthingssuchassur veyquestionnair
es,surveyf orms,surveyi nter
viewsandcust omersatisfacti
on
cards,etc.Oneoft hemostcommonexampl esoft hisresearchmet hodi sthefeedbackfor
m gi vento
customer satthetimeofbi ll
ingatarestaurant.Itisast r
aight f
orwardmet hodofknowi ngwhet heror
notthecust omerissat i
sfi
edwi ththebusiness’sexisti
ngser vi
cesandpr oductsorwhatkindof
changeswoul dtheconsumerl i
ketosee.Sur veysar ealsoconduct edint hefor
m ofweb
questionnairest
hesedayst hatenablebusinessest ocol l
ectal otoffeedbackandt henanalyzeitfor
furt
heradmi nist
ration.

Observati
on.Ther
ear etwomaj orobservat
iont echniquesorr esearchmethodsusedinpr i
mar y
marketresear
ch,andtheyareobser vat
ionthroughi nteracti
onandcommuni cati
onwiththesubject
andobservati
onthroughnoi nt
eracti
onandcommuni cati
onwi ththesubj
ect.Thi
sform ofresearch
methodcomesundert hequanti
tat
iveprimaryresear chsincet hroughi
t;r
esearcher
sevaluateor
measurethebehavioroftherespondentsortheuser singener al
.Thisismoreofapersonal
approachincomparisontosurveysandquest ionnaires,etc.

Tri
al sandexper i
ment at
ion.Thi
smet hodofpr i
maryr esearchinvol
vessci entif
ictestswhere
hypot hesesandvar i
ables,et
c.areused.Thisisaquant itat
ivetypeofmar ketresearchwhi chmay
eit
herbecont roll
edouti nthefi
eldorwithincontr
olledenvironments.I nordertounder st
andthis
for
m ofr esearch,hereisanexampl ethatyoucanr eferto:Afoodpr oductcompanycr eated3
dif
ferentfoodpackagi ngstyl
esandt hensoldthepr oductstodiff
erentconsumer s.Aft
eralimi
ted
periodoft i
me, i
tanalyzedthesalesandcamet oaconcl usionaboutt hepreferredpackagingstyl
eor
design.

In-depthInterviews.Onemayt hinkofani n-
depthint
ervi
ewt obeaquant i
tati
veapproacht oprimar
y
mar ketresearch,butthi
smet hod, i
nfact,
isaquali
tat
iveresearchthattakesintoconsiderat
ionthe
kindsofchoi cesandpr ef
erencesacust omerbasehas.Intervi
ews,unli
kef ocusgroups,involve
i
nt er
acti
onbet weenonemoder atorandoner espondentandseveraltypesofmodesandmet hods
maybeusedt oconductthem.I ntervi
ewsmaynotal waysber est
ri
ctedt oasetpatternofquest i
ons

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butcanalsobei
nthef
orm ofaconversat
ionwit
hthetargetcustomerbaseoraudi
ence.Thi
skindof
aresear
chmethodhel
pstodigfur
therint
owhatthecustomerwant s,andt
heanswerscanlaterbe
anal
yzedtocometoaconclusi
onforthefi
nalpr
oductdeli
very.

Sampl
ing

Samplingi stheselecti
ngofr epresentati
veunitsfrom atotalpopulati
on
Apopul at
ionr ef
erstoallel
ement s,unitsorindivi
dualsthatareofinterestt
oresear
cher
sfora
specif
icstudye.gal lr
egist
eredvot ersforanelecti
on.
Samplingpr oceduresareusedi nst udyi
ngthelikeli
hoodofevent sbasedonassumpt i
onsaboutt
he
fut
ure.

1. Random sampl i
ng,equalchancef oreachmemberoft hepopulat
ion
2. Strat
if
iedsampling,populati
ondividedint
ogr oupsre:acommonchar act
eri
sti
c,
random sampleeachgr oup
3. Quotasampl i
ng,judgment al
,sampl i
ngerrorcannotbemeasur edstat
isti
cal
ly,
mainl
y
usedinexplorat
orystudiestodevel ophypotheses,
non-probabil
ist
ic.

Quest
ionnai
reConst
ruct
ion

Questi
onnai
reisdesi
gnedtoeli
citi
nfor
mati
ont
hatmeet
sthest
udi
esr
equirement
s.Quest
ions
shoul
dbeclear
,easytounder
stand&direct
edt
owar
dsmeeti
nganobj
ect
ive.

Needt odefi
neobj
ecti
vesbef
oredesi
gningthequest
ionnai
re.Mustmaintai
ni mpar
ti
ali
tyandbever
y
carefulwi
thper
sonaldat
a.Fourbasi
ctypesofquest
ionsare:Openended,Dichot
omous,Mult
ipl
e
choiceandScaled

MI
STAKESTOAVOI
DWHENDOI
NGMARKETRESEARCH

 Doingonl ysecondar ymarketresearch–Whi ledoi

ngmar ketr
esearch,onemustavoi dmaki ngthe
mistakeofdoi ngonlysecondar yresearchandneglect
ingpr i
marymar ketresearch.I
tistr
uet hat
secondar yresearchisimportantandt i
me-savingbutprimaryresearchmaybr i
ngaboutaf r
esh
perspective,updatedandlatestresult
sandoffersabettertakeatthemar ket.Thi
ngslikecustomer’
s
val
ues, psychology,att
it
udes, l
if
estyl
eandi nt
erest
scanonl ybeknownwhenoneconduct sprimary
mar ketresearch.

 Doingonl yprimarymar ketresearch–Anot hercommonmi st

aket hatmustbeavoidedwhendoi ng
marketr esearchi
sdoi ngonl ypri
marymar ketresearch.Businessesoftenmaket hemistakeof
spendingsomucht imeonpr imaryresearcht hattheyforgetthatusingsecondar
ysour cesfordata
couldalsopr oveusefulandal otmor eti
me- savi
ng.Secondar yresearchmayof f
ersomedat aand
stat
sf orfreeandmayel i
minatetheneedt ogoanext r
ami leforthesamei nf
ormati
on.Hence, al
l
businessesmustmakei tapointtodoal i
ttlebitofbot htheresearchworks.

 Usingonlythewebf orresearch–I ti
st ruethatt heinternetorthewebi sthegreatestdatabasef ora
widevari
etyofinformationanddat abutj ustrelyingoni tandnotusinganyot hersour cecouldpr ove
tobeabigmi stakeasf arasmar ketresearchi sconcer ned.Onemustr ememberthatt heinternet
maynotal waysof f
erreli
abl
esour cesandcompl eteinformati
on.And, astheysay,incompl ete
i
nformati
oni sdangerous.Thus, onemustal waysmakei tapointt
ot r
youtot hermor ecredibl
e
sourcesaswellsuchasgover nmentsour ces, previ
ousbusi nessfi
les,etc.

 Limi
tedvisi
on–I ti
scommonf orpeopletoseewhattheywishtosee,butyoujustcannotaffordto
havetunnelvi
sioni
fyouar ehandli
ngandr unni
ngabusiness.Ami st
akethatbusinessesof
tent end
tomakei st
or emai
nwithinacer t
ainencl
osureandnotseeingwhatisoutsi
deit.Theymustr ather
maket heeff
ort,
nomatterhowl ongitt
akestopeepoutsi
deandt akeagli
mpseatt helar
gerpicture.

Page36of36
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Businessesmustextendt
heirvisi
on,
lear
nmor
eandt
henappl
ythei
rfunct
ionst
oat
tr
actmaxi
mum
peopleofdif
fer
entdemographics.

 Notbeingabl etoidentif
yyourt ar
getaudi ence–Oneoft hemostcommonr easonsorcausesf ort
he
fai
lureofproducts,services,andbusinessi stheinabi
lit
yt oidenti
fythetar
getaudi ence.Whilewith
somepr oducts,i
tiseasi ertotapthepot enti
alcustomer sbutwi thsomeother s,
findingwhoyourr eal
audienceiscanbet ough.Forexampl e–f oodpr oducts.Butj ustbecausei
tisdiffi
cultdoesn’tmean
i
tisimpossi bl
e.Iti
shi ghlyimportantforallbusinesscompani estoknowexact l
ywhot hei
rtarget
audienceisandt henf ocustheirmarketingandot hereffort
st owardsthem i
npar ticular
.

 Notgivingconsumersani ncenti
vetocommuni catewithyou–Consumer sar esmar tandneedtobe
givenbenefi
tsinordert
ogett hem att
ract
ed.Askingconsumerstorespondt oasur veyquest
ionnai
re
withoutgivi
ngthem anyincenti
vecanbeabi gmi st
ake.But,ontheotherhand,off
er i
ngthe
consumer safr
eecouponoraf reevoucheri
nreturnforthei
rti
mecoul dsuddenlyturntheti
deinyour
direct
ion.

3. Coll
ectt
heinf
ormati
on–Informationiscol
lect
edbyabusinessdirect
lybyempl
oyingthei
r
humanresourcesi
nmarketresearch(t
hisi
saspecial
izedqual
if
icati
on)togoonf
ieldandcol
lect
pri
marydataoremployamar ketr
esearchagency.
4. Anal
ysesofinf
ormati
on–Fol
lowingcol
lecti
onofdata,
mar ket
ingmanager
sut
il
izest
ati
sti
cal
andanal
yti
calmethodst
oanalyzeanddeter
minethesigni
fi
canceofdat
a.
5. Pr
esentingthef
indi
ngs–Theinf
ormati
onanalyzedusi
ngstat
ist
icalanal
ysi
sispresent
edt
othe
market
ingteam andbusi
nessmanagementt
omaker el
evantmarketi
ngdecisi
ons

(
d)Mar
ket
ingDeci
sionSuppor
tSyst
ems (MDSS)r elyonsimple
systemssuchasMi crosoftExcelandon- l
ineanal yti
caltool sl
ikel
inearpr ogr
ammi ng,r
egressi
on
analysi
s&spreadsheett hathelpcoll
ectdat a.Dat acompi ledforanalysisisstor
edandpr ocessed
fr
om adat awarehouse,whichi ssimplyadat ar epositorysystem thathelpsstoreandf urther
processdatacoll
ectedinternal
lyandext ernall
y.Thiscomponentconsi stsofsystem manager swho
manageandmai nt
ainthesyst em assetsincludingsof twareandhar dwar enetwor k,monitori
ts
acti
viti
esandensurecompl iancewi t
hor ganizationalpolicies.

Di
str
ibut
ingneededi
nfor
mat
ion
Marketi
nginf
ormationhasnovalueunt
ilmanagersuseitt
omakebet termarketi
ng
deci
sions.
Deci
sionmaki ngwoul
drequi
recoll
ect
iveinf
ormati
onandanal ysesofint
ernalr
ecor
ds,
marketi
ngint
ell
igencerepor
tsandmarketr
esearch&system suppor
t.

ConsumerBuyi
ngBehavi
our

BuyingBehavi
ouri
sthedeci
sionpr
ocessesandact
sofpeopl
einvol
vedi
nbuyi
ngandusi
ng
product
s.

Mar
ker
sneedt
ounder
stand:

Page37of37
 PRI
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 Whyconsumer smaket hepur
chasesthattheymake?
 Whatfact
orsinfl
uenceconsumerpurchases?
 Thechangingfact
orsinoursoci
ety.

ConsumerBuyi
ngBehavi
ourref
erst
othebuyi
ngbehavi
ouroft
heul
ti
mat
econsumer
.Af
ir
m needst
o
anal
yzebuyi
ngbehavi
ourfor
:

 Buyer’
sreact i
onstoaf i
rmsmar ket
ingstr
ategyhasagr eatimpactonthefir
m’ ssuccess.
 Themar ketingconceptstressesthatafi
rm shouldcreateaMarketi
ngMi xthatsat i
sfi
es
(gi
vesutil
ityto)customers,ther
eforeneedtoanalyzethewhat,where,whenandhow
consumer sbuy.
 Marketerscanbet t
erpredicthowconsumer swillrespondtomarketi
ngstrategies.

Bl
ackbox
Thebl ackboxmodelshowst heinteract i
onofst i
muli,consumerchar acteristics,anddecision
processandconsumerr esponses.I tcanbedi sti
nguishedbet weeninterper sonal st
imuli(between
people)orintr
apersonalstimuli(withinpeopl e).
Theblackboxmodeli sr elatedt otheblackbox
theoryofbehaviouri
sm, wher ethef ocusi snotsetont hepr ocessesi
nsi deaconsumer ,butt he
rel
ati
onbet weenthestimul iandt her esponseoft heconsumer .Themar ketingst imuliar
epl anned
andpr ocessedbythecompani es, wher eastheenvironment alstimul
usi sgi venbysoci alfactors,
basedont heeconomi cal,polit
icalandcul turalci
rcumst ancesofasoci ety.Thebuyer s’blackbox
containsthebuyercharacteristi
csandt hedeci si
onpr ocess,whichdeter minest hebuyer s’response.

Envi
ronment
alf
act
ors Buyer
'sbl
ackbox

Buyer'
s
r
esponse
Mar
keti
ng Envi
ronmental Buyer
Deci
sionPr
ocess
St
imul
i Sti
muli Char
act
eri
sti
cs

Probl em
Economi c Att
itudes recogni t
ion Productchoi
ce
Pr
oduct Technological Motivation Informat ionsearch Brandchoice
Pr
ice Poli
ti
cal Perceptions Alternative Dealerchoi
ce
Pl
ace Cult
ural Personal i
ty eval uati
on Purchaseti
ming
Pr
omoti
on Demogr aphic Li
festyle Pur chasedeci si
on Purchase
Natural Knowl edge Post -purchase amount
behavi our

Theblackboxmodelconsider
sthebuyersresponseasar esul
tofaconscious,
rati
onaldeci
sion
process,
inwhichi
tisassumedthatthebuyerhasrecognizedtheprobl
em.However,i
nr eal
it
ymany
decisi
onsarenotmadeinawarenessofadeterminedproblem bytheconsumer.

Consumerbuyi
ngr
oles
 Thei
nit
iat
or:thepersonwhosuggestsbuyingaproductorservi
ce
 Thei
nfl
uencer:thepersonwhosepointofvi
eworadvicewil
linfl
uencet
hebuyi
ngdeci
sion.I
t
maybeaper sonoutsidethegr
oup(singer
,at
hlet
e,act
or,et
c..
)butonwhichgr
oupmember s

Page38of38
 PRI
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rel
yon.
 Thedecider:t
hepersonwhowi llchoosewhi chproducttobuy.Ingener al
,i
t’
stheconsumer
butinsomecasesi tmaybeanot herperson.Forexampl e,
the“leader”ofasoccersupporter
s’
group(member shi
pgroup)thatwi lldef
ine,f
orthewhol egroup,whichsupporter
’sscarfbuy
andbeardur i
ngthenextgame.
 Thebuyer:thepersonwhowi llbuyt heproduct.General
ly,
thiswillbethefi
nalconsumer.
 TheUser:Aper sonwhoconsumesorusest hepr oductorservi
ce.Acompanyneedst o
i
dentif
ytheserolesbecausethey.

St
agesoft
heConsumerBuyi
ngPr
ocess

The5st
agesar
e:

St
agesoft
heConsumerBuyi
ngPr
ocess

Page39of39
 PRI
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PLESOFMARKETI
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1.Pr
obl
em Recogni
ti
on(awarenessofneed)-di
ff
erencebet
weent
hedesi
redst
ateandt
he
act
ualcondit
ion.Aneedcanbetriggeredbyint
ernalst
imulil
ikehunger
.Hungersti
mulat
esyourneed
toeatorcanbestimulat
edbyexternalsti
mulit
hroughproductinf
ormati
oni.eseeacommerci
alfora
newpairofshoes,st
imulat
esyourrecogniti
onthatyouneedanewpai rofshoes.

2.I
nfor
mat
ionsear
ch-Oncet
heneedi
sident
if
ied,
it’
sti
mef
ort
heconsumert
oseek
i
nformationaboutpossi
blesol
uti
onstot heprobl
em.Hewi l
lsearchmoreorl
essinf
ormati
on
dependingonthecomplexit
yofthechoicestobemadebutal sohisl
evelofi
nvol
vement.(
Buyi
ng
pastarequir
esli
tt
lei
nfor
mat i
onandinvolvesfewerconsumersthanbuyi
ngacar.
)

Thent heconsumerwi
llseekt
omakehi
sopi
niont
ogui
dehi
schoi
ceandhi
sdeci
sion-
maki
ng
processwith:

 I
nter
nalinf
ormati
on:thi
sinfor
mati
onisal
readypresentint
heconsumer’
smemor
y.Itcomes
f
rom pr
eviousexper
ienceshehadwit
hapr oductorbrandandt
heopini
onhemayhaveof
t
hebrand.

 Ext
ernali
nfor
mat
ion

Ani
ndi
vidualcanacqui
rei
nfor
mat
iont
hroughanyoft
hef
oll
owi
ngsour
ces:

 SocialSources-Hemi ghtdiscusshisneedwithhi
sf r
iends,f
amil
ymember s,coworker
sand
otheracquaintances.
 Commer ci
alsources-Adver ti
sements,sal
espeoplePackagingofapart
icularproducti
n
manycasespr omptindivi
dual stobuythesame,Displ
aysetc)
 Publicsources-Newspaper , Radio,
Magazine
 Experienti
alsources-Indivi
dual ’
sownexperi
ence,pri
orhandli
ngofaparticul
arproduct(Ti
m
woulddef i
nitel
ypurchaseaDel ll
apt
opagainifhehadal r
eadyusedone)

3.Eval
uat
ionofAl
ter
nat
ives-Thenextst
epi
stoeval
uat
ethevar
iousal
ter
nat
ivesavai
labl
e
i
nt hemarket
.Ani
ndi
vidualaf
tergat
her
ingrel
evanti
nfor
mat
iont
ri
est
ochooset
hebestopt
ion
avail
abl
easperhi
sneed,tast
eandpocket.

4.Pur
chasedeci
sion-Att
hisf
our
thst
ep,
thi
siswher
ethepur
chasef
inal
lyhappens.
Choose
buyi
ngal
ter
nat
ive,
incl
udespr
oduct
,package,
stor
e,met
hodofpur
chaseet
c.

5.Post
-Pur
chaseEval
uat
ion-Thepurchaseoft
hepr
oducti
sfol
lowedbypostpur
chase
evaluat
ion.Postpurchaseevaluati
onreferstoacustomer ’
sanal ysi
swhethertheproductwasuseful
tohim ornotandwhet hertheproductfulf
il
ledhisneedornot .Theconsumercanbedel ight
ed,
sati
sfacti
on,di
ssati
sfacti
onaftercompar i
ngt hei
rexpectat
ionsvsper f
ormance.Cognit
ive
Dissonanceisthediscomfortthatcomeswi t
heverypurchase,haveyoumadet her
ightdeci
sion.
Thiscanber educedbywar ranti
es,af
tersalescommuni cationetc.

Waysofr
educi
ngcogni
ti
vedi
ssonance

 Lookuptosatisf
iedcustomer
s
 Lookforadver
tsthatsuppor
tsyourchoi
ce
 Seekaft
ersaleservi
ce
 Retur
ntheproductforref
und

Page40of40
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Notal
ldecisionpr
ocessesl
eadtoapurchase.Allconsumerdeci
sionsdonotal
waysi
ncl
udeal
l
5st
ages,determi
nedbythedegr
eeofcompl exi
ty.
..

Typesofconsumerbuyi
ngbehavi
ourar
edet
ermi
nedby:
 LevelofI
nvolvementinpurchasedecisi
on.Import
anceandint
ensi
tyofi
nter
esti
naproduct
i
napar ti
cularsi
tuati
on.
 Buyer’
slevelofinvol
vementdeter
mineswhyhe/ sheismoti
vat
edtoseekinf
ormati
onabouta
cert
ainproductsandbrandsbutvirt
uall
yignoresot
hers.

Hi
gh-i
nvolvementproductsarethosethatrepr
esent
stheconsumer’
spersonali
ty,st
atusand
j
ust
if
yingl
ifest
yle;f
orexample,buyingahomet heat
re.Hi
ghinvol
vementpurchasesarehighpr
iced
t
hathavehighri
skandr equi
reshighinvolvement
.

Low-i
nvol
vementproductsar
ethosethatr
efl
ectr
out
inepur
chasedeci
sionsandr
equi
resl
ow
i
nvol
vement
;forexample,
buyingacandyoranicecr
eam.

Thef
ourt
ypeofconsumerbuyi
ngbehavi
ourar
e:

 Rout
ineResponse/
Progr
ammedBehavi
our
--buyi
ngl
owi
nvol
vementf
requent
ly
pur chasedl owcosti tems;needver ylitt
lesear chanddeci si
onef fort;pur chasedalmost
aut omat ically.Exampl esincludesoftdrinks,snackf oods, milketc.
 L imi t
edDeci sionMaki ng- -buyingpr oductoccasi onal l
y.Whenyouneedt oobtain
i
nf ormat ionaboutunf ami l
iarbrandinaf ami li
arproductcat egory, perhaps.Requi resa
moder ateamountoft imef orinf
ormationgat heri
ng.Exampl esincl udeCl othes--know
productcl assbutnott hebr and.
 E xtensi veDeci sionMaki ng/ Compl exhi ghi nvolvement ,unf ami l
iar,expensiveand/or
i
nf requent lyboughtpr oducts.Highdegr eeofeconomi c/performance/ psychologicalri
sk.
Exampl esi ncludecar s,homes, comput ers,education.Spendal otoft imeseeki ng
i
nf ormat ionanddeci ding.
Informat ionf rom thecompani esMM;f riendsandr elatives,storeper sonnelet c.Got hr
ough
allsixst agesoft hebuyi ngprocess.
 Impul sebuyi ng,noconsci ouspl anni ng.

Thepur chaseofthesamepr oductdoesnotalwaysel

ici
tthesameBuyi ngBehavi our.Productcan
shi
ftfr
om onecat egorytothenext.
Forexampl e:
Goingoutf ordi
nnerforonepersonmaybeext ensi
vedecisi
onmaki ng(forsomeonet hatdoesnotgo
outoftenatall)
,butl
imit
eddecisionmakingforsomeoneelse.Thereasonf orthedinner,whetheri
t
i
sananni ver
sarycel
ebrati
on,oramealwi t
hacoupleoffri
endswillal
sodet erminetheext entoft
he
decisi
onmaki ng.

Factor
sthatAf
fectt
heConsumerBuyi
ngDeci
sion
Process
Aconsumer
,maki
ngapur
chasedeci
sionwi
llbeaf
fect
edbyt
hef
oll
owi
ngt
hreef
act
ors:

1. Cultur
al
2. Social
3. Personal
4. Psychologi
cal

I
.Cul
tur
alf
act
ors

Page41of41
 PRI
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Cul
tur
alf
act
orsar
ecomingfr
om thedi
ff
erentcomponent
srel
atedt
ocul
tur
eorcul
tur
alenvi
ronment
f
rom whi
cht
heconsumerbel
ongs.

Cul
tur
e

Cul
tur
eiscr
uci
alwheni
tcomest
ounder
standi
ngt
heneedsandbehavi
our
sofani
ndi
vidual
.

Throughouthisexistence,anindivi
dualwillbeinf
luencedbyhisfamil
y, hi
sfri
ends,hiscultural
envir
onmentorsoci etythatwill“
teach”him val
ues, pr
efer
encesaswel lascommonbehavi our sto
thei
rowncul t
ure.Forabr and,iti
si mport
anttounder st
andandt akei
nt oaccountt
hecul turalfactor
s
i
nherenttoeachmar ketortoeachsi t
uati
oni nordertoadaptit
sproductandi t
smar ket
ingst rategy.
Asthesewillpl
ayar oleint hepercept
ion,habit
s,behaviourorexpect
ationsofconsumer s.

Sub-
cul
tur
es:

Asocietyiscomposedofsever alsub-culturesinwhichpeoplecani denti

fy.Subculturesaregr oups
ofpeoplewhoshar ethesameval ues​basedonacommonexper ienceorasi mi l
arlif
estyleingeneral
.
Subcultur
esar ethenational
it
ies,reli
gions,ethni
cgroups,agegroups, genderoft heindivi
dual,
etc.
Thesubcul tur
esar eoft
enconsi deredbyt hebrandsforthesegment ati
onofamar ketinorderto
adaptapr oductoracommuni cati
onst rategytothevalues​
orthespeci f
icneedsoft his
segment .
Consumer sareusuall
ymor er ecepti
vetoproductsandmar ket
ingstrategi
est hat
specif
ical
lytargetthem.

Soci
alcl
asses:

Socialclassesaredef
inedasgr oupsmor eorlesshomogenousandrankedagai
nsteachot her
accordingt oafor
m ofsoci
alhierarchy.Evenifi
t’
sver
ylargegr
oups,
weusual l
yfindsimi
larvalues,
l
if
estyles,inter
est
sandbehavioursi nindi
vidual
sbel
ongingtot
hesamesocialclass.

Weoftenassumet
hreegener
alcat
egor
iesamongsoci
alcl
asses:l
owercl
ass,
middl
ecl
assand
uppercl
ass.

Peoplefrom di
ff
erentsoci
alcl
assest endtohavedi
ffer
entdesi
resandconsumptionpat
terns.
Dispar
iti
esresult
ingfr
om thedif
ferenceinthei
rpur
chasingpower.Accor
dingtosomeresearchers,
behaviourandbuyinghabitswouldalsobeawayofi denti
fi
cat
ionandbelongi
ngtoit
ssocialclass.

Beyondacommonf oundationtothewhol epopul

ati
onandtaki
ngintoaccountthatmany
counter
exampl
enaturall
yexist
,theyusuallydonotal
waysbuythesamepr oducts,donotchoosethe
samekindofvacat
ion,donotalwayswat chthesameTVshows, donotalwaysreadt hesame
magazines,
donothavet hesamehobbi esanddonotalwaysgointhesamet ypesofr et
ail
ersand
stor
es.

Forexample,
consumersfrom themiddl
eclassanduppercl
assgener
all
yconsumemor
ebal
anced
andhealt
hyfoodproduct
st hanthosefr
om thel
owercl
ass.

I
I.Soci
alf
act
ors

Socialf
act
orsareamongthefact
orsi
nfl
uenci
ngconsumerbehavi
oursigni
fi
cant
ly.Theyf
alli
nto
thr
eecategor
ies:r
efer
encegr
oups,f
amil
yandsocialr
olesandst
atus.

Ref
erencegr
oupsandmember
shi
pgr
oups:

Page42of42
 PRI
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Themember shi
pgr oupsofani ndi
vidualaresocialgroupstowhichhebelongsandwhi chwil
l
i
nfluencehim.Themember shipgroupsar eusuallyrelat
edtoit
ssoci
alorigi
n, age,placeofresi
dence,
wor k,
hobbies,l
eisure,
etc.
.Theinfl
uencel evelmayvar ydependi
ngonindividualsandgr oups.Buti
s
generall
yobservedcommonconsumpt iont r
endsamongt hemembersofasamegr oup.The
understandi
ngoft hespeci
ficofeachgr oupal l
owsbr andstobett
ert
argettheiradvertisi
ngmessage.

Moregeneral
ly,r
efer
encegroupsaredefinedasthosethatprovi
detotheindi
vidualsomepoint
sof
compari
sonmor eorlessdir
ectabouthisbehaviour
,li
fest
yle,
desir
esorconsumerhabi t
s.They
i
nfl
uencetheimaget hatt
heindi
vidualhasofhimselfaswellashisbehavi
our.Whetheri
tisa
membershipgrouporanon- member shi
pgroup.

Aspi
rat
ionalgr
oup

Theindi
vidualcanal
sobeinfl
uencedbyagr ouptowhichhedoesn’ tbelongyetbutwi
shestobepar
t
of
.Thisiscall
edanaspir
ati
onalgroup.Thisgroupwi
llhaveadirectinf
luenceontheconsumerwho,
wishi
ngtobelongtothi
sgroupandl ookl
ikeit
smember s,wi
llt
rytobuyt hesameproduct
s.

Somebr andshaveunderst
oodthisver
ywel
landcommuni
cat
e,i
mpl
ici
tl
yornot
,ont
he“
soci
al
benef
it
”pr ovi
dedbythei
rproduct
s.

Manybr andslookupt otargetopini

onleaderst
ospreadtheuseandpurchaseoft
hei
rproducti
na
soci
algroup,throughani nt
ernalperson.Ort
hroughasponsorshiporapar
tner
shi
pwitharefer
ence
l
eader(celebr
ity,act
or,musician,
athlet
e,et
c.)f
orlar
gergroups.

Fami
ly:

Thef amil
yismaybet hemostinfl
uenci
ngfactorforanindi
vidual
.Itformsanenvironmentof
sociali
zat
ioninwhichanindivi
dualwil
levol
ve,shapehispersonalit
y,andacquir
eval ues.Butal
so
developatti
tudesandopini
onsonvar i
oussubjectssuchaspol i
ti
cs,soci
ety,
socialrelat
ionsor
himselfandhisdesir
es.Butalsoonhisconsumerhabi t
s,hi
sper cepti
onofbrandsandt heproduct
s
hebuys.

Weallkept
,formanyofusandforsomepr
oduct
sandbr
ands,
t hesamebuyi
nghabi
tsand
consumpti
onpatt
ernsthatt
heoneswehadknowni
nourfami
ly.

Percept
ionsandf amilyhabi
tsgeneral
lyhaveast r
onginfluenceontheconsumerbuyi ngbehaviour.
Peoplewillt
endt okeepthesameast hoseacquiredwiththeirfami
li
es.Forexample,ifyouhave
neverdrunkCokedur ingyourchi
ldhoodandyourpar ent
shavedescr i
beditasapr oduct“ful
lof
sugarandnotgoodf orheal
th”
.Thereisfarlesschancethatyouaregoingtobuyi twhenyouwi ll
growupt hatsomeonewhodr i
nksCokesi ncechil
dhood.That ’
swhyit’
simportantforbrandstobe
seenasaf ami l
ybrandinordertobecomeaconsumerhabi tf
orpar
entsandchildrenwhent heywill
becomeadul ts.

Soci
alr
olesandst
atus:

Theposit
ionofanindivi
dualwit
hinhisfamil
y,hiswork,hi
scountr
yclub,hisgr
oupoffri
ends,etc.
.
canbedefinedasroleandsoci
alstatus.Asocialr
oleisasetofat
ti
tudesandacti
vit
iesthatan
i
ndivi
dualissupposedtohaveanddoaccor dingtohisprof
essi
onandhi sposi
ti
onatwor k,hi
s
posit
ioni
nt hef
amily,hi
sgender,et
c..–andexpectati
onsofthepeoplearoundhi
m.

Socialst
atusmeanwhi l
erefl
ect
stherankandt heimpor t
anceoft
hisroleinsociet
yorinsocial
groups.Somear emorevaluedthanother
s.Thesoci alr
oleandstat
uspr ofoundl
yinfl
uencesthe
consumerbehaviourandhispurchasi
ngdecisions.Forexample,
aconsumermaybuyaFer rariora
Porscheforthequal
ityoft
hecarbutalsofortheexternalsi
gnsofsocialsuccessthatthi
skindof
carsrepresent
s.Moreover
,iti
sli
kelyt
hataCEOdr i
vingasmallcarli
keaFor dFi
estaora

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VolkswagenGol
fwouldbet
akenl
essser
iousl
ybyi
tscust
omer
sandbusi
nesspar
tner
sthani
fhei
s
dri
vingaGermanluxur
ycar
.

Again,manybr
andshaveunderstoodi
tbycreat
ingani
mageassoci
atedwi
tht
hei
rpr
oduct
s
ref
lect
ingani
mport
antsoci
alroleorst
atus.

I
II
.Per
sonalf
act
ors:

Decisi
onsandbuyingbehaviourar
eobvi
ousl
yalsoinfl
uencedbythechar
act
eri
sti
csuni
quet
oa
part
icul
arper
son.E.g.Sex,
Race,Age,
Educat
ion,Occupat
ionetc.

Age:

Aconsumerdoesnotbuyt hesameproductsorservi
cesat20or70year s.Hislif
estyl
e,val
ues,
envi
ronment,
activit
ies,
hobbiesandconsumerhabitsevolvethr
oughouthisli
fe.Forexample,duri
ng
hisl
if
e,aconsumercoul dchangehisdi
etfr
om unheal t
hyproducts(
fastf
ood,readymeal s,et
c..
)toa
heal
thi
erdi
et,duringmid-l
ifewit
hfamil
ybeforeneedingtofol
lowalit
tlel
ateralowchol est
eroldi
etto
avoi
dhealt
hpr oblems.

Thefactor
si nf
luencingthebuyingdecisi
onprocessmayal sochangewit
hti
me.Thefamil
ylif
ecycl
e
oft
hei ndi
vidualwillal
sohaveani nfl
uenceonhisvalues,l
if
est
ylesandbuyi
ngbehavi
ourdependi
ng
whetherhe’ssingle,i
nar el
ati
onship,i
nar el
ati
onshi
pwi t
hkids,et
c.

Forabrandorar
etail
er,i
tmaybeinterest
ingtoident
if
y,under
stand,measureandanal
yzewhatar
e
thecr
it
eri
aandpersonalfact
orst
hatinfl
uencetheshoppingbehavi
ourofthei
rcust
omersinor
derto
adapt
.

Pur
chasi
ngpower
:

Thepurchasi
ngpowerofani ndivi
dualwillhaveadeci
siveinfl
uenceonhi sbehavi
ourand
pur
chasingdecisi
onsbasedonhi sincomeandhi scapi
tal.Thisobviousl
yaff
ectswhathecanaff
ord,
hi
sperspecti
veonmoneyandt helevelofimport
anceofpriceinhispurchasi
ngdecisi
ons.I
tal
so
pl
aysar ol
einthekindofr
etail
erswher ehegoesorthekindofbr andshebuys.

Li
fest
yle:

Theli
fest
yleofanindivi
duali
ncludesallofit
sact i
vit
ies, i
nter
est
s,values​
andopini
ons.Thelif
est
yle
ofaconsumerwillinf
luenceonhisbehaviourandpur chasingdeci
sions.Forexample,
aconsumer
wit
haheal t
hyandbal ancedl
ifest
ylewil
lprefertoeator ganicpr
oduct sandgotospecif
icgrocer
y
st
ores,wi
lldosomej oggingregul
arly(
andt heref
orewi llbuyshoes,clot
hesandspecif
icproduct
s),
et
c..

Per
sonal
it
yandsel
f-concept
:

Personali
tyi
sthesetoft rai
tsandspecificcharacteri
sti
csofeachi ndividual .Iti
sthepr oductoft
he
i
nteracti
onofpsychologicalandphysiologicalcharact
eristi
csoftheindi vidualandr esult
sin
constantbehavi
ours.I
tmat eri
ali
zesint
osomet rait
ssuchasconf i
dence, sociabil
it
y,autonomy,
chari
sma, ambit
ion,opennesst oother
s, shyness,curi
osity,adapt
abil
ity, etc..

Whilethesel
f-conceptistheimaget hattheindivi
dualhas–orwoul dli
ketohave–ofhim andhe
conveystohisentourage.Thesetwoconcept sgreat
lyinf
luencethei
ndivi
duali
nhischoi
cesandhis
wayofbeinginever ydayli
fe.Andthereforealsohisshoppingbehavi
ourandpurchasi
nghabit
sas
consumer.

I
nor
dert
oat
tr
actmor
ecust
omer
s,manybr
andsar
etr
yingt
odevel
opani
mageandaper
sonal
it
y

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 PRI
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t
hatconveyst
het
rai
tsandval
ues​
-realordesi
red–ofconsumer
stheyar
etar
get
ing.

Forexampl e,si
nceitsl
aunch,Appl
eculti
vatesanimageofinnovat
ion,
creati
vit
y,bol
dnessand
singular
it
ywhi chisabl
etoattr
actconsumer swhoident
if
ytotheseval
ues​andwhof eelval
ued–i
n
theirsel
f-concept–bybuyingaproductfr
om Apple.

Becauseconsumersdonotjustbuyproductsbasedontheirneedsorf
ort
heiri
ntri
nsi
cfeat
uresbut
theyarealsol
ooki
ngforpr
oductsthatareconsi
stentandreinf
orcet
heimagetheyhaveof
themselvesort
heywouldl
iketohave.

Themoreaproductorbrandcanconveyaposit
iveandf
avour
abl
esel
f-i
maget
otheconsumer
,the
morei
twil
lbeappreci
atedandregul
arlypur
chased.

Psychol
ogi
calf
act
ors
Psychol
ogi
calf
act
orsi
ncl
ude:

Mot
ives-
-

Amot i
veisani nt
ernalener
gizingforcethatori
entsaperson'
sacti
vit
iestowardsat
isf
yinga
needorachievingagoal.
Acti
onsareef f
ectedbyasetofmot i
ves,notjustone.I
fmarket
erscanidenti
fymoti
vesthen
theycanbet
t erdevel
opamar ket
ingmi x.
.

Masl
owHi
erar
chyofNeeds.
Ther
eisneedt
odeter
mineatwhatl
eveloft
hehi
erar
chyar
etheconsumer
sar
eatdet
ermi
newhat
moti
vat
esthei
rpur
chases

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Per
cept
ion-
-
Percepti
onistheprocessofselecti
ng,
organi
zingandinterpreti
nginf
or mationinputst
opr oduce
meaning.i
.ewechosewhati nfowepayat t
enti
onto,organizeitandinterpreti
t.
I
nformati
oninputsarethesensationsr
ecei
vedthroughsight,tast
e,hearing,smellandtouch.

Select
iveExposur
e-selecti
nputstobeexposedtoourawareness.Moreli
kel
yifi
tisl
inkedt
oan
event,
sati
sfi
escurrentneeds,i
ntensi
tyofi
nputchanges(
sharppr i
cedrop)
.

Sel
ect
iveDi
stor
ti
on-
Changi
ng/
twi
sti
ngcur
rentr
ecei
vedi
nfor
mat
ion,
inconsi
stentwi
thbel
ief
s.

Sel
ecti
veRet
enti
on-
Rememberi
nput
sthatsupportbel
ief
s,f
orget
sthosethatdon'
t.
I
nter
preti
ngi
nfor
mati
oni
sbasedonwhatisal
readyfamil
iar
,onknowledgethati
sstor
edi
nthe
memory.

Lear
ning-
Lear ngi
ni stheprocessthr
oughwhi char elati
velypermanentchangei nbehaviourresult
sfrom t
he
consequencesofpastbehaviour.
Mar ket
ersneedt ounder st
andi ndi
vidual’
scapacityt
olearn.
Learni
ng,changesinaperson'sbehaviourcausedbyi nformationandexper i
ence.Theref
oreto
changeconsumers'behaviouraboutyourpr oduct,needt ogivethem newi nfor
mationof
product
..
.f
reesampleetc.Whenmaki ngbuyi ngdeci si
ons, buyersmustpr ocessinf
ormation.
Knowledgeisthefamil
iar
it
ywi tht
hepr oductandexper t
ise.Inexperi
encebuyersoftenusepr i
cesas

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 PRI
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ani
ndi
cat
orofqual
it
ymor
ethant
hosewhohaveknowl
edgeofapr
oduct
.

At
ti
tudes-
Iti
st heknowl edgeandposi t
iveandnegat ivef eel
ingsaboutanobj ectoractivit
y-maybet angibl
eor
i
ntangible,l
ivi
ngornon-l iving.Driveperceptions. I
ndivi
duallearnsat ti
tudesthroughexper i
enceand
i
nteracti
onwi thotherpeople.Consumerat tit
udest owar daf i
rm andi t
spr oductsgreatl
yinfl
uencethe
successorf ai
lureofthefi
r m'smar ketingstrategy.At t
it
udesandat ti
tudechangear ei
nfluencedby
consumer s’personali
tyandl if
estyle.Consumer sscreeninformationthatconf l
ict
swi t
htheir
att
it
udes.Di st
ortinf
ormationt omakei tconsistentandsel ecti
velyretai
ni nf
ormat i
onthatreinfor
ces
ouratti
tudesTher eisadifferencebet weenat t
itudeandi ntenti
ont obuy( abil
itytobuy).

Or
gani
sat
ionalbuyerbehavi
our

Theor ganizati
onalbuyi
ngprocessisent i
rel
ydif
fer
entf rom t
heconsumerbuyi ngprocess.While
buyi
ngdeci si
onsaremader elati
vel
yeasi l
yandqui cklybyindividualcust
omers,organi
sati
onal
buyi
ngi nvolvesthor
oughanddeepanal ysi
s.Organi
zationspurchaseproductsr
angingfrom hi
ghly
complexmachi nerytosmal
lcomponents.

I
nanor gani
zati
on,thepurchasedecisionsareinf
luencedbyseverali
ndi
vidualsandar
enotmadein
i
sol
ati
onbyani ndi
vidual
.Organizat
ionalbuyersaremor econcer
nedaboutt hepri
ceandqual
it
yof
t
heproductalongwiththeservi
cebeingpr ovi
dedbyt hevendor

Or
gani
sat
ionalbuyi
ngr
oles

1.I
nit
iat
ors:

Usual
lyt
heneedf
orapr
oduct
/i
tem andi
ntur
nasuppl
ierar
isesf
rom t
heuser
s.Butt
her
ecanbe

occasi
onswhent
het
opmanagement
,mai
ntenanceort
heengi
neer
ingdepar
tmentoranysuch

r
ecogni
seorf
eelt
heneed.Thesepeopl
ewho“
ini
ti
ate”orst
artt
hebuyi
ngpr
ocessar
ecal
led

i
nit
iat
ors.

2.User
s:

Undert
hiscat
egor
ycomeuser
sofvar
iouspr
oduct
s.I
ftheyar
etechni
cal
lysoundl
iket
heR&D,

engi
neer
ingwhocanal
socommuni
cat
ewel
l.Theypl
ayavi
talr
olei
nthebuyi
ngpr
ocess.Theyal
so

actasi
nit
iat
ors.

3.Buyer
s:

Theyar
epeopl
ewhohavef
ormalaut
hor
it
ytosel
ectt
hesuppl
ierandar
ranget
hepur
chaset
erms.

Theypl
ayaver
yimpor
tantr
olei
nsel
ect
ingvendor
sandnegot
iat
ingandsomet
imeshel
ptoshape

Page47of47
 PRI
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t
hepr
oductspeci
fi
cat
ions.

Themaj
orr
olesorr
esponsi
bil
it
iesofbuyer
sar
eobt
aini
ngpr
oposal
sorquot
es,
eval
uat
ingt
hem and

sel
ect
ingt
hesuppl
ier
,negot
iat
ingt
het
ermsandcondi
ti
ons,
issui
ngofpur
chaseor
der
s,f
oll
owup

andkeepi
ngt
rackofdel
iver
ies.Manyoft
hesepr
ocessesar
eaut
omat
ednowwi
tht
heuseof

comput
erst
osavet
imeandmoney.

4.I
nfl
uencer
s:

Techni
calper
sonnel
,exper
tsandconsul
tant
sandqual
if
iedengi
neer
spl
ayt
her
oleofi
nfl
uencer
sby

dr
awi
ngspeci
fi
cat
ionsofpr
oduct
s.Theyar
e,si
mpl
yput
,peopl
eint
heor
gani
sat
ionwhoi
nfl
uence

t
hebuyi
ngdeci
sion.I
tcanal
sobet
het
opmanagementwhent
hecosti
nvol
vedi
shi
ghandbenef
it
s

l
ongt
erm.I
nfl
uencer
spr
ovi
dei
nfor
mat
ionf
orst
rat
egi
cal
lyeval
uat
ingal
ter
nat
ives.

5.Deci
der
s:

Amongt
hemember
s,t
hemar
ket
ingper
sonmustbeawar
eoft
hedeci
der
sint
heor
gani
sat
ionandt
ry

t
oreacht
hem andmai
ntai
ncont
act
swi
tht
hem.Theor
gani
sat
ionalf
ormalst
ruct
uremi
ghtbe

decept
iveandt
hedeci
sionmi
ghtnotevenbet
akeni
nthepur
chasi
ngdepar
tment
.

Gener
all
y,f
orr
out
inepur
chases,
thepur
chaseexecut
ivemaybet
hedeci
der
.Butf
orhi
ghval
ueand

t
echni
cal
lycompl
expr
oduct
s,seni
orexecut
ivesar
ethedeci
der
s.Peopl
ewhodeci
deonpr
oduct

r
equi
rement
s/speci
fi
cat
ionsandt
hesuppl
ier
sar
edeci
der
s.

6.Appr
over
s:

Peopl
ewhoaut
hour
iset
hepr
oposedact
ionsofdeci
der
sorbuyer
sar
eappr
over
s.Theycoul
dal
sobe

per
sonnelf
rom t
opmanagementorf
inancedepar
tmentort
heuser
s.

7.Gat
eKeeper
s:

Agat
ekeeperi
sli
keaf
il
terofi
nfor
mat
ion.Hei
stheonet
hemar
ket
erhast
opasst
hroughbef
orehe

r
eachest
hedeci
sionmaker
s.Under
standi
ngt
her
oleoft
hegat
ekeeperi
scr
it
icali
nthedevel
opment

ofi
ndust
ri
almar
ket
ingst
rat
egi
esandt
hesal
esper
son’
sappr
oach.Theyal
lowonl
ythati
nfor
mat
ion

f
avour
abl
etot
hei
ropi
niont
ofl
owt
othedeci
sionmaker
s.

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Char
act
eri
sti
csofI
ndust
ri
alMar
ket

I
ndust
ri
almar
keti
schar
act
eri
zedbyt
hef
oll
owi
ng:

(
i) Thei ndust
ri
almarket
ersdealwi
thver
yfew number
sofbuyer
swhobuyi
nlar
gequant
it
ies
whencomparedwit
hconsumermarket
.

(i
i) Busi nessorindustr
ialmar ket
sar emoregeographi
cconcentr
atedt
hanconsumermar ket
s.
Avai
labi
li
tyofnat ur
alresources,raw materi
als,l
abour
s,manageri
alandtechni
calexper
ti
seand
capi
talmaywar r
antgeographicalconcent
rat
ion

(i
ii
) Manyindustri
alproductshavei
nel
asti
cdemand.Thisi
mpli
esthatdemandf
ormanyi
ndust
ri
al
pr
oduct
sisnotaffectedbychangesi npri
cemostl
yint heshor
trun.Demandforsomei
ndust
ri
al
pr
oduct
sispr
iceinsensi
tive.

(v) Busi
nessorindustr
ialproductf
acesderi
veddemand.Thedemandf ori
ndust
ri
alproductsisby
demandf oranot
herindustr
ialorconsumerproduct.Fori
nst
ance,t
her
ateofdemandforsteelbyan
automobil
ecompanyi snecessit
atedbydemandf orcars.

(vi
)Indust
ri
alpurchaserequi
reswel
l-
trai
nedexper
tsorpr
ofessi
onalandknowl
edgeabl
ebuyer
s.
Requi
resaf
tersal
esservi
ces.

(vi
i)Businessmar keti
nvolvesf
ormalized buyi
ng pr
ocess.Busi nessnormal
lyasksfordet
ail
ed
productspeci
fi
cati
on,purchaseorder
,bi ddi
ngorbargain,suppli
ersourci
ngandformalappr
oval.
Thisisunli
keconsumerbuyingwhi
chdoesnotunder gothisprocess.

(
vii
i)Di
rectDi
str
ibuti
on:Mosti
ndust
ri
alpr oductsar
edist
ri
buteddi
rect
lyt
othebuyer
/userespeci
all
y
wheret
heordersizei
slar
geandspecialdeli
veryarr
angementismade.

(i
x) ComplexDecisi
on:Pur chaseofi
ndust
ri
alproductsi
nvolveshugeamountofmoney,compl
ex
andtechni
calconsi
derat
ions,economi
cconsider
ati
on,par
ti
cipant
setc,
thus,
maki
ngbuyi
ngdecisi
on
complex.

(
x) I
tinvol
vesmor
etechni
cal
lycompl
expr
oduct
s.

Fact
orsAf
fect
ingt
hePur
chaseofI
ndust
ri
alGoods

I
ndustr
ialbuyer
sareinfl
uencedbybot
heconomicandper
sonalf
actor
sinthei
rprocessofmaking
buyi
ngdecisi
ons.Thefol
lowi
nghavebeeni
dent
if
iedasf
act
orsi
nfl
uenci
ngthepurchaseofi
ndust
rial
goods:

Envi
r onmentalfactor
s:Thet hrustofenvi ronmentalfactor
si nfl
uencingthepurchaseofi ndustri
al
goodscent r
esoneconomi cf actors.Purchaseofi ndustri
algoodsi saf f
ectedbylevelofpr i
mar y
demand,economi ctrends,costofmoney,gover nmentpoli
cies( monetar
y,physi
calandfiscal)
,and
degreeofeconomi cuncer t
ainties,etc.I
ndustrialbuyersareal soinfl
uencedbycultural(tr
adit
ion,
customs,nor ms,value,reli
gion,et c)
,poli
tico-
economi cprevalence(central
lypl
anned,freemar ket
economy, et
c),t
echnol ogi
calandcompet i
tivedevelopmentint heeconomy.

Or
gani
zat
ionalf
act
or:Thepol
ici
es,obj
ect
ive,pr
oducer
s,syst
emsandst
ruct
ureofanor
gani
zat
ion

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i
nfluenceindustr
ialbuyi
ng.Allindustri
alpurchasesmadebyanor ganizat
ionmustali
gnwithits
poli
cies,obj
ect
ives,andprocedure.Suchpoli
ciesandstr
uctur
edeter
mi nethenumberofpeopl
ethat
shouldinvol
veinthebuyingdecision,
thei
revaluat
ingcr
it
eri
a,andwhot heyare.

I
ndivi
dualFact
or:I
ndustri
alpur
chaseisinf
luencedbydif
fer
encesinbuyingdeci
sionparti
cipant
s.For
i
nstance,onepart
ici
pantmaydemandf or1000unitsofagi venpr
oductwhileanothermaydemand
forl
ess.Agai
n,onemayl i
kequali
tygoodshenceexpensi
vewhi l
eanothermayli
keinferi
orandcheap
goods.

I
nterper
sonalFactor
:Thisi
nfl
uencesi
ndustri
albuyingbasedonrel
ati
onshipexi
sti
ngbetweenbuying
deci
sion par
ti
cipant
s.Good inter
act
ion and coherenceexi
sti
ng between t
hesepar t
ici
pant
swi l
l
i
ncreasechancesofqual i
tybuyingdeci
sion.However ,t
herever
seist hecasef orpoororloose
i
nteract
ionandcoherence.

Busi
nessBuyerBehavi
our

TypesofBuyi
ngSi
tuat
ions

Themajortypesofbuyi
ngsi
tuat
ionhavebeeni
dent
if
ied,
namel
y;st
rai
ghtr
ebuy,
modi
fi
edr
ebuy,
and
newtask.

St
rai
ghtRebuy:St
rai
ghtr
ebuyoccur
swher
ebuyer
shaveal
readyest
abl
ishedor
derspeci
fi
cat
ion
andal lt
heirsubsequentor
derpl acement
smustf oll
owt hesamespecifi
cationwithoutmodi f
icat
ions.
Wher eabuyeri ssati
sfi
edwi t
hpr evi
ousbuying,heselectsthesuppl
ierthatmadet heor der.Thisis
call
ed in-suppli
er(
s).Thei n-suppli
ertendst o maint
ain productquali
ty,stablepr i
ceand save
reorderi
ngt i
me.The“ out
”suppl i
ermayof f
ersomet hi
ngnew,whi chmaynotguar anteesatisf
action
tothebuyer .

Modi
fi
edRebuy:
Her
e,t
hebuyeri
ntendst
omodi
fyt
hepr
oduct(
int
ermsofqual
it
y,pr
iceand
feat
ures)andsuppli
er.Thebuyercandecidetoinvol
veallavail
abl
eandwi l
li
ngsuppli
ersi
nordert
o
maket heappropr
iat
echoice.I
nt hi
scase,in-
suppli
erwillbecomepressur
izedoranxi
oustosubmit
proposalt
hatcancutanedgeforhim whil
eout-suppl
ier
scanseei tasanopport
unit
ytostr
ike.

NewTask:
Thi
soccur
swher
eacompanyi
sbuyi
ngapr
oductf
ort
hef
ir
stt
ime.I
nthi
scasel
arge
buyingdeci
sionpar
ti
cipants,gr
eat
err
isk,hi
ghercostar
einvol
vedandgr
eat
eref
for
tst
osour
ceand
col
lecti
nfor
mationar
er equir
ed.

Deci
sion-
maki
ngPr
ocessoft
heI
ndust
ri
alBuyerorSt
epsi
nIndust
ri
alBuyi
ng

Page50of50
 PRI
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PLESOFMARKETI
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Pr
obl
em Recogni
ti
on

Thebuyi ngpr ocessbegi nswhensomeonei nthecompanyr ecognizesapr oblem orneedt hatcanbe

metbyacqui r
ingaspeci f
icproductorser vice.Problem recogni t
ioncanr esultfrom internalor
externalsti
mul i
.Internal
ly,t
hecompanymaydeci detolaunchanewpr oductt hatr equiresnew
product i
onequi pmentandmat eri
als.Oramachi nemaybr eakdownandneednewpar ts.Per hapsa
purchasingmanageri sunhappywi thacur rentsuppl i
er'
spr oductqual i
ty,service,orpr i
ces.
Externall
y,thebuyermaygetsomenewi deasatat radeshow, seeanad, orreceiveacal lfr
om a
salespersonwhoof fersabetterproductoral owerpr i
ce.Inf act,
intheiradver t
ising,busi ness
mar ketersoft
enal ertcustomerstopot entialproblemsandt henshowhowt hei
rpr oductspr ovi
de
soluti
ons.

Gener
alNeedDescr
ipt
ion

Havingr ecogni
zedaneed, t
hebuyernextpr eparesageneralneeddescr ipti
ont hatdescr i
best he
characteri
sti
csandquant i
tyoftheneededi t
em.Forstandarditems, t
hispr ocesspr esentsfew
problems.Forcompl exit
ems, however,t
hebuyermayhavet owor kwithot hers—engi neers,users,
consul t
ants—todef
inetheitem.Thet eam maywantt oranktheimpor t
anceofr eli
abili
ty,durabil
it
y,
pri
ce, andotherat
tri
butesdesiredintheit
em.Int hi
sphase,thealertbusinessmar ketercanhel pthe
buyersdef i
nethei
rneedsandpr ovi
deinf
ormationaboutthevalueofdi f
ferentpr oduct
characteri
sti
cs.

Pr
oductSpeci
fi
cat
ion

Thebuyingor ganizationnextdevel opsthei t

em'stechnicalproductspeci f
icati
ons, oft
enwiththehel
p
ofavalueanal ysi
sengi neeri
ngteam.Val ueanalysisisanappr oachtocostr eductioninwhich
component sar estudiedcar ef
ullytodetermineift
heycanber edesigned,standardized,ormadeby
l
esscost l
ymet hodsofpr oducti
on.Thet eam decidesont hebestpr oductcharacterist
icsand
speci
fi
est hem accor dingly.Sel
lers,too,
canuseval ueanal ysisasat ooltohelpsecur eanew
account.Byshowi ngbuyer sabet terwayt omakeanobj ect,
out si
desellerscant urnstrai
ghtr
ebuy
si
tuati
onsi nt
onew- tasksi t
uati
onst hatgivethem achancet oobtainnewbusi ness.

Suppl
ierSear
ch

Thebuyernowconduct sasuppl i
ersearchtofindt hebestvendor
s.Thebuyercancompi l
easmal l
l
istofquali
fi
edsuppli
ersbyreviewingtradedirectori
es,doi
ngacomput ersearch,
orphoningother
companiesforrecommendations.Today, moreandmor ecompaniesareturni
ngtotheInter
netto
fi
ndsupplier
s.Formarket
ers,thishaslevell
edt heplayi
ngfiel
d—theInt
ernetgi
vessmallersuppl
ier
s
manyoft hesameadvantagesasl argercompet it
ors.

Thesedays, manycompani esarevi

ewingsuppli
ersearchmor eassupplierdevel
opment .These
companieswantt odevelopasystem ofsuppl
ier
-par
tnersthatcanhelpitbringmorevaluet oit
s
customers.Forexample,Wal-MarthassetupaSupplierDevelopmentDepar tmentwhi
chseeksout
quali
fi
edsupplier
sandhel psthem t
hroughthecomplexWal -Martbuyi
ngpr ocess.I
toff
er saSuppli
er
ProposalGuideandmai ntai
nsaWebsi teoff
eri
ngadvicetosupplier
swishingt odobusinesswith
Wal-Mart.

Thenewert hebuyingtask,andt hemorecompl exandcost l

yt heit
em,thegreat
ertheamountofti
me
thebuyerwillspendsearchi
ngf orsuppl
iers.Thesuppl ier
'staskistogetli
stedi
nmaj ordi
rect
ori
es
andbuildagoodr eputat
ioninthemar ketplace.Salespeopleshouldwatchforcompaniesinthe
processofsearchingf
orsuppliersandmakecer t
ainthattheirfi
rmisconsi
dered.

Pr
oposalSol
ici
tat
ion

Page51of51
 PRI
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PLESOFMARKETI
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I
ntheproposalsolicit
ationstageofthebusinessbuyingprocess,t
hebuyerinvi
tesqual
if
iedsuppl
ier
s
t
osubmitpr oposals.I
nr esponse,somesupplierswil
lsendonlyacatalogorasalesper
son.However,
whentheitem i
scompl exorexpensive,t
hebuyerwi l
lusual
lyrequi
redetai
ledwrit
tenpr
oposalsor
f
ormalpresentati
onsf r
om eachpot enti
alsuppli
er.

Businessmarketer
smustbeski l
ledi
nr esearchi
ng,wri
ti
ng,andpresent
ingproposalsinresponset
o
buyerproposalsol
icit
ati
ons.Pr
oposalsshouldbemar ket
ingdocuments,notj
usttechnical
documents.Presentati
onsshoul
dinspireconfi
denceandshouldmaket hemarketer'
scompany
st
andoutf rom t
hecompet i
ti
on.

Suppl
ierSel
ect
ion

Themember softhebuyi ngcent ernowr evi ewt hepr oposal sandsel ectasuppl ierorsuppliers.
Duringsuppl i
erselection,thebuyi ngcent eroftenwi lldr awupal istofthedesi redsuppli
erat tri
butes
andt heirrel
ati
veimpor t
ance.I nonesur vey, purchasi ngexecut iveslistedthef oll
owingattri
but esas
mosti mpor t
antininfluencingt her elationshi pbet weensuppl ierandcust omer:qual i
typroduct sand
services,on-ti
medel ivery,ethicalcor por atebehavi or, honestcommuni cation,andcompet itive
pri
ces.Ot herimpor t
antf actorsi ncluder epai randser vi cingcapabi l
it
ies,technicalaidandadvi ce,
geogr aphicl
ocation,performancehi story, andr eputat i
on.Themember soft hebuyingcent erwi llr
ate
suppl i
ersagainsttheseat tri
but esandi dent if
ythebestsuppl i
ers.

Buyersmayat t
emptt onegot
iat
ewi thpref
erredsuppli
ersforbett
erpri
cesandter
msbef or
emaking
thefi
nalselecti
ons.Intheend,theymaysel ectasingl
esupplierorafewsuppl
ier
s.Manybuyers
pref
ermul t
iplesourcesofsuppliestoavoi
dbei ngtot
all
ydependentononesupplierandtoal
low
comparisonsofpr i
cesandper f
or manceofseveralsuppl
iersoverti
me.

Or
der
-Rout
ineSpeci
fi
cat
ion

Thebuyernowpr eparesanor der-routinespeci f

icat i
on.Itincludest hefinalorderwiththechosen
supplierorsuppl iersandlist
si temssuchast echni calspeci f
icat
ions,quant i
tyneeded, expect edti
me
ofdelivery,returnpolici
es,andwar r
ant i
es.Inthecaseofmai ntenance, repair,
andoper atingitems,
buyersmayusebl anketcontractsratherthanper i
odi cpurchaseor ders.Abl anketcontractcreatesa
l
ong- termr elati
onshipinwhi cht hesuppl ierpromi sestor esupplyt hebuyerasneededatagr eed
pri
cesf orasett i
meper iod.Abl anketor dereli
mi nat estheexpensi vepr ocessofr enegotiati
nga
purchaseeacht i
met hatstockisr equired.Italsoal lowsbuyer stowr i
temor e, butsmaller,purchase
orders,resultinginlowerinvent orylevelsandcar r
yi ngcost s.

Blanketcontr
acti
ngleadstomoresingle-
sourcebuyingandtobuyingmor ei
temsfrom t
hatsource.
Thispracti
celocksthesuppli
eri
nti
ghterwiththebuyerandmakesi tdi
ff
icul
tforot
hersuppl
ier
sto
breakinunlessthebuyerbecomesdissati
sfi
edwithpri
cesorser
vice.

Per
for
manceRevi
ew

Inthi
sstage,thebuyerrevi
ewssupplierperf
ormance.Thebuyermaycontactuser
sandaskt hem t
o
rat
ethei
rsat i
sfact
ion.Theper
formancer evi
ewmayl eadthebuyert
oconti
nue,modif
y,ordropthe
arr
angement .Thesell
er'
sjobistomoni t
orthesamef act
orsusedbythebuyert
omakesur ethatt
he
sel
leri
sgivingtheexpectedsati
sfact
ion.

Wehavedescr ibedt hest agest hatt ypicallywoul doccuri nanew- taskbuyi ngsituat
ion.Theeight -
stagemodelpr ovidesasi mpl eviewoft hebusi nessbuyi ng- decisionprocess.Theact ualprocessis
usuallymuchmor ecompl ex.Inthemodi fi
edr ebuyorst raightrebuysi t
uation,someoft hesest ages
woul dbecompr essedorbypassed.Eachor ganizationbuysi nit
sownway, andeachbuyi ng
sit
uat i
onhasuni quer equirement s.Di ff
erentbuyi ngcent erpar t
icipantsmaybei nvol
vedatdi f
ferent
stagesoft hepr ocess.Althoughcer tainbuyi ng- processst epsusual l
ydooccur ,buyersdonotal ways
foll
owt hem inthesameor der,
andt heymayaddot herst eps.Often, buyerswi llr
epeatcertai
nst ages
ofthepr ocess.Finally,acust omerr elati
onshipmi ghtinvolvemanydi ff
erenttypesofpur chases
ongoi ngatagi ventime, allindiff
er entst agesoft hebuyi ngpr ocess.Thesel l
ermustmanaget he
totalcustomerr elat
ionshi p,notjusti ndividualpur chases.

Page52of52
 PRI
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Segment
ati
on,
Tar
get
ing,
andPosi
ti
oni
ng

Amar
ketisanaggr
egat
eofpeopl
ewho, asi
ndividual
soror
gani
zat
ions,
haveneedsforproductsi
n
apr
oductcl
assandwhohavetheabi
li
ty,
will
ingnessandaut
hori
tyt
opurchasesuchproducts.

Segment
ati
on,
tar
get
ing,
andposi
ti
oni
ngt
oget
hercompr
iseat
hreest
agepr
ocess.

Wef
ir
st:

(
1)Det
ermi
newhi
chki
ndsofcust
omer
sexi
st,
then

(
2)Sel
ectwhi
choneswear
ebestof
ftr
yingt
oser
veand,
final
ly,

(3)I
mpl
ementoursegment
ati
onbyopti
mizi
ngourpr
oducts/
ser
vicesf
orthatsegmentand
communicat
ingt
hatwehavemadethechoi
cet
odist
ingui
shoursel
vesthatway.

Page53of53
 PRI
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PLESOFMARKETI
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Segment ati
oninvol
vesfi
ndi ngoutwhatki
ndsofconsumerswit
hdiff
erentneedsexi
st.I
ngener
al,
it
holdstruethat“Youcan’tbeallt
hingst
oallpeopl
e,
”andexperi
encehasdemonst r
atedt
hatf
ir
ms
thatspecial
izei
nmeet i
ngt heneedsofonegroupofconsumer
soveranothertendtobemore
profi
table.

REASONSFORSEGMENTI
NGMARKETS

Thereareseveralimportantr
easonswhybusinessesshoul
dat
temptt
osegmentt
hei
r
marketscaref
ully.Thesearesummarisedbel
ow

Page54of54
 PRI
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PLESOFMARKETI
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 Bet
termat
chi
ngofcust
omerneeds

Cust
omerneedsdi
ff
er.Creat
ingsepar
ateof
fer
sforeachsegmentmakessenseandpr
ovi
des
cust
omer
swi t
habettersol
ution

 Enhancedpr
ofi
tsf
orbusi
ness

Exceptf
orfeworgani
zati
onsthatarenotpr
ofi
tori
ent
ed,Mostbusinessesar eset
upt omake
prof
it
s.Howevercust
omer shavedif
fer
entdi
sposabl
eincome.Theyare,theref
ore,dif
fer
entin
howsensit
ivetheyar
etopr i
ce.Bysegmenti
ngmarkets,
busi
nessescanr aiseaverageprices
andsubsequentl
yenhanceprofi
ts

 Bet
teroppor
tuni
ti
esf
orgr
owt
h

Marketsegmentat
ioncanbui
ldsal
es.Forexampl
e,cust
omerscanbeencour
agedto"t
rade-
up"af
ter
bei
ngintroducedt
oaparti
cul
arproductwi
thanint
roduct
ory,
lower
-pr
icedproduct

 Ret
ainmor
ecust
omer
s

Customercircumstanceschange,forexampletheygrowolder
,formfamili
es,changejobsorget
promoted,changetheirbuyingpatt
erns.Bymarketi
ngproduct
st hatappealt
ocustomer satdi
ff
erent
stagesoftheirl
if
e("l
if
e-cycle"
),abusinesscanret
aincust
omerswhomi ghtother
wiseswitcht
o
competingproductsandbr ands

 Tar
getmar
ket
ingcommuni
cat
ions

Busi
nessesneedtodel i
vertheirmarketi
ngmessaget oarelevantcust
omeraudi
ence.Ift
hetarget
marketi
stoobroad,thereisast r
ongr i
skthat(1)t
hekeycust omersar
emissedand(2)thecostof
communicat
ingtocust omersbecomest oohigh/unprof
it
able.Bysegmenti
ngmarkets,t
hetarget
cust
omercanber eachedmor eoft
enandatl owercost.

 Gai
nshar
eoft
hemar
ketsegment

Unlessabusi nesshasast r
ongorl eadingshareofamar ket
,iti
sunlikel
yt obemaxi misingit
s
profit
abil
it
y.Mi norbrandssuff
erfrom lackofscaleeconomiesinproductionandmar keti
ng,
pressuresfrom distr
ibutor
sandl i
mi t
edspaceont heshel
ves.Throughcar ef
ulsegment ati
onand
targeti
ng,businessescanof t
enachi evecompet i
ti
veproducti
onandmar ket i
ngcostsandbecomet he
preferr
edchoiceofcust omersanddi st
ribut
ors.I
notherwords,segmentationoffer
stheoppor tuni
ty
forsmal l
erfi
rmst ocompet ewithbiggerones.

Cr
it
eri
aneededf
orsegment
ati
on

Measurabl
e:Asegmentshoul
dbemeasurabl
e.I
tmeansyoushouldbeabl
etot
ellhowmany
pot
enti
alcust
omersandhowmanybusinessesareoutt
her
einthesegment
.

Accessi
ble:Asegmentshouldbeaccessiblethroughchannel
sofcommuni
cat
ionanddi
str
ibut
ion
l
ike:sal
esforce,
transpor
tat
ion,
dist
ri
butors,t
elecom,orint
ernet
.

Dur
abl
e:Segmentshoul
dnothavef
requentchangesat
tr
ibut
eini
t.

Page55of55
 PRI
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Substant
ial:Makesur
ethatsi
zeofyoursegmenti
slar
geenought
owar
rantasasegmentandl
arge
enoughtobepr of
it
abl
e

UniqueNeeds:Segmentsshoul
dbedi f
ferentint
hei
rresponset
odif
ferentmar
ket
ingeff
ort
s
(Marketi
ngMix).
Consumerandbusinessmar ket
scannotbesegmentedonthebasesofsame
var
iablesbecauseoft
heiri
nher
entdif
ferences.

ActionableorFeasibl
e:I
thastobepossi bl
etoapproacheachsegmentwithaparti
cularmarketi
ng
programmeandt odrawadvant
agesf r
om that
.Thesegment sthatacompanywishestopursuemust
beact i
onabl
einthesensethatthereshouldbesuff
ici
entf
inance,per
sonnelandcapabil
it
ytotake
them all
.Hence,dependi
ngupont hereachofthecompany,thesegmentsmustbeselected.

Var
iabl
est
hatcanbeusedt
osegmentmar
ket
s.

Somedi
ff
erentwaysyoucansegmentyourmar
keti
ncl
udet
hef
oll
owi
ng;
Demographics-whichfocusesont hecharacter
ist
icsofthecustomer .Forexampleage,gender,
i
ncome, education,
jobandcul t
uralbackgr
ound, f
ert
il
it
yrates,migrati
onpat t
erns,
andmor tal
it
y
rat
es,
ethnici
ty,educat
ion,occupati
on,famil
ylif
ecycle,f
amilysize,
r el
igi
onandsoci alcl
ass
Geogr aphical
-locat
ionsuchascont i
nent,countr
y,stat
e,pr
ovi
nce,ci
tyorr
uralthatt
hecust
omer
groupr esi
des,cli
mate,t
errain,natur
alresources,popul
ati
ondensi
ty,
subcultur
alval
ues,di
ff
erent
populationgrowthsindif
ferentareas

Psychographics-whichrefer
st othecustomergroup'
sl i
fest
yle.Forexample,
thei
rsocialcl
ass,
l
if
estyl
e,personali
ty,
opinions,andat t
it
udes,
personali
tycharacteri
sti
csandmot i
ves.Marketer
s
mustbeawar eofthechangi nglif
estyl
esandmar ketproductsaccordingl
y.

Behavi
ourwhichi
sbasedoncustomerbehavi
our.Forexample,onli
neshoppers,
shoppi
ngcent
re
cust
omers,br
andpref
erenceandpr
iorpur
chases,regul
arusers-pot
ent
ialuser
s-nonuser
s
Heavy/
moder
ate/
li
ghtuser
s.

Tar
get
ing

Eval
uat
ingMar
ketSegment
s

Targeti
ngevaluatest heat tract
ivenessofeachsegmentofi t
sbuyi ngpower ,size,growthoft he
market,competit
ivenesset c.Defendingatar
getmar ketr
equi
resmar ketsegmentati
on,“theprocess
ofpulli
ngapar ttheent ir
emar ketasawhol eandsepar ati
ngi tintomanageabl e,dispar
ateunits
basedondemogr aphics”.Wet henchooseorcomeupwi t
hapar ti
cularstrat
egyorapr oductit
selff
or
eachtargetedsegment .
Developingatargetmar ketstrat
egyhasthreephases:

Tar
get
ingt
hemar
ket
(s)

o undif
fer
entiat
ed
o concentr
ated
o multi
-segmented

Noonestrategywillsuital
lconsumergroups,sobei
ngablet
odevelopspeci
fi
cst
rat
egi
esf
oryour
tar
getmarketsisveryimpor t
ant.
Therear
ethreegener alstr
ategi
esforsel
ecti
ngyourtar
getmarket
s:

Page56of56
 PRI
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1.Undi ffer
enti
atedTar geti
ng:Thisapproachvi ewsthemar ketasonegr oupwi t
hnoi ndividual
segment s,t
herefor
eusi ngasi nglemarketingst r
ategy.Thisstrat
egymaybeusef ulforabusi nessor
productwi thli
ttl
ecompet iti
onwher eyoumaynotneedt otail
orstrat
egiesfordif
ferentpreferences.
Popul arwhenl argescalepr oducti
onbegan.Notsopopul arnowduet ocompet it
ion, i
mpr oved
mar ketingresearchcapabi l
iti
es,andtotalproductionandmar ket
ingcostscanber educedby
segment ati
on.Organi
zat i
onmustbeabl et odevelopandmai ntai
nasi ngl
emar keti
ngmi x.Maj or
objectiveistomaxi mizesales.Theel ement softhemar ketingmixdonotchangef ordiff
erent
consumer s,al
lelement saredevelopedf orallconsumer s.

2.Concentr
atedTarget
ing:Thisapproachfocusesonselect
ingaparti
cularmar ketni
cheonwhich
marketi
ngeff
ortsar
etargeted.Yourf
irmisfocusingonasinglesegmentsoyoucanconcent rateon
underst
andi
ngtheneedsandwant softhatpart
icul
armarketint
imat
ely.Smallfi
r msoft
enbenefi
t
fr
om thi
sstr
ategyasfocusingononesegmentenabl esthem tocompeteeffect
ivelyagai
nstl
arger
fi
rms.

3.Mul ti
-SegmentTar get
ing:Thisapproachisusedi fyouneedt ofocusont woormor ewelldefined
mar ketsegment sandwantt odevelopdiffer
entstrategiesforthem.Mul tisegmentt ar
geti
ngof fers
manybenef i
tsbutcanbecost lyasitinvol
vesgr eaterinputfrom management , i
ncreasedmar ket
researchandi ncreasedpromotionalstr
ategies.Pri
ort oselecti
ngapar ti
culartargeti
ngstrategy,you
shouldper f
orm acostbenefitanalysi
sbet weenallavai l
abl
est rategi
esanddet erminewhichwi l
lsuit
yoursituati
onbest .
Posit
ioni
ng
Posit
ioni
ngisdevelopingaproductandbrandimageinthemindsofconsumers.I
tcanalsoincl
ude
improvi
ngacust omer'
spercepti
onabouttheexperi
encetheywil
lhaveift
heychooset
opur chase
yourproductorservi
ce.Fi
rst
,considerwhycust
omersshouldpurchaseyourpr
oductr
atherthan

Page57of57
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thoseofyourcompet i
tors.Dothisbyidenti
fyi ngyouruniquesel
li
ngpr oposi t
ion,anddr awa
positi
oning t ounderstandhoweachsegmentper cei
vesyourproduct, brandorser vi
ce.Thi swi llhelp
youdet erminehowbestt oposit
ionyouroffering.Then,youcanselectt hemar keti
ngmi xt hatwi llbe
mostef fecti
veforeachoft hem.
Next ,
lookatt hewant sandneedsofeachsegment ,ortheprobl
em thatyourpr oductsol vesf ort hese
people.Cr eateavaluepr oposit
ion t
hatclearlyexplainshowyourofferingwi l
lmeett hisr equirement
betterthananyofyourcompet i
tors'pr
oduct s, andt
hendevelopamar ketingcampai gnt hatpr esent s
thi
sval uepr oposi
ti
oni nawayt hatyouraudi ence

Thebusi nesscanposi ti
vel
yinfl
uencet hepercepti
onsofitschosencust omerbaset hr
oughstr
ategi
c
promoti
onalactivit
iesandbycar eful
lydefi
ningyourbusiness'marketingmi x.
Eff
ecti
vepositi
oningi nvol
vesagoodunder st
andingofcompet i
ngpr oductsandt hebenefit
sthatare
soughtbyyourt argetmarket.I
talsorequir
esyout oidenti
fyadiff
erentialadvantagewithwhichitwil
l
deli
vertherequi
redbenef i
tstothemar keteff
ecti
velyagai
nstthecompet it
ion.Businessshoul
daim
todefi
net hemselvesintheeyesoft hei
rcustomersinregardstotheircompet i
ti
on.

Mai
ncat
egor
iesofposi
ti
oni
ng

Byproductattr
ibut
e-Aproductat
tr
ibut
eisaspecif
icf
eat
ureorbenef
itoft
heproduct
.Posi
ti
oni
ngin
thi
swayf ocusesononeortwooftheproduct
’sbestf
eat
ures/
benef
it
s,rel
ati
vet
othecompeti
ti
ve
off
eri
ngs.

Byuser-Thi
spositi
oni
ngappr
oachhi
ghl
ight
stheuserandsuggeststhattheproducti
sthei
deal
sol
uti
onfort
hattypeofper
sonandmayevencont
ri
butetot
heirsocialsel
f-i
denti
ty.

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Byproductcl
ass-Thisposi
ti
oni
ngstrat
egytendstot
akealeader
shipposi
ti
oni
ntheover
allmar
ket
.
St
atementswiththegener
almessageof“wearethebesti
nourfi
eld”ar
ecommon.

Againstcompeti
ti
on-Wi
tht
hisappr
oacht
hef
ir
m woul
ddi
rect
lycompar
e,acompar
isonagai
nst
cer
tainwell
-knowncompet
it
ors.

Byuse/
appli
cat
ion-Wi
ththisappr
oach,theproduct/
brandi
spositi
onedi
ntermsofhowiti
susedin
themar
ketbyconsumer
s,indi
cati
ngthattheproductist
hebestsol
uti
onfort
hatpar
ti
cul
artask/
use.

Byquali
tyorval
ue-Somef i
rmswillposit
ionpr
oduct
sbasedonr
elat
ivehi
ghqual
it
y,orbasedont
he
cl
aimthattheyr
epresentsi
gni
fi
cantvalue.

Byusi
ngacombinat
ion-oft
heaboveopt
ions-Somepr
oduct
s/br
andsar
eposi
ti
onedusi
nga
combi
nat
ionoft
heaboveposit
ioni
ngopt
ions.

Basesf
orBusi
nessMar
ketSegment
ati
on

Busi
nessmar ketcanbesegment
edont
hebasesconsumermar
ketvar
iabl
esbutbecauseofmany
i
nherentdi
ff
erencesli
ke

 Businessesarefewbutpur
chasei
nbul
k
 Evaluat
eindepth
 Jointdeci
sionsaremade

Busi
nessmar
ketmi
ghtbesegment
edont
hebasesoff
oll
owi
ngvar
iabl
es:

 CompanySi ze:whatcompanysi zesshouldweser ve?

 I
ndust ry:Whichindustr ytoserve?
 Purchasi ngapproaches:Pur chasing-funct
ionorganizati
on,Nat
ureofexi
sti
ngrelationshi
ps,
purchasepol ici
esandcr i
teri
a.
 Productusage
 Sit
uat i
onalfactors:seasonaltrend,urgency:shouldservecompaniesneedi
ngqui ckorderdel
iver
,
Order:focusonl argeor dersorsmal l
.
 Geogr aphic:Regionalindustri
algrowthr at
e,Customerconcentr
ati
on,andint
ernational
macr oeconomi cfactors.

STRATEGI
CPLANNI
NG

Marketi
ngplaysacr it
icalr
oleincorporat
est r
ategi
cplanningwi t
hinsuccessfulcompanies.Mar ket
-
ori
entedstr
ategicplanningisthemanager ialprocessofdevelopingandmai ntai
ningaviablefit
amongt heorganizati
on’sobject
ives,
skil
ls, andresourcesanditschangingmar ketopportunit
ies.
Theaim ofstr
ategicplanningistoshapet hecompany’ sbusinessesandpr oductssothatt heyyiel
d
tar
getprofi
tsandgr owthandkeept hecompanyheal thydespiteanyunexpect edthr
eatsthatmay
ari
se.

St
rat
egi
cpl
anni
ngcal
lsf
oract
ioni
nthr
eekeyar
eas.

Page59of59
 PRI
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 Thefi
rstareaismanagi ngacompany’sbusi
nessesasani nvest
mentport
fol
io.
 Thesecondar eainvol
vesassessi
ngeachbusiness’
sstr
engt hbyconsi
der
ingthemar
ket
’s
growt
hr at
eandt hecompany’sposit
ionandfiti
nthatmarket.
 Andthethirdareaisthedevel
opmentofstr
ategy

1.Def
ini
ngt
heCor
por
ateMi
ssi
on
Anor gani
zat
ionexiststoaccompl i
shsomet hing:t omakecar s,
lendmoney, provideanight
’slodging,
andsoon.Abusi nessmi ssioncanbedef i
nedi nt ermsofthr eedimensions:customergroups,
customerneeds,andt echnology.Itsspecifi
cmi ssionorpur posei susuall
yclearwhenthebusi ness
star
ts.Overt
ime,however ,themi ssionmayl osei tsrel
evancebecauseofchangedmar ketconditi
ons
ormaybecomeuncl earast hecor porat
ionaddsnewpr oductsandmar ket
s.Whenmanagement
sensesthatt
heor ganizati
oni sdrif
ti
ngf rom itsmi ssion,i
tmustr enewitssearchforpur
pose

Awel l
-worked- outmi ssionstatementprovidesempl oyeeswi
thasharedsenseofpurpose,dir
ecti
on,
andoppor tuni
ty.Italsogui desgeographicall
ydispersedempl
oyeestoworkindependentl
yandyet
col
lecti
velytowar drealizingtheorgani
zation’sgoals.Goodmissi
onstat
ementsfocusonal imit
ed
numberofgoal s, st
resst hecompany’ smaj orpoli
ciesandval
ues,anddefi
nethecompany’smaj or
competit
ivescopes.

2.Set t
ingcompanyobj ectives-t hefir
m’sstat
ementmissionneedstoberefi
nedint
o
specifi
canddet
ail
edsuppor
tingobject
ives.Themi ssi
onleadst
oahi er
archyofobj
ecti
ves,
incl
udi
ng
businessandmarket
ingobj
ecti
ves.Theobj ect
ivesshoul
dbeSpecif
ic,Measurabl
e,At
tai
nable,
Realist
icandTi
mef r
ame

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3.Anal
ysi
ngt
hecur
rentbusi
nesspor
tf
oli
o-Largecompani
esnor
mal
lymanagequi
te
diff
erentbusinesses,
eachrequi
ringit
sownstrat
egy.AnSBUhast hreecharacterist
ics:(
i)Iti
sa
singlebusinessorcoll
ecti
onofrelat
edbusi
nessesthatcanbeplannedseparatel
yf rom therestof
thecompany; (i
i)i
thasitsownsetofcompeti
tors;(
ii
i)i
thasamanagerr esponsibleforstr
ategic
planningandpr ofi
tperf
ormancewhocontrol
smostoft hefact
orsaff
ect
ingpr of
it
.

Thepurposeofidenti
fyingt hecompany’sstr
ategicbusi
nessuni t
si st
odevelopsepar
atestrat
egies
andassignappropri
atef undingtotheenti
rebusinessport
fol
io.Seniormanagersgeneral
lyapply
anal
yti
caltool
st ocl
assifyal loft
hei
rSBUsaccor dingt
oprofitpotenti
al.Twooft
hebest-known
busi
nesspor t
fol
ioevaluationmodel sar
etheBost onConsult
ingGr oupmodelandtheGeneral
El
ectr
icmodel .

TheBost
onConsul
ti
ngGr
oupAppr
oach

 TheBostonConsult
ingGroup(BCG)
,aleadi
ngmanagementconsul
ti
ngfi
rm,devel
opedand
popul
ari
zedthegrowth-
sharematri
xshownin.Thegr
owth-shar
ematri
xisdi
videdint
ofour
cel
ls,
eachindi
cati
ngadiffer
entt
ypeofbusi
ness:

Quest ionmar ksar ebusi

nessesthatoper ateinhigh-growthmar ket sbuthavel ow
relativemar ketshar es.Mostbusinessesstartof fasquestionmar ksast hecompanyt ri
esto
ent erahi gh- growt hmar ketinwhichthereisalreadyamar ketleader
.Aquest i
onmar k
requi resal otofcashbecauset hecompanyi sspendi ngmoneyonpl ant, equipment, and
per sonnel .Thet erm quest ionmarkisappropriatebecauset hecompanyhast ot hi
nkhar d
aboutwhet hert okeeppour ingmoneyintothi
sbusi ness. St arsaremar ketleader
si na
high- growt hmar ket.Ast arwasonceaquest ionmar k,butitdoesnotnecessar i
lyproduce
posi ti
vecashf low;t hecompanymustst il
lspendt okeepupwi t
hthehighmar ketgrowt hand
fi
ghtof fcompet i
tion.

Cashcowsar eformerstarswit
hthelargestrel
ati
vemarketshareinaslow-growth
market
.Acashcowpr oducesalotofcashforthecompany(duetoeconomi esofscaleand
hi
gherprof
itmar
gins)
,payingthecompany’sbill
sandsupporti
ngitsotherbusi
nesses.

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Dogsarebusi
nesseswit
hweakmar
ketshar
esi
nlow-
growt
hmar
ket
s;t
ypi
cal
ly,
these
gener
atel
owprofi
tsorevenl
osses.

Af
terplot
tingit
svariousbusi
nessesi
nthegrowth-shar
ematri
x,acompanymustdet
ermine
whethertheportf
oli
oishealt
hy.Anunbal
ancedportf
oli
owouldhavet
oomanyCorporat
eand
Di
visionStrat
egicPlanni
ngdogsorquest
ionmar ksort
oofewstar
sandcashcows.

Thenextt
askist
odet
ermi
newhatobj
ect
ive,
str
ategy,
andbudgett
oassi
gnt
oeachSBU.
Fourst
rat
egi
escanbepur
sued:

1.Bui
ld:
Theobj
ect
iveher
eist
oincr
easemar
ketshar
e,evenf
orgoi
ngshor
t-t
erm ear
nings
t
oachi
evethi
sobj
ecti
veifnecessar
y.Buil
dingi
sappropr
iat
eforquest
ionmar
kswhose
mar
ketshar
esmustgrowiftheyaretobecomestar
s.

2.Hol
d:Theobj
ect
ivei
nahol
dst
rat
egyi
stopr
eser
vemar
ketshar
e,anappr
opr
iat
e
st
rat
egyf
orst
rongcashcowsi
ftheyar
etocont
inueyi
eldi
ngal
argeposi
ti
vecashf
low.

3.Har
vest
:Theobj
ect
iveher
eist
oincr
easeshor
t-t
erm cashf
lowr
egar
dlessofl
ong-
ter
m
eff
ect.Harvesti
ngi nvol
vesadecisi
ontowithdrawfr
om abusinessbyimplement i
nga
program ofcontinuouscostret
renchment
.Thehopei storeducecost
sfasterthanany
potenti
aldropinsal es,
thusboosti
ngcashflow.Thi
sstrat
egyisappropr
iateforweakcash
cowswhosef utureisdim andf
rom whi
chmor ecashflowisneeded.Harvest
ingcanalsobe
usedwi t
hquest ionmar ksanddogs.

4.Di
vest
:Theobj
ect
ivei
stosel
lorl
iqui
dat
ethebusi
nessbecauset
her
esour
cescanbe
bet
terusedel
sewher
e.Thi
sisappr
opr
iat
efordogsandquest
ionmar
kst
hatar
edr
aggi
ng
downcompanyprofi
ts.

Successf
ulSBUsmovethroughali
fecycl
e,st
art
ingasquest
ionmar
ksandbecomi
ngst
ars,
t
hencashcows,andf
inal
lydogs.

4.Pl
anni
ngmar
ket
ingandf
unct
ionalst
rat
egi
es
Thefuncti
onaldepar t
mentsi neachuni tworkt
oget hertoaccompl ishstrategi
cobj ect
ives.Marketi
ng
depart
mentpr ovidesaguidingphilosophy–consumeror ientat
ion,provi
desi nputsbyi denti
fyi
ng
att
ract
ivemar ketsanddesigningstrategi
esforreachingobj ect
ives.Market i
ngisaf orerunnerto
moststrat
egicpl anni
ngactivi
ti
esasi torigi
nat
esmar ketopportuniti
esthroughr esearchand
marketi
ngintell
igencewhichwi l
lthenbeusedbyt opmanagementt osetlongt erm goals.

Gener
alEl
ect
ri
c(GE)
Inthismodel ,eachbusi nessi sr atedi nt er
msoft womaj ordimensi ons—mar ketattract i
venessand
businessstrengt h.Theset wofact orsmakeexcel l
entmar keti
ngsensef orratingabusi ness.
Compani esar esuccessf ult otheext entthattheyent erattr
acti
vemar ketsandpossesst her equired
businessstrengt hst osucceedi nthosemar kets.Ifoneoft hesef actor sismi ssing, thebusi nesswi l
l
notpr oduceout standingr esult
s.Nei therast r
ongcompanyoper atingi nanunat tract i
vemar ketnora
weakcompanyoper atingi nanat tract i
vemar ketwi lldowel l
.Usingt heset wodi mensi ons,theGE
mat ri
xisdividedi nt
oni necel l
s.Thet hreecellsintheupper -l
eftcorneri ndi
cat estrongSBUssui tabl
e
forinvestmentorgr owt h.Thedi agonalcel lsst r
etchingf rom t
hel owerl eftt
ot heupperr i
ghti ndicate
SBUsofmedi um attractiveness;t heseshoul dbepur suedselecti
vel yandmanagedf orear nings.The
threecellsi
nt hel ower- ri
ghtcor nerindi cateSBUsl owi noverallattractiveness, whi cht hecompany
maywantt ohar vestordi vest.However ,portf
oliomodel smustbeusedcaut iously.Theymayl eada
fi
rmt ooveremphasi zemar ket
- shar egr owthandent r
yintohigh- growt hbusi nessesort onegl ectits
currentbusinesses.Al so, themodel s’ r
esultsar esensi t
ivetoratingsandwei ghtsandcanbe

Page62of62
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manipulat
edtoproduceadesi
redl
ocat
ioninthemat
ri
x.Fi
nall
y,t
hemodelsf ai
ltodel
ineat
et he
syner
giesbet
weent woormorebusi
nesses,whi
chmeanthatmakingdeci
sionsforonebusinessata
ti
memi ghtberi
sky.

Ansof
fMat
ri
x

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TheAnsoffMatri
xalsoknownast heAnsof
fproductandmar ketgrowthmatr
ixi
samar ket
ing
pl
anningtoolwhichusuall
yaidsabusi
nessindeterminingit
sproductandmarketgr
owth.Thisi
s
usual
lydeter
minedbyf ocusi
ngonwhethert
hepr oductsareneworexisti
ngandwhetherthe
marketi
sneworexi st
ing.

Themodelwasi nvent
edbyH.IgorAnsoff
.Ansoffwaspri
maril
yamat hemat
ici
anwi
thanexper
t
i
nsighti
ntobusinessmanagement.I
tisbel
ievedthatt
heconceptofst
rat
egi
cmanagementi
s
widel
yatt
ribut
edt ot
hegreatman.

TheAnsof
fMatr
ixhasfouralt
ernat
ivesofmarket
ingst
rat
egi
es;Mar
ketPenet
rat
ion,
product
devel
opment
,marketdevel
opmentanddiver
sifi
cati
on.

Mar
ketPenet
rat
ion
Marketpenetr
ati
on,coversexi
sti
ngpr
oductsandalsoexist
ingmarket
s.I
nthi
sstr
ategyt
herewil
l
theuseofpromotionalmethods,
put
ti
ngvariouspri
cingpol
ici
est
hatmayattr
actmorecl
ient
ele,
oronecanmaket hedi st
ri
buti
onmoreext
ensive.

InMarketPenet rat
ion,t
heriskinvol
vedinitsmarket
ingst
rategi
esisusuall
ytheleastsincethe
productsarealreadyfamil
iartotheconsumer sandsoistheestabl
ishedmarket.Anot
herwayi n
whichmar ketpenet r
ati
oncanbei ncreasedisbycomingupwi t
hvar i
ousi
nit
iat
ivesthatwill
encourageincreasedusageoft heproduct.

Pr
oductDevel
opment
Inproductdevel
opmentgr owthstrategy, newproductsar
eintroducedint
oexistingmar
kets.
Productdevel
opmentcandi ff
erfrom t heintr
oducti
onofanewpr oducti
nanexi sti
ngmarketori
t
caninvolvet
hemodifi
cationofanexi sti
ngpr oduct
.Bymodifyingtheproductonewouldprobabl
y
changeitsoutl
ookorpresentati
on, i
ncr easetheproduct
sperformanceorqualit
y.Bydoingso,it
canappealmor etot
healreadyexi st
ingmar ket.
Mar
ketDevel
opment

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Inthisstrategy,
thebusi nesssellsit
sexisti
ngproductstonewmar kets.Thiscanbemade
possi bl
ethroughfurthermar ketsegment at
iontoai
dinident i
fyi
nganewcl ientel
ebase.This
str
at egyassumest hatt heexist
ingmar ketshavebeenfullyexpl
oit
edt hustheneedt oventurei
nto
newmar kets.Ther
ear evar i
ousappr oachestothi
sstrategy,whichinclude:Newgeogr aphi
cal
mar kets,newdistr
ibutionchannel s,
newpr oductpackaging,anddiff
erentpr i
cingpol
ici
es.

Di
ver
sif
icat
ion
Diversif
icat
ionisagrowthst rat
egyinvolvesanor gani zati
onmar ket
ingorsel l
ingnewpr oductsto
newmar ketsatthesamet ime.Iti
sthemostr iskyst rategyamongt heot hersasitinvolvestwo
unknowns, newproduct
sbei ngcreatedandt hebusi nessdoesnotknowt hedevelopment
problemst hatmayoccurint heprocess.Ther eisal sot hefactthatt
herei sanewmar ketbeing
targeted,whichwil
lbri
ngt heproblem ofhavingunknownchar acter
ist
ics.Forabusi nesst otakea
stepintodiversi
fi
cati
on,t
heyneedt ohavet heirfactsr ightregar
dingwhati texpectstogai nfrom
thestrategyandhaveacl earassessmentoft her i
sksi nvol
ved.

Therearetwotypesofdiversi
fi
cati
on.Ther eisr
elateddiver
sif
icat
ionandunr el
ateddiver
sif
icat
ion.
Inrel
ateddiver
sif
icati
on,
thismeanst hatthebusinessremainsint hesameindust r
yinwhichitis
famil
iarwit
hinunrelat
eddiver
sif
icat
ion;therear
eusual l
ynopr evi
ousi ndust
ryrelat
ionsormarket
experi
ences.

Cont
ent
sofaMar
ket
ingPl
an

Themar
ket
ingpl
ancr
eat
edf
oreachpr
oductl
ineorbr
andi
soneoft
hemosti
mpor
tantout
put
sof

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pl
anni
ngf
ort
hemar
ket
ingpr
ocess.At
ypi
calmar
ket
ingpl
anhasei
ghtsect
ions:

Executi
vesummar yandt ableofcont
ents:Thi
sbriefsummar
yout
li
nest
hepl
an’
smai
n
goal
sandrecommendat
ions;i
tisf
oll
owedbyat
abl
eofcontents.

Cur rentmarketi
ngsi tuati
on:Thi
ssecti
onpresent
srel
evantbackgrounddat
aonsales,cost
s,
pr
ofit
s,themar
ket
,competi
tors,
dist
ri
but
ion,
andthemacroenvir
onment ,
drawnfrom af
actbook
maintai
nedbyt
heproductmanager.

Opport
unit
yandi ssueanalysis: Thi
ssecti
onident
if
iest
hemaj oroppor
tuni
ti
esandt
hreat
s,
st
rengt
hsandweaknesses,andi
ssuesfacingthepr
oductli
neorbrand.

Objecti
ves:Thissect
ionspel
lsoutt
hefi
nanci
alandmar ket
ingobj
ect
ivestobeachieved.
Market
ingst
rat
egy:Thi
ssecti
onexplai
nsthebr
oadmar ket
ingstr
ategyt
hatwil
lbeimplementedto
accompli
sht
heplan’sobj
ecti
ves.

Act ionpr ograms: Thi

ssectionout l
inesthebr oadmar keti
ngpr ogramsf orachievingt he
businessobj ect i
ves.Eachmar keti
ngstrategyel ementmustbeel aboratedtoanswert hesequest ions:
Whatwi llbedone?Whenwi l
litbedone?Whowi lldoit?Howmuchwi l
litcost? Pr oj
ect edprofi
t-
and-lossstat ement :Acti
onplansal l
owt heproductmanagert obui l
dasuppor t
ingbudgetwi th
for
ecastedsal esvolume( unit
sandaver agepr ice),costs(pr
oduction,physicaldist
ri
bution, and
marketing),andpr oj
ectedprofit
.Onceappr oved, thebudgetisthebasi sfordevelopingplansand
schedulesformat erialpr
ocurement ,pr
oduct i
onschedul ing,employeer ecr
uitment,andmar keti
ng
operati
ons.

Control
s:Thi
slastsecti
onout
li
nesthecontr
olsf
ormoni
tori
ngtheplan.Typical
ly,
thegoalsand
budgetar
espel
ledoutforeachmonthorquar
tersoseni
ormanagementcanr evi
ewther esul
tseach
peri
od.

Notwocompanieshandlemarketi
ngpl
anningandmarket
ingpl
ancont
entexact
lyt
hesameway.
Mostmarket
ingpl
anscoveroneyearandvaryinl
engt
h;somefi
rmstaket
heirpl
ansver
yser
iousl
y,
whi
leot
hersusethem asonl
yar oughgui
detoacti
on.

PRODUCT
Di
ff
erencesbet
weenGoodsandSer
vices
Goodsar
etangi
ble.Youcanseet
hem,
feelt
hem,
toucht
hem et
c.

Ser
vicesar
eint
angi
ble.Ser
vicesar
ether
esul
tofhumanormechani
calef
for
tst
opeopl
eorobj
ect
s.

Maj
ordi
sti
ngui
shi
ngchar
act
eri
sti
csofSer
vices:
 Intangibil
it
y-maj orcomponentofaser vi
cei sintangibl
e
 Per i
shibali
ty-manycannotbest oredf orfuturesalesAi r
line/Amusementr ide.I
fservi
ce
providersdonothaveanycust omer satapar ti
cularperiod, theywi l
llosetheoppor t
uni
ty
topr ovi
det heser vi
ce
 Inseparabili
ty-customercont actisoftenthei ntegralpartoftheser vi
ce...
Legal
services/hairdresser,thereforeoftenadi rectchannelofdi stribut
ion.Theser vice
personnelper sonali
ty,facialexpression,toneofvoi ce,appear anceofper sonnel
 Var i
abili
ty-productsar estandar disedbutser vicequalit
yl ackofst andardizati
onbecause
servicesar elabourintensive.

Page66of66
 PRI
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THREELEVELSOFAPRODUCT/
TOTALPRODUCTCONCEPT
Market
ersmustf i
rstident
if
ythecoreconsumerneedstodevelopcor
eproduct,t
hendesignthe
act
ualproductandfindwayst oaugmentiti
nordertocr
eatethebundleofbenef
it
sthatwil
lbest
sat
isf
ythecustomer .

 Cor
ePr
oduct
-Mar
ket
ersmustf
ir
stdef
inewhatt
hecor
eBENEFI
TSt
hepr
oductwi
ll
providethecustomer .Gener i
cproductisthebasi cproduct.Leveloneist hemostbasi clevel
andsi mplylooksatwhatpeopl esetouttobuyandwhatbenef it
sthepr oducerwoul dlike
thei
rpr oducttooff
erbuyer s.Forexampleacamer ai sexpectedtotakepi ct
uresbutt here
maybeot herbenefi
tst hatt heproducerwant sthebuyert oenjoysuchasawi delens,face
recogniti
onandhi ghdef initi
onvideos.Sopr i
ort odesigninganypr oductdesignersshoul d
l
istthecor ebenefi
tsthepr oductneedstopr ovide
Thecor ebenefitofbuyingadr il
lismakinghol es
Thecor ebenefitofacari st ransport
ati
on
 Ac tualPr oduct -Mar ketermustt henbuildtheact ualproductaroundt hecorepr oduct.
Actualproducttransl
at elistofcoreproductbenef it
sintoproductthatpeopl ewillbuy.May
havet hefoll
owingchar act eri
sti
cs:
 Qual itylevel
 Feat ures
 Br andname
 Packagi ng
 Desi gn

Peoplearenotsati
sfi
edwi ththecorebenefi
tofaproductorservi
ce,theyexpectaddit
ionalthi
ngs
Ift
hesefeat
uresexceedt hebuyers’expect
ati
onstheywillbesati
sfi
ed.
ACDorDVDpl ayerisexpectedtoofferacert
ainqual
it
yofsound, achoiceofbatter
y,controll
ight
s,
andlooksophist
icat
ed.Al lcombinedtocaref
ull
ydeli
verthecorebenefit
.

 Augment
edPr
oduct
-of
feraddi
ti
onalconsumerbenef
it
sandser
vices.

 Warrant
y
 Customertrai
ning
 Aft
ersaleservi
ce
 Deli
very
 Guarantee

Page67of67
 PRI
NCI
PLESOFMARKETI
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 Repai
r
 Credi
t
 I
nstal
lat
ion

Pr
oductbenef
it
s:al
ltheel
ement
sofanof
ferwhi
chconsumer
sper
cei
veasmeet
ingt
hei
rneeds
andwant
sandprovi
desati
sfacti
onthroughperfor
manceandimage
Productat
tr
ibutes:qual
it
y, f
eatur
es,styl
ing,
design,
brandi
ng,
andpackagi
ng

Cl
assi
fyi
ngPr
oduct
s
Pr
oduct
scanbecl
assi
fi
eddependi
ngonwhot
hef
inalpur
chaseri
s.

Consumerpr
oduct
s:dest
inedf
ort
hef
inalconsumerf
orper
sonal
,fami
lyandhousehol
duse.

Busi
nesspr
oduct
s:ar
etosat
isf
ythegoal
soft
heor
gani
zat
ion.Thesamepr
oductcanbe
pur
chasedbybot
h,f
orexampl
eacomput
er,
fort
hehomeort
heof
fi
ce

Component
soft
hemar
ket
ingmi
xwi
llneedt
obechangeddependi
ngonwhot
hef
inalpur
chaseri
s.

Thef
oll
owi
ngar
ecl
assi
fi
cat
ionsf
orconsumerpr
oduct
s:

 Conveni
ence:
Aconsumeri
tem t
hati
swi
del
y-avai
labl
epur
chasedf
requent
lyandwi
th
mi nimalef f
or t.Aconveni encegoodi sr eadilyavai l
abl e;i
tdoesnotr equiretheconsumert o
got hroughani ntensi vedeci si
on- makingpr ocess.Exampl esofconveni encegoodsi nclude
newspaper sandcandy.
Conveni encepr oduct scanbecat egor i
zedi ntost aple( mil
k),impul se(notintendedpr i
orto
shoppi ngt rip)&emer gency
 Sh oppi ng: Consumer sexpendconsi derabl eeffortplanningandmaki ngpur chase
deci sionse. gappl iances, stereos,camer as.Consumer sarenotpar t
icularl
ybr andl oyal .
Needpr oduceri ntermedi arycooper ation,highmar gi
ns, l
essout let sthanconveni encegoods.
Useofsal esper sonnel ,
communi cationofcompet iti
veadvant age, branding,adver t
ising,
cust omerser viceet c.At t
ributebased( NonPr iceCompet i
ti
on) ,
pr oductwi t
ht hebestsetof
attributesi sbought .Ifproductat t
ributesar ej udgedt obesi mi l
ar ,thenpr i
cedbased.
 Sp eci alty: Item thati sext r
aor di
naryoruni queenought omot ivat epeopl etomakean
unusualef f
or ttogeti t.Exampl esaredesi gnercl ot
hes, exoticper fumes, li
mited- editioncars,
stunni ngdesi gns,wor ksoff amouspai nt
ers.Buyerknowswhatt heywantandwi llnotaccept
asubst itute, i
.eMer cedes.Donotcompar eal ternati
ves.Br and, storeandper sonl oyal .Wil
l
payapr emi um i fnecessar y.Needr emi nderadver ti
sing.
 Un sought : Product swhichconsumer sareunawar e, pr
oduct st hatpeopl edonotnecessar y
thinkofpur chasi ng.Umbr ellas,FuneralPlot s,Encycl opaedia

Cl
assi
fi
cat
ionsf
orBusi
nesst
oBusi
nesspr
oduct
s:

RawMat
eri
als&Par
ts

 RawMateri
als
 Manuf
actur
ingmat
eri
alsandpar
ts

Page68of68
 PRI
NCI
PLESOFMARKETI
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Capi
tali
tems

 I
nstall
ati
on
 Accessori
esequi
pment

Suppor
tGoodsandSer
vices

 Operati
ngsuppli
es
 Maintenancer
epairi
tems
 Businessadvi
soryservi
ces

El
ement
sofaPr
oductMi
x

I
fanor
gani
zat
ioni
smar
ket
ingmor
ethanonepr
oducti
thasapr
oductmi
x.

 Pr
oducti
tem-asingl
eproduct
 Pr
oductl
ine-
allit
emsofthesametype
 Pr
oductmix-
totalgr
oupofproduct
sthatanor
gani
zat
ionmar
ket
s

Depthmeasurest
henoofpr oduct
sthatareoff
eredwit
hineachproductl
ine.Sat
isf
iesseveral
consumersegmentsf
orthesamepr oduct,
maximizesshel
fspace,di
scouragescompetit
ors,cover
s
arangeofpri
cesandsustai
nsdealersupport
.Highcosti
ninvent
oryetc.

Widthmeasur
esthenoofproductli
nesacompanyoff
ers.Enabl
esafi
rmtodi
ver
sif
ypr
oduct
s,
appeal
stodif
fer
entconsumerneedsandencour
agesonestopshoppi
ng.

Foranewpr
oductt
osucceedi
tmusthave:

 desi
rableatt
ribut
es
 beunique
 haveit
sf eat
urescommuni
cat
edt
otheconsumer(
mar
ketsuppor
tnecessar
y)

Devel
opi
ngnewproduct
sisexpensi
veandri
sky.
Fai
lur
enott
oint
roducenewproduct
sisal
sorisky.

Page69of69
 PRI
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PLESOFMARKETI
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WhyNewPr
oduct
sFai
l

 Lackofdifferenti
ati
ngadvantage
 Inadequatemar ketingr
esear
ch
 Poormar ketingplan
 Poortiming
 Targetmar kettoosmall
 Poorproductqual it
y
 Noaccesst omar ket

Ei
ghtSt
agesi
nNewPr
oductDevel
opmentPr
ocess

1.I
deaGener
ati
on:

Onlyafewideasaregoodenought
or eachcommer cial
izat
ion.Ideascanbegenerat
edbychance, or
bysyst
ematicappr
oach.Needapurposeful
,focusedeff
orttoidenti
fynewwaystoserveamar ket.
Newopportuni
ti
esappearf
rom t
hechangesint heenvir
onment .Conti
nuoussyst
ematicsear
chf or
newproductoppor
tuni
ti
es

Market
ingor
ient
edsour
ces-i
dent
if
yoppor
tuni
ti
esbasedonconsumerneeds,
labr
esear
chi
s
di
rect
edtosati
sfyt
hatr
esear
ch

Labor
ator
yor
ient
edsour
ces-
ident
if
yoppor
tuni
ti
esbasedonpur
eresear
chorappl
iedr
esear
ch.

I
ntr
a-f
ir
m devi
ses-
brai
nst
ormi
ng,
incent
ivesandr
ewar
dsf
ori
deas.

2.I
deaScr
eeni
ng:

Ast hepurposeofi deagener ati

onistocr eatealargenumberofi deas,thepurposeoft hesucceeding
stagesist oreducet henumberofi deast oanat t
racti
vepracticalfew.Thef i
rstidea-pruningstageis
screening.Dur i
ngt heideascreeni
ngst age,theideasar eanalyzedagai nstasetofpr edetermined
crit
eri
a, t
odet er
mi newhi chi
deasar eper t
inentandappr opri
a¬t efort
hecompany.Thepr oducti
deas
havet omat chwi t
hcompanyobj ecti
ves, (
productline)str
ategiesandr esources.Therefore,avari
ety
oftoolsandt echniqueshavebeenpr ovided,toassistinscreeningnewpr oductideas,includi
ng
rati
ngscal eandcheckl istmodelsofproductsuccess/ f
ail
urediscriminator

3.ConceptDevel
opmentandTest
ing:Apr
eli
minar
yst
agei
nthepr
oduct(
orser
vice)
developmentprocesswheremar keter
satt
empttoobtai
nini
ti
alfeedbackaboutthei
rideasfr
om bot
h
externalandi
nter
nalstakeholder
s.Potent
ialpur
chaser
sareint
roducedtotheforemostideaor
defini
ti
onoftheproduct-thisisconceptt
esti
ng.

4.Mar
ket
ingSt
rat
egyDevel
opment
:
Craf
tamar keti
ngstrategyplanwhichincludes:
 Targetmarketsize,
st r
uctureandbehaviour,t
heplannedpr oductposi
ti
oni
ng&sal
es,
shar
e&
profi
tgoal
sf orthef
irstfewyears.
 Productspl
annedpr i
ce, dist
ri
buti
onstr
ategyandmar keti
ngbudget
 Long- r
unsal esandpr ofi
tgoal
sandlongt erm marketi
ngmi

5.Busi
nessAnal
ysi
s:

Anal
yzepot
ent
ialcont
ri
but
iont
osal
es,
cost
sandpr
ofi
ts.Fi
ndouti
fiti
stechni
cal
lyf
easi
blet
o

Page70of70
 PRI
NCI
PLESOFMARKETI
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producet
henewproduct.I
fyoucanproducethenewproductatalowenoughcostsoast
obeabl
e
tomakeaprofi
t.Mustpassthebusi
nesstestcr
it
eri
aforf
urt
herdevel
opment.

6.Pr
oductDevel
opment
:Fol
lowi
ngt
hist
hepot
ent
ialpur
chaseri
spr
esent
edwi
tht
hepr
oduct
i
tsel
finf
inalorpr
otot
ypef
orm -t
hisi
spr
oductt
est
ing.

7.TestMar
ket
ing
Limitedintroductioni ngeogr aphicalar easchosent or epresentint endedmar ket.
Aimi stodet erminet hereactionofpr obabl ebuyer s, l
essenst her i
skofproductf ailur
e,reducest he
ri
skofl ossofcr edi bili
tyorundercut ti
ngapr ofi
tablepr oduct.Candet erminetheweaknessesi nt he
MM andmakeadj ust ment s.Needt osel ecttheappr opr i
ateMM andcheckt heval i
dit
y.Itist
he
sampl elaunchoft heMar keti
ngMi x.Det er
mi netogoahead, modi fyproduct ,
modi fymar ket
ingpl an
ordropt hepr oduct .Itusesasi mul atedt estmar ket .Freesampl esof f
eredi nthemal l
,takenhome
andi nt
erviewedovert hetelephonel ater.Bigt i
met estingwi thbr andnameat tachedandpackagi ng
developed.Testmar ketisexpensi ve.Firm' scompet itorsmayi nterfer
e.Compet itorsmaycopyt he
productandr ushi tout .TestMarket sar etheul t
imat ewayt otestanewpr oduct.Companyput sf or
th
afullscaleadver t
isi ngandmar ketingpl anf orselect edcities/r
egi ons

SimulatedTestMarket
ingi
swhenyoufi
nd30or40shopper
satashoppi
ngcent
re,
showt
hem some
ads,givethem somemoney,andt
henseewhi
chbrandt
heybuy.

Cont
rol
ledTestMarket
ingrel
iesonapanelofr
ealst
orest
ocar
ryt
henewpr
oduct
sforaf
ee.Sal
es
ar
emeasuredthroughscanners..

8.Commer
cial
izat
ion:

Plansforful
l-scal
emar ketingandmanuf acturi
ngmustber efi
nedandset t
led.
Needtoanal yzetheresultsofthetestmar kettodetermineanychangesi nt hemarketingmix.
Needtomakedeci si
onsr egardingwarrant i
esetc(reducesconsumer’srisk).Warr
antiescanoffera
compet i
ti
veadvantage.Or ganisat
ionspendal otofmoneyonadver ti
sing,personneletc.combined
withcapit
alexpendit
uremakescommer cial
izati
onveryexpensive.

Pr
oductLi
feCycl
e(PLC)

Anewpr oductpassesthroughsetofstagesknownaspr oductli

fecycle.Pr
oductli
fecycl
eappli
esto
bothbrandandcategoryofproducts.I
tsti
meper i
odvaryfrom producttoproduct
.Companies
alwaysatt
empttomaxi mizetheprofi
tandrevenuesovertheenti
r el
if
ecycleofaproduct.I
nordert
o
achievi
ngthedesir
edlevelofprof
it
,theint
roduct
ionofthenewpr oductattheproperti
meiscruci
al.
Ifnewproducti
sappealingtoconsumerandnost i
ffcompeti
ti
oni soutther
e,companycancharge
highpri
cesandearnhighpr of
it
s.

St
agesofPr
oductLi
feCycl
e
Pr
oductl
if
ecycl
ecompr
isesf
ourst
ages:

1. I
ntroduct
ionstage
2. Growthstage
3. Maturi
tystage
4. Decli
nestage

Page71of71
 PRI
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Pr
oductLi
feCycl
e(PLC)

1.I
ntr
oduct
ionst
age

Producti
sint
roducedint hemar ketwithint
ent i
ontobuildacl earidentit
yandheavypr omoti
onis
doneformaximum awar eness.Beforeactualofferi
ngofthepr oductt ocustomer s,pr
oductpasses
thr
oughproductdevelopment,involvesprototypeandmar kettests.Compani esincurmorecostsin
thi
sphaseandalsobearaddi ti
onalcostf ordistr
ibut
ion.Ont heot herhand,thereareaf ew
customer
satthisstage,meansl owsal esvolume.So, duringint r
oductorystagecompany’ sprof
it
s
showsanegativefi
gurebecauseofhugecostbutl owsal esvol ume.

Atint
roduct
ionst
age,t
hecompanycoref
ocusisonestabl
ishi
ngamar
ketandar
isi
ngdemandf
or
theproduct
.So,t
heimpactonmar
keti
ngmixisasfol
lows:

Pr
oduct
Br
anding,Qual
ityl
evelandi
ntel
lect
ualpr
oper
tyandprot
ect
ionsar
eobtai
nedtost
imulat
econsumers
f
ortheentir
eproductcat
egor
y.Producti
sundermor
econsider
ati
on,
asfi
rsti
mpressi
onist
helast
i
mpression.

Pri
ce
High(
skim)pri
cingisusedf
ormakinghi
ghpr
ofi
tswi
thintent
iontocoveri
nit
ialcosti
nashortperi
od
andlowprici
ngisusedtopenet
rat
eandgai
nthemarketshare.companychoiceofpri
cingst
rat
egy
dependsontheirgoal
s.

Pl
ace
Di
str
ibut
ionatt
hisst
agei
susual
lysel
ect
iveandscat
ter
ed.

Promotion
Atint
roductorystage,pr
omotionisdonewit
hintenti
ontobuil
dbr andawareness.Samples/
tri
alsar
e
provi
dedthatisfruit
fuli
nat
tracti
ngearl
yadoptersandpotenti
alcustomer
s.Promot i
onalpr
ograms
aremor eessenti
alinthi
sphase.Iti
sasmuchi mportantastoproducetheproductbecauseit
posit
ionstheproduct.

Page72of72
 PRI
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2.Gr
owt
hSt
age

Inthisst age,
company’ssalesandpr of
itsstartsi
ncreasingandcompet i
ti
onal sobegintoincr
ease.
Thepr oductbecomeswel lrecogni
zedatt hisstageandsomeoft hebuyersrepeatthepurchase
patterns.Duringthi
sstage,
firmsfocusonbr andpref
erenceandgai ni
ngmar ketshare.I
tismarket
accept ancestage.Butduetocompet i
ti
on, companyi nvestmoreinadvert
isementtoconvince
customer ssoprofi
tsmaydeclineneartheendofgr owt hstage.

Ef
fecton4P’
sofmar
ket
ingi
sasunder
:

Product
Al
ongwi t
hmai nt
aini
ngt
heexi
sti
ngquali
ty,
newfeat
uresandimpr
ovement
sinpr
oductqual
it
ymay
bedone.Allt
hisi
sdonetocompeteandmaint
aint
hemarketshar
e.

Price
Priceismai
ntai
nedormayi
ncr
easeascompanyget
shi
ghdemandatl
owcompet
it
ionori
tmaybe
reducedtogr
aspmorecust
omers.

Distr
ibuti
on
Distr
ibuti
onbecomesmor esignif
icantwiththeincr
easedemandandaccept abi
li
tyofpr
oduct.More
channelsar eaddedfori
ntensivedist
ributi
oninordertomeeti
ncreasingdemand.Ontheotherhand
resel
lersstartget
ti
ngint
erestedinthepr oduct
,sotradedi
scount
sar ealsomini
mal.

Promotion
Atgrowthstage,promoti
onisincreased.Whenaccept
abi
li
tyofpr
oducti
ncr
eases,
mor
eef
for
tsar
e
madef orbrandprefer
enceandloyalty.

3.Mat
uri
tyst
age

Atmat uri
tyst age, brandawar enessi sstrongsosal econt i
nuestogr owbutatadecl i
ningr ateas
compar edt opast .Att hisstage,therear emor ecompet it
orswi t
ht hesamepr oductscompanymay
needt oper f
orm somet ypeofpr oductmodi f
icati
ontocor rectweakoromi ttedat tr
ibutesi nthe
product.
Needt obui l
dbr andl oyal ty(sel
ectivedemand) ,
communi cati
onsshoul dstressthebr andoft he
product,sinceconsumer sar emor eawar eoft heproduct sbenefi
tsandt herei smor ecompet it
ion,
mustdi f
ferentiateyourof fer
ingfrom yourcompet i
tors.
Maybegi nt omovet owar dintensivedist r
ibution-t
hepr oductismor eaccept ed,therefore
i
ntermedi ari
esar emor ei ncl
inedt oriskaccept i
ngthepr oduct.
Pricedealing/cuttingormeet i
ngcompet i
ti
on, especial
lyifprevi
ousl yadopt edapr iceski mmi ng
str
ategy.So, compani esdef endt hemar ketshar eandext endingpr oductli
fecycl e,ratherthan
maki ngthepr ofi
ts, Byof feri
ngsal espromot i
onst oencour ageretailertogivemor eshel fspacet ot
he
productthant hatofcompet itor
s.Att hisst ageusuallyloyalcustomer smakepur chases.

Mar
ket
ingmi
xdeci
sionsi
ncl
ude:

Product
Atmaturi
tystage,companiesaddfeat
uresandmodif
ytheproducti
nor
dert
ocompeteinmarketand
dif
fer
enti
atetheproductfr
om competi
ti
on.Atthi
sst
age,i
tisbestwayt
ogetdomi
nanceover
competi
torsandincreasemarketshar
e.

Page73of73
 PRI
NCI
PLESOFMARKETI
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Pri
ce
Becauseofi
ntensecompet
it
ion,
atmatur
it
yst
age,
pricei
sreducedi
nor
dert
ocompet
e.I
tat
tr
act
sthe
pri
ceconsci
oussegmentandretai
nst
hecust
omers.

Dist
ri
buti
on
Newchannelsareaddedtofaceint
ensecompet
it
ionandi
ncent
ivesar
eof
fer
edt
oret
ail
erst
oget
shel
fpref
erenceovercompeti
tor
s.

Pr
omoti
on
Pr
omoti
onisdoneinordert
ocr
eat
epr
oductdi
ff
erent
iat
ionandl
oyal
ty.I
ncent
ivesar
eal
soof
fer
edt
o
at
tr
actmor
ecustomers.

4.Decl
inest
age

Decli
neinsales&profitscausedbychangesi ntastesandprefer
encesunfavour
abl
eeconomic
condit
ionsandsti
ffcompet i
ti
on.Canj ust
if
ycont i
nuingwitht
heproductaslongasi
tcontr
ibut
est
o
prof
it
sorenhancest heeffect
ivenessoftheproductmi x.
Needtodecidetoeli
mi nateorreposit
iontoextenditsli
fe

Atdecl
inest
agecompanyhast
hreeopt
ions:

o Maintai
nt heproduct,Reducecostandfindi
ngnewusesofpr oduct.
o Harvesttheproductbyr educi
ngmar ket
ingcostandconti
nueoffer
ingtheproductt
oloyalni
cheunt
il
zeroprofi
t.
o Disconti
nuethepr oductwhent her
e’snoprof
itorasuccessori
savailabl
e.Sel
li
ngouttocompeti
tor
s
whowantt okeepthepr oduct
.

Atdecl
ini
ngstage,market
ingmi xdecisi
onsdependsoncompany’
sstrat
egy.Forexampl
e,i
f
companywantt ohar
vest,t
hepr oductwil
lremainsameandpr
icewil
lbereduced.I
ncaseof
l
iqui
dati
on,supplywi
llbereduceddramat i
cal
ly.

Li
mit
ati
onsofPr
oductLi
feCycl
e(PLC)

Productlif
ecyclei scri
ticizedthati
thasnoempi r
icalsuppor tanditisnotfrui
tfuli
nspecialcases.
Diff
erentproductshavedi ff
erentpropert
iessot heirlif
ecyclealsovaries.I
tshowst hatproductli
fe
cycleisnotbestt ooltopr edictt
hesales.Somet imesmanager i
aldecisi
onsaffecttheli
feofproducts
i
nt hiscasePr oductLifeCycl eisnotplayinganyr ole.Productlif
ecycleisveryf r
uit
fulf
orlargerf
ir
ms
andcor porat
ionsbuti tisnothundr edper centaccur atet
ooltopr edi
cttheli
fecycleandsal esof
productsinallthesituations.

Buyer
s'Pr
oductAdopt
ionPr
ocess

1. Awar
eness

Buyer
sbecomeawar
eoft
hepr
oduct

2. I
nter
est

Buyer
sseeki
nfor
mat
ionandar
erecept
ivet
olear
ningaboutpr
oduct

Page74of74
 PRI
NCI
PLESOFMARKETI
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3. Eval
uat
ion

Abuyerconsi
der
spr
oductbenef
it
sanddet
ermi
neswhet
hert
otr
yit

4. Tr
ial

Buyer
sexami
ne,
testort
ryt
hepr
oductt
odet
ermi
neusef
ulnessr
elat
ivet
oneeds

5. Adopt
ion/
Rej
ect
ion

Buyerspurchasetheproductandcanbeexpect
edt
ousei
twhent
heneedf
ort
hegener
al
typeofproductar
ises.

Rat
eofadopt
iondependsonconsumert
rai
tsaswel
last
hepr
oductandt
hef
ir
m'smar
ket
ingef
for
ts.

Di
ff
usi
onPr
ocess

Diff
usionofI
nnovati
onTheory,
developedbyE.M.Rogersin1962,isoneoftheoldestsocialsci
ence
theori
es.I
torigi
nat
edincommuni cat
iontoexpl
ainhow,overt
ime,anideaorpr oductgai
ns
moment um anddif
fuses(
orspreads)thr
oughaspecifi
cpopulat
ionorsocialsystem.Theendr esul
t
ofthisdi
ff
usionist
hatpeopl
e,aspartofasocialsyst
em,adoptanewi dea,behaviour
,orproduct.

Innovationmeansthataper sondoessomet hi
ngdiff
erent
lythanwhattheyhadpr eviously(i.
e.,
purchaseoruseanewpr oduct,acqui
reandperfor
m anewbehaviour,etc.
).Thekeyt oadopt i
oni s
thatthepersonmustperceivetheidea,behavi
our,
orproductasnewori nnovat
ive.Itisthroughthis
thatdif
fusi
on(spr
eading)ispossible.

Diffusi
onofanewi dea,
behaviour,
orpr oductdoesnothappensi multaneouslyi
nasoci alsyst
em;
ratheriti
saprocesswherebysomepeopl ear
equickertoadopttheinnovati
onthanother s.
Researchershavefoundthatpeopl
ewhoadoptani nnovati
onearlyhavediff
erentchar
acterist
ics
thanpeopl ewhoadoptaninnovati
onlat er.Whenpromotinganinnovationtoat ar
getpopulati
on,iti
s
i
mpor t
anttounder
standthecharacter
isticsofthetar
getpopulat
ionthatwillhel
porhinderadopt i
on
oftheinnovati
on.

Fi
veadopt
ercat
egor
ies

Iti
ssti
llnecessarytounderst
andthecharact
eri
sti
csoft
hetar
getpopulat
ion.Whenpromotingan
i
nnovat
ion,therearedi
ffer
entstr
ategi
esusedtoappealt
othedi
ff
erentadoptercat
egor
ies.

1. Innovat ors-Thesear epeoplewhowantt obethefir

stt otrytheinnovati
on.Theyar e
ventur esomeandi nterest
edinnewi deas.Thesepeoplear everywi l
li
ngtot akeri
sks,andare
oftent hefirsttodevelopnewi deas.Veryli
tt
le,i
fanythi
ng, needst obedonet oappealtothi
s
popul ation.
2. Ear l
yAdopt ers-Thesear epeoplewhor epresentopi
nionl eaders.Theyenjoyleadershi
p
roles,andembr acechangeoppor t
unit
ies.Theyarealreadyawar eoftheneedt ochangeand
soar ever ycomf or
tableadopti
ngnewi deas.Strat
egiest oappealtothispopulati
oninclude
how- tomanual sandi nformati
onsheetsoni mplement ati
on.Theydonotneedi nfor
mat i
onto
convincet hem tochange.

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 PRI
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PLESOFMARKETI
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3. EarlyMaj orit
y-Thesepeopl earer arelyleader s,butt
heydoadoptnewi deasbef orethe
averageper son.Thatsai d,theytypicallyneedt oseeevidencethattheinnovat ionwor ks
beforetheyar ewill
ingtoadopti t
.St r
ategi estoappealtot hi
spopulat i
onincludesuccess
stori
esandevi denceoft heinnovation'sef fecti
veness.
4. LateMaj ority-Thesepeopl ear escept icalofchange, andwi l
lonlyadoptani nnovationaf t
er
i
thasbeent ri
edbyt hemajorit
y.Strategiest oappealtot hi
spopulationincludei nformation
onhowmanyot herpeopl ehavet r
iedt hei nnovationandhaveadopt edi tsuccessf ul
ly.
5. Laggar ds-Thesepeopl eareboundbyt raditi
onandver yconservat
ive.Theyar every
sceptical/fullofdoubtofchangeandar et hehardestgrouptobringonboar d.St r
ategiesto
appealt othispopul ati
onincludest ati
stics, f
earappeals,andpressuref r
om peopl eint he
otheradopt ergr oups.

Fi
vemai
nfact
orst
hati
nfl
uenceadopt
ionofani
nnovat
ion

1. Relat
iveAdvant age-Thedegr eetowhichaninnovati
onisseenasbetterthanthei
dea,
progr
am, orproducti
treplaces.
2. Compat ibil
it
y-Howconsi st
enttheinnovati
oniswiththeval
ues,experi
ences,andneedsof
thepotentialadopter
s.
3. Compl exit
y-Howdi f
fi
culttheinnovati
onistounderst
andand/oruse.
4. Tri
abili
ty-Theext enttowhi chtheinnovat
ioncanbetestedorexperi
mentedwi t
hbeforea
commi tmentt oadoptismade.
5. Observabili
ty-Theext enttowhi chthei
nnovati
onprovidest
angibl
eresult
s.

Li
mit
ati
onsofDi
ff
usi
onofI
nnovat
ionTheor
y

 Muchoft heevi denceforthistheory,i

ncludi
ngtheadopt ercat
egories,di
dnotorigi
natein
publi
cheal thandi twasnotdevel opedtoexpli
cit
lyapplytoadoptionofnewbehavi our
sor
heal
thi nnovations.
 I
tdoesnotf osterapar ti
cipatoryapproachtoadopt i
onofapubl i
chealthprogram.
 I
twor ksbet terwi t
hadoptionofbehavi oursrat
herthancessationorpreventi
onofbehaviour
s.
 I
tdoesn' ttakei ntoaccountani ndivi
dual'
sresourcesorsocialsupporttoadoptthenew
behaviour( orinnovati
on).

Page76of76
 PRI
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Br
andi
ng

Aname,term,design,symboloranyot herf
eat
urethatident
if
iesonesel
ler
'sgoodorser
viceas
di
sti
nctf
rom another.Brandingispar heact
toft ualproduct
.
Wit
houtbrands,shopper’schoicebecomesarbi
trary

 Brandnamei sthatpartthatcanbespoken, i
ncludingletter
s,wor ds.
Brandnamessi mpli
fyshoppi ng,guar
anteeacer t
ainlevelofqualityandal
lowforself
expressi
on.
 Brandmar k-elementsoft hebrandthatcannotnotbespoken, i.
esymbol
 Trademar k-
legaldesignat i
onthattheownerhasexcl usiverightstothebr
andorpar tofa
brand.
Tradename- Thef ul
llegalnameoft heorganizat
ion.i.
eFor d,notthenamef oraspecif
ic
product.

Benef
it
sofBr
andi
ng

Pr
ovi
desbenef
it
stobuyer
sandsel
ler
s

TOBUYER:

 Helpbuyer sidenti
fyt
hepr oductthattheyli
ke/di
sli
ke.
 Ident
ifymar keter
 Helpsreducet het
imeneededf orpurchase.
 Helpsbuyer sevaluat
equal i
tyofproductsespeci
allyi
funabl
etoj
udgeapr
oduct
s
character
istics.
 Helpsreducebuyer sperceivedriskofpurchase.
 Buyermayder i
veapsychologicalrewardfr
om owningthebr
and,
IERol
exorMercedes.

TOSELLER:

 Diff
erent i
ateproductof feri
ngf rom compet itors
 Helpssegmentmar ketbycr eatingt ail
oredi mages,i .
e.Contactl
enses
 Brandi dentif
iesthecompany’ spr oduct smaki ngrepeatpurchaseseasierf
orcust
omers.
 Reducepr i
cecompar i
sons
 Brandhel psf i
rmi ntroduceanewpr oductt hatcarri
esthenameofoneormor eofit
sexist
ing
product s.
..
halfasmuchasusi nganewbr and, l
owerco.designs,adver
tisi
ngand
promot ionalcosts.
 Easiercooper ati
onwi t
hi nter
medi ari
eswi thwel lknownbr ands
 Facil
itatespromot ionalef f
orts.
 Helpsf osterbrandl oyaltyhelpingt ost abil
izemar ketshare.
 Fi
rmsmaybeabl et ochar geapr emi um fort hebrand.

Cr
it
eri
aforchoosi
nganame:

 Easyforcustomer stosay,spellandrecall(i
nc.for
eigner
s)
 Indi
cateproductsmaj orbenefi
ts
 Shouldbedistinct
ive
 Compat i
blewithallproduct
si nproductli
ne
 Usedandr ecognizedinalltypesofmedi a
 Usewor dsofnomeani ngtoavoidnegat i
veconnot ati
on,
Kodak,Exxon
 Canbecr eatedinter
nallybytheorganization,orbyaconsul
tancy

Page77of77
 PRI
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Legalr
est
ri
cti
ons,
i.
e.Foodpr
oduct
smustadher
etot
heNut
ri
ti
onLabel
li
ngandEducat
ion

TypesofBr
ands

Manuf
act
urer
sBr
ands:

I
niti
atedbyt heproducer.
.
Requirestheproducertobeinvol
vedindi
str
ibuti
on,pr
omotion,andtosomeextent
,pr
ici
ng.
Brandl oyal
tyi
sencouragedbyqualit
y,pr
omotionandguarantees.Pr
oducert
ri
estost
imulat
e
demand;encour agi
ngmi ddl
ement omaketheproductavai
labl
e(PULL)

Pr
ivat
eDi
str
ibut
orBr
ands:

I
nit
iat
edandownedbyt heresel
ler
s.
Manufactur
ersnotident
if
iedi
ntheproduct
.
Hel
psr et
ail
ersdevelopmoreeff
ici
entpr
omoti
on,
gener
atehi
ghermar
ginsandi
ncr
easest
orei
mage.

Wholesal
er’
sbrands
Thecompetit
ionbet
weenmanuf
act
urer
s’br
andsandpr
ivat
ebr
ands(
15%r
etai
lgr
ocer
y)i
s
i
ntensi
fyi
ng.

Gener
icbr
ands

Indi
catesonlyproductcategoryname' ornon-
decrepi
tbrandthatisnotadvert
ised,
andissoldat
apri
cesubstantiall
ylowerthanthecompar abl
ebrandedproducts.Gener
icbrandproduct
saremore
popul
arinrecessionaryti
mes,butlargelyi
ncaseoffungi
bleproductssuchasal umi
nium f
oil
,
handtool
s,paperpr oduct
s,smallappli
ances.

Pr
otect
ingaBr
and

Needtodesignabrandt hatcanbepr otectedthroughregistr

ati
on.
Generi
cwordsarenotpr otectable(al
umi nium foil
),sur
namesandgeogr aphi
corfuncti
onalnames
aredi
ff
icul
ttoprot
ect.Topr ot
ectexclusiverightstoabr andmustmakecer t
aint
hatthebrandisnot
l
ikel
ytobecomeconsi deredani nfri
ngementonanyexi sti
ngregist
eredbrand.Guar
dagainstabrand
namebecomi ngagener i
ct erm usedtor ef
ert ogeneralproductscategor
y.

Br
andi
ngPol
ici
es

Fi
rstquesti
oniswhet
hertobrandornottobr
and.Homogenouspr
oduct
sar
edi
ff
icul
ttobr
and(
Not
Purdue,Robi
nsonBri
ck)
.Brandingpol
ici
esar
e:

 I
ndividualBrandi
ng:Nami ngeachproductdiff
erent
ly,facil
it
atesmar
ketsegmentat
ionand
noover l
ap.
 OverallFamilyBr
anding:Allpr
oductsarebrandedwi t
ht hesamename,orpartofaname,
pr
omot i
onofoneitem alsopromotesotherit
ems.
 BrandExt ensi
onBranding:Useoneofitsexist
ingbrandnamesaspar tofabrandforan
i
mpr ovedornewpr oduct,usual
lyi
nt hesamepr oductcategory.

Page78of78
 PRI
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Abr
andcanconveyupt
osi
xlevel
sofmeani
ng:

 Att
ributes:TheMer cedes-Benzbr and,forexampl e,suggest
sexpensive,wel
l-bui
lt
,wel
l-
engineered, durabl
e,high-presti
geaut omobi l
es.
 Benef i
ts:attr
ibutesmustbet r
anslatedintofuncti
onalandemot i
onalbenef
it
s.
 Values:Mer cedesst andsforhighper formance,safety,andpresti
ge.
 Culture:Mer cedesrepresentsGermancul t
ure,organized,ef
fi
cient
,highqual
it
y.
 Personal i
ty:thebrandpr oj
ectsacer tainpersonalit
y.
 User :t
hebr andsuggest sthekindofconsumerwhobuysandusest heproduct.

Br
andEqui
ty

Thisphrasedescri
bestheval
ueofhavi
ngawell
-knownbr
andname,basedont
heideat
hatthe
ownerofawel l
-knownbrandnamecangenerat
emoremoneyfr
om product
swi
tht
hatbrandname
thanfr
om productswit
halesswell
-knownname.

Br
andAwar
eness

Thisi
stheextentt
owhi chabr andisrecognizedbypot
entialcust
omer s,andiscor
rect
lyassoci
ated
withapar
ticul
arproduct.Expr
essedusual l
yasapercentageoftargetmar ket
,br
andawarenessis
thepri
marygoalofadverti
singintheearlymonthsoryearsofapr oduct'
sintr
oduct
ion.

Canni
bal
izat
ion
Inmarket
ingst
rat
egy,cannibal
izat
ionr
eferstoareduct
ioni
nsalesvol
ume,sal
esrevenue,
ormar
ket
shar
eofoneproductasar esul
tofthei
ntroduct
ionofanewproductbythesameproducer
.

Packagi
ng

Packagingisthet
echnologyofenclosingorpr ot
ectingpr oductsf ordi
stri
buti
on, storage,sale,and
use.Packagingal
soreferstotheprocessofdesigni ng,evaluati
ng, andproducingpackages.
Packagingcanbedescr i
bedasacoor dinatedsystem ofpr eparinggoodsf ortranspor t
,war ehousing,
l
ogisti
cs,sal
e,andenduse.Packagi ngcontains,protects,preserves,t
ransport
s, informs,and
sel
ls.I
nmanycount ri
esitisfull
yint
egratedintogover nment ,business,andinsti
tut i
onal,
indust r
ial,
andpersonaluse.

Level
sofPackagi
ng

Pr
imarypackagi
ngisseenatt
hepointofsal
e.I
tneedst
ocont
ainandpr
otectt
hepr
oduct
,aswel
las
di
spl
ayitandprovi
deinf
ormat
ion.

Secondar
ypackagi
ngisthemi
ddl
elayerofpackagi
ng-f
orexampl
eacar
dboar
dboxwi
thanumber
ofi
denti
calpr
oduct
sinsi
de.

Shi
ppingpackagi
ngistheout
ercont
ainert
hatal
lowseasi
erhandl
ingdur
ingt
ransf
erbet
weenf
act
ory,
di
str
ibut
ioncentr
esandret
ail
ers

Packagi
ngFunct
ions

Page79of79
 PRI
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 Protectproductandmai nt
ainfuncti
onalform,i
.emilk.
 Promot eproductbycommuni cati
ngf eat
uresDevelopreusabl epackagef oralt
ernati
veuse.
 Segment ati
on,tai
lor
edtoaspeci f
icgroup
 Packagesandl abelscommuni catehowt ouse,tr
anspor t
,recycle,
ordisposeoft hepackage
orproduct.
 Withphar maceuti
cals,
food,medical,andchemicalproducts, sometypesofi nf
ormat i
onare
requir
edbygover nments.Somepackagesandl abelsalsoar eusedfortrackandt race
purposes.

 Thepackagingandl abelscanbeusedbymar keterstoencouragepotenti

albuyer
st o
purchasetheproduct.
 Packagescanhavef eaturesthataddconvenienceindistri
buti
on,handl
ing,st
acking,di
spl
ay,
sal
e, openi
ng,r
e-closi
ng, use,di
spensi
ng,reuse,recycl
ing,andeaseofdisposal
.

 Abar
ri
erfr
om oxygen,
wat
ervapour
,dust
,et
c.,
isof
tenr
equi
red.Per
meat
ioni
sacr
it
ical
f
act
orindesi
gn.

 Keepingthecont
entscl
ean, f
resh,ster
il
eandsafeforthei
ntendedshel
fli
fei
sapri
mary
funct
ion.
 Packagescanbemadewi t
himpr ovedtamperresi
stancet
odet ert
amperi
ngandal
socan
havetamper-evi
dentf
eaturestohelpindicat
etamperi
ng.

Cr
it
ici
smsofPackagi
ng

Lif
einit
sfull
nessofactivit
iesgoeswithmeri
tsanddemerit
sandassuchpackagi
ngisoutl
eftout.A
l
otorconsumerscompl ainsthatpackagi
ngaddedtothecostort
hepr
oduct
sthatarebei
ngoffer
ed
t
othroughthecri
ti
cism areasf ol
lows:

 Excessi
vepackagingdeplet
esnat ur
alresour
ces.
 Thatsomemat eri
alsusedonpr oductpackagi
ngtendstobehazardous.
 Thepackagingisdecepti
veinnature.
 Thecrit
icspinpoi
ntedalsoattheveryexpensivemater
ial
susedforthepackagi
ngofsome
productli
kebeerandcosmeticproduct.

Label
li
ng

Labelsser
vet ocapt
uretheatt
entionofshopper
s.Theuseofcatchywor
dsmaycausest
rol
li
ng
customerstostopandevaluat
et heproduct
.
Thelabeli
slikel
ytobethefir
stthingnewcustomersseeandthusoff
ert
hei
rfi
rsti
mpr
essi
onofthe
product
.

Label
sar
eDescr
ipt
ive

Page80of80
 PRI
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PLESOFMARKETI
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Alabeli
sacar r
ierofinf
ormat i
onaboutt heproduct
.Theatt
achedl
abelprovi
descust
omerswi
th
i
nformati
ont oaidtheirpurchasedecisionorhelpimprovet
heexper
ienceofusi
ngthepr
oduct
.
Label
scani nclude:
 Car eanduseoft heproduct
 Reci pesorsuggest i
on
 I ngredientsornut r
it
ionali
nformation
 Pr oductguar antees
 Manuf acturernameandaddr ess
 Wei ghtst atement s
 Sel lbydat eandexpi rat
iondate
 War nings
 I nstructi
onsforuse

 Facili
tatesidenti
fi
cati
onofaproduct
 Descr i
ptivefunct
ion
 Indicatethegradeoftheproduct
 Descr i
besour ceofproduct
,it
scontentandmaj
orf
eat
ures
 Howt ouset heproductet
c.
 Labelcanbeapr omoti
onalt
ool
 Information.

Nat
ureofPr
ici
ng
Pr
iceistheval
uepl acedonwhati sexchanged.Somethi
ngofval
ueisexchangedf
orsat
isf
act
ionand
ut
il
it
y,incl
udestangible(
funct
ional)andint
angibl
e(pr
esti
ge)f
act
ors.

Buyer
smustdet ermi
neift
heutil
it
ygainedfrom theexchangei
swort
hthebuyi
ngpowerthatmustbe
sacr
if
iced.Pri
cerepr
esent
sthevalueofagood/ servi
ceamongpot
enti
alpur
chasesandf
orensuri
ng
competit
ionamongsell
ersinanopenmar keteconomy.

Market
ersneedtounderst
andtheval
ueconsumer
sderivefr
om apr
oductanduset
hisasabasi
sfor
pr
ici
ngapr oduct
--mustdothi
sifwearecust
omeror
iented.

Fact
orsAf
fect
ingPr
ici
ngDeci
sions
Ther
eisconsiderableuncert
aintyregardi
ngthereact
iontopr
iceonthepar
tofbuyer
s,channel
members,compet i
torset
c.
I
tisal
soimpor t
antinmar ketplanning,
analysi
sandsalesfor
ecast
ing.

I
nter
nalf
act
ors Ext
ernalFact
ors

Mar
ket
ing Nat
ureofmar
ket

Obj
ect
ives demand

Mar
ket
ingmi
xSt
rat
egi
es Compet
it
it
ors

Cost
s Ot
herext
ernalf
act
ors

Or
gani
sat
ionf
orpr
ici
ng (
economy,
legal
)

Page81of81
 PRI
NCI
PLESOFMARKETI
NGMODULE

I
NTERNALFACTORS

1.Or
gani
zat
ionalandMar
ket
ingObj
ect
ives,

Needtobeconsist
entwit
hcompanies’
goals.i
.e.excl
usi
ver
etai
lerset
shi
ghpr
ices.Al
soconsi
stent
wit
hthemarket
ingobject
ivesf
ort
heyear.

2.TypesofPr
ici
ngObj
ect
ives

Pr
ici
ngobj
ect
ives:

 a.Sur vival-Itisappar entt hatmostmanager swi sht opur suest r

at egiest hatenabl et heir
organi zationst ocont inuei noper ationfort hel ongt erm.Sosur vivali sonemaj orobj ect i
ve
pursuedbymostexecut ives.Foracommer cialfirm, thepr i
cepai dbyt hebuyergener at
est he
fi
rn1'sr evenue.I fr evenuef allsbel owcostf oral ongper iodoft ime, t
hef irm cannotsur vive
 b.Pr of i
t-Sur vivaliscl osel ylinkedt oprof it
abi li
ty.Maki nga$500, 000pr ofitdur ingthenext
yearmi ghtbeapr i
cingobj ecti
vef oraf i
rm.Anyt hi nglesswi llensur ef ail
ure.Al lbusi ness
enterpr i
sesmustear nal ong- term pr ofi
t.Formanybusi nesses, long- term pr ofitabil
ityal so
all
owst hebusi nesst osat isfythei rmosti mpor tantconst ituent s-st ockhol ders.Lower -t
han-
expect edornopr ofit
swi lldr i
vedownst ockpr icesandmaypr ovedi sastrousf ort he
company
 c.Sal es-Justassur vivalr equi resal ong- term pr ofi
tforabusi nessent erprise,pr ofi
tr equires
sales.Asyouwi llrecal lfrom ear li
eri nthet ext ,thet askofmar ketingmanagementr elatest o
managi ngdemand.Demandmustbemanagedi nor dertor egul ateexchangesorsal es.Thus
mar ket i
ngmanagement 'sai mi st oaltersal espat ternsinsomedesi rableway.
 d.Mar ketshar e-Mar ketShar e:I fthesal esofSaf ewaySuper mar ketsi ntheDal las-For t
Wor thmet ropolitanar eaaccountf or30%ofal lfoodsal esi nt hatar ea, wesayt hatSaf eway
hasa30%mar ketshar e.Managementofal lfirms, l
argeandsmal l,areconcer nedwi th
mai ntaininganadequat eshar eoft hemar ketsot hattheirsal esvol umewi l
lenabl ethef irm
tosur viveandpr osper .Agai n, pricingst rategyi soneoft het ool sthati ssi gnifi
canti n
creatingandsust ainingmar ketshar e.Pr icesmustbesett oat tractt heappr opr iatemar ket
segmenti nsi gnificantnumber s.
 e.Image-Pr i
cepol iciespl ayani mpor tantr ol einaf fecti
ngaf irm' sposi t
ionofr espectand
esteem i ni t
scommuni ty.Pr icei sahi ghl yvi siblecommuni cat or.Itmustconveyt he
messaget ot hecommuni tyt hatt hef i
rm of fersgoodval ue, t
hati ti sfai ri
ni tsdeal ingswi th
thepubl i
c, t
hati tisar eliabl epl acet opat roni ze, andt hatitstandsbehi ndi t
spr oduct sand
services

3.Cost
s,

Inthelongrun, cannotsurvi
vebysell
ingatorbel owcost .Needt otakeint
oaccountal
lcost
s,
costsassociatedwi t
hproduct,wit
htotalproductli
neet c.Breakevenpointi
swherethecost
ofproducingthepr oductisequalt
other evenuederivedfrom sell
ingtheproduct
.
Fixed-donotchangewi t
hchangei n#uni t
sproduced
Variable-
varydirectl
ywiththechangeint he#uni t
spr oduced

4.Or
gani
sat
ionf
orpr
ici
ng.
Managementandmustdeci dewhichdepartmentwi t
hintheor
ganisati
onisresponsibl
efor
sett
ingpricese.g.topmanagement,market
ing,accounti
ngorbuying.Thesedepartmentshave
dif
ferentobject
ivestowar
dsachi
evingoverallgoal
softheorgani
sation.

Ext
ernalf
act
ors.

Page82of82
 PRI
NCI
PLESOFMARKETI
NGMODULE

1.Nat
ureofmar
ketanddemand
Costssetsl owerli
mitsofpriceswhil
stmar ketanddemandset supperli
mits.Bot
hconsumersand
i
ndust r
ialbuyersmustbal ancethepri
ceofapr oductofser vicesagainstt
hebenefit
sofowni
ngi t
.
Beforesettingpri
cesmar ketersmustunderstandt herelat
ionshi pbetweenpriceanddemandforit
s
productsi.e.l
esswillbeboughtatahi gherprice&mor eatl owerprice.

2.Compet
it
ion
Acompani espricingdeci sionsisaffect
edbycompet i
tor
’spr i
cesandt heirpossibler
eactiont othe
cooperat
ion’spricingst r
ategies.Consumerswil
levaluat
eapr oduct
’spriceandval ueagai nstthe
pri
cevalueofcompar abl
epr oducts.Acompany’shighpricingstrat
egymayat tr
actcompet i
tors
whereasal owpr icingstrategymaydi scour
agecompet i
tors.Undercompet i
ti
onamar ketwilloperat
e
underfourkindsofmar ketsituati
on;oli
gopol
y,monopoly,monopol ist
iccompet i
t i
onisper f
ect
competit
ion.

3.Resel
ler
s
Howwi llt
heresel
ler
sreacttovar
iouspri
cescompani
esmustsetpr
icest
hatgi
ver
esel
ler
saf
air
pr
ofi
t,encour
age,supportandhel
psellcompanypr
oduct
s?

Channelmemberexpecttorecei
veaprofitf
orservi
cesperformed.Needtokeep
dist
ri
but
ors/r
etai
ler
shappy,avoi
dconfl
icts,
useexclusivedeal
ing,andavoi
ddiscount
ers.
Mayusepr i
ceguarant
eestoassurewholesal
ers/
retai
lerst
hatthepricet
heypayisthelowest
avail
abl
e.

4.Buyer
sPer
cept
ions,
Pricesensi
ti
vit
yvari
esamongmarketsegmentsandacr
ossdif
fer
entproduct
s(i.
e.necessary
productsvs.l
uxur
y).
Needtoknowbuyersaccept
abl
erangeofpri
cesandsensit
ivi
tytowardspri
ce
changes.

5.Ot
herExt
ernalFact
ors
Economicconditi
onscanhaveadr amatici
mpactont heef
fect
ivenessofdif
ferentpr
ici
ngst
rategi
es.
Economicfactor
ssuchasi nf
lat
ion,r
ecessi
on’si
nter
estrat
eswi l
linf
luencepri
cedecisi
onsbecause
theybot
haf f
ectthecostofpr
oducingproduct+theconsumer’
sper cepti
onforthepri
ceandvalue.

Gover
nmental
soaf
fect
spr
ici
ngdeci
sionst
hroughpr
icecont
rol
s,set
ti
ngofpr
icef
loor
sandcei
li
ng.

Pr
iceset
ti
ngpr
ocess
1. Sel
ecttheprici
ngobj ect
ivet
odecidewhereyouwanttoposit
ionyourmar ketof
fer
ing.Thefive
majorobject
ivesthatyoucanpursuearesurvi
val
,maximum curr
entprofi
t,maximum mar ketshar
e,
maximum mar ketskimmingorproduct–quali
tyl
eader
shi
p.Havi ngaclearerobj
ecti
vemakesi t
easi
ertosetapr i
ce.

2. Deter
mi nethedemand.De terminehowmanypr oductsyoucansel linagiventi
meper i
od
.
Thepriceyousetwi l
laff
ectthedemandlevelandimpactyourbusi
nessobj
ect
ivesdi
ff
erent
ly.I
n
normalsituat
ions,pr
iceanddemandar ei
nverselyr
elat
ed,i
nthatthehi
ghert
hepr i
cet
helowerthe
demandandvi cever
sa.

3. Esti
matethecost
s.Whil
edoi
ngt hi
s,youwanttochargeapri
cethatcover
syourcostofpr
oduct
ion,
dist
ri
but
ionandsell
ingoft
heproductplusadecentr
etur
nforyouref
fort
sandri
sks.

Page83of83
 PRI
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PLESOFMARKETI
NGMODULE
4. Analyzecompetit
orcost
s,pr
ices,of
fer
sandpossi
blereacti
ons.Youshouldconsi
deryournear
est
compet i
tor
’spr
ice,pr
oductf
eaturesandeval
uat
ethem tocheckthei
rworthtothecust
omers.You
canthendecidetochargemore,sameascompetit
ororless.

5. Sel ectapr
ici
ngmethod.Whenselect
ing,consi
derthecostofthepr
oductorservi
ce,
competi
tor
pricesandthecust
omer ’
sassessmentoftheuniquefeat
ures.Thepr
ici
ngmet hodyoudeci
deshoul
d
includeoneormoreoftheseconsi
derati
ons.

6. Final
ly,
selectthepri
ce.Here,
youmustconsiderthefol
lowi
ng:1)Impactofot
hermarketi
ng
act
ivi
ti
eslikebrandquali
tyandadverti
singi
nrelat
iontocompet
iti
on.2)Compani
espr
icingpol
icy,
3)
Impactofthepriceonotherpar
tiesl
ikethedi
str
ibutor
sanddealer
s.

Basi
cPr
ici
ngConcept
s
Amajorf
actori
ndetermi
ningtheprof
itabi
li
tyofanypr
oducti
sest
abl
ishi
ngabasepr
ice.Ther
ear
e
t
hreemethodsofset
ti
ngapr oduct
’sbaseprice:

•Cost
-or
ient
edpr
ici
ng

•Demand-
ori
ent
edpr
ici
ng

•Compet
it
ion-
ori
ent
edpr
ici
ng

1.Cost
-Or
ient
edPr
ici
ng

Costpl
usPr
ici
ng

Marketer
sfir
stcal
culat
ethecost sofacquir
ingormakingaproductandt hei
rexpensesofdoing
busi
ness,t
henaddtheirpr
ojectedprofi
tmar gi
ntoarr
iveatapri
ce.Twocommonmet hodsaremark-
uppri
cingandcost-
pluspri
cing.Usedmai nlybyManufact
urer
s&ser viceorgani
zationsExamines
cost
sthenaddsstandardmark- up.Products&servi
cesareal
lconsideredindi
viduall
y

Mar
k-uppr
ici
ng

Ther earesever alreasonswhyexpr essingmark-upasaper cent ageofsel l

ingpr i
ceispr eferr
edt o
expressingitasaper centageofcost.Oneisthatmanyotherrat i
osar eexpr essedasaper cent ageof
sales.Forinstance, sel
li
ngexpensesar eexpr
essedasaper cent ageofsal es.Ifell
ingcost sare8%,
thi
smeanst hatf oreach$100,000i nnetsal
es,thecostofsell
ingt hemer chandi seis
$8,000.Adverti
singexpenses, operati
ngexpenses,andothertypesofexpensesar equot edi nthe
sameway.Thus, thereisaconsistencywhenmaki ngcompar isonsinexpr essingal lexpensesand
costs,incl
udingmar k-up,asapercentageofsales(sel
li
ngprice).Mi ddl
emenr eceivemer chandi se
dailyandmakesal esdai l
y.

Break-EvenAnal ysisAsomewhatmor esophisticatedapproachtocost -ba3edpr ici

ngist hebr eak-
evenanal ysis.Theinformationrequir
edf orthef ormulaforbreak-evenanalysi
si savail
ablefrom t he
accountingr ecordsinmostf ir
ms.Thebr eak-evenpr iceisthepri
cet hatwil
lproduceenoughr evenue
tocoveral lcostsatagi venlevelofproduction.Tot alcostcanbedi vi
dedintofixedandvar i
able( t
otal
cost=f i
xedcost+var iablecost)
.Recallthatfixedcostdoesnotchangeast hel evelofproduction
goesupordown.

TargetRat
esofRet ur
nBreak-evenpri
cingi sar easonableapproachwhenthereisalimi
tont he
quantit
ywhichaf inncanprovideandparticularlywhenat argetret
urnobj
ect
iveissought.Assume,
forexample,
thatthef i
rm wi
ththecostsil
lust r
atedint hepr
eviousexampledetenni
nesthatitc8.
;'
l
provi
denomor et han10,000unitsoft
hepr oducti nthenextper i
odofoper
ati
on.Further
mor e,t
he
fi
rm hassetatargetforprof
itof20%abovet otalcosts.

Page84of84
 PRI
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2.Demand-
Ori
ent
edPr
ici
ng

Marketerswhousedemand- or
ient
edpri
cingat
tempttodeter
minewhatconsumer
sarewill
ingto
payforgoodsandser
vices.Thekeytot
hismethodofpri
cingist
heconsumer’
spercei
vedvalueof
thei
tem

3.Compet
it
ion-
Ori
ent
edPr
ici
ng

Mar
ket
ersmayel
ectt
otakeoneoft
hreeact
ionsaf
terl
ear
ningt
hei
rcompet
it
ors’
pri
ces:

•Pr
iceabovet
hecompet
it
ion

•Pr
icebel
owt
hecompet
it
ion

•Pr
icei
nli
newi
tht
hecompet
it
ion(
goi
ng-
rat
epr
ici
ng)

Compet
it
ion-
Ori
ent
edPr
ici
ngMet
hods

Goi
ngr
atepr
ici
ng.

Thenumberspri
cei
sbasedl
argel
yoncompeti
ti
on’
spr
iceswit
hlessatt
ent
ionpai
dtoit
sowncost
s
anddemand.Thenumbermaychanget
hesamepri
ce,
mor eorl
essit
smajorcompet
it
ions.

Seal
edbi
dpr
ici
ng

Thismethodoccurswhenacobidsf
orajobe.gbuildi
ngcontract
orsmustbidonpossibl
epr
oject
s
andonthismethodacompanycannotsetapri
cebelowacertainl
evelandt
hemustal sonot
ethat
thehi
gherthepri
ceitwi
llbi
dthel
owerarei
tschancesofget
ti
ngt ocontr
act
.

Typesofst
rat
egi
esf
ornewpr
oduct
s:

Pri
ceSki mmingChargehi
ghestpricepossiblethatbuyerwhomostdesi retheproductwil
lpay.
Generatemuchneededinit
ialcashflow,coverhighR&Dcost s.Esp.goodforli
mitedcapaci
ty
i
ntroducti
ons.Att
ractmar
ketsegmentmor eint
erestedinquali
ty,stat
us,uni
quenessetc.
Goodifcompet i
ti
oncanbemi nimizedbyothermeans, IE,
brandl oyal
ty,
patent
,highbarr
ier
stoent
ry
et
c.Consumer sdemandmustbei nelast
ic.

Penetr
ati
onPrici
ngPricereducedcompar edt ocompeti
tor
stopenet
rat
ei nt
omar ket
stoi
ncrease
sal
es.
Lessfl
exibl
e,moredif
fi
cul
ttor ai
sepr i
cesthanitist
olowerthem.Mayusei tt
ofoll
owpri
ce
ski
mmi ng.Goodasabar r
iertoentry.Appropri
atewhenthedemandiselast
ic.Useift
her
eisan
i
ncreaseineconomiesofscalethroughincreaseddemand.

Pr
oductMi
xSt
rat
egi
es

Productmixpr
icingstr
ategiesi
nvolveadj
ust
ingpri
cest
omaximizet
hepr
ofi
tabi
li
tyf
oragr
oupof
pr
oductsrat
herthanforjustoneit
em.Thesestr
ategi
esi
ncl
ude:

o Pri
celini
ng
o Opti
onal
o Capti
veproductprici
ng
o Bundlepri
cing
o Geographicalpr
ici
ng

Page85of85
 PRI
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PLESOFMARKETI
NGMODULE

Pr
icel
ini
ng

Specialpri
cingt echniquet hatsetsal i
mi tednumberofpr icesforspeci f
icgr oupsorl i
nesof
mer chandise.Youar ealreadyf amil
iarwi thpr i
celines.Ti esmaybepr i
cedat$15, $17,$20, and
$22.50;bluejeansmaybepr icedat$30, $32. 95,$37. 95, and$45.Eachpr icemustbef arenoughso
thatbuyerscanseedef i
nitequal i
tydif
ferencesamongpr oducts.Pricelinest endtobeassoci ated
withconsumershoppi nggoodssuchasappar el,
appl iances, andcar petingr at
hert hanpr oductl i
nes
suchasgr ocer i
es.Cust omer sdover ylit
tlecompar ison- shoppi ng.Priceliningser vessever al
purposest hatbenefitbothbuyer sandsel lers.Customer swantandexpectawi deassor tmentof
goods, parti
cularl
yshoppi nggoods.Manysmal lpricedi f
f er
encesf oragi veni t
em canbeconf usi
ng.
Ift
ieswer epricedat$15, $15. 35,$15.75, andsoon, select ionwoul dbemor ediff
icult;thecust omer
couldnotjudgequal i
tydifferencesasr eflectedbysuchsmal li
ncrement si nprice.So, having
rel
ativel
yfewpr i
cesreducest heconfusion

Opti
onalpr
oductpr
ici
ng-
invol
vesset
ti
ngpr
icesf
oraccessor
iesoropt
ionssol
dwi
tht
hemai
n
pr
oduct

Capti
veproductpri
cing-setst
hepriceforonepr
oductlowbutcompensat
esf
ort
hatl
owpr
iceby
set
ti
nghighpricesforthesuppl
iesneededtooperat
ethatpr
oduct
.

Bundlepr
ici
ng-acompanyof f
erssever
alcomplementaryproduct
sinapackagethati
ssoldata
si
nglepri
cethati
slowerthant
hecostofbuyingeachitem separ
atel
yi.
e.,
breakdownpri
cesand
al
lowcustomerstodeci
dewhattheywanttopurchase.

Psychol
ogi
calPr
ici
ngSt
rat
egi
es

Psychol
ogi
calpr
ici
ngstr
ategi
esar
epr
ici
ngt
echni
quest
hathel
pcr
eat
eani
ll
usi
onf
orcust
omer
s.
Somecommononesar e:

•Odd-
evenandpr
est
igepr
ici
ng

•Mul
ti
ple-
uni
tpr
ici
ng

•Ever
ydayl
owpr
ices(
EDLP)andPr
est
igepr
ici
ng

Odd- evenprici
nginvol
vessetti
ngpr i
cest hatendi neitheroddorevennumber st oconveycert
ain
i
mages.I tisbasedonapsychol ogicalpri
nci pl
et hatoddnumber sconveyabargai nimage,whil
e
evennumber sconveyaqualit
yimage.Odd- evenpr ici
ng,endpri
ceswi t
hacertai nnumber,$99.
95
soundscheapert han$100.Mayt ellf
riendst hatitis$99.Cust
omersliketor
ecei vechange,si
nce
changei sgiven,t
henthetransact
ionmustber ecorded.Consumersmayper ceivethatalotofti
me
takenconsideringthepr
ice,anditissetasl owaspossi bl
e.Evenpri
cesaremor eunusualthanodd
prices.

Mul
ti
ple-
uni
tpr
ici
ngsuggest
sabar
gai
nandhel
pst
oincr
easesal
esvol
ume.

Everydaylowpr i
ces(EDLP)ar
elowpr i
cessetonaconsi
stentbasi
swithnointent
ionofrai
singt
hem
oroffer
ingdiscountsint
hefut
ure.Thesehelptor
educepr
omot i
onalexpensesandlossesdueto
discounti
ng.

Pr
est
igepr
ici
ngset
shi
gher
-than-
aver
agepr
icest
osuggestst
atusandhi
ghqual
it
ytot
hecust
omer
.

Pr
omot
ionalPr
ici
ng

Pr
omoti
onalpr
ici
ngi
sgeneral
lyusedi
nconjuncti
onwi
thsal
espr
omot
ionswher
epr
icesar
ereduced
f
orashor
tperi
odoft
ime.Twocommont ypesare:

Page86of86
 PRI
NCI
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•Lossl
eaderpr
ici
ng

•Speci
al-
eventpr
ici
ng

Lossleaderpr
ici
ngi
susedt
oincr
easest
oret
raf
fi
cbyof
fer
ingver
ypopul
ari
temsf
orsal
eatbel
ow
costpri
ces.

Speci
al-
eventpri
cingit
emsar ereducedi npricef
orashortper
iodoft
ime,basedonaspecif
ic
happeni
ngorholiday.Rebatesarepart
ialrefundsprovi
dedbythemanufact
urertoconsumer
swhil
e
couponsall
owcust omerstotakereducti
onsatt heti
meofpurchase.

Pr
ici
ngPol
ici
es

One-
Pri
cePol
icy

Aone-pr
icepoli
cyisonei
nwhichal
lcustomersarechar
gedt
hesamepr
ices,
quot
edt
othem by
meansofsignsandpri
cet
agswit
houtdeviat
ions.

PRI
CEFLEXI
BILI
TY

Pr
icingdecisi
onr el
atestotheext
entofpr i
ceflexibil
it
y.Aflexiblepr i
cingpoli
cymeanst hattheprice
i
sbidornegot iat
edseparatel
yforeachexchange.Thi sisacommonpr act
icewhenselli
ngt o
or
ganizati
onalmar ketswhereeachtransacti
oni stypical
lyqui tel
ar ge.I
nsuchcases, t
hebuyermay
i
nit
iatet
hepr ocessbyaskingforbiddingonapr oductorser vicethatmeet scert
ainspecif
icati
ons.
Al
ternat
ivel
y,abuyermaysel ectasupplierandat tempttonegot i
atet hebestpossi
blepri
ce.
Marketi
ngef f
ecti
venessinmanyi ndustr
ialmar ketsrequir
esacer tainamountofpr i
cefl
exibil
it
y.

TypesofPr
iceFl
exi
bil
it
y

Di
scount
sandAl
lowances

Inaddit
iont
odecisi
onsrelatedt
othebasepri
ceofproduct
sandser vi
ces,mar
keti
ngmanagersmust
alsosetpol
ici
esrel
atedt
ot heuseofdi
scountsandal
lowances.Therearemanydif
fer
entt
ypesof
pricer
educt
ions-
eachdesignedtoaccompli
shaspecifi
cpurpose.

Quanti
tydiscountsarereducti
onsinbasepr icegi
venast her esultofabuyerpur chasi
ngsome
predet
erminedquantit
yofmer chandise.Anoncumul ati
vequant it
ydi scountappli
estoeachpur chase
andisint
endedt oencouragebuyerst omakel ar
gerpurchases.Thi smeanst hatthebuyerholdsthe
excessmer chandi
seuntili
tisused,possibl
ycutti
ngt heinventorycostoft hesell
erandpr event
ing
thebuyerf
rom switchi
ngt oacompet it
oratleastunt
ilthestocki sused.

Seasonaldiscountsarepri
cereductionsgivenorout-of-
seasonmer chandise.Anexamplewouldbe
adiscountonsnowmobi l
esduri
ngt hesummer .Theint
enti
onofsuchdi scountsistospr
eaddemand
overtheyear.Thiscanall
owf ul
leruseofpr oducti
onfaci
li
ti
esandimpr ovedcashf l
owduringthe
year.El
ect
ricpowercompani esuset helogicofseasonaldi
scountstoencour agecust
omer st
oshif
t
consumptiontoof f
-peakperi
ods.Sincethesecompani esmusthavepr oductioncapaci
tytomeet
peakdemands, theloweri
ngofthepeakcanl essenthegenerat
ingcapacityrequir
ed.

Cashdi scount
sarereduct
ionsonbasepricegiventocustomersforpayi
ngcashorwit
hinsome
shortti
meper i
od.Forexample,atwo-
percentdiscountonbil
lspaidwit
hint
endaysisacash
discount.Thepur
poseisgenerall
ytoacceler
atethecashflowoftheorgani
zat
ion.

Tradediscountsar
epri
cereduct
ionsgi
vent
omi ddlemen( e.
g.,
whol esal
ers,i
ndustri
aldistr
ibutors,
ret
ail
ers)toencour
agethem t
ostockandgi
vepreferr
edtreatmenttoanor ganizat
ion'sproducts.For
example,aconsumergoodscompanymaygi vearetai
lera20%di scounttoplaceal argerorderfor

Page87of87
 PRI
NCI
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soap.Suchadi
scountmi
ghtal
sobeusedt
ogai
nshel
fspaceorapr
efer
redposi
ti
oni
nthest
ore.

Personalallowancesar esi mi
lardevicesaimedatmi ddlemen.Theirpurposeistoencour age
middlement oaggressivelypr
omot etheor gani
zation'sproducts.Forexample,af urnit
ure
manuf acturermayof f
ert opaysomespeci fi
edamountt owardar et
ail
er'
sadvertisingexpensesifthe
ret
ail
eragr eestoincludet hemanufact urer
'sbrandnamei ntheads.Somemanuf acturer
sor
wholesalersalsogivepr izemoneycal ledspij
fsforretai
lerst
opassont otheretailer'
ssalescler
ks
f
oraggr essivel
yselli
ngce11ai nitems.Thi sisespeciall
ycommoni ntheelectr
oni csandcl ot
hing
i
ndust ri
es,whereitisusedpr i
mar il
ywi thnewpr oducts,slowmover s,orhi
ghmar ginitems.

Trade-i
nallowancesalsoreducethebasepr i
ceofaproductorservi
ce.Theseall
owthesel
lerto
negoti
atethebestpri
cewi t
habuyer .Thetrade-
inmay,ofcourse,beofval
ueifi
tcanberesold.
Accepti
ngt r
ade-i
nsisnecessaryinmar keti
ngmanytypesofproducts.Aconstr
ucti
oncompanywith
ausedgr aderworth$70,
000woul dnotlikel
ybuyanewmodelf r
om anequipmentcompanythatdi
d
notaccepttrade-
ins,par
ti
cular
lywhenot hercompani
esdoacceptt hem.

1.Di
scountPr
ici
ngandal
lowances

 Trade, givenbyapr oducert oani nt

ermedi aryf orperformingcer tai
nf uncti
ons( int ermsof%
offli
stpr ices)
 Quant it
y, duet oeconomi esofpur chasingl argeqt ys.Passcostsavi ngsont ot hebuyer .
Ther earef ivear easofcostsavi ngs, r
educedpersel li
ngcost s,fixedcost sdecl i
neorr emai
n
thesame, l
owercost sfrom t hesuppl i
er sofrawmat eri
als,longerpr oduct i
onr unsmeansno
i
ncr easei nhol dingcost s,shi f
tstorage, fi
nanci ng,ri
skt akingfunct ionstot hebuyer .Can
cumul ative/ noncumul at i
ve.
 Cash, forpr omptpayment ,2/ 10net30, means2%di scountal l
owedi fpaymenti smade
within10days, enti
rebal ancei sduewi thin30days, nodi scount ,afterthatinterestwi l
lbe
char ged.
 Seasonal ,purchaseoutofseason
 All
owances, tradeinallowances, pricereduct ionsgr antedf orturningi nausedi tem when
purchasi nganewone- toachi evedesi redgoal .Popul arint heai r
craftindustry.Al so
promot ionalal lowances, pricer educti
oni nr eturnfordeal erspr omot ionaleffort
s.

2.PriceDiscri
minat
ion-
Itexi
stswhent
hepr
oducti
ssol
datdi
ff
erentpr
icest
odi
ff
erentbuyer
sandi
t
takesseveralfor
ms;

a. Cust
omersBasis.
-Di
ff
erentcust
omerspaydi
ff
erentamount
sfort
hesamepr
oduct
sor
ser
vicee.
g.showsadvance&gatet
icket
s

b. Pr
oductfor s-
m Basi Diff
erentver
sionsoft
hepr
oductar
epr
iceddi
ff
erent
lybutnot
pr
oport
ional
lytothei
rrespecti
vecosts.

c. Pl s-
aceBasi Di
ff
erentl
ocat
ionsar
epr
iceddi
ff
erent
lyevent
hought
hecostofof
fer
ingt
he
l
ocat
ionsi
sthesame.

d. Ti s-
mebasi Her
epr
icesar
evar
iedseasonal
ly,
bydayorbyhour
.

Geogr
aphi
calpr
ici
ng-r
efer
stopr
iceadj
ust
ment
srequi
redbecauseoft
hel
ocat
ionoft
he
customerf
ordel
iver
yofproduct
s.Inthisstrat
egy,t
hemanufact
urerassumesr
esponsi
bil
it
yfort
he
costandmanagementofproductdel
ivery.Therear
esever
alfor
ms:

a. F.O.B(fr
eeonboar
d)-Acocanaskeachcustomertopayshi
ppingcost
sfr
om t
hefact
ory
tothecust
omer
’sspeci
fi
cdest
inat
ion.Thegoodsar
eplacedf
reeonboardacar
ri
erat

Page88of88
 PRI
NCI
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whi
chpoi
ntt
it
leandresponsi
bil
it
ypassest
othecust
omerwhopayst
hef
rei
ghtf
rom t
he
f
act
oryt
othedest
inat
ion.

b. Uniform Del
iveryPrici
ng-Acowi
llchar
get
hesamepr
iceandf
rei
ghtt
oal
lcust
omer
s
regardl
essoft hei
rlocati
on.

c. ZonePr
icing-
Acowil
lest
abl
isht
woormorezonesandal
lcust
omer swithi
nthesame
zonewi
llpayt
hesamepri
ceandt
hispr
icei
shi
gherinmor
edistantzones.

d. BasingPointMethod-Thismethodal
lowsthesell
erstodesi gnatesomecityasabasing
pointandchargeallcustomer
sthefr
eightcost
sfrom thatcitytocustomerlocat
ion
regardl
essofthecityfr
om whicht
hegoodsar eactual
lybeingshi pped.

e. Frei
ghtAbsor
pti
on-
Themanufact
urewillabsor
bfreightchar
gesinor
dert
ogetthe
busi
ness.Thi
smethodi
susedformarketpenetr
ationandalsotoontoi
ncreasi
ngl
y
competi
ti
vemarket
s.

Di
str
ibut
ion
Achannelofdi st
ri
buti
onormar keti
ngchannelisagroupofindi
vidual
sandorganizat
ionsthat
directst
heflowofproduct
sfrom producer
sandcustomers.Eachchannelmemberhasdi f
fer
ent
responsibi
li
ti
eswithi
ntheoverallst
ruct
ureofthedi
stri
but
ionofthesystem;mutualprofi
t/
successi
s
obt ai
nedthr
oughcooperati
on.

Market
ingInt
ermedi
ari
esl
inkpr
oducer
stoot
heri
ntermedi
ari
esort
otheul
ti
mat
euser
soft
he
pr
oduct.Operat
ebet
weenthepr
oducerandt
hefi
nalbuyer
.

Typesofut
il
it
ydi
str
ibut
ionof
fer
s:
 TI
ME...
whenthecustomer swantt
opurchasetheproduct.
 PLACE.
..wher
ethecust omer
swanttopurchasetheproduct.
 POSSESSION..
.f
aci
li
tatescust
omerownershipoftheproduct
.
 FORM..
.someti
mes,ifchangeshavebeenmadet otheproducti
nthedi
str
ibut
ionchannel

Funct
ionsofI
nter
medi
ari
es
1. Riskt aki ng–Assumi ngt heriskconnect edwithcar ryingoutchannelwor korbeingapar tofa
channel
2. Financi ng–Acqui ri
ngf undstofinancef ori
nventories
3. Physi caldi st
ri
buti
onofgoods–St orageandmovementofphysi calgoods
4. Negot iations–Reachi nganagr eementonpr i
cingandot hertermswhi chmaybeapar tofthe
transact ion
5. Mat ching – Pl acing or derwi t
ht he manufact
ur ers and mat chi
ng the orderstothe actual
requi rement .
6. Cont acts– Mai ntaini
ngcont actswi t
hexisti
ngcust omer saswel lestabli
shingcont
actswi t
h
pot ent i
alcust omersandmai ntainingthesamewi thther egulat
or ybodi
es
7. Pr omot ions–Car ryingouteffectivecommuni cationst ostimulatepurchasing
8. Infor mat ion–Gat her i
ngi nf
ormat ionaboutpotent i
alcust omers,compet it
ionaswellastr
acking
theenvi r onmentalfactors
.

TypesofChannel
sofDi
str
ibut
ion

Page89of89
 PRI
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Sel
ect
ionofDi
str
ibut
ionChannel
s

(
i)Pr
oduct
:

Perishabl
egoodsneedspeedymovementandshor terrouteofdi
str
ibut
ion.Durableand
standardi
zedgoods, needslongeranddiver
sif
iedchannels.Techni
calproductrequi
ringspeci
ali
zed
sell
ingandpr oductsofhighunitval
uehavetheshortestchannel
.Productsaresolddirect
lyby
tr
avelli
ngsalesforce.

(
ii
)Mar
ket
:

(
a)Forconsumermar
ket
,ret
ail
eri
sessent
ialwher
easi
nbusi
nessmar
ketwecanel
imi
nat
eret
ail
ing.

(b)Forl
argemar
ketsi
ze,
wehavemanychannel
s,wher
eas,
forsmal
lmar
ketsi
zedi
rectsel
li
ngmay
beprofi
tabl
e.

(c)Forhi
ghl
yconcent
ratedmar
ket
,dir
ectsel
li
ngispr
efer
redwher
easf
orwi
del
yscat
ter
edand
dif
fusedmarket
s,wehavemanychannel
sofdist
ri
but
ion.

(d)Sizeandaver
agefr
equencyofcustomer
’sor
dersalsoi
nfl
uencet
hechanneldeci
sion.I
nthesal
e
offoodproduct
s,weneedbothwholesal
erandr
etai
ler
.

Customeranddealeranalysi
swillprovi
dei nf
ormationonthenumber,
type,l
ocat
ion,buyi
nghabitsof
consumer sanddealer
sinthi
scasecanal soinf
luencethechoi
ceofchannel
s.Forexample,desi
re
forcredit
,demandforper
sonalservice,
amountandt i
meandef f
ort
sacustomeriswill
ingtospend-
areallimport
antf
actorsi
nchannel schoice.

(
ii
i)Mi
ddl
emen:

(
a)Mi
ddl
emenwhocanpr
ovi
dewant
edmar
ket
ingser
viceswi
llbegi
venf
ir
stpr
efer
ence.

(
b)Themi
ddl
emenwhocanof
fermaxi
mum co-
oper
ati
oni
npr
omot
ionalser
vicesar
eal
sopr
efer
red.

(
c)Thechannelgener
ati
ngt
hel
argestsal
esvol
umeatl
oweruni
tcosti
sgi
vent
oppr
ior
it
y.

(
iv)Company:

Page90of90
 PRI
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(a)Thecompany’ssizedeter
minesthesi
zeofthemar
ket,
thesi
zeofi
tsl
argeraccount
sandi
ts
abil
it
ytosetmiddlemen’sco-oper
ati
on.Alar
gecompanymayhaveshor
terchannel
.

(b)Thecompany’spr
oduct-mi
xinf
luencest
hepat
ter
nofchannel
s.Thebr
oadert
hepr
oduct
-li
ne,
the
short
erwil
lbethechannel
.

I
ftheproduct
-mi
xhasgr
eat
erspeci
ali
zat
ion,
thecompanycanf
avorsel
ect
iveorexcl
usi
ve
deal
ershi
p.

(
c)Acompanywithsubstant
ialf
inanci
alr
esour
cesmaynotrel
yonmiddl
emenandcanaff
ordt
o
r
educet
helevel
sofdist
ri
buti
on.Af i
nanci
all
yweakcompanyhast
odependonmiddl
emen.

(
d)Newcompani
esr
elyheavi
lyonmi
ddl
emenduet
olackofexper
ience.

(
e)Acompanydesir
ingtoexerci
segr
eat
ercontr
oloverchannelwi
llpr
eferashor
terchannelasi
twi
ll
f
aci
li
tat
ebet
terco-
ordinat
ion,
communicat
ionandcontrol
.

(f
)Heavyadver
ti
singandsal
epromoti
oncanmotivatemi
ddl
emeni
nthepr
omot
ionalcampai
gn.I
n
suchcases,
alongerchai
nofdi
str
ibut
ioni
spr
ofi
table.

Thus,quanti
tyandqual
it
yofmar
ket
ingser
vicespr
ovi
dedbyt
hecompanycani
nfl
uencet
hechannel
choi
cedirect
ly.

(
v)Mar
ket
ingEnvi
ronment
:

Duri
ngr ecessionordepressi
on,shorterandcheaperchannelispr ef
erred.Duri
ngprosperi
ty,
wehave
awiderchoi ceofchannelalt
ernati
ves.Thedi st
ri
buti
onofper i
shablegoodseveni ndi
stantmarket
s
becomesar eali
tyduetocoldstoragefaci
li
tiesintr
ansportandwar ehousing.Hence,
thi
sleadsto
expandedr oleofint
ermediar
iesinthedistr
ibuti
onofperishabl
egoods.

(
vi)Compet
it
ors:

Marketerscl
osel
ywatchthechannelsusedbyr i
val
s.Manyat i
me,simil
archannelsmaybe
desi
rablestobri
ngaboutdist
ri
buti
onofacompany’ sproduct
s.Someti
mes, marketersdel
iber
atel
y
avoi
dchannelsusedbycompet it
ors.Forexampl
e,companymayby- passretai
lstorechannel(
used
byri
vals)andadoptdoor-
to-doorsales(wher
etherei
snocompet i
ti
on).

(
vii
)Cust
omerChar
act
eri
sti
cs:

Thi
sref
erst
ogeogr aphi
caldist
ri
but
ion,
frequencyofpur
chase,
aver
agequant
it
yofpur
chaseand
number
sofprospecti
vecustomers.

(
vii
i)ChannelCompensat
ion:

Thisinvol
vescost-
benefi
tanal
ysi
s.Majorelementsofdistri
buti
oncostapar tfr
om channel
compensationaretr
ansport
ati
on,
warehousing,storageinsur
ance, mater
ialhandl
ingdistr
ibuti
on
personnel
’scompensati
onandint
erestoninventorycarr
iedatdif
ferentsell
ingpoint
s.Distr
ibuti
on
CostAnalysisi
safastgrowi
ngandperhapst hemostr ewardi
ngar eainmar ket
ingcostanalysi
sand
control
.

Di
str
ibut
ionst
rat
egi
es

I
ntensi
veDi
str
ibut
ion:

Page91of91
 PRI
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Al
lavail
ableoutl
etsar
echosenformaximum exposure(wit
hinr
eason.Usedforconveni
ence
pr
oducts,especi
all
ywhensaleshaveadi r
ectr
elat
ionshi
ptoavai
labi
li
ty.Avai
labi
li
tymor
e
i
mportantthanthenat
ureoftheoutl
et.Usedmostl
yonconveniencegoods

Sel
ect
iveDi
str
ibut
ion:

Onlysomeavailabl
eoutlet
s(usuall
ygeographi
c)ar
echosen.Typical
lyusedonshopping
product
s.
Buyerspref
ertospendtimesearching.Cust
omerservi
ceimport
ant.Sel
ecti
vedist
ri
buti
on
motivat
esretai
lsuppor
t.Producer
shavemor econtr
ol.Ret
ail
erpromoti
onalsupport

Excl
usi
veDi
str
ibut
ion:

Oneout letinar elat

ivel
ylar
gearea.Product
spur chasedinfr
equent l
y,lastalongti
meand
requir
eser vice.Usedasani ncenti
vetosell
ers.Noonet ounder cutthem.Allowsforthe
highestcont rol.
Easiertogetr etail
erstocar
ryacompl et
einventoryandt oprovi
deser viceandrepair
faci
li
ties.
Maybeusedt ointr
oducenewpr oduct
s,andthenchangewhenmar ketismorecompetit
ive
(Movef rom introducti
ontothegrowthstageofthepr oductl
ifecycle.

Pr
omot
ion
Promotioni
scommuni cat
ingwit
hindivi
dual
s,groupsororgani
zati
onstodir
ectl
yorindi
rect
lyto
faci
li
tat
eexchangesbyinf
ormingandpersuadi
ngoneormor eaudi
encestoacceptanorgani
zati
on'
s
product
s.Companiesmustcommuni cat
ewiththeircust
omers;t
hiscommunicati
onshouldnotbe
l
efttochance.

Pr
omot
ionandSoci
ety
Mar
ket
ersneedt
ocommuni
cat
e,t
her
efor
eneedamedi
um t
ofaci
li
tat
ecommuni
cat
ion.

Pr
omot
ionandt
heCommuni
cat
ionPr
ocess

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Mar
ket
ingCommuni
cat
ionsPr
ocess
Basi
cModelofCommuni
cat
ion
TheBasi
cModelofCommuni
cat
ionconsi
stsoft
hef
oll
owi
ngel
ement
s.

 Sour
ce–Asour
cei
sal
sor
efer
redt
oasasender
.Thesenderhasa
messaget oconveytoothers.Thesendercanbeanyonefrom abrand
manager(inamaj orcor
porationsuchasNikeorBudweiser)t
oa
sal
espersoninasmal l
erorganizat
ion.Atti
mes,cel
ebri
ti
esareusedto
endor
sepr oduct
sandactasasenderf ort
heproduct
.Itisalways
i
mportanttomakesur ethat t hesourcei
scredi
bleandtrust
worthy.

o Adir
ectsour
cecanbea sal
esper
sondel
iver
inga
messageaboutapr
oduct

o Anindi
rectsour
ceusesawell knownpubl
icf
igur
eto
dr
awat t
entiont
oaproduct
.

 Encode–Thesour
ceencodesort
ransl
atesi
deasi
ntoamessage.For
exampl
e,abr
andmanagerdeci
dest
o pr
omot
eanewpr
oduct
.

 Message–Af
terdef
ini
ngt
het
argetmar
ket
,themar
ket
erdesi
gnsan
ef
fect
ivemessaget
hatwi
llachi
evet
hecommuni
cat
ionobj
ect
ives.

 Recei
ver–Ther
ecei
veri
stheper
sonorgr
oupwi
thwhom t
hesender
attemptstosharei
deas.Marketer
swantaresponse,t
hereact
ionsoft
he
receiver
,af
terbei
ngexposedtothemessage:f
orexample,
aconsumer
receivi
ngthemessageaboutthenewproduct.

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 Decode–Ther
ecei
verdecodesori
nter
pret
sthemessage.Fora
messaget obedecodedbyar ecei
vert
hewayi twasi nt
endedbyt he
sender,
thesenderandr ecei
verneedtohavecommonexper iences.In
otherwords,arecei
vermaynotdecodeamessaget hewayitwas
i
ntendedtoifherbackgroundandexperiencedif
fergreatl
yfr
om the
sender’
s.Amar ket
erhastobesensiti
vetotheintendedaudience.

 Noi
se–Noi
sei
nter
fer
eswi
thordi
srupt
sef
fect
ivecommuni
cat
ion.Thi
s
cani
ncl
udeapoort
elevi
sionor r
adi
osi
gnal
.

 Feedback–Feedbacki
smoni
tor
ingandeval
uat
inghowaccur
atel
ythe
i
ntendedmessagei sbeingreceived.Thiscanbedonebyconduct ing
marketresear
ch.Essenti
all
y,thisinvol
vesaskingconsumer
siftheyhave
seenthemessage, i
ftheyrecallt
hemessage, andwhatthei
ratt
itudewas
towardstheproduct
.

Pr
omot
ionalMi
x

Sal
esPr
omot
ion:

SalesPr omotionistheuseofshor t-t

ermincenti
vestoencour agethepur chaseorsaleofapr oduct.
Salespr omotionsareprogramssuchascont est
s,coupons,displays,tr
adeshows, sampl es,
premiums, productdemonst rat
ions,orot
herincenti
vesthatmar ketersdesigntobuil
di nt
eresti
nor
encour agepurchaseofapr oductdur i
ngaspecifi
edtimeperiod.Sal espromotionsareintendedto
sti
mul ateimmedi at
eaction,oft
enint hef
orm ofapurchase,ratherthantobui l
dlong-term
l
oyalty.Salespr omoti
onof f
ersreasonstobuynow.

Salespr omotiongear
edtomar keti
nginter
mediar
iesiscall
edtradepromotion.Compani esactuall
y
spendaboutasmuchont r
adepr omotionasonadverti
singandconsumer -ori
entedsalespromot i
on
combi ned.Tradepromotionstrategi
esincl
udeoffer
ingfr
eemer chandise,
buybackallowances, and
mer chandiseall
owancesal ongwi t
hsponsorshi
pofsalesconteststoencouragewhol esaler
sand
ret
ailerstosellmoreofcertai
npr oduct
sorproductli
nes.

Sal
esPr
omot
ionObj
ect
ives:

Sal
espr
omot
ionobj
ect
ivesdi
ff
erwi
del
y:

 Incr
easeShort-Term Sales(consumerpr omotion)
 Buil
dLong-Term Mar ketShare(consumerpr omot ion)
 EncourageRetail
erstoCarryNewI temsandAddi tionalI
nventor
y(tradepr
omoti
on)
 EncourageRetail
erstoAdver t
iseandPr ovi
deMor eShelfSpace(tr
adepromot
ion)
 EncourageRetail
erstoBuyAhead( t
r adepromot ion)
 Incr
easeSalesForceSuppor t(sal
esf orcepromot i
on)
 Incr
easeNumberofNewAccount s( salesforcepr omot i
on)

Sel
l smayuseconsumerpr
er omoti
onst
oincr
easeshort
-term sal
esortohel
pbuil
dlong-t
erm
marketshar
e.Obj
ect
i ort
vesf radepr
omoti
onsincl
udegett
ingretai
ler
stocar
rynewitemsandmor
e

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i
nventory,
gett
ingthem t
oadverti
set
heproductandgivei
tmoreshel
fspace,andgett
ingthem t
obuy
ahead.Salesf
orcepromotionobj
ect
ivesi
ncl
udegett
ingmoresal
esforcesupportf
orcurr
entornew
product
sorgetti
ngsalespeopl
etosi
gnupnewaccount s.

Salespromot
ionsar
eusual
lyusedt
oget
herwi
thadver
ti
sing,
per
sonalsel
li
ng,
orot
herpr
omot
ionmi
x
tools.

ConsumerSal
esPr
omot
ionTool
s

Coupons
Acouponi sacer t
if
icatethatgivesbuyer sasavingwhent heypurchaseaspecif
iedproduct.
Couponscanst imulatesalesofamat urebrandorpr omoteear
lytri
alofanewbr and.Redempt i
on
rateshavebeendecl i
ninginr ecentyear s,however
,asar esul
tofcouponclutt
er.Mostmaj or
consumergoodscompani esar ei
ssui ngfewercouponsandt argeti
ngthem morecareful
ly.Theyare
alsocult
ivat
ingnewout l
etsfordistri
but i
ngcoupons, suchassupermarketshel
fdispensers,
electr
oni
cpoi nt
-of-
salecouponpr inters,or“paper
lesscouponsystems.”

CashRebat
eOf
fer
s

Acashrebat
eisanoffertor
efundpartofthepur
chasepr
iceofapr
oductt
oconsumer
swhosenda
“
proofofpur
chase”t
ot hemanufact
urer.

Pr
icePacks

Apricepacki
sar educedpricet
hatismarkedbytheproducerdi
rectl
yont helabelorpackage.Pri
ce
packscanbesinglepackagessoldatareducedpri
ce,
ortwor el
atedproductsbandedt oget
her.Pr
ice
packsarever
yeffect
ive—evenmor esot
hancoupons—i nsti
mulati
ngshort-t
erm sales.

Pat
ronageRewar
ds

Apat
ronager
ewar
discashorot
herawar
dfort
her
egul
aruseofacer
tai
ncompany’
spr
oduct
s.

Speci
alPacks

Aspecialpackisapackaget
hatgi
vestheshoppermor
eproduct
sinst
eadofloweri
ngi
tspr
ice.A
speci
alpackalsocanbeaseparat
eproductgi
venawayal
ongwithanotherpr
oduct
.

Sampl
es

Asampl ei
sasmallamountofaproductoff
eredt
oconsumersfort
ri
al.Sampl
ingi
sthemost
ef
fect
ive—butmostexpensi
ve—waytoint
roduceanewproduct
.

Pr
emi
ums

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Apr emi
um isagoodof f
eredei
therfr
eeoratl
owcostasanincent
ivetobuyapr oduct
.Apremium i
s
nottheproductbei
ngpromoted.Iti
susedasanincent
ivet
oencouragepurchaseofthef
eatur
ed
product
.Apr emium maycomei nsi
deorout
sidet
hepackage,
orthroughthemail.

Adver
ti
singSpeci
alt
ies

Anadverti
singspecialt
yisausefulart
icl
eimprint
edwi t
hanadvertiser
’sname, givenasagif
tto
consumers.Typi
calitemsincl
udepens, cal
endars,keyri
ngs,matches,shoppingbags,T-shi
rt
s,caps,
nai
lfil
es,
andcof feemugs.Inarecentstudy,63percentofal
lconsumer ssurveyedwereeit
her
carr
yingorwearinganadspecialtyit
em.

Poi
nt-
of-
Pur
chase(
POP)Pr
omot
ions

Apoint
-of-
purchasepr omotioni
sadisplayordemonstr at
iont
hattakesplaceatthepointof
pur
chaseorsale.Unfortunat
ely,
manyr et
ailer
sdonotliketohandlethehundredsofdispl
ays,si
gns,
andposter
stheyreceivefrom manuf
acturerseachyear.Manufact
urershaverespondedbyofferi
ng
bet
terPOPmat er
ial
s,tyingthem i
nwithtelevi
sionorpr
intmessages,andofferi
ngtosetthem up.

Cont
est
s,Sweepst
akes,
andGames

Contests,sweepst
akes,andgamesar epromotionaleventsthatgiveconsumerst hechancetowi n
somet hi
ng—suchascash, tr
ips,
orgoods—byl uckort hr
oughext raeffor
t.Acontestcall
sfor
consumer stosubmitanentry—ajingl
e,guess,
orsuggest i
on—t obej udgedbyapanelt hatwil
lsel
ect
thebestentri
es.Asweepstakescallsf
orconsumer stosubmi ttheirnamesforadr awing.Agame
presentsconsumerswithsomething—bingonumber s,missi
ngl ett
ers—everyti
met heybuy,which
mayormaynothel pthem winaprize.

Tr
ade-
Ori
ent
edPr
omot
ion:

Manuf acturer
sdirectmor esalespromoti
ondol l
arstowar dretail
ersandwhol esalers.Trade
promot i
oncanper suader esell
erstocarr
yabr and,giveitshelfspace, pr
omot eitinadver ti
sing,and
pushittoconsumer s.Shelfspaceissoscar cethesedayst hatmanuf acturersoftenhavet oof f
er
di
scount s,all
owances, buy-backguarantees,orfreegoodst oretai
ler
sandwhol esalerst oget
productsont heshelfand, oncethere,
tostayoni t.Manuf acturer
susesever altr
adepr omot i
ont ool
s.
Manyoft hetool
susedf orconsumerpromot ions—cont ests,premiums, displ
ays—canal sobeused
astradepr omoti
ons.

Di
scount
s

Adi scountisast r
aightreducti
oninpr i
ceonpur chasesduri
ngast at edperi
odofti
me.Thi sisalso
calledprice-of
f,of
f-i
nvoice,oroff
-li
st.Thediscountcouldbebasedont hevolumeoft heproduct
ordered.
Allowances
Anal lowanceispr omot i
onalmoneypai dbymanuf actur
erstoret
ailer si
nretur
nforanagr eementto
featurethemanuf acturer’
sproductsinsomeway.Anadver t
isi
ngal lowancecompensat esretai
ler
s
foradvertisi
ngthepr oduct.Adispl
ayal l
owancecompensat esthem f orusi
ngspecialdispl
ays.

Per
sonalSel
li
ng:

Per
sonalsel
li
ngi
spr
omot
ionalpr
esent
ati
onbyt
hef
ir
m’ssal
esf
orceconduct
edonaper
son-
to-

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personbasi swi ththebuyerf orthepur poseofmaki ngsal esandbui ldi
ngcust omerrelationshi ps.
Personalsel l
ingist heoldestf orm ofpr omot ion.Thi sdirectform ofpr omot i
onmaybeconduct ed
face-t
o- f
ace, overthet elephone, t
hr oughvi deoconf erencing, orthroughi nt
eracti
vecomput erli
nks
betweent hebuyerandt hesel l
er.Thesal esper soncangeti mmedi atef eedbackfrom thecust omer .
Today, mostsal espeopl ear ewell-educat ed,wel l-trainedpr ofessional swhowor ktobui l
dand
mai nt
ainlong- term customerr el
ationshipsbyl i
steni ngt othei rcust omer s,assessi
ngcust omer
needs,andor ganizingthecompany’ sef f
ortst osol vecust omerpr obl ems.Thet erm salesper son
coversawi der angeofposi t
ions.Atoneext reme, asal esper sonmi ghtbel argel
yanor dert aker ,such
asadepar t
mentst oresal espersonst andingbehi ndacount er.Att heot herextremear eor derget ters,
whoseposi tionsdemandt hecreativesellingofpr oduct srangi ngf rom appl i
ances,i
ndust rial
equipment ,andai rplanest oinsurance, adver ti
sing, andi nformat i
ont echnologyservices.

TheRol
eofPer
sonalSel
li
ng:

Gener al
ly,apersonalsal esefforti
smor eimpor tantwhenaf i
rm engagesi napushst rat
egy,i
nwhi ch
thegoali stopusht hepr oductt hr
oughthedi stri
butionchannelsot hatitisavailabletoconsumers.
Per sonalselli
ngal soisl ikel
yt obecrucialinB2Bcont extswhendirectinteracti
onwi thupper-l
evel
managementi sr equiredt osecur eanimpor tantsale—andof tenwheni ntensepr icenegoti
ati
ons
occurbef orethesal eismade.I nadditi
on, i
nexperiencedbuyer smayneedt hehands- onassi
stance
thatapr ofessi
onalsal esper soncanpr ovide.
Fir
mssel l
ingproduct st hatconsumer sbuyi nfrequently,suchascomput ers,l
awnmower s,and
coll
egeeducat i
ons, oftenr el
yheavilyonper sonalselling,asdofir
mssel lingcompl exorvery
expensivepr oductst hatneedasal espersont oexplain,just
if
y,andsellthem.

Di
sadvant
agesofPer
sonalsel
li
ng

Fi
r st,whent hedollaramountofindividualpurchasesislow,iti
sn’
teconomical
lyf
easibl
etouse
per sonalselli
ng.Thecostpercont actwi t
hacust omerishighcomparedtootherf
ormsof
communi cati
on,suchasadverti
sing.
Sal espeopl ecanalsoonlymakeal imitednumberofsal escall
saday.Rel
ianceonpersonalsel
li
ng
i
sef f
ectiveonlywhent hesuccessr ati
oi sati
tshighest.Becauset
hecostofuti
li
zingsal
espeopl
eis
high, t
elemar ket
ingisgrowi
ngi npopul arit
y.

Appr
oachest
oPer
sonalSel
li
ng:

Personalsel
li
ngisoneoft heoldestfor
msofpr omotion,buti
tsi
magehasbeentarnishedbysmoot h
-tal
kingpit
chmenwhohavesomet imessaidanythi
ngt omakeasal
e.I
nmor erecentyear s,personal
sell
inghasbeguntor edeem i
tselfasaprof
essionandhasmovedf r
om atr
ansactional,hard-sell
techniquet
oar el
ati
onshipmar keti
ngapproach.

Tr
ansact
ionalMar
ket
ing

Thehar dsel
lisahigh-pressur
eprocess.Har
d-sel
ltact
icsar
eafor
m oftr
ansact
ionalsel
li
ng,afor
m
ofpersonalsel
li
ngthatfocusesonmaki nganimmediat
esalewi
thli
tt
leornoatt
emptt odevel
opa
rel
ati
onshipwiththecustomer.

Rel
ati
onshi
pMar
ket
ing

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Today’sprofessi
onalsalespersoni smor el
ikelytopracticerel
ati
onshipsell
ing, afor
m ofper sonal
sel
linginwhicht hesal
espersonseekst odevelopamut uall
ysati
sfyi
ngr el
ationshipwiththe
consumer .Relat
ionshi
pselli
ngi nvolveswinning,keeping,anddevelopingcust omers.Winninga
customermeansconver t
ingani nterest
edpr ospectint
osomeonewhoi sconvi ncedthatthepr oduct
holdsvalueforhim orher

Per
sonalSel
li
ngPr
ocess:

Pr
ospect
ing

Prospecti
ngist hestepoft hesellingpr ocessthatincl udesidenti
fyinganddevel opingal i
stof
potent
ialorprospectivecust omer s.Prospectsorsal esl eadscancomef r
om existi
ngcust omerl
ist
s,
tel
ephonedirectori
es, orcommer cial
lyavai l
abledatabases.Somet imescompani esgeneratesal
es
l
eadst hr
ought heiradverti
singorsal espr omotionsbyl etti
ngcust omer srequestmor einf
ormati
on.
Onewayt ogener ateleadsi sthroughcol dcall
ing,whent hesalesper soncontactsprospectswit
hout
pri
orintr
oductionorar rangement .Salespeopl ealsor elyonr ef
errals.Curr
entclient
swhoar e
sati
sfi
edwi t
htheirpur chaseof t
engi ver efer
ral
s.

Qual
if
ying

Salespeoplenextneedt oquali
fythei
rprospect
s,thestepoft
heselli
ngprocessthatdet
ermineshow
l
ikelyprospect
sar etobecomecust omers.Prospectscanbequali
fi
edbylookingatthei
rfi
nancial
abil
ity,
volumeofbusi ness,speci
alneeds,l
ocati
on,andpossibi
li
ti
esforgrowth.

Pr
e-appr
oach

Thepr e-approachi st hestepint hesell

ingpr ocessi nwhichthesalespersonlearnsasmuchas
possibleaboutapr ospect i
vecust omerbefor emaki ngasalescall
.Sal espeopl
etrytolearnasmuch
aspossi bleaboutqual i
fi
edpr ospectsearlyon.Theymaypr obepri
orpur chasehist
ory,curr
entneeds,
orinf
or mat i
onaboutt heiri
nterests.Thesalesper soncanconsultindust r
yandonl i
nesources,
acquaintances,etc.t olearnaboutt heprospect .Anothertaskist
odeci deont hebestapproach,
whichmi ghtbeaper sonalvisit
,aphonecal l
,oral etter
.Thebestti
mi ngshouldbeconsi der
ed
caref
ullybecausemanypr ospectsar ebusiestatcer t
ainti
mes.Finall
y, t
hesalespersonshouldgive
thoughtt oanover allsalesstrategyfortheaccount .

Appr
oach

Theappr oachisthestepi ntheselli

ngpr ocessinwhi cht hesalesper sonusuall
ymeet sthecust omer
forthefirstti
me.Heorsheshoul dstar tbuil
dingther el
at i
onshipdur ingtheappr oach.The
salespersonshoul dknowhowt omeetandgr eetthepr ospectandgett herelat
ionshipof ftoagood
start
.Thi sstepinvol
vest hesalesperson’ sappearance, openinglines,andthefol l
ow- upremar ks.
Theopeni ngli
nesshoul dbeposi ti
vet obui l
dgoodwi l
lfrom thebegi nningofther el
ationship.I
fthe
salespersonmadecont actwi t
ht hepr ospectthroughar eferr
al,t
hesal espersonshoul dpr obablysay
soup- front.Thi
sopeni ngmi ghtbef ollowedbysomekeyquest ionst olearnmor eaboutt he
customer ’sneedsorbyshowi ngadi splayorsampl etoat t
ractthepr ospect’
sat t
entionandcur i
osi
ty.
Asi nallstagesofthesel l
ingprocess, list
eningtot hecust omeri scrucial
.

Sal
esPr
esent
ati
on

Thesalespresent
ati
onisthest
epint heselli
ngprocessi
nwhi chthesal
espersonseekst o
persuasi
vel
ycommuni cat
etheproduct’sfeatur
esandthebenefit
sitwil
lpr
ovideaft
ert hesale.Pr
oof
statement
s,suchasdataonpastsales,testi
monial
s,guar
antees,orr
esearchresul
ts,helptomake

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thesalesperson’spresent ati
oncr edibl
e.Somesal espresent ati
onsarecanned,meaningascripthas
beenwr itt
eninadvance, andt hesamemessagei sdel i
veredt omanyprospects.Thi
stechni
queof t
en
providesaser i
esofver balpr ompt stowhichthereareexpect edcustomerresponses.Asimi
lar
approachcal l
edaf ormulat edappr oachident
if
iesapr ospect ’
sneedsandt henprovi
desscri
pted
salespitchkeyedtot hatki ndofpr ospect
.Thesest andardizedapproachesworkfineinsomecases,
butthemostef fect
ivesal espr esentati
onsarethoset hataret ai
lor
edtothespecif
iccust
omer.

Demonst
rat
ion

Onei mportantadvantageofpersonalselli
ngovermostadver ti
singi
stheabil
ityofsalespeopleto
provideademonst rati
onoftheproductt othepotentialbuyer.Manyfi
rmsusenewt echnologiesto
maket heirdemonstrati
onsmor eeffecti
ve.Multi
medi ainter
acti
vedemonstrati
onsar enowcommon.
Thekeyt oagooddemonst rat
ion—onet hatgainst hecustomer’satt
enti
on,keepshisorheri nter
est,
i
sconvi ncing,andstaysint
hecust omer ’
smemor y—isplanning.Thesal
espersonshoul dcheckand
recheckallaspectsofthedemonst rati
onpriort
oi tsdeli
very.

Handl
ingObj
ect
ions

Handlingobj ect
ionsisthestepint hesel l
ingpr ocessi nwhi chthesal
esper sonseeksout ,cl
ari
fies,
andover comescust omerobj ect
ionst obuyi ng.Cust omersal mostalwayshaveobj ecti
onsduringthe
presentati
onorwhenaskedt opl aceanor der .Thepr obl
em canbeei therlogicalorpsychologi
cal,
andobj ecti
onsar eoft
enti
mesunspoken.Thesal espersonshoul dhandleobj ect
ionsusingaposi ti
ve
approach, byseekingouthiddenobj ecti
ons, askingthepr ospecttoclari
fyanyobj ecti
ons,andtaking
objecti
onsasoppor t
uniti
estoprovi demor einformat i
on—t urni
ngtheobject i
onsintoreasonsfor
buying.Everysalespersonneedst rainingint heski l
lsofhandl i
ngobjecti
ons.

Cl
osi
ng

Closingist hestepintheselli
ngprocessi nwhi chthesal espersonaskst hecustomerf oranor der.
Somesal espeopl edonotgetar oundt oclosingordonothandl eitwell
.Theymayl ackconfidence,
feelguil
tyaboutaski ngfortheorder,orfailt
or ecognizether i
ghtmomentt ocloset hesal
e.
Salespeopl eshouldknowhowt orecognizecl osingsignalsfrom thebuyer,incl
udingbodyl anguage,
comment s,andquest i
ons.Salespeoplecanusesever alclosingtechniques.Theycanaskf orthe
order,r
eviewpoi ntsofagreement ,of
fertohel pwr i
teupt heor der
,askwhet hertheybuyerwant st hi
s
modelort hatone,ornotethatthebuyerwi l
lloseoutiftheor derisnotplacednow.Thesal esperson
mayal soof fert
hebuyerspeci alr
easonst ocl ose,suchasal owerpriceoranext raquantit
yatno
charge.

Fol
low-
Up

Follow-upist helastst epint hesel li

ngpr ocess,inwhi cht hesal espersonfoll
owsupaf t
erthesaleto
ensurecustomersat isfactionandr epeatbusi ness.Rightaf terclosing,thesalespersonshoul d
compl et
eanydet ailsondel iverytime, purchaset erms, andot hermat t
ers.Thesalesper sonthen
shouldschedul eaf ollow- upcal lwhent hei nit
ialorderisr eceived, t
omakesur ethereispr oper
i
nst al
lat
ion,i
nst r
uct ion, and/ orservicing.Thisvisitshoul drevealanypr obl
ems, assur ethebuyerof
thesalesperson’si nter est,andr educeanybuyerconcer nst hatmi ghthavear i
sensi ncethesale.
Follow-upalsoal lowst hesal esper sont obridgetot henextpur chase.Oncear el
ationshipdevelops,
theselli
ngpr ocessi sonl yt hebegi nning.Evenasonecycl eofpur chasi
ngdr awst oacl ose,agood
salespersonisalreadyl ayingt hef oundat i
onf orthenextone.

Adver
ti
sing:

Pai
df orm ofnonpersonalcommuni
cat
ionaboutanorgani
zat
ionori
tspr
oduct
sthati
str
ansmi
tt
ed
toatargetaudiencethr
oughamass/br
oadcastmedium.

Page99of99
 PRI
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UseofAdver
ti
sing

 Pr
omot
ingPr
oduct
sorOr
gani
zat
ions

I
nstit
uti
onalAdvert
isi
ngpr omotesorgani
zat
ions,images,
ideasorpol
it
icali
ssues.I
EBeer
Companysponsor sresponsibl
edri
nkingtopromotethecompanyimage.
ProductAdver
ti
singpromot esgoodsandservices.

 St
imul
ati
ngPr
imar
yDemand

Fi
rsttoint
roduceproductneedst
ostimul
atepri
marydemand.Adver
ti
singi
nfor
mspeopl
e
abouttheproduct(
intr
oducti
onstageoft
heproductl
if
ecycl
e).
.

 Maki
ngsal
esper
sonsmor
eef
fect
ive

Tri
estopr
esaleproducttobuyersbyinf
ormi
ngt
hem ofuses,
feat
uresandbenef
it
s-
encour
agethem t
ocont actdeal
erset
c.

 I
ncr
easi
nguseofpr
oduct

Consumercanconsumeonlysomuchofaproduct
,thi
sli
mit
sabsol
utedemand.Mayneed
toconvi
ncethemarkett
ousethepr
oducti
nmor et
hanoneway.

 Remi
ndi
ngandr
einf
orci
ngcust
omer
s

Reminder
,needt
okeepcompany/ pr
oductnameatt
heforef
rontofconsumer
s'mi
ndsi
nthe
competi
ti
vemarket
place.Rei
nfor
cementpr
event
scogni
ti
vedissonance.

 Reduci
ngSal
esf
luct
uat
ions

I
ncr
easesalesdur
ingsl
owper
iodswil
lhel
pincr
easeproduct
ioneff
ici
ency;i
.eadver
ti
sing
r
educedpr
icesofl
awnmowersinthewint
ermonths(
reduceinvent
orycosts

Devel
opi
nganAdver
ti
singCampai
gn

1.I
dent
if
yandAnal
yzet
heAdver
ti
singTar
get
.

Thegroupofpeoplef
orwhi
cht
headver
ti
sementi
sai
medat
,maydi
rectcampai
gnatonl
ya
por
ti
onofthetargetmar
ket
.

2.Def
ini
ngObj
ect
ives.

Whatthefi
rm hopestoaccompl
ishf
rom t
hecampai
gn,shoul
dbeclear
,preci
seand
measurabl
e,canhelpmeasuret
hesuccessatt
heendofthecampai
gn.Useabenchmar
ke.
g.

I
ncreaseproduct
/brandawareness
Changeconsumerat t
it
udes
I
ncreasecustomerknowledgeofproductf
eat
ures

Page100of100
 PRI
NCI
PLESOFMARKETI
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3.Det
ermi
net
heAdver
ti
singAppr
opr
iat
ion

Tot
alamountofmoneyt
hatamar
ket
eral
locat
esf
oradver
ti
singi
naspeci
fi
cper
iod.

Therearef
ivedi
ff
erentwayst
oest
abl
ishapr
omot
ional
budget
.

Met
hodsf
orSet
ti
ngAdver
ti
singBudget

Sever
almet
hodsar
eusedf
orset
ti
ngadver
ti
singbudget
.Dependi
nguponi
nter
nalsi
tuat
ionsoft
he

company,
thesui
tabl
emet
hodi
sfol
lowed.Ever
ymet
hodhasi
tsmer
it
s,demer
it
s,andappl
icabi
li
ty.

a.Per
cent
ageofSal
esMet
hod:
Iti
sacommonl yusedmet hodtosetadvert
isi
ngbudget.I
nthismethod,t
heamountf oradver
ti
singis
decidedonthebasi sofsales.Adver
ti
singbudgetisspeci
fi
cpercentofsal
es.Thesalesmaybe
curr
ent,oranti
cipated.Somet i
mes,t
hepastsalesarealsousedasthebasefordecidi
ngonad
budget.Iti
sassumedt hattherei
spositi
vecorrel
ati
onbetweensal
esandadverti
singexpendit
ure.
Thisisnotthescienti
ficmethodtodecideonadver t
isi
ngbudget
.

Meri
ts:
(a)I
tisbasedonsal
esvolume.Theref
ore,
costofadver
ti
singcanbeof
fsetagai
nstpr
ofi
tsear
ned
f
rom thesal
es.I
tsat
isf
iesf
inanci
almanagement.

(b)Thi
smet hodencouragesmarket
ingmanagert
othi
nki
nter
msofr
elat
ionshi
pbet
ween
promot
ionalcost
s,sel
li
ngprice,
andprof
it
sperunit
.

(c)I
tmaintai
nscompeti
tivepar
it
y.Al
lfi
rmsi
nthei
ndust
ryspendappr
oxi
mat
elyt
hesameper
cent
age
ofsalesf
oradver
ti
sing.

(
d)I
tkeepst
hecompanyi
nconst
antt
ouchwi
tht
hesal
est
argett
obeachi
eved.

Demeri
ts:
(a)I
nabsenceofspeci
ficgui
del
ines,
iti
snotpossi
blet
odeci
det
heappr
opr
iat
epercentofsal
es.I
t
l
acksascient
if
icbase.

(
b)Long-
ter
m pl
anni
ngi
snotpossi
blebecauseal
ong-
ter
m sal
esf
orecast
ingseemsdi
ff
icul
t.

(c)I
tnegl
ectsotherobj
ect
ivesofadver
ti
sing.Onl
ysal
esar
egi
venpr
ior
it
y.I
tdoesn’
tconsi
dert
he
needofadvert
isi
ng.

(
d)St
ageofpr
oductl
if
ecycl
eisnotconsi
der
ed.

(
e)I
tis,
tosomeext
ent
,inf
lexi
ble.

(
f)I
tisassumedt
hatonl
yadver
ti
singaf
fectsal
es.I
tiser
roneous.

b.Obj
ect
ivesandTaskMet
hod:
Thisi
st hemostappr opr
iat
eadbudgetmethodforanycompany.Iti
sascient
if
icmethodtoset
adver
tisingbudget
.Themet hodconsi
derscompany’
sownenvironmentandrequi
rement.Obj
ecti
ves
andtaskmet hodguidesthemanagertodevel
ophispromot
ionalbudgetby

Page101of101
 PRI
NCI
PLESOFMARKETI
NGMODULE
(
1)def
ini
ngspeci
fi
cobj
ect
ives,

(
2)det
ermi
ningt
het
askt
hatmustbeper
for
medt
oachi
evet
hem,
and

(
3)est
imat
ingt
hecost
sofper
for
mingt
het
ask.

Thesum ofthesecost
sist
heproposedamountf
oradvert
isi
ngbudget.Themet hodisbasedonthe
rel
ati
onshipbetweent
heobj
ecti
vesandthet
asktoachi
evetheseobjecti
ves.Thecost
sofv ar
ious
advert
isi
ngacti
vit
iest
obeperf
ormedtoachi
evemarket
ingobject
ivesconsti
tut
eadverti
singbudget
.

Undert
hismet
hod,
fol
lowi
ngst
epsar
etobef
oll
owedt
osetadver
ti
singbudget
:

1.Det
ermi
nemai
nobj
ect
ivesofmar
ket
ingdepar
tment
.

2.Setadver
ti
singobj
ect
ivesi
nter
msofsal
es,
prof
it
s,br
andl
oyal
ty,
compet
it
ivest
abi
li
ty,
etc.

3.Det
ermineadverti
singt
askinter
msofvar
iousadver
ti
singact
ivi
ti
esr
equi
redt
obeper
for
medt
o
achi
evetheadvert
isi
ngobject
ives.

4.Est
imat
ecostofeachadver
ti
singact
ivi
tyf
ort
hedef
inedper
iod.

5.Makesum ofcost
sofal
ltheact
ivi
ti
es.I
tist
heest
imat
edamountf
oradver
ti
sing.

Thus,adverti
singbudgetissetont hebasisoftheobj
ecti
vesacompanywant stoachieveandin
whatwayi twant stheobject
ivestobeachieved.Thi
smet hodi
slogical
lyconsist
entandpracti
cal
ly
appli
cabl
ef orallthecompanies.Themet hodemphasizesonactualneedsofthecompany.I ti
s
consi
deredasasci ent
if
icmet hodtosetadbudget.

c.Compet
it
ivePar
it
yMet
hod:
Competi
ti
onisoneoft
hepower fulf
actor
saff
ectingmarket
ingperf
ormance.Thismethodconsider
s
thecompet
it
ors’
adver
ti
singacti
viti
esandcostsforset
ti
ngadverti
singbudget.Theadver
ti
sing
budgeti
sfi
xedonthebasisofadvert
isi
ngst
rategyadoptedbythecompetit
ors.

Thus,competi
ti
vefactorisgivenmor eimportanceindecidingadvertisi
ngbudget.Ifnotfol
lowed
caref
ull
y,t
hismethodmayr esul
tintomisleading.I
tisobviousthatacompanydi f
ferssigni
ficantl
y
fr
om thecompeti
torsintermsofpr oductcharacter
isti
cs,object
ives,sal
es,f
inanci
alcondi t
ions,
managementphilosophy,otherpromotionalmeansandexpenses, imageandr eputati
on,price,et
c.

Theref
ore,i
tisnotadvi
sabl
etofol
lowthecompetit
orsbl
indly.Marketi
ng/adver
ti
singmanager
shouldtakecompeti
tor
s’adver
ti
singstr
ategyast
hebase, butshouldnotfol
lowasiti
s.The
advert
isi
ngbudgetmustbeadjustedtothecompany’
sinternalandexter
nalsit
uati
on.

Li
mitat
ions:
(a)I
ncaseofanewpr
oduct
,themet
hodf
ail
stogui
def
ordeci
dingonadver
ti
singbudget
.

(
b)Iti
sdif
fi
cul
ttoknowi
nwhi
chst
ageofl
if
ecycl
ethepr
oductofcl
osecompet
it
ori
spassi
ng
t
hrough.

(c)Companydi
ff
ersint
ermsofsales,
prof
it
s,chal
lenges,
financi
alcondi
ti
ons,
andsoon.Tof
oll
ow
competi
tor
sdir
ectl
ymaybeerroneous.

(
d)Adver
ti
singi
snott
hesol
efact
orst
hataf
fectt
hesal
es;i
nter
playofmanyf
act
orsdet
ermi
nessal
es.

(
e)I
ncase,
whent
her
ear
emanycompet
it
ors,
iti
sdi
ff
icul
ttodeci
deast
owhom t
hecompanyshoul
d

Page102of102
 PRI
NCI
PLESOFMARKETI
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f
oll
ow.

(
f)Themethodisfol
lowedonl
ywhent
her
ear
edomi
nantcompet
it
ors.I
nabsenceofcompet
it
ion,
the
methodcannotbeused.

(
g)Themet
hodcanmakeasenseonl
ytof
oll
ower
sandchal
lenger
s.I
tisnotappl
icabl
etoamar
ket
l
eader
.

d.Af
for
dabl
eorFundAvai
labl
eMet
hod:
Thisi
s,inrealsense,
notamet hodtosetadverti
singbudget
.Themethodi
sbasedont hecompany’s
capaci
tytospend.Iti
sbasedont henoti
ont hatacompanyshouldspendonadver
ti
singasperits
capaci
ty.Companywi thasoundfinanci
alposit
ionspendsmoreonadvert
isi
ngandvi
cever sa.

Underthismet
hod,budget
aryall
ocationismadeonl yaf
termeeti
ngallt
heexpenses.Adver
ti
sing
budgetistr
eat
edastheresi
dualdecision.Iff
undisavai
labl
e,t
hecompanyspends;otherwi
set he
companyhastomanagewi thoutadverti
sing.Thus,
acompany’scapacit
ytoaff
ordisthemain
cri
ter
ion.

Li
mitati
ons:
(a)Themethodcompl
etel
yignor
est
her
oleorneedofadver
ti
singi
nthecompet
it
ivemar
ket
envi
ronment.

(b)I
nlongrun,
itl
eadst
ouncer
tai
npl
anni
ngast
her
eisnoguar
ant
eet
hatt
hecompanywi
llspendf
or
advert
isi
ng.

(c)Exceptcompanyfi
nanci
alposi
ti
on,ot
herf
act
orsl
ikecompany’
sneedf
oradver
ti
sing,
consumer
base,competit
ion,
andsofort
hareignor
ed.

(
d)Thi
smet
hodonl
ygui
dest
hatacompanyshoul
dnotspendbeyondi
tscapaci
ty.

(
e)Thi
sisnotamet
hodi
nrealsense.

(
f)Ther
eispossi
bil
it
yofbi
asi
ndeci
dingadver
ti
singamount
.

e.Exper
tOpi
nionMet
hod:
Manymar ket
ingf i
rmsfoll
owt hi
smet hod.Bothinternalandexternalexpertsareaskedtoesti
mat
e
theamounttobespentf oradvert
isementf oragivenperiod.Expert
s,ont hebasisoftheri
ch
experi
enceont hearea,
candet er
mineobj ecti
vel
yt heamountf oradverti
sing.Exper
tssupplyt
hei
r
esti
mateindi
viduall
yorjoint
ly.

Alongwi
ththeest
imates,theyal
sounderl
inecer
tai
nassumpti
ons.I
nternalexpert
sinvol
ve
company’
sexecut
ives,suchasgeneralmanager
,market
ingmanager,advert
isi
ngmanager,sal
es
manager,
dist
ri
but
ionmanager ,et
c.

Whereasexter
nalexpert
sinvol
vemarket
ingconsultants,dealers,suppliers,dist
ri
butor
s,tr
ade
associ
ati
ons,adver
ti
singagenci
es,
andot herpr
ofessionalsrelatedtot hef i
eld.Market
ing
consul
tant
sandadver t
isi
ngagenci
esprovidesuchser vi
cesonpr ofessionalbasis.

Advert
isi
ngbudgetrecommendedbyext er
nalexper
tsismor eneutr
al(
bias-
free)and,hence,
is
rel
iabl
e.Expert
sconsider
soverallsi
tuat
ionandgivethei
ropiniononhowmuchacompanyshoul d
spend.Mostly,
theexpert
sconsiderallt
herel
evantfact
orsrelatedt
oadvert
isi
ngwhi l
edecidi
ngon
advert
isi
ngbudget.

Mer
it
s:

Page103of103
 PRI
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PLESOFMARKETI
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Expertopi
nionmet
hodof
fer
sfol
lowi
ngmerit
s:
(a)Theesti
matest
endt
obemor ebal
ancedasvar
iousexecut
ivesandexper
tsar
einvol
ved.

(b)Thebudgetismoreaccur
ateandreal
ist
icbecauset
hei
nter
nalexecut
ivesar
ewel
lawar
eof
company’sstr
engthsandweaknesses.

(
c)I
tist
heonl
yopt
ionwhenacompanyi
snew,
havi
ngnopastexper
ience.

(
d)Ext
ernalexper
tst
endt
obemor
eneut
ralast
heyar
eext
ernalt
oor
gani
sat
ion

Demeri
ts:
However,
theusermustbeawareoffol
lowingpossibl
edemeri
ts:
(
a)Iti
snotascient
if
icmethod.Per
sonalvalue,
experi
ence,
andatti
tudespl
ayvi
talr
ole.

(b)I
tisdif
fi
cul
ttof
ixr
esponsi
bil
it
yoft
hef
inalest
imat
esasmanyexper
tscont
ri
but
etobudget
esti
mates.

(
c)Ext
ernalexper
tsar
enotf
ull
yawar
eoft
hecompany’
smar
ket
ingsi
tuat
ions.

(
d)Whenmor einter
nalexper
tsar
einvol
ved,
itmaydet
eri
orat
erel
ati
onduet
opossi
bleconf
li
ctsor
l
ackofconsensus.

(
e)Possi
bil
it
yofpr
ejudi
ceorbi
ascannotbei
gnor
ed.

(
f)Al
lopi
nions,
rightorwr
ong,
aregi
venequali
mpor
tance

f
.Ot
herMet
hods:
Ther
ear
esomeot
hermet
hodsusedf
orset
ti
ngadver
ti
singbudget
.

Theyhavebeenli
stedbel
ow:
i
.Arbi
tr
aryAll
ocat
ionMethod

i
i.Pr
ofi
tMaxi
mizat
ionAppr
oach

i
ii
.Incr
ement
alMet
hod

i
v.Sal
esFor
ceOpi
nionMet
hod,
etc.

4.Cr
eat
inganAdver
ti
singMessage

Afunct
ionofthepr
oduct'
sfeatur
es,
usesandbenefit
s.Mustbeawar
eoft
hechar
act
eri
sti
cs
oft
argetmarket
,di
ff
erentmessagetodi
ff
erentt
argetmar
ket.

5.Devel
opi
ngaMedi
aPl
an

Set
sfort
htheexactmedi
avehicl
estobeusedanddatesandt
imesofads.Ef
fect
ivenessof
pl
andetermineshowmanypeoplei
ntheadver
ti
ser
'st
argetwi
llbeexposedt
othemessage.
Needtoselectt
hemedi
atobeusedanddatesandti
mesadsappear .

Var
iousMedi
a

o TVChannel
s
o Radi
o

Page104of104
 PRI
NCI
PLESOFMARKETI
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o Magazi nes, Leadt i
meconsi derati
ons,alsopassal ongrat
e,subscr
ipt
ionpl usnews
agentsal es.
o Newspaper s,Localvs.national
o DirectMai l
, Evoluti
onofDat abasemar keting.
o Out door,Bil
lboar dsTransit.
..
CityBuses, Bli
mps. .
.AtEvents
o Placed- Based, Schools,al
sosponsoreducat ionalprograms,Super
mar kets,Heal
th
Clubs
o El
ect ronic,Needt oselectgeneralmedia, IENewspaper s,t
hensubclass,IE
PhiladelphiaInqui r
er.

6.Eval
uat
ingt
heef
fect
ivenessoft
hecampai
gn

Measur
etheachi
evementoft
heobj
ect
ives,
assessi
ngt
heef
fect
ivenessoft
hecopyet
c.,
and
t
hemedia.

Publ
ici
ty

Publi
cit
yismenti
oninthemedia.Organizati
onsusual l
yhavelit
tl
econtr
oloverthemessageinthe
media,atl
east
,notastheydoinadvert
ising.Regardingpubl
icit
y,r
eport
ersandwr i
ter
sdecidewhat
wil
lbesaid.
Atnocharge(mostoftheti
me)Par tofpubl i
crel
ati
ons,abroadsetofcommunicati
on
act
ivi
ti
esusedtocreat
eandmai nt
ainfavourablerelati
onsbetweentheorgani
zati
onanditspubli
cs:

o customer s
o empl oyees
o stockholders
o gover nmentoff
ici
als
o societyingeneral

Needtocul
ti
vateeff
ecti
vemedi
arel
ati
ons,
andt
arget
ingpubl
ici
tyt
okeymar
ket
sar
evi
ewed
asthehi
ghestpri
ori
ti
es.

Publ
icr
elat
ions

Publi
crel
ati
onsincl
udeongoingactivi
ti
est oensur
etheoverallcompanyhasast r
ongpubli
cimage.
Publi
crel
ati
onsactivi
ti
esi
ncludehelpi
ngt hepubli
ctounderstandthecompanyandi t
sproduct
s.
Oft
en,publ
icrel
ati
onsareconductedthroughthemediathatis,newspaper
s,t
elevi
sion,magazi
nes,
et
c.

Fact
orst
oconsi
deri
nsel
ect
ingPr
omot
ionalTool
s

BudgetAvai
labl
e.Formanycompanies,thebudgetavai
labl
etomar ketaproductdet
ermi
neswhat
el
ementsofthepromoti
onmixareutil
ized.Thebudgetaff
ectsapromotion’
sreach(numberof
peopl
eexposedtothemessage)andfrequency(howoftenpeopl
ear eexposed).

Stageintheproductlif
ecycl
e.Thestageintheproductli
fecycleal
soaff
ectsthetypeandamountof
promotionused.Productsi
ntheintr
oductoryst
agestypicall
yneedalotmorepr omoti
onaldollar
sto
creat
eawar enessinthemarketpl
ace.Consumersandbusi nesseswon’
tbuyapr oductiftheydonot
knowabouti t
.Mor ecommunicati
onisneededint hebeginni
ngoftheproductli
fecycl
et obuil
d
awarenessandt r
ial.

Page105of105
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Typeofpr oductandtypeofpur chasedeci
sion.Diff
erentproductsalsorequir
edif
ferenttypesof
promot ion.Verytechnicalproductsandveryexpensi veproducts(highi
nvolvement)oftenneed
professionalsell
ingsot hecustomerunder standshowt hepr oductoper
atesanditsdifferentfeatur
es.
Bycont rast,advert
isi
ngi softenreli
edupont osellconveniencegoodsandpr oductspur chased
routinel
y( l
owi nvol
vement )sincecustomersar efamili
arwi t
htheproductsandtheyspendr elati
vel
y
l
itt
let i
memaki ngpurchasedeci sions.

Targetmar ketchar
acterist
icsandconsumer s’readi
nesstopur chase.Inor dertosel
ectthebest
met hodst oreachdiff
erenttargetmar kets,organizati
onsneedt oknowwhatt ypesofmedi adifferent
targetsuse, howoftentheymakepur chases, wheretheymakepur chases,andwhatt heirreadiness
topur chasei saswellaschar acteri
sticssuchasage, gender,andlifest
yle.Somepeopl ear eear l
y
adopt ersandwantt otrynewt hingsassoonast heyareavail
able,andot hergroupswai tuntil
product shavebeenont hemar ketf
orawhi l
e.Someconsumer smi ghtnothavet hemoneyt o
purchasedi f
fer
entproducts,althought heywi l
lneedthepr oductlater.

Consumer s’preferencesf
orvari
ousmedi a.Inter
msoft argetmar
kets,col
lege-
agedstudent
smay
pref
eronline,cellphone,mobil
emarketing,andsocialmediamorethanolderconsumersdo.Media
pref
erenceshavebeenr esear
chedextensivel
ybyacademi cs,mar
ketingresear
chcompanies,and
companiest ofindouthowconsumer swantt ober eached.

Regulati
ons,competi
tors,
andenvir
onmentalf
actors.Regulat
ionscanaff
ectt
hetypeofpr omot i
on
used.
.Thehopei sthatbyadver
tisi
nglat
eatnight,
youngchi l
drendonotseetheadvert
isement s.
Thestrengthoftheeconomycanhaveani mpactaswel l
.Inaweakeconomy, someorgani zat
ions
usemor esalespromoti
onssuchascouponstogetconsumer sint
othei
rstor
es.Theri
ski sthat
consumer smaybegintoexpectcouponsandnotwantt obuyi t
emswithoutaspeci
alpromot i
on.

Avail
abi
li
tyofmedia.Organizat
ionsmustalsoplantheirpr
omotionsbasedonavai l
abil
it
yofmedia.
Magazinestendtohaveal ongerleadt
ime,socompani esmustplanfarinadvanceforsome
magazines.Bycontr
ast,becauseofthenumberofr adi
ostati
onsandt henatur
eoft hemedium,
organi
zati
onscanoftenplaceradiocommer ci
alsthesamedaytheywantt hem tobeaired.Soci
al
mediaandonl i
nemediamaybei mmediate,butusersmustbecarefulaboutwhattheypostandthei
r
pri
vacy.

Page106of106
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SERVI
CESMARKETI
NG
Servi
cei ndustri
esar equi tevaried.Thegover nmentsect or ,
empl oymentser vices, hospitals,l
oan
agencies,milit
aryser vices,poli
ceandf i
redepartment s,postof f
ice,regulat
or yagenci es,andschool s,
i
si ntheservicebusi ness.Thepr ivatenon-profi
tsector ,
wi t
hi t
smuseums, charities,churches,
coll
eges, f
oundat i
ons, andhospi t
als,isintheservicebusi ness.Agoodpar toft hebusi nesssect or
,
withitsair
li
nes, banks, hotels,i
nsur ancecompani es,Internetservicepr ovi
ders, lawfirms,
managementconsul tingfirms,medi calpracti
ces,mot ion-picturecompani es, plumbi ng-repair
compani es,realestatef i
rms, andWeb- basedservices, i
sint heservicebusi ness.Manywor kersin
themanuf acturingsect or,suchascomput eroperator
s, accountant s,andlegalst aff,
arer eal
ly
servi
cepr ovi
der s.

DESI
GNI
NGANDMANAGI
NGSERVI
CES
Aser vi
ceisanyactorperf
ormancethatonepartycanof f
ertoanothert
hati
sessenti
all
yint
angi
ble
anddoesnotr esul
tintheownershi
pofanythi
ng.Itsproducti
onmayormaynotbet iedtoaphysical
product.Ser
vicessuchasbanki
ngandot herf
inancialser
vicesar
eamai nst
ayoftheInt
ernet
.Fi
ve
categori
esofanof f
eri
ng’
sservi
cemi xcanbedisti
nguished:

1.Pur
etangi
blegood:
Theof
fer
ingi
sat
angi
blegoodsuchassoap;noser
vicesaccompany
t
hepr
oduct
.

2.Tangi blegoodwi thaccompanyi ngser vices: Theof

feri
ngconsi st
sofatangi
ble
goodaccompani
edbyoneormor eser
vices.GeneralMotors,
forexample,of
fersrepair
s,
maint
enance,
warrant
yful
fi
lment
,andotherservi
cesalongwithitscar
sandt rucks.

Page107of107
 PRI
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PLESOFMARKETI
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3.Hybrid:Theof
fer
ingconsi
stsofequalpar
tsofgoodsandser
vices.Forexampl
e,peopl
e
pat
roni
zer
est
aurant
sforbot
hfoodandser vi
ce

4.Maj orServicewi t
haccompanyi ngmi norgoodsandser vices: Theoff
eri
ng
consist
sofamajorservi
cealongwit
haddit
ionalservi
cesorsuppor
ti
nggoods.Forexample,
air
li
ne
passengersar
ebuyingtr
ansport
ati
onser
vice,buttheygetf
oodanddrinks,
aswell
.

5.Pur
eser
vice:
Theof
fer
ingconsi
stspr
imar
il
yofaser
vice;exampl
esi
ncl
udebaby-
sit
ti
ngand
psychot
her
apy

Char
act
erist
icsofSer
vicesandThei
rMar
ket
ing
I
mpli
cat
ions
Servi
ceshavefourmajorcharacter
ist
icsthatgreatl
yaffectt
hedesi
gnofmar
ket
ingpr
ogr
ams:
i
ntangibi
li
ty,
insepar
abi
li
ty,var
iabil
it
y,andperishabil
it
y.

1.I
ntangi
bil
it
y

Servicesarei nt
angible.Unlikephysicalproducts,theycannotbeseen, tasted,f
elt
, heard,
orsmel led
beforetheyar ebought .Theper sonwhoi sget ti
ngaf acelif
tcannotseet heexactresultsbeforethe
purchase, j
ustast hepat i
entint hepsychiat
rist’
sof fi
cecannotknowt heexactout comebef ore
tr
eatment .Tor educeuncer taint
y,buyerswilllookforsignsorevidenceoft heservicequalit
y.They
wil
ldr awinf er
encesaboutqual i
tyfr
om thepl ace,people,equipment,communi cationmat er
ial
,
symbol s,andpr i
cethatt heysee.Ther ef
ore,theser vi
ceprovider
’staskisto“ managet heevidence,”
to“tangibil
izetheintangible.”

2.I
nsepar
abi
li
ty

Ser vicesar etypicall

ypr oducedandconsumedsi mul t
aneousl y,unlikephysi calgoods,whichar e
manuf actured,putintoinventory, di
st r
ibutedt hroughr esel
lers, andconsumedl ater.I
faper son
render st heservice,t
hent hepr oviderispar toftheser vice.Becauset hecl ientisalsopresentast he
servicei sproduced, provider-cli
entinter actionisaspeci alfeat ur
eofser vicesmar keti
ng—bot h
providerandcl i
entaf f
ectt heout come.Of t
en, buyer sofser viceshavest rongpr oviderpref
erences.
Sever alst r
ategiesexistforgettingar oundt hisli
mi tat
ion.Onei shi gherpr icinginlinewiththe
provider ’sli
mitedt i
me.Anot heri shavi ngt hepr oviderwor kwi thl argergr oupsorwor kfaster.Athir
d
alt
er nativeistot rai
nmor eservicepr ovidersandbui l
dupcl i
entconf idence, asH&RBl ockhasdone
withi t
snat i
onalnetwor koft r
ainedt axconsul tants.

3.Var
iabi
li
ty

Becauseser vi
cesdependonwhopr ovi
desthem andwhenandwher etheyarepr ovi
ded,theyare
highlyvar
iable.Knowi ngthi
s,servi
cef i
rmscant aket
hreestepstowardqualitycontrol
.Thefir
stis
recrui
ti
ngther ightservi
ceempl oyeesandpr ovi
dingt
hem withexcel
lenttr
aining.Thisiscruci
al
regardl
essofwhet heremployeesarehighlyskil
ledpr
ofessi
onalsorlow-ski
lledwor ker
s.

Thesecondst
epi
sst
andar
dizi
ngt
heser
vice-
per
for
mancepr
ocesst
hroughoutt
heor
gani
zat
ion.

Page108of108
 PRI
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Compani
escandot hi
sbyprepar
ingafl
owchar
tthatdepi
ctsever
yservi
ceeventandprocess.Usi
ng
thi
sfl
owchar
t,managementcani
denti
fypot
ent
ialf
ailpoi
ntsandthenpl
animprovements.

Thethi
rdst
ep—I smoni
tor
ingcust
omersat
isf
act
iont
hroughsuggest
ionandcompl
aintsyst
ems,
cust
omersurveys.

4.Per
ishabi
li
ty

Servi
cescannotbestor
ed;onceanairpl
anetakesofforamovi
estar
ts,anyunsol
dseat
scannotbe
heldforfut
uresal
e.Per
ishabi
li
tyi
snotaproblem whendemandforaservi
ceisst
eady,
but
fl
uctuati
ngdemandcancausepr obl
ems.

MARKETI
NGSTRATEGI
ESFORSERVI
CEFI
RMS
Inadditi
ontothetr
aditi
onalfourPsofmar keti
ng, servicepr ovidersmustpayat t
entiontot
hreemor e
PssuggestedbyBoomsandBi tnerforser
vicesmar keti
ng:peopl e,physicalevi
dence, andprocess.
Becausemostservicesareprovidedbypeople,thesel ection,traini
ng, andmot ivati
onofempl oyees
canmakeahugedi ffer
enceincust omersati
sfaction.Ideal l
y,serviceempl oyeesshoul dexhi
bit
competence,acar
ingatti
tude,responsi
veness, i
niti
ative,problem- solvingabili
ty,andgoodwi l
l.
Companiesshouldalsotrytodemonst r
atetheirservicequal it
yt hroughphysi calevidenceand
present
ati
on.

St
rat
egi
esf
orI
mpr
ovi
ngDemandandSuppl
yDemandSt
rat
egi
es

 Usedi ff
erentialprici
ngt oshi ftdemandf rom peakt oof f-peakper iods;movietheatresand
carr entalfi
rmsdot hisbyl ower ingpr i
cesdur ingoff-peakper iods.
 Cul t
ivatenonpeakdemandt obui l
dsal esdur ingof f
-peakper iods;hot elsdothiswiththeir
weekendmi ni-vacat i
onpackages.
 Devel opcompl ement aryser vicest opr ovideal t
ernativesf orcust omer sduri
ngpeakper i
ods;
manybanksdot hisbypr ovidingdr op-offboxesf ordeposi tsandpayment s.
 Installreservationsyst emst obet termanagedemandl evel s;ai rli
nes,hotel
s,andphysi ci
ans
empl oysuchsyst emsext ensively.
 Hirepar t-ti
meempl oyeest omeetpeakdemand;r estaur ant s,st ores,andWeb- based
businessesof t
enbr ingint empor arystaffer stohel poutdur inghol i
daysandot herpeak
per i
ods.
 Int r
oducepeak- ti
meef f
iciencyr out i
nest okeeppr oduct i
vityhi ghdur ingperi
odsofhi gh
demand;par amedi csof tenassi stphysi ciansdur ingbusyper i
ods.
 Incr easeconsumerpar ti
cipationt ospeedt ransact i
ons;t hisi soner easonwhy
super marketsar eexper iment i
ngwi thself- servicecheckout swher eshoppersscanandbag
theirowngr ocer i
es.
 Pl anf acil
it
iesf orfutureexpansi ont oincr easesuppl y;anamusementpar kcanbuy
sur r
oundi ngl andf orlaterdevel opmentasdemandi ncr eases.
 Shar eserviceswi thot herpr ovider stohel pmanagedemand;hospi t
alscandot hi
sby
shar ingmedi cal -
equi pmentpur chasesandschedul ing.

Customer sviewaserviceasfair
lyhomogeneous;t
heycarel
essaboutt
heprovi
derthanthe
pri
ce.Theal ter
nat
ivetopricecompeti
ti
oninservi
cesmarket
ingi
stodevel
opadiff
erent
iated
of
fer,del
ivery,ori
mage.

Of
f er
.Theservi
ceoffer
ingcani ncludeinnovati
vefeatures.Thecustomerexpectsthepr i
mary
servi
cepackage;tot hi
ssecondaryser vicefeat
urescanbeadded.Ahot elcanoff
erhot elrooms
(pri
mar yservi
cepackage)withconnect ionsforcomputers,faxmachines,ande-mail(secondary
servi
cef eat
ures)
.Alt
houghmostser viceinnovati
onsareeasi l
ycopi
ed, t
hecompanyt hat
regularl
yint
roducesnewf eatur
eswi llgainasuccessionoft empor
arycompet i
ti
veadvant ages
andear nareputati
onforinnovati
on

Page109of109
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Del
iver
y.Aservicecompanycanhi r
eandtrai
nbett
erpeopl
etodeliverit
sservi
ce.Itcan
devel
opamor eatt
racti
vephysi
calenvi
ronmenti
nwhichtodel
ivertheservi
ce.Oritcandesigna
superi
ordeli
veryprocess)
.Deli
ver
ythusenhancest
hefir
m’sdif
ferent
iati
on.

I
mage.Servi
cecompaniescanal
sodiff
erenti
atethei
rimaget
hroughsymbolsandbrandi
ng.
Di
ff
erent
iat
iont
hroughbr
andingisaspeci
altyofthecharge-
car
ddivi
sionofAmeri
canExpress.

Managi
ngSer
viceQual
it
y

Servicefirmtosucceedi sbydeliver
ingconsi stent
lyhi gher-quali
tyser vi
cethant hatofit
s
compet i
torsandbyexceedi ngcustomer s’expectati
ons.Theseexpect ati
onsaref ormedbythe
fi
rm’spastexper iences,wordofmout h,andadver t
isi
ng.Af t
erreceivi
ngt heservice,cust
omers
compar etheper ceivedservicewitht
heexpect edservice.Iftheperceivedser vi
cef al
lsbel
owthe
expectedservice,customer sloseint
erestinthepr ovider .I
ftheperceivedservicemeet sor
exceedst hei
rexpect at
ions,theyareaptt ouset heprovi deragain.

Compani
est
hati
sef
fect
iveatr
esol
vingcompl
aint
s:

Develophi
ri
ngcr
it
eri
aandt
rai
ningpr
ogr
amst
hatt
akei
ntoaccountempl
oyees’
ser
vice-
r
ecoveryrol
e.

Devel
opguidel
inesf
orser
vicer
ecover
ythatf
ocusonachi
evi
ngf
air
nessandcust
omer
sat
isf
act
ion.

Removebarr
ier
sthatmakei
tdi
ff
icul
tforcust
omer
stocompl
ain,
whi
ledevel
opi
ngef
fect
ive
r
esponsesyst
ems..

Maintai
ncustomerandpr
oductdatabasesthatl
ett
hecompanyanal
yzet
ypesandsour
cesof
compl
aintsandadj
ustit
spol
ici
esaccordi
ngly.

I
NTERNATI
ONALMARKETI
NG
Int
er nat
ionalMarketi
ngcanbedef i
nedasexchangeofgoodsandser vi
cesbetweendi ff
erentnational
mar ketsinvol
vingbuyer
sandsellers.
Accor di
ngt ot heAmericanMar keti
ngAssoci ati
on,“Inter
nati
onalMar ket
ingi sthemul t
i-nat
ional
processofpl anningandexecuti
ngt heconception,pri
ces,promoti
onanddi st
ributi
onofi dealgoods
andser vicestocreat
eexchangesthatsati
sfytheindivi
dualandorganizati
onalobject
ives.
”

REASONSFORGOI
NGI
NTERNATI
ONAL

Page110of110
 PRI
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i
.Domest
icmar
ket
sar
esat
urat
edandt
her
eispr
essur
etor
aisesal
esandpr
ofi
ts.Most
compani
eshavever
yambit
ioussal
esandpr
ofi
ttar
get
s.I
fsuchf
igur
eshavet
ober
eal
ized,
compani
eshavetomoveoutoft
hei
rdomest
icmarket
s.

i
i.Domest
icmar
ket
sar
esmal
l.Compani
eswhi
chhaveambi
ti
onst
obecomebi
gwi
llhave
t
olookf
orbi
ggermar
ket
sout
sidet
hei
rboundar
ies.

i
ii
.Domest
icmar
ket
sar
egr
owi
ngsl
owl
y.Mostcompani
esar
enol
ongercont
entt
o
growincremental
ly.I
fsuchcompanieshavet
oachi
evehi
ghgr
owt
hrat
es,
theyhavet
oobt
ainsome
ofthei
rsalesf
rom int
ernat
ionalmar
kets.

i
v.Compet
it
ion

v.
Fir
st-
moverAdvant
age
Thefir
st-moveradvantageisbasical
lygetti
ngintoamarketandgaini
ngal
lthebenef i
tsofbeingfi
rst
.
Fori
nstance,you’
llabl
et oqui
cklygaintract
ioninanewmar ketbybei
ngfi
rst.Anotherbenefi
tis
you’
llgetear
lyadopter
sonboar deasi ersi
ncethere’
snooneelsecompeti
ngf ort
heiratt
enti
on.

CONCEPTSOFI
NTERNATI
ONALMARKETI
NG
Domest
icMar
ket
ing:Domest
icMar
ket
ingi
sconcer
nedwi
thmar
ket
ingpr
act
iceswi
thi
nthe
mar
ket
er’
shomecount
ry.

For
eignMar
ket
ing:I
tref
erst
odomest
icmar
ket
ingwi
thi
nthef
orei
gncount
ry.

I
nter
nat
ionalMar
ket
ing:
Iti
sconcer
nedwi
tht
hemi
croaspect
sofamar
ketandt
akest
he

Page111of111
 PRI
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companyasauni
tofanal
ysi
s.

I
nter
nat
ionalTr
ade:I
nter
nat
ionalTr
adei
sconcer
nedwi
thf
lowofgoodsandser
vicesbet
ween
t
hecount
ri
es

.
Gl
obalMar
ket
ing:Gl
obalMar
ket
ingconsi
dert
hewor
ldasawhol
east
het
heat
reofoper
ati
on.

WAYSOFENTERI
NGTHEI
NTERNATI
ONALMARKET

1.Expor
ti
ng

Expor
ti
ngisper
hapst hefir
ststepforacompanytogoglobal
.Iti
sthef
ir
stoft
heat
tempt
sto
under
standt
heint
ernationalenvi
ronmentdevel
opmarketsabr
oad.
Expor
ti
ngcanbedirectorindir
ect.

Di
rectexpor
ti
ngt
hecompanysel
lst
oacust
omeri
nanot
hercount
ry.Thi
sist
hemostcommon
appr
oachempl
oyedbycompani
estaki
ngthei
rfi
rsti
nter
nat
ionalstepbecauset
heri
sksoff
inanci
al
l
osscanbemini
mized.I
ndir
ectexporti
ngusual l
ymeansthatthecompanysell
stoabuyerint
he
homecount
rywhointur
nexpor
tst
heproduct

2.For
eigni
nvest
ment
I
trefer
stoinvest
menti
nfor
eigncount
ry.Thesef
aci
li
ti
esar
eei
therwhol
lyownedorf
orei
gn
part
nershi
pfir
ms.

3.Mer
ger
sandacqui
sit
ions
Inmerger
,twocompaniescometogetherbutonl
yonesurvivesandt
heothergoesoutofexi
stence
asiti
smergedintheothercompany.Whil
einacquisi
ti
on,onecompany(acqui
rer
)get
scontrolover
theot
hercompany(acquir
ed)att
hewi l
li
ngnessofeachofthecompani
es.

4.Joi
ntvent
ures
JointVent
uresasameansoff or
eignmarketent
ryhaveaccel
erat
edsharply.Joi
ntvent
uresr
efert
o
j
oiningwit
hf or
eigncompani
estoproduceormarkett
heproductsorser
vices.

5.St
rat
egi
cal
li
ance:
ASt rategicInternati
onalAl li
ance(SIA)isabusinessrelationshipestabl ishedbyt woormor e
compani est ocooperat eoutofmut ualneedandt osharer iskinachi evingacommonobj ect
ive.
Itisanagr eementbet weencompani esthatisofstrat
egici mpor t
ancet ooneorbot hcompani es’
compet i
tiveviabil
it
y.St rat
egyrefer
st othemeanst ofulfi
lcompany’ sobj ecti
ves.Ont hebasisof
structure, st
rategi
calliancescanbecl assif
iedint
oequi tybasedandnon-equi tybased.
Non- equi tybasedal l
iancessuchasl i
censi
ngagr eement s,mar keti
ngagr eements,technol
ogy
transferagr eement setc.arefoundt obemor edynami c,const r
uctiveandst r
ategic.Thescopeof
strategical l
iancerangesf rom ResearchandDevel opmentt odistr
ibution.

6.Li
censi
ngandf
ranchi
sing:
Ameansofest ablishingaf oothol
dinf orei
gnmar ketswi thoutl argecapi taloutl
aysislicensing.Itisa
favour
it
est rat
egyf orsmal landmedi um sizedcompani es.Int ernati
onallicensinghelpsaf ir
mf rom
onecount r
y( l
icensor )t
oper mitanotherfir
mi naf orei
gncount ry(li
censee)t ouseitsintel
lectual
propert
ysuchaspat ents,
trademarks, copyrights,technology, technicalknow- how,mar keti
ngski l
l
etc.i
nreturnforroyalpayment s.Royalpayment sorl i
censef eei sregulatedinmostoft hecountr i
es.
Theadvant agesofl icensi
ngar emostappar entwhen:capi tali sscarce, i
mpor trest
ri
ctionsforbid
othermeansofent ry,acount r
yissensi t
ivetof oreignowner ship, ori
tisnecessar ytopr ot
ect

Page112of112
 PRI
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tr
ademarksandpatentsagainstcancell
ationofnon-use.
Animportantr
iskofl
icensi
ngist hatt
helicensormaygi vebirt
htohisowncompet
it
ori
.e.t
he
l
icenseecanbecomeacompet i
toraft
ertheexpiryofthelicensi
ngagreement
.

TARI
FFS
Atari
ffi
satax.I
taddst
othecostofi
mpor
tedgoodsandi
soneofsever
alt
radepol
ici
est
hata
count
rycanenact.

Funct
ionsoft
ari
ff
s

1.Pr
otect
ingConsumers
Agovernmentmaylevyat ar
iffonpr
oduct
sthati
tfeel
scouldendangeri
tspopulat
ion.Forexampl
e,
Sout
hKor eamayplaceat ar
if
fonimport
edbeeff
rom theUnit
edStatesi
fitt
hinkst
hatthegoods
coul
dbetaint
edwithdisease.

2.InfantIndustr
ies
Theuseoft ari
ff
stopr otecti
nfantindustr
iescanbeseenbyt heImpor tSubst i
tuti
onIndustri
ali
zat
ion
(I
SI)strat
egyempl oyedbymanydevel opingnati
ons.Thegover nmentofadevel opingeconomywi ll
l
evyt ari
ff
soni mpor tedgoodsi nindustr
iesinwhichitwant stofostergrowth.Thisincreasesthe
pri
cesofi mpor t
edgoodsandcr eatesadomest i
cmar ketfordomest i
call
ypr oducedgoods, whil
e
protecti
ngt hoseindustri
esfrom beingforcedoutbymor ecompet i
ti
vepr i
cing.Itdecreases
unempl oymentandal l
owsdevel opingcountri
estoshiftfrom agr
icult
uralproductst ofi
nishedgoods.

3.NationalSecuri
ty
Barri
ersarealsoemployedbydevelopedcountri
estoprotectcertaini
ndustr
iesthataredeemed
str
ategical
lyimport
ant,suchasthosesupport
ingnati
onalsecur i
ty.Def
enceindustri
esareoft
en
vi
ewedasvi t
altostat
einter
est
s,andoftenenj
oysigni
ficantlevel
sofpr ot
ect
ion.

4.Ret
aliat
ion
Count
riesmayalsosettar i
ff
sasar etal
iat
iont
echni
quei
ftheythi
nkt
hatatradi
ngpart
nerhasnot
pl
ayedbyt herul
es..Ret
aliat
ioncanalsobeemployedi
fatradi
ngpar
tnergoesagai
nstthe
gover
nment '
sfor
eignpolicyobject
ives.

5.Prot
ectingDomesticEmpl oyment
Thelevyi
ngoft ar
if
fsi
softenhi ghlypoli
ti
cized.Thepossibil
it
yofincreasedcompet it
ionfr
om
i
mpor t
edgoodscant hreatendomest icindustri
es.Thesedomest i
ccompani esmayf i
reworkersor
shi
ftproducti
onabroadtocutcost s,whichmeanshi gherunemploymentandal esshappyelector
ate.
Theunempl oymentargumentof tenshif
tstodomest icindust
riescomplainingaboutcheapforeign
l
abour,andhowpoorwor kingconditi
onsandl ackofr egul
ati
onallowforeigncompani estoproduce
goodsmor echeaply

TypesofTar
if
fs

1.Speci
fi
cDuty:Speci
fi
cdutyi
sbasedonthephysi
calchar
act
eri
sti
csofgoods.Whenaf i
xedsum of
money,keepi
nginviewthewei
ghtormeasur
ementofacommodity,i
slevi
edastar
iff
,iti
sknownas
speci
fi
cduty.

2. Adval or
em Duty:Thesedut
iesarei
mposed“accor
dingtovalue.
”Whenafi
xedpercentofval
ue
ofacommodi t
yisaddedasat ar
if
fiti
sknownasadvalorem dut
y.Iti
gnor
est
heconsiderat
ionof
weight
,si
zeorvolumeofcommodi ty.

Theimposit
ionofadvalor
em dutyismor ejust
if
iedi
ncaseoft hosegoodswhosevaluescannotbe
deter
minedont hebasi
softhei
rphysicalandchemicalcharacteri
sti
cs,
suchascostl
yworksofart
,
rar
emanuscr i
pts,et
c.I
npracti
ce,t
histypeofdutyismostlyleviedonmajor
it
yofit
ems.

3. Combi
nedorCompoundDut
y:I
tisacombi
nat
ionoft
hespeci
fi
cdut
yandadval
orem dut
yona

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 PRI
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si
ngl
eproduct
.Forinst
ance,t
herecanbeacombineddut
ywhen10%ofvalue(
adval
orem)andRe
1/
-oneverymeterofcl
othischargedasdut
y.Thus,
int
hiscase,
bot
hdut
iesar
echar
gedtoget
her
.

4. Count er
vail
ingDut y:I
tisimposedoncert
aini
mport
swhereproduct
sar
esubsidizedby
expor
tinggover
nment s.Asar esul
tofgover
nmentsubsi
dy,
import
sbecomecheaperthandomest
ic
goods.Tonull
if
yt heeff
ectofsubsidy,
thi
sdutyisi
mposedinaddi
ti
ontonor
malduties.

5. RevenueTar i
ff
:At ar
if
fwhi chisdesignedtopr
ovider
evenuetothehomegover nmentiscal
led
revenuet
ari
ff
.General
ly,atari
ffisimposedwithaviewofear
ningrevenuebyimposingdutyon
consumergoods,part
icul
arly,
onl uxur
ygoodswhosedemandf r
om theri
chisinel
asti
c.

6. Ant i-dumpingDut
y:Atti
mes, expor
ter
sat
tempttocaptureforei
gnmar ket
sbysell
inggoodsat
rock-
bottom pr
ices,
suchpract
iceiscall
eddumping.Asaresultofdumping,domesti
cindust
ri
esfi
nd
i
tdiff
icul
ttocompetewithi
mpor t
edgoods.Tooff
setanti
-dumpi ngeff
ect
s,dutiesar
elevi
edin
addit
iontonormalduti
es.

7. Pr otecti
veTari
ff
:Inordertopr
otectdomesti
cindust
ri
esfr
om sti
ffcompeti
ti
onofimport
ed
goods,
prot ect
ivet
ari
ffi
sleviedoni
mpor t
s.Normall
y,averyhi
ghdutyisimposed,soastoei
ther
di
scouragei mport
sortomaket heimportsmoreexpensi
veasthatofdomesti
cproduct
s.

NON-
TARI
FFBARRI
ERSTOTRADE

Non- Tari
ffBar r
iers( NTBs)r efert orestrict
ionst hatresultfrom prohibiti
ons,condit
ions,or
specifi
cmar ketr equirement sthatmakei mportati
onorexpor t
ati
onofpr oductsdiff
icul
tand/ or
costl
y.NTBsal soi ncludeunj ustif
iedand/ orimproperapplicati
onofNon- Tari
ffMeasures.NTBs
ari
sef rom di
fferentmeasur est akenbygover nment sandaut hori
ti
esinthef orm ofgovernment
l
aws,r egulat
ions,pol icies,conditions,restri
cti
onsorspeci fi
cr equi
rement s,andprivat
esect or
businesspractices, orprohibi
tionst hatprotectthedomest i
cindustri
esfrom forei
gncompet it
ion.

Typesofnon-
tar
if
fbar
ri
ers

Licenses
Al i
censeisgr
antedtoabusi nessbythegovernment,andall
owsthebusi
nesstoimportacertai
n
typeofgoodintothecountry.Forexample,
therecouldbearest
ri
cti
ononimportedcheese,and
l
icenseswouldbegr antedtocertai
ncompaniesallowingt
hem t
oactasimport
ers.Thiscreat
esa
restr
ict
iononcompet i
ti
on,andincreasespri
cesfacedbyconsumers.

ImportQuotas
Animpor tquot
aisarest
ri
cti
onplacedont heamountofapar ti
culargoodt
hatcanbeimpor
ted.Thi
s
sortofbarri
eri
soft
enassoci
atedwiththeissuanceofli
censes.Forexampl
e,acount
rymayplacea
quotaont hevol
umeofimportedci
trusfr
uitthati
sall
owed.

VoluntaryExportRest
raints(
VER)
Thistypeoftradebarri
eris"vol
untary"inthatiti
screat
edbyt heexporti
ngcount
ryrat
herthant
he
i
mpor tingone.Avoluntaryexportr
estrai
ntisusuallyl
evi
edatt hebehestoft
heimport
ingcount
ry,
andcoul dbeaccompani edbyar eci
procalVER.Forexampl e,
Br azi
lcoul
dplaceaVERont he
exportati
onofsugartoCanada, basedonar equestbyCanada.

LocalContentRequir
ement
Inst
eadofpl aci
ngaquot aonthenumberofgoodsthatcanbeimpor t
ed, thegover
nmentcanr equi
re
thatacertai
npercentageofagoodbemadedomest i
call
y.Therestri
ctioncanbeaper cent
ageoft he
gooditself
,orapercentageoft
hevalueofthegood.Forexampl
e, arest r
ictionont
heimportof
comput er
smi ghtsaythat25%ofthepiecesusedt
omaket hecomput erar emadedomesti
call
y, or
cansayt hat15%ofthevalueofthegoodmustcomef rom domesticall
ypr oducedcomponents.

I
NTERNATI
ONALENVI
RONMENT

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1.Polit
icalEnvi r
onment:TheInternati
onalMar ket
ingacti
viti
estakeplacewithinthepol i
ti
cal
envir
onmentofnat i
onalpoli
ti
calinsti
tut
ionssuchast hegover nment,pol
it
icalexecutive,l
egisl
ati
ve
andt hej udiciar
y.Anycompanydoi ngbusinessoverseasshoul dCar
efull
ystudyt hepol i
ti
cal
envir
onmentoft hecountr
yitintendstooper at
eandanal yseissuessuchast heat t
it
udeoft he
poli
ti
calpar tyinpowertoward
(a)Sover ei
gnty,
(b)PoliticalRisk,
(c)Taxes,
(d)ThreatofEqui t
ydil
uti
onand
(e)Expr opriati
on.

a.Soverei
gnty:Thesover
eignpolit
icalpowerofacountr
yinacommandeconomymaydet ermine
everyaspectofeconomicli
feofthepeople.I
ncontrast
,inamarketeconomy,
thegover
nmentmay
onlyplaytherol
eofafacil
it
atorandar egul
ator
.

b.Pol i
ticalRisk:Ther eisalwaysapol it
icalriskinvol
vedinmaki ngi nvestment sbot
hwithinand
wit
houtt hecount ry.Theel ementofr iskandi t
sseveri
tyisrelati
velyhighi nf orei
gncountri
es.More
objectively,theextentofpol it
icalri
skdependsupont hepoliti
calstabili
tyoft hehostcountry.An
unstabl ecount r
yi sfraughtwi thinvestmentr isks.Acountryneedst obest ablebothint
ernall
yand
externally.Frequentchangesi nthegover nmentandat tendantchangesi nt heeconomicpol i
cyofthe
gover nmentwi l
lincreasetheel ementofuncer t
aint
yandadver selyeffectuponacompany' sabi
li
tyto
operat eeffecti
velyinaf oreigncount ry.Investmentsinhighlydestabili
zedcount ri
esli
keAfghanist
an
andI raqmaybever yat t
ractiveeconomi call
yspeakingbutt hepolit
icalrisksi nvol
vedare
overwhel mi ng.

c.Taxes:Acompanywhi chisgeographical
lydiversifi
edneedst ot akecareoft hetaxlawsoft he
countri
esinwhi chi toperates.Companies,generallymi ni
mi zestheirt
axliabil
itybyshi ft
ingthe
l
ocationoftheirincome.Onemet hodofreducingt axliabil
ityi
scalledearningsst r
ipping.For ei
gn
compani esreduceear ningsby' makingloanstot heiraffi
li
atesinacount r
yr atherthanmaki ngdirect
for
eigninvestment .Thesubsi diar
ycompanywhi cht akest heloancandeductt heinterestitpayson
suchloansandr educeitst axburden.

d.Equi
tyStr
ippi
ngandDi l
uti
onofControl
:Inl
essdevelopedcountr
ies,ther
eisageneraltendencyt
o
exer
tpoli
ti
calpr
essureforgover
nmentalcont
roloff
oreigncompanies.Host-nat
iongover
nment s
mayattempttocont
rolownershi
pofforei
gn-ownedcompani esoperat
inginthei
rCountri
es.

e.Expr opr
iati
on:Expr opriati
oni stheul t
imatet hreatthatagover nmentcanposet owardaf oreign
company.Expr opri
at i
onr ef
erst ogover nmentalact i
ont odi spossessacompanyi nvest
or .Generall
y,
compensat ionispr ovidedt oforeigninvestors.However ,quiteof t
en, t
hecompensat i
oni snotpr ompt,
adequat eandef f
ective.Iftherei snocompensat iont hentheactofexpr opri
ati
onwouldbet ermedas
confiscati
on.Whensever elimitati
onsar eimposedt heact ivi
tiesofaf oreigncompany,itistermedas
creepingexpropr i
ation.Suchr estr
icti
onmayi ncludel i
mitat i
onsonr epatri
ati
onofprofi
ts,dividends,
royalti
es,l
ocalcont entetc, quotasf orhir
inglocalnat ionals,pr i
cecont r
olsetc.Al
ltheserest r
icti
on
l
imitationsadverselyaf f
ectst hepr ofi
tabi
lit
yoff orei
gni nvest ment .

2.Inter nationalSoci al&Cul turalEnvi ronment :Thesoci alandcul t

uralenvi
ronmentencompassi ng
ther eligiousaspect s;l anguage;cust oms;t r
aditi
onsandbel i
efs;tastesandpr efer
ences;social
stratifi
cat i
on;soci alinstit
utions;buyi ngandconsumpt i
onhabi tsetcareal
lver yimportantfactorsfor
business.Whati sl i
kedbypeopl eofonecul turemaynotbel ikedbyt hoseofsomeot herculture.One
ofthemosti mpor t
antr easonsf orthef ail
ureofanumberofcompani esinf
or eignmar ketsistheir
fai
lur et ounder standt hecul turalenvi r
onmentoft hesemar ketsandt osuit
abl yformulatetheir
businessst r
ategies.
Manycompani esmodi fytheirpr oductsand/ orpromot ionstrategiestosui
tthet astesand
prefer encesorot herchar acteristicsoft hepopulationoft hediff
erentcount
ries.Signifi
cant
dif
fer encesi nthet ast esandpr eferencesmayexi stevenwi thinthesamecount ry,part
icular
lywhen
thecount r
yisver yvast ,
popul ousandmul ti
-cult
ur all
ikeIndia.

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Forabusi nesstobesuccessf ul,
itsstrategyshoul dbet heonet hatisappropriateinthesoci
o-
cult
uralenvironment .Themar ketingmi xwi llhavetobesodesi gnedasbestt osuitthe
envir
onment alchar acteristi
csofthemar ket.InThai land, HeleneCurti
sswitchedt oblackshampoo
becauseThaiwomenf eltthatitmadet heirhai rlookgl ossier.
Evenwhenpeopl eofdi fferentculturesuset hesamebasi cproduct,t
hemodeofconsumpt i
on,
condit
ionsofuse, purposeofuseort heper ceptionsoft hepr oductattr
ibut
esmayvar ysomuchso
thatt
hepr oductat tri
butes, methodofpr esent ati
on, positioning,ormethodofpr omotingtheproduct
mayhavet obevar i
edt osuitthechar acteri
st i
csofdi fferentmar ket
s.
Thediffer
encesi nl anguagesomet i
meposeaser i
ouspr obl em,evennecessitati
ngachangei nthe
brandname.Fori nstance, Chevrolet’sbrandnameNovai nSpani shmeans“ i
tdoesn’ tgo”
.Insome
l
anguages, Pepsi-Col a’sslogan“ comeal i
ve”t r
anslat esas“ comeoutoft hegr ave”.

Theval uesandbeli
efsassociatedwit
hcolourvar ysigni
fi
cantl
ybetweendi ff
erentcult
ures.White
i
ndicatesdeathandmour ninginChinaandKor ea;butinsomecount ries,
itexpresseshappinessand
i
sthecol ouroft
hebridaldress.
Whiledeali
ngwiththesocialenvir
onment,wemustal soconsidert
hesoci alenvir
onmentoft he
businesswhichencompassesi tssoci
alresponsibil
it
yandt healer
tnessorvigil
anceoft he
consumer sandofsociet
yatl ar
ge.

3.Economi cEnvironment:Thereareofcour
set heusualeconomicindi
cator
sthatoneneedst obe
awar eofsuchasi nfl
ati
on,GrossDomesticProduct(GDP),l
evel
sofempl oyment,
nat i
onali
ncome,
thepredisposit
ionofconsumer stospendsavingsortousecredit
,aswellasmanyot hers.
Int
ernationalmarketer
sequallyneedtobeawar eofeconomicfactorswhenundertaki
ngmar ket
ing
decisions

Popul ati
onfi
guresprovideabasicindi
cati
onoftheat t
racti
venessofthemar ketintermsofsizeand
potent i
algr
owthbyl ookingatl
if
eexpectancy,
agedi str
ibuti
onandpopul at
iongr owth.Theyall
ow
mar keterst
oidenti
fythesegmentsandt hegeographicalareastheyshouldtargetAlso,i
ncomel evel
s
needt obetakenintoaccountast heypr
ovideanindicationofthepurchasi
ngpoweroft hemarket
andal lowcompaniest oadaptt
heirmarketi
ngconcept saccordingl
y.

Apackagedgoodscompany, forexampl e,br

oughtoutamor eeconomi cversi
onofi tsproductin
countri
esthathavel oweri ncomel evelsbyusingcheaperr awmat er i
als.Nonetheless,mar ket
ers
shouldnotgr eatlyrelyont hisindicatorastherearecer t
aint ypesofpr oduct sthatbecauseoft he
highvaluetheycr eatef ortheconsumerar enotaffectedbyi ncomel evels.InChina, f
orexampl e,due
tobeingagoodupgr adef orbicyclesandacheapal ternati
vef orcar s,salesofmot orcyclesarehigh
i
nt hecountrydespi tet hefactthatthepr i
ceofthepr oductr epr esent sahi ghproporti
onofsal ary
Besides,market ersneedt oconsi derconsumpt ionpatternwhi chal l
owt hem toidentif
ythe
proporti
onofi ncomet hatconsumer sspendonnecessi t
ies, i
ncl udingf oodandr ent,and
consequentlythepr opor ti
ont hatisleftt
ospendonl essimpor tantar easofconsumpt ion,suchas
householdgoodsandl eisure.

Giventhatpurchasesinthesear eascanbecancelledorpostponedunexpect edl

y,companiescan
deter
mi nethelevelofconfi
dencei nthemarketanotheri
mportanteconomi calel
ementi si
nfl
ati
onas
i
tstronglyaff
ectsconsumer s'buyinghabit
sandabi l
it
ytobuy.Inmar ketswithhighinfl
ati
onrates
compani esneedt omodifytheirproductmaki
ngitlessexpensi
vetopr oducesot hattheycanlower
thei
rpricestorespondtocust omerneedsandsust aindemand.

I
naddi t
ion,mar
ketersneedtoconsidert heavail
abi
lit
yandqual i
tyoflocalinfrastr
ucture.
Transpor t
ati
on,
communi cat
ion,
andener gynetworkshaveani mportanteffectont hecompany's
functi
ons.Theyalsopr ovi
deanindicationforthedemandofi ndustr
ialproduct sandser vi
ces.The
factthattwobil
li
onpeopl eli
vewithoutelectr
ici
tyandt hattheaccesst oat elephoneisveryl i
mit
edin
Asia,forexample,i
nformsindustr
ialproductsandser vicescompaniest hatt hereareimportant
mar keti
ngopportuni
tiesfort
hem there.

Furt
hermor
e,compani
esneedtoconsiderr
egi
onaleconomici
ntegr
ati
onsastheycancreateboth
opport
uni
ti
esandbenef
it
s,andthr
eatsandprobl
emsf ort
hem.TheEuropeanUni
on,forexample,

Page116of116
 PRI
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providesmanybenefi
tstocompani
esoper
ati
ngwi
thi
nEur
ope,
suchaseconomi
esofscal
ethankst
o
thelargesi
ngl
emar ket
.

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