Notes

DBA 5202

MASTER OF
BUSINESS ADMINISTRATION

MARKETING
MANAGEMENT

CENTRE FOR DISTANCE EDUCATION

ANNA UNIVERSITY
CHENNAI - 600 025

ANNA UNIVERSITY
Marketing Management

Notes

Course Writer Course Reviewer

Dr.K.Chandrasekar, Director, Ms. A.Sai Sathya
Centre for Management, Chairman Assistant Professor,
Board of Studies in Management St.Joseph’ S college(Arts & Science),
Education and Entrepreneurship Chennai.
Development,
Mobile No.9043276433
University of Kerala,
Thiruvananthapuram- 695034

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 MARKETING MANAGEMENT Notes

SYLLABUS

COURSE OBJEC TIVE: To understand about Marketing concepts, Marketing Strategies, Buyer
Behavior, and Marketing Trends.
COURSE OUTCOME: Better formulation of Marketing Strategies, Marketing Mix Decisions,
Customer Relationships and Enhanced Advertising of Products.
UNIT I - INTRODUCTION - Marketing – Definitions - Conceptual frame work – Marketing
environment: Internal and External-Marketing interface with other functional areas–
Production, Finance, Human Relations Management, Information System. Marketing in
global environment– Prospects and Challenges.
UNIT II - MARKETING STRATEGY-Marketing strategy formulations – K e y D r i v e r s o f
Marketing Strategies- Strategies for Industrial Marketing– Consumer Marketing –– Services
marketing–Competitor analysis - Analysis of consumer and industrial markets – Strategic
Marketing Mix components.
UNIT III - MARKETING MIX DECISIONS - Product planning and development – Product life
cycle – New product Development and Management – Market Segmentation – Targeting and
Positioning – Channel Management – Advertising and sales promotions – Pricing Objectives,
Policies and methods.
UNITIV - BUYER BEHAVIOUR - Understanding industrial and individual buyer behavior
- Influencing factors– Buyer Behaviour Models– Online buyer behaviour- Building and
measuring customer satisfaction– Customerrelationships management–Customeracquisition,
Retaining, Defection.
UNIT V - MARKETING RESEARCH & TRENDS IN MARKETING - Marketing Information
System–ResearchProcess Conceptsand applications: Product

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Notes

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 Notes
MARKETING MANAGEMENT
CONTENTS
Lesson No. ` UNIT Page No.
UNIT I
Lesson 1 MARKETING MANAGEMENT-AN 7 - 22
INTRODUCTION
Lesson 2 CONCEPTUAL FRAMEWORK 23 - 34
Lesson 3 MARKETING ENVIRONMENT 35 - 52
Lesson 4 MARKETING INTERFACE WITH OTHER 53 - 59
FUNCTIONAL AREA
Lesson 5 MARKETING INTERFACE WITH 60 - 69
PRODUCTION & FINANCE
Lesson 6 MARKETING INTERFACE WITH HUMAN 70 - 78
RELATION MANAGEMENT
Lesson 7 MARKETING INFORMATION SYSTEM 79 - 88
Lesson 8 MARKETING IN GLOBAL ENVIRONMENT- 89 - 98
PROSPECTUS AND CHALLENGES
UNIT II
Lesson 9 MARKETING STRATEGY 99 - 110
Lesson 10 KEY DRIVERS OF MARKETING STRATEGY 110 - 130
Lesson 11 INDUSTRIAL MARKETING SYSTEM 131 - 142
Lesson 12 CONSUMER MARKETING 143 - 151
Lesson 13 SERVICE MARKETING-DEFINITION & 152 - 166
CHARACTERISITCS
Lesson 14 COMPETITOR ANALYSIS 167 - 174
Lesson 15 ANALYSIS OF CONSUMER & INDUSTRIAL 175 - 186
MARKET
Lesson 16 STRATEGIC MARKETING MIX 187 - 195
UNIT III
Lesson 17 PRODUCT PLANNING AND DEVELOPMENT 196 - 208
Lesson 18 PRODUCT LIFE CYCLE STRATEGIES 209 - 222
Lesson 19 NEW PRODUCT DEVELOPMENT & 223 - 233
MANAGEMENT

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Lesson 20 MARKET SEGMENTATION 234 - 245
Lesson 21 TARGETING & POSITIONING 246 - 260
Lesson 22 CHANNEL MANAGEMENT 261 - 275
Lesson 23 ADVERTISING & SALES PROMOTION 276 - 288
Lesson 24 PRICING OBJECTIVES, POLICIES & METHODS 289 - 302
UNIT IV
Lesson 25 UNDERSTANDING INDUSTRIAL AND 303 - 313
INDIVIDUAL BUYER BEHAVIOUR
Lesson 26 INFLUENCING FACTORS OF BUYING 314 - 322
BEHAVIOUR
Lesson 27 BUYER BEHAVIOUR MODEL 323 - 340

Lesson 28 ONLINE BUYER BEHAVIOUR 341 - 349

Lesson 29 BUILDING AND MEASURING CUSTOMER 350 - 359
SATISFACTION
Lesson 30 CUSTOMER RELATIONSHIP MANAGEMENT 360 - 371
Lesson 31 CUSTOMER ACQUISITION, RETAINING, 372 - 380
DEFECTION
UNIT V
Lesson 32 MARKETING INFORMATION SYSTEM 381 - 390
Lesson 33 MARKETING RESEARCH PROCESS 391 - 402
Lesson 34 CONSUMER BEHAVIOUR & RETAIL RESEARCH 403 - 415
Lesson 35 CUSTOMER DRIVEN ORGANIZATION 416 - 421
Lesson 36 CAUSE RELATED MARKETING & ETHICS IN 422 - 427
MARKETING
Lesson 37 ONLINE MARKETING & E-COMMERCE 428 - 439

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 Lesson - 1 Marketing Management-An Introduction

Notes
UNIT - I
LESSON 1 – MARKETING
MANAGEMENT-AN INTRODUCTION
CONTENT:
LEARNING OBJECTIVE
LEARNING OUTCOME
1.1 INTRODUCTION
1.2 MARKETING CONCEPT
1.3 CUSTOMER ORIENTED PLANNING & IMPLEMENTATION
1.4 COORDINATION OF ALL ORGANIZATIONAL ACTIVITIES
1.5 DEFINITION OF MARKETING
1.6 CORE CONCEPTS OF MARKETING
1.7 EVOLUTION OF MARKETING MANAGEMENT
1.8 ROLE OF MARKETING
1.9 THE MARKETING MIX (THE 4 ‘P OF MARKETING)-AN
INTRODUCTION
1.10 LIMITATIONS OF THE MARKETING MIX FRAMEWORK
SUMMARY
CASE STUDY
KEYWORDS
EXERCISE-POINTS TO PONDER
SELF ASSESSMENT QUESTIONS

LEARNING OBJECTIVE:
• To study the demand of customers before offering them any goods or
services.
• To create demand through various means and also to find out the different
taste and preferences of the consumers.
• To focus on customer needs and satisfaction instead of selling the goods
and services
• To outline key marketing concepts and its application to different markets.

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Notes LEARNING OUTCOME:

• To Understand the place and contribution of marketing to the business
enterprise.
• It requires constant interaction with the various strata of the society.
• To integrates and combines the other business functions like production,
finance, personnel etc.
• Marketing reflects the business mission of a firm before the public and
society.
1.1 INTRODUCTION:
The apex body in United States of America for the Marketing functions,
American Marketing Association (AMA) defines marketing as, “Marketing
consists of those activities involved in the flow of goods and services from the
point of production to the point of consumption”. The AMA has since amended
its definition to read as: “Marketing is an organizational function and a set of
processes for creating, communicating, and delivering value to customers and
for managing customer relationships in ways that benefit the organization and
its stakeholders.”
Hence, it can be summarized that marketing is basically meeting unfulfilled
needs for target markets, identifying those unfulfilled needs and planning how to
meet them through products, services, and ideas. It also includes communicating
the value to them along with the price. It also includes which is affordable and
profitable and also distributing the products so that customers have appropriate
accessibility and have quick and easy delivery. Marketing is thus, the process of
planning and executing the conception, pricing, promotion, and distribution
of ideas, goods and services to create exchanges (with customers) that satisfy
individual and organizational objectives.
Marketing has grown into a very important functional area in management
basically due to the increasing supply and lower demand over the years. This is
primarily through the competitive intensity in every sphere of the market. When
competition increases, as you know, every firm wants to be heard in the market.
This will make the firms to be different than the competitors. Hence, marketing
becomes a very important functional area for every firm where the competition
is very high.
In a business firm, marketing generates the revenues that are managed by financial
people and used by the production people in creating products or services. The
challenge of marketing is to generate that revenue by satisfying consumers
wants at a profit and in a socially responsible manner. Marketing is not limited
to business. Whenever you try to persuade somebody to do something you are
engaging in marketing.

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Traditionally, markets were viewed as a place for exchange of goods and services Notes
between sellers and buyers to the mutual benefit of both. Today, marketing is
exchange of values between the seller and the buyer. Value implies worth related
to the goods and services being exchanged. The buyer will be ready to pay for
the goods if they have some value for him.
Marketing is the business function that controls the level and composition of
demand in the market. It deals with creating and maintaining demand for goods
and services of the organization.
Marketing management is “planning, organizing, controlling and implementing
of marketing programmes, policies, strategies and tactics designed to create and
satisfy the demand for the firms’ product offerings or services as a means of
generating an acceptable profit.”
It deals with creating and regulating the demand and providing goods to customers
for which they are willing to pay a price worth their value.
Marketing Management performs all managerial functions in the field of
marketing. Marketing Management identifies market opportunities and comes
out with appropriate strategies for exploring those opportunities profitably. It has
to implement marketing program and evaluate continuously the effectiveness of
marketing-mix. It has to remove the deficiencies observed in the actual execution
of marketing plans, policies, and procedures. It looks after the marketing system
of the enterprise.
Institute of Marketing Management, England, has defined Marketing
Management as “Marketing Management is the creative management function
which promotes trade and employment by assessing consumer needs and
initiating research and development to meet them. Its co-ordinates the resources
of production and distribution of goods and services, determines and directs the
total efforts required to sell profitably to ultimate user.
Marketing Management is the process of management of marketing programs
for accomplishing organizational goals and objectives.
Marketing Management Involves:
1. The setting of marketing goals and objectives,
2. Developing the marketing plan,
3. Organizing the marketing function,
4. Putting the marketing plan into action and
5. Controlling the marketing programme.
Marketing Management is both a science as well as an art. Those responsible
for marketing should have good understanding of the various concepts and
practices in marketing, communication, and analytical skills and ability to
maintain effective relationship with customers, which will enable them to plan
and execute marketing plans.

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Notes
1.2 THE MARKETING CONCEPT:
After World War II, the variety of products increased, people had more
discretionary income, and could afford to be selective and buy only those
products that more precisely met their changing needs and wants. However,
these needs were not immediately obvious. Sometime during the mid-1950s,
there was growing recognition among American business people that merely
efficient production and extensive promotion, including hard selling, did not
guarantee that customers would buy products. With the passage of time, more
knowledge, and experience, customers increasingly seemed unwilling to be
persuaded. More and more companies found that determining what customers
wanted was a must before making a product, rather than producing products first
and then persuading them to buy. The key questions became:
1. What do customers really want?
2. Can we develop it while they still want?
3. How can we keep our customers satisfied?
Thus, the marketing concept era began.
Marketing concept proposes that an organization should focus on customer needs
and wants, coordinate its efforts, and endeavor to accomplish organizational
goals. Geraldine E Williams reported that the CEO of Nike said, “For years we
thought of ourselves as a production-oriented company, meaning we put all our
emphasis on designing and manufacturing the product. But now we understand
that the most important thing we do is market the product.” The major focus of
all sets of organizational activities should be satisfying customer needs. This
requires carefully listening to customers as a student listen to a teacher. Stanley
F Slater and John C Naver reported that there is positive relationship between
market orientation and performance.
Sometimes, philosophies that sound quite reasonable and appear attractive on
paper, are difficult to put into practice. To embrace the marketing concept as the
guiding philosophy, the concerned firm must accept certain general conditions
and manage some problems. Alan Grant and Leonard Schlesinger are of the
view that market-orientation requires organization-wide generation of market
intelligence across departments, and organization wide responsiveness to it.
It means establishing a reliable information system to learn about real needs of
customers and design the right need satisfying solutions. Setting up an information
system can usually be an expensive proposition and requires committing money
and time to its development and maintenance. Company-wide coordination may
require restructuring the internal operations and overall objectives in case of one
or more departments.
Appreciating the critical role of marketing, the head of marketing has to be part
of the top management team. Acceptance and implementation of marketing

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concept demands support of top management and other managers and staff. To Notes
inculcate a customer-orientation culture, it is necessary that employees at all
levels in the organization should understand the value of the customer and the
importance of the customer satisfaction.
Obviously, the internal customers (company employees at all levels) themselves
should be satisfied and motivated to promote an organization-wide culture that
puts high value on creating a satisfied customer. For this, the company has to
ensure an appropriate work environment and take care of their legitimate needs.
Benson P. Shapiro is of the opinion that a company is customer focused if the
answers are “yes” to the four critical questions:
1. Are we easy for customers to do business with?
2. Do we keep our promises?
3. Do we meet the standards we set?
4. Are we responsive to customer needs?
The marketing concept emphasizes three main principles.
1.3 CUSTOMER-ORIENTED PLANNING & IMPLEMENTATITONS:
It should be the sole aim of all employees, irrespective of their department or
functional area, to satisfy customers’ needs. It would require carefully segmenting
the market on the basis of the right criteria, targeting suitable segment(s), learning
about customer needs and wants, analyzing and spotting the right opportunities
and matching them with the company’s strengths.
1.4 COORDINATION OF ALL ORGANISATIONAL ACTIVITIES:
Mainly product planning, pricing, distribution, and promotion should be
combined in a sensible and consistent manner, and the head of marketing should
be a part of top-level management. Coordinated marketing is critically important
to achieve organizational goals the reward of doing the job well will bring in
sales and profits because without profits, the firm cannot survive, neither would
it be in a position to improve its offers.
Marketing concept is significantly different from production concept and selling
concept. Not long ago, Indian auto companies, Hindustan Motors, Premier
Automobiles, and Bajaj Auto hardly showed any consideration for customers,
producing obsolete models in large numbers (demand exceeded the supply).
Though the prices kept on increasing, little was done to improve the models.
Bajaj was the only manufacturer of scooters preferred by customers and to own
one, customers had to deposit money in advance and wait for five to ten years
before they could become proud owners. It is only after the entry of Maruti cars,
with Japanese collaboration, that things started changing.
Premier Auto and Hindustan Motors experienced major setbacks, sales declined
and ultimately there were hardly any willing buyers. In the beginning, Maruti

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Notes found it difficult to meet the demand and buyers willingly booked the car and
waited for delivery. Bajaj Auto faced a similar situation as customers had many
choices of two-wheelers. The position now appears as if almost every auto
manufacturer is desperately trying to please customers. Customers have strong
preferences for certain features and price ranges. Maruti has even started selling
second-hand, reconditioned, and reliable cars from its outlets to customers
looking for such deals, is order to expand its hold on the market.

Figure 1: Typical Organizational Pyramid and Its Inverted Position

In line with the marketing concept, it is imperative that the typical pyramid
depicting an organization needs to be inverted to pursue marketing concept.
In an inverted position, the customer will occupy the highest pedestal and top
management will be at the bottom position. The communication flow will start
from the customer, and the employees and executives will look up to learn what
the customer wants and then respond to the inputs. This is the way to offer desired
value, deliver more satisfaction, and help retain the customer.
Marketing concept is sometimes interpreted as a philosophy of attempting to
satisfy all customers’ needs with no concern for the cost. This would seem to be
a sure way to financial disaster. The marketing concept is consistent with the idea
of taking into consideration only those customer segments that the company can
satisfy both effectively and profitably.
The firm has to earn profits to survive, offer new and better products and services,
and be a meaningful member of society. A company might therefore choose to
offer less costly products and services to unprofitable customer segments, or

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even avoid them altogether. Being market-oriented pays dividends and has a Notes
significant effect on company performance.
1.5 DEFINITION OF MARKETING:
As you know, various authors have different way of giving their definitions for
marketing. Some of the key definitions of Marketing are:
Philip Kotler, the father of modern marketing provides one of the most complete
definitions of marketing: “the science and art of exploring, creating, and
delivering value to satisfy the needs of a target market at a profit. Marketing
identifies unfulfilled needs and desires. It defines measures and quantifies the size
of the identified market and the profit potential. It pinpoints which segments the
company is capable of serving best, and it designs and promotes the appropriate
products and services. ”
This means that for him, marketing is the science and art of exploring, creating
and contributing value to meet the needs of a specific target and thus achieve a
benefit.
According to AMA, Marketing is the activity, set of institutions, and processes
for creating, communicating, delivering, and exchanging offerings that have
value for customers, clients, partners, and society at large.
Schiffman and Kanuk (1994) talk about the marketing concept which they insist
is about a company determining accurately the needs and wants of specific target
markets, and delivering the desired satisfactions better than the competition.
They also say that a marketer should make what it can sell, instead of trying to
sell what it has made.
Lamb, et al (2007:7) say marketing is about anticipating and satisfying consumer
needs by means of mutually beneficial exchange processes and doing so profitably
and more effectively than competitors by means of efficient managerial processes
Marketing consists of the strategies and tactics used to identify, create and
maintain satisfying relationships with customers that result in value for both the
customer and the marketer.
Let’s examine this definition in a little more detailed manner by focusing on a
few of the key terms.
Strategies and Tactics - Strategies are best explained as the direction the marketing
effort will take over some period of time, while tactics are actionable steps or
decisions made in order to follow the strategies established. For instance, if a
strategy is to enter a new market, the tactics may involve the marketing decisions
made to carry this out. Performing strategic and tactical planning activities in
advance of taking action is considered critical for long-term marketing success.
Identify - Arguably the most important marketing function involve efforts
needed to gain knowledge of customers, competitors, and markets. We will
see throughout this course material, how marketing research is utilized in all
decision-making areas.

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Notes Create - Competition forces marketers to be creative people. When marketers

begin new ventures, such as building a new company, it is often based around
something that is new (e.g., new product, new way to distribute a product, new
advertising approach, etc.). But once the new venture is launched, innovation
does not end. Competitive pressure is continually felt by the marketer, who must
respond by devising new strategies and tactics that help the organization remain
successful.
Maintain - Today’s marketers work hard to insure their customer’s return to
purchase from them again. Long gone are the days when success for a marketer
was measured simply in how many sales, they made each day. Now, in most
marketing situations, marketing success is evaluated not only in terms of sales
figures but also by how long a marketer can retain good customers. Consequently,
marketers’ efforts to attract customers do not end when a customer makes a
purchase. It continues in various ways for, hopefully, a long time after the initial
purchase.
1.6 CORE CONCEPTS OF MARKETING:
In this article we will discuss about the core concepts of marketing. The concepts
are: - 1. Needs 2. Wants 3. Demand 4. Customer Value 5. Exchange 6. Customer
and Consumer 7. Customer Satisfaction 8. Customer Delight 9. Customer
Loyalty 10. Marketing V/s Market.
The core concept of marketing is a social and managerial process by which
individuals or firms obtain what they need or want through creating, offering,
exchanging products of value with each other.
1. Needs:
Needs are the basic requirements which human beings require for existence.
These mainly consist of air, water, food, clothing and shelter. Along with these
needs, some other needs which are required to be satisfied are education, medical
care, entertainment, and recreation. It is a difficult task for a marketer to identify
the needs of the customers since costumers may not be conscious of their needs,
and even if they are, then they might be unable to put forth their needs clearly.
The needs can be further classified into 5 types as:
(i) Stated Needs
(ii) Real Needs
(iii) Unstated Needs
(iv) Delight Needs
(v) Secret Needs
2. Wants:
The wants are a step ahead of needs and are largely dependent on the human
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needs. A need becomes a want when a need is directed to a specified object. Notes
Wants are designed according to the taste and preferences of the society.
3. Demand:
A demand is generated when a customer is willing to buy a particular product
and has an ability to pay for it. A company should study not only how many
people want their product but also how many would actually afford to buy the
product. E.g. Many people would be desirous to buy Ferrari car; however, there
is only a small segment which can afford to buy it which reflects the demand for
Ferrari car in the market.
Demand = Willingness to pay + Ability to pay
4. Customer Value:
Value reflects the sum of the perceived tangible and intangible benefits and costs
to customers. Here the costs include both economic and non-economic costs
whereas benefits include both tangible as well as intangible ones. A product or
services is successful when it delivers value and satisfaction to the buyers. Value
is usually a combination of quality, service, and price.
5. Exchange:
It is act of obtaining an object which one needs from another by offering some
other thing in return. Marketing occurs when individuals decide to satisfy needs
and wants through exchange. Marketing helps to create a business environment
where exchange of value can take place.
6. Customer and Consumer:
Customers and consumers are used interchangeably to define the same
individual but there is a difference. The path of the product, after it is purchased,
differentiates the customer from a consumer.
If an individual purchases an item for his own use, then that individual is a
consumer; however, if the individual buys the product as a gift or purchases it
for someone else for any reason then the person purchasing that product is the
customer and the person who will use the product or benefit from its purchase
is the actual consumer. The customer can be a consumer but a consumer may or
may not be a customer.
7. Customer Satisfaction:
Satisfaction reflects a person’s judgment of product’s perceived performance in
relationship to expectations. Customer satisfaction with a purchase depends on
how well the product’s performance lives up to the customer’s expectations.
(i) If the performance falls short of expectations, the customer is dissatisfied.
(ii) If it matches expectations, then the customer is satisfied.
(iii) If it exceeds the expectations, then the customer is delighted.

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Notes 8. Customer Delight:

Customer delight can be defined as the effect of delivering a product or service
that surpasses customer expectations in a favorable experience.
Performance > Expectations → Delighted Customer
In most cases delighted customers tend to come back again because of the great
services they have received from the company. Customer Delight directly affects
sales and profitability of a company as it distinguishes the company and its
products and services from the competition.
9. Customer Loyalty:
Loyalty can be defined as a customer’s strong continuing belief that a particular
organization’s products/services offer remains their best option. Customers are
said to be loyal when they consistently purchase a certain product or brand over
an extended period of time.
Loyalty also means customers hanging in there, even when there may be a
problem with the company’s products or services, just because the organization
was good to them in the past and had addressed their issues whenever they arise.
It means that customers do not seek out competitors and, even when approached
by competitors do not show any interest in them.
10. Marketing V/s Market:
Marketing is the process of trying to get group of people interested in buying
company’s products or services. It is an organizational function and a set of
processes that work in tandem to serve the market effectively, efficiently and
profitably. It is a set of processes for creating, communicating, and delivering
value to customers and for managing customer relationships in ways that benefit
the organization and its stakeholders.
Marketing is all those activities that facilitate trade. These include activities
that identify consumers’ needs such as market research and those activities that
satisfy consumers’ needs e.g., packaging and distribution. Marketing activities
therefore support the marketing of goods and services.
1.7 EVOLUTION OF MARKETING MANAGEMENT:
The evolution of marketing is composed of a series of responses to major
external challenges. Pre- industrial marketing, based around craft production
and personal relationships with local customers, was challenged by the
urbanization and mechanization of the industrial revolution. The industrial era
created expanding markets which required an emphasis on production, logistics
and selling, to get the goods to the customer. In the late 1950s, the challenge of
increasingly saturated and competitive markets led to the birth of an explicit
marketing philosophy.

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Marketing is a relatively latest discipline having emerged in the early 1900s. Notes
Prior to this time, most issues that are now commonly associated with marketing
were either assumed to fall within basic concepts of economics (e.g., price setting
was viewed as a simple supply/demand issue), advertising (well developed by
1900), or in most cases were simply not yet explored (e.g., customer purchase
behavior, importance of distribution partners).
Led by marketing scholars from several major universities, the development of
marketing was in large part motivated by the need to dissect in greater detail,
relationships and behaviors that existed between sellers and buyers. In particular,
the study of marketing lead sellers to recognize that adopting certain strategies
and tactics could significantly benefit the seller/buyer relationship.
In the older days of marketing (before the 1950s) this often meant identifying
strategies and tactics for simply selling more products and services with little
regard for what customers really wanted. Often, this led companies to embrace
a “sell-as-much- as-we-can” philosophy with little concern for building
relationships for the long term.
But starting in the 1950s, companies began to see that old ways of selling were
wearing thin with customers. As competition grew stiffer across most industries,
organizations looked to the buyer side of the transaction for ways to improve.
What they found was an emerging philosophy suggesting that the key factor
in successful marketing is to understand the needs of customers. The famous
“marketing concept” suggests that marketing decisions should flow from first
knowing the customer and what they want. Only then should an organization
initiate the process of developing and marketing products and services.
The marketing concept continues to be at the root of most marketing efforts,
though the concept does have its own problems (e.g., doesn’t help much with
marketing new technologies) a discussion of which is beyond the scope of
this tutorial. But overall marketers have learned they can no longer limit their
marketing effort to just getting customers to purchase more. They must have an
in-depth understanding of who their customers are and what they want.
1.8 THE ROLE OF MARKETING:
As we’ve seen the key objective of an organization’s marketing efforts is to
develop satisfying relationships with customers that benefit both the customer
and the organization. These efforts lead marketing to serve an important role
within most organizations and within society.
At the organizational level, marketing is a vital business function that is necessary
in nearly all industries whether the organization operates as a for-profit or as a
not-for- profit. For the for-profit organization, marketing is responsible for most
tasks that bring revenue and, hopefully, profits to an organization. For the not-
for-profit organization, marketing is responsible for attracting customers needed
to support the not-for-profit’s mission, such as raising donations or supporting a

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Notes cause. For both types of organizations, it is unlikely they can survive without a
strong marketing effort.

Marketing is helpful in the overall business planning and taking various

decisions regarding production and other activities in the business.

Marketing is also the organizational business area that interacts most frequently
with the public and, consequently, what the public knows about an organization
is determined by their interactions with marketers. For example, customers may
believe a company is dynamic and creative, based on its advertising message.
At a broader level marketing offers significant benefits to society. These benefits
include:
• Developing products that satisfy needs, including products that enhance
society’s quality of life
• Creating a competitive environment that helps to lower product prices
• Developing product distribution systems that offer access to products to a
large number of customers and many geographic regions
• Building demand for products that require organizations to expand their
labor force
• Offering techniques that have the ability to convey messages that change
social behavior in a positive way (e.g., anti-smoking advertising)
1.9 THE MARKETING MIX (THE 4 P’S OF MARKETING)-AN
INTRODUCTION:
The term “marketing mix” became popularized after Neil H. Borden published
the article in the year 1964, ‘The Concept of the Marketing Mix’. Borden
began using the term in his teaching in the late 1940’s after James Culliton had
described the marketing manager as a “mixer of ingredients”. The ingredients
in Borden’s marketing mix included product planning, pricing, branding,
distribution channels, personal selling, advertising, promotions, packaging,
display, servicing, physical handling, and fact finding and analysis.
E. Jerome McCarthy later grouped these ingredients into the four categories that
today are known as the 4 P’s of marketing, depicted below:
Marketing decisions generally fall into the following four controllable categories:
• Product
• Price
• Place (distribution)
• Promotion

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Notes

These four P’s are the parameters that the marketing manager can control, subject
to the internal and external constraints of the marketing environment. The goal
is to make decisions regarding the four P’s with a focus on the customers in the
target market so as to create perceived value and generate a positive response.
Product/Service
• What does the customer want from the product/service? What needs does
it satisfy?
• What features does it have to meet these needs?
• Are there any features you’ve missed out?
• Are you including costly features that the customer won’t actually use?
• How and where will the customer use it?
• What does it look like? How will customers experience it?
• What size(s), color(s), and so on, should it be?
• What is it to be called?
• How is it branded?
• How is it differentiated from your competitors?
• What is the most it can cost to provide, and still be sold sufficiently
profitably? (See also Price, below).
Place
• Where do buyers look for your product or service?
• If they look in a store, what kind? A specialist boutique or in a supermarket,
or both? Or online? Or direct, via a catalogue?
• How can you access the right distribution channels?
• Do you need to use a sales force? Or attend trade fairs? Or make online
submissions? Or send samples to catalogue companies?
• What do you competitors do, and how can you learn from that and/or
differentiate?

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Notes Price
• What is the value of the product or service to the buyer?
• Are there established price points for products or services in this area?
• Is the customer price sensitive? Will a small decrease in price gain you
extra market share? Or will a small increase be indiscernible, and so gain
you extra profit margin?
• What discounts should be offered to trade customers, or to other specific
segments of your market?
• How will your price compare with your competitors?
Promotion
• Where and when can you get across your marketing messages to your
target market?
• Will you reach your audience by advertising in the press, or on TV, or
radio, or on billboards? By using direct marketing mailshot? Through
public relation? On the Internet?
• When is the best time to promote? Is there seasonality in the market? Are
there any wider environmental issues that suggest or dictate the timing of
your market launch, or the timing of subsequent promotions?
• How do your competitors do their promotions? And how does that influence
your choice of promotional activity?
1.10 LIMITATIONS OF THE MARKETING MIX FRAMEWORK:
The marketing mix framework was particularly useful in the early days of the
marketing concept when physical products represented a larger portion of the
economy. Today, with marketing more integrated into organizations and with a
wider variety of products and markets, some authors have attempted to extend its
usefulness by proposing a fifth P, such as packaging, people, process, etc. Today,
however, the marketing mix most commonly remains based on the 4 P’s. Despite
its limitations and perhaps because of its simplicity, the use of this framework
remains strong and many marketing textbooks have been organized around it.

SUMMARY

1. “Marketing is an organizational function and a set of processes for

creating, communicating, and delivering value to customers and for
managing customer relationships in ways that benefit the organization and
its stakeholders.”
2. “Marketing Management is the creative management function which
promotes trade and employment by assessing consumer needs and initiating
research and development to meet them. Its co-ordinates the resources of

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 Lesson - 1 Marketing Management-An Introduction

production and distribution of goods and services, determines and directs Notes
the total efforts required to sell profitably to ultimate user.
3. Marketing is also the organizational business area that interacts most
frequently with the public and, consequently, what the public knows about
an organization is determined by their interactions with marketers
4. The Concept of Marketing has evolved as Production concept, Sales
Concept and Marketing Concept
5. The 4Ps of Marketing are Product, Price, Place and Promotion.

CASE STUDY :
Case Study 1 – Coca-Cola collaborates with App Annie.
Coca-Cola is a beloved beverage brand enjoying worldwide recognition and
profit. Other than its trademark soft drinks, the company also has several
sister brands under its name. Over the years, Coca-Cola has developed into
a tech-savvy, modern business, thanks to its innovation strategies.
The latest app developed by Coca-Cola includes the Coca-Cola Freestyle
for customers, Coke Notify Service Request for retailers. Read the case
study titled “Coca-Cola relies on App Annie to amaze and delight its
customers” for more details.
The study describes the significant challenges faced by the brand and how
it overcomes them with remarkable success. Towards the end, you also
learn about the future prospects of the company.
Ideal solution format:
• Explain the background of Coca-Cola, and why is it such a relevant
brand.
• List down the various sister brands and companies under Coca-Cola.
• Discuss the innovation strategies that the brand adopts
• Explain the three significant apps launched by Coca-Cola
• Summarize the challenges faced by Coca-Cola
• Talk about App Annie Intelligence and its benefits.
• Discuss how App Annie contributes to better customer engagement.

KEYWORDS:
Needs and wants: Satisfaction of the needs and wants of individuals and
organizations.
Creating a market offering: Complete offer for a product of service.
Customer value: greatest benefit or value for the money.
Exchange mechanism: Exchange of products/services for money/for something
of value to them.

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Notes Brand: Name, term, sign, design or some combination of the above used
to identify the products of the seller and to differentiate them from those of
competitors.
Product Mix: All the features of the product or service to be offered for sale.
Price Mix: Value (Money) in lieu of product/service received by seller from a
buyer.
Promotion Mix: Informing the customers about the products and persuading
them to buy the same.
Place Mix: Physical distribution: Various decisions regarding distribution of
products.
EXERCISE:
POINTS TO PONDER:
1.------------- is the father of modern marketing.
2.Marketing is a process which aims at-----------
3.Marketing is the activity, set of -----------------& processes for creating,
communicating, delivering & exchanging offerings that have value for
customers, clients, partners & society.
4.The key term in the American Marketing Association’s definition of
marketing is----------
5.Marketing is ----------------there is a constant tension between the formulated
side of marketing and the management side.

SELF ASSESSMENT QUESTIONS:

SHORT ANSWER QUESTION:
1.Define Marketing.
2.What are the concept of marketing?
3.Define the marketing concept.
4.List out the objectives of marketing.
5.Write a short note on role of marketing.
6.State any two points of limitation of the marketing mix framework.
LONG ANSWER QUESTIONS:
1.Explain the concept of marketing.
2.Explain marketing concept and compare with selling concept. Give Example.
3.Discuss the coordination of marketing in all organizational activities.
4.Describe briefly about Evolution of marketing management.

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 Lesson 2 – Conceptual Frame Work

Notes
LESSON 2 – CONCEPTUAL FRAME
WORK
CONTENT:
LEARNING OBJECTIVE
LEARNING OUTCOME
2.1 INTRODUCTION
2.2 EVOLUTION OF MARKETING
2.3 CONCEPTUAL FRAMEWORK -MARKETING FRAMEWORK
2.4 TARGET MARKET
2.5 MARKETING PROCESS
2.6 MARKETING STRATEGY
SUMMARY
CASE STUDY
KEYWORDS
EXERCISE-POINTS TO PONDER
SELF ASSESSMENT QUESTIONS

LEARNING OBJECTIVE:
• To defines the overall planning, strategic process, goals and objectives and
all-important terms of marketing.
• It integrates the entire marketing management activity and provides the
proper flow in which marketer should proceed.
• To emphasize on innovation in every sphere, on providing better value to
customers.
• To know the various views of business as consumer satisfying process.
LEARNING OUTCOME:
• The Marketing function is responsible for forecasting and managing the
rate of supply and distribution of firm’s products.
• It helps to market planning involves deciding on marketing strategies that
will boost company to attain its overall objective.
• To focus on the desired success of marketing depend on correct and timely
decision.
• The needs and wants of different types of customers and converting them
to marketable opportunities.

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Notes 2.1 INTRODUCTION:

Most successful organizations have adopted the marketing concept. The
marketing concept is based on the “right” principle. The marketing concept is
the use of marketing data to focus on the needs and wants of customers in order
to develop marketing strategies that not only satisfy the needs of the customers
but also the accomplish the goals of the organization.
An organization uses the marketing concept when it identifies the buyer’s needs
and then produces the goods, services, or ideas that will satisfy them (using the
“right” principle). The marketing concept is oriented toward pleasing customers
(be those customers organizations or consumers) by offering value. Specifically,
the marketing concept involves the following:
Focusing on the needs and wants of the customers so the organization can
distinguish its product(s) from competitors’ offerings. Products can be goods,
services, or ideas.
Integrating all of the organization’s activities, including production and
promotion, to satisfy these wants and needs Achieving long-term goals for the
organization by satisfying customer wants and needs legally and responsibly
2.2 EVOLUTION OF MARKETING:
Marketing is as old as human civilization. Even in the earliest stage of human
civilization exchange was taking place, though, without any consideration. The
evidence of this could be noted from the anthropological studies. The number
of excavations that have taken place around the world has also confirmed this.
However, in those days, the exchange was not so well organized or structured.
This was because, there was very little surplus and efforts to create surplus was
not even realized. When groups of human beings started living in batches, there
a rose the need for exchange within the group or among the groups.
Historical evidence indicated that this took place in a very crude barter term.
This was the earliest seed for modern marketing. Another convincing evidence
is the number of ancient literatures of Indian origin. All of them referred to the
classification of the society in to four groups’ viz., Brahmins, Shathriyas, vysyas
and Sudras. Of these four groups, was mainly indulging in exchange activities.

In marketing each and every thing is related to consumer needs organizational

develop the product according to consumer demands.

They were governed by ethical practices and considered it as sin to violate such
practices. As years rolled, the approach to marketing also changed. From a stage
of household exchange of goods and services, exchange started taking place
between families and households. Such an exchange always took place through
barter system.

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 Lesson 2 – Conceptual Frame Work

But when exchange took place between different groups in the society, the need Notes
for a medium of exchange was felt. Originally stones were used which was
replaced by anything which commanded social respect was accepted.
But in due course, precious metals like gold and silver were used as a medium.
It is interesting to note that till very recently, the value of many was linked to
the value of gold. When man invented money, exchange became very smooth
devoid of all the problems associated with the barter exchange system.
While exchange was getting perfected, the world stated looking at marketing
in different ways. Till the mid 1940‟s it was thought that the producers should
produce what is possible and then make efforts to sell what is produced.
In this approach, marketing was viewed from producers/seller’s side. But this was
proved to be a fatal mistake by Levitt through his historic article. Levitt brought
sense to the world of marketing. He proved that market should be facing customer
rather than the customer facing the market. In other words, manufacturers should
contently look at the market to capture signals and translate that into acceptable
products or services.
Hence, marketing became customer focused and customers centered. So, the
approach now turned out to be “produce what the consumer’s want‟. This
automatically made every producer to identify his consumer and study his
requirements so that what is produced is what is wanted. 1.3 Marketing Concepts
has undergone a great change over the period. The different stages of change are
explained below.
1. Production Concept of Marketing: This is the oldest concept of marketing.
It emphasizes that consumers will favour those products that are available
and highly affordable and therefore management should focus on improving
production and distribution activities. This holds well when i. the demand for
products exceeds the supply and ii. The product cost is high. To overcome the
problem of cost, production should take place in large scale to meet the demand.
At the same time, price should also be addressed so that by making available
large quantity, buyer who wants to buy the product would be able to buy. But
there are occasions when the product is not attractive, even at low price; the
buyers may not buy the product.
2. Product Concept of Marketing: This concept believed that the consumers
will favour those products that offer the best quality, performance and features
and therefore the organization should devote its energy to making continuous
product improvements.
This concept implies that there is no effort required for marketing a product, as
long as the product is good and its price is reasonable. This concept remained
as an important guideline for the manufacturers for quite a long time. But when
considering the reality, it could easily be proved that this concept is not true.

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Notes A producer may feel that he should come up with a good quality product, while
the consumers may look for better solution to a problem. FOR EXAMPLE,
colleges may feel that the high school students want a liberal arts education,
failing to note that the preference is for vocational education. Hospitals may feel
that patients want fast cure but patients may be looking for permanent remedy.
The consumers may not be aware of the product features and qualities unless
a vigorous selling effort is made by the producers. Further, now a day every
manufacture has a separate research and development section to facilitate
continuous product improvement.
For example, from a 7 stage of ordinary washing soap, continuous research
has brought us the detergent powder easy to use. But this concept of marketing
would expect a well-organized promotional drive to make the product a success.
3. Selling Concept of Marketing: In this concept the importance of sales efforts
to be undertaken to make the consumers buy the products which otherwise
will remain unsold. So every organization has to make substantial selling
and promotional effort to push the sales of its product. Even the best product
cannot have desired sales without the help of sales promotion and aggressive
salesmanship.
This concept points out that goods are not bought but they have to be sold
through organized advertisement and sales promotion efforts. FOR EXAMPLE,
goods like automobiles are not readily bought by the consumers and they have
to be sold only through promotional effort. Hence, the producers have to develop
effective promotional effort.
Hence, the producers have to develop effective promotional programmes to sell
the products. Even in the case of election, several political parties attempt to
project their candidates by using various promotional efforts. While, there is
nothing illogical about this approach, yes, producer might have to conceal the
flaws in the product and hard sell the product.
Hence, more often than not, the consumers regret their decision after purchasing
the product. Even if they try to force the producers to compensate the loss, it
might not be forthcoming.
4. Profit Concept of Marketing: According to profit concept of marketing, there is
a necessity for the marketing function to generate profit for the organization. But
it is the production activities which would determine the cost of manufacturing
and so profit generation becomes the ultimate responsibility of the marketing
function.
For this purpose, the marketing personnel have to identify the right product and
take it to the right people at the right time at right price through the right channel
and with right promotion. This would indicate the extent to which the marketing
function has to ensure profit realization for a firm.

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This in turn will force the production function to minimize its cost of production Notes
so that marketing function can try to optimize its activities by maximizing profit
at minimum cost. On its part, the production department has to protect its own
interest.
So now a day, the production department would sell the product to marketing at
a price befitting its cost of production and a market quantum of profit. In turn,
the marketing would determine a price with which it would be able to generate
profit and also meet its promotional expenses. Hence this concept of marketing
underscores the need to minimize cost at every level, so that at every level every
function can earn profit.
5. Modern Marketing Concept: The modern marketing concept revolves
around customer. It focuses on the ultimate customer and undertakes to meet
his requirements in full. For this the organization has to correctly understand
the customer requirement and deliver the desired products more effectively and
efficiently than the competitors. 8 Hence a major shift took place in emphasis
from product to customer.
This has led to the manufacturers accept the philosophy, manufacturer is
following the old approach, [manufacturing what he can], then be would be out
of business in no time. The modern concept is built in recognition of consumers‟
sovereignty and so it helps every organization to maximize customer satisfaction
and profit.
It is this realization of the need to study customer want that very detailed research
efforts are made to study and analyze consumer behavior. Similarly marketing
information system has become a significant method of receiving valuable inputs
about consumers‟ wants and needs.
Based on this approach, every manufacturer has to redefine his production
decision from design to delivery. A constant study of the change in consumer’s
behavior has become a necessity to remain in business. The unique selling
proposition is developed on the basis of customer’s reaction to various product
features.
Further, every manufacturer and marketing personnel tries to exceed customer
expectations so as to win the customer from the competition. Customer complaints
are given utmost respect and importance and the business consider the customer
complaints as the best input for product improvement. „
A compiling customer is seen as the contributing customer. ‟ Hence the modern
marketing concept has changed the market for almost every product from seller’s
market‟ to „ buyer’s market. At the same time, it should be noted that the tall
claim that every organization tries to meet the customer expectations in full, is
proved to be true on paper than in practice.
6. Social Marketing Concept: This philosophy of marketing underlines the
importance of marketing activities to support and ensure social well-being.

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Notes Marketing should determine the needs, wants and interests of target markets and
deliver the desired satisfaction effectively. Only through this marketing can keep
the competitors at bay.
This broadened role of marketing is prescribed for marketing as in modern days,
a number of products and services hasten environmental pollution, scarcity and
inflation. FOR EXAMPLE, excessive use of ground water resources to produce
mineral water and earn money will result in faster depletion of water source.
Similarly, use of harmful ingredients in product manufacturing/process, would
cause irreparable damage to human beings.
Further questionable business practices and unethical actions would bring about
a severely damaged social fabric. Another important example is the Bhopal
gas tragedy. Years have rolled without little efforts to uplift the victims. Profit
maximizing efforts have only helped a small segment of the community and
caused impoverishment of the community.
Hence, in these days, marketing concept emphasizes that every organization
should consciously explore the scope for it to contribute to the social-well-being.
When firms have started adopting this approach, not only they could substantially
increase their sales, the society also benefited from this. Social marking concept
therefore aims at enabling consumers to get maximum satisfaction and contribute
to their quality of life, designing product with consumer’s interest as an input
and ensuring all marketing efforts to have consumer as the focal point.
2.3 CONCEPTUAL FRAMEWORK -MARKETING FRAMEWORK:
The basic elements of a marketing strategy consist of (1) the target market, and
(2) the marketing mix variables of product, price, place and promotion that
combine to satisfy the needs of the target market. The outer circle in Figure
lists environmental characteristics that provide the framework within which
marketing strategies are planned.

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Notes

2.4 TARGET MARKET:

Companies do best when they choose their target market(s) carefully and prepare
tailored marketing programs.
Customer Needs:
We can distinguish among five types of needs:
1. Stated needs (the customer wants an inexpensive car).
2. Real needs (the customer wants a car that operating cost, not its initial
price, is low).
3. Unstated needs (the customer expects good service from the dealer).
4. Delight needs (the customer would like the dealer to include an on-board
navigation system).
5. Secret needs (the customer wants to be seen by friends as a savvy consumer).
Integrated Marketing:
When all the company’s department’s work together to serve the customer’s
interests, the result is integrated marketing. It takes place on two levels,
1. Various marketing function,
2. By another department.
Profitability:
A company makes money by satisfying customer needs than its competitors.
2.5 THE MARKETING PROCESS:
Under the marketing concept, the firm must find a way to discover unfulfilled
customer needs and bring to market products that satisfy those needs. The process
of doing so can be modelled in a sequence of steps: the situation is analysed to
identify opportunities, the strategy is formulated for a value proposition, tactical
decisions are made, the plan is implemented and the results are monitored.

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Notes

Situation Analysis
A thorough analysis of the situation in which the firm finds it serves as the basis
for identifying opportunities to satisfy unfulfilled customer needs. In addition to
identifying the customer needs, the firm must understand its own capabilities and
the environment in which it is operating.
The situation analysis thus can be viewed in terms an analysis of the external
environment and an internal analysis of the firm itself. The external environment
can be described in terms of macro-environmental factors that broadly affect
many firms, and micro-environmental factors closely related to the specific
situation of the firm.
The situation analysis should include past, present, and future aspects. It should
include a history outlining how the situation evolved to its present state and an
analysis of trends in order to forecast where it is going. Good forecasting can
reduce the chance of spending a year bringing a product to market only to find
that the need no longer exists.
If the situation analysis reveals gaps between what consumers want and what
currently is offered to them, then there may be opportunities to introduce
products to better satisfy those consumers. Hence, the situation analysis should
yield a summary of problems and opportunities. From this summary, the firm
can match its own capabilities with the opportunities in order to satisfy customer
needs better than the competition.
There are several frameworks that can be used to add structure to the situation
analysis:
• 5 C Analysis - company, customers, competitors, collaborators, climate.
Company represents the internal situation; the other four cover aspects of
the external situation
• PEST analysis - for macro-environmental political, economic, societal,
and technological factors. A PEST analysis can be used as the “climate”
portion of the 5 C framework.

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• SWOT analysis - strengths, weaknesses, opportunities, and threats - Notes

for the internal and external situation. A SWOT analysis can be used to
condense the situation analysis into a listing of the most relevant problems
and opportunities and to assess how well the firm is equipped to deal with
them.
2.6 MARKETING STRATEGY:
Once the best opportunity to satisfy unfulfilled customer needs is identified, a
strategic plan for pursuing the opportunity can be developed. Market research
will provide specific market information that will permit the firm to select the
target market segment and optimally position the offering within that segment.
The result is a value proposition to the target market. The marketing strategy
then involves:
o Segmentation
o Targeting (target market selection)
o Positioning the product within the target market
o Value proposition to the target market
Marketing Mix Decisions
Detailed tactical decisions then are made for the controllable parameters of the
marketing mix. The action items include:
• Product development - specifying, designing, and producing the first units
of the product.
• Pricing decisions
• Distribution contracts
• Promotional campaign development
IMPLEMENTATION AND CONTROL:
At this point in the process, the marketing plan has been developed and the
product has been launched. Given that few environments are static, the results
of the marketing effort should be monitored closely. As the market changes,
the marketing mix can be adjusted to accommodate the changes. Often, small
changes in consumer wants can addressed by changing the advertising message.
As the changes become more significant, a product redesign or an entirely new
product may be needed. The marketing process does not end with implementation
- continual monitoring and adaptation is needed to fulfill customer needs
consistently over the long-term.

SUMMARY
1. Companies do best when they choose their target market(s) carefully and
prepare tailored marketing programs.

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Notes 2. A company makes money by satisfying customer needs than its competitors.
3. The external environment can be described in terms of macro-environmental
factors that broadly affect many firms, and micro-environmental factors
closely related to the specific situation of the firm.
4. Market research will provide specific market information that will permit
the firm to select the target market segment and optimally position the
offering within that segment.
5. The marketing process does not end with implementation - continual
monitoring and adaptation is needed to fulfil customer needs consistently
over the long-term.

CASE STUDY :
Ginika, Tannish and Rohit were friends from college days and now they
are doing different kinds of business. They regularly meet and discuss their
business ideas and exchange notes on customer satisfaction, marketing efforts,
product designing, selling techniques, social concerns etc.

In one of such meetings, Ginika drew the attention of Tannish and Rohit
towards the exploitation of consumers. She said that most of the sellers were
exploiting the consumers in various ways’ and were not paying attention
towards the social, ethical and ecological aspects of marketing, whereas she
was not doing so.
Tannish told that they were under pressure to satisfy the consumers, but
stated that the consumers would not buy or not buy enough unless they were
adequately convinced and motivated for the same.
Rohit stressed that a company cannot achieve its objectives without
understanding the needs of the customers. It was the duty of the businessmen
to keep consumer satisfaction in mind because business is run by the resources
made available to them by the society. He further stated that he himself was
taking into consideration the needs of the customers.
Identify the various types of thinking that guided Ginika, Tannish and Rohit
in the marketing efforts of their business. Also, state one more feature of the
various types of thinking identified that is not given in the above para.
Answer:
The various types of thinking that guided Ginika, Tannish and Rohit in the
marketing efforts of their business are described below:
• (Ginika) Societal marketing concept: The main focus of this
philosophy is on both the needs of the potential buyers as well as
concern for the society at large. The ends include profit maximisation
through customer satisfaction and social welfare.
• (Tannish) Selling concept: The main focus of this philosophy is on

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existing products. The ends include profit maximisation through sales Notes
volume.
• (Rohit) Marketing concept: The main focus of this philosophy is
on customer’s needs. The ends include profit maximisation through
customer’s satisfaction.
KEYWORDS:
1. PRODUCTION CONCEPT = In the earlier days of the industrial revolution,
the number of producers were limited, → limited supply of industrial products
→ not able to match demand. So, anyone who was able to produce goods could
easily find buyers for the same.
2. PRODUCT CONCEPT= With passage of time, the supply improved→
customers started looking for products that were superior in performance, quality
and features.
3. SELLING CONCEPT= increase in scale of production→ competition among
the sellers → Product quality and availability alone did not ensure survival as a
large number of firms were now selling products of similar quality.
4. MARKETING CONCEPT: Implies that a firm can achieve its goals by
identifying needs of the customer and satisfying them better than the competitors.
Customer satisfaction is the precondition for realizing the firm’s goal and
objectives,
5. SOCIAL MARKETING CONCEPT: Under this concept customer
satisfaction is supplemented by social welfare.
EXERCISE:
POINTS TO PONDER:
Answer the following questions:
1.Today, marketing must be understood in a new sense that can be characterized
as ----------------
2.------------- is the act of obtaining a desired object from someone by offering
something in return.
3.Want for a specific product backed by an ability to pay is called-----------
4.Marketers often use the term ------------- to cover various groupings of
customers.
5.Good marketing is no accident but a result of careful planning and --------
------

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Notes
SELF ASSESSMENT QUESTIONS:
SHORT ANSWER QUESTIONS:
1. What is product concept?
2. Define the selling concept.
3. What is remarketing?
4. What is counter marketing?
5. Differentiate between selling and marketing.
6. What is marketing strategy?
7. What is SWOT Analysis?
LONG ANSWER QUESTIONS:
1. Explain briefly about the evolution of marketing management.
2. Discuss the different concept of marketing with example.
3. Explain the classification of marketing process.
4. Write a short note on marketing strategy and its implementation and
control.
5. Discuss about target market in detail.
6. What is social marketing concept. Explain in detail with example.

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 Lesson 3 – Marketing Environment

Notes
LESSON 3 – MARKETING
ENVIRONMENT
CONTENT:
LEARNING OBJECTIVE
LEARNING OUTCOME
3.1 INTRODUCTION
3.2 MARKET PLANING
3.3 SCANNING BUSINESS
3.4 VALUE CHAIN
3.5 SWOT ANALYSIS
3.6 ENVIRONMENTAL ANALYSIS
3.7 THE STRUCTURE OF THE MARKETING ENVIRONMENT
3.8 MARKETING ENVIRONMENT
3.9 BUSINESS CYCLES
SUMMARY
CASE STUDY
KEYWORDS
EXCERCISE
SELF ASSESSMENT QUESTIONS

LEARNING OBJECTIVE:
• To know the modern concept of marketing highlights satisfaction of
consumer needs and wants whereas the societal concept cares for the well-
being of the consumer as well as that of society.
• To identify the marketing activities of a business firm are affected by a
large number of environmental factors that surrounds the company.
• To comprehend the environmental influences an organization in many
ways, its understanding is of crucial importance.
LEARNING OUTCOME:
• To study the marketing environment across the country is changing rapidly
and business leaders are under increasing pressure to cope with this
dynamic macro environment.

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Notes • To know that Marketing environment states to external factors and forces
that affect the company’s ability to develop and maintain successful
relationship with its target customers.
• To understand the predictability of environment becomes a difficult
exercise.
3.1 INTRODUCTION:
The Business environment surrounds and impacts upon the organization. There
are three key perspectives on the environment, namely the ‘macro-environment,’
the ‘micro-environment’ and the ‘internal environment’. Micro - environment
influences the organization directly. It includes suppliers that deal directly or
indirectly, consumers and customers, and other local stakeholders.
Micro tends to suggest small, but this can be misleading. In this context, micro
describes the relationship between firms and the driving forces that control this
relationship. It is a more local relationship, and the firm may exercise a degree
of influence.
Micro - environment includes all factors that can influence the organization, but
that are out of their direct control. A company does not generally influence any laws
(although it is accepted that they could lobby or be part of a trade organization).
It is continuously changing, and the company needs to be flexible to adapt. There
may be aggressive competition and rivalry in a market. Globalization means that
there is always the threat of substitute products and new entrants.
The wider environment is also ever changing, and the marketer needs to
compensate for changes in culture, politics, economics and technology. Keeping
this in mind the environmental influences need to be studied and you will have
the inputs in all the forces that influence the organization in its quest for effective
marketing.
3.2 MARKETING PLANNING:
Marketing is a process of developing and implementing plans to identify and
satisfy customer needs and wants with the objective of customer satisfaction and
profits making. The main elements of marketing planning are - market research
to identify and anticipate customer needs and wants; and planning of appropriate
marketing mix to meet market requirements/demands.
“Marketing Planning is the process of developing marketing plan incorporating
overall marketing objectives, strategies, and programs of actions designed to
achieve these objectives.”
Marketing Planning involves setting objectives and targets, and communicating
these targets to people responsible to achieve them. It also involves careful
examination of all strategic issues, including the business environment, the
market itself, the corporate mission statement, competitors, and organizational
capabilities.

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3.3 SCANNING BUSINESS: Notes

Environmental scanning refers to possession and utilization of information about

occasions, patterns, trends, and relationships within an organization’s internal
and external environment.
Internal analysis of the environment is the first step of environment scanning.
Organizations should observe the internal organizational environment.
This includes employee interaction with other employees, employee interaction
with management, manager interaction with other managers, and management
interaction with shareholders, access to natural resources, brand awareness,
organizational structure, main staff, operational potential, etc. Also, discussions,
interviews, and surveys can be used to assess the internal environment. Analysis
of internal environment helps in identifying strengths and weaknesses of an
organization.
While in external analysis, three correlated environments should be studied and
analyzed —immediate / industry environment national environment broader
socio-economic environment / macro-environment
Examining the industry environment needs an appraisal of the competitive
structure of the organization’s industry, including the competitive position of a
particular organization and it’s main rivals. Also, an assessment of the nature,
stage, dynamics and history of the industry is essential. It also implies evaluating
the effect of globalization on competition within the industry.
Analyzing the national environment needs an appraisal of whether the
national framework helps in achieving competitive advantage in the globalized
environment.
Analysis of macro-environment includes exploring macro-economic, social,
government, legal, technological and international factors that may influence
the environment. The analysis of organization’s external environment reveals
opportunities and threats for an organization.
3.4 VALUE CHAIN
Michael Porter views the total economic system in an industry as a value creating
system and should be used to identify ways and means to deliver more value to
its customers. Every business is involved in designing (product development),
producing (operations), and marketing, delivering, and supporting its product.
Nine strategically relevant activities go into creating customer value and also
involve costs. Five of these activities are core functions and must be performed
for a successful sale and include: (1) inbound logistics to produce the product
(raw materials, etc.), (2) actual product production (operations), (3) shipping
out finished product (outbound logistics), marketing and sales, and (4) servicing
(service support).

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Notes The remaining four activities are support activities to facilitate the functioning of
the five core functions in the value chain and include: (5) finance, (6) accounts,
(7) information technology, and (8) human resources.
The value chain begins with new product development that creates product
specifications.
Using these specifications, operations convert inbound supplies into finished
products; marketing and sales generate demand by communicating with target
customers and also brings in customer inputs; distribution makes the product
available to customers, and service responds to customers during or after the
sale.

CORE COMPETENCIES:
• List of core competency examples
• Innovation expertise
• Speed and flexibility in the marketplace
• Superior product development skills
• Greater marketplace and customer understanding
• Strong analysis and database skills
• Industry/market knowledge and expertise
• Experts in marketing communications
• Fast or friendly customer service
• Streamlined and efficient processes
• Logistics expertise
• Strategic/entrepreneurial insight
• Skills in the early identification of trends/opportunities
Core competencies are special skills and capabilities of the firm that provides
some competitive advantage in the marketplace. We are primarily interested in
those skills and capabilities that allow the firm/brand to deliver superior customer
value.

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You should note that core competencies are skill sets that reside in the people Notes
and processes within the organization. They are ways that the organization
operates, rather than the physical resources that the firm. You should use the
words “expertise”, “abilities”, “skills”, “know-how”, “processes” and so on.
Probably the best way to understand a core competency is to consider some
examples. Here is a list of some potential core competencies that a firm may
have.
Marketing is a key aspect of a firm’s products and services. The right marketing
strategy allows firms to achieve goals and gain a competitive advantage.
Enterprises worldwide conduct various short-term and long-term analyses to
assess their business environment. Marketing is a creative message to influence
business sales by capturing the interest of your target audience.
Without extensive research and analysis, a marketing campaign cannot be
successful. PESTLE analysis is broadly used by businesses. The analysis focuses
more on external factors, which influence the business’ progress, hence making it
more reliable. As the analysis is done from a macroeconomic perspective, it can
be used for planning and strategizing, helping businesses chart a course for the
future. The Political, Economic, Social, Technological, Legal and Environmental
factors allow firms to get an extensive understanding of the trends.
3.5 SWOT ANALYSIS:
STRENGTHS
Branches
Bank deliver products and services through a variety of channels ranging from
extensive branch network, extension counters, ATM Centre, Internet banking and
Mobile banking. There are 344 branches all over India. Non-performing assets
of the bank is reduced. i.e, amount of bad and doubtful debts reduced. Supreme
customer services. Employees are shareholders hence more commitment from
employees. Technology Implementation Weaknesses
A major part of bank’s branch network is concentrated in southern India. More
than 90% of the total branches are located in Southern India. Any disruption,
disturbance or breakdown in the economy of these areas could adversely affect
the result of bank’s business and operations.
CSB does not have any trademark for the name ‘The Catholic Syrian Bank” along
with the logo and the tag line ‘support all the way’ associated with the Bank.
The Bank may not be able to prohibit persons from using the said trademark to
their advantage and any unfavorable use of such trademark may adversely affect
bank’s goodwill and business. Human resource profile is weak. Cost involved in
adopting technology. Reducing Spreads. CBS is not started yet.

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Notes 3.6 ENVIRONMENT ANALYSIS:

Environment plays a critical role in business, especially in marketing. The
marketing environment is constantly changing and thus presenting new
opportunities and threats. A marketer’s task is to correctly analyse the
environment and design a marketing mix, which will fit the environment. The
ultimate purpose of the environmental analysis is to facilitate the firm’s strategic
response to the environmental changes. The firm can attain its objective with
strategic planning in order to encase on environmental opportunities.
3.7 THE STRUCTURE OF THE MARKETING ENVIRONMENT:
The consumer occupies the core/central position of all business activities and
hence occupies the centre of the marketing environment. The organization
with its resources and having a policy and structure surrounds the consumer
with its particular market offering as do its competitors, suppliers and other
intermediaries. This microenvironment of marketing is again affected by the
macro environment, which consists of the government, technical, political,
social, economic factors. This is graphically represented by Figure 2.1.

Figure: The Marketing Environment

The Micro and Macro Environment
There are two types of environmental forces, which influence an organization’s
marketing activities. Some of these forces are external to the firm and the
organization has little control over them. The other type of forces comes from
within the organization and can be controlled by it. Hence, the marketing
environment can be divided into two major components:

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Notes

Figure: Constituents of Macro Environment

• Macro Environment: consists of demographics and economic conditions,
sociocultural factors, political and legal systems, technological
developments, etc. These constitute the general environment, which affects
the working of all the firms.
• Micro environment: consist of suppliers, consumers, marketing
intermediaries, etc. These are specific to the said business or firm and
affect its working on short term basis.

Figure: Constituents of Micro Environment

3.8 MARKETING ENVIRONMENT:
Environmental scanning helps in assessing the impact the environment could
create on the business. The grounded theory proposed comprises three main
components: the categories (the core category and the subsidiary categories),
the principal relationships among them, and the contextual factors that shape the

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Notes categories and relationships. From an internal perspective, these factors include
corporate history and culture. From an external perspective, these contextual
factors include the overall economic, social, cultural and political conditions that
characterize modern India and shape, at least to a certain extent, the organizations
operating in that reality. The core category identified was that of environmental
scanning, to which a set of subsidiary categories were related.
According to Aguilar, environmental scanning refers to the exposure to and
acquisition of “information about events and relationships in a company outside
environment, the knowledge of which would assist top-management in its task
of charting the company’s future course of action.”
This interrelated set of categories contributes to understanding how contextual
factors - external and internal to the organization, influence the scanning activity,
and also how, perceived environmental change affects strategic change. The task
of explaining variance among companies resides with a few key relationships
among those categories. Now, let us see each environment in detail.

Marketing Environment is complex, dynamic, multi-faceted and has a far-

reaching impact, dividing it into external and internal components enables us to
understand it better.

3.8.1 SOCIAL ENVIRONMENT:

Indian society is multifaceted to an extent perhaps unknown in any other of
the world’s great civilizations. Virtually, no generalization made about Indian
society is valid for all of the nation’s multifarious groups. Comprehending
the complexities of Indian social structure has challenged scholars and other
observers over many decades.
The ethnic and linguistic diversity of Indian civilization is more like the diversity
of an area as variable as Europe than like that of any other single nation-state.
Living within the embrace of the Indian nation are vast numbers of different
regional, social, and economic groups, each with different cultural practices.
Particularly noteworthy are differences between social structures in the north
and the south, especially in the realm of kinship systems.
Throughout the country, religious differences can be significant, especially
between the Hindu majority and the large Muslim minority; and other Indian
groups—Buddhists, Christians, Jains, Jews, Paresis, Sikhs, and practitioners of
tribal religions—all pride themselves on being unlike members of other faiths.
Urban-rural differences can be immense in the Indian Society. Nearly 74 percent
of India’s population dwells in villages, with agriculture providing support for
most of these rural residents. In villages, mud-plastered walls ornamented with
traditional designs, dusty lanes, herds of grazing cattle, and the songs of birds at
sunset provide typical settings for the social lives of most Indians.

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In India’s great cities, however, millions of people live amidst cacophony of Notes
roaring vehicles, surging crowds, jammed apartment buildings, busy commercial
establishments, loudspeakers blaring movie tunes—while breathing the poisons
of industrial and automotive pollution.
3.8.2 CULTURAL ENVIRONMENT:
A society’s culture includes its values, its ethics and the material objects produced
by its people. It is the accumulation of shared meanings and traditions among
members of a society. A culture can be described in terms of its ecology (the
way people adapt to their habitat), its social structure and its ideology (including
people’s moral and aesthetic principles).
Culture refers to the set of values, ideas and attitudes that are accepted by a
homogeneous group of people and transmitted to the next generation. Subculture
refers to the norms and values of subgroups within the larger or national culture.
African American, Hispanics, and Asians represent sizable subcultures. It is
inappropriate to think in terms of stereotypes when marketing to these subcultures.
Afro - Americans represent the largest racial/ethnic subculture in the United
States. While price-conscious, they are motivated by product quality and choice.
India consists of people who are either Aryans or Dravidians to a large extent.
Current research indicates that stereotypes are misleading. Christians are the
subculture in India where as in United States; it is the culture by itself. Asians
are the fastest growing subculture in the United States.
The growth of this subculture is due primarily to immigration. Like Hispanics,
Asians represent a diverse subculture including Chinese, Japanese, Asian-
Indians, and many other nationalities. Two groups of Asians have been identified:
(1) Assimilated
Assimilated Asians are conversant in English and exhibit buying patterns very
much like “typical” American consumers.
(2) Non-assimilated
Non-assimilated Asians cling to their native languages and customs.
Culture is part of the external influences that impact the consumer. That is, culture
represents influences that are imposed on the consumer by other individuals. The
definition of culture offered by Engel is “that complex whole which includes
knowledge, belief, art, morals, custom, and any other capabilities and habits
acquired by man personally as a member of society.” From this definition, the
following observations can be made:
Culture, as a “complex whole,” is a system of interdependent components.
Knowledge and beliefs are important parts.
Culture has several important characteristics:
(1) Culture is comprehensive. This means that all parts must fit together in
some logical fashion. For example, bowing and a strong desire to avoid the
loss of face are unified in their manifestation of the importance of respect.

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Notes (2) Culture is learned rather than being something we are born with.
(3) Culture is manifested within boundaries of acceptable behavior. For
example, in American society, one cannot show up to class naked, but
wearing anything from a suit and tie to shorts and a T-shirt would usually
be acceptable. Failure to behave within the prescribed norms may lead
to sanctions, ranging from being hauled off by the police for indecent
exposure to being laughed at by others for wearing a suit at the beach.
(4) Conscious awareness of cultural standards is limited. A hardcore south
Indian can be easily distinguished when handling a fork and knife in eating
out in north India.
(5) Cultures fall somewhere on a continuum between static and dynamic
depending on how quickly they accept change. For example, Indian culture
has changed a great deal since the 1950s, while the culture of Saudi Arabia
has changed much less.
It should be noted that there is a tendency of outsiders to a culture to overstate the
similarity of members of that culture to each other. In India, there is a great deal
of heterogeneity within our culture; however, people often underestimate the
diversity within other cultures. For example, in Latin America, there are great
differences between people who live in coastal and mountainous areas; there are
also great differences between social classes.
Subculture refers to a culture within a culture. For example, Afro - Americans
are, as indicated in the group name, Americans; however, a special influence of
the Afro
- American community is often also present. For example, although this does
not apply to everyone, Afro - Americans tend to worship in churches that have
predominantly Afro - American membership, and the church is often a significant
part of family life. Different perspectives on the diversity in U.S. culture exist.
The “melting pot” metaphor suggests that immigrants gradually assimilate after
they arrive.
Therefore, in the long run, there will be few differences between ethnic groups
and instead, one mainstream culture that incorporates elements from each will
result. The “salad bowl” metaphor, in contrast, suggests that although ethnic
groups will interact as a whole (through the whole mix of salad) and contains
some elements of the whole (through the dressing), each group will maintain its
own significant traits (each vegetable is different from the others).
The “melting pot” view suggests that one should run integrated promotions
aimed at all groups; the “salad bowl” approach suggests that each group should
be approached separately.
Subculture is often categorized on the basis of demographics. Thus, for
example, there is the “teenage” subculture and the “French- Indian” subculture

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in Pondicherry and “Portuguese- Indian” subculture in Goa. While being part of Notes
the overall culture, these groups often have distinguishing characteristics.
An important consequence is that a person who is part of two subcultures may
experience some conflict. For example, teenage native Indians experience a
conflict between the mainstream teenage culture and the orthodox Indian ways.
Values are often greatly associated with age groups because people within an
age-group have shared experiences. For example, it is believed that people old
enough to have experienced the American Depression are more frugal because
of that experience.
Regional influence, both in the United States and other areas, is significant.
Many food manufacturers offer different product variations for different regions.
Joel Garreau, in his book, ‘The Nine Nations of North America’, proposed nine
distinct regional subcultures that cut across state lines. Although significant
regional differences undoubtedly exist, research has failed to support Garreau’s
specific characterizations. Let us look at some of the subcultures prevailing in
India.
3.8.3 ECONOMIC ENVIRONMENT:
Business fortunes and strategies are influenced by the economic characteristics
and economic policy dimensions. The economic environment includes the
structure and nature of the economy, the stage of development of the economy,
economic resources, the level of income, the distribution of income and assets,
global economic linkages, economic policies etc. A widely used classification of
economies is on the basis of per capital income, i.e., the average annual income
per person.
Accordingly, countries are broadly classified as low-income, high-income
economies and the middle-income economies. Low-income economies are those
economies with very low per capital income. All economies with per capital
$755 or less in 2000 are regarded as low-income economies.
There are 63 low-income economies in 2000. High income economies are
countries with very rich income per capital. Those with a per capital GNP of $
9266 or above in 2000 fall in the category of high-income economies.
There are mainly two categories of high-income economies, namely, industrial
economies and oil exporters. Middle income economies fall in between the
low income and high income economies. The middle-income economies are
subdivided in to lower middle income and upper middle-income economies. In
2000, there are 92 middle income economies (54 lower middle incomes and 38
upper middle incomes. The low income economies are sometimes referred to as
third world (the high income and middle income economies representing the first
and second worlds.). Low income is just an indication of deprivation people in
developing countries. Low income prevents access to basic necessities, not only
better and modern amenities.

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Notes The term recession is depression in an economy which leads to stagnation and
poor incomes. Within the category of low-income economies, for example,
sometimes a special category name that has least developed economies is
identified. Most of the least developed economies suffer from one or more of the
following constraints: a very low GNP per capita, land locked remote insularity,
desertification and exposure to natural disasters.
According to the Human Development Report there are more than 40 least
developed countries in 1999. There are, on the other hand, developing
economies such as the Asian countries. They are sometimes referred to as newly
industrializing economies. Now Peoples Republic of China is regarded as a
newly industrializing economy.
The most comprehensive indicator of the level of economic activity of an
economy is its aggregate output, i.e., the total annual output of finished goods
and services, known as gross national product (GNP), which is defined as the
total market value of all final goods and services produced in an economy during
a given time period (usually a year).
GNP is a monetary measure of total output. It excludes transfer payments (like
buying and selling of bonds and securities, gifts taxes, or welfare payments) and
secondhand sale of goods, as these are a part of current production.
In order to avoid double-counting. GNP excludes the production contribution
of housewives, the efforts of self-help in a productive process by members of
households, or improvement in product quality not reflected in price changes.
Similarly, social cost of environmental pollution is not deducted from total
output. Yet, GNP is till the best measure of nation’s total output.
There are three ways to look at the level of economic activity. viz., the output,
income and expenditure. Depending upon the way we look at them, we call them
gross national product (GNP), gross national income (GNI) and gross national
expenditure (GNE), where;
• GNP – Sum of the market value of all final goods and services in an
economy during a given time period;
• GNI – Sum of the money incomes derived from activities involving current
production in an economy during a given time period; and
• GNE – Sum of all that is spent of currently produced goods and services
by all types of buyers in an economy during a given period.
Thus, national income can be measured by any of the three ways:
(i) As an aggregate of goods and services produced during a year;
(ii) As an aggregate cost of factor services in the economy during a year; or
(iii) As an aggregate of expenditure on consumption, saving and investment
during a year.
The national income data can also be quite helpful for business. In order to
undertake long-term investments and to formulate business policies it is quite

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essential for a dynamic management to do a thorough analysis of changes Notes

occurring in the national income. Since national income reveals, on the one
hand, the structure of the economy and, on the other, the possible directions of
change in the future economic policy of the government, national income data in
the hands of an expert managerial economist can prove a life-line for business.
It is quite vital for a firm, aspiring to capture or retain leadership in business, as
it is perhaps one of the most essential ingredients for any business forecasting
exercise. The national income data can also be successfully used for determining
the product diversification programme and undertaking technological innovations.
National income statistics is, thus, a wealth of information, but its usefulness
depends on keenness to observe and probe as well as patience to analyses.
3.9 BUSINESS CYCLES:
The effect of upswings and downswings in economic activity is felt quite intensely
because of the ever-increasing business activity and the strong inter-relations
between different sectors of an economy and between various economies. The ill
effects of the wide swings in business activity were almost ravaging during the
Great Depression of 1930s. it was also noticed that after depression there was no
‘natural recovery’ of the economic activity.
Artificial measures to be adopted for this purpose needed a scientific understanding
of the swings in the activity. Business cycle or trade cycle refers to the fluctuations
in economic activity occurring regularly in the capitalist societies. In a business
cycle there are wave-like fluctuations in four inter-linked economic variables:
aggregate employment, income, output and price level.
When the values of these economic variables over time are plotted on a graph,
we get a wave-like figure, which is given the name of a ‘cycle’. According to
Keynes, “A trade cycle is composed of periods of good trade characterized by
rising prices and low unemployment percentages, alternating with periods of bad
trade characterized by falling prices and high unemployment percentages”.
Mitchell gives even a more explicit idea of what a business cycle is when he
says, “Business cycles are a type of fluctuations found in the aggregate economic
activity of nations that organize their work mainly in business enterprises. A
cycle consists of expansions, and revivals which merge into the expansion phase
of the next cycle. This sequence of change is recurrent but not periodic…” in
short one can observe that:
(1) Business cycles are the wave-like fluctuations in economic activity as
reflected in the basic economic variables like employment, income, output
and price level.
(2) These fluctuations are cyclical in nature. One must distinguish between
secular trend, random fluctuations, seasonal changes and cyclical
fluctuations. The secular trend represents long run changes in business
activities which occurs slowly and are spread over a number of years.

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Notes Such long-run changes are the results of factors like improvement in production
techniques, change in population, etc., which occur suddenly and are
unpredictable. Effect of these events on the economy is limited to the period of
occurrence of the event, as there is no regularity in their occurrence.
Thus, neither the secular trend nor the random variations in economic activity
can form the part of business cycle. The seasonal changes, which are short-run
oscillations with regularity, can be confused with the cyclical fluctuations. But
the basic difference between the two is that seasonal variations repeat themselves
each year (e.g., demand for heavy woolen clothes, light woolen clothes and
cotton clothes, and so on, depending on the season each year), while the cyclical
fluctuations have a longer life span.
The seasonal fluctuations, therefore, have easier predictability and adjustability
in business than the cyclical fluctuations.
(3) The sequence of changes in business cycle (i.e., recovery, prosperity,
depression and recession) recurs frequently and in a fairly similar pattern.
(4) The rhythm or the periodicity between the cycles need not be similar.
(5) Business cycles are a type of fluctuations found in the aggregate economic
activity and not in any single firm or industry. In fact, it connotes the
cyclical changes in overall economic environment affecting all the business
entities.
Business cycles, the periodic booms and slumps in economic activities, are
generally compared to ‘ebb and flow’. The ups and downs in the economy
are reflected by the fluctuation in aggregate economic magnitudes, including
production, investment, prices, wages, bank credits, etc.
The upward and downward movement in these magnitudes shows different
phases of business cycles. Basically, there are only two phases in cycle, viz.,
prosperity and depression. However, considering the intermediate stages between
prosperity and depression, the various phases of trade cycle may be enumerated
as follows:
1. Expansion of economic activities,
2. Peak of boom or prosperity,
3. Recession, the downtrend,
4. Trough, the bottom of depression, and
5. Recovery and expansion.
In a stagnated economy, depression begins when growth rate turns negative
i.e., total output, employment, prices, bank advances, etc., decline during the
subsequent periods. The span of depression spreads over a period during which
growth rate stays below the secular growth rate or below the zero-growth rate in
a stagnated economy.
Trough is the phase during which the down-trend in the economy slows down
and eventually stops, and the economic activities once again register an upward

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movement with a lapse of time. Trough is the period of most severe strain on the Notes
economy. When the economy registers a continuous and rapid upward trend in
output, employment, etc., it enters the phase of recovery though the growth rate
may still remain below the steady growth rate.
And when the growth rate crosses the line of steady growth rate, the economy
once again enters the phase of expansion and prosperity, if economic fluctuations
are not controlled by the government, business cycles continue to recur.
RECOVERY:
This is the phase of revival of demand for goods and services. The economic
activity as a whole increase slowly, although the general prices start rising. The
upward movement of business activity is slow, production picks up, construction
activity is revived and there is a gradual rise in employment. This is a period
when the industrialists and the businessmen repay the loans taken by them from
the banks earlier and the frozen stocks held by the banks are released.
Stocks of goods remain below the normal with the shopkeepers. Once the
recovery starts, it results in a snowballing process for investment. The result is
that demand orders pour in and the producers get stimulus and encouragement
to produce more. The sellers stop their conservative period in general favoring
expansion in business activity.
The capital equipment is replaced. Banks are liberal in the matter of advances.
The prices recover and tend to reach the normal. The speed, with which the
expansion of business activity takes place in response to a given initial increase
in investment, would depend upon the multiplier effect.
PROSPERITY:
During this phase there is a rapid cumulative movement of prices, employment,
income and production. The prices and general business activity is above the
normal. Total output starts growing at a rapid pace due to higher investment and
employment. Prices of finished products rise faster than the increase in wage-
rate, raw material prices and interest rate.
Consequently, producers stand to gain. Prices of all the commodities do not rise
to the same extent. The sequence of general price rise generally begins with
increase in security prices, which then passes on to raw material prices, wholesale
prices, wages of unskilled labor, retail prices and finally the interest rates.
RECESSION:
When the business cycle takes a downward turn from the state of prosperity,
the state of recession is said to have set in. During the phase of prosperity,
production increases with every increase in commodity prices. As more and
more of unemployed labor, capital and raw material are employed, interest rate,
wages and other costs rise with increasing rapidity.
Simultaneously, the banks suddenly discover that they have expanded their
deposits a little too far. The ratio of cash reserves to total deposits falls. The banks

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Notes become reluctant to advance loans in the interest of their safety and statutory
requirements. In order to meet their obligations, the sellers would, therefore,
have to unload their stocks in the market.
Due to unloading of stocks by many firms, the prices start declining. Profit margins
decline further because costs start overtaking prices. Business psychology
becomes depressed and the boom bursts. There is a struggle for solvency among
the businessmen. Some firms close down while others reduce production, leading
to reduction in investment, employment, income and demand.
This process is cumulative. This phase of business cycle is characterized by
fall in prices, commercial panic, restriction and calling back loans by banks, a
sharp increase in interest rate and fall in investment. Soon the production falls,
unemployment increases and inventory stocks get accumulated.
There is a collapse of confidence. If not controlled in the beginning by timely
monetary and fiscal measures by government which can sustain investment at
a high level, recession may give way to even a more grave situation, called
depression.
DEPRESSION:
If unchecked, depression is a natural consequence of the recessionary crisis.
Gradually, the process of falling prices, demand and employment gather
momentum. Decrease in price follows the same sequence as does the price
increase in case of the state of boom.
In this phase, general demand for goods and services falls faster than the
production of goods, though this is more in case of capital goods than consumer
goods. Producers find selling prices falling faster than their costs. Producers
suffer losses because by the time the goods are ready for sale the prices are found
to have fallen further, with the result that producers are not able to recover their
full cost.
Businessmen get panicky, and start releasing their stocks, which hastens the
decline in prices. The phenomenon of over-production appears and workers in
large numbers are thrown out of work.
There are accumulated reserves with banks. Demand for credit is at its lowest,
resulting in idle funds with the banks. In general, the bottom of depression is
reached when liquidation of accumulated stocks is completed. Depression is,
thus, characterized by low prices, idle funds with banks, mass unemployment
and slack trade.
SUMMARY
• There are three key perspectives on the environment, namely the ‘macro-
environment,’ the ‘micro-environment’ and the ‘internal environment’.
• Environmental scanning helps in assessing the impact the environment
could create on the business

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• Culture is part of the external influences that impact the consumer. That Notes
is, culture represents influences that are imposed on the consumer by other
individuals
• Business fortunes and strategies are influenced by the economic
characteristics and economic policy dimensions. The economic
environment includes the structure and nature of the economy, the stage
of development of the economy, economic resources, the level of income,
the distribution of income and assets, global economic linkages, economic
policies etc.,
• Business cycles are the wave-like fluctuations in economic activity as
reflected in the basic economic variables like employment, income, output
and price level
• There are only two phases in a business cycle, viz., prosperity and
depression.
CASE STUDY :
GOOGLE: A CASE STUDY OF SUCCESSFUL MARKET
ENVIRONMENT
• Operating HR is a field of science at Google. They are constantly
experimenting and innovating to find the best way to satisfy employees
and to help them work effectively.
• Google made an important acquisition to buy You tube Youtube has
grown to become the world’s largest online video sharing service
• Every company wants to hire talented people to work for them realizing
this impact, Google created a distinctive corporate culture when the
company attracted people from prestigious colleges around the world.
• The role of flow and building capacity for innovation flow is the
movement of information or equipment between departments, office
groups, or organizations flow plays a role in getting stakeholders
involved in working creatively and innovatively Definitely, Google
gets it done very well.
• Most highlights of this study show Google’s proficiency in handling
their internal marketing environment. In addition:
• Google acquired Android, made it open source, created OHA (Open
Handset Alliance). So, this made android to successfully rival against
iOS and change the mobile phone market trends.
• Most of Google’s products are free for users further making business
miserable for iOS.

KEYWORDS:
Micro Environment: Micro environment refers to the environment, which is
closely linked to the organization, and directly affects organizational activities.

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Notes Macro Environment: Macro environment involves a set of environmental

factors that is beyond the control of an organization.
Suppliers: It provides raw material to produce goods and services.
Marketing Intermediaries: It helps organizations in establishing a link with
customers. They help in promoting, selling, and distributing products.
Customers: Customers buy the product of the organization for final consumption.
The main goal of an organization is customer satisfaction.
Competitors: It helps an organization to differentiate its product to maintain
position in the market.
EXERCISE:
POINTS TO PONDER:
Answer the following questions given below:

1.Political Environment of marketing includes---------------------

2.SWOT Analysis is a tool of--------------------

3.The elements of demographic environment is /are---------------

4.The demographic environment component of the -------------------consist of

people that form a market.

5.The marketing environment can be defined as a combination of both----------

SELF ASSESSMENT QUESTIONS:
SHORT ANSWER QUESTIONS:
1.What is Global Market?
2.List out the factors influencing global marketing.
3.What is market environment?
4.Define Micro Environment.
5.What is meant by SWOT Analysis?
6.What is Value chain?
LONG ANSWER QUESTIONS:
1.Explain the factors influencing marketing Environment.
2.Explain the prospectus and challenges of global environment.
3.Describe the concept of SWOT analysis of a company in detail.
4.Write a short note on Macro environment factor would help the organization.
5.Analyze the concept of value chain in detail.

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Notes
LESSON 4 – MARKETING INTERFACE
WITH OTHER FUNCTIONAL AREAS
CONTENT:
LEARNING OBJECTIVE
LEARNING OUTCOME
4.1 MARKETING INTERFACE WITH OTHER FUNCTIONAL AREAS
4.2. RESEARCH AND DEVELOPMENT
4.3 PRODUCTION/OPERATIONS/LOGISTICS
4.4 HUMAN RESOURCE MANAGEMENT
4.5 IT (WEBSITES, INTRANETS AND EXTRANETS)
4.6 FINANCE DEPARTMENT
4.7 THE MARKETING
SUMMARY
CASE STUDY
KEYWORDS
EXERCISE-POINTS TO PONDER
SELF ASSESSMENT QUESTIONS

LEARNING OBJECTIVE:
• The objective of how marketing connects with and permeates other
functional areas within the organization.
• To find out how marketing can interact with service R&D, production,
logistics, operations, human resource management, IT and customer
service.
• To know in response to increased competitive pressure, shortening product
life cycle, and heightened customer demand are increasing their ability to
adapt and build competitive advantage.
LEARNING OUTCOME:
• It results in strategy will create a synergy within the company which will
contribute to business success
• To understand that marketing environment have the responsibility of
marketing the product or service with the functional areas across the nation.

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Notes • To ensure that the values and opportunities of an economy are taken
into consideration with a view to achieving an integrated approach to
development.
4.1 MARKETING INTERFACE WITH OTHER FUNCTIONAL
AREAS:
Marketing’s Relationship with other Functions within an organization the
marketing function within any organization does not exist in isolation.
Therefore, it’s important to see how marketing connects with and permeates
other functions within the organization…. marketing interacts with research
and development, production/operations/logistics, human resources, IT and
customer service.
4.2 RESEARCH DEVELOPMENT:
Research and development is the engine within an organization which generates
new ideas, innovations and creative new products and services. For example, cell
phone/mobile phone manufacturers are in an industry that is ever changing and
developing, and in order to survive manufacturers need to continually research
and develop new software and hardware to compete in a very busy marketplace.
Think about cell phones that were around three or four years ago which are
now completely obsolete. The research and development process delivers new
products and is continually innovating. Innovative products and services usually
result from a conscious and purposeful search for innovation opportunities which
are found only within a few situations.
Peter Drucker (1999) Research and development should be driven by the
marketing concept. The needs of consumers or potential consumers should be
central to any new research and development in order to deliver products that
satisfy customer needs (or service of course).
The practical research and development is undertaken in central research
facilities belonging to companies, universities and sometimes to countries.
Marketers would liaise with researchers and engineers in order to make sure that
customer needs are represented. Manufacturing processes themselves could also
be researched and developed based upon some aspects of the marketing mix.
For example, logistics (place/distribution/channel) could be researched in order
to deliver products more efficiently and effectively to customers.
4.3 Production/Operations/Logistics: As with research and development, the
operations, production and logistics functions within business need to work
in cooperation with the marketing department. Operations include many other
activities such as warehousing, packaging and distribution.
To an extent, operations also include production and manufacturing, as well as
logistics. Production is where goods and services are generated and made. For
example, an aircraft is manufactured in a factory which is in effect how it is

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produced i.e. production. Logistics is concerned with getting the product from Notes
production or warehousing, to retail or the consumer in the most effective and
efficient way.
Today logistics would include warehousing, trains, planes and lorries as
well as technology used for real-time tracking. Obviously, marketers need to
sell products and services that are currently in stock or can be made within a
reasonable time limit. An unworkable scenario for a business is where marketers
are attempting to increase sales of a product whereby the product cannot be
supplied. Perhaps there is a warehouse full of other products that our marketing
campaign is ignoring.

Manufacturing people are responsible for the smooth running of the factory to
produce the right products in the right quantities at the right time for the right cost.

4.4 Human Resource Management (HRM): is the function within your

organization which overlooks recruitment and selection, training, and the
professional development of employees. Other related functional responsibilities
include well-being, employee motivation, health and safety, performance
management, and of course the function holds knowledge regarding the legal
aspects of human resources.
So, when you become a marketing manager you would use the HR department
to help you recruit a marketing assistant for example. They would help you with
scoping out the job, a person profile, a job description, and advertising the job.
HR would help you to score and assess application forms, and will organise the
interviews. They may offer to assist at interview and will support you as you
make your job offer.
You may also use HR to organise an induction for your new employee. Of
course, there is the other side of the coin, where HR sometimes has to get tough
with underperforming employees. These are the operational roles of HR. Your
human resources Department also have a strategic role., human resources see
people as a valuable asset to the organization. They assist with a global approach
to managing people and help to develop a workplace culture and environment
which focuses on mission and values.
They also have an important communications role, and this is one aspect of
their function which is most closely related to marketing. For example, the HR
department may run a staff development programme which needs a newsletter or
a presence on your intranet. This is part of your internal marketing effort.
4.5.IT (Websites, Intranets and Extranets): As marketers we are concerned
with how technology is used to treat information i.e. how we get information,
how we process it, how we store the information, and then how we disseminate
it again by voice, image or graphics. Obviously, this is a huge field but for our
part we need to recognise the importance of websites, intranets and extranets to
the marketer.

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Notes A website is an electronic object which is placed onto the Internet. Often websites
are used by businesses for a number of reasons such as to provide information
to customers. So, customers can interact with the product, customers can buy
a product, more importantly customers begin to build a long-term relationship
with the marketing company.
Information Technology underpins and supports the basis of Customer
Relationship Management (CRM), an intranet is an internal website. An intranet
is an IT supported process which supplies up-to-date information to employees
of the business and other key stakeholders. For example, European train
operators use an intranet to give up-to-date information about trains to people
on the ground supporting customers. An extranet is an internal website which is
extended outside the organization, but it is not a public website.
An extranet takes one stage further and provides information directly to
customers/distributors/clients. Customers are able to check availability of stock
and could check purchase prices for a particular product. For example, a car
supermarket could check availability of cars from a wholesaler.
Customer service provision Customer service provision is very much integrated
into marketing. Customer service takes the needs of the customer as the central
driver. Customer service function revolves around a series of activities which
are designed to facilitate the exchange process by making sure that customers
are satisfied.
Today customer service provision can be located in a central office or actually in
the field where the product is consumed. For example, you may call a software
manufacturer for some advice and assistance. You may have a billing enquiry.
You might even wish to cancel a contract or make changes to it.
The customer service provision might be automated, it could be done solely
online, or you might speak to a real person especially if you have a complex
or technical need. Customer service is supported by IT to make the process of
customer support more efficient and effective, and to capture and process data
on particular activities.
So, the marketer needs to make sure that he or she is working with the customer
service provision since it is a vital customer interface. The customer service
provision may also provide speedy and timely information about new or
developing customer needs.
For example, if you have a promotion which has just been launched you can use
the customer service functions to help you check for early signs of success.
4.6 Finance Department: The marketing department will need to work closely
with the finance department to ensure that: There is an adequate budget to meet
the needs for research, promotion and distribution. The finance department
has a whole organisation brief to ensure that all the business operates within
its financial capabilities. They will want all departments to work within their

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allocated budgets. Like all departments, marketing may wish to overspend Notes
if profitable marketing opportunities emerge over the year. The marketing
department is likely to concentrate on sales volume and building market share,
while the finance department may be more focused on cash flow, covering costs
and paying back investment as quickly as possible.
4.7 The Marketing: Finance approach has been helpful to understand better
the impact of the crisis on firms and at the same time provide tools for firms to
respond to the crisis so that firms can turn it (at macro level) into an opportunity
for the firm to create value.

SUMMARY
• Research and development are the engine within an organization which
generates new ideas, innovations and creative new products and services.
• Peter Drucker (1999) Research and development should be driven by
the marketing concept. The needs of consumers or potential consumers
should be central to any new research and development in order to deliver
products that satisfy customer needs
• Human Resource Management (HRM) is the function within your
organization which overlooks recruitment and selection, training, and the
professional development of employees.
• IT (websites, intranets and extranets) As marketers we are concerned with
how technology is used to treat information

CASE STUDY :
In 2016, Alibaba Group Holding Limited (Alibaba) founder Jack Ma
Yun (Jack Ma) unveiled the group’s ‘New Retail’ concept to take the retail
experience to a whole new level. Ever since, the company had been pouring
billions into implementing this strategy as it believed that the future of retail
would not be a question of just online vs. offline. Daniel Zhang (Zhang), CEO
of Alibaba, explained how the company adopted its New Retail strategy to
integrate online and offline retail, expand into digital content, and support its
globalization push, as it sought to expand its retail empire both within and
outside China.
Through New Retail, Alibaba was also hoping to help bricks-and-mortar shops
digitize their operations to offer online services, and to use the data thus generated
from such businesses to further improve and tailor its operations.
Based in Hangzhou, China, Alibaba was founded in 1999 by Jack Ma and Peng
Lei. Alibaba owned and operated a diverse array of businesses around the world
in numerous sectors, specializing in e-commerce, retail, the Internet, A Jack Ma
explained New Retail as the concept of moving not just Alibaba, but all retail
beyond the tired delineations of digital vs. physical. “The big prize for Alibaba

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Notes in New Retail is modernizing the ‘other 80%’ of retail sales not yet online. This
means redefining the entire process of conventional retail workflow. We think
this business will ultimately be as high a margin, or better than the existing
marketplace model,” said Aaron Kessler, a Raymond James analyst. Analysts
believed that the idea was developed mainly to utilize the ‘infrastructure’
(including platform, instant e-payment, logistics, and most importantly, the data)
which Alibaba had built over the years to enable, penetrate, and reform what
was left out from the e-commerce world, with the aim of providing a shopping
experience containing the best of both online and offline. Industry observers
opined that New Retail was different from an omni-channel because while the
latter was generally provided by brands/retailers, New Retail would be provided
by a platform (of Alibaba) functioning as business infrastructure serving not
only the consumer, but also the merchants and brands.
Artificial Intelligence (AI), and technology. Alibaba’s initial public offering in
September 2014, was the largest IPO ever on US markets, raising US$25 billion.
The company’s vision, outlined on its website, “from the outset, the company’s
founders shared a belief that the Internet would level the playing field by enabling
small enterprises to leverage innovation and technology to grow and compete
more effectively in the domestic and global economies,” clearly indicated the
power and potential of the Internet as a medium for trade and business.
KEYWORDS:
Research and development: Research and development is the engine within an
organization which generates new ideas, innovations and creative new products
and services.
Operations, production and logistics functions: Operations include many
other activities such as warehousing, packaging and distribution.
The marketing department: Marketing is responsible for communicating with
customers about products. Production is where goods and services are generated
and made:
The interface refers: “that area where innovation is brought to market.”
EXERCISE:
POINTS TO PONDER:
Answer the following questions given below:

1.------------------ is the collection and interpretation of information about forces, events,

and relationships that may affect the organization.

2.The ________ concept holds that consumers and businesses, if left alone, will
ordinarily not buy enough of the organization’s products.

3.If a firm is practicing ____________________, the firm is training and effectively

motivating its customer-contact employees and all of the supporting service people to
work as a team to provide customer satisfaction.

4. The term ------------- is used to for industries that create and provide services.

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Notes
SELF ASSESSMENT QUESTIONS:
SHORT ANSWER QUESTIONS:
1.What is marketing interface?
2.How marketing has interconnected with other functional areas.
3.State any two objectives of marketing environment.
LONG ANSWER QUESTIONS:
1.Explain different types of risks for the organization interconnected with other
departments.
2.Discuss the pros and cons of all the department function inside the organization.

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Notes
LESSON 5 – INTERFACE OF FINANCE
WITH OTHER BUSINESS FUNCTIONS
CONTENT:
LEARNING OBJECTIVE
LEARNING OUTCOME
5.1 MARKETING AND FINANCE INTERFACE
5.2 MARKETING AND PRODUCTION
5.3 MARKETING AND RESEARCH & DEVELOPMENT
SUMMARY
CASE STUDY
KEY WORDS
EXERCISE-POINTS TO PONDER
SELF ASSESSMENT QUESTIONS

LEARNING OBJECTIVE
• To know the marketing -finance interface has expanded its boundary and
solidified power based on a relativistic perspective.
• To identify where marketing is concerned with managing the process that
converts inputs into output, that is essential part to the marketing.
• To understand that once the new products or services are introduced,
marketing has the responsibility to inform the HRM department punctually
and sufficiently.
LEARNING OUTCOME:
• To ensure that marketing information provides input into to marketing
decision including product improvements, price and packaging decisions.
• To describe marketing is interconnected with other functional business areas
in many major organizations.
• The outcome of marketing results in cost and benefits of marketing channels.
5.1 MARKETING AND FINANCE INTERFACE:
The Marketing Manager takes many decisions which have a significant impact on
the profitability of the firm. For example, he should have a clear understanding of
the impact of the credit extended to the customers on the profits of the company.

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Otherwise in his eagerness to meet the sales targets he is likely to extend liberal Notes
terms of credit which may put the profit plans out of gear. Similarly, he should
weigh the benefits of keeping a large inventory of finished goods in anticipation
of sales against the costs of maintaining that inventory. Other key decisions of
the Marketing Manager which have financial implications are pricing, product,
promotion and advertisement, choice of product mix and distribution policy.
There are many decisions, which the Marketing Manager takes which have a
significant location, etc. In all these matters assessment of financial implications
is inescapable impact on the profitability of the firm. For example, he should
have a clear understanding of the impact the credit extended to the customers is
going to have on the profits of the company. Otherwise in his eagerness to meet
the sales targets he is liable to extend liberal terms of credit, which is likely to put
the profit plans out of gear. Similarly, he should weigh the benefits of keeping
a large inventory of finished goods in anticipation of sales against the costs of
maintaining that inventory. Other key decisions of the Marketing Manager,
which have financial implications, are:
• Pricing
• Product promotion and advertisement
• Choice of product mix
• Distribution policy.
IDENTIFICATION AND DESCRIPTION OF MARKETING ACTIVITES:
Before identifying and describing the interdependencies between marketing and
other business functions, we have to establish the marketing activities developed
and performed by the marketing function. Marketing activities are related to
the stages of the marketing plan. Because marketing plans are developed at
strategic and tactical level, marketing activities should be identified as strategic
and tactical ones. This type of classification is relevant but only during the time
period when these activities are performed, how often they are developed, staff
and information resources used to deal with development and implementation of
these activities.
The main steps of the marketing plan and the related marketing activities:
The main steps of the Marketing activities Description of
marketing plan involved marketing activities
Marketing Audit Marketing Planning; Obtaining, interpreting
(internal and external) Market Research and presenting data
about the business
environment, the market,
consumers, competition
and internal marketing
results.

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Notes Identifying marketing Marketing Planning Identifying key

opportunities opportunities,
threats, strengths and
weaknesses to develop a
competitive advantage.
Setting marketing Marketing Planning Defining marketing
objectives and financial objectives
(sales, market share,
profit, etc.).
Defining marketing Marketing Planning Presenting the
strategies marketing approach to
achieve objectives
Marketing program Marketing Planning; Presentation of the
actions Product, portfolio and detailed marketing
brand management; program that has to be
New product undertaken to achieve
development process the objectives.
management; Price and
Distribution channels
management; Marketing
communications.
Budgeting the marketing Marketing planning Allocating financial
plan resources to marketing
activities to achieve
desired results.
Marketing activities Marketing Planning; Describing how the
control Controlling, monitoring marketing control
and taking corrective activities will be
actions performed.
INTERFACE BETWEEN MARKETING AND FINANCE:
All marketing plans should include a major financial dimension. Evolution of
cost and profit (for the brand, product, product line, etc.) expressed in monetary
units or percentage of sales, budgets needed to implement strategies and
marketing plans are all necessary components of the marketing plan. Budgeting
and profitability analysis are also key aspects of marketing planning and control,
which implies financial tools.
Many of the marketing decisions are and should be viewed as investment
decisions. Whenever a new product decision is made, financial instruments and
criteria should be used to evaluate the investment. This type of evaluation of
marketing decisions should not be limited to new products and should include
decisions on advertising, promotion, price and distribution (virtually all elements
of the marketing mix).

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The link between marketing and finance is not limited to the use of financial Notes
input when developing marketing strategies and plans. The development of any
financial plan involves capital requirements, cash flow analysis, credit and other
financial policies that require marketing inputs. Such inputs, especially those
related to sales and revenues forecasts that are listed in different marketing plans
are essential for any financial planning.
Moreover, a marketing approach to financial decisions offers a new perspective
usually lacking in the specialized financial literature. Consider, for example:
The utilization of the annual financial reports and other reporting documents as
elements in a communication campaign addressed to the financial community;
The evaluation of responses related to changes in price, payment methods,
discounts and credit;The application of financial performance indicators to
relevant market segments and/or certain products;The impact of different
marketing activities (example – launching new products) on investors’
expectations and, consequently, on the market price of the shares.
All these links and interrelationships between the activities performed by
marketing and finance are presented in table 2:
Links in interrelations between Marketing and Finance
The main steps of the Marketing activities Description of
marketing plan involved marketing activities
Marketing Audit Marketing Planning; Obtaining, interpreting
(internal and external) Market Research and presenting data
about the business
environment, the
market, consumers,
competition and internal
marketing results.
Identifying marketing Marketing Planning Identifying key
opportunities opportunities,
threats, strengths and
weaknesses to develop a
competitive advantage.
Setting marketing Marketing Planning Defining marketing and
objectives financial
objectives (sales, market
share, profit, etc.).

Defining marketing Marketing Planning Presenting the

strategies marketing approach to
achieve objectives

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Notes Marketing program Marketing Planning; Presentation of the

actions Product, portfolio and detailed marketing
brand management; program that has to be
New product undertaken to achieve
development process the objectives
management; Price and
Distribution channels
management; Marketing
communications.
Budgeting the marketing Marketing planning Allocating financial
plan resources to marketing
activities to achieve
desired results.
Marketing activities Marketing Planning; Describing how the
control Controlling, monitoring marketing control
and taking corrective activities will be
actions performed.

5.2 MARKETING AND PRODUCTION:

The link between marketing and production is a dual one. On one hand,
production capabilities determine the number and type of products which can
be marketed, and, on the other hand, a more accurate prediction of sales forecast
for each product and product line is essential for efficient production operations.
Taking into account the fluctuations and uncertainties in the demand of most
products and the difficulties they create in achieving efficient production
operations, management can undertake two major strategies: a) change the
production capacity by changes in current resources (overtime, 2nd and/or 3rd
shift, etc.), improved inventory management, subcontracting, etc.; b) influence
the nature, level or timing of demand in agreement with the production capacity
constraints. This latter strategy can be obtained by using specific marketing
strategies such as advertising, sales promotion, pricing, product (by adding or
removing products from the portfolio). Implementing such strategies requires
detailed information about the market responses to such strategic moves.
The interdependency between marketing and production is most evident in
the development of new products. The relationship between the design of new
products and production facilities is based on extensive market research-based
estimates of the demand for the new products, time and space distribution.
Moreover, since a new product can cannibalize an existing product (or products),
estimates of the impact of this phenomenon must be made to adjust the production
schedule for existing products.

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To understand the nature of interrelations between marketing and production it Notes

is necessary to understand the basic conflicts between these two functions of an
organization.

Production function strives for efficient production cycles (long runs, relatively few
and simple designs and reasonable quality criteria).

Marketing, on the other hand, is looking for short production cycles, many
models and high standards of quality.
The compromise between these potential sources of conflict between production
and marketing involves considerable financial efforts from the company. It
is thus desirable that the specific solution should be based explicitly on the
analysis of costs and benefits involved. Both functions should attempt to answer
questions like “the investment in a very rigorous system of quality is a profitable
one or will the company better invest in some other activities?”. Clearly, both
marketing and production need to co-exist so that a firm can do the right thing
(by the marketing function) and the thing right (by the production function).
Connections and interrelations between marketing and production activities are
presented in table 3.
Links and interrelations between Marketing and Production
Marketing Activities Type of relation Production Activities
Market evolution Efficiency of production
forecast (market activities; Production
research) Sales capacity planning.
evolution forecast
(market research)
Developing new Production capacity
products, Product planning, Production
portfolio management capabilities identification
Marketing and Procurement
Procurement function has become, in periods of shortage of raw materials, one
of the most important functions of an industrial organization. Many companies
were forced to modify their products to cope with the lack of raw materials or
replace them with more easily obtained or cheaper.
Marketing research regarding the degree of consumer acceptance of these
products with modified characteristics is an important input for efficient planning
of procurement activities. On the other hand, procurement research aimed at
identification and evaluation of new materials and sources of supply can benefit,
in many cases, from closer links with marketing research, which is generally at
a more advanced level of development.

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Notes Marketing planning requires input from the procurement plans to introduce new
materials or anticipated changes in production activities due to changes in supply
of various raw materials. Ties and the type of interrelations between marketing
and procurement activities are presented in table 4:
Links and interrelations between Marketing and Procurement
Marketing Activities Type of relation Procurement Activities
Market research Procurement of
regarding the new materials and
degree of acceptance of equipments
new materials

Marketing research Identifying new

regarding the suppliers of raw
identification of new materials
suppliers of raw
materials
5.3 MARKETING AND RESEARCH & DEVELOPMENT:
The Research & Development (R&D) effort of any organization must be
linked very closely to the marketing and product development efforts of the
organization. Ignoring the links between R & D and marketing has resulted in
many technology-oriented companies developing products that are the engineer’s
dream and the marketer’s nightmare. To avoid an R&D effort which is detached
from relevant marketing input, it is essential to understand the interrelationship
between the two.
The major link between R&D and marketing revolve around the new product
development efforts of the organization. Each of the new product development
stages, from idea generation to the final product development stage, requires
close interaction between marketing and R&D. Even the product design stage,
which traditionally has been viewed as the sole domain of R&D, can benefit
from marketing research inputs on the product features most desired by various
target market segments and the respondent’s tradeoffs among various product
features.
The marketing – R&D interface should recognize the potential contribution
of each. Marketing research can rarely find innovative new product ideas. It
can, however, provide insight consumers’ unsolved problems and needs, assess
their reactions to product concepts, and help the engineers in the generation and
evaluation of new product ideas.
Realistic expectations and an organizational climate which encourages the
interface between the two functions and stimulates innovation are essential
ingredients for successful new product development efforts. Ties and interrelations
between marketing and research & development are presented in table 5:

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Links and interrelations between Marketing and Research & Development Notes
Marketing Activities Type of relation Research & Development
Activities
Market research regarding Developing new products
market acceptance of new
products, identify unmet or
latent needs

CONCLUSIONS
Marketing Perspective vs. Other Business Functions’ Perspectives
Function Function Perspective Marketing Perspective
Finance Rational arguments Marketing decisions
based on investment based on intuitive and
decisions; Fix, stable rational arguments;
budgets; Prices must Flexible and adaptable
cover costs. budgets; Prices that allow
market development.
Production Long period of time for Short period of time
design; Few products for design; Customized
and designs; Standard components and
components; Long products; Short time for
production time and production preparation;
Large production series; Small production
Rare product changes; series & product range;
Standard production Frequent changes of
orders; Acceptable level models and products;
of control. Innovative product
design; High level of
quality.
Research & Fundamental research; Applied research;
Development Intrinsic Quality; Perceived quality;
Functional Attributes. Attributes generating
benefits & emotions.
It would also offer new concepts and methods which marketing could borrow
from and adapt. Greater interface between marketing and other business
disciplines would not only enrich this discipline, but could also lead to greater
relevance of the results of research in marketing.
The dependency of many marketing decisions on considerations involving other
business functions, although widely recognized by marketing practitioners, has
been largely ignored in the academic literature and research and has been left
to the business policy literature. Yet, effective and efficient marketing decisions

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Notes require the incorporation of the considerations of other, non-marketing, business

functions in the design and implementation of marketing research, marketing
models, marketing planning and control systems, management information
systems, marketing strategies and marketing organization.
Taking into account these differences in the perspective of marketing and other
functions of an organization, it is important to systematically evaluate the
possible outcomes of such interactions. Basing marketing decisions and activities
not only on marketing considerations but also on relevant considerations from
other business functions while keeping up to date with developments in these
areas could provide new guidelines to many of the basic and applied marketing
research efforts.

SUMMARY

1. How marketing is not a soul responsible department for business function.

2. Marketing is well integrated with other functional areas like HRM, CRM,
production, logistics & financial management and too other functional
business areas.
3. How marketing is interconnected with other business functional areas.

CASE STUDY :
In June 1999, the FMCG major Hindustan Lever Ltd. (HLL)1 announced
that it would offer 50% extra volume on its Fair & Lovely (F&L) fairness
cream at the same price to the consumers. This we were seen by industry
analysts as a combative initiative to prevent Cavin Kare’s Fair ever from
gaining popularity in retail markets. HLL’s scheme led to increased sales of
F&L and encouraged consumers to stay with F&L and not shift to the rival
brand. In December 1999, Godrej Soaps4 created a new product category -
fairness soaps - by launching its Fair Glow Fairness Soap.

The product was successful and reported sales of more than Rs.700 million in the
first year of its launch. Godrej extended the brand to fairness cream by launching
fair glow fairness cream in July 2000. By 2001, Cavin Kare’s Fair ever fairness
cream, with the USP of ‘a fairness cream with saffron’ acquired a 15% share,
and F&L’s share fell from 93% (in 1998) to 76%. Within a year of its launch,
Godrej’s Fair Glow cream became the third largest fairness cream brand, with a
4% share in the Rs.6 billion fairness cream market in India.
KEY WORDS:
Accountants: It helps to understand the basic inventory management and
capacity utilization.

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Financial Managers take capital budgeting decision, based on production Notes

requirements.
Personnel department is interested in understanding job analysis, job
descriptions, job specification and job evaluation.
EXERCISE:
POINTS TO PONDER:
Answer the following Questions given below:

1.The ___ concept of marketing is one of the oldest marketing concepts.

2. Collecting marketing information is a marketing function that’s related to ___.

3. Marketing is a ‐‐‐‐‐‐‐‐‐‐‐‐‐ function of transferring goods from

producers to consumers.

4.Marketing helps firms to increase their profits by

SELF ASSESSMENT QUESTIONS:
SHORT ANSWER QUESTIONS:
1.What is marketing?
2.How marketing can help finance to progress.
3.Define marketing with procurement.
4.List out marketing interrelation with human resource.
LONG ANSWER QUESTIONS:
1.Discuss about interconnection between marketing with finance.
2.Explain the link and interrelate marketing with research & development.

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Notes
LESSON 6 – MARKETING INTERFACE
WITH HUMAN RELATION
CONTENT:
LEARNING OBJECTIVE
LEARNING OUTOME
6.1MARKETING & HRM
6.2 WAYS TO STREAMLINE HUMAN RESOURCE AND MARKETING
COOPERATION
6.3 WHAT MARKETING CAN LEARN FROM HRM
SUMMARY
CASE STUDY
EXERCISE
KEYWORDS
SELF ASSESSMENT QUESTIONS

LEARNING OBJECTIVE:
• To identify the organization’s demand for human resources with particular
skills and abilities.
• To focus on talent interested in the company is critical to long term success.
• To gain information from human resource department should be concerned
with the new skills and experience needed for the new workers at present.
LEARNING OUTCOME:
• The marketing staff must take responsibility not only for new sales features
but also for correctly identifying customer needs and preferences.
• To market various goods and services, human resource is most important for
business success is to effectively coordinating production and marketing.
• To ensure that marketers utilize all factors of production into perfect resource
to their customers goods quickly.

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THE RELATIONSHIP BETWEEN MARKETING & HUMAN Notes

RESOURCES
6.1 MARKETING & HRM
The Personnel department of the organization is concerned with hiring, training
and management of the appropriate marketing personnel. Although aided in this
function by marketing management, the primary responsibility for the marketing
personnel process is, in many companies, in the hands of the personnel department
[24]. Marketing should callaborate with the personnel department in developing
job descriptions, screening candidates and designing training programs and
incentive systems.
Furthermore, marketing research, as a specialized marketing activity, could
provide valuable help in the design and implementation of a number of personnel
research projects. For example, a discriminant analysis can be conducted on the
characteristics of the ’successful’ vs. ’unsuccessful’ marketing
Marketing and human resources aren’t as separate as you might think. A
company needs to attract profitable customers to achieve decent sales numbers,
but getting top talent interested in your company is also critical to long-term
success. Whenever you’re trying to convince people to help you, whether you’re
after their dollars or their working hours, you need to position and market your
proposition so it looks attractive.
The Outcomes of a Human Resources and Marketing Collaboration
To be confident in the value delivered by the company, marketing teams should
be confident in those behind building this value. This is where HR and Marketing
departments can bridge each other’s gaps.
As a result, HR departments will be able to build their brand culture by developing
training programs, new employee retention strategies and analyzing workforce
needs in more detail. Marketing departments will boost HR’s ability to attract
those employees who believe in ongoing company advancements and constant
growth.
Potential employees now pay thorough attention to how the company is ranked
in the marketplace, particularly how it’s perceived by the competitors and other
market players. Therefore, it is one of the major tasks for marketing departments
to work on building a reputable status, market recognition and branding of the
company.
Marketing teams are responsible for understanding customer needs and creating
communications that will focus on meeting these needs. Today, HRs should use
this knowledge to help employees meet the expectations given by marketing.
At the same time, marketing departments will also use this collaboration to their
advantage. HR will help marketing build internal communications in a more
effective way and educate others about the company’s capabilities.

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Notes
As HRs is responsible for hiring employees, they are the most aware of what skills
and knowledge those employees have.

Marketing, on the other hand, operates not only with business models but also
knows the real level of value the company can deliver. They can be more specific
in their communications and thus build more trust to their brands.
Speaking of benefits for the company in general, when two of the most influential
departments work more effectively, it results in increased conversion rate, higher
revenue and better service delivered to the customers. It once again proves that
companies should implement business models where HR and Marketing work
together on meeting key business goals.
Links and interrelations between Marketing and Personnel
Improving HR and Marketing collaboration will help the company build a more
reputable brand than has been possible before. Even though it is not the type of
collaboration which is easy to achieve, it brings an array of benefits that push the
company towards desirable growth.
This is the way to build a stronger team that is more effective and flexible. Any
company that wants to become an employer of choice should strongly rely on
marketing efforts for accomplishing this goal.
Marketing Function Type of relation Personnel Activities
Activities
Market Research Research and internal
evaluation of personnel

Develop and implement Developing job

marketing plans and description, recruitment,
activities employee assessment,
training programs

6.2 WAYS TO STREAMLINE HUMAN RESOURCE AND MARKETING

COOPERATION:
Build External and Internal Awareness
Create a strong social media presence, including not just company branded
pages, but also through the individual profiles of Marketing and HR’s team
members. It can help them get a more personal voice in communicating with
potential employees and clients. In addition, HRs can suggest employees who
have shown excellent results and Marketing can share these achievements via
social media, newsletters or in special website sections. This will be helpful in
motivating the workforce and reinforcing the trust of potential customers.

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Tracking the progress Notes

Apart from hiring candidates, HRs should also track their ongoing progress to
learn their capabilities and know whether they are ready to take on new roles.
This can be achieved via training programs that will not only help the companies
retain valuable employees but also let them advance to new positions. Marketing
can let the company show itself as a worthy workplace for its employees.
Also, marketing can work on creating inspirational workshops and motivational
programs. At the same time, HRs should always update marketing about
workforce progress so that it is possible to evaluate company capabilities with
better precision.
Meeting in the cloud
HR and Marketing teams should take maximum advantage of cloud computing.
Cloud technologies will streamline their collaboration capabilities and allow
them to share their findings and insights safely and with ease.
In-house meetings
Companies should improve communication between different departments,
especially human resources and marketing. This would be possible through
holding meetings where the teams could exchange strategies and deal with
overlaps. They should assess what needs be done both collectively and by each
department independently.
It is important to clarify responsibilities and functions. When the strategies and
functions are discussed, the brand alignment plans should be created and infused
into business practices. Both HR and Marketing should share ongoing updates
on their progress and future plans.
Why (and How) HR Needs to Act More like Marketing
At this point, we all know that company culture plays a pivotal role in companies
hurtling into out digital transformations. This is particularly true for the marketing
department, which is changing at such a break-neck pace that marketing success
now depends heavily on support from HR to identify and train new skillsets.
On the flip side, success in HR could use a major assist from marketing, or at
least HR professionals who think like marketers. The competition for the best
talent is fast and furious and, in many cases, that battleground is the social web.
This year, I have been working on an in-depth evaluation of recruiting practices
for a Fortune 500 company. It’s clear that an injection of marketing thinking
could help lead to the HR transformation the company needs; and I doubt this
company is an outlier. Specifically, HR could benefit from adopting seven
marketing practices:
Compete for talent the way companies compete for customers.
Today there is intense competition for the very best talent. When a high-potential

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Notes employee checks out a company, the first place they go is increasingly social
media platforms like Facebook and LinkedIn, or perhaps review sites like Glass
door.
The company presence on these sites is usually owned by marketing or PR.
Through my research for this project, I found that most companies take an
extremely sales-oriented approach to their web presence.
But in many industries, finding the best employees might be as important as
finding the best customers. Why wouldn’t we take a more balanced, recruiting-
centric approach to our web presence?
2. Pay more attention to user interfaces. As part of this project, I also kicked
the tires on the process for people seeking to apply for jobs at the largest tech
companies. What I found across the board was a cumbersome, clunky process
designed to feed information into an algorithm. The process is not human-
oriented, it’s computer-oriented.
As a job applicant, I would like to fill in a few fields and then have access to a
live person through chat or maybe even a live person via web video. This is a
common practice in customer service. Why wouldn’t we provide the same kind
of attention to people who want to work for us and lead us into the future?
3. Be. More. Human. At the end of many of my talks and articles I emphasize
that in the digital age, the most human companies will win. We have fantastic
opportunities to use technology to tear down barriers between people instead of
erecting them. And yet, after evaluating dozens of industry websites, on nearly
every HR-oriented web page these opportunities were lost. If you have applied
for a job lately, perhaps you’ve seen…
Stock photo images of perfectly diverse people jumping for joy instead of real
faces and real smiles in a real workplace.
Text-heavy descriptions of what the company does instead of stories (especially
videos) of how the company feels to people who work there.
A lack of the use of video “tours” as a medium to communicate the culture and
values of the company.
Have you seen this cool promotion by the country of Sweden? Sweden has a
phone number. You can call a toll-free number and talk to a random Swede who
has volunteered to be an ambassador for the nation. Why wouldn’t we do this at
a large company?
If I was conflicted between an offer from Acme Pharmaceuticals and Mega
Source Software, the chance to talk to a real employee might make the difference.
4. Build employees’ brands to help them amplify your message. On the marketing
side, we frequently dream about networks of employees who post stories about
our products, leading to massive new views to our content.

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In reality, that doesn’t happen too often. Employee social sharing networks look Notes
good on paper but in reality, there has been mixed success. Who wants to post
company fodder on Twitter or their personal Facebook page?
But talking about the culture at work, commenting about the pride they have in
an organization, or posting photos from a company picnic … well, that’s easy
to do. We should give employees the training and tools to do their very best job
when creating content about the employment culture of the company.
It was recently working with a huge global tech giant and met a young lady who
had started a blog on her own about how to use her company’s technology for
social good. Nobody in her department even knew she had done it.
Wow! How do we support a person like that, encourage her, and reward her?
How could that young woman start a movement? Why wouldn’t the company
amplify HER content instead of the other way around?
5. Try contextual advertising. Today any kind of marketing usually has a
paid promotional component. If we are trying to attract employees instead of
customers, why wouldn’t we do the same thing?
There are people talking online about their job hunting experiences all the time.
It might make sense to show targeted ads that can help prospective employees
with their questions and problems.
6. Think strategically about touchpoints. The buyer’s decision is a tangled mess
of touchpoints. They may see ads, search online for information, and talk to
friends. Marketers try to have some kind of content waiting customers at each
point in the fragmented journey.
Obviously, there is also a similar winding path to the employment journey. Why
not consider populating those touchpoints with helpful information like we do
on the marketing side? Consider adding content for each of the decision-points
in a potential employee’s journey. Help them assess (and perhaps even compare)
your company culture, pay, benefits, etc.
7. Use influencer marketing to recruit. We are rapidly moving toward a world
in which ads are blocked or ignored, but people still love to receive information
from the online personalities they love and trust.
HR using influencer marketing, but why not? When people seek information
about a company, who are they most likely to listen to? How do we connect with
those important online personalities in a meaningful way so that they become
advocates for our company?
One tech company hired a well-known industry blogger to create content on
behalf of the company. Due to the blogger’s prestigious status the company
instantly gained credibility. Wouldn’t HR be recruiting efforts benefit from a
similar strategy?

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Notes But at least to a marketer’s eyes, existing HR recruiting practices are so behind
our digital times that there’s little to lose in trying them.
6.3 WHAT MARKETING CAN LEARN FROM HRM:
Influencing business behaviour and strategy. As a marketer, you often have a
tangible product and/or brand communication platform. By working alongside
Human Resources, you have the opportunity to better understand employee
engagement, behaviours, beliefs and challenges. Why? In HR your product is
the organization, the people and their values.
The collaboration with human resources allows marketers to be seen as a key
contributor to the structure of the entire organization.
Putting people first. Marketing can learn from HR that the organization exists
first internally and then externally. Indeed, the brand lives through its employee’s
thoughts, communications and behaviors. Human Resources can help Marketing
gain answers to the following questions: Who are your employees?
What kind of organization is this? What is the character or ethos of the organization
and its people? What is the organization’s social and environmental purpose?
Together, you will uncover the answers to the above. Together, you will uncover
the answers, and deliver authentic ways to communicate the true value of your
organization. That purpose will spark innovation and you will impact your
people, your customers and stakeholders alike. Together you will shape the
future of the organization.
How we can we work better together
Collaboration is a skill and if you are used to working as an individual contributor
then it will take some practice. Please find below some quick tips to help you
collaborate (want to engage your Gen Ys – ask them about collaboration as they
prefer working in teams compared to the other generations).
Acknowledge that you have the same purpose and social accountability. Your
organization most likely has a great solution or product to meet people’s needs.
Strategic marketing, brand management, and Human Resources use this purpose
as a feed and driver of all decision making. Keep it in mind and leverage it as
your most meaningful reason to exist in the organization. Collaborate to make
it happen.
Clarify roles and responsibilities. People work better together when they know
what their role is. Whatever strategies you decide to collaborate on with your
peer(s) make sure you first clarify roles and responsibilities to ensure efficient
and excellent execution.
Be authentic and don’t be afraid of conflict. Conflict is inevitable whenever
people work together on a common goal so embrace it, learn to manage it and
watch the creativity flow.

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Measure the impact. Discuss with your Marketing or HR colleague how you can Notes
consolidate your dashboards or metrics to demonstrate the ROI of your strategy.

SUMMARY

Employer brand complements your master brand; therefore, managing the

inner workings of the master brand is a joint accountability between Marketing
and HR. Consider that a brand is one’s experience with an organization, or its
products, not just the creative messaging.
It must reflect the reality of what is taking place daily within the organization.
Trust in organizations has a large way to grow, and when marketing and HR
collaborate on an employer brand strategy together, they ensure that the company
lives up to the commitment it makes in its words, and how it lives each and every
day.
“For example, you do not make a life decision to sell mortgages, but you make
a life decision to work for a specific financial institution. If you are looking for
a job, those institutions are irrelevant to you if they try to convince you to join
them to sell mortgages.
However, if they tell you about their people policies, culture, values, and
value that they can add to your life as an employee, the conversation becomes
interesting. The decision to buy a product is not as high impact as selecting an
employer. Seeing it through your customer’s eyes, if everyone is offering the
same product, you want to buy it from people you trust.

CASE STUDY :
Watson Public Ltd Company is well known for its welfare activities and
employee-oriented schemes in the manufacturing industry for more than ten
decades. The company employs more than 800 workers and 150 administrative
staff and 80 management-level employees. The Top-level management views
all the employees at the same level. This can be clearly understood by seeing
the uniform of the company which is the Same for all starting from MD to
floor level workers. The company has to different cafeterias at different places
one near the plant for workers and others near the Administration building.

The company has one registered trade union. The relationship between the union
and the management is very cordial. The company has not lost a single man day
due to strike. The company is not a paymaster in that industry. The compensation
policy of that company, when compared to other similar companies, is very less
still the employees don’t have many grievances due to the other benefits provided
by the company. But the company is facing a countable number of problems in
supplying the materials in the recent past days. Problems like quality issues,
mismatch in packing materials (placing material A in the box of material B)
incorrect labelling of material, not dispatching the material on time, etc…

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Notes The management views the case as there are loopholes in the system of various
departments and hand over the responsibility to the HR department to solve the
issue. When the HR manager goes through the issues, he realized that the issues
are not relating to the system but it relates to the employees. When investigated
he come to know that the reason behind the casual approach by employees in
work is
• The company hired new employees for a higher-level post without
considering the potential internal candidates.
• The newly hired employees are placed with higher packages than that of
existing employees in the same cadre.
Questions:
1. Narrate the case with a suitable title for the case. Justify your title.
KEYWORDS:
Operations: Operations is where inputs, or factors of production, are converted
to outputs, which are goods and services.
Planning: Managers plan by setting long-term goals for the business, as well
short-term strategies needed to execute against those goals.
Personnel Management is that branch of management which is concerned with
the recruitment, selection, development and the optimum use of the employees.
The production management is needed by the manufacturing organizations.
EXERCISE:
POINTS TO PONDER:
Answer the following questions given below:

1.Good marketing is no accident but a result of careful planning and _____.

2.________ is not a type of Marketing Concept.

3.______ are the form of human needs take as shaped by culture & individual
personality.
4.The key customer markets consist of ____________

5.If the focus is on social and ethical concerns in marketing’ is characteristic of the
SELF ASSESSMENT QUESTIONS:
SHORT ANSWER QUESTIONS:
1.Why HR Needs to Act More like Marketing
2.What marketing can learn from HRM?
3.How to use marketing to recruit for organization.
LONG ANSWER QUESTIONS:
1.Explain the ways to streamline human resource and marketing cooperation.
2.State the features of marketing interface with HRM.

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Notes
LESSON 7 – MARKETING
INFORMATION SYSTEM
CONTENT:
LEARNING OBJECTIVE
LEARNING OUTCOME
7.1 INTRODUCTION
7.2 MANAGEMENT INFORMATION SYSTEM
7.3 COMPUTERNNETWORK AND INTERNET
7.4 DATA MINING AND DATA WAREHOUSING
7.5 MARKETING INTELLIGENT SYSTEM
7.6 MARKETING RESEARCH PROCESS
SUMMARY
CASE STUDY
KEYWORDS
EXERCISE
SELF ASSESSMENT QUESTIONS

LEARNING OBJECTIVE:
• An understanding of the different roles managers plays and how marketing
information systems can support them in these roles
• To appreciate of the different types and levels of marketing decision
making
• A knowledge of the major components of a marketing information system.
One can then determine whether information systems will be valuable
tools and how they should be designed.
• The understanding of the nature of analytical models within marketing
information system.
LEARNING OUTCOME:
• To understand the proper role of information systems one must examine
what managers do and what information they need for decision making. We
must also understand how decisions are made and what kinds of decision
problems can be supported by formal information systems.

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Notes • An awareness of the often-under-utilized internal sources of information

available to enterprises
• The ability to clearly distinguish between marketing research and marketing
intelligence.
7.1 INTRODUCTION:
Marketing Information System (MIS) assesses the information needs of
different managers and develops the required information from supplied data in
time regarding competition, prices, advertising, sales, distribution and market
intelligence etc. Most of today’s information systems are computer applications
in a sophisticated data-driven age. These enable marketers to be better informed
about their customers, potential customers and competitors. New applications
are being developed at a faster pace.
7.2 MARKETING INFORMATION SYSTEM:
The term ‘Marketing Information Systems’ refers to a programme for managing
and organizing information gathered by an organization from various internal
and external sources. MIS assesses the information needs of different managers
and develops the required information from supplied data in time regarding
competition, prices, advertising expenditures, sales, distribution and market
intelligence, etc. Information sources for MIS include a company’s internal
records regarding marketing performance in terms of sales, and effectiveness
and efficiency of marketing actions, marketing databases, marketing intelligence
systems, marketing research, and information supplied by independent
information suppliers.

Figure
``

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 Lesson 7 – Marketing Information System

Notes
"A marketing information system is a continuing and interacting structure of people,
equipment and procedures to gather, sort, analyse, evaluate, and distribute pertinent,
timely and accurate information for use by marketing decision makers to improve their
marketing planning, implementation, and control".

Database:
A database refers to the collection of comprehensive information about customers
and prospects such as demographic and psychographic profiles, products and
services they buy, and purchase volumes, etc., arranged in a manner that is
available for easy access and retrieval. Databases allow marketers access to an
abundance of information, – often through a computer system – such as sales
reports, news articles, company news releases, and economic reports from
government and private agencies, etc., that can be useful in making various
marketing decisions.
Internal Records:
Modern technology is making information required for marketing decisions
ever more accessible. It is possible to track customer buying behaviour and
better analyse and understand what customers want. The integration of various
modern technologies is allowing companies to access valuable information.
Ever increasing numbers of market researchers and managers are having access
to e-mail, voice mail, teleconferencing, video conferences, and faxes.
Internal database is the most basic starting point in developing a strong MIS.
Marketers, not just the growing numbers of large retailers in our country, need
information about what is demanded more by customers and what is not. Internal
record systems help in tracking what is selling, how fast, in which locations, to
which customers, etc.
Availability of all such information relies on reports available on orders received
from sales people, resellers, and customers, copies of sales invoices, prices, costs,
inventories, receivables, payables, etc. Getting inputs and designing systems to
provide right data to the right people at the right time is critical for marketing
decisions.
Accumulated data about customers in various internal records is an important
source to build database such as customer inquiries, existing customers and
past purchasing histories of these customers. The key information in this regard
consists of RFM (Recency, Frequency, and Money) variables.
Recency refers to the time of purchase, frequency reflects the number of times
the customer made a product purchase from the firm, and money denotes the
quantity and monetary value of the purchase. RFM helps analyse and develop a
customer index that reflects which customers are more profitable for the business.

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Notes USP Age, in its September 2004 issue has reported that BPCL has been
compiling its database for the past four years and has a formidable collection
of more than 1.4 million customers. Shopper’s Stop has been compiling data
of its regular customers through its loyalty programme, First Citizen. Further,
a company in India can obtain a database for as little as 50 paise to Rs. 5 per
contact. Companies involved in Direct Marketing such as Catalogue Selling and
Mail Order Marketing are heavy users of databases.
External Sources:
Census Bureau is one key source of information regarding various demographic
variables. Besides Census Bureau of India, other sources include Newspapers,
Trade Publications, Technical Journals, Magazines, Directories, and Balance
Sheets of companies, Syndicated and published research reports. Various third-
party information suppliers offer a variety of information about customers as per
marketer’s requirements, for a price. For example, Reader’s Digest markets a
database covering 100 million households.
It is one of the best databases to assess potential markets for consumer products.
It lets Reader’s Digest management know the likes and dislikes of many of its
readers. Behaviour Scan is a single source information service that monitors
consumer household televisions and records the programmes and commercials
watched.
This source is an example that screens about 60,000 households in 26 US
markets. Many companies develop their own databases. According to Laurence
N. Goal, a single source providing information about household demographics,
purchases, television viewership behaviour, and responses to promotions is
called a single-source data.
When consumers from these households go shopping in stores equipped with
scanner-installed computers, they present their credit cards to billing clerks for
payment. This permits each customer’s identification to be electronically coded
so that the marketer can track his or her purchases.
Some Important Data Sources
1. The Thomas Register: It is the world’s most important industrial buying
guide for industrial products. Thomas Register of Indian Manufacturers
is available in print, CD, and through Internet. It has 120,000 listings of
40,000 industrial manufacturers and service providers covering 10,000
different product and service categories.
2. The Source Directory: Source Publishers, Mumbai publish this directory.
Currently Mumbai and Delhi editions are available. It provides contact
information on ad agencies and related services, marketing and sales
promotion consultants, market research firms, music companies,
telemarketing, and different media.

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3. Yellow Pages: Tata Press and GETIT yellow pages are leaders. Currently, Notes
yellow pages publications are available for all cities and major towns of
India. New Horizons is a joint venture between Living Media and Singapore
Telecom and have been publishing directories for specific businesses.
4. Internet: It is a source of extensive data on almost any subject. Different
types of published data, research findings, statistics, and figures are
available either free or on payment.
7.3 COMPUTER NETWORKS AND INTERNET:
Present day computer networks enable marketers to access data sources and
customers with immediate information about products and performance. Through
such networks, marketers can exchange e-mails with employees, customers, and
suppliers. Online information services such as Comp Serve and America Online
typically offer their subscribers access to e-mail, discussion groups, files for
downloading, chat rooms, and databases and other related research materials.
Marketers can subscribe to “mailing lists” that periodically deliver electronic
newsletters to their computer screens.
This helps increased communication with a marketer’s customers,
suppliers, and employees and boosts the capabilities of a company’s marketing
information system. Online information services are available only to subscribers.
However, the Internet allows global exchange of e-mails, discussion through
newsgroups on almost any subject, downloading of files, chat rooms, etc. A well-
maintained database enables a company to analyze customer needs, preferences,
and behaviour. It also helps in identifying right target customers for its direct
marketing efforts.
7.4 DATA MINING AND DATA WAREHOUSING:
The term ‘data mining’ refers to automated data analysis of large amount of data
stored in a data warehouse. This is similar to extracting valuable metals from
mountains of mined ore. The purpose is to unearth – with the help of modern
computing power – meaningful patterns of information that might be missed or
remain undiscovered.
Data mining creates customer database, which is extremely important for all
narrowly defined target-marketing efforts. Data mining also leads to build
database on resellers, distribution channels, media, etc. Data warehousing refers
to storing subject-based, integrated, non-volatile, time variant data in support of
managerial decisions. It can be viewed as a central collection of clean, consistent,
and summarized information gathered from several operational systems.
With increasing computing capabilities, organizations are collecting large
amounts of a variety of information or data possibly faster than they can use, and
for this reason all the collected data or information needs to be sorted, classified
and warehoused, so that it can be retrieved when needed in a meaningful manner.

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Notes
Data mining is the process of finding anomalies, patterns and correlations within
large data sets to predict outcomes.

7.5 MARKETING INTELLIGENCE SYSTEMS:

In the current fast-paced business climate, keeping up with macro-environmental
changes and competition is becoming increasingly difficult. Marketing
intelligence system refers to systematic and ethical approach, procedures, and
sources that marketing managers use to gather and analyse everyday information
about various developments with regard to competitors and other business trends
in the marketing environment.
This intelligence is collected from various sources such as newspapers,
trade publications, and business magazines, talking with suppliers, channel
members, customers, other managers, and sales force people. About competitive
intelligence, the general idea is that more than 80 per cent information is public
knowledge.
The most important sources from which to obtain competitive intelligence
include competitors’ annual and financial reports, speeches by company
executives, government documents, trade organizations, online databases, and
other popular and business press. The company can take certain steps to obtain
quality marketing intelligence.
The company should take steps to train and motivate field sales personnel about
the types of information to report regularly on any relevant developments in
the marketplace. Besides sales force, the company can take steps to motivate
channel members to pass along important intelligence. The company can also
purchase competitors’ products, and attend trade fairs.
Some important questions that managers should ask about competitive
intelligence are: l how fast does the competitive climate in our industry change?
How important is it to keep our knowledge about these changes current? l What
are the objectives of our company about competitive intelligence? Who are the
important clients for competitive intelligence? To whom should the intelligence
effort be reported?
With rapid developments in the area of software applications that run on PCs, it is
becoming increasingly possible to keep track of client lists and the various kinds
of contacts that are made with each client. Many such programmes keep track
of clients’ names, addresses, phone and fax numbers, e-mail addresses, personal
details such as birthdays, likes and dislikes, product/brand usage, hobbies, club
memberships, etc.
Most of today’s information systems are computer applications in a sophisticated
data driven age. These enable marketers to be better informed about their

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customers, potential customers, and competitors. This helps marketers to be Notes

more productive and establish and sustain competitive advantage.
New applications are being developed at a faster pace. The ultimate focus of most
such systems is to enable marketers to know enough about any given customer
and the competitive context, to fine-tune their marketing efforts to better serve
the target market so that customer’s needs are met perfectly. This is the ultimate
dream for every marketer.
7.6 MARKETING RESEARCH PROCESS:
While the Marketing Information System has its focus on managing the flow of
relevant information to decision-makers in the marketing department, marketing
research is concerned with the function of generating information for marketing
decision-makers.
There are occasions when there are no easy answers for a variety of marketing
situations that marketing manager’s face. Such situations may call for
conducting formal marketing studies of specific problems and opportunities.
Marketing research is intended to address carefully defined marketing problems
or opportunities.
It helps in identifying consumer needs and market segments, furnishes information
necessary for developing new products and formulating marketing strategies,
enables managers to measure the effectiveness of marketing programmes
and promotional activities, develops economic forecasting, helps in financial
planning, and quality control. Research undertaken without precisely defining
the problem and objectives usually results in wasting time and money.
For conducting marketing research, companies develop systematic procedures
for collecting, recording, and analysing data from secondary and primary
sources to help managers in making decisions. Marketing research is different
from market research, which is information collected about a particular market
or market segment.
In the process of marketing research, companies collect a lot of different types
of information. David G. Bakken is of the opinion that it is easy to think of all
these in terms of three Rs of marketing: l Recruiting New Customers. l Retaining
Current Customers. l Regaining Lost Customers.
To recruit new customers, the researchers study different market segments to
develop the right products and services consumers need and want. To retain
customers, the marketer may conduct customer satisfaction studies.
Marketers realize that good relationship with customers is important for long-
term positive sales results. Regaining lost customers can be a formidable
problem. It needs innovative marketing and outstanding communications. The
information collected with respect to the first and the second Rs helps regaining
the lost customers.

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Notes
SUMMARY

Information sources for MIS include a company’s internal records regarding

marketing performance in terms of sales, and effectiveness and efficiency
of marketing actions, marketing databases, marketing intelligence systems,
marketing research, and information supplied by independent information
suppliers.
A database refers to the collection of comprehensive information about customers
and prospects such as demographic and psychographic profiles, products and
services they buy, and purchase volumes, etc., arranged in a manner that is
available for easy access and retrieval.
Modern technology is making information required for marketing decisions
ever more accessible. It is possible to track customer buying behavior and better
analyses and understand what customers want.
Besides Census Bureau of India, other sources include Newspapers, Trade
Publications, Technical Journals, Magazines, Directories, and Balance Sheets of
companies, Syndicated and published research reports.
Present day computer networks enable marketers to access data sources and
customers with immediate information about products and performance. Through
such networks, marketers can exchange e-mails with employees, customers, and
suppliers.
The term ‘data mining’ refers to automated data analysis of large amount of data
stored in a data warehouse. This is similar to extracting valuable metals from
mountains of mined ore.

CASE STUDY :
A waiter takes an order at a table, and then enters it online via one of the
six terminals located in the restaurant dining room. The order is routed to a
printer in the appropriate preparation area: the cold item printer if it is a salad,
the hot-item printer if it is a hot sandwich or the bar printer if it is a drink. A
customer’s meal check-listing (bill) the items ordered and the respective prices
are automatically generated. This ordering system eliminates the old three-
carbon-copy guest check system as well as any problems caused by a waiter’s
handwriting. When the kitchen runs out of a food item, the cooks send out an
‘out of stock’ message, which will be displayed on the dining room terminals
when waiters try to order that item. This gives the waiters faster feedback,
enabling them to give better service to the customers. Other system features
aid management in the planning and control of their restaurant business. The

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Notes
system provides up-to-the-minute information on the food items ordered
and breaks out percentages showing sale of each item versus total sales.
This helps also compares the weekly sales totals versus food costs, allowing
planning for tighter cost controls. In addition, whenever for tighter cost
controls. In addition, whenever an order is voided, the reasons for the void
are keyed in. This may help later in management decisions, especially if
the voids consistently related to food or service. Acceptance of the system
by the users is exceptionally high since the waiters and waitresses were
involved in the selection and design process. All potential users were asked
to give their impressions and ideas about the various systems available
before one was chosen.

KEY WORDS:
• Deterministic models
• Internal reports
• Marketing intelligence
• Model banks
• Operational decisions
• Stochastic models
• Strategic decisions
• Tactical plans
EXERCISE:
POINTS TO PONDER:

Answer the following questions given below:

1.------------------- is a collection of hardware, software, data, people and

procedures that work together to produce quality information for marketing
decision makers.

2.This involves the process and methods used to gather information, analyze
it, and report findings related to marketing of goods and services-------------
3.------------is a set of statistical tools and decision models.
4.Data Mining is a process of-------------useful data from a larger database.
5.The main components of marketing information system are--------------

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Notes
SELF ASSESSMENT QUESTIONS:
SHORT ANSWER QUESTIONS:

1. What are stochastic models?

2. Name the four components of an MIS.
3. What were the functions of management that Henry Fayol identified?
4. To which management role does the textbook suggest MIS has least to
contribute?
LONG ANSWER QUESTIONS:
1. What are the 3 levels of decision making outlined in this chapter?
2. According to Kotler, what are the contributing elements to an MIS?
3. Which elements of the marketing environment are mentioned in the
chapter?
4. What differences are there between marketing research and marketing
intelligence?

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Notes
LESSON 8 – MARKETING IN GLOBAL
ENVIRONMENT-PROSPECTUS AND
CHALLENGES
CONTENT:
LEARNING OBJECTIVE
LEARNING OUTCOME
8.1 MARKETING IN GLOBAL ENVIRONMENT
8.2 WORLD WIDE COMPETITION
8.3 EVOLUTION TO GLOBAL MARKETING
8.4 ELEMENTS OF THE GLOBAL MARKETING MIX
8.5 RURAL MARKETING
SUMMARY
CASE STUDY
KEYWORDS
EXERCISE
SELF ASSESSMENT QUESTIONS

LEARNING OBJECTIVE:
• To Formulate an understanding of social and cultural differences from a
global marketing perspective
• To Analyze how an economic environment is measured from a global
marketing perspective
• To Show how international political and trade regulations impact global
marketing
LEARNING OUTCOME:
• The Business activity tends to grow and thrive when a nation is politically
stable. When a nation is politically unstable, multinational firms can still
conduct business profitably.
• To Relate the uses of demographic evaluation to global marketing.
• A demographic profile typically involves age bands, social class bands,
and gender delineations. It can also include religious affiliations, income
brackets, and a variety of other characteristics used to separate a country’s
population into groups similar to a company’s customer.

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Notes • To outline the impact natural resources, infrastructure and technology has
on new markets within the global marketing environment
8.1 MARKETING IN GLOBAL ENVIRONMENT:
Global marketing as marketing on a worldwide scale reconciling or taking
commercial advantage of global operational differences, similarities and
opportunities in order to meet global objectives.
8.2 WORLD WIDE COMPETITION:
One of the product categories in which global competition has been easy to
track in U.S.is automotive sales. The increasing intensity of competition in
global markets is a challenge facing companies at all stages of involvement in
international markets. As markets open up, and become more integrated, the
pace of change accelerates, technology shrinks distances between markets and
reduces the scale advantages of large firms, new sources of competition emerge,
and competitive pressures mount at all levels of the organization.
Also, the threat of competition from companies in countries such as India, China,
Malaysia, and Brazil are on the rise, as their own domestic markets are opening
up to foreign competition, stimulating greater awareness of international market
opportunities and of the need to be internationally competitive. Companies which
previously focused on protected domestic markets are entering into markets in
other countries, creating new sources of competition, often targeted to price-
sensitive market segments.
Not only is competition intensifying for all firms regardless of their degree
of global market involvement, but the basis for competition is changing.
Competition continues to be market-based and ultimately relies on delivering
superior value to consumers. However, success in global markets depends on
knowledge accumulation and deployment.
8.3 EVOLUTION TO GLOBAL MARKETING:
Global marketing is not a revolutionary shift, it is an evolutionary process. While
the following does not apply to all companies, it does apply to most companies
that begin as domestic-only companies.
Domestic marketing
A marketing restricted to the political boundaries of a country, is called “Domestic
Marketing”. A company marketing only within its national boundaries only has
to consider domestic competition. Even if that competition includes companies
from foreign markets, it still only has to focus on the competition that exists in
its home market. Products and services are developed for customers in the home
market without thought of how the product or service could be used in other
markets. All marketing decisions are made at headquarters.

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The biggest obstacle these marketers face is being blindsided by emerging global Notes
marketers. Because domestic marketers do not generally focus on the changes in
the global marketplace, they may not be aware of a potential competitor who is a
market leader on three continents until they simultaneously open 20 stores in the
North eastern U.S. These marketers can be considered ethnocentric as they are
most concerned with how they are perceived in their home country. Exporting
goods to other countries.
International marketing
If the exporting departments are becoming successful but the costs of doing
business from headquarters plus time differences, language barriers, and cultural
ignorance are hindering the company’s competitiveness in the foreign market,
then offices could be built in the foreign countries. Sometimes companies buy
firms in the foreign countries to take advantage of relationships, storefronts,
factories, and personnel already in place. These offices still report to headquarters
in the home market but most of the marketing mix decisions are made in the
individual countries since that staff is the most knowledgeable about the target
markets. Local product development is based on the needs of local customers.
These marketers are considered polycentric because they acknowledge that each
market/country has different needs.

A company marketing only within its national boundaries only has to consider
domestic competition.

8.4 ELEMENTS OF THE GLOBAL MARKETING MIX:

The ―Four P’s‖ of marketing: product, price, placement, and promotion are all
affected as a company moves through the five evolutionary phases to become a
global company. Ultimately, at the global marketing level, a company trying to
speak with one voice is faced with many challenges when creating a worldwide
marketing plan.
Unless a company holds the same position against its competition in all markets
(market leader, low cost, etc.) it is impossible to launch identical marketing plans
worldwide.
Product
A global company is one that can create a single product and only have to tweak
elements for different markets. For example, Coca-Cola uses two formulas (one
with sugar, one with corn syrup) for all markets. The product packaging in every
country incorporates the contour bottle design and the dynamic ribbon in some
way, shapes, or form. However, the bottle or can also include the country’s
native language and is the same size as other beverage bottles or cans in that
same country.

91
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Notes Price
Price will always vary from market to market. Price is affected by many variables:
cost of product development (produced locally or imported), cost of ingredients,
cost of delivery (transportation, tariffs, etc.), and much more. Additionally, the
product’s position in relation to the competition influences the ultimate profit
margin. Whether this product is considered the high-end, expensive choice, the
economical, low-cost choice, or something in-between helps determine the price
point.
Placement
How the product is distributed is also a country-by-country decision influenced
by how the competition is being offered to the target market. Using Coca-Cola
as an example again, not all cultures use vending machines. In the United States,
beverages are sold by the pallet via warehouse stores. In India, this is not an
option. Placement decisions must also consider the product’s position in the
market place. For example, a high-end product would not want to be distributed
via a ―dollar store‖ in the United States. Conversely, a product promoted as the
low-cost option in France would find limited success in a pricey boutique.
Promotion
After product research, development and creation, promotion (specifically
advertising) is generally the largest line item in a global company’s marketing
budget. At this stage of a company’s development, integrated marketing is the
goal. The global corporation seeks to reduce costs, minimize redundancies in
personnel and work, maximize speed of implementation, and to speak with one
voice. If the goal of a global company is to send the same message worldwide,
then delivering that message in a relevant, engaging, and cost-effective way is
the challenge.
Effective global advertising techniques do exist. The key is testing advertising
ideas using a marketing research system proven to provide results that can be
compared across countries. The ability to identify which elements or moments of
an ad are contributing to that success is how economies of scale are maximized.
Market research measures such as Flow of Attention, Flow of Emotion and
branding moments provide insights into what is working in an ad in any country
because the measures are based on visual, not verbal, elements of the ad.
Advantages:
• The advantages of global market we can introduce our product by using
advertising
• Economies of scale in production and distribution
• Lower marketing costs
• Power and scope

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• Consistency in brand image Notes

• Ability to leverage good ideas quickly and efficiently
• Uniformity of marketing practices
• Helps to establish relationships outside of the “political arena”
• Helps to encourage ancillary industries to be set up to cater for the needs
of the global player
• Benefits of eMarketing over traditional marketing
Reach
The nature of the internet means businesses now has a truly global reach. While
traditional media costs limit this kind of reach to huge multinationals, eMarketing
opens up new avenues for smaller businesses, on a much smaller budget, to
access potential consumers from all over the world.
Scope
Internet marketing allows the marketer to reach consumers in a wide range of
ways and enables them to offer a wide range of products and services. eMarketing
includes, among other things, information management, public relations,
customer service and sales. With the range of new technologies becoming
available all the time, this scope can only grow.
Interactivity
Whereas traditional marketing is largely about getting brands message out there,
eMarketing facilitates conversations between companies and consumers. With
a two-way communication channel, companies can feed off of the responses of
their consumers, making them more dynamic and adaptive.
Immediacy
Internet marketing is able to, in ways never before imagined, provide an
immediate impact. Imagine you’re reading your favourite magazine. You see
a double-page advert for some new product or service, maybe BMW’s latest
luxury sedan or Apple’s latest iPod offering. With this kind of traditional media,
it’s not that easy for you, the consumer, to take the step from hearing about
a product to actual acquisition. With eMarketing, it’s easy to make that step
as simple as possible, meaning that within a few short clicks you could have
booked a test drive or ordered the iPod. And all of this can happen regardless of
normal office hours.
Effectively, Internet marketing makes business hours 24 hours per day, 7 days
per week for every week of the year. By closing the gap between providing
information and eliciting a consumer reaction, the consumer’s buying cycle is
speeded up and advertising spend can go much further in creating immediate
leads.

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Notes Demographics and targeting

Generally speaking, the demographics of the Internet are a marketer’s dream.
Internet users, considered as a group, have greater buying power and could
perhaps be considered as a population group skewed towards the middle-classes.
Buying power is not all though. The nature of the Internet is such that its users
will tend to organize themselves into far more focused groupings.
Savvy marketers who know where to look can quite easily find access to the
niche markets they wish to target. Marketing messages are most effective when
they are presented directly to the audience most likely to be interested. The
Internet creates the perfect environment for niche marketing to targeted groups.
Adaptivity and closed loop marketing
Closed Loop Marketing requires the constant measurement and analysis of
the results of marketing initiatives. By continuously tracking the response and
effectiveness of a campaign, the marketer can be far more dynamic in adapting
to consumers’ wants and needs. With eMarketing, responses can be analyzed
in real-time and campaigns can be tweaked continuously. Combined with
the immediacy of the Internet as a medium, this means that there’s minimal
advertising spend wasted on less than effective campaigns.
Maximum marketing efficiency from eMarketing creates new opportunities to
seize strategic competitive advantages. The combination of all these factors
results in an improved ROI and ultimately, more customers, happier customers
and an improved bottom line.
Disadvantages:
Differences in consumer needs, wants, and usage patterns for products
• Differences in consumer response to marketing mix elements
• Differences in brand and product development and the competitive
environment
• Differences in the legal environment, some of which may conflict with
those of the home market
• Differences in the institutions available, some of which may call for the
creation of entirely new ones (e.g., infrastructure)
• Differences in administrative procedures
• Differences in product placement.
8.5 RURAL MARKETING:
Indian market for the consumer products is made up of two distinct parts, one is
urban and other is rural market. It has been a matter of great enquiry both for the
marketing academics and practitioners whether there is a need for developing
separate strategy for rural markets.

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By and large, Indian market scenario shows that marketers have rarely come out Notes
with separate marketing strategy for rural markets overtly, however, marketers
did develop separate marketing mix for rural markets covertly. Whenever it is
rural marketing for their brands, marketer tended to price their products low,
keeping the products quality at an average level, cutting costs on the extra frills
added to the product.
The essence of the present thesis lies in opening up a debate as to the need for a
separate marketing strategy in the context of unique features of the rural market
compared to urban market. In what follows, we present a frame or an outline of
marketing strategy for rural marketing.
The vastness of the rural market poses both a challenge and an opportunity to
the marketers. The desire to improve the living standards is felt as keenly in the
rural areas as in the urban areas. Rural incomes are rising and the poverty ratio
is falling.
The marketing strategy to tap this vast market potential must take into account
the special characteristics of the rural areas, attitudes and socio- psychological
characteristics of the rural population.
In fact, improving the marketing channels and distribution outlets and
communication facilities can themselves being about a transformation of the
rural areas.
The design and development of a marketing strategy essentially has to flow from
a thorough understanding of the consumer, in this context it is the rural consumer.
Therefore, at the first instance, the rural consumer has to be understood and next
the differences between the rural and urban consumer. The rural consumer in
majority of the cases is illiterate, a low-income consumer, more price sensitive,
more of social interaction within his group, psychologically emotional, guided
by opinion leaders, having lower aspirational levels, and having imitational
characteristics. This fact matrix leads a greater challenge to deal with the rural
consumer.

Rural marketing is a process of developing, pricing, promoting, and distributing

rural specific goods and services leading to desired exchange with rural customers to
satisfy their needs and wants, and also to achieve organizational objectives.

SUMMARY
Global marketing as marketing on a worldwide scale reconciling or taking
commercial advantage of global operational differences, similarities and
opportunities in order to meet global objectives.
However, success in global markets depends on knowledge accumulation and
deployment. Global marketing is not a revolutionary shift, it is an evolutionary
process.

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Notes A marketing restricted to the political boundaries of a country, is called “Domestic

Marketing”.
If the exporting departments are becoming successful but the costs of doing
business from headquarters plus time differences, language barriers, and cultural
ignorance are hindering the company’s competitiveness in the foreign market,
then offices could be built in the foreign countries.
Ultimately, at the global marketing level, a company trying to speak with one
voice is faced with many challenges when creating a worldwide marketing plan.

CASE STUDY :
The case is about China-based technology start-up OnePlus’s foray
into India, the world’s fastest-growing smartphone market. In India, OnePlus
positioned itself to appeal to users of high-end phones and undercut rival
products on price, despite closely matching them on specifications. OnePlus
devices appealed to cost-conscious young customers in a country where many
buyers were first time users of smartphones. Following its launch in India in
December 2014, the company sold close to one million smartphones in the
country by the end of 2015. The case discusses the company’s strategy in
India and the reasons behind its success. Despite a promising start in India,
OnePlus faced some challenges in the country such as intense competition,
low smartphone penetration, concerns related to intellectual property rights,
and price sensitive Indian consumers. OnePlus had a long way to go in order
to catch up with market leaders in India, including home grown players as
well as Chinese smartphone brands that offered high-end phones at affordable
prices. Whether OnePlus would be able to crush the competition and rule the
Indian smartphone market going forward remained to be seen.

Issues

The case is structured to achieve the following teaching objectives:

• Evaluate OnePlus’s globalization strategy and its entry and expansion
strategy in India
• Understand the factors that contributed to the success of OnePlus in India
• Understand the importance of the Indian market to OnePlus’s growth
• Identify the issues and challenges faced by OnePlus in its key growth
market India and explore strategies that the company might adopt to
sustain itself in this market
• Explore future strategies that OnePlus can adopt to emerge as a leading
player in the Indian smartphone market

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Notes
KEYWORDS:
• Aesthetics: The concepts of beauty and good taste; the study of sensory
or sensori-emotional values, sometimes called judgments of sentiment
and taste. More broadly, scholars in the field define aesthetics as “critical
reflection on art, culture, and nature. “
• Per capita incomes: The average income or income per person that is
calculated by taking a measure of all sources of income in the aggregate
(such as GDP or Gross National Income) and dividing it by the total
population. It does not attempt to reflect the distribution of income or
wealth.
• Industrialized: A highly developed economy and advanced technological
infrastructure relative to other, less-developed nations. Developed countries
have post-industrial economies, meaning the service sector provides more
wealth than the industrial sector.
• Developing nation: Countries with more advanced economies than
less-developed nations (nations with a low living standard, undeveloped
industrial base, and low Human Development Index (HDI)), but which
have not yet fully demonstrated the signs of a developed country.
• Expropriation: The act of expropriating; the surrender of a claim to
private property; the act of depriving of private propriety rights.
• Generational cohort: A group of individuals (within some population
definition) who experience the same event within the same time interval.
The notion of a group of people bound together by the sharing of the
experience of common historical events developed in the early 1920s.
• Inexhaustible: Unlikely to be depleted in foreseeable future
• Ubiquitous resource: Existing or occurring everywhere
EXERCISE:
POINTS TO PONDER:
Answer the following questions given below:

1.Business across several countries with some decentralization of management decision

making to subsidiaries is-----------------

2. The following factor does not differentiate the international business from domestic
business--------------

3. By entering into international business, a firm expects an improvement in---------------

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Notes SELF ASSESSMENT QUESTIONS:

SHORT ANSWER QUESTIONS:
1. What is Global Market?
2. List out the factors influencing global marketing.
3. Write down the steps involved in entering global market.
4. List out the various challenges of global environment.
5. What is rural marketing?
6. What is meant by international marketing?
LONG ANSWER QUESTIONS:
1. Explain the factors influencing global environment.
2. Analyze how to enter global market.
3. Describe global marketing mix program.
4. Explain prospectus and challenges in global environment.
5. Discuss briefly about Rural marketing.
6. Write a short note on elements of marketing mix.
7. Describe briefly about the evolution of global marketing.

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 Lesson 9 - Marketing Strategy

UNIT - II Notes

LESSON 9 – MARKETING STRATEGY

CONTENT:
LEARNING OBJECTIVE
LEARNING OUTCOME
9.1 INTRODUCTION
9.2 MARKETING STRATEGY
9.3 STRATEGY FOR INDUSTRIAL MARKET
9.4 PORTER’S GENERIC STRATEGIES
9.5 THE IMPORTANCE OF MARKETING STRATEGY
9.6 MARKETING PLAN PREPARATION
9.7 STEPS FOR STRATEGY FORMULATION
9.8 LEVELS OF STRATEGY FORMULATION
SUMMARY
CASE STUDY
KEYWORDS
EXERCISE
SELFASSESSMENT QUESTIONS

LEARNING OBJECTIVE:
• To evaluate how marketing strategies align with corporate strategies
• To explain the inputs and components of a marketing strategy
• To show how common analytic tools are used to inform the organization’s
strategy
• To explain how the development and maintenance of customer relationships
are an essential part of an organization’s marketing strategy
LEARNING OUTCOME:
• The essence of the marketing strategy of any firm can be grasped from the
firm’s target market and marketing mix.
• The main aim of marketing strategy is to cope with competition.

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Notes • To focus on marketing strategy of a firm is the complete and unbeatable

plan or instrument designed specifically for attaining the marketing goals
of the firm.
9.1 INTRODUCTION:
Setting a marketing strategy is essential to keeping your team in sync and
performing well. It aligns the entire company around shared market, business,
and product assumptions. This is key to launching campaigns and promotional
activities that effectively engage potential customers, drive revenue, build brand
awareness, and strengthen the relationship with existing customers.
Your strategy sets the direction for your everyday marketing activities. This
keeps the team focused on what matters most so you can successfully acquire,
keep, and grow customers.
The key components of marketing strategy
A marketing strategy is based on deep research and analysis, factoring what
can positively or negatively impact your business success. This research forms
the foundation of your overall marketing plan and sets the direction for how to
achieve your company’s vision, mission, and business goals.
The table below defines the key components of a marketing strategy.
Component Purpose
Marketing goals Define a set of time-bound and measurable
marketing goals that support your
overarching business goals.

Marketing initiatives Capture the high-level efforts needed to

achieve your marketing goals and the
timeline for completing them.
Target market Identify segments of customers who share
common characteristics and the marketing
approach for each one.
Market analysis Determine the external market factors that
could impact the success of your business.

SWOT analysis Make better marketing decisions based on

your strengths, weaknesses, opportunities,
and threats.
Positioning strategy Articulate where your product fits in
the market, what sets it apart, and why
customers should care about it.

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Marketing mix Define the right marketing mix to promote Notes

your product (often using the 9Ps model).

Creative brief Guide the implementation and delivery

of a marketing program or campaign by
defining the goals, customer truths, and
brand voice.
Buyer personas Create a detailed description of your ideal
target customer so you can develop relevant
market campaigns and content.
Competitor analysis Identify other companies competing in
your market and rank them based on their
strengths and weaknesses.
9.2 MARKETING STRATEGY:
Marketing strategy is a process that can allow an organization to concentrate
its limited resources on the greatest opportunities to increase sales and achieve
a sustainable competitive advantage. A marketing strategy should be cantered
around the key concept that customer satisfaction is the main goal.

A marketing strategy refers to a business's overall game plan for reaching

prospective consumers and turning them into customers of their products or services.

Key part of the general corporate strategy

Marketing strategy is a method of focusing an organization’s energies and
resources on a course of action which can lead to increased sales and dominance
of a targeted market niche. A marketing strategy combines product development,
promotion, distribution, pricing, relationship management and other elements;
identifies the firm’s marketing goals, and explains how they will be achieved,
ideally within a stated timeframe. Marketing strategy determines the choice of
target market segments, positioning, marketing mix, and allocation of resources.
It is most effective when it is an integral component of overall firm strategy,
defining how the organization will successfully engage customers, prospects, and
competitors in the market arena. Corporate strategies, corporate missions, and
corporate goals. As the customer constitutes the source of a company’s revenue,
marketing strategy is closely linked with sales. A key component of marketing
strategy is often to keep marketing in line with a company’s overarching mission
statement.
Basic theory:
1. Target Audience
2. Proposition/Key Element
3. Implementation

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Notes Tactics and Actions

A marketing strategy can serve as the foundation of a marketing plan. A marketing
plan contains a set of specific actions required to successfully implement a
marketing strategy. For example: “Use a low-cost product to attract consumers.
Once our organization, via our low-cost product, has established a relationship
with consumers, our organization will sell additional, higher-margin products
and services that enhance the consumer’s interaction with the low-cost product
or service.”
A strategy consists of a well thought out series of tactics to make a marketing
plan more effective. Marketing strategies serve as the fundamental underpinning
by marketing plans designed to fill market needs and reach marketing objectives.
Plans and objectives are generally tested for measurable results.
A marketing strategy often integrates an organization’s marketing goals, policies,
and action sequences (tactics) into a cohesive whole. Similarly, the various
strands of the strategy, which might include advertising, channel marketing,
internet marketing, promotion and public relations, can be orchestrated. Many
companies cascade a strategy throughout an organization, by creating strategy
tactics that then become strategy goals for the next level or group. Each one
group is expected to take that strategy goal and develop a set of tactics to achieve
that goal. This is why it is important to make each strategy goal measurable.
Marketing strategies are dynamic and interactive. They are partially planned
and partially unplanned. See strategy dynamics.
9.3 STRATEGIES FOR INDUSTRIAL MARKETING:
Marketing strategies may differ depending on the unique situation of the
individual business. However, there are a number of ways of categorizing some
generic strategies. A brief description of the most common categorizing schemes
is presented below:
Strategies based on Market Dominance - In this scheme, firms are classified
based on their market share or dominance of an industry. Typically, there are four
types of market dominance strategies:
• Leader
• Challenger
• Follower
• Nicher
9.4 PORTER GENERIC STRATEGIES
Strategy on the dimensions of strategic scope and strategic strength. Strategic
scope refers to the market penetration while strategic strength refers to the firm’s
sustainable competitive advantage. The generic strategy framework (porter
1984) comprises two alternatives each with two alternative scopes. These are

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Differentiation and low- cost leadership each with a dimension of Focus-broad Notes
or narrow.
• Product differentiation (broad)
• Cost leadership (broad)
• Market segmentation (narrow)
Innovation Strategies - These deals with the firm’s rate of the new product
development and business model innovation. It asks whether the company is on
the cutting edge of technology and business innovation. There are three types:
• Pioneers
• Close followers
• Late follower
Growth Strategies - In this scheme we ask the question, ―How should the firm
grow? There are a number of different ways of answering that question, but the
most common gives four answers:
• Horizontal integration
• Vertical integration
• Diversification
• Intensification
A more detailed scheme uses the categories
• Prospector
• Analyser
• Defender
• Reactor
• Marketing warfare strategies - This scheme draws parallels between
marketing strategies and military strategies.
1. Strategic models:
Marketing participants often employ strategic models and tools to analyse
marketing decisions. When beginning a strategic analysis, the 3Cs can be
employed to get a broad understanding of the strategic environment. An Ansoff
Matrix is also often used to convey an organization’s strategic positioning of
their marketing mix. The 4Ps can then be utilized to form a marketing plan to
pursue a defined strategy.
There are many companies especially those in the Consumer Package Goods
(CPG) market that adopt the theory of running their business cantered around
Consumer, Shopper & Retailer needs. Their Marketing departments spend
quality time looking for “Growth Opportunities” in their categories by identifying

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Notes relevant insights (both mind-sets and behaviours) on their target Consumers,
Shoppers and retail partners. These Growth Opportunities emerge from changes
in market trends, segment dynamics changing and also internal brand or
operational business challenges. The Marketing team can then prioritize these
Growth Opportunities and begin to develop strategies to exploit the opportunities
that could include new or adapted products, services as well as changes to the
7Ps.
Real-life marketing
Real-life marketing primarily revolves around the application of a great deal
of common sense; dealing with a limited number of factors, in an environment
of imperfect information and limited resources complicated by uncertainty and
tight timescales. Use of classical marketing techniques, in these circumstances,
is inevitably partial and uneven.
Thus, for example, many new products will emerge from irrational processes
and the rational development process may be used (if at all) to screen out the
worst non-runners. The design of the advertising, and the packaging, will be the
output of the creative minds employed; which management will then screen,
often by ‘gut-reaction’, to ensure that it is reasonable.
For most of their time, marketing managers use intuition and experience to
analyse and handle the complex, and unique, situations being faced; without
easy reference to theory. This will often be ‘flying by the seat of the pants’, or
‘gut-reaction’; where the overall strategy, coupled with the knowledge of the
customer which has been absorbed almost by a process of osmosis, will determine
the quality of the marketing employed. This, almost instinctive management, is
what is sometimes called ‘coarse marketing’; to distinguish it from the refined,
aesthetically pleasing, form favoured by the theorists.
The Purpose of Strategic Marketing
Marketing Strategy is a long-term approach to planning, with the main goal of
achieving a sustainable competitive advantage. Strategic Planning includes an
analysis of the Strategy, starting from the status of the business before shaping,
evaluating and selecting a market-oriented competitive position that contributes
to the achievement of organizational marketing goals and objectives.
In this context, Marketing Strategy is utilized for the development of partnerships
with the customers of the organization. It is also employed for the organization to
gain insights in its customers, in terms of the features, specifications and benefits
of the products and/or services the organization offers. Essentially, Marketing
Strategy focuses on encouraging the target population to buy specific products
and services offered by the business.
• A Marketing Strategy may be entirely innovative or it may have been
tested before.

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• An Effective Marketing Strategy will help a business prevail over Notes

competition.
9.5 THE IMPORTANCE OF MARKETING STRATEGY:
In short, Marketing Strategy should clearly explain how an enterprise will
achieve its predefined goals. More specifically, effective Marketing Strategy:
• May provide the business with an advantage over its competitors
• Contributes to the development of goods and services that maximize
profitability,
• Helps to identify parameters affected by business growth and thus facilitates
the creation of a business plan that will meet customer needs.
• Helps to determine the right price for the goods and services offered by the
enterprise, based on information gathered in the context of market research
conducted as part of the Strategy formulation process.
• Ensures effective coordination of the various organizational departments.
• Helps the enterprise make the most of its resources in delivering its sales
message to the target market.
• It helps to proactively determine the advertising/ promotional budget, by
developing a methodology for the budgeting of the advertising/ promotional
budget.
Please note that for Strategy design and Marketing Plan preparation, it is
important to take into account the characteristics of the target market. The Buying
Behaviour and the Purchasing Process in Institutional Markets are completely
different from Consumer Markets.
In the previous Section, Market Analysis, we describe the steps and facts
analysed in order for the enterprise to gain market insight, based on the
characteristics of the specific enterprise, and its strengths and weaknesses in
relation to the competition and the environment in which it operates. We also
describe the criteria and rationale involved in defining the target market of the
enterprise, as well as potential Market segmentation and Segment(s) selection.
In the Marketing Strategy formulation Section, we explain the stages involved
in developing your Marketing Strategy, based on the results of the Market
Analysis Section.
Defining your Marketing Strategy is a prerequisite for the development of an
effective Marketing Plan. Once your Marketing Strategy is established, you can
develop a Marketing Plan that explains how you will implement your Strategy
in practice based on measurable data.

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Notes Stages in Marketing Strategy definition:

The following steps are involved in defining Marketing Strategy:
• Marketing Strategy Definition
o Unique Selling Proposition (USP)
o Total Customer Experience - Marketing Mix
• Product
• Price
• Place
• Promotion (Promotional Strategy - Marketing Plan)
• Marketing Plan Preparation
o Marketing Plan
o Tracking and measuring the results of the Marketing Planning
Unique Selling Proposition (USP):
First you need to describe the Unique Selling Proposition (USP) of your business.
The unique selling proposition must be an exciting proposal that describes the
essence of your business.
Your Unique Selling Proposition should distinguish your products and/ or
services from those of your competitors.
It should be expressed in just one sentence and summarise the essence of your
business, as your Unique Selling Proposition will be the focus of all Marketing
efforts.
The question that your Unique Selling Proposition should answer for your
customer base is: “That’s why you have to buy from me instead of my
competition.”
The key to a successful Unique Selling Proposition is to provide your potential
customers with a specific benefit they find attractive. It’s not enough to say that
your product or service is “better” or that it has “greater value”. You have to
communicate to your customers, what is the specific benefit you offer them.
Thus, before launching a product or service into the market, it is useful to develop
a Unique Selling Proposition and proactively assess whether, or not, the product
or service is likely to sell:
• If there is no benefit that differentiates your product or service from
competition, why would anyone want to buy it?
• And, even if there is a benefit that makes your product or service stand out,
is this something consumers consider as added value to them?
If none of the above conditions is met, why spend time or money on developing
a product that will not be sustainable in the market?

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The Unique Selling Proposition is a particularly important marketing tool for Notes
small businesses that are compelled to compete with other small businesses, as
well as larger ones. Your business may outperform competition, but if you do not
communicate it to potential customers, they will have no reason to choose your
business over a competitor.
Four steps for developing a Unique Selling Proposition:
1. The first step involves evaluating the products and/ or services your business
offers, always from the perspective of the target market, as already defined
in the Market Analysis section, according to economic characteristics,
demographic characteristics, geographic characteristics, psychographic
characteristics, behaviours and trends. As part of this step, the following
questions should be answered from the perspective of the target market:
“What does our typical customer really want?”, “Does our customer base
want a lower price, better service, a specific location, home delivery, etc.?
“
2. During the second step, it is necessary to determine which specific benefit,
out of the benefits your target market values, your products and/ or services
can offer better than the competition. In essence, you should answer the
question: “What do my products or services offer that the products or
services of my competitors do not offer?” As part of this assessment, it
is necessary to take into account the strengths and weaknesses of your
business in relation to the competition, as explained in the Market Analysis
Section. Note that the promise of a particular benefit to the customer,
through the Unique Selling Proposition, must be real! If a false promise is
given your Marketing actions will have negative effects.
3. The next step is to write a proposal that incorporates the outcome of the two
previous stages. The proposal should be quite easy to remember, so that
it can be used as a promotional slogan. For example, “We serve the best
gluten-free pizza in the city” or “High-quality furniture at an affordable
price.”
4. Finally, you need to integrate your Unique Selling Proposition into all your
advertising and promotional activities, such as your emails to customers,
your website, all your publications and profiles on social media such as
Facebook, LinkedIn, Twitter, Pinterest, etc.
Some well-known examples of Unique Selling Proposition
• M&M “The milk chocolate that melts in your mouth, not in your hand.”
• FedEx “When it absolutely, positively has to get there overnight.”
• Subway “Subs with under 6 grams of fat.”
• Hallmark “When you care enough to send the very best.”

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Notes Total Customer Experience - Marketing Mix

The next step in defining your Marketing Strategy is to identify the parameters
that determine the total experience of your customers, from the products and/ or
services you sell.
The overall experience of your customers is determined by the Marketing Mix
you provide, i.e. the combination of Product, Price, Place and Promotion you
offer. Also, people constitute important parameter of your Marketing Mix, as at
every contact of your business with your potential customers the characteristics
of your Marketing Mix must be transmitted.
Your Marketing Mix must be configured in order to serve the characteristics and
needs of your target market, as identified in the Market Analysis section. And of
course it should fully reflect your Unique Selling Proposition.
Moreover, your Marketing Mix, compared to that of your competition, determines
your Market positioning.
Below you can see, in brief, some of the basic information that should be
evaluated for the development of your Marketing Mix (“4 Ps”).
Please note that the Marketing Mix should be adjusted for each market segment
selected, in order to provide the desired Market positioning in each specific
segment.
• Product: Product refers to either a natural product or a service you are
planning to offer. Some of the product/ service parameters to be determine
involve:
o Brand Name
o Products or Services
o Functionality
o Packaging
o Quality
o Warranty
• Price: The pricing factor examines the pricing policy for your product or
service. Pricing aspects that need to be determined include:
o Bundling (if you have related products/ services)
o Price flexibility
o Pricing strategy
o Retail Price
o Seasonal Price (if applicable)
o Wholesale price (for sales volumes)

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• Location: Also known as Distribution, this parameter concerns the delivery Notes
of your product or service to your customers. Location decisions involve
defining parameters such as:
o Distribution centres
o Channels of distribution
o Inventory management
o Logistics
o Order processing
o Transportation
o Distribution type
o Warehousing/ Storage
• Promotion: This parameter determines the various aspects of how you
plan to advertise/ promote your product or service. Elements to be decided
include:
o Advertising
o Marketing Budget
o Promotional Strategy
o Publicity and Public Relations
o Sales Team
o Sales promotion
9.6 MARKETING PLAN PREPARATION
Once your Marketing Strategy has been defined, you can proceed with the
development of your Marketing Plan. The Marketing Plan is a document that
includes detailed description and instructions for the implementation of the
Marketing Tactics and Programmes of the enterprise or a product or a service.
The Marketing Plan covers the specific Marketing Tactics and Programmes to be
implemented over a specified period of time, usually annually.
A Marketing Plan focuses on attracting new and retaining existing customers. It
is Strategic and includes figures, facts and goals. A Marketing Plan describes all
the tools and tactics an enterprise will employ to achieve its sales goals. It’s the
action plan that defines what you’re going to sell, who wants to buy it, and the
tactics you’ll use to achieve your sales targets.
Elements determined by the Marketing Plan
The Marketing Plan determines specific actions to be implemented. For each
specific action to be implemented the Marketing Plan specifies the medium/
media to be utilized, the Marketing material to be prepared and utilized, the

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Notes launch and completion dates, the cost of implementation, and the person(s) to
carry out the implementation of each action – including internal and/ or external
partners - and their responsibilities for efficient and effective implementation. In
this perspective, the Marketing Plan includes a detailed timetable of the actions
each person involved should perform. Also, it includes sales forecasts that project
the results of each activity. This is vital in order to avoid catastrophic stock-outs
due to increased sales resulting from each marketing action.
For the selection of advertising/ promotional media/ channels, target market –
customers’ characteristics should be taken into account. In this context, questions
such as “who makes the purchase decision?”, “what sources of information
does the decision maker use?”, “who influences the decision maker?” should be
answered. Also, the cost for each medium/ channel should be assessed In relation
to the Target Market reach provided. In order to maximize the effectiveness of
marketing actions and optimize the utilization of the Marketing budget, it is
important to select media and actions that enhance Target Market reach.
For example, exploiting the opportunities offered by Internet Marketing, in
relation to “traditional” advertising/ promotion media, enhances both increased
targeting and metrics accuracy. In addition, the use of the Internet provides
the opportunity to implement interactive marketing activities and to directly
communicate with your target market(s).
It is important to take into account seasonality factors, where applicable.
Monitoring and measuring the outcome of the Marketing Plan
As for any Plan, the progress of the Marketing Plan should be monitored and
measured, in order to adjust/revise as needed.
The results of each marketing action/ campaign provide insights that can be
utilized as benchmark for evaluating the Marketing Plan and adjusting Marketing
Actions to follow.
Also, whenever influencing market parameters change, the Marketing Plan
should be amended accordingly in order to remain aligned with your Marketing
Strategy and goals.
Moreover, it is imperative that you continuously monitor the market for marketing
activities by the competition. Such activities can affect the effectiveness of your
own marketing activities; thus you must take them into account both for your
implementation timeframe as well as for evaluating the results of your activities.
When marketing budgets are limited, Marketing needs to work smarter
than ever. Evaluating your activities does not need to be costly and can
provide significant cost savings in the long-run.
Utilize your website to measure your marketing
Various marketing activities are designed to drive customers to your website,
so you should analyze your website statistics on a regular basis. You need to

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know how many people visit your website, which pages they visit and when. For Notes
example, if you run ads in the press, you can monitor if the traffic to your website
increased at the time an ad was released.
Ask your customers how they found you
Ask your new clients how they learnt about you. It could have been “word-of-
mouth,” or by subscribing to a list, or they could have seen you at an exhibition
you attended. You should always ask and find out their source of information,
and you should keep a record with their answers. This data will help you evaluate
the effectiveness of your marketing methods.
Ask your customers why they chose you
You may know the channel through which your customers have reached you, but
what was your message that won their interest? Ask a group of customers what
made them get in touch with your business. It could be the reputation of your
business or the quality you offer in relation to your prices. The message that will
prove to be more effective should become the focus of your future Marketing
activities.
Ad Measurement
If you advertise in different places or different media, you can use different
phone numbers or URLs, tailored for each individual ad, in order to determine
the source of interest. This way you can compare response rates and evaluate
which option offers the best return on investment (Return on Investment).
Measure your outgoing mail
In each letter you send, you can include a prepaid card or envelope for prepaid
replies so that there is no cost for the customer to reply. The less one needs to
do to answer, the higher the response rate. Response cards should have a code
depending on the target market segment of the recipient, so that you can track
the origin of the response.
Ask your customers for your marketing
The response rate to your outgoing mail answers “how many”, not “why”.
For example, if you have sent 1000 letters, you can call a small sample of 50
recipients and request their feedback on points, such as:
• If they remember receiving your letter.
• If they have opened your letter.
• Can they remember what your main message was?
• Have they replied?
• Why?
Based on the results, you may find that while many recipients positively assessed
your letter, they did not proceed to reply. In such a case, sending a reminder letter

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Notes will increase the response rate. Or you may find that using media other than mail,
such as phone or email, will enhance the response rate.
9.7 STEPS OF STRATEGY FORMULATION
The steps of strategy formulation include the following:

1. Establishing Organizational Objectives: This involves establishing long-

term goals of an organization. Strategic decisions can be taken once the
organizational objectives are determined.
2. Analysis of Organizational Environment: This involves SWOT analysis,
meaning identifying the company’s strengths and weaknesses and keeping
vigilance over competitors’ actions to understand opportunities and threats.
Strengths and weaknesses are internal factors which the company has
control over. Opportunities and threats, on the other hand, are external
factors over which the company has no control. A successful organization
builds on its strengths, overcomes its weakness, identifies new opportunities
and protects against external threats.
3. Forming quantitative goals: Defining targets so as to meet the company’s
short-term and long-term objectives. Example, 30% increase in revenue
this year of a company.
4. Objectives in context with divisional plans: This involves setting up targets
for every department so that they work in coherence with the organization
as a whole.
5. Performance Analysis: This is done to estimate the degree of variation
between the actual and the standard performance of an organization.

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6. Selection of Strategy: This is the final step of strategy formulation. It Notes

involves evaluation of the alternatives and selection of the best strategy
amongst them to be the strategy of the organization.
Strategy formulation process is an integral part of strategic management, as it
helps in framing effective strategies for the organization, to survive and grow in
the dynamic business environment.
9.8 LEVELS OF STRATEGY FORMULATION
There are three levels of strategy formulation used in an organization:

• Corporate level strategy: This level outlines what you want to achieve:
growth, stability, acquisition or retrenchment. It focuses on what business
you are going to enter the market.
• Business level strategy: This level answers the question of how you are
going to compete. It plays a role in those organization which have smaller
units of business and each is considered as the strategic business unit
(SBU).
• Functional level strategy: This level concentrates on how an organization
is going to grow. It defines daily actions including allocation of resources
to deliver corporate and business level strategies.
Hence, all organizations have competitors, and it is the strategy that enables
one business to become more successful and established than the other.
SUMMARY
• It is clear that the marketing strategy is the most important tool while
framing the overall business strategy of the organization.
• While designing the marketing strategy the firm has to consider many
factors like potential customers, market segmentation, unique selling
proposition, situations prevailing etc.

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Notes • Effective marketing strategy benefits the company in not only knowing its
customers but also delivering maximum customer satisfaction.
• Thus, an effective marketing strategy finally results into building corporate
image of the company.
• The functional strategy should be designed on the basis of business level
strategy, whereas the business level strategy should be derived from the
corporate level strategy.
• A Marketing Strategy may be entirely innovative or it may have been
tested before.
• Helps to determine the right price for the goods and services offered by the
enterprise, based on information gathered in the context of market research
conducted as part of the Strategy formulation process.
• Your Unique Selling Proposition should distinguish your products and/ or
services from those of your competitors.
• A Marketing Plan focuses on attracting new and retaining existing
customers. It is Strategic and includes figures, facts and goals.

CASE STUDY :
The case discusses the marketing strategies of Japan-based Honda
Motor Company Limited (HMCL) in India. Though HMCL had entered India
way back in 1984 by entering into joint ventures with leading two-wheeler
companies, the company established its wholly owned subsidiary - Honda
Motorcycle and Scooters India Limited (HMSI) in October 1999. Within a
couple of years after the launch of its successful products including Activa,
Dio and Eterno, HMSI had emerged as the largest scooter company in India.
The case describes in detail the product, pricing, distribution and promotional
strategies of HMSI. It briefs the challenges faced by the company and its recent
foray in the motorcycles business in India.
The case also includes a brief note on the Indian two-wheeler industry
describing the leading players and their marketing strategies.

ISSUES:
The case is structured in a way so as to enable students to:
• Understand the competitive landscape in the Indian two-wheeler industry
and study the marketing strategies of Honda in particular.
• Study the entry strategies of two-wheeler manufacturers in India.
• Examine and analyze the marketing mix of Honda Motors.
• Compare and contrast the marketing strategy of Honda with other leading
players in the Indian two-wheeler industry including Bajaj Auto and Hero
Honda Motors.

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KEYWORDS: Notes

Market Niches: A firm in an industry that serves small segments that other firms
over looks or ignore.
Market Follower: A runner up firm in an industry that wants to hold its share
without rocking the boat.
Focus: Here the company focuses its effort on servicing a few market segments
well rather than going after the whole market.
Differentiation: the company concentrates on creating a highly differentiated
product line and marketing programme so that it comes across as the class leader
in the industry.
Matrix Plotting: On analysis of the competitors, product positions plotting have
to be done on the matrix by combining the PUV analysis with appropriate price
information.
Hybrid is the most popular strategy, where firms have a uniform product, but
change advertising and promotion to suit local conditions.
EXCERCISE:
POINTS TO PONDER:
Answer the following Questions Given below:
1.The customer driven marketing strategy is another name of------------------
2. Identify segments of customers who share common characteristics and the
marketing approach for each one -----------------
3. Articulate where your product fits in the market, what sets it apart, and why
customers should care about it-----------------
4.Considering competitive positions, the firm other than market leader who is
fighting hard in its industry to increase market share is classified as-------------
5. Determine the external market factors that could impact the success of your
business---------------
SELF ASSESSMENT QUESTIONS:
SHORT ANSWER QUESTIONS:
1. What is marketing strategy?
2. Define industrial Marketing.
3. Give reasons for additional Ps for services.
4. What is porter ‘s analysis?
5. What is marketing plan preparation?
LONG ANSWER QUESTIONS:
1. Explain the key drivers of marketing strategies.
2. Bring out the characteristics of B2B marketing for marketers. What are the
marketing strategies in industrial marketing?
3. Discuss the porter’s model for competitor’s analysis.
4. Explain the importance of analyzing consumer market.
5. State the characteristics of industrial markets. Discuss the importance of
analyzing industrial market.

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Notes
LESSON 10 – KEY DRIVERS OF
MARKETING STRATEGY
CONTENT:
LEARNING OBJECTIVE
LEARNING OUTCOME
10.1 INTRODUCTION
10.2 MEANING AND DEFINITION OF MARKETING STRATEGY KEY
DRIVERS
10.3 MARKETING STRATEGIES AND MARKETING PLANS
10.4 CONDITIONS FOR SUCCUSSFUL MARKETING STRATEGY
10.5 MARKETING STRATEGY
SUMMARY
CASE STUDY
KEYWORDS
EXERCISE
SELF ASSESSMENT QUESTIONS

LEARNING OBJECTIVE:
• To goal set by a business when promoting its products or services to
potential consumers that should be achieved within a given time frame.
• The concept of Strategic planning that encompasses marketing, promotion,
sales, and financial goals and is essentially about developing goals for your
business.
• The effective marketing strategy company can establish an effective
distribution network to reach its customers.
LEARNING OUTCOME:
• A marketing plan is also important for developing a promotional strategy
as it helps the business to identify its target markets and to set measurable
goals.
• The ultimate goal of a marketing strategy is to achieve and communicate a
sustainable competitive advantage over rival companies by understanding
the needs and wants of its consumers.
• To understand many businesses are adopting consumer-oriented marketing
strategies because they are so often useful in leading to higher sales and
profit.

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10.1 INTRODUCTION: Notes

At the heart of any business strategy is a marketing strategy. A marketing strategy

is something that every single business; no matter how big or small, needs to have
in place. Businesses exist to deliver products that satisfy customers. Marketing
is the process of planning and executing the conception, pricing, promotion, and
distribution of ideas, goods, and services. A marketing strategy is composed of
several interrelated components called the marketing mix. The Marketing mix
consists of answers to a series of product and customer related questions.
A clear marketing strategy should revolve around the company’s value
proposition, which communicates to consumers what the company stands for,
how it operates, and why it deserves their business. This provides marketing
teams with a template that should inform their initiatives across all of the
company’s products and services. For example, Wal-Mart (WMT: NYSE) is
widely known as a discount retailer with “everyday low prices,” whose business
operations and marketing efforts are rooted in that idea.
10.2 MEANING AND DEFINITION OF MARKETING STRATEGY KEY
DRIVERS:
The effective marketing strategy plays a very important role in the business
working of the firm. Some of its important benefits are discussed as follows:
1. Strategic Planning: The most important aspect of marketing strategy is
that it involves strategic planning. Strategic planning is a concept that
encompasses marketing, promotion, sales, and financial goals and is
essentially about developing goals for your business. Having a strategic
plan for the business means having a plan in place to deal with both
expected and unexpected situations. For example, if company knows that
its mortgage will increase by 5 percent next year, then a strategic plan will
outline how company will increase sales or decrease expenses to meet this
additional outflow.
2. Establishes Effective Distribution: With the effective marketing strategy
company can establish an effective distribution network to reach its
customers. Once the strategy is finalized it is very easy to locate target
customers and also the market areas where it can sell product effectively.
For example, younger customers will be more likely to shop using a smart
phone or on a website. Older customers might prefer to shop at retail
outlets. If the market research shows that the company’s product needs to
be in retail stores but if the company doesn’t have a sales force, then it can
use a wholesaler or distributor.
3. Streamlines Product Development: A marketing strategy helps the
company to create products and services with the best chances for making a
profit. This is because marketing strategy starts with market place research,
taking into Consideration Company’s optimal target customer, what your

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Notes competition is doing and what trends might be on the horizon. Using this
information, company can determine the benefit customers and clients
want what they’re willing to pay and how company can differentiate its
product or service from the competition.
4. Developing Financial Goals: Marketing strategies are also important for
guiding the business into the development of financial goals. Financial
goals are two-fold: They are related to sales targets and also to expenses
budget. Sales targets are initially set as part of the marketing plan 4 but might
change over time according to changing market conditions, increases in
product price, or increases or decreases in consumer demand. Monitoring
expenses is also part of financial goal development. If business tends to
spend more than it brings in, it will have a serious problem maintaining
long-term business viability. However, if the business is able to closely
monitor its outflows, only spending what it absolutely needs to, then it will
be better equipped to increase the profit margins.
5. Preparation of Marketing Plan: Marketing strategies are often first
brainstormed and written as part of an organization’s marketing plan.
Most marketing plans include the current or expected strategies for your
products, the price points of those products, how to distribute the products,
and also the advertising and marketing tools. A marketing plan is also
important for developing a promotional strategy as it helps the business
to identify its target markets and to set measurable goals. It is vital to the
success of the organization that implements a marketing plan that aims for
growth and positive change in the bottom line.
6. Understanding the Customers: Marketing strategies can also assist the
“right” demographics. Effective marketing strategy enables a business
firm to identify market segments that it will serve and what product offers
it will make. A well-defined marketing strategy clearly describes whom to
serve and whom to exclude.
7. Assists with Marketing Communications: Market research will help to
create brand, or image it wants to establish about business. It facilitates
the company to communicate to its target customer. Marketing strategy
facilities the company to determine if a particular magazine, radio station
or website fits company’s selling plans.
8. Facilitates Optimum Use of Resources: There can be optimum utilization
of resources in order to achieve the desired objectives. If there are no proper
strategies, then the organization may not be able to make arrangement of
proper resources. There may be arrangement of fewer resources, in which
case, the organization may not be able to undertake its activities and there
may be also arrangement of more resources 5 that what is actually required
and as such it may lead to wastage of resources.

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9. Selection of the Right Communication Tactics: A clear understanding of Notes

the target audience and an idea of the desired goal will help to drive the
selection of appropriate media choices. For instance, if the target audience
is elderly, the Internet is not likely to represent a good communication
tactic. Conversely, if the target audience is college-age students, local
newspapers are not likely to be a good choice. The company’s goals also
provide insight into communication tactics. A goal of increasing marketing
share by 25 percent might require an extensive multi-media campaign; a
goal of adding 10 new customers might require only a news release and an
ad in the local paper. Marketers rarely benefit by over-reaching their goals
and being unable to meet demand.
10. Enhances Corporate Image: Well defined strategies can generate corporate
image of the firm. This is because strategies when implemented properly
bring good returns to the organization. The organization is in a position to
undertake its social responsibility towards customers, employees, suppliers
and others and as such the organization can earn goodwill in the market.
10.3 MARKETING STRATEGIES VS MARKETING PLANS:
The marketing strategy informs the marketing plan, which is a document that
details the specific types of marketing activities a company conducts and contains
timetables for rolling out various marketing initiatives.
Marketing strategies should ideally have longer lifespans than individual
marketing plans because they contain value propositions and other key elements
of a company’s brand, which generally hold consistent over the long haul. In
other words, marketing strategies cover big-picture messaging, while marketing
plans delineate the logistical details of specific campaigns.
Academics continue to debate the precise meaning of marketing strategy, and
so multiple definitions exist. The following quotes from industry experts help
crystallize the nuances of (modern) marketing strategy:
“The sole purpose of marketing is to sell more to more people, more often and at
higher prices.” (Sergio Zyman, marketing executive and former Coca-Cola and
JC Penney marketer)
“Marketing is no longer about the stuff that you make, but about the stories you
tell.” (Seth Godin, former business executive, and entrepreneur)
“The aim of marketing is to know and understand the customer so well the
product or service fits him and sells itself.” (Peter Drucker, credited as the
founder of modern management)
“Marketing’s job is never done. It’s about perpetual motion. We must continue to
innovate every day.” (Former vice chair and chief marketing officer, GE)
“Take two ideas and put them together to make one new idea. After all, what is
a Snuggie but the mutation of a blanket and a robe?” (Jim Kukral, speaker and
author of Attention!)

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Notes The Creation of Marketing Strategy:

The ultimate goal of a marketing strategy is to achieve and communicate a
sustainable competitive advantage over rival companies by understanding
the needs and wants of its consumers. Whether it’s a print ad design, mass
customization, or a social media campaign, a marketing asset can be judged
based on how effectively it communicates a company’s core value proposition.
Market research can help chart the efficacy of a given campaign and can help
identify untapped audiences to achieve bottom-line goals and increase sales

The marketing plan details the strategy that a company will use to market its products
to customers.

10.4 CONDITIONS FOR A SUCCESSFUL MARKETING STRATEGY:

The essentials of an effective marketing strategy refer to the guidelines for
designing a marketing strategy. The following are the essentials of a good
marketing strategy:
1. Knowing the Target Audience: For a truly effective marketing strategy,
company must study and evaluate its business and its target audience, then
create a plan of action and follow through with it. The first part of business
is to evaluate the actual business the company is having. This means
looking at business from a customer’s or end user’s point of view and
finding what they truly get out of company. And many business owners are
surprised to find that it’s not what they actually thought.
2. Proper Market Segmentation: To have effective marketing strategy
proper market segmentation is required. Market segmentation facilitates
demographic segmentation of the customers. For example, a plumbing
business might focus on homeowners, whereas the companies that supply
video games might focus on teenagers. It can’t be said enough how
important it is to know who your target audience is, and how you can best
appeal to them.
3. Unique Selling Proposition: The next part of creating a great marketing
strategy is finding out what company offers that no other company does.
To set the company apart, it should advertise the thing that makes the
company special – the magic that no other company has. This unique
selling proposition may include offering products at the lowest prices,
providing the best customer service etc. This must not only be included in
marketing strategy, but it must be a part of every aspect of marketing done
by the company.
4. Situation Analysis: Marketing strategy should conduct market analysis
i.e. SWOT analysis (strengths, weaknesses, opportunities, and threats),
and a competitive analysis. The market analysis will include a market
forecast, segmentation, customer information, and market needs analysis.
This analysis will make the strategy effective.

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5. Objective Oriented: The strategy should be objective oriented. It should be Notes

developed by considering the organizational objectives. Strategies, which
are not consistent with the objectives of the organizations, do not serve
any purpose. The strategies which are consistent with the organizational
objectives will be able to achieve desired objectives.
6. Identification of Competitive Advantage: One important part of any
strategy is a specification of how the organization will compete in each
business and product-market within its domain. How can it position itself
to develop and sustain a differential advantage over current and potential
competitors. To answer such questions, managers must examine the market
opportunities in each business and product market and the company’s
distinctive competencies or strengths relative to its competitors.
7. Simplicity: The marketing strategy should be simple and clear to understand.
It should be well defined. Clarity in terms is important while framing
marketing strategy. While designing the marketing strategy ambiguity
should be avoided. It should be understood by all in the organization.
8. Flexibility: Business has to survive in the competitive and uncertain
business environment. These environmental factors are not constant. To
adjust with these changes, marketing strategy should be flexible. It should
allow the changes in the short run. They should not be rigid. It should
allow modifications whenever the situation demands.
9. Resource deployments: Every organization has limited financial and
human resources. Formulating a strategy also involves deciding how those
resources are to be obtained and allocated, across businesses, product-
markets, functional departments, and activities within each business or
product-market.
10. Comprehensive: The marketing strategy should be comprehensive in
nature. It should cover all those areas which are relevant to the firm. A
good strategy always considers the factors which are affecting the business
functioning directly or indirectly.
11. Consistency: The marketing strategy should be consistent with the
strategies of the other departments of the organization. All the functional
strategies should be complimentary to each other; ultimately all the
functional strategies of the organization should be consistent with the
overall organizational strategy.
12. Periodical Review: Strategies should be periodically reviewed. Such a
review allows the firm to make necessary changes in the strategy depending
upon the needs of the firm. Periodic review also benefits to incorporate the
fluctuations taking place in the business environmental factors.

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Notes The Strategy can be Broadly Classified into Three Levels:

Corporate Strategy - Defining what business the company is in Setting the
overall structure, systems and processes
Business Strategy - Deciding how to compete Identifying competitive advantage
Selecting key success factors
Functional Strategy - Coordination of company departments to business
strategy
1. Corporate Strategy: Corporate level strategy occupies the highest level of
strategic decision-making and components dealing with the objective of the firm,
acquisition and allocation of resources and coordination of strategies of various
SBUs for optimal performance. Top management of the organization makes
such decisions. The nature of strategic decisions tends to be value-oriented,
conceptual and less concrete than decisions at the business or functional level.
Single-business companies have the advantage of focus and rapid response but
are vulnerable to problems in their industry.
Their corporate strategy must demonstrate the advantages of remaining active
in only one industry while evaluating business opportunities in areas with
complementary activities. With a goal of optimizing company operations,
profitability and growth, the corporate strategy must compare the return of a
continuing investment in the single business with the acquisition or starting up
of complementary businesses. At the corporate level, managers must coordinate
the activities of multiple business units.
Attempts to develop and maintain distinctive competencies at the corporate level
focus on generating superior human, financial, and technological resources;
designing effective organization structures and processes; and seeking synergy
among the firm’s various businesses.
Synergy can provide a major competitive advantage for firms where related
businesses share R&D investments, product or production technologies,
distribution channels, a common sales force and/or promotional themes.
Corporate strategy describes company’s overall direction in terms of its general
attitude toward growth and the management of its various businesses. The
corporate strategy typically fits within the three main categories - stability
strategy, growth strategy and retrenchment strategy.
a) Stability strategy: The basic approach of stability strategy is to maintain
present course and be steady as it goes. In an effective stability strategy,
companies will concentrate their resources where the company presently has
or can rapidly develop a meaningful competitive advantage in the narrowest
possible product-market scope consistent with the firm’s resources and market
requirement’s.

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b) Growth strategy: Growth strategy is the means through which an organization Notes
plans to achieve its objective to grow in turnover and volume. There are four
broad growth strategies which include; product development, diversification,
market development and market penetration. It is a style that seeks stock with
future investment rates of return being great than the stocks. A business growth
strategy starts with market insights. The source of insights lies within and across
the market ecosystem.
While research firms and strategic marketing consultants can bring these insights
to bear on an ad-hoc basis, companies committed to growth will serve themselves
well by developing systems and processes to ensure a continuous flow of market
insights into their business. This is a key strategy for developing the demand side
of the business.
Business growth strategies are unique in every business. However, there are
broad categories of strategies for business growth: ƒ New Product/Service
Strategy Development ƒ Market Expansion Strategy ƒ Product Diversification
Strategy ƒ Market Opportunity Analysis ƒ Competitive Market Analysis ƒ
Market Segmentation Strategy
c) Retrenchment strategy: A strategy used by corporations to reduce the diversity
or the overall size of the operations of the company. This strategy is often 10
used in order to cut expenses with the goal of becoming a more financial stable
business.
Typically, the strategy involves withdrawing from certain markets or the
discontinuation of selling certain products or service in order to make a beneficial
turnaround. Retrenchment is a corporate level strategy that aims to reduce the size
or diversity of an organization. Retrenchment is also reduction in expenditure to
become financially stable.
Retrenchment strategy is a strategy used by corporate in order to reduce the
diversity or to cut the overall size of the operations of the company. This strategy
is often used to cut down expenses with the goal of becoming more financially
stable business. Typically, the strategy involves withdrawing from certain
markets or the discontinuation of selling certain products or services in order to
make a beneficial turn around.
2. Business Strategy: The business strategy of a single-business company is
similar to that of a business unit of a diversified company except that the business
strategy must support corporate strategic initiatives aimed at the single business.
The business strategy sets goals for performance, evaluates the actions of
competitors and specifies actions the company must take to maintain and improve
its competitive advantages. Typical strategies are to become a low-price leader,
to achieve differentiation in quality or other desirable features or to focus on
promotion. How a business unit competes within its industry is the critical focus
of business-level strategy.

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Notes A major issue in a business strategy is that of sustainable competitive advantage.

What distinctive competencies can give the business unit a competitive
advantage? And which of those competencies best match the needs and wants
of the customers in the business’s target segments? Another important issue a
business-level strategy must address is appropriate scope: how many and which
market segments to compete in, and the overall breadth of product offerings and
marketing programs to appeal to these segments.
Finally, synergy should be sought across product-markets and across the
functional departments of the organization. Business-level strategy is applicable
in those organizations, which have different businesses and each business is
treated as strategic business unit (SBU).
The fundamental concept in SBU is to identify the discrete independent product/
market segments served by an organization. Since each product/market segment
has a distinct environment, a SBU is created for each such segment.
For example, Reliance Industries Limited operates in textile fabrics, yarns,
fibres, and a variety of petrochemical products. For each product group, the
nature of market in terms of customers, competition, and marketing channel
differs. Therefore, it requires different strategies for its different product groups.
Thus, where SBU concept is applied, each SBU sets its own strategies to make
the best use of its resources (its strategic advantages) given the environment it
faces. At such a level, strategy is a comprehensive plan providing objectives for
SBUs, allocation of resources among functional areas and coordination between
them for making optimal contribution to the achievement of corporate-level
objectives.
Such strategies operate within the overall strategies of the organization. The
corporate strategy sets the long-term objectives of the firm and the broad
constraints and policies within which a SBU operates. The corporate level will
help the SBU define its scope of operations and also limit or enhance the SBUs
operations by the resources the corporate level assigns to it. There is a difference
between corporate-level and business-level strategies.
3. Functional Strategy: Functional strategy, as is suggested by the title, relates
to a single functional operation and the activities involved therein. Decisions at
this level within the organization are often described as tactical. Such decisions
are guided and constrained by some overall strategic considerations.
Functional strategy deals with relatively restricted plan providing objectives for
specific function, allocation of resources among different operations within that
functional area and coordination between them for optimal contribution to the
achievement of the SBU and corporate level objectives. Below the functional-
level strategy, there may be operations level strategies as each function may be
divided into several sub functions.

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For example, marketing strategy, a functional strategy, can be subdivided into Notes
promotion, sales, distribution, pricing strategies with each sub function strategy
contributing to functional strategy.
Marketing Functional Strategy: In companies that are marketing oriented, the
marketing strategy on a functional level influences the other functions and their
strategies. A typical marketing strategy is to determine customer needs in an area
where the company has a natural competitive advantage.
Such advantages might be in location, facilities, reputation or staffing. Once the
marketing strategy has identified the kind of product customers want, it passes
the information to operations to design and produce such a product at 12 the
required cost. The advertising department must develop a promotional strategy,
sales must sell the product and customer service must support it.
The marketing strategy forms the basis for the strategies of these other departments.
The primary focus of marketing strategy is to effectively allocate and coordinate
marketing resources and activities to accomplish the firm’s objectives within a
specific product-market. Therefore, the critical issue concerning the scope of
a marketing strategy is specifying the target market for a particular product or
product line.
Next, firms seek competitive advantage and synergy through a well-integrated
programme of marketing mix elements (the 4 Ps of product, price, place,
promotion) tailored to the needs and wants of potential customers in that target
market.
Other Functional Strategies: The non-marketing functional strategies must
support the marketing strategy that, in turn, is a component of the overall business
strategy. In a single-business company, those strategies are tightly focused on
one industry, but they must also deliver data that allows the corporate strategy to
examine possible diversification. Single-business companies are usually either
highly ranked in their single business or dominant in their niche. The strategies
at the functional level try to maintain such a position but also look for external
danger signs. If events outside the company’s control lead to a deterioration
of its position, strategic components from a functional level must signal to the
corporate level that an implementation of alternative strategies is required.
Strategic Marketing Partners:
Strategic planning is the process of developing and maintaining a strategic fit
between the organization’s goals and capabilities and its changing marketing
opportunities. It is the base for the long-term planning of the firm. At a corporate
level, the firm starts defining the company’s mission. A mission statement is
a statement of the organization’s purpose. The mission leads to a hierarchy of
goals.
Based on this, the management must plan the business portfolio: the collection
of businesses and products that make up the company. Portfolio analysis is the

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Notes process by which management evaluates the products and businesses that make
up the company. The first step is identifying the strategic business units (SBU)
that are vital to the company. The well-known model of the Boston Consulting
Group (BCG) sorts the SBUs into a growth-share matrix, leading to four types
of SBUs:
Stars: high growth and high share units, in need of investment.
Cash cows: low-growth, high share units, producing cash.
Question marks: low-share units, in high-growth markets. Require cash, but
can turn out to be unprofitable.
Dogs: low-growth, low-share units, which are not very profitable.
After the units are classified, the company should determine in which units to
build share, hold share, harvest the profits or divest the SBU.
Designing the business portfolio also means looking at future businesses. The
product/market expansion grid is a portfolio-planning tool for identifying
company growth opportunities through:
Market penetration: company growth by increasing sales of current products
to current market segments without changing the product.
Market development: company growth by identifying and developing new
market segments for current company products.
Product development: company growth by offering modified or new products to
current market segments.
Diversification: company growth through starting up or acquiring businesses
outside the company’s current products and markets.
Companies also need strategies for downsizing, which means reducing the
business portfolio by eliminating products or business units that are not profitable
or that no longer fit the company’s overall strategy.
Marketing provides a philosophy, input and strategies for the strategic business
units. Besides customer relationship management, marketers must also invest in
partner relationship management to form an effective value chain: the series of
internal departments that carry out value-creating activities to design, produce,
market, deliver and support a firm’s products.
When trying to create customer value, a firm must go beyond the internal value
chain and partner up with others in the value delivery network. The value
delivery network is the network composed of the company, its suppliers, its
distributors and ultimately its customers who partner with each other to improve
the performance of the entire system.
10.5 MARKETING STRATEGY:
Marketing strategy is the marketing logic by which the company hopes to create
customer value and achieve profitable customer relationships. The company
must choose which customers to serve and how to serve them. This process
involves four steps:

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Market segmentation: dividing a market into distinct groups of buyers who have Notes
different, needs, characteristics or behaviour and who might require separate
products or marketing programmes. A market segment is a group of consumers
who respond in a similar way to a given set of marketing efforts.
Market targeting is the process of evaluating each market segment’s attractiveness
and selecting one or more segments to enter.
Positioning is arranging for a product to occupy a clear, distinctive and desirable
place relative to competing products in the minds of consumers.
Differentiation is actually differentiating the market offering to create superior
-customer value.
The marketing mix is the set of tactical marketing tools: product, price, place
and promotion that the firm blends to produce the response it wants in the target
market. Product refers to the combination of goods and service the firm offers.
Price is the amount the customer pays to obtain the product.
Place refers to the availability of the product. Promotion relates to the activities
that communicate the benefits of the product.
Managing the marketing process requires four marketing management functions.
The first is marketing analysis, starting with a SWOT analysis. A SWOT analysis
is an overall evaluation of the company’s strengths (S – internal capabilities),
weaknesses (W – internal limitations), opportunities (O – external factors that
can be profitable) and threats (T – external factors that might challenge the
company). Secondly, marketing planning involves choosing the right marketing
strategies.
Third is marketing implementation: turning marketing strategies and plans into
marketing actions to accomplish strategic marketing objectives. And finally,
there is marketing control: measuring and evaluating the results of marketing
strategies and plans and taking corrective action to ensure that the objectives
are achieved. Operating control refers to checking the performance against
the annual plan, while strategic control involves looking at the match between
strategies and opportunities.
Nowadays, marketers need to back up their spending by measurable results.
The return on marketing investment (marketing ROI) is the net return from a
marketing investment divided by the costs of the marketing investment. The
marketing ROI measures the profits generated by investments in marketing
activities and can be a helpful tool, but is also difficult to measure.
Strategy implementation and the marketing’s role. Strategic fit among many
activities is fundamental not only to competitive advantage but also to the
sustainability of that competitive advantage. Business strategy is reflected in the
pattern of decisions that the business makes to achieve competitive advantage.

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Notes Elements of Marketing Organization’s Architecture:

Marketing organization culture: the deeply rooted set of values and believes
which
provide norms of behaviour and decision making within the marketing function.
- Adhocracy type: flexibility and external orientation - entrepreneurial and
creative behaviour
- Market type: control and external orientation - highly competitive behaviour
- Clan type: flexibility and internal orientation - relationship-building behaviour
- Hierarchy type: control and internal orientation - behaviours focused on
predictability and smooth operations.
- Marketing strategy: set of integrated decisions via which the business aims
to achieve its marketing objectives and satisfy customers in their target market/
markets.
- Aggressive marketer: high quality, innovative products, close customer
relationship, extensive market segmentation research and intensive advertising,
Strategy implementation and the marketing’s role Strategic fit among many
activities is fundamental not only to competitive advantage but also to the
sustainability of that competitive advantage. Business strategy is reflected in the
pattern of decisions that the business makes to achieve competitive advantage.
Elements of Marketing Organization’s Architecture:
Marketing Organization Culture: the deeply rooted set of values and believes
which provide norms of behaviour and decision making within the marketing
function.
- Adhocracy type: flexibility and external orientation - entrepreneurial and
creative behaviour
- Market type: control and external orientation - highly competitive behaviour
- Clan type: flexibility and internal orientation - relationship-building behaviour
- Hierarchy type: control and internal orientation - behaviours focused on
predictability and smooth operations.
- Marketing Strategy: set of integrated decisions via which the business aims
to achieve its marketing objectives and satisfy customers in their target market/
markets.
- Aggressive marketer: high quality, innovative products, close customer
relationship, extensive market segmentation research and intensive advertising,
selective distribution channel.

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Notes
SUMMARY
It is clear that the marketing strategy is the most important tool while framing
the overall business strategy of the organization. While designing the marketing
strategy the firm has to consider many factors like potential customers, market
segmentation, unique selling proposition, situations prevailing etc. Effective
marketing strategy benefits the company in not only knowing its customers but
also delivering maximum customer satisfaction.
Thus, an effective marketing strategy finally results into building corporate
image of the company. The functional strategy should be designed on the basis
of business level strategy, whereas the business level strategy should be derived
from the corporate level strategy.

CASE STUDY :
The case presents an overview of Haier’s entry and expansion

strategies into the Indian consumer durables market. Haier entered
India by establishing its own subsidiary in late 2003. Contrary to its
competitors, the company adopted the strategy of pricing the products at
a premium and providing additional features. Haier consistently worked
towards building its brand and developing distribution network in India.
Product innovation had been the core focus of Haier and the company
flooded the Indian market with several new products like bottom mounted
refrigerators and detergent free washing machines. Haier also launched
mobile phones and unveiled plans to bring out laptops.
The case examines the marketing strategies of Haier in India and examines its
expansion plans to achieve its goal of capturing 20% of the consumer durable
market in India by 2010.

ISSUES:
• Entry and expansion strategies of Haier in India.
• Marketing mix of Haier India.
• Challenges faced by Haier in the Indian consumer durables market.
KEYWORDS:
Strategic planning: Strategic planning is a concept that encompasses marketing,
promotion, sales, and financial goals and is essentially about developing goals
for your business.
Corporate level strategy: Corporate level strategy occupies the highest level of
strategic decision-making and components dealing with the objective of the firm,
acquisition and allocation of resources and coordination of strategies of various
SBUs for optimal performance.

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Notes Stability strategy: The basic approach of stability strategy is to maintain present
course and be steady as it goes. In an effective stability strategy, companies
will concentrate their resources where the company presently has or can rapidly
develop a meaningful competitive advantage.
Retrenchment strategy: A strategy used by corporations to reduce the diversity
or the overall size of the operations of the company.
Functional Strategy: Functional strategy, as is suggested by the title, relates to a
single functional operation and the activities involved therein. Decisions at this
level within the organization are often described as tactical.
EXERCISE:
POINTS TO PONDER:
Answer the following Questions given below:

1.A group of managers is considering pricing strategy and differentiation. At which level
of strategy are the managers most likely to be working---------------

2.An organization’s general expression of its overall purpose is known as its----------------

3.The marketing strategy in which a firm sells different segments and offers different
product is classified as-----------------

4.The marketing strategy in which the firm with superior image and sales to the large
SELF ASSESSMENT QUESTIONS:
SHORT ANSWER QUESTIONS:
1. Differentiate between industrial marketing and consumer marketing.
2. What is competitor Analysis?
3. What is stability marketing?
4. Define functional strategy.
5. What is meant by Retrenchment strategy?
LONG ANSWER QUESTIONS:
1. Bring out the characteristics of B2B marketing for marketers. What are the
marketing strategies in industrial marketing?
2. What is the utility of marketing mix? Explain the strategic marketing mix
components.
3. Explain the importance of analysing consumer market.
4. What are the elements of strategic marketing planning? Highlight the
difficulties in strategic marketing planning.

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Notes
LESSON 11 – INDUSTRIAL MARKETING
SYSTEM
CONTENT:
LEARNING OBJECTIVE
LEARNING OUTCOME
11.1 INTRODUCTION
11.2 THE CONCEPT OF INDUSTRIAL MARKETING:
11.3 DEFINITION OF INDUSTRIAL MARKETING
11.4 CHARACTERISTICS OF INDUSTRIAL AND CONSUMER
MARKETING
11.5 DEMAND IN INDUSTRIAL MARKETING
SUMMARY
CASE STUDY
KEYWORDS
EXCERCISE
SELF ASSESSMENT

LEARNING OBJECTIVE:
• To know industrial marketing is B2B (business-to-business marketing)
and promotes goods and services from one business to another.
• To gain knowledge Industrial products and services are typically used in
the production of other consumption-related products and services, either
for the end -consumers or for organizational use.
• To increase in demand for consumer goods resulted in increase in demand
for industrial products.
LEARNING OUTCOME:
• To ensure industrial marketing strategies are to assemble the 4p’s to
industrial customers and to keep-up with changing requirements of
industrial customers while doing business on a pro-active basis.
• To find out an industrial marketer can create added value by providing
training of technical knowledge in an efficient and effective way.
• To understand normally industrial marketing involves large orders and
long-term relationships between the producer and supplier.

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Notes 11.1 INTRODUCTION:

The fundamentals of consumer marketing are equally applicable to the industrial
marketing. The work of the industrial market is exclusively different, as all
the forces of market that affect industrial demand. The managers of industrial
market must react in a different way to change the markets, develop products to
meet these changes, and market them in exclusively different ways to the target
and sophisticate customers while maintaining corporate policies. Therefore,
industrial marketers face many distinctive marketing situations not normally
encountered in the consumer market. Further, the industrial market has been the
Backbone of the high standard of living enjoyed by consumers in past or since the
industrial revolution at global level. It is dynamic and challenging in any nation‘s
economic growth and development. As and when the principles, knowledge,
and practice of marketing cut across all industries, to market effectively in the
industrial market than it becomes compulsory for the policy makers to study
the industrial marketing differently and to understand the industrial marketing
problems.
11.2 THE CONCEPT OF INDUSTRIAL MARKETING:
The marketing concept for the business enterprises of industrial buyer is to define
the needs of a target market and modify the organization ‘s product or service
to satisfy those needs more successfully than its competitors. The marketing
concept is applicable and important in both the industrial and consumer
markets due to the differences in terms of the nature of markets. It is evident
that consumer marketers have embraced the marketing concept more fully than
their industrial counterparts because Industrial customers like organizations-
businesses, institutions, and government agencies having unique needs. The
industrial marketing concept involves more than facilitating exchange with these
customers because it is based upon the structure of a partnership between buyer
and seller for the purpose of achieving the organizational goals of both. Generally,
industrial organisations tend to be technically oriented-much more interested in
a particular product and its technical development. Many managers in such firms
are promoted out of engineering and research and development departments.
Sometimes technical values tend to dominate their decision making. When it
happens, there is a risk of becoming so charmed with a technical accomplishment
or particular product parameters that the necessary flexibility for responding to
customer needs in a competitive market place disappears. It is more serious
in industrial marketing due to the complexity of the problems customers are
attempting to solve. For marketing effectiveness, the product should always be
regarded as a variable and should be viewed from the perspective of the customer.
Customer benefits and need satisfaction, rather than the physical product, should
be the centre of attention. Further, customer satisfaction should be dominant
in all corporate decision making; so, it cannot be the exclusive domain of the
marketing department.

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Providing customer satisfaction must involve all decision makers and will Notes
affect product design, demand analysis, manufacturing techniques, resource
utilization, and long-range profits of the business-organizations. Moreover, the
understanding of the concept of industrial marketing is compulsory for industrial
marketing manager to provide proper guidance and stimulation for research and
development of new products; to exploit and develop markets for new products;
to define the methods for promoting products to customers considering the major
increase in the cost of media advertising and personal selling; to innovate in
distribution and other areas to keep up with changing requirements of industrial
customers doing business on a multinational basis; to meet stiff competition
through modernized business; to refine and modify product positioning; and to
approach problems in the modern ways.

Industrial marketing is B2B (business-to-business marketing) and promotes

goods and services from one business to another.

11.3 DEFINITION OF INDUSTRIAL:

The word Industrial Marketing is also treated as Business-to-Business
Marketing, or Business Marketing, or Organizational Marketing. Industrial
marketing/business marketing is to market the products and services to business
organizations: manufacturing companies, government undertakings, private
sector organisations, educational institutions, hospitals, distributors, and dealers.
The business organizations, buy products and services to satisfy many objectives
like production of goods and services, making profits, reducing costs, and, so
on. In contrary, marketing of products and services to individuals, families, and
A household is made in consumer marketing. The consumers buy products and
services for their own consumption. Further, industrial marketing consists of all
activities involved in the marketing of products and services to organizations
that use products and services in the production of consumer or industrial goods
and services, and to facilitate the operation of their enterprises. The companies/
selling organizations that sell steel, machine tools, computers, courier services,
and other goods and services to business firms/buying organizations need to
understand the buyers‘ needs, purchasing power/resources, policies, and buying
procedures. They have to create value (benefit) for the buying organizations
(customers) with products and services and focus on buying organizational
needs and objectives.
For example, a company manufacturing and marketing precision steel tubes to
bicycle, a manufacturer is doing business marketing. Industrial marketer of the
precision steel tube company must understand the needs of bicycle manufacturers
such as Hero Cycle and Atlas Cycle, in terms of their quality requirements,
applications of tubes, availability or delivery on daily or weekly basis, and so on.
Similarly, a small and proprietary firm, giving technical advice (or services) to
paint manufacturers is also doing business marketing. The needs and objectives
of industrial buyers are satisfied through the following exchange processes.

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Notes 11.4 CHARACTERISITCS: INDUSTRIAL AND CONSUMER:

What are the characteristics of Industrial Marketing?
In the industrial sector there are some things that are very different from a B2C
business, like for example:
• Sales processes are longer and more complex than in a B2C and require a
long-term relationship between companies.
• In a B2B they are more focused on durable business relationships than
in a B2C. Also, they make bigger efforts to maintain these commercial
relationships.
• Even when B2B companies have less clients than a B2C, the purchase
volume always will be bigger on an industrial level and more durable over
time.
Where to start building the Industrial Marketing strategy?
There are several companies in the industrial sector that bet on traditional
marketing strategies, but they are putting aside some digital marketing techniques
that can help them grow their business while respecting their nature.
New technologies have given us multiple ways to market our business to reach a
much wider audience and the industrial sector is not the exception.
The basics of marketing management: deciding the target markets; finding out
the needs and wants of the target markets, developing products and services to
meet the requirements of those markets, and evolving marketing programmes or
strategies to reach and satisfy target customers in a better and faster way than
competitors apply to both consumer and industrial marketing. The industrial
markets are geographically concentrated; the customers are relatively fewer; the
distribution channels are short; the buyers (or customers) are well informed; the
buying organizations are highly organized and use
Sophisticated purchasing techniques; the purchasing decisions are based on
observable stages in industrial marketing. Industrial marketing is more a
responsibility of general management in comparison to consumer marketing.
Sometimes, it is difficult to separate industrial marketing strategy from the
corporate (company) strategy. But in case of consumer marketing, many
times the changes in marketing strategy are carried out within the marketing
department, through changes in advertising, sales promotion, and packaging
strategies. However, the changes in industrial marketing strategy generally have
company-wide implications.
Market Characteristics:
Basically, the significant differences exist between industrial and consumer
market characteristics that affect the nature of industrial marketing. These
differences are: size of market; geographic concentration; and competitive nature
of the markets.

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Size of the Market: Compared to the great number of households that constitute Notes
the mass market for consumer goods and services, In the case of industrial
markets, it is common to find less than 20 companies to represent the total
market for an industrial product or service. In fact, only three or four customers
may comprise the major portion of a total market. For example, for a consumer
product like toothpaste or soap, a mass market, consisting of all the households
In India, exist. Further, in industrial arena, oligopolistic buying organizations (very
large firms) tend to dominate many markets such as, large power transformers or
high-tension switchgears; there are limited numbers of customers-mainly State
Electricity Boards, large private and public sector organizations. While there
are relatively few industrial customers, they are larger in size, purchase larger
quantities, and engage in this volume purchasing on a repeat basis.
Geographical Concentration: Industrial customers also tend to be concentrated
in specific areas of the India such as Andaman Nikobar, the Leh Hills. Such
concentration occurs mainly because of natural resources and manufacturing
processes. For example, the geographic location of natural resources explains
the concentration patterns of most energy-producing firms. Only a handful of
counties in California, Oklahoma, Texas, and Louisiana produce the bulk of
our gas and oil. Manufacturers whose production processes add weight to their
products tend to locate near customers, while those whose processes subtract
weight tend to locate near sources of input. Manufacturers of computers and
other advanced electronic products present an interesting case of plant location.
They tend to concentrate in areas that have advanced teaching and research
facilities and desirable living locales such as the Silicon Valley in Bangalore.
Such locations are chosen to facilitate the attraction of intelligent, educated
employees, who seek both intellectual challenges and physical pleasures.
Competitive Nature: An additional difference between the two markets is
the nature of oligopolistic buying. In the industrial arena, oligopolistic buying
organizations, organizations that are very large firms, tend to dominate many
markets. For instance, the small number of large automobile producers in the
United States purchase 60 percent of all synthetic rubber, 60 percent of all lead,
and 72 percent of all plate glass produced in the United States. These oligopsonists
‘reactions to changes in one another’s buying practices affect industrial marketing
strategy decisions. Due to the fact that technological or cost-effective advantages
override geographical considerations, industrial organizations are more directly
involved in international purchasing. Therefore, the major finished goods
exports of industrialized nations tend to be industrial rather than consumer goods
manufacturers. Industrial demand as well as industrial supply, therefore, is more
apt to cross international boundaries than are demand and supply in the consumer
market. However, because of increasing improvements in foreign technology
and marketing skills, subsidized by government policies, worldwide competition
makes it more difficult for Indian suppliers of industrial goods to compete not
only in foreign markets, but domestically as well. Industrial marketers, then,

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Notes are more subject to world political, economic, and competitive changes than are
their consumer counterparts.
Product Characteristics:
In industrial marketing, the products or services are generally technically
complex and not purchased for personal use. They are purchased as components
parts of the products and services to be produced or serve the operations of
the organisations. Because of the importance given to the technical aspects of
products, the purchases are made based on the specifications evolved by the
buyers. The real risk in falling in love with the technical aspects of a product
in industrial marketing is to ignore the flexibility in responding to customer’s
needs in a competitive market. Some companies, as a result, commit the serious
mistake of trying to change the customer to fit the product. For example, the
quality control manager of a cold rolled (C.R.) steel strip‖ manufacturing
company informed an important customer (who used C.R. steel strip for the
manufacture of luggage bags) that the customer was not justified in rejecting his
company product, as it was as per the relevant Indian standard specifications and
that the customer‘s product specifications were more rigorous than the Indian
Standard specifications. However, the customer refused to accept the product,
as it was failing at the shop floor operations. The customer, therefore, not only
returned the entire rejections but also cancelled the balance orders. Subsequently,
other competitors supplied the product as per the needs and specifications of the
customer, who placed orders with them. As compared to consumer marketing,
industrial customers place a greater importance on service, that is, timeliness,
certainly delivery or availability of product, because any delay in supply will
have a significant impact on the production or operations.
11.5 DEMAND IN INDUSTRIAL:
The demand for industrial products and services does not survive by itself. It is
derived from the ultimate demand for consumer goods and services. Therefore,
industrial demand is called derived demand. Sometimes, the demand for industrial
product is called joint demand, when the demand for a product depends upon its
use along with the existence of other product or products. Cross elasticity of
demand exists for some substitute products in industrial market. These concepts
are detailed as follows:
Derived Demand:
The single most important force in marketing of industrial products and services
is derived demand. Industrial customers buy goods and services for making the
use in producing other goods and services and finally produced product/service
sold to the consumers. In industrial marketing, the demand for industrial goods
and services is derived from consumer goods and services. For example, the
demand for precision steel tubes does not exist in market. It is demanded for
the production of bicycles, motorcycles, scooters, and furniture (steel tables and
chairs), which are consumed by the consumers. Thus, the demand for precision

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A steel tube is derived from the forecast of consumer demand for bicycles, Notes
motorcycles, scooters, and furniture. In case of capital goods, such as machinery
and equipment (e.g. machine tools, textile machinery, leather machinery, etc.)
that are used to produce other goods, the purchases are made not only for the
current requirements, but also in anticipation of profit; form the future usage. If
businessmen of feel that there may be a recession in near future, their purchases
will be drastically curtailed. On the other hand, if the attitude of businessmen
is favourable (i.e. they feel the business is on the upswing) their investment in
capital goods and other industrial products will increase. Thus, the attitude of
businessmen is very important, as it reflects the optimism or pessimism about
the future.
During the periods of recession, or reduced consumer demand, industrial firms
reduce their inventories/stocks, or reduce the production, or do both. On the other
hand, during the period of prosperity, there is an increased production and sales of
consumer goods, which results in an increased demand for industrial goods. This
may be the right time for price increases and building stocks as ready availability
and shorter delivery period becomes very important. An. industrial marketing
firm should be in close touched customers purchase, finance, quality, R&D and
marketing departments, so as to get information on changes in customers ‘sales,
new product development, financial condition, and the quality of its products.
Joint Demand:
Joint demand is common in the industrial market because it occurs when one
industrial product is useful if other product also exists. For example, a pump
sets cannot be used for pumping water, if the electric motor or diesel engine
is not availab1e. Similarly, the department of telecommunication (DoT), which
requires a complete kit, consisting of different items, for joining the underground
telecom cables, cannot buy only some of the items from a supplier as it does not
content the kit. Thus, some industrial products do not have industrial demand,
but are demanded only if the other products are available from the industrial
supplier.
Cross-Elasticity of Demand:
Simply, elasticity is the change in demand from a change in price. The demand
for most of the industrial goods can be inelastic (i.e. insensitive to changes in
prices) for a particular industry, but at the same time, highly elastic (i.e. sensitive
to changes in prices) for individual suppliers. This is because, the total industry
demand comes from the united needs of all the customers rather than price, and
hence it is relatively inelastic. Though, between the various suppliers, a slight
change in the price by one firm may create a major change in the quantity and
thereby, be highly elastic for anyone firm. Cross-elasticity of demand is the
reaction of the sales of one product to a price change in another product.
This concern present in both consumer and industrial marketing, but it is more
imperative in industrial marketing as it can have a dramatic impact on the

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Notes marketing strategy of an industrial firm. For example, the demand for aluminium
is related to the prices of wood and steel for the doors and window frames, as
they are close substitutes. Apart from other advantages of aluminium doors and
windows, the cost comparison with steel and wooden door and window frames
play an important role in the purchase decisions in the construction of houses,
commercial offices, factories, hotels, hospitals, and so on. Aluminium extrusion
companies regularly collect the information on cost of steel and wood, and
advertise the advantages of use of aluminium in terms of negligible maintenance
cost, elegant look, environment, friendly in comparison to wood, and so on.
Whenever there is a change in the price of aluminium due to changes in excise
duty or other input costs, there is an impact on the sales of doors and windows
made out of wood or steel.
The reverse is applicable for changes in the prices of steel or wood. Thus,
the marketing persons working in the aluminium extrusion companies should
recognize that the cross-elasticity of demand exists for their products. If the
cross-elasticity of substitute products is high, it indicates that these products
compete in the same market. An industrial marketer must know how the demand
for his products is likely to be affected by the changes in the prices of substitute
products. Because of the unique characteristics of derived demand, the industrial
marketing persons would anticipate any increase or decrease in the demand for
their products, based on the changes in the demand for their customers’ products.
They must know that existence of cross-elasticity of demand for their products
so as to recognise both direct and indirect competition. It ought to be clear
after going through this lesson that industrial marketing is more multifarious
than consumer marketing and the marketing success depends on understanding
the intricacies involved in it. Industrial marketing strategy has company-wide
implications and is, therefore, more of a general management function, affecting
the various departments or functions in an organisation.
1. Set the objectives
Remember that to build a successful industrial marketing strategy you have to
be clear about the objectives that you want to reach. Keep in mind that at the end
of the day a Marketing Strategy is the path that will lead you to conquer those
objectives.
Some of the most common industrial companies’ objectives regarding a
Marketing strategy are the following:
• Get quality leads.
• Increase the traffic to their website.
• Acquire new customers.
• Increase the Database.
• Take their business to an international market.
• Position their business.

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2. Set the budget Notes

The strategy that you will implement will depend on the budget that you have.
Remember that to set a budget you need to consider the people you are going to
work with, the tools that you are going to use and the actions that will be part of
the plan.
3. Get the best team
You need to have a marketing team that clearly understands what your industry
is all about. If your own team doesn’t dominate the topic, how do you expect
them to communicate it?
Also, your team should have previous experience working with companies in the
industry and have a deep knowledge about the matter.
4. Think about the strategy
To create the strategy, you have to think about all the resources and tools you
have available based on your budget. We will give you some ideas of what you
can do in Industrial Marketing.
Strategic Planning Process in Industrial Marketing:
Strategic Planning Process in Industrial Marketing Stage 4: Strategic Choices
This stage has four steps: 1. Product and new product strategies.
1. Pricing policies and strategies.
2. The promotional plan and
3. The distribution plan.
Strategic Planning Process in Industrial Marketing Product and New Product
Strategies:
Product strategy recognition needs to be given to the three interrelated elements
of the product
(i) The product physical attributes including its performance, style and quality.
(ii) The benefits or ‘bundle of satisfactions’ that it delivers to the buyer and
(iii) The marketing support services such as delivery, installation and after-
sales service.
Strategic Planning Process in Industrial Marketing Two ways in which new
products are added in industries:
1. Acquisition:
(a) The organization can buy other Firms
(b) It can buy a license or franchise and
(c) It can buy patents.

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Notes 2. Internal new product development. This can be done in two ways:
(a) Products developed by in-house R&D.
(b) Products developed by outside agencies. Strategic Planning Process in
Industrial Marketing
3. Pricing Policies and Strategies Prices are influenced by some significant
factors:
(i) Corporate objectives
(ii) Competitive stance
(iii) Nature and structure of competition
(iv) Product life-cycle
(v) Customers and negotiations
(vi) Government regulations and
(vii) Industrial consortiums. Because of its flexibility, price can be used in a
variety of ways as a tactical weapon, including boosting short-term sales
and reflecting geographical or segmentation differences. Strategic Planning
Process in Industrial Marketing
4. The Promotional Plan Marketing communications represent the most visible
face of the organization. The relationships that exist between the communications
or promotions mix and the other elements of the marketing mix Strategic Planning
Process in Industrial Marketing
5. The Distribution Plan The distribution plan focuses on the set of decisions
relating to the processes which are concerned with the flow of supplies,
intermediaries and end users.
Major decision areas in channel management are
• formulating the channel strategy
• designing the channel structure
• selecting and motivating the channel members
• coordinating channel strategy with the marketing mix
• Evaluating channel member performance.
Strategic Planning Process in Industrial Marketing Stage 5: Strategic Evaluation
Strategic evaluation criteria Financial Non-financial Liquidity Sales volume
Cash generation Market share Profit Growth rate Cost leadership Risk exposure
Earnings per share Competitive position Shareholder’s value Customer
satisfaction Share price Reliance on new products
Strategic Planning Process in Industrial Marketing Stage 6: Strategic
Implementation and Control The pressures on marketing organizations are as

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shown in Figure and have significant implications for marketing planning and Notes
control. The strategists must develop understanding, a commitment and skill to
deal proactively with new situations

SUMMARY
In all, the concept of industrial marketing may be referred as marketing of
goods and services to business organizations: manufacturing companies,
service organizations, institutions and middlemen in private and public sector
organizations, and Government undertakings. The differences between industrial
and consumer marketing exist in certain characteristics such as market, product,
buyer behaviour, channel, promotional, and price. The demand for industrial
products is derived from the ultimate demand for consumer goods and services. It
is, therefore, called as derived demand. Joint demand occurs when one industrial
product is required, if other product also exists. Cross-elasticity of demand is the
reaction of the sales of one product to a price change in another product.
CASE STUDY :
The case study focuses on the growth of Airbus and it also covers
extensively the competition in the aerospace industry. The case provides a detail
account of the structure of the aerospace industry and the nature of competition
in the industry. It explains how Airbus achieved a leadership position in the
industry with market share increasing from 13% in 1995 to 57% in 2002.
The case also provides information about the Airbus’s A-380 aircraft and how
the success of this model could provide a competitive advantage for Airbus.
In October 2002, The Seattle Times, a local newspaper published from Seattle,
USA, where Boeing is headquartered, carried a headline story, Boeing is slipping
to No. 2. According to the newspaper report, Boeing’s sole competitor, Airbus
Industries (Airbus) had bagged an order from EasyJet1 for 120 A-319 jets.
EasyJet was one of Boeing’s most loyal customers (Refer Exhibit I for a profile
of Boeing). Analysts felt that after EasyJet’s shift away from Boeing, other low-
cost airlines would follow suit in opting for Airbus.
Airbus seemed all set to take market leadership in the low cost segment from
Boeing for the first time. From the mid-1990s onwards, Airbus had steadily
increased its market share. By the late 1990s, Boeing and Airbus had an equal
share in the market. Rival Boeing accused Airbus of resorting to heavy price
cutting in order to beat off the competition. It also accused Airbus of producing
aircraft for which it had not received orders and creating a glut in the market. But
Airbus rejected the allegations saying that it was in the market to make money
and not to buy market share. Some analysts were of the opinion that Airbus was
able to increase its market share because of the financial support it received from
its consortium partners. However, others attributed Airbus’ success to its fuel-
efficient jets, which were economical to run.

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Notes ISSUES:
Understand how innovative product development can lead to competitive
advantage, catapulting a company to the No. 1 position
KEYWORDS:
An industrial marketer can create added value by providing training of technical
knowledge in an efficient and effective way. This effective marketing not only
helps to increase sales.
Material & Parts: These consists raw material, finished material & parts. Raw
materials are generally farm products namely cotton, wheat, vegetables etc.
Financial Exchange Process: The yielding of credit or the need to exchange
money from one currency to another at the time of dealing with foreign buyers
is called as foreign exchange. Award of credit facilities to an organization is
financial exchange.
Industrial Distributors and Dealers: Industrial distributors and dealers take
title to goods; thus, they are the industrial marketer ‘s intermediaries; acting in a
similar capacity to wholesalers or even retailers.
Government Customers: In India, the largest purchasers of industrial products
are Central and State Government departments, undertakings, and agencies, such
as railways, department of telecommunication, defence, Director General of
Supplies and Disposal (DGS&D), state transport undertakings, state electricity
boards, and so on.
EXERCISE:
POINTS TO PONDER:
Answer the following questions given below:
1.When there is a large potential market for a product, the firm will adopt-----------
2.When the firm concentrate on serving needs of any specific customer group, it is
considered as--------

3.In pricing industrial goods, the most important factors---------------

4.------------skills represent the essence of industrial marketing.

SELF ASSESSMENT QUESTION:
SHORT ANSWER QUESTIONS:
1.Define Industrial Marketing.
2.List out the characteristics of Industrial Marketing.
3.State the two features of consumer Marketing.
4.Write a short note on concept of Industrial Marketing.
LONG ANSWER QUESTIONS:
1.Mention the prospectus of Industrial Marketing.
2.Explain the concept of Industrial Marketing.

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Notes
LESSON 12 – CONSUMER MARKETING

CONTENT:
LEARNING OBJECTIVE
LEARNING OUTCOME
12.1 CONSUMER MARKET
12.2 SIGNIFICANCE OF CONSUMER MARKETING
12.3 CHARACTERISITCS OF CONSUMER MARKET
12.4 BUSINESS MARKET VS CONSUMER MARKET
12.5 WHAT ARE DIFFERENT TYPES OF CONSUMERS IN
CONSUMERS MARKETING
SUMMARY
CASE STUDY
KEYWORDS
EXCERCISE
SELF ASSESSMENT QUESTIONS

LEARNING OBJECTIVE:
• To analyses personal, socio-cultural and environmental dimensions that
influences consumer decision making.
• To understand consumer behaviour in an informed and systematic way.
• To demonstrate how knowledge of consumer behaviour can be applied to
marketing.
• To Identify and explain factors which influence consumer behaviour
LEARNING OUTCOME:
• Designing and evaluating the marketing strategies based on fundamentals of
consumer buying behaviour.
• To relate internal dynamics such as personality, perception, learning
motivation and attitude to the choices consumers make.
• This explains various aspects of consumer decision making process keeping
the individual, social and cultural dimensions of consumer behaviour.

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Notes
12.1 WHAT IS CONSUMER MARKET:
The consumer market comprises of those people who are the end-users and they
don’t resell the product or service any further. We see products and consumers
everywhere in the market.
Whenever a person buys a product, then he becomes a part of the consumer
market. We can categorize the whole consumer market into four types; retail,
transportation, food, and beverages (drinks). Buyers usually make their own
decisions whenever they want to buy something in the market.
Marketing and advertising play a very significant role in influencing the buying
decision of the consumers; it tells them which product to choose by educating
them about the product. When it comes to choosing the product, people prefer
brand products because of the loyal. Brand loyalty doesn’t just happen; marketers
do a lot of research to find relevant information about their market and then
target them through TV ads and other promotion.
12.2 SIGNIFICANCE OF CONSUMERS:
The consumer market is comprised of consumers, and when they keep consuming
products and services. The businesses flourish because of it; the economy of the
country grows as a result.
In simple words, when people spend products, then producers and entrepreneurs
produce and deliver more products in the market. As a result, the running cycle
of production and consumption contributes to the national economy of the whole
country.
Significance of Consumer Market
Each time you buy a product or service, you are participating in the consumer
market. Whether you’re picking up groceries for the week or paying to get your
car washed, you’re part of this larger system.
A consumer market is the very system that allows us to purchase products, goods,
and services. These items can be used for personal use or shared with others. In
a consumer market, you make your own decisions about how you will spend
money and use the products you purchase. The more people who go out and
actively purchase products, the more active the consumer market.
Consumer Market is the Largest Market
The consumer market in the United States is made up of approximately 300
million consumers. The United States has the largest consumer market in the
world. Consumers spend more money in the U.S. than in any other country.
Because this market is so large, it is helpful to break it down into more manageable
segments. Within the consumer market, there are subsets that can be identified
based on demographics and other groupings. Some of these subsets include age,
gender, interests, income level, and geographic location. The consumer market is

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the umbrella that covers all of the segments that can be created within that huge Notes
market.
In a consumer market, marketing provides a critical role in educating people on
what buying options are available. Because consumers are empowered and can
make their own purchasing decisions, they also have more choices to make. As
a result, it becomes more vital that companies educate potential customers about
their products and encourage them to buy their products. This encourages a more
diverse and vibrant free market system that provides the opportunity for more
variety and options.
12.3 CHARACTERISTICS OF CONSUMER MARKET:
Having discussed it earlier that the consumer market is comprised of consumers
and buyers, and these people are from different backgrounds and they have
different choices and preferences. Marketers create different segments of the
market based on their tastes and choices. In other words, those segments are the
characteristics of the consumer market. Some of those characteristics are given
below with examples;
Demographic Consumer Markets
Demographic characteristics mean consumers’ age, income, social and economic
background, gender, size of their family, ethnicity, religion, culture, education
level, job type, social class, and nationality. Marketers collect all of such
information through a survey, telephonic interviews, and from the local public
office where such information is easily available.
Not only they collect data, but they also study each part in detail. Then they also
create different ranges like; age would be 18 to 25, 33 to 45, 55 to 65, or +65.
Their income would fall between 15000 to 25000 Rs, or +50000, which tell us
their social class.
The purpose of collecting well-detailed information is to target precisely those
segments of the market. For instance, telephonic calls and SMS packages would
interest the young market falling in the age from 18 to 25.
Psychographic Consumer Markets
Psychographic characteristics mean values, interests, opinions, attitudes, and
activities of the consumers. They tell us the psychological nature of an individual
in terms of his thinking, and it’s very important to know these things because you
set your marketing strategies based on their views.
For instance, the target consumer market of parental magazines would-be
mothers who are bearing babies. They are interested to learn about parenting.
Companies conduct focus groups and in-depth interviews with the consumers of
their target market. The moderator starts the discussion with an open topic, and
then he asks the participant to share their views on the particular. That’s how
companies find out the inner psychological nature of their target market.

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Notes Behaviourism Consumer Markets

Behaviouristic characteristic requires a lot of marketing research to find out the
product and brand loyalty level of consumers. How people react towards certain
offers; when company offers them certain benefits and packages. The number of
times people visit the market, stores, or the mall for the same product. It tells us
the loyalty of the people towards the product and brand.
After finding out the loyalty of their consumer market; advertisers and marketers
categorize the market into light, medium and heavy users list. Then they target
each niche and check how people are responding. Most important, they want to
know and expect the repetitive behaviour of the consumers.
Geographic Consumer Markets
Geographic characteristic means the location of the consumers and where they
are situated. It includes population density, size of the market, region, rural,
urban, and climate of the market because it’s very important to know the size,
density and location of the market before jumping into it.
For instance, a small-time seller can’t survive in a big competitive market; he
should look for the market where big companies have no interest in. There he
would have an opportunity to excel.
In cold regions, you can’t sell summer clothes, because people won’t buy it. The
point of the matter is people living in different parts of the world have different
needs, requirements, tastes, and interests. Businesses must conform to the local
norms of the society to be liked and survive.
Examples of Consumer Markets
Food, drinks, beverages, legal, health and financial services, clothes, electronic
stuff, and its accessories and many others, these all are the examples of consumer
markets where buyers purchase products or services for the sake of the consumer,
instead of buying things to resell it.
12.4 BUSINESS MARKETING VS CONSUMER MARKETING:
Business Marketing: Business Marketing refers to the sale of either products or
services or both by one organization to other organizations that further resell the
same or utilize to support their own system.
Consumer marketing: on the other hand refers to the transaction of goods and
services between organizations and potential customers.
The above definitions of business marketing and consumer marketing highlight
the difference between the two commonly used terms in marketing (B2B and
B2C).Business marketers do not entertain consumers who purchase products
and services for their end-use. They deal only with other businesses/firms to sell
their products.
In consumer markets, products are sold to consumers either for their own use or
use by their family members.

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Products in consumer market are further categorized into: Notes

Fast Moving Consumer Goods (Abbreviated as FMCG): Fast moving consumer
goods are items that are sold quickly to the end-users generally at nominal costs.
Example - Aerated drinks, grocery items and so on.
Consumer Durables: Goods that a consumer uses for a considerable amount of
time rather than consuming in one use are categorized under Consumer Durables.
Consumer Durables are further categorized into - White Goods and Brown
Goods White Goods - (Refrigerators, Microwaves, air conditioners and so on
(Majorly all household appliances)
Brown Goods - (Television, CD Players, Radio, Game Consoles (Majorly used
for entertainment and fun)
Soft Goods: Soft goods are products which have a shorter lifecycle and their
value decreases after every use. E.g. shirts, clothes, shoes.
Examples of Business Marketing (industrial marketing): Office furniture
(Cabinets, desks, workstations, drawers) - End user will not purchase workstations
for his own use at home.Bulk SMS service (utilized by organizations)
In business marketing, marketers deal with lesser number of individuals as
compared to consumer marketing where one has to deal with the mass market.
Generally a single employee of one organization would be appointed to deal
with the concerned employee of the other organization (client). He does not have
to interact with the entire organization.
Organization A sells laptops and desktops to Organization B (A case of B2B
marketing).Tom from Organization A have to deal only with either the IT
professional or the administration representative.
Organizations dealing with consumers need to interact with every individual
who is a potential end-user.
Industrial marketing is more focused as compared to consumer marketing.
Business marketers generally deal with sophisticated employees whereas it
is not at all necessary every end user in consumer market would respond to
marketers politely. Business buyers generally are educated and well informed. In
consumer market, your buyer can be anyone- educated, uneducated, labour and
so on. Business marketers themselves need to be well spoken and polished. They
must have a pleasing personality and good convincing power.
Business marketers need to be extremely careful about their mode of
communication. Emails exchanged with clients should have appropriate subject
line. Mails with irrelevant subject line are generally not read by clients. In
business marketing, marketers ought to send personalized emails. Bulk SMS
or mass mailers do not work in business marketing. In consumer marketing,
products can be promoted through advertising, pamphlets, brochures, hoardings

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Notes or simply mass mailers.

There is a smaller number of business buyers as compared to individuals who
purchase for their own end use.
12.5 WHAT ARE DIFFERENT TYPES OF CONSUMERS IN
CONSUMERS MARKETING:
• Loyal Customers
• Impulse Shoppers
• Bargain Hunters
• Wandering Consumers
• Need-Based Customers
Consumers are generally typecast according to their behaviour, and more and
more, that behaviour occurs online. Following are the most common five types
of consumers in marketing.
Loyal Customers: Loyal customers make up the bedrock of any business. As
the name implies, loyal customers are those who have made a commitment to
your product or service. Even though they may comprise the smallest percentage
of your overall consumer base, your loyal customers are also the most likely to
generate the majority of your income. As an added bonus, they’re far more likely
to recommend your company to others.
However, it’s important not to make the mistake of taking loyal customers
for granted they’re as likely as anyone else to move on to greener pastures if
your business isn’t meeting their needs and preferences. It’s essential to keep
this customer base involved, engaged, and feeling as if they’re valued by your
company. Consider adding reward programs and interactive social media to keep
them coming back.
Impulse Shoppers: Impulse shoppers are those simply browsing products and
services with no specific purchasing goal in place. This consumer segment
generates significant revenue for most retailers. This type of consumer is usually
receptive to upselling and has the potential to become a loyal customer if products
and services meet or exceed their expectations and desires.
Bargain Hunters: Bargain hunters are seeking the best deal, period, and most
likely won’t be swayed by upselling techniques in fact, this may cause them
to move on. This type of customer has very little potential to become a loyal
customer unless it’s part of your business strategy to offer the lowest possible
price points at all times. This customer also rarely, if ever, makes purchases on
impulse. Advertising sales is the best way to appeal to those in this customer
group.
Wandering Consumers: Wandering customers are somewhat related to impulse
shoppers, but they’re much less likely to make purchases. This type of customer

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is more prevalent in brick-and-mortar locations, but they do stumble into online Notes
retail venues on occasion. It’s sometimes possible to make a sale to those just
wandering through provided you can stimulate their interest, but keep in mind
that many of them are simply attracted to the social interaction of shopping and
have no intention of making a purchase.
Need-Based Customers
As the name implies, need-based consumers are driven by the need for a
specific product or service. Although these customers generally make purchases
decisively and quickly once they find what they’re seeking, they’re easily lured
away by competing businesses. However, they’re frequently converted into loyal
customers. They often have practical questions or concerns that can be addressed
with a proactive social media presence.

SUMMARY
The consumer market comprises of those people who are the end-users and they
don’t resell the product or service any further. We see products and consumers
everywhere in the market.
The consumer market is comprised of consumers, and when they keep consuming
products and services. The businesses flourish because of it; the economy of the
country grows as a result.
Psychographic characteristics mean values, interests, opinions, attitudes, and
activities of the consumers.
Behaviouristic characteristic requires a lot of marketing research to find out the
product and brand loyalty level of consumers. How people react towards certain
offers; when company offers them certain benefits and packages.
The above definitions of business marketing and consumer marketing highlight
the difference between the two commonly used terms in marketing (B2B and
B2C).Business marketers do not entertain consumers who purchase products
and services for their end-use. They deal only with other businesses/firms to sell
their products.

CASE STUDY :
In March 2011, Cadbury India Ltd., the leader in the Indian chocolate
market, came out with a new advertisement campaign, ‘Khane ke baad, meethe
mein kuch meetha ho jaye’ (After a meal, let’s have something sweet), for
its main brand Dairy Milk. These advertisements received appreciation from
different quarters for their fresh insights into the Indian way of life and for
putting forth convincing propositions to customers to induce them to consume
Dairy Milk on a daily basis. However, industry observers were of the view that
these advertisements might not bring about a dramatic increase in the sales of
Dairy Milk in the absence of successful new product development.

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Notes Cadbury India was the erstwhile Indian subsidiary of Cadbury Plc. Cadbury
Plc., headquartered in Uxbridge, London Borough of Hillingdon, England, was
the second largest confectionery maker in the world. It had a sales turnover of
US$8.3 billion in 2009. A significant chunk of Cadbury Plc.’s business was
generated from the emerging markets. Euromonitor International, a research
firm based out of London, had reported that Cadbury Plc. derived 38% of its
sales revenue from the developing markets. Its Indian subsidiary, Cadbury India,
was a confectionery giant in India...
Issues:
• To understand the current brand positioning strategy of Dairy Milk
• To analyse the impact of positioning Dairy Milk as a dessert on its sales
• To analyse what else can be done to augment the current brand positioning
strategy in driving the sales of Dairy Milk

KEYWORDS:
Cognitive evaluation: When the consumer uses objective choice criteria.
Affective evaluation: Using emotional reasons for evaluating the alternatives.
Cognitive dissonance: Buyer discomfort caused by post purchase conflict.
Cost-plus – Adds a standard percentage of profits to the future costs to manufacture
the product. Evaluation of the fixed and variable costs is an important part of this
pricing method.
Price: Price is the amount of money consumer will pay for the products or service.
Discount – which is based on advertising, helps reduce prices and thus can attract
new customers and expand the market share.
Psychological – which has an impact on consumer behaviour, such as a price that
looks better: 6.99 $ per pound instead of $ 7.00 per pound.
Loss Leader – Sales takes place at a price lower than the cost of production in
order to attract customers to the store to buy other products.
Intensive distribution is the placement of a product in as many places or
widespread, often at low prices.
Selective distribution narrows distribution to a few businesses and usually
upscale products are sold through retailers that only sell high-quality products.
Exclusive distribution restricts distribution to a single reseller.

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EXERCISE: Notes
POINTS TO PONDER:
Answer the following Question given below:

1._________ is the study of how individuals, groups and organizations select, buy, use
and dispose of goods, services, ideas or experiences to satisfy their needs and wants.

2. A consumer buying behavior is influenced by----------------------

3. ________ exerts the broadest and deepest influence on buying behavior.

4.________ is the fundamental determinant of a person’s wants and behavior.

SELF ASSESSMENT QUESTIONS:
SHORT ANSWER QUESTIONS:
1. Define Consumer Marketing.
2. Bring out the characteristics of Consumer Marketing.
3. Differentiate of Industrial Marketing and Consumer Marketing.
4. Who is Loyal Customer.
5. What is meant by Impulsive Buyer?
6. Define Wandering Customer.
LONG ANSWER QUESTIONS:
1. What are different types of consumers in consumers marketing?
2. Explain the importance of analysing consumer Marketing.
3. Discuss about the characteristics of consumer Marketing.
4. Differentiate between consumer marketing and Business Marketing.

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Notes
LESSON 13 – SERVICES MARKETING
-DEFINITION AND CHARACTERISTICS
CONTENT:
LEARNING OBJECTIVE
LEARNING OUTCOME
13.1 INTRODUCTION
13.2 DEFINITION AND CHARACTERISTICS OF SERVICES
13.3 TYPES OF SERVICES
13.4 DIFFERENCE BETWEEN GOODS AND SERVICES
13.5 SERVICES MARKETING IMPORTANCE
13.6 IMPORTANCE MARKETING OF SERVICES
13.7 THE SEVEN P’S SERVICE MARKETING MIX
13.8 SERVICES MARKETING - MOMENT OF TRUTH
13.8 MOMENTS OF MAGIC AND MOMENTS OF MISERY
13.9 MAINTAINING SERVICE QUALITY
13.10 MEASURING SERVICE QUALITY
13.11 SERVQUAL MODEL
13.12 TEN DIMENSIONS
13.13 FIVE GAPS
SUMMARY
CASE STUDY
KEYWORDS
EXERCISE
SELF ASSESSMENT QUESTIONS

LEARNING OBJECTIVE:
• To understand service marketing is a strategy which promotes and
showcase the intangible benefits and offerings delivered by a company to
drive end customer value.
• To determine service marketing is a concept which mainly focuses on the
business of non-physical intangible goods.
• These services enable customers to obtain the temporary right to use a
physical good that they prefer not to own.

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LEARNING OUTCOME: Notes

• Thus, Service marketing is driven by people who provide benefits &

solutions to the needs of the customers.
• A service is an activity or a series of activities which take place in interactions
with a contact person or a physical machine and which provides consumer
satisfaction.
• The argument that services require different marketing strategies is based
on the insight that services are fundamentally different to goods and that
services marketing requires different models to understand the marketing
of services to customers.
13.1 INTRODUCTION
The world economy nowadays is increasingly characterized as a service
economy. This is primarily due to the increasing importance and share of the
service sector in the economies of most developed and developing countries. In
fact, the growth of the service sector has long been considered as indicative of a
country’s economic progress.
Economic history tells us that all developing nations have invariably experienced
a shift from agriculture to industry and then to the service sector as the main stay
of the economy.
This shift has also brought about a change in the definition of goods and services
themselves. No longer are goods considered separate from services. Rather,
services now increasingly represent an integral part of the product and this
interconnectedness of goods and services is represented on a goods-services
continuum.
13.2 DEFINITION AND CHARACTERISTICS OF SERVICES:
The American Marketing Association defines services as - “Activities, benefits
and satisfactions which are offered for sale or are provided in connection with
the sale of goods.”
The defining characteristics of a service are:
Intangibility: Services are intangible and do not have a physical existence.
Hence services cannot be touched, held, tasted or smelt. This is most defining
feature of a service and that which primarily differentiates it from a product.
Also, it poses a unique challenge to those engaged in marketing a service as they
need to attach tangible attributes to an otherwise intangible offering.
Heterogeneity/Variability: Given the very nature of services, each service
offering is unique and cannot be exactly repeated even by the same service
provider. While products can be mass produced and be homogenous the same
is not true of services. E.g.: All burgers of a particular flavour at McDonalds are
almost identical. However, the same is not true of the service rendered by the
same counter staff consecutively to two customers.

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Notes Perishability: Services cannot be stored, saved, returned or resold once they
have been used. Once rendered to a customer the service is completely consumed
and cannot be delivered to another customer. E.g.: A customer dissatisfied with
the services of a barber cannot return the service of the haircut that was rendered
to him. At the most he may decide not to visit that particular barber in the future.
Inseparability/Simultaneity of production and consumption: This refers to
the fact that services are generated and consumed within the same time frame.
E.g.: a haircut is delivered to and consumed by a customer simultaneously unlike,
say, a takeaway burger which the customer may consume even after a few hours
of purchase. Moreover, it is very difficult to separate a service from the service
provider. E.g.: the barber is necessarily a part of the service of a haircut that he
is delivering to his customer.
13.3 TYPES OF SERVICES:
Core Services: A service that is the primary purpose of the transaction. E.g.: a
haircut or the services of lawyer or teacher.
Supplementary Services: Services that are rendered as a corollary to the sale
of a tangible product. E.g.: Home delivery options offered by restaurants above
a minimum bill value.
13.4 DIFFERENCE BETWEEN GOODS AND SERVICES:
Given below are the fundamental differences between physical goods and
services:
Goods Services
A physical commodity A process or activity
Tangible Intangible
Homogenous Heterogeneous
Production and distribution are Production, distribution and
separation from their consumption consumption are simultaneous
processes
Can be stored Cannot be stored
Transfer of ownership is possible Transfer of ownership is not possible

13.4 SERVICES MARKETING - IMPORTANCE

Stated simply, Services Marketing refers to the marketing of services as against
tangible products.
As already discussed, services are inherently intangible, are consumed
simultaneously at the time of their production, cannot be stored, saved or resold
once they have been used and service offerings are unique and cannot be exactly
repeated even by the same service provider.
Marketing of services is a relatively new phenomenon in the domain of
marketing, having gained in importance as a discipline only towards the end of
the 20th century.

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Services marketing first came to the fore in the 1980’s when the debate started on Notes
whether marketing of services was significantly different from that of products so
as to be classified as a separate discipline. Prior to this, services were considered
just an aid to the production and marketing of goods and hence were not deemed
as having separate relevance of their own.
The 1980’s however saw a shift in this thinking. As the service sector started to
grow in importance and emerged as a significant employer and contributor to the
GDP, academics and marketing practitioners began to look at the marketing of
services in a new light. Empirical research was conducted which brought to light
the specific distinguishing characteristics of services.
By the mid 1990’s, Services Marketing was firmly entrenched as a significant
sub discipline of marketing with its own empirical research and data and growing
significance in the increasingly service sector dominated economies of the new
millennium. New areas of study opened up in the field and were the subject of
extensive empirical research giving rise to concepts such as - the product-service
spectrum, relationship marketing, franchising of services, customer retention etc.

Service Marketing is simply defined as a phenomenon wherein a service or an

intangible commodity is promoted and marketed among the target audience.

13.5 IMPORTANCE OF MARKETING OF SERVICES

Given the intangibility of services, marketing them becomes a particularly
challenging and yet extremely important task.
A key differentiator: Due to the increasing homogeneity in product offerings,
the attendant services provided are emerging as a key differentiator in the mind
of the consumers. E.g.: In case of two fast food chains serving a similar product
(Pizza Hut and Domino’s), more than the product it is the service quality that
distinguishes the two brands from each other. Hence, marketers can leverage on
the service offering to differentiate themselves from the competition and attract
consumers.
Importance of relationships: Relationships are a key factor when it comes to
the marketing of services. Since the product is intangible, a large part of the
customers’ buying decision will depend on the degree to which he trusts the
seller. Hence, the need to listen to the needs of the customer and fulfil them
through the appropriate service offering and build a long-lasting relationship
which would lead to repeat sales and positive word of mouth.
Customer Retention: Given today’s highly competitive scenario where multiple
providers are vying for a limited pool of customers, retaining customers is even
more important than attracting new ones. Since services are usually generated and
consumed at the same time, they actually involve the customer in service delivery
process by taking into consideration his requirements and feedback. Thus, they
offer greater scope for customization according to customer requirements thus
offering increased satisfaction leading to higher customer retention.

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Notes 13.6 THE 7 P’S OF SERVICES MARKETING:

The first four elements in the services marketing mix are the same as those in
the traditional marketing mix. However, given the unique nature of services, the
implications of these are slightly different in case of services.
Product: In case of services, the ‘product’ is intangible, heterogeneous and
perishable. Moreover, its production and consumption are inseparable. Hence,
there is scope for customizing the offering as per customer requirements and the
actual customer encounter therefore assumes particular significance. However,
too much customization would compromise the standard delivery of the service
and adversely affect its quality. Hence particular care has to be taken in designing
the service offering.
Pricing: Pricing of services is tougher than pricing of goods. While the latter can
be priced easily by taking into account the raw material costs, in case of services
attendant costs - such as labor and overhead costs - also need to be factored in.
Thus a restaurant not only has to charge for the cost of the food served but also
has to calculate a price for the ambience provided. The final price for the service
is then arrived at by including a mark up for an adequate profit margin.
Place: Since service delivery is concurrent with its production and cannot be
stored or transported, the location of the service product assumes importance.
Service providers have to give special thought to where the service would be
provided. Thus, a fine dine restaurant is better located in a busy, upscale market
as against on the outskirts of a city. Similarly, a holiday resort is better situated
in the countryside away from the rush and noise of a city.
Promotion: Since a service offering can be easily replicated promotion becomes
crucial in differentiating a service offering in the mind of the consumer. Thus,
service providers offering identical services such as airlines or banks and
insurance companies invest heavily in advertising their services. This is crucial
in attracting customers in a segment where the services providers have nearly
identical offerings.
We now look at the 3 new elements of the services marketing mix - people,
process and physical evidence - which are unique to the marketing of services.
People: People are a defining factor in a service delivery process, since a service
is inseparable from the person providing it. Thus, a restaurant is known as much
for its food as for the service provided by its staff. The same is true of banks and
department stores. Consequently, customer service training for staff has become
a top priority for many organizations today.
Process: The process of service delivery is crucial since it ensures that the same
standard of service is repeatedly delivered to the customers. Therefore, most
companies have a service blue print which provides the details of the service
delivery process, often going down to even defining the service script and the
greeting phrases to be used by the service staff.

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Physical Evidence: Since services are intangible in nature most service providers Notes
strive to incorporate certain tangible elements into their offering to enhance
customer experience. Thus, there are hair salons that have well designed waiting
areas often with magazines and plush sofas for patrons to read and relax while
they await their turn. Similarly, restaurants invest heavily in their interior design
and decorations to offer a tangible and unique experience to their guests.
13.7 SERVICES MARKETING - MOMENT OF TRUTH:
Every business knows that in order to thrive it needs to differentiate itself in
the mind of the consumer. Price has proved inadequate since there is a limit to
how much a firm can cut back on its margins. Product differentiation is also no
longer enough to attract or retain customers since technological advances have
resulted in products becoming almost identical with very few tangible differences
from others in the same category. Consequently, marketers have realized the
importance of service differentiation as a sustainable strategy for competing for
a portion of the customer’s wallet.
Service Encounter / Moment of Truth
A moment of truth is usually defined as an instance wherein the customer and
the organization come into contact with one another in a manner that gives the
customer an opportunity to either form or change an impression about the firm.
Such an interaction could occur through the product of the firm, its service
offering or both. Various instances could constitute a moment of truth - such
as greeting the customer, handling customer queries or complaints, promoting
special offers or giving discounts and the closing of the interaction.
Importance
In today’s increasingly service driven markets and with the proliferation of
multiple providers for every type of product or service, moments of truth have
become an important fact of customer interaction that marketers need to keep in
mind. They are critical as they determine a customer’s perception of, and reaction
to, a brand. Moments of truth can make or break an organization’s relationship
with its customers.
This is more so in the case of service providers since they are selling intangibles
by creating customer expectations. Services are often differentiated in the minds
of the customer by promises of what is to come. Managing these expectations
constitutes a critical component of creating favorable moments of truth which in
turn are critical for business success.
13.8 MOMENTS OF MAGIC AND MOMENTS OF MISERY
Moments of Magic: Favorable moments of truth have been termed as ’moments
of magic’. These are instances where the customer has been served in a manner
that exceeds his expectations. Eg: An airline passenger being upgraded to from
an economy to a business class ticket or the 100th (or 1000th) customer of a new

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Notes department store being given a special discount on his purchase. Such gestures
can go a long way in creating a regular and loyal customer base. However, a
moment of magic need not necessarily involve such grand gestures. Even the
efficient and timely service consistently provided by the coffee shop assistant
can create a moment of magic for the customers.
Moment of Misery: These are instances where the customer interaction has a
negative outcome. A delayed flight, rude and inattentive shop assistants or poor
quality of food served at a restaurant all qualify as moments of misery for the
customers. Though lapses in service cannot be totally avoided, how such a lapse
is handled can go a long way in converting a moment of misery in to a moment
of magic and creating a lasting impact on the customer.
Customer’s Expectations and Delight
In today’s ultra-competitive business environment merely meeting customer
expectations is not enough. In order to effectively differentiate themselves
from the competition, service providers need to focus on exceeding customer
expectations to create customer delight and create a pool of loyal customers.
Therefore, when deciding on a service delivery design, it is imperative for the
service provider to consider the targeted customer base and their needs and
expectations. This will help in developing a service design that will help the
provider to effectively manage customer expectations leading to customer
delight.
Customer Needs and Expectations
Customer needs comprise the basic reason or requirement that prompts a
customer to approach a service provider. For instance, a person visits a restaurant
primarily for the food it serves. That is the customer’s need. However, the
customer expects polite staff, attentive yet non-intrusive service and a pleasant
ambience. If these expectations are not properly met the guest would leave the
restaurant dissatisfied even if his basic requirement of a meal being served has
been met. Thus, knowing and understanding guest expectations is important for
any service provider.
Customer Satisfaction, Dissatisfaction and Delight:
Based on the quality of the service experience a customer will either be satisfied,
dissatisfied or delighted. Knowing a customer’s expectation is instrumental in
developing a strategy for meeting and exceeding customer expectations.
Customer Dissatisfaction: This is a situation when the service delivery fails to
match up to the customer’s expectations. The customer does not perceive any
value for money. It’s a moment of misery for the customer.
Customer Satisfaction: In this case, the service provider is able to match the
customer’s expectations and deliver a satisfactory experience. However, such a
customer is not strongly attached to the bran and may easily shift to a competing
brand for considerations of price or discounts and freebies.

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Customer Delight: This is an ideal situation where the service provider is able Notes
to exceed the customer’s expectations creating a Moment of Magic for the
customer. Such customers bond with the brand, are regular and loyal and will
not easily shift to other brands.
Meeting and Exceeding Customer Expectations
Exceeding customer expectations is all about creating that extra value for the
customer. The hospitality industry specializes in creating customer delight.
Example, most 5-star hotels maintain customer databases detailing room order
choices of their guests. So, if a guest has asked for say orange juice to be kept in
the mini bar in his room, the next time that he makes a reservation at the hotel,
the staff ensures that the juice s already kept in the room. Such small gestures go
a long way in making customers feel important and creating customer delight.
Another novel way of exceeding guest expectations is often demonstrated by
travel companies. Since, they usually have details on their customers’ birthdays,
they often send out an email greeting to their guests to wish them. This not only
makes an impact on the guest but also helps to keep the company acquire ‘top of
the mind recall’ with the guest.
13.9 MAINTAINING SERVICE QUALITY:
After having attained the desired service level, the next great challenge faced by
service providers is to maintain service standards at levels of excellence. This
is as important, and as tough, as establishing service standards and attaining to
them in the first place.
There are basically two approaches that any organization can have towards
maintaining service standards - a proactive approach or a reactive approach.
Proactive: A proactive approach entails actively reaching out to customers
and trying to gather their feedback on service quality and suggested areas
of improvement. This can be done by way of Surveys and administering
questionnaires, Gap Analysis, and Staff training
Surveys and questionnaires: Such an approach helps a brand to anticipate
customer demands and expectations and align its service offering accordingly.
Also, the findings of such surveys can help to identify common issues and
demands of customers hence helping a company to customize its service offering.
Gap Analysis: Another approach that is adopted for analysing service quality is
that of the gap analysis. The company has an ideal service standard that it would
like to offer to its customers. This is contrasted with the current level of service
being offered. The gap thus identified serves both as a measure and as a basis for
planning a future course of action to improve the service offering.
Staff Training: Another crucial aspect of the proactive approach is staff
training. Companies nowadays spend generously on training their personnel to
adequately handle customer queries and/or complaints. This is particularly true

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Notes if a company is changing its service offering or going in for a price hike of its
existing services. For example, when a fast-food chain increases the price of its
existing products, the staff has to handle multiple customer queries regarding the
hike. Lack of a satisfactory explanation would signify poor service standards and
lead to customer dissatisfaction.
Reactive: A reactive approach basically consists of resorting to a predetermined
service recovery mechanism once a customer complains about poor service
quality. It usually starts with apologizing to the customer and then taking steps
to redeem the situation. The fundamental flaw with this approach is that, here the
customer has already had a bad experience of the brand’s service.
13.10 MEASURING SERVICE QUALITY:
Another crucial element to be kept in mind while seeking to maintain service
quality is to have in place a metric for ‘measuring’ quality. The particular
parameters selected would depend on the type of business, service model and
the customer expectations. For example: at a customer service call center of a
telecom provider, the metric for measuring service quality could be the average
time taken for handling a call or rectifying a complaint. For a fast-food outlet,
the metrics for measuring service quality of the sales staff could be the number
of bills generated as a percentage of total customer footfalls or the increase in
sales month on month.
Once a system is put in place for measuring quality, a standard can then be
mandated for the service standard the organization is seeking to maintain.

13.11 SERVQUAL MODEL:

What is the SERVQUAL Model?
The Service Quality Model or SERVQUAL Model was developed and
implemented by the American marketing gurus Valarie Zeithaml, A. Parasuraman
and Leonard Berry in 1988. It is a method to capture and measure the service
quality experienced by customers.
Initially, emphasis was on the development of quality systems in the field
product quality. Over time, it became more and more important to improve the
quality of related services. Improved service quality could give organizations a
competitive edge. In addition, service in general became more important, and as
a result, the SERVQUAL Model had a serious impact in the eighties. Back then,
measuring service was abstract and not easily quantifiable.
The SERVQUAL Model is primarily a qualitative analysis. If a satisfaction
survey mainly depends on the transactions between supplier and buyer, the
observed quality is measured through generic, environmental factors.

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Notes

Shortcomings
This framework can be used to expose shortcomings in the service and address
them. In that sense, it is a so-called ‘GAP Analysis‘. It compares the expected
service quality and the service quality that has actually been experienced.
This experience is measured based on the customer’s perceptions. It is an
external analysis of customer needs in relation to the quality of the service they
experienced. Because of that, the focus is always on customer needs and not on
the measuring system or the organization’s perception; the way they would like
to see themselves. Furthermore, when determining the customer needs, the gap
between customer expectations and the actual service they experience, needs to
be taken into account.
Expectancy Pattern
Central to the SERVQUAL Model is the expectancy pattern of the service quality;
the difference between expectations and perception. It there is a difference in
quality, that is shown in the difference (the gap) between what was expected and
what was actually experienced. The SERVQUAL Model enables organizations
to learn which factors play a role how the customer’s expectancy pattern is
formed. That way, the organization can improve itself and take this expectancy
pattern into account beforehand.
13.12 TEN DIMENSIONS:
The first studies according to the SERVQUAL Model, were carried out
exclusively for the services of a telecommunications, banking and a maintenance
company. The previously mentioned researched surveyed consumers and their
perceptions of the experienced service quality of these three organizations. From
the original questionnaire of almost 100 items, 25 finally remained that were
considered important by the consumers regarding customer service. In the end,

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Notes this resulted in the following ten dimensions that still play an important role in
the SERVQUAL Model:
Reliability
Responsiveness
Competence
Access
Courtesy
Communication
Credibility
Security
Knowing the customer
Tangibles
The reliability depends on to what extent the service is accurate and honest.
Responsiveness is about promptly and adequately responding to customer
questions or complaints. Competence relates to the expertise an organization
has and the access determines if a customer can quickly and efficiently
contact the right department. Courtesy is the trying to be polite to customers
and communication is about clear, honest and prompt information for clients.
Credibility is about to what extent the organization’s message is believable and
reliable. Security is meant to add trust to the service and proper access for the
consumer. Knowing the customer includes a personal approach and responding
well to customers’ needs and wishes. The tangibles are tangible information; that
what is visible to the customers in the form of for instance the visibility of staff
(work clothes/uniform), the decoration and cleanliness of an office building and
all other facilities.
A smaller version of the SERVQUAL Model is the RATER model. Where the
SERVQUAL Model works with 10 dimensions to measure the quality of service,
the RATER model works with 5 dimensions.
13.13 FIVE GAPS:
Both the communication between the customer and the service-providing
organization, as well as the organization’s internal communication, are of vital
importance for the level of quality of the service. It is good when organizations
know the expectancy pattern of their customers. Therefore, the SERVQUAL
Model identifies five gaps that can arise between the customer’s needs and the
service that a company offers.
1. Knowledge gap: A gap arises when an organization’s knowledge of
customer expectations is lacking, preventing them from approaching
consumers in the right way.

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2. Standards gap: The organisation has already formed its own idea about Notes
what the customer expects from their service. If this idea is wrong from the
start and does not correspond to what customers actually expect, there is a
significant risk that the organization will translate it wrongly into a quality
policy and corresponding rules.
3. Delivery gap: A gap can also occur when the organization offers service
that is different from what the consumer had expected. This also involves
an incorrect implementation. For instance, in the way employees carry out
policy.
4. Communications gap: Sometimes, the external (marketing)
communication that the organisation sends out, can create the wrong
expectations among customers. It also happens that the organisation
communicates and promises things that are not in line with what they can
actually deliver.
5. Satisfaction gap: Dissatisfaction results from a (significant) difference
between the service a customer expects and the service they actually
experience. Eventually, this will lead to the biggest gap in the experience
of quality.

SUMMARY

The American Marketing Association defines services as - “Activities, benefits

and satisfactions which are offered for sale or are provided in connection with
the sale of goods.”
Marketing of services is a relatively new phenomenon in the domain of
marketing, having gained in importance as a discipline only towards the end of
the 20th century.
The first four elements in the services marketing mix are the same as those in
the traditional marketing mix. However, given the unique nature of services, the
implications of these are slightly different in case of services.
A moment of truth is usually defined as an instance wherein the customer and
the organization come into contact with one another in a manner that gives the
customer an opportunity to either form or change an impression about the firm.
The SERVQUAL Model is primarily a qualitative analysis. If a satisfaction
survey mainly depends on the transactions between supplier and buyer, the
observed quality is measured through generic, environmental factors.

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Notes
CASE STUDY :
The case is about India’s mobile app-based ride sharing firm Ola’s attempt
to make a re-entry into the fast-growing food delivery space, which it had
earlier exited. It starts out by mentioning the reasons that had driven Ola to
make an exit from the Indian food delivery space. Ola’s re-entry through the
acquisition of the fast-growing Indian food delivery company, Food panda,
is then described. The case let touches upon the advantages that Ola expected
to gain through the re-entry. It concludes with a look at the future prospects
of Ola’s food delivery business.

In December 2017, India’s mobile app-based ride-sharing firm Ola made a

re-entry into the food delivery space. It acquired the third largest player in the
market – Food panda India (Food panda) – for around US$ 50 million from
Germany-based Delivery Hero Group. Furthermore, Ola planned to invest
US$ 200 million (Rs. 1,330 crore) in expanding Food panda’s business,
which was the largest funds infusion in an Indian food delivery company.
Ola’s founding partner Pranay Jivrajka became the interim CEO of Food
panda and was supported by the existing leadership team at the food delivery
business.

ISSUES:
• To analyse the reasons that drive a company to make a market exit and a
subsequent market re-entry.
• To examine the chances of a company finding success in a new and
emerging market space.
• To scrutinize the strategies to be undertaken by a company to make a mark
in a growing but highly competitive market.

KEYWORDS:
Core service: the basic reason for the business; that which solves consumer
problems
Supplementary goods and services: supplements or adds value to the core
product and helps differentiate the service from competitors (e.g. consultation,
safe-keeping, hospitality, exceptions)
Facilitating services: (sometimes called delivery services): Facilitate the

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delivery and consumption of the core service (are essential to delivery) (e.g. Notes
information provision, order-taking, billing, payment methods)
Supporting services: support the core and could be eliminated without
destabilizing the core.
Lean services capes – environments that comprise relatively few spaces, contain
few elements and involve few interactions between customers and employees.
e.g. kiosks, vending machines
Peripheral evidence: is actually possessed as part of the purchase of a service
but has no independent value unless backed by the service. e.g. a cheque book,
credit card, admission ticket, hotel stationery.
Essential evidence: unlike peripheral evidence cannot be possessed by the
client. It contributes to ambience or image e.g. building and furnishings, layout,
equipment, people, etc.
Intangibility – services lack physical form; they do not interact with any of our
senses in a conventional way, they cannot be touched or held.
Inseparability – production and consumption cannot be separated (compared
with goods where production and consumption are entirely discrete processes)
Perishability – service performances are ephemeral; unlike physical goods,
services cannot be stored or inventoried.
Variability (also known as heterogeneity) – services involve processes delivered
by service personnel and subject to human variation, customers often seek highly
customized solutions, services are inherently variable in quality and substance.
EXERCISE:
POINTS TO ONDER:
Answer the Following Questions given Below:
1.Service Marketing become difficult because of-----------------
2. Service are characterized by all of the following characteristics except
for-------------
3. Solutions used to minimize the marketing problems attributed to
heterogeneity include---------
4. The following is not included in seven Ps of the marketing mix given
by Booms and Bitner----------
5. The following is not ways in which intangibility can be overcome------------

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Notes
SELF ASSESSMENT QUESTIONS:
SHORT ANSWER QUESTIONS:
1.Define Marketing Services.
2.What is services?
3.List out the classification of services.
4.Write any three differences of product and services.
5.What are the elements of marketing mix in service marketing.
6.What are the factor for future service marketing?
LONG ANSWER QUESTIONS:
1.Explain the classification of services.
2.Discuss the importance of marketing services.
3.Explain the differences between product and services.
4.Describe the characteristics of services.
5.Enumerate the essential elements of marketing mix in service marketing mix.

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 Lesson 14 – Competitior Analysis

Notes
LESSON 14 – COMPETITIOR ANALYSIS
CONTENT:
LEARNING OBJECTIVE
LEARNING OUTCOME
14.1 COMPETITOR-INTRODUCTION
14.2 HOW TO DO A COMPETITOR ANALYSIS
14. 3 MARKETING
SUMMARY
CASE STUDY
KEYWORDS
EXERCISE
SELF ASSESSMENT QUESTIONS

LEARNING OBJECTIVE:
• To identify the competitor analysis in marketing and strategic management
is an assessment of the strengths and weakness of current and potential
competitors.
• This competitor analysis provides both an offensive and defensive strategic
context to identify opportunities and threats.
• To know primary objective of competitor analysis is to understand and
predict the rivalry or interactive market behaviour between firms competing
in the same market arena.
LEARNING OUTCOME:
• An outcome of the competitor analysis is to try and predict the strategic
marketing decision.
• To understand how competitor analysis may respond to the marketing
decisions made by the firm carrying out the analysis as well as other
competitors in the market.
• It also attempts to predict and anticipate competitive actions and reactions
in the market place.
14.1 COMPETITOR-INTRODUCTION:
Organizations must operate within a competitive industry environment. They do
not exist in vacuum. Analysing organization’s competitors helps an organization

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Notes to discover its weaknesses, to identify opportunities for and threats to the
organization from the industrial environment. While formulating an organization’s
strategy, managers must consider the strategies of organization’s competitors.
Competitor analysis is a driver of an organization’s strategy and effects on how
firms act or react in their sectors. The organization does a competitor analysis to
measure / assess its standing amongst the competitors.
A competitor analysis also called a “competitive analysis” is used to understand
your competitors’ strategies, in turn opening up new opportunities for your own
business. The information you uncover can be used to inform your marketing
strategy, design new product lines and select useful business tools all of which
help distinguish you from your competition. Before you dive into any research,
clearly defined goals are needed. A competitor analysis should aim to:
• Understand competitors’ strategies
• Identify their strengths and weaknesses
• Find out what customers think about them
• Develop a competitive strategy that caters for your target market
Competitor analysis begins with identifying present as well as potential
competitors. It portrays an essential appendage to conduct an industry
analysis. An industry analysis gives information regarding probable sources of
competition (including all the possible strategic actions and reactions and effects
on profitability for all the organizations competing in the industry). However, a
well-thought competitor analysis permits an organization to concentrate on those
organizations with which it will be in direct competition, and it is especially
important when an organization faces a few potential competitors.
Michael Porter in Porter’s Five Forces Model has assumed that the competitive
environment within an industry depends on five forces- Threat of new potential
entrants, Threat of substitute product/services, bargaining power of suppliers,
bargaining power of buyers, Rivalry among current competitors. These five forces
should be used as a conceptual background for identifying an organization’s
competitive strengths and weaknesses and threats to and opportunities for the
organization from its competitive environment.
The main objectives of doing competitor analysis can be summarized as follows:
To study the market;
To predict and forecast organization’s demand and supply;
To formulate strategy;
To increase the market share;
To study the market trend and pattern;
To develop strategy for organizational growth;

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When the organization is planning for the diversification and expansion Notes
plan;
To study forthcoming trends in the industry;
Understanding the current strategy strengths and weaknesses of a
competitor can suggest opportunities and threats that will merit a response;
Insight into future competitor strategies may help in predicting upcoming
threats and opportunities.
Competitors should be analysed along various dimensions such as their size,
growth and profitability, reputation, objectives, culture, cost structure, strengths
and weaknesses, business strategies, exit barriers, etc.
14.2 HOW TO DO A COMPETITOR ANALYSIS:
Here are the four steps every business can cover in their competitor analysis to
make sure no stone is left unturned:
1. Identify Your Competitors
You can’t analysis your competitors if you don’t know who they are all of them.
The key is to put yourself in the shoes of your target customer.
A Google search for your business type and location is how many customers
will find you initially, but their search terms may differ. Let’s say you’re starting
a retail business selling children’s clothes in Birmingham. A potential customer
could search with a number of phrases like “Birmingham kids clothing shop”,
“children’s clothing shop in Birmingham” and “Birmingham children’s clothes.”
By coming up with as many searches as possible and seeing which businesses
appear in the results, you’ll get an idea of what your target customer sees when
they do the same. Take note of household name brands and companies that
frequent the top three results, as these are the ones most likely to win business.
Some businesses simply don’t show up in searches, usually because they haven’t
listed their business with Google. If they have a brick-and-mortar presence
though, they still have the chance to drive footfall from passers-by and through
word-of-mouth promotion. Even without your own physical store, your business
is in competition with those out on the street. Take a walk around your town and
local area to see what’s about.
You can remove the guesswork of this stage entirely by simply asking your
customers where else they shop for similar products or services. Focus groups,
questionnaires, surveys or a simple chat across the counter are all legitimate
ways of finding out. You’ll also get first-hand information on how they feel your
business compares to competitors’.
The final thing to do is combine all the information you’ve collected and create
a list of the top 10 competitors. Even though there may be many more, a shorter
list is more practical to work with.

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Notes 2. Analyse Your Competitors

Armed with your top 10 competitor list, you can now do a deep dive into the
background, location, products or services, marketing, sales and workforce of
each.
Business background: What important dates and events has each competitor
seen since inception? The key areas of focus are ownership, financials and
organizational structure. How have these affected where the company is today?
Facilities and location: Explore the location of each competitor’s office or store
as well as the appearance of their online presence. Location is a key factor in their
strengths and weaknesses as it affects foot traffic, logistics and accessibility.If
you have a brick-and-mortar business, location is vital to your success. There’s
a fine balance to tread. Moving into an area that’s over-saturated with similar
businesses creates higher competition but an area where there’s no competition
at all may be too isolated.
Location also affects the ease with which you can distribute your own products
and services as well as the supplies you receive. Researching your rivals’
business operations can provide a sneak peak into the facilities you need, as well
as pitfalls you want to avoid.
Products: Product-based businesses should look at competitors to see what they
offer, the breadth of their product lines and whether they’re missing anything
crucial. Industry news can reveal whether they’re developing products and if
they have patents and licenses pending.
Pricing: It’s tricky to find out what your competitors’ pricing strategy looks like
in detail, but there are a few ways you can build a top line understanding:
• Use online competitor price tracking software
• Check prices of products in store and online and compare these between
competitors
• Take note of discounts
• Speak to suppliers and distributors
• Call up your competitor to see what deals they offer over the phone
• Speak to customers about how much they spend on competitors’ products
• A clearer idea of pricing trends and anomalies puts you in good stead
to understand where your own price points should fall. You’ll probably
notice that many smaller businesses add higher markups to their products,
whereas large businesses swallow a bigger percentage of the difference.
14. 3 Marketing: Which channels are your competitors using to reach out to
customers and what messages are they using? You might want to break down
your competitors’ marketing tactics so that they’re easier to analyse. The key
areas are:

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Their brand: The way the company presents itself to customers. Notes
Their website: Its appearance, features (like online ordering), returns policy and
functionality.
Their social media: How they speak to customers one on.
Their online and offline advertising: The messages and promotions they push
through display advertising or offline media such as store signage.
Their email marketing: The style, content and frequency of emails they’re
sending.
It’s not easy to get a true picture of the marketing metrics your competitors are
using, or how (and if) they’re achieving them. What you should hope to gain
from this particular analysis are insights into potential strengths and weaknesses
that your business can benefit from. The number of followers a competitor has
on social media, the ease with which you can buy through their website, the
usefulness of the content in their emails and the strength of their branding are all
opportunities for you to improve your own approach.
Sales: Understanding competitors’ sales strategies can help you make strategic
decisions about where, what and how you make your own sales. As with their
marketing though, you’ll find that a lot of information isn’t publicly available.
Using news resources, competitors’ websites and by following the same sales
process your customers would, you should still be able to answer some of these
key questions:
• What is the competitor’s annual revenue and growth pattern?
• Which online and offline channels are they selling through?
• Are there multiple locations?
• What does the sales process look like?
• Do they have dedicated salespeople?
• Do they offer discounts and is there a pattern to these?
• Do they partner with other businesses to increase or simplify sales?
• Are they involved in reselling programmes?
• Why and when do they tend to lose customers during the sales process?
• Are they expanding?
Personnel:
Staff keeps your business running, so they’re an important part of your competitor
analysis. As a small business taking extra care over costs, the number of people
your competitors employ, what their hours are, how much they get paid and what
types of contract they have are big takeaways that can inform how you might
build a strong team on a budget.

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Notes Glassdoor is a useful resource, not only for finding out the above, but for seeing
what people have to say your competitors as an employer. You may find recurring
themes that help you tailor your own approach to leadership and employee
management.
3. Segment Your Competition:
Once you’ve conducted extensive research on each of your listed competitors,
it’s time to categories them into primary, secondary and tertiary groups.
Primary competition: These are your direct competitors. They target the same
audience as you, have a similar product offering and use many similar tactics.
These are the businesses you should keep close tabs on.
Secondary competition: These competitors are similar to your business but may
offer variations of your product, either at the high or low end of the spectrum.
They may also have a similar target market but an entirely different product.
Tertiary competition: These competitors’ products are somewhat related to
yours but do not appeal exclusively to your target audience. Although not a
direct competitor, tertiary competition can still pose a threat if it has a better
location, bigger team and so on. It’s for this reason you shouldn’t underestimate
the impact of their presence in the market.
4. Determine Business Opportunities
With all the information you’ve gathered through the competitor analysis, you’re
now ready to think tactically about how you will become a worthy rival. The
questions to take a deep dive into are:
Are direct and indirect competitors growing or scaling back?
Why is this and what does it mean for your business?
After exploring your products, marketing, sales and workforce, what clear
opportunities do you have to differentiate from the competition?
Are there areas where competitors are weaker and your business can stand out?
What are your competitors’ strengths and how can you compete?
What is your plan if competitors drop out or enter the market?
Whatever the size of your business, a competitor analysis can be used daily and
in your long-term planning to grow faster and manage operations efficiently.
Fledgling business owners can model their business plan accordingly and enter
the market on a strong foot. Whilst seasoned entrepreneurs can re-evaluate
priorities and gauge how their business has grown over time.
SUMMARY
A competitor analysis also called a “competitive analysis” is used to understand
your competitors’ strategies, in turn opening up new opportunities for your own
business. The information you uncover can be used to inform your marketing
strategy, design new product lines and select useful business tools all of which

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help distinguish you from your competition. Notes

You can’t analysis your competitors if you don’t know who they are all of them.
The key is to put yourself in the shoes of your target customer.
Armed with your top 10 competitor list, you can now do a deep dive into the
background, location, products or services, marketing, sales and workforce of
each.
Once you’ve conducted extensive research on each of your listed competitors,
it’s time to categories them into primary, secondary and tertiary groups.
With all the information you’ve gathered through the competitor analysis, you’re
now ready to think tactically about how you will become a worthy rival.

CASE STUDY :
In the 1980s when the Japanese copier manufacturer Canon began

to enter the US market, Xerox was convinced that Canon was dumping a
product in the US at below cost. Because Xerox was shipping product at
a price that was approximately equal to the Xerox’s manufacturing costs.
So, Xerox decided that they were going to take apart a Canon copier and
send all the pieces to their distributor in Japan and get the distributor to
come back and tell them what the parts all cost, so that they could bring a
dumping action before the US Department of Commerce, and hopefully
get punitive tariff put on Canon’s products. Instead, what they found
out when they got all the pieces back, was that Canon had figured out
a less expensive way to build and assemble and in fact service copiers.
For example, they found that in some cases Canon had put two screws
to hold an assembly in place rather than four, or six that xerox had. So,
Xerox took all of this information and added up the cost and they were
really shocked to find that Canon in fact could make a profit at that price.
And at that point Xerox might have thrown up their hands and said we
have to get out of the small desktop copier business, but instead they
decided that they would try to figure out what they could do to reduce
their own costs. Xerox obviously had its assumptions pretty seriously
challenged, and they rose to that challenge and recalibrated.

KEYWORDS:
Competitor Objective: To determine the competitor’s strengths and weaknesses
relative to your own product.
Competitor’s Assumptions: The competitive market model as commonly
described in textbooks includes a number of assumptions that are thought to be
necessary to reach the efficient allocation of resources and stable price predicted
by the model.

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Notes Competitor strategy: The long-term plan of a particular company in order to gain
competitive advantage over its competitors in the industry.
Competitors ‘s Resource and Capabilities: in order to develop a competitive
advantage, the firm must have resources and capabilities that are superior to
those of its competitors.
Competitor profiling: Is part of the competition analysis. It consists in finding
out and processing data about competing businesses or products in order to
generate the key information about them, categorize them and identify their key
competitive differences.
EXERCISE:
POINTS TO PONDER:
Answer the following Questions Given Below:

1. When a market leader owns a large part in the overall market, it is said to be-----
------
2. A competitor analysis may be thought of as competition analysis at the micro
level-----------
3. The approach that is be focused not only on searching for weaknesses of the
opponent (to gain a competitive advantage for the company) but also searching
for starting points for collaboration is called --------------
4. The Competitor analysis has ---------- number of phases.
5. The objectives of the competitor analysis are to obtain insight into-------------
SELF ASSESSMENT QUESTIONS:
SHORT ANSWER QUESTIONS:
1.What is competition?
2.Write any three characteristics of competition?
3.List out the factors influencing competition.
4.What are the forms of competition?
5.What are the steps involved in competitors’ analysis?
LONG ANSWER QUESTIONS:
1.Describe the characteristics of competition.
2.Discuss the factors influencing competition.
3.Explain the forms of competition.
4.How to analyzing competitors. Explain.
5.Explain market leader strategy.

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Notes
LESSON 15 – ANALYSIS OF CONSUMER
& INDUSTRIAL MARKETS
CONTENT:
LEARNING OBJECTIVE
LEARNING OUTCOME
15.1 INTRODUCTION
15.2 CONSUMER MARKET
15.3 TYPES OF INDUSTRIAL CUSTOMERS
15.4 INDUSTRIAL MARKET VS CONSUMER MARKET
SUMMARY
CASE STUDY
KEYWORDS
EXERCISE
SELF ASSESSMENT QUESTIONS

LEARNING OBJECTIVE:
• To determine consumer marketing, products are often simple and can be
mass marketed. On the other hand, Industrial marketing, products are very
niche- specific and require specialized knowledge on the part of both the
buyer and seller.
• The aim of marketing is to meet and satisfy target customers need and wants
better than competitors.
• To gain knowledge in industrial marketing mix strategies that are possible
for marketing managers.
LEARNING OUTCOME:
• The outcome is to recognize marketing information systems and marketing
research applications in industrial marketing.
• The ultimate goal of consumer and industrial marketing as the systematic
collection and evaluation of data regarding customer’s preferences for actual
and potential products and services.
• Identify which consumer needs are important and whether the needs are
being met by current products

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Notes
15.1 INTRODUCTION:
To develop an effective marketing plan, an industrial marketer needs to
understand industrial markets. The industrial market is composed of commercial
enterprises, governmental organizations, and institutions whose purchasing
decisions vary with the type of industrial good or service under consideration.
Effective marketing programs thus depend upon a thorough understanding of
how marketing strategy should differ with the type of organization being targeted
and the products being sold.
The industrial market is characterized by wonderful diversity both in customers
served and products sold. Component parts, spare parts, accessory equipment,
and services are example of the types of products purchased by the variety of
customers in the industrial market. Industrial distributors or dealers who in turn
sell to other industrial customers, commercial businesses, government, and
institutions buy a variety of products that, in one way or another, are important
to the functioning of their business endeavors.
Knowing how this immense array of industrial customers ‘purchase and use
products and what criteria are important in their purchasing decision is an
important aspect of industrial marketing strategy. For the purpose, industrial
sellers understand the types of industrial buyers.
15.2 CONSUMER MARKET:
It is a very wide market. It consists of the all the people who have some unsatisfied
demand. The number of buyers is large in number. But since the purchases done
by them are for the personal consumption and not to utilise it for selling or further
production, individuals buy in small quantities. Because of the large number of
consumers there is no close relationship between them and the manufacturer.
Along with the large numbers the buyers as widely distributed also.
The entire world is consumer market. As there is large number of buyers and
as these buyers are geographically widespread, there are a large number of
middlemen the distribution channel. The purchase is small in quantity and the
consumers have many alternatives to choose from. So they are very sensitive to
price change. The demand in the consumer market is price elastic.
The consumer market (sometimes referred to as the retail market), involves the
buying and selling of everyday goods, such as appliances, furniture, groceries,
clothing, etc. On the buying side of the equation, we consumers have a huge
selection of products and services to pick from. There are so-called brand
products (well-known names and reputations), and less expensive, lesser-known
goods. This environment translates into a wide variety of prices, designs, and
capabilities offered to the buyer.
On the other side, the sellers in the consumer market face a number of pressures
to profitably address the many options available to the consumer markets buyer.

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These pressures include high operating costs, expensive manufacturing and Notes
distribution costs, and heavy competition.
15.3 TYPES OF INDUSTRIAL CUSTOMERS:
Industrial customers are normally classified into four groups:
1. Commercial Enterprises,
2. Governmental Agencies,
3. Institutions, and
4. Co-operative Societies.
Commercial Enterprises:
Commercial enterprises are private sector, profit-seeking organisations such
as IBM, General Motors, Computer Land, and Raven Company, purchase
industrial goods and/or services for purposes other than selling directly to
ultimate consumers. However, since they purchase products for different uses,
it is more useful from a marketing point of view to define them in such a way as
to understand their purchasing needs at the time of examination of the varieties
of products they purchase and how marketing strategy can be developed to meet
their needs.
Figure: Industrial Customers

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Notes Aluminium-extruded products such as door and window frames, by using an

extrusion press. Thus, aluminium billets are called manufactured materials.
Component Parts: Component parts such as electric motors, batteries and
instruments can be installed directly into products with little or no additional
changes. When these products be sold to customers who use them in their
production processes, they are marketed as OEM goods. The component parts
are also sold to the dealers or distributors, who resell them to the replacement
market. For example, MICO spark plugs are sold to a truck or car manufacturer,
as well as to automotive dealers/distributors throughout India.
Capital items: Capital items are used in the production processes and they wear
out over certain time frame. Generally, they are treated as a depreciation expense
by the buying firm or user customers. These are classified as follows:
Installations/Heavy Equipment: Installations are major and long-term
investment items such as factories, office buildings and fixed equipment’s like
machines, turbines, generators, furnaces, and earth moving equipment. These
items are shown in the balance sheet as plant and equipment, and are fixed
assets to be depreciated over a period of years if they are absolutely purchased.
However, if these are leased, the purchaser treats the cost for tax purpose as an
expense. As the unit purchase price of capital items is high, borrowing money
for a period of time, which is roughly equivalent to the expected life of the fixed
assets, finances these items.
Accessories/Light Equipment: Light equipment and tools which have lower
purchase prices and are not considered as part of fixed plant, are power operated
hand tools, small electric motors, dies; jigs, typewriters and computer terminals.
Purchases of accessories are either considered as current expenses with purchase
prices taken as operating expenses in the year purchased, or they may be
considered as fixed assets and therefore, depreciated over a period of few years.
Plant and Buildings: These are the real estate property of a business/ organization.
It includes the firm ‘s offices, plants (factories), warehouses, housing, parking
lots, and so on
Supplies and Services
Supplies and services sustain the operation of the purchasing organization.
They do not become a part of the finished product. They are treated as operating
expenses for the periods in which they are consumed.
Supplies: Items such as paints, soaps, oils and greases, pencils, typewriter
ribbons, stationery and paper clips come under this category. Generally, these
items are standardized and marketed to a broad section of industrial users.
Services: Companies need a broad range of services like building maintenance
services, auditing services, legal services, courier services, marketing research
services and others.

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15.4 INDUSTRIAL MARKET VS CONSUMER MARKET: Notes

Let’s be honest. When it comes to marketing, many industrial companies let it

fall by the wayside. If there’s time or money left in the budget, an advertisement
might be placed in a trade journal or in a regional newspaper. For many industrial
companies, marketing simply isn’t worth the time or effort.
But herein lies the issue. What many companies may think of as marketing (and
what they’re seeing little return on) isn’t the kind of marketing they should be
implementing. Industrial marketing is an entirely different beast compared to its
more popular and more recognized counterpart, consumer marketing.
While consumer marketing deals with product markets (think finished goods
that are largely bought by individuals, like shoes, clothing, books, etc.) industrial
marketing deals with factor markets, or highly specialized products and services
for select consumers (think labor, machinery or unfinished products (1).
Of course, the end goal is still the same: gain qualified leads that turn into
quality customers. But the way to get those leads needs to be approached entirely
differently. Here are the main differences between industrial marketing and
consumer marketing:
1. Products are Highly Specialized.
In consumer marketing, products are often simple and can be mass marketed.
On the other hand, in industrial marketing, products are very niche-specific and
require specialized knowledge on the part of both the buyer and seller.
When it comes to marketing your Lithium-ion batteries that work specifically
with medical machinery, your target audience certainly isn’t going to be everyone
and anyone.
By creating eBooks, webinars, blog posts and other materials about the problems
your target audience face, industrial companies can help educate their buyers
during the critical research and analysis stage of the industrial buy cycle (a stage
which is nearly nonexistent in the consumer buying process.)
2. Industrial Buyers are Professionals:
While consumer market buyers can be swayed by social or psychological
motives, industrial market buyers know exactly want they want and are often a
part of a buying team (while an individual may purchase a product, the decision
may be a highly scrutinized team decision.)
Buyers are looking for benefits (often hard ROI numbers) and how this purchase
will help them meet their goals. Through case studies, white papers and other
factual content marketing material, industrial companies can differentiate
themselves and provide the reliable information that industrial buyers seek to
analyze before making decisions.

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Notes 3. There’s an emphasis on partnerships vs. advertising:

In consumer marketing you may be able to convince a buyer to buy a pair
of socks based on their impulses. In the industrial market, gaining a buyer
requires a longer timeline (sometimes months or years) and a formation of
trust and expertise. Industrial marketing focuses on “lead nurturing,” building a
relationship between you and the buyer (2). Based on the products the industrial
company sells, a sale can result in a partnership that lasts for years.
As can be deduced from above, the industrial buying process is vastly different
from the typical consumer buying process. The industrial market is comprised of
products that are highly specialized, consists of professional buyers that conduct
considerable research on products before buying and relies on establishing
relationships between buyers and sellers. The sale cycle is much longer, again
emphasizing that relationships and communication channels between industrial
companies and potential customers must stay open and nurtured.
A survey from Engineering360 showed that the top most important characteristics
during the buying process included technical support, delivery and availability;
characteristics that stressed service vs. price (3). As such, marketing and customer
service are inextricably linked in the industrial buying process, again showing
the importance of brand loyalty through the implementation of such marketing
tactics as customer surveys, newsletters and open forums.
According to Gartner, “57% of a typical purchase decision is made before
customer even talks to a supplier” while “53% of those surveyed claimed that the
sales experience itself was one of the greatest contributing factors in continued
loyalty to the brand (4).”
Difference between Consumer Market and Industrial Market:
As an industrial owner, you cannot refute the importance of industrial marketing
strategies in scaling the sales of your highly specialized products or services.
However, you might have always wondered how industrial marketing is different
from consumer marketing. Well, the difference between these two marketing
strategies can be understood by recognizing the distinction in their target markets.
Consumer Market
It is a market that involves the sale of goods/services to the end-users. So, if you
are selling, say books, groceries, bags, or shoes that are purchased by customers
who are going to use or consume it finally, then you are in the consumer market.
Industrial Market
It is a factor market that involves the sale of unfinished or semi-finished goods
that are used by buyers as a raw material in their production process. For
example - when a manufacturer of large toy-making machinery sells it to another
business who uses this machinery to produce and sell toys in the market, then
these businesses are in the industrial market.

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Difference between Industrial and Consumer Marketing: Notes

Industrial Marketing
Industrial marketing or B2B marketing refers to the marketing of industrial
goods/services in the industrial market. Industrial marketing relies on the tools of
competitive tendering and effective communication channels between industrial
companies and professional buyers of their highly specialized products. It
involves a protracted sale-purchase process that aims at providing innovative
solutions to the problems of industrial customers.
Consumer Marketing
Consumer or B2C marketing refers to the marketing of finished products/
services to the potential end-customers in a consumer market. It relies on gaining
extensive knowledge about the tastes and preferences of the end-customers.
It focuses on generating demand through marketing tools such as advertising
campaigns, attractive packaging, after-sales services, etc.
Relevant: B2B vs. B2C Growth Marketing: How Are They Different?
Comparative Analysis
Criteria Industrial Marketing Consumer Marketing
Type of Products Products are complex Products are simple and
and highly specialized easy-to-use that can be
that require expert straightforwardly mass-
knowledge. marketed.
Target Audience Professional and trained End-users who purchase
business owners who the product or avail
use the product of your the services for final
industrial company as consumption and
a factor of production, gratification.
i.e. as an input in their
production process.
Motives of Sellers To influence institutional To create awareness
buyers throughout their of the availability of a
complete industrial product or service by
buying process. a particular brand and
generate demand by
highlighting the salient
features

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Notes Strategic Focus Developing and Dynamic advertising that

nurturing partnerships induces the impulsive
that focus on building buying behavior of the
long-term relations with customers and makes
business partners by them loyal to the brand.
gaining their trust. Customers may or may
not be the long-term
users of the products/
services.
Marketing Strategies Digital Content Various online and
marketing (posting offline advertising and
blogs, white papers, case marketing tools including
studies on informational print, television, and
websites), personalized several online or social
presentations to clients, media platforms.
distributing product
samples, etc.
Marketing Elements Encompasses all Encompasses only
the operational highlighting the benefits/
competencies and utilities that customers
processes employed will derive by using the
by the company in product/service.
delivering value to their
customers.
Market Reach Narrow and constricted Wide and extensive as
as industrial marketers consumer marketers
deal with the limited market the products/
magnitude of businesses services to potential
requiring products/ mass customers.
services of their clients.
Economic factors regarding money, interest rate, banking, etc.
• Interest rates (determines costs of financing of business and investment
activity),
• Overall level of debt,
• Level of government debt,
• Inflation rate, and inflation perspectives,
• Monetary policy, supply of money,
• Rating agency evaluation of country,
• Banking facilities and level of services (e-banking, Internet banking, etc.)
• Financial market condition, asset prices, freedom in trading

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• Phase of economic cycle (prosperity, recession, depression, recovery) Notes

• Availability of mortgage debt,
• Exchange rates,
• Influence of international organization (WMF, World Bank, etc.),
Economic factors affecting business include all important trends in the economy
that can help or hinder the company in achieving its objectives. Economic factors
that commonly affect businesses include consumer behaviour, employment
factors, interest rates and banking and inflation and overall economic indicators.
They also include several legal regulations in the country, which are described
in: Legal factors affecting business. Analysis of economic factors is integral
part of every strategic analysis method including PEST analysis, STEEP
analysis, PESTEL analysis, PESTLE and other derivatives of strategic business
environment analysis.
Behaviour Factors:
Marketing is so much more than creating a catchy phrase or a jingle people will
sing for days. Understanding consumer behaviour is a vital aspect of marketing.
Consumer behaviour is the study of how people make decisions about what they
buy, want, need, or act in regards to a product, service, or company. It is critical to
understand consumer behaviour to know how potential customers will respond
to a new product or service. It also helps companies identify opportunities that
are not currently met.
A recent example of a change in consumer behaviour is the eating habits of
consumers that dramatically increased the demand for gluten-free (GF) products.
The companies that monitored the change in eating patterns of consumers created
GF products to fill a void in the marketplace. However, many companies did
not monitor consumer behaviour and were left behind in releasing GF products.
Understanding consumer behaviour allowed the pro-active companies to increase
their market share by anticipating the shift in consumer wants.
The Three Factors
To fully understand how consumer behaviour affects marketing, it’s vital to
understand the three factors that affect consumer behaviour: psychological,
personal, and social.
1. Psychological Factors
2. Personal Factors
3. Social Factors

SUMMARY

• To develop an effective marketing plan, an industrial marketer needs

to understand industrial markets. The industrial market is composed of

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Notes commercial enterprises, governmental organizations, and institutions

whose purchasing decisions vary with the type of industrial good or service
under consideration
• The consumer market (sometimes referred to as the retail market), involves
the buying and selling of everyday goods, such as appliances, furniture,
groceries, clothing, etc.\
• Industrial distributors and dealers take title to goods; thus, they are
the industrial marketer ‘s intermediaries; acting in a similar capacity
to wholesalers or even retailers. The intermediaries not only serve
the consumer market but also, they serve other business enterprises,
government agencies, or private and public institutions
• The industrial products and services are classified into three broad groups:
(i) materials and parts, (ii) Capital items, (iii) Supplies and services
• Industrial marketing or B2B marketing refers to the marketing of industrial
goods/services in the industrial market
• Consumer or B2C marketing refers to the marketing of finished products/
services to the potential end-customers in a consumer market

CASE STUDY :
The case let examines the unique e-commerce operations of Metal
junction Services Ltd., which have revolutionized the way metals are sold and
purchased in India. The case let details how MSL catered to both ends of the
value chain, namely, e-selling (through metaljunction.com) and e-procurement
services (through commercejunction.com). The case let also discusses the
various other initiatives taken by the company, like online financial services, the
setting up of coaljunction.com to provide e-selling services to coal companies
and the launch of an online store for selling branded and non-branded
fixed price prime steel. The latter part of the case let deals with the various
promotional initiatives taken by MSL to bag the position of the world’s leading
e-marketplace for steel. Technology, especially information technology, has
revolutionized the marketing of industrial products and services. It has brought
customers, who would otherwise be inaccessible, closer to the marketer, apart
from offering wider choices to the customer, and improved the efficiency of
marketing activities.

ISSUES:
• The importance and advantages of e-marketplace for selling commodities
• The e-selling and e-procurement services of Metal junction Services Ltd
• The various initiatives of Metal junction Services Ltd., to promote itself
and become the world’s leading e-marketplace for steel

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• The transactional relationship of Metal junction Services Ltd., with its Notes
clients and the channel partners of its clients
QUESTION FOR DISCUSSION:
• 1. How has an Indian e-commerce company like Metal junction Services
Ltd., which primarily procures and sells commodities like steel and coal,
managed to become the largest e-market place for steel in the world?
• 2. ‘Metal junction should restrict its activities to the steel sector. Its expansion
into varied sectors will have a negative impact on its core competency sector
i.e. Steel.’Discuss. What measures should the company take to expand its
operations globally and become a global e-marketplace like alibaba.com,
ariba.com or worldwideretailexchange.com?
KEYWORDS:
• Consumer: The consumer is the one who pays to consume the goods and
services produced. As such, consumers play a vital role in the economic
system of a nation. In the absence of their effective demand, the producers
would lack a key motivation to produce, which is to sell to consumers.
• Market Research: The systematic collection and evaluation of data
regarding customers’ preferences for actual and potential products and
services.
• Marketing Research: The function that links the consumers, customers,
and public to the marketer through information. This information is used
to identify and define marketing opportunities and problems; generate,
refine, and evaluate marketing actions; monitor marketing performance;
and improve understanding of marketing as a process.
• Ethnography: The branch of anthropology that scientifically describes
specific human cultures and societies.
• Focus Group: A group of people, sampled from a larger population,
interviewed in open session for market research or political analysis.
• Empirical Data: Data derived from reliable measurement or observation.
EXERCISE:
POINTS TO PONDER:--
Answer the following Questions given below:
1. Buying goods and services for further processing or for use in the
production process refers------------
2. Fewer, larger buyers is the key characteristics of---------------
3. Webster and Wind define _______as the decision-making process by

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Notes
which formal organizations establish the need for purchased products and
services and identify, evaluate and choose among alternative brands and
supplies.
4. _____ goods are meant for final consumption by consumers and not
for sale.
goods are those which are used for further production of goods.
5. ______ goods are those which are used for further production of goods.

SELF ASSESSMENT QUESTIONS:

SHORT ANSWER QUESTIONS:
1.What is industrial Marketing?
2.List out the type of exchange in industrial market.
3.What are the classification of industrial goods.
4.What is consumer marketing?
5.What are the methods of promotion in consumer marketing?
LONG ANSWER QUESTIONS:
1.Explain the differences between industrial goods and consumer goods.
2.Write briefly on marketing mix of consumer products.
3.Discuss the industrial marketing strategies.
4.Explain different types of consumer goods.
5.Describe the classification of industrial goods.

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Notes
LESSON 16 – STRATEGIC MARKETING
MIX
CONTENT:
LEARNING OBJECTIVE
LEARNING OUTCOME
16.1 INTRODUCTION
16.2 DEFINITION OF ‘MARKETING MIX
16.3 4C’s OF THE MARKETING MIX
16.4 WHAT ARE THE 5 PS OF MARKETING
16.5 7PS OF MARKETING MIX
16.6 STRATEGIC MARKETING MIX COMPONENTS
16.7 LIMITATION OF MARKETING MIX ANALYSIS (4PS OF
MARKETING)
SUMMARY
CASE STUDY
KEYWORDS
EXERCISE
SELF ASSESSMENT QUESTIONS

LEARNING OBJECTIVE:
• To analyze effective marketing strategy combines the 4 Ps of the marketing
mix.
• To boost company marketing objectives by providing its customers with
value.
• The 4 Ps of the marketing mix are related and combine to establish the
product’s position within its target markets.
LEARNING OUTCOME:
• Discuss various branding strategies and explain the benefits of packaging
and labelling.
• Developing a product that meets the needs of the target market.
• To identify how the firms marketing strategy and marketing mix must
evolve

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Notes 16.1 INTRODUCTION:

The marketing mix is the mixture of controllable marketing variables that the firm
uses to influence and pursue the sought level of sales in the target market. It is the
tools use to influence or persuade the wants, needs, and demands of the customer
for PSI (product, service, or information). n simple terms, the marketing mix is
the tool that is used to influence the target market and its demand for products,
services, or information.
So, understanding the basic concept of the marketing mix and its extensions in
important for achieving success in marketing.
16.2 DEFINITION OF ‘MARKETING MIX’:
Definition: The marketing mix refers to the set of actions, or tactics, that a
company uses to promote its brand or product in the market. The 4Ps make
up a typical marketing mix - Price, Product, Promotion and Place. However,
nowadays, the marketing mix increasingly includes several other Ps like
Packaging, Positioning, People and even Politics as vital mix elements.
Description: What are the 4Ps of marketing?
Elements of Marketing Mix
What makes the marketing mix?
The marketing mix is a combination of elements that are essential for marketing
plan and strategy. As the business space changed, so did the marketing mix.
First, it was the 4Ps of Marketing Mix. Then 7Ps of Marketing Mix. Also, we
need to know the 4C’s of Marketing that complements the 4Ps of Marketing
Mix.
In this post, we will go through all the elements of the marketing mix and
understand how they were developed, how they are implemented in marketing.

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Price: refers to the value that is put for a product. It depends on costs of Notes
production, segment targeted, ability of the market to pay, supply - demand and
a host of other direct and indirect factors. There can be several types of pricing
strategies, each tied in with an overall business plan. Pricing can also be used a
demarcation, to differentiate and enhance the image of a product.
Product: refers to the item actually being sold. The product must deliver
a minimum level of performance; otherwise even the best work on the other
elements of the marketing mix won’t do any good.
Place: refers to the point of sale. In every industry, catching the eye of
the consumer and making it easy for her to buy it is the main aim of a good
distribution or ‘place’ strategy. Retailers pay a premium for the right location. In
fact, the mantra of a successful retail business is ‘location, location, location’.
Promotion: this refers to all the activities undertaken to make the product
or service known to the user and trade. This can include advertising, word of
mouth, press reports, incentives, commissions and awards to the trade. It can
also include consumer schemes, direct marketing, contests and prizes.
4C’s of Marketing fit marketing mix perfectly and complements each other. They
explain what should be the main focus in the 4Ps of Marketing Mix.

A marketing mix includes multiple areas of focus as part of a comprehensive marketing

plan. The term often refers to a common classification that began as the four Ps: product,
price, placement, and promotion.

16.3 4C’s OF THE MARKETING MIX ARE;

1. Customer Value,
2. Cost,
3. Convenience,
4. Communication.
16.4 WHAT ARE THE 5 PS OF MARKETING?
The 5 P’s of Marketing – Product, Price, Promotion, Place, and People. As the
elements of Marketing Mix are debated and developed, marketing gurus and
scholars added “people” to the marketing mix.
But now the marketing mix is defined by the 7Ps of Marketing Mix,
16.5 7PS OF MARKETING MIX:
4Ps of the marketing mix is not enough for companies marketing strategies
anymore. That is why the 7P’s of marketing were developed.
Businesses were very much product-centric rather than customer-centric.
Customer care, providing services were not important. But businesses changed,
and competition has increased.

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Notes So differentiating from competition and gaining market share became important.
7Ps of Marketing Mix helps companies to develop marketing strategies for the
modern competition age.
In 1981 Booms and Bitner extended the 4Ps of Marketing Mix to 7Ps of Marketing
Mix. They added Process, People (Participants), and Physical evidence to reflect
the new reality in marketing.
Elements of 7p’s of the marketing mix are;
1. Product,
2. Price,
3. Place,
4. Promotion,
5. People,
6. Process, and
7. Physical evidence,
Is there an 8th P – the 8th P of the Marketing Mix:
As businesses advance with modern times. Many are considering “Productivity”
as the 8th P of Marketing Mix.
One might argue that Productivity is a part of the Process element of the 7p’s of
Marketing Mix. But the Productivity P asks how efficiently the market offering is
delivering the results to customers. It asks the marketer to consider the efficiency
of the marketing process.
Even after 31 years (or 54 in the case of the original P’s), the Marketing Mix
is still very much applicable to a marketer’s day to day work. A good marketer
will learn to adapt the theory to fit with not only modern times but their business
model.
What is the importance of the marketing mix?
All the elements of the marketing mix influence each other. They make up the
business plan for a company and handled right, can give it great success. But
handled wrong and the business could take years to recover. The marketing
mix needs a lot of understanding, market research and consultation with several
people, from users to trade to manufacturing and several others.
16.6 STRATEGIC MARKETING MIX COMPONENTS:
In the sequence of strategic analysis and decisions, “marketing mix” analysis
falls after various external and internal environmental analyses such as
PESTEL analysis, Porter’s Five Forces analysis, SWOT Analysis and even
formulation of competitive strategies (Porter’s Generic Strategies).
Marketing mix is an imperative concept in modern marketing and academically
it is referred to as the set of controllable tools that the firm blends to produce
the response it wants in the target market, so it consists of everything the firm
can do to influence the demand for its product (Kotler and Armstrong, 2004).

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It is important to realise that marketing mix strategy of any company can have Notes
one major function, that is, strategic communication of the organisation with its
customers (Proctor, 2000). It was further argued that marketing mix provides
multiple paths as such communication can be achieved either in spoken form and
written communications (advertising, selling, etc.) or in more symbolic forms
of communication (the image conveyed in the quality of the product, its price
and the type of distribution outlet chosen). However, the key element is that the
main aspects of marketing mix that will be discussed below “should not be seen
as individual entities, but as a set of interrelated entities which have to be set in
conjunction with one another” (Proctor, 2000: 212).
Main Aspects of Marketing Mix (100):
The easiest way to understand the main aspects of marketing is through its
more famous synonym of “4Ps of Marketing”. The classification of four Ps of
marketing was first introduced and suggested by McCarthy (1960), and includes
marketing strategies of product, price, placement and promotion.
The following diagram is helpful in determining the main ingredients of the four
Ps in a marketing mix.
Product
In simpler terms, product includes all features and combination of goods and
related services that a company offers to its customers. So, the Air bus product
includes its body parts such as the engine, nut bolts, seats, etc. along with its
after-sales services and all are included in the product development strategy of
the Airbus. However, a serious criticism can be raised here in terms of how
marketing mix analysis will cater for companies such as ABN Amro Bank,
NatWest Bank, British Airways and Fedex Corporation as they don’t possess
tangible products.
It was argued that is it feasible to omit service-oriented companies with the logic
that the term “services” does not start with a “P”, however, it was asserted that
these companies can use the terminology of “service products” under marketing
mix strategy making (Kotler & Armstrong, 2004).
Lazer (1971) argued that product is the most important aspect of marketing
mix for two main reasons. First, for manufacturers, products are the market
expression of the company’s productive capabilities and determine its ability to
link with consumers. So, product policy and strategy are of prime importance to
an enterprise, and product decisions dictate the scope and direction of company
activity.
Moreover, the market indicators such as profits, sales, image, market share,
reputation and stature are also dependent on them. Secondly, it is imperative to
realize that the product of any organization is both a component and a determinant
of the marketing mix as it has a great influence on the other elements of the mix:
advertising, personal selling, channels of distribution, physical distribution and
pricing. So without proper product policy, a company cannot pursue for further
elements of marketing mix.

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Notes Pricing
Pricing is basically setting a specific price for a product or service offered. In
a simplistic way, Kotler and Armstrong (2004) refer to the concept of price as
the amount of money that customers have to pay to obtain the product. Setting a
price is not something simple. Normally it has been taken as a general law that a
low price will attract more customers.
It is not a valid argument as customers do not respond to price alone; they respond
to value so a lower price does not necessarily mean expanded sales if the product
is not fulfilling the expectation of the customers (Lazer, 1971).
Generally pricing strategy under marketing mix analysis is divided into two
parts: price determination and price administration (ibid).
Price determination is referred to as the processes and activities employed
to arrive at a price for a product including consideration of relative prices of
products within the same line, and differences in price for similar products of
differing grades and qualities.
Price administration is referred to as the activities involved in fitting basic prices
to particular sales situations such as geographic locale, functions performed by
customers, position of distribution channel members, or special sales situations.
An example of this is special discounted prices at, for instance, GAP, NEXT etc.,
or Coca Cola and Pepsi where different prices are set in different geographical
areas considering the difference in patterns of usage as well as varying
advertisement costs.
Placement
Placement under marketing mix involves all company activities that make the
product available to the targeted customer (Kotler and Armstrong, 2004). Based
on various factors such as sales, communications and contractual considerations,
various ways of making products available to customers can be used (Lazer,
1971).
Companies such as Ford, Ferrari, Toyota, and Nissan use specific dealers to make
their products available, whereas companies such as Nestle involve a whole
chain of wholesaler retailers to reach its customers. On a general note, while
planning placement strategy under marketing mix analysis, companies consider
six different channel decisions including choosing between direct access to
customers or involving middlemen, choosing single or multiple channels of
distributions, the length of the distribution channel, the types of intermediaries,
the numbers of distributors, and which intermediary to use based on the quality
and reputation (Proctor, 2000)
Promotion
Promotional strategies include all means through which a company communicates
the benefits and values of its products and persuades targeted customers to buy
them (Kotler and Armstrong, 2004). The best way to understand promotion is
through the concept of the marketing communication process.

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Promotion is the company strategy to cater for the marketing communication Notes
process that requires interaction between two or more people or groups,
encompassing senders, messages, media and receivers (Lazer, 1971). Taking the
example of Nokia, the sender of the communication in this case is Nokia, the
advertising agency, or both; the media used in the process can be salesmen,
newspapers, magazines, radio, billboards, television and the like.
The actual message is the advertisement or sales presentation and the destination
is the potential consumer or customer, in this case mobile phone users.
16.7 LIMITATION OF MARKETING MIX ANALYSIS (4PS
OF MARKETING):
Despite the fact that marketing mix analysis is used as a synonym for the 4Ps of
Marketing, it is criticized (Kotler & Armstrong, 2004) on the point that it caters
seller’s view of market analysis not customers view. To tackle this criticism,
Lauter born (1990) attempted to match 4 Ps of marketing with 4 Cs of marketing
to address consumer views:
Product – Customer Solution Price – Customer Cost Placement – Convenience
Promotion – Communication.
SUMMARY

Whether you are using the 4Ps, the 7Ps, or the 4Cs, your marketing mix plan
plays a vital role. The Marketing mix is a mixture of controllable marketing
variables that firms use to pursue the sought level of sales in the target market.
Even though the original 4Ps of Marketing Mix were developed 1960s and
7Ps of Marketing Mix developed in the 80s; Marketing Mix is still very much
applicable to modern strategic marketing planning. 4Ps, the 7Ps, or the 4Cs,
marketing mix is crucial for creating a plan that increases sales and profitability,
customer satisfaction, and brand recognition.

CASE STUDY :
The case discusses the ‘mobile music strategy’ adopted by Sony Ericsson
Mobile Communications AB (Sony Ericsson). The company leveraged the
strengths of its parent companies, Sony Corporation and Ericsson to introduce
the Walkman phone. The case discusses in detail about the impact of the
Walkman phone on the company’s performance. The case includes details
of how the company leveraged the Walkman brand and initiated several
strategic tie-ups. The case also highlights the competition among mobile phone
manufacturers with regard to music phones among mobile phone manufacturers
with regard to music phones and the competition with portable music players.
On January 18, 2006, Sony Ericsson Mobile Communications AB (Sony
Ericsson) announced that its pre-tax profit in the last quarter of 2005 (Oct ‘05 -
Dec ‘05) was 206 million euros with total revenues of 2.31 billion euros.

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Notes The results took many analysts by surprise and beat all market predictions in
terms of revenues, and profits. The key driver for this strong performance was
the worldwide success of its Walkman4 branded mobile phones (Walkman
phones), launched in the third quarter of 2005. It was estimated that the company
had shipped around three million units of Walkman phones from the time of
product launch in August 12, 2005, to the final quarter ending December 31,
2005. The success of the Walkman phones series on Sony Ericsson’s profit and
revenues was significant. The company shipped an overall 16.1 million mobile
phone units for the last quarter of 2005.
This was an increase of 28% over the same period in 2004 and a 17% increase
over the third quarter in 2005. Miles Flint (Flint), President, Sony Ericsson, said,
“This has been a good quarter for Sony Ericsson, proving that our strategy of
expanding the product portfolio upward into best-in-class imaging, music, and
3G5 products while increasing the number of more affordable and attractively
designed volume models is paying off.
We are increasingly benefiting from the opportunities created by the joint
venture (Sony and Ericsson), and with three new Walkman phones shipping in
the fourth quarter (W550, W600, W900), we are optimistic that Sony Ericsson
can set the standard in music as well as imaging going forward.”6 Sony Ericsson
had announced its ‘mobile music strategy’ in February 2005, under which high
quality digital music players would be integrated with stylishly designed mobile
phones. The Walkman phones were first introduced in Europe in August 2005
and became an instant hit. Stocks were quickly sold out and the company had
problems in meeting the rising market demand. The phones were later introduced
worldwide and become extremely popular.
ISSUES:
• Understand the impact of the mobile music strategy on the performance of
Sony Ericsson
• Understand the nature of competition in the mobile phone industry
KEYWORDS:
Product refers to a good or service that a company offers to customers. Ideally, a
product should fulfil an existing consumer demand.
Price: refers to the value that is put for a product. It depends on costs of
production, segment targeted, ability of the market to pay, supply - demand and
a host of other direct and indirect factors.
Place: When a company makes decisions regarding place, they are trying to
determine where they should sell a product and how to deliver the product to the
market.
Promotion includes advertising, public relations, and promotional strategy. The
goal of promoting a product is to reveal to consumers why they need it and why
they should pay a certain price for it.

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Placement under marketing mix involves all company activities that make the Notes
product available to the targeted customer (Kotler and Armstrong, 2004).
EXERCISE:
POINTS TO PONDER:
Answer the following Questions given below:

1.The concept through which the life is brought up in message of advertising strategy in
memorable and distinctive way is classified as------------

2.Introducing existing products to different geographical areas including international

expansion------------------

3.Which marketing strategy give emphasis on creating new offerings for existing market------
------

SELF ASSESSMENT QUESTIONS:

SHORT ANSWER QUESTIONS:
1.What is position defense strategy?
2.Define market viewer strategy.
3.List out reaction pattern of competitors.
4.What is flanking defense strategy?
5.What is Guerilla attack?
LONG ANSWER QUESTIONS:
1. Explain marketing strategies buyer on the firm’s share in target market.
2.Explain market leader strategies.
3.What are the steps involved in market challenger strategies. Explain.
4.Describe various level of market follower strategies.
5.Discuss market nicher strategies.

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Notes
UNIT - III
LESSON 17 – PRODUCT PLANNING AND
DEVELOPMENT
CONTENT:
LEARNING OBJECTIVE
LEARNING OUTOCME
17.1 PRODUCT MANAGEMENT
17.2 PRODUCT HIERARCHY
17.3 COMPANIES PRODUCT MIX
17.4 PRODUCT MIX OF SELECT COMPANIES
17.5 PRODUCT MIX-WIDTH EXPANSION
17.6 COMPONENTS OF PRODUCT PLAN
SUMMARY
CASE STUDY
KEYWORDS
EXERCISE
SELF ASSESSMENT QUESTIONS

LEARNING OBJECTIVE:
• To know the consistency of the product mix refers to how closely relate the
various product lines are in terms of the end use, production requirements,
distribution channels, or some other way.
• Learn to measure product success metrics using relevant product marketing
metrics and tools
• To Develop an understanding of how disruptive business models create
successful products.
LEARNING OUTCOME:
• To Understand the role of a Product Manager in a product’s development
and management
• To Acquire skills across product management functions including design
and development

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• To Use practical frameworks to ideate and evaluate while learning road- Notes
mapping and prototyping
• To Create and release minimum viable products for prototype testing
17.1 PRODUCT MANAGEMENT: PRODUCT LEVELS,
PRODUCT HIERARCHY, PRODUCT MIX
According to Philip Kotler, there are five levels of a product. Marketing managers
need to think their way around five different levels of product when working
through the essentials of the offer which is going to be made to the customers.
They are:
The core benefit: The basic benefit which is what the customer really wants
when deciding on a particular product. For example, toothpaste which is able to
clean the teeth.
The generic product: This is the basic version of the actual physical product, for
example, an electric cooker.
The expected product: A set of attributes and conditions that buyers normally
agree to when they purchase a product. For example, a soap is expected to last
long and at the same time does not wear away due to water.
The augmented product: The product includes additional services and benefits
which help to distinguish it from competitive offerings; for example, a
manufacturer of television might extend the normal warranty period from one
year to say three years. In fact, SHARP television offered seven years warranty.
The potential product: At the final level stands the product of the future, namely
all the transformations and augmentations that a particular product might undergo
in the future. This is where the companies search for new ways to satisfy their
customers and differentiate their products. The emergence of Hypermarkets is
one example.
It is hence, imperative that you are given an in-depth information on what is
product, why product management is important to organizations, the ways of
new product development and its entry into the market etc. Let us learn them in
detail.
PRODUCT MANAGEMENT:
17.2 PRODUCT HIERARCHY:
Each product is related to certain other products. The product hierarchy stretches
from basic needs to particular items that satisfy those needs. There are 7 levels
of the product hierarchy:
1.Need family:
The core need that underlines the existence of a product family. Let us consider
computation as one of needs.

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Notes 2. Product family:

All the product classes that can satisfy a core need with reasonable effectiveness.
For example, all of the products like computer, calculator or abacus can do
computation.
3. Product class:
A group of products within the product family recognized as having a certain
functional coherence. For instance, personal computer (PC) is one product class.
4. Product line:
A group of products within a product class that are closely related because they
perform a similar function, are sold to the same customer groups, are marketed
through the same channels or fall within given price range. For instance, portable
wire-less PC is one product line.
5. Product type:
A group of items within a product line that share one of several possible forms
of the product. For instance, palm top is one product type.
6. Brand:
The name associated with one or more items in the product line that is used to
identify the source or character of the items. For example, Palm Pilot is one
brand of palmtop.
7. Item/stock-keeping unit/product variant:
A distinct unit within a brand or product line distinguishable by size, price,
appearance or some other attributes. For instance, LCD, CD- ROM drive and
joystick are various items under palm top product type.
Product is anything that can be offered to a market to satisfy a want or need.
Products that are marketed include physical goods, services, experiences, events,
persons, places, properties, organizations, information, and ideas. A product
mix (also called product assortment) is the set of all products and items that a
particular seller offers for sale.
For example, Kodak’s product mix consists of two strong product lines:
information products and image products. A company’s product mix has a certain
width, length, depth, and consistency. These concepts are illustrated below.
Width:
The width of the product mix refers to how many different product lines the
company carries. Hindustan Unilever Limited (HUL) has different product lines.
It offers different products for the consumers. The product lines offered by HUL
are Home and personal care, food and beverages and industrial, agricultural and
others.

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Length: Notes
The length of a product mix refers to the total number of items in the mix. This
is obtained by dividing the total length by the number lines. Procter and Gamble
offers different product line width. It offers different brands under detergents
like Tide, Ariel.
Depth:
The depth of a product mix refers to how many variants are offered of each
product in the line. Hindustan Unilever Limited offers toothpaste named Close
Up at different sizes like 20 grams, 50 grams, 150 grams etc. In this case, HUL
had a product depth of three.
Consistency:
The consistency of the product mix refers to how closely relate the various
product lines are in terms of the end use, production requirements, distribution
channels, or some other way. P&G’s product lines are consistent so for as they
are consumer goods that go through the same distribution channels. The lines are
less consistent in so far as they perform different functions for the buyers.
These four products mix dimensions permit the company to expand its business
in four ways. It can add new product lines, thus widening its product-mix. It can
lengthen each product line. It can add more product variants to each product
and deepen its product mix. Finally, a company can pursue more product-line
consistency.
17.3 COMPANIES PRODUCT MIX:
WIPRO Software, Hardware,
Soaps, Baby Care,
Cooking media,
Lighting and Medical
equipment’s
RELIANCE Power projects,
Telecom, Satellite
and Internet Services,
Infrastructure (Roads,
Oil lines, Ports,
Landscape business),
Petrochemicals,
Textiles, Fibers, Plastics,
Refining and Marketing
UB Spirits, Media,
Healthcare, Agro-
chemicals, Engineering
and Media software

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Notes MODI Cements, Alkalies,

Tyres, Cigarettes,
Telecom equipments,
Cellular service, Paper
products, Hardware
and Office Automation
equipments
TTK Cookery products,
Undergarments,
Pharmaceuticals,
Cleaning agents and
Personal care products
17.4 PRODUCT MIX OF SELECT COMPANIES:
Product strategies:
Godrej offers different brands of refrigerators, soaps and other things to its
consumers. Did this diverse assortment of products develop by accident? No,
it reflects a planned strategy by the company. To be successful in marketing,
producers and middlemen need carefully planned strategies for managing their
product mixes.
Product-mix expansion
Product-mix expansion is accomplished by increasing the depth within a
particular line and/or the number of lines a firm offers to consumers. Let’s look
at these options. When a company adds a similar item to an existing product
line with the same brand name, this termed a line extension. For illustrations,
pull the coupons insert out of your Sunday newspaper. For example, Pepsi cola
company introduced many new flavors for its drink like diet Pepsi, Lehar team
etc. Likewise, Coca-Cola Company introduced news flavors like sprite, diet
coke etc.
The line extension strategy is also used by organizations in service fields.
For example, universities now offer programs to appeal to prospective older
students, and the Roman Catholic Church broadened its line of religious services
by adding Saturday and Sunday evening masses. There are many reasons for
line extensions. The main one is that the firm wants to appeal to more market
segments by offering a wider range of choices for a particular product. A line
extension was the most pronounced trend in marketing during the early 1990s.
Line extensions have become as common as to raise questions about their
effectiveness. Another way to expand the product-mix, referred to as mix
extension, is to add a new product line to the company’s present assortment.
To illustrate, when Johnson & Johnson introduced a line of Acuvue disposable
contact lenses that was mix extension because it added another product to the
company’s product mix. In contrast, line extension adds more items within the
same product line.

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When J&J adds new version of baby soaps, that’s line extension. Under a mix- Notes
extension strategy, the new line may be related or unrelated to current products.
Furthermore, it may carry one of the company’s existing brand names or may be
given an entirely new name. Here are examples of these four alternatives. Most
often, the new line is related to the existing product-mix because the company
wants to capitalize in its expertise and experience.

Product-mix expansion is accomplished by increasing the depth within a particular line

and/or the number of lines a firm offers to consumers.

Related product, same brand:

Pepsi cola’s Pepsi, Miranda, Lehar, 7up, diet Pepsi, etc. SmithKline Beecham’s
Horlicks, boost etc.
Unrelated product, same brand:
Godrej produces many unrelated products like refrigerators, soaps etc.
Related product, different brand:
Procter & Gamble introduces luvs as a companion to its disposable diapers.
Unrelated product, different brand:
Veegaland, an amusement park at Kochi from the well-known voltage stabilizer
maker V-Guard. McDonald’s testing leaps and bounds, an indoor playground for
children and their parents.
Trading up and trading down:
The product strategies of trading up and trading down involve a change in
product positioning and an expansion of the product line. Trading up means
adding a higher price product to a line to attract a broader market. Also, the seller
intends that the new product’s prestige will help the sale of its existing lower-
price products. By adding Adreno and Energy as new bikes to the saddle of LML
scooters, the company has traded up. Trading down means adding a lower price
product to a company’s product line.
The firm expects that people who cannot afford the original higher price product
or who see it as too expensive will buy the new lower price product. The reason:
the lower price product carries some of the status and some of the other more
substantive benefits (such as performance) of the higher price item. Nirma
introduced Nirma soap in the northern market at Rs.5 when other low-end soaps
are sold at the lowest price of Rs.6.
Sometimes the effect of trading down can be achieved through advertising,
without introducing new, lower priced products. A manufacturer of fine chinaware
might accomplish this by advertising some of the lower price in its existing
product lines. Trading up and trading down are perilous strategies because the
new products may confuse buyers, resulting in negligible net gain.

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Notes It is equally undesirable if sales of the new item or line are generated at the
expense of the established products. When trading down, the new offering may
permanently hurt the firm’s reputation and that of its established high-quality
product. To reduce this possibility, new lower- price products may be given
brand names unlike the established brands. In trading up, on the other hand,
the problem depends on whether the new product or line carries the established
brand or is given a new name.
If the same brand name is used, the firm must change its image enough so that
new customer will accept the higher price product. At the same time, the seller
does not want to lose its present customers. The new offering may present a
cloudy image, not attracting new customers but driving away existing customers.
If a different brand name is used, the company must create awareness for it and
then stimulate consumers to buy the new product.
Alteration of existing products:
As an alternative to developing a completely new product, management should
take a fresh look at the organizations existing products. Often, improving an
established product – product alteration can be more profitable and less risky
than developing a completely a new one.
However, product alteration is not without risks. When Coca-Cola co. modified
the formula for its leading product and changed its name to new coke, sales
suffered so much that the old formula was brought back 3 months later under the
Coca-Cola classic name.
Product-mix contraction:
Another product strategy, product-mix contraction, is carried out either by
eliminating an entire line or by simplifying the assortment within a line. Thinner
and/ or shorter product lines or mixes can weed out low-profit and unprofitable
products. The intended result of product-mix contraction is higher profits from
fewer products.
Hindustan Lever has announced that it would prune its brand portfolio during
the year 2001-2002. During the early 1990’s most companies expanded – rather
than contracted – their product-mixes. Numerous line extensions document this
trend.
As firms find that they have an unmanageable number of products or that various
items or lines are unprofitable, or both, product-mix pruning is likely. The result
in many organizations will be fewer product lines, with the remaining lines
thinner and shorter.
Rationale for Product Mix:
Internationally, brand rationalization has been on companies’ agendas for some
time. In September 1999, Unilever announced that it would prune its brand
portfolio by 75% - from 1600 to 400. The basket of 400 includes brands like Dove,

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Lux, and the Calvin Klein range of fragrances. Extensions are a company’s way Notes
of responding to consumer’s desires, which are often gauged through research.
Still, many consumers cannot differentiate across the numerous alternatives –
and get frustrated or angry in the process. The large number of new offerings also
poses problems for many retailers. Under these circumstances, it is important for
a product manager to look at the optimum mix of products in the company’s
portfolio. It is hence necessary that the product manager gives due consideration
to the financial aspects related to the products and concentrates on the following:
• Cumulative annual sales revenue
• Cumulative support costs
• Cumulative assets use including that of buildings, machinery, inventories
and receivables
• Cumulative profit contribution and finally
• Cumulative return on assets contribution by the product
• By calculating the above, the product manager can look at the following as
alternatives:
• Concentrating on the true profitability of each product irrespective of the
years of reckoning
• Pricing has to be reworked based on the total costs
• Possible outsourcing products to augment the product-mix
Product line extensions:
A product line if it is too short, then the product manager can increase profits by
adding items in the similar line under the same brand name, usually with new
features. This is termed as product line extension. The line extension may be
innovative, ‘me-too’, or filling in using another package size like that of Bisleri
(from one litre bottle, offered two litre bottle). The vast majority of new product
introductions consists of line extensions. Bacardi white rum which entered India,
soon realising the need for black rum, added the brand into their line. In a study
undertaken by Holak and Bhatt the following is revealed about line extensions:
• Line extensions of strong brands are more successful than weak brands
• Line extension of symbolic brands enjoy greater market success than those
of less symbolic brands
• Line extensions that receive strong advertising and promotional support
are more successful than those that receive less promotional support
• Firm size and marketing competence plays a part in an extension success
• Earlier line extensions have helped in the market expansion of the parent
brand

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Notes • Incremental sales generated by line extension may more than compensate
for the loss in sales due to cannibalization.
Some of the examples of product line extensions are:
• TVS Victor scooter from motorcycle manufacturer TVS-Suzuki
• Kinley club soda from Coca-Cola
• Elf Equitaine has launched Elf Super Sporty S 15W40 through Elf
Lubricants
• Reebok has widened their DMX range with the launch of DMX 6 series
• Reckitt and Coleman launched their line extension – Harpic plus bleach
• Parker pens introduced a line extension – Parker Zodiac pens
• Pepsi came out with their Miranda lime drink as the Miranda extension
• Johnson and Johnson introduced New Stayfree secure sanitary napkins
• HLL launched the new variant of Surf – Surf with excel power
• P&G introduced Pantene Pro-V anti-dandruff and Head & Shoulders
menthol shampoo
• Dabur extended Vatika to Vatika henna cream conditioning shampoo
• Marico introduced Parachute lite, Parachute nutrition grooming cream,
Parachute nutrition after wash liquid for woman
• Britannia introduced dairy products like Britannia butter and Britannia
cheese spread
• Mercedes Benz introduced Mercedes E 230 and M 250-D
• Iodex came out with Iodex power cream for the lower waist area problems
• Iodex sport was launched for people with a sporty attitude
• Bajaj scooters introduced Bajaj Pulsar DTSi
17.5 PRODUCT MIX-WIDTH EXPANSION:
1. Dettol:
Dettol started off in the 1930’s with Dettol mouthwash, antiseptic cream, and
obstetrics cream and liquid antiseptic. Over the years, the portfolio has expanded
to soaps, liquid soap and shaving cream, Dettol plaster and several other products
are still to use the brand equity of Dettol. This has been done mainly due to the
threat of Savlon. All these products will be positioned along Dettol’s core values
trust and protection.
2. Godrej:
Apart from their growing portfolio of soap brands, Godrej bought Key, Ezee and
Trilo from Cussons International. It has since added many brands in the soap

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category including Godrej fair glow, Godrej sandal, Fair ever vanishing cream Notes
etc. Godrej also added ‘cook lite’, edible oil and later on added a small variant –
Chota Cook lite. In the FMCG sector, Godrej is trying to augment their portfolio
with new brands from competitors.
3. DS Groups:
During 1999, DS group conducted a study through McKinsey and decided to
increase their product-mix by adding food and beverages, salt and spices branded
Catch tea and edible oils in the same brand name and also mouth fresheners. This
is done apart from their major brands – Baba Zarda and Rajni ganda pan masalas.
17.6 COMPONENTS OF PRODUCT PLAN:
Each product level within a business unit must develop a marketing plan for
achieving its goals. The marketing plan is one of the most important outputs of
the marketing process, and it should contain the following elements.
Executive summary and table of contents.
The marketing plan should open with a brief summary of the plan’s main goals
and recommendations. The executive summary permits senior management to
grasp the plan’s major thrust. A table of contents should follow the executive
summary.
Current marketing situation:
This section presents relevant background data on sales, costs, profits, the market,
competitors, distribution and the macro-environment. The data are drawn from a
product fact book maintained by the product manager.
Opportunity and issue analysis:
After summarizing the current marketing situation, the product manager proceeds
to identify the major opportunities/ threats/strengths/ weakness and issues facing
the product line.
Objectives:
Once the product manager has summarized the issues, he or she must decide on
the plan’s financial and marketing objectives.
Marketing strategy:
The product manager is responsible for the broad marketing strategy or “game
plan” to accomplish the plan’s objectives. In developing the strategy, the co-
ordination of product manager, production manager and buyers are needed. The
product manager also needs to talk to the sales manager to obtain sufficient sales
force support and to the financial officer to obtain sufficient funds for advertising
and promotion.

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Notes Action programs:

The marketing plans should specify the broad marketing programs for achieving
the business objectives. Each marketing strategy should be focused in such a
way that the action to be done, when and how it is to be done should be planned.
Projected profit and loss statement:
Action plans allow the product manager to build a supporting budget. On the
revenue side, this budget shows the forecasted sales volumes in units and the
average price. On the expense side, it shows the cost of production, physical
distribution, and marketing, broken into finer categories. The difference between
revenue and sales is projected profit. Once approved, the budget is the basis for
developing plans and schedules for material procurement, production schedule,
employee recruitment, and marketing operations.
Control:
The last section of the market plan outlines the controls for monitoring the plan.
Typically, the goals and budget are spelled out for each month or quarter. Senior
management can review the results each period. Some control sections include
contingency plans. A contingency plan outlines the steps; management would
take in response to specific adverse developments, such as price war or strikes.

SUMMARY

As the competition becomes more intensified in years to come, companies are

gearing to face them by becoming more specialized. Hence, the marketing
department becomes more professionalized and, in this context, product
management gains prominence. The expanding markets based on liberalization,
privatization and globalization needs a professional approach coupled with
the sophistication in technology and consumers becoming more educated, this
development in product management is inevitable.

CASE STUDY :
The case focuses on the world’s first mass produced hybrid passenger
car - Prius - manufactured by the world’s second largest automaker Toyota
Motors. The case explains the new hybrid technology used in the car. It also
looks for the reasons for the success of the original Prius in the Japanese
market and of the subsequent models of the Prius launched in the US and other
markets. The strategies for marketing the product in the US are also analysed.
In December 1997, Toyota Motor Corporation (Toyota) of Japan launched its
hybrid vehicle Prius in the Japanese market. This was one of the first mass-
produced hybrid vehicles in the world. It used the Toyota Hybrid System
(THS), which combined an internal combustion engine fueled by gasoline
with an electric motor. Prius achieved a balance between high mileage
and low emissions and was the upshot of the company’s initiative to

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Notes
produce environment-friendly automobiles and its goal of manufacturing the
‘Ultimate Eco Car’(Refer Exhibit I for the Ultimate Eco Car goal of Toyota).
The Prius generated a lot of enthusiasm in the industry as it was both efficient
and stylish. It was also a safe car. The car conformed to Japanese regulations
and standards pertaining to environmental pollution. Having sold more than
100,000 units worldwide by 2002, it was the bestselling hybrid car model in
the world.
The company introduced further refined models in 2000 and 2003. Toyota
introduced Prius in the US market in 2000. Before entering, Toyota conducted
a research study of the US market and consumer preferences there. It
developed various strategies specifically for this market based on its research
findings. The price of the new improved Prius was unchanged from that of
the original Prius. These initiatives helped Prius to break successfully into
the tough US market even though it was based on a new concept of a hybrid
car. In 2001, the Automotive Engineering International3 recognized Prius as
the ‘world’s best engineered passenger car.’
ISSUES:
• History of hybrid vehicles.
• Working and usefulness of hybrid vehicles.
• The growing need for clean and green cars in the 21st century.
• The system Toyota put in place for the manufacture of the original Prius.
• The technology and other aspects and features of the original Prius and its
subsequent versions.
• Toyota’s marketing strategies in the US.
• The role of buzz marketing in the marketing of new and innovative products
like the Prius.
KEYWORDS:
• Agile Product Planning: Easy product management methodologies can
be applied to product planning and as we discussed above. There are three
stages of agile product planning
• Product Strategy: This is about how the objectives will be achieved,
including identifying the target group, their demands, the benefits of the
product offered to the target group, and to the business itself.
• Product Tactics: This level focuses on the basics of functionality, design,
user interaction, and sprint goals.
• Production Innovation: Product innovation means the development and
market introduction of a new, redesigned or substantially improved good
or service.

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Notes • Product Diversification: Diversification also means expansion of the

business by adding new products to the existing product mix. Therefore,
only an existing company can diversify.
EXERCISE:
POINTS TO PONDER:
Answer the following Questions given below:

1.The composite of all products offered for sale by a firm is called------------

2.-------------refers to all the related products manufactured by a single firm.

3.-------------- can be referred to as anything that is offered to the market for attention,
acquisition, and consumption that could satisfy a need or want.

4.The number of products present under a particular product line are known as -----------

SELF ASSESSMENT QUESTIONS:

SHORT ANSWER QUESTIONS:
1.What is product?
2.What are the classification of products?
3.What is product planning?
4.List out the importance of product planning.
5.What is marketing mix?
LONG ANSWER QUESTIONS:
1.Discuss product planning.
2.How do marketing strategy and marketing mix strategy change across the PLC
stages.
3.Explain the product line extension.
4.Describe the components of products plan.
5.Explain the product mix for selected companies

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Notes
LESSON 18 – PRODUCT LIFE CYCLE
STRATEGY
CONTENT:
LEARNING OBJECTIVE
LEARNING OUTCOME
18.1 INTRODUCTION
18.2 PRODUCT LIFE CYCLE
18.3 STAGES OF PRODUCT LIFE CYCLE
18.4 MARKETING STRATEGIES
18.5 NEW PRODUCT DEVELOPMENT
18.6 PRODUCT MIX & PRODUCT LINE DECISIONS
18.7 PRODUCT LINE DECISION
SUMMARY
CASE STUDY
KEYWORDS
EXERCISE
SELF ASSESSMENT QUESTIONS

LEARNING OBJECTIVE:
• To understand whether there is a real improvement in a product’s market
share, companies compare the percentage of sales volume to that of the
competitors in the same product category.
• To succeed, companies use additional promotional and distribution
resources to squeeze enough profits from the stable markets they enjoy.
• The marketer’s marketing objectives depend mostly on where the product
is in its life cycle.
LEARNING OUTCOME:
• A successful marketing plan can guarantee improvements in the market
share.
• It is an integr-al process in management of any product and revolves
around the introduction, growth, and decline stages.

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Notes • For emerging businesses, the cycle concept is an ideal tool that enables
marketers to forecast future sales and plan new marketing strategies.
18.1 INTRODUCTION:
The concept of product life cycle is concerned with the sales history of a product.
It portrays their changes in sales and profits overtime. Profits maximise before
there sales are highest because the intensity of competition increases at the end
of growth and before the start of maturity stage.
18.2 PRODUCT LIFE CYCLE:
The concept of the product that passes through changes in its total life known as
Product Life Cycle (PLC) is based on the following facts:
• Product has a limited life
• A product sale passes through distinct stages
• Profits rise and fall at different stages of Product Life Cycle
• Products require different marketing, financial, manufacturing, purchasing
and
• Human resource strategies in each life cycle stage.

Figure: Product Life Cycle in Relations to Demand Technology Cycle

Demand/Technology Life Cycle

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We have to remember that although certain basic needs remain unchanged over a Notes
long period of time, improved technologies effect up gradations in the matching
product for the need category. For example, our need for travelling from one
place to another has been satisfied by progressively superior categories of
products like horseback, horse drawn carriage, sail boat, steam engine, electric
trains, automobiles, aeroplanes etc. These are manifestations of technology life
cycles, where the demand/ technology cycle leads to product life cycle as shown
in the curves in Figure
18.3 STAGES OF PRODUCT LIFE CYCLE:
The lifetime of every product is typically divided into four stages:
Introduction: A period of slow sales growth as the product is introduced in
the market. Profits are non-existent because of heavy expenses incurred in
connection with product introduction.
Growth: A period of rapid market acceptance and substantial profit improvement.
Maturity: A period of a slowdown in sales growth because the product has
achieved acceptance by most potential buyers. Profits stabilize or decline because
of increased competition.
Decline: The period when the sales show a downward drift and profits set eroded/
plateau off.

Figure: The Lifecycle Model

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Notes 18.4 MARKETING STRATEGIES: MARKETING STRATEGIES

Introduction stage
• Sales growth is slow
• Profits are negative or very low
• Promotional expenditure is at its highest ratio to sales
• Prices tend to be high because costs are high
Pioneer advantage
• Early users will recall the pioneer’s brand name if product satisfies them
• The pioneer’s brand may set the standard
• Pioneer’s brand normally aims at the middle of the market so captures
more users
• Due to inertia, customer may stick to Pioneer brand
• Producers reap advantages of economies of scale, technological leadership,
and patent rights.
Growth stage
• Rapid climb in sales
• Consumption increases
• New competitors enter with new product features and expanded distribution
Profit increases during this stage, as promotion costs are spread over larger
volumes of production. Unit manufacturing costs fall faster than price declines
owing to the producer learning effect.
A firm in the growth stage faces a trade-off between a high market share and
high current profit. By spending money on product improvement, promotion
and distribution it can capture a dominant position. It foregoes maximum current
profit in the hope of making even greater profits over the next few stages.
Maturity stage
Most of the products we see around us today are at the maturity stage in their life
cycles, learning marketing managers with the onerous task of coping with all the
problems that go with marketing the mature product. The market is dominated
by a few giant firms perhaps a quality leader, a service leader and a cost leader
– who make profits mainly though high volume and lower cost. Market nichers,
including market specialist, product specialist and customizing firms surround
these dominant firms.
• Market modification - expand market with the two factors that make up
sales volume

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• Volume = number of brand user × usage rate per user Notes

• How to increase number of brand users?
• Converting non-users
• Entering new market segments
• Winning competitors’ customers.
• How to increase usage rate of current users?
• Use the product on more occasions
• Use more of the product on each occasion
• Use the product in new ways.
Product modification: at the maturity stage, sales can be stimulated by modifying
the product’s characteristics by quality improvement, feature improvement or
style improvement.
Quality improvement: aims at increasing the product’s functional performance
‘stronger’, ‘bigger’, ‘better’, ‘new and improved’.
Feature improvement: aims at adding new features - size, weight, power steering,
improved safety features like Anti-lock braking system, engine immobiliser
Style improvement: aims at improving the product’s aesthetic appeal - car body
style, car interior
Marketing mix modification: sales can also be stimulated by modifying other
marketing mix elements such as:
• Prices
• Distribution
• Advertising
• Sales promotion
• Personal selling
• Services
Getting over the matured product syndrome: The following systematic framework
can be used for a possible ‘breakthrough’ from the mature product syndrome:
1. Natural changes in the size of the market potential: change in demographic
profile.
2. New users’ segments.
3. Innovative product differentiation.
4. Convert non-users into users.
5. Convert light users to heavy users.

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Notes 6. Increase amount used on each use occasion.

7. Expand distribution coverage.
8. Expand distribution intensity.
Decline Stage
Sales decline because of:
• Technological advances
• Shifts in consumer tastes and preferences
• Increased competition
Emergence of substitute products
It is very difficult for an organisation to establish the exact moment to declare the
death of a product – or even when the real aging process has started, or whether
the product can be (or should be) revived again.
18.5 NEW PRODUCT DEVELOPMENT:
Every company must develop new products which shape the company’s
future. As the customers’ tastes and preferences are ever changing, new
product development becomes a necessity for an organisation. R&D, spurred
on by technological innovations/breakthroughs, is a sine qua non for product
development.
Categories of New Product
New to the world products: New products that create an entirely new market,
e.g., SONY’s Walkman.
New product lines: A new product that allows a company to enter an established
market for the first time. For example, an appliance manufacturer who launches
microwave ovens for the first time.
Additions to the existing product lines: New products that supplement a
company’s existing product line (package sizes, flavours, from window-type to
split air-conditioners, and so on).
Improvements and revisions of existing products: New products that provide
improved performance or greater perceived value and replace existing product.
Repositioning’s: Existing products that are targeted to new markets or new
market segments, e.g., Rajdoot motorcycle re-positioned as a motorcycle best
suited for rural use, milk-transportation, etc.
Cost reductions: New products that provide similar performance at lower cost,
e.g., reverse osmosis-type water filter.

product development (NPD) covers the complete process of bringing a

new product to market, renewing an existing product or introducing a product in a new
market. A central aspect of NPD is product design, along with various business
considerations.

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18.6 PRODUCT MIX & PRODUCT LINE DECISIONS: Notes

Product Mix
A product mix is the set of all products and items that a particular seller offers for
sale. A company’s product mix has certain width, length, depth and consistency.
The width of a product mix refers to how many different product lines the
company carries.
The length of a product mix refers to the total number of items in a particular
product line.
The depth of a product mix refers to how many variants are offered of each
product in the line.
The consistency of the product mix refers to how closely relate the various
product lines are in end use, production requirements, distribution channels, or
some other way.

Figure: Product-mix Width and Product-line Length for HLL

Product line decisions: In offering a product line, companies normally develop
a basic platform and module that can be added to meet different customer
requirements.
Product line length: A product line is too short if profits can be increased by
adding items; the line is too long if profits can be increased by dropping items.
Line Stretching
Line stretching occurs when the company lengthens its product line beyond its
current length.
Down market stretch: A company position in the middle market may want to
introduce a lower price line for any of three reasons:

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Notes 1. The company may notice strong growth opportunities down the line.
2. The company may wish to tie up lower end competitors who may otherwise
try to move up market and thus offer low priced offering.
3. The company may find that the middle market is stagnating or declining.
Up market stretch: Companies may wish to enter the high end of the market
for more growth, higher margins or simply to position themselves as full-line
manufacturers.
Two ways stretch: A company serving the middle market might decide to stretch
their line in both directions.
18.7 PRODUCT LINE DECISION:
Product Line Decisions: Many companies start as a single product item or
product line business. After getting a taste of success and with availability of
more resources, companies decide to expand their product line and / or introduce
newer product lines in consonance with market opportunities or in response to
competitors’ moves. For example, for quite some time, Nirma had only a single
detergent brand and subsequently added a new product line by introducing a
bathing soap. HLL realised the serious threat from Nirma washing powder and
introduced cheaper versions of detergents.
Companies make decisions that concern either adding new items in existing
product lines, deleting products from existing product lines, or adding new
product lines. Another aspect relates to upgrading the existing technology either
to reduce the product costs or to improve quality, for stretching (downwards,
upwards, or both ways), or line filling.

Figure: Selected Product Mix Elements in Just Three Product Lines of HLL
Product managers need to closely examine the sales and profits of each item in
a product line. The findings will help them decide whether to build, maintain,
harvest, or divest different items in a particular product line.
Line Stretching: Product lines tend to lengthen over the years for different reasons
such as excess manufacturing capacity, new market opportunities, demand from
sales force and resellers for a richer product line to satisfy customers with varied
preferences, and competitive compulsions. Lengthening of lines raises costs in

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many areas and decisions are based on careful appraisal. However, at some point Notes
in time somebody, often the top management intervenes and stops this.
Downward Line Stretch: Companies sometimes introduce new products with an
objective of communicating an image of technical excellence and high quality
and locate at the upper end of the market. Subsequently, the company might
stretch downwards due to competitor’s attack by introducing a low-end product
in response to competitive attack, or a company may introduce a low-end product
to fill up a vacant slot that may seem attractive to a new competitor. Another
possibility is that market may become more attractive at low-end due to faster
growth rate. For example, P&G introduced its Ariel Microsystem detergent at
high-end assuring high quality. Customer response was not encouraging and the
company saw more opportunities at lower end and introduced cheaper green
alternative Ariel Super Soaker. Mercedes has offered its E Class model to
compete at much lower price point than its high-end S Class models.
Downward stretch sometimes poses risks: For example, low-end competitors may
attack by moving into high-end, or for a prestige-image company introduction
of a low-end model may adversely affect its product-mage. Parker pen stretched
downward and introduced ballpoint pen at low-price. This hurt Parker as a high
class product. Another risk is that introducing a lower-end item might cannibalize
(eat away sales) the company’s high-end item.

Figure: Line Stretching Decisions

Upward Stretch: In this situation, companies operating at low-end may opt to
enter high-end because of better opportunities as a result of faster market growth,
or the need to create an image of full line company. For example, Videocon
entered the market with a twin-tub low-end washing machine. Subsequently,
after the introduction of IFB automatic washing machine and entry of other
players the market expanded.
The average household income of middle class also showed positive trends. To
take advantage of a market growing at the higher-end, Videocon also introduced

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Notes an automatic washing machine. Maruti Udyog introduced its medium priced
models such as Maruti Zen, Maruti Esteem, WagonR, Alto, and Swift after it had
entered the market with its low-end Maruti 800 and Maruti Omni.
Toyota introduced its Lexus luxury car as a standalone product (with no outward
link to Toyota) for just this very reason. It did not want it to be in any way
affected by Toyota’s no-doubt superb, but mass market image.
There may be certain risks associated with upward line stretching. These may
include prospective customers’ perceptions that the newcomer in the high-end
category may not produce high-quality products, or competitors already well-
established in the high-end market may retaliate by introducing items in the low
end of the market. For example, long established footwear company Bata failed
in its attempt when it tried upward stretch and finally introduced its Power line
of economical sports shoes.
Both-Way Stretch: Companies operating in the medium range of the market may
decide to stretch product line(s) both ways for reasons of opportunities arising in
different market segments. The main risk is that it may prompt some customers
to trade down. However, companies often prefer to retain their customers by
providing low-end alternatives rather than losing them to competitors.
Line Filling: A company may decide to lengthen the existing product line(s) by
adding more items. The possible objectives leading to line filling may include
realising incremental profits, meeting dealers’ demands in response to their
complaints that they lose sales because of missing items in the lines, excess
capacity pressures, and trying to fill up vacant item slots to keep out competitors.
For example, Videocon and some other TV and AC manufacturers have
introduced models at various price-points right through high-end to low-end.
Similarly, IBM, HP Compaq, Acer, and Sony etc. have introduced laptop PCs at
various feature-price points ranging from high-end to low-end.
Line filling may sometimes lead to cannibalisation, apart from confusing
customers about the products’ positioning unless the company succeeds in
clearly differentiating each item meaningfully in customers’ minds.

SUMMARY
We have to remember that although certain basic needs remain unchanged over a
long period of time, improved technologies effect up gradations in the matching
product for the need category.
Profit increases during this stage, as promotion costs are spread over larger
volumes of production. Unit manufacturing costs fall faster than price declines
owing to the producer learning effect.
Most of the products we see around us today are at the maturity stage in their life
cycles, learning marketing managers with the onerous task of coping with all the
problems that go with marketing the mature product.

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Every company must develop new products which shape the company’s future. Notes
As the customers’ tastes and preferences are ever changing, new product
development becomes a necessity for an organisation.
A product mix is the set of all products and items that a particular seller offers for
sale. A company’s product mix has certain width, length, depth and consistency.

CASE STUDY :
SONY products as an example of the product life cycle
The conventional product life cycle bend is separated into four key stages.
Products initially experience the Introduction organize, before going into
the Growth arrange. Next comes Maturity until in the long run, the product
will enter the Decline organize. These cases show these phases for specific
markets in more detail.
3D Televisions: 3D may have been around for a couple of decades, however
simply after impressive speculation from telecasters and innovation organizations
are 3D TVs accessible for the home, giving a decent case of a product that is in
the Introduction Stage.
Blue Ray Players: With cutting edge innovation conveying the absolute best
review involvement, Blue Ray gear is as of now appreciating the unfaltering
increment in deals that is average of the Growth Stage.
DVD Players: Introduced various years prior, makers that make DVDs, and the
gear expected to play them, have built up a solid piece of the overall industry.
Notwithstanding, despite everything they need to manage the difficulties from
different innovations that are normal for the Maturity Stage.
Video Recorders: While it is as yet conceivable to buy VCRs this is a product
that is certainly in the Decline Stage, as it’s turned out to be less demanding and
less expensive for shoppers to change to the next, more current configurations.
Marketing Strategy of SONY:
Like most other superstar brands, SONY too has indicated substantial spotlight
on advertising and has substantiated itself more quick-witted than others around
there. While computerized showcasing is at the focal point of this methodology,
the brand has additionally utilized alternate channels for fruitful advertising and
the advancement of its image and products. SONY has utilized an imaginative
advancement blend to achieve its clients.
Three components are very particular about its promoting methodology. The
principal component is a product. When you have your product blend right,
you have little to fear from your rivals. Sony’s emphasis is on plan, quality and
innovation around there. Aside from being innovatively effective, its products are
superior to most as far as quality and plan as well. Sony has substantiated itself
remarkable as far as product quality and plan. It’s evaluating and advancements
methodology are the other two vital components in its promoting technique. An

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Notes exceptional evaluating procedure compares to the top-notch picture of SONY

and its products.
Sony’s consumption of publicizing and advancements is high. The substantial
promoting spending plan likewise mirrors the overwhelming rivalry in the
hardware business. At the point when the opposition in the business is as high,
you have to demonstrate to some degree more profound spotlight on showcasing
and advancement. SONY’s marking methodology to a substantial degree has
assumed a solid part at helping it conquer the focused weight.
Another stage that has assumed a focal part of SONY’s promoting system is
online networking. Online networking can be a noteworthy help if you can
outline an innovative client encounter. SONY has utilized online networking
for both client engagement and advancement of its products. Aside from a
huge number of adherents and a few prominent Facebook and Twitter pages,
there is considerably more than SONY is doing through online networking. It
has additionally utilized Pinterest and Google in addition to showcasing and
advancement.
SONY’s system has constantly centred around client agreeableness and more
profound lucidity. The credit goes to SONY’s innovative execution that it has
been so effective at drawing in its adherents through online networking channels.
Be that as it may, the story isn’t restricted to only the computerized channels
because SONY is knowledgeable at utilizing the conventional channels as well.
It utilizes conventional channels too adroitly. One can run over its advertisements
on open-air areas like announcements and behind transports and on the dividers.
The promotions of SONY’s top-notch TVs are effectively found on sparkling
extensive announcements in the metropolitan territories.
While SONY has utilized an excellent valuing technique like Apple still it has
its own particular vast fan section with high brand dedication. This top-notch
evaluating system passes on an excellent brand picture and a top-notch client
encounter. Generally, SONY’s advertising methodology is exceptional in many
perspectives.
CONCLUSION:
In conclusion, the product life cycle is a vital idea inside an association. With a
specific end goal to influence a product to get by in the market as far as might
be feasible, it is extremely fundamental for the advertisers to comprehend the
product life cycle to give/outline viable showcasing systems for each period of
PLC. A powerful administration of PLC will most likely expand its life and pick
up development in the aggressive market. To know more about the product life
cycle

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KEYWORDS: Notes

1. Rapid Skimming Strategy: This strategy consists of introducing a new

product at high price and high promotional expenses. The purpose of high price
is to recover profit per unit as much as possible.
2. Slow Skimming Strategy: This strategy involves launching a product at a
high price and low promotion. The purpose of high price is to recover as much
as gross profit as possible. And, low promotion keeps marketing expenses low.
3. Rapid Penetration: The strategy consists of launching the product at a low
price and high promotion. The purpose is the faster market penetration to get
larger market share. Marketer tries to expand market by increasing the number
of buyers.
4. Slow Penetration: The strategy consists of introducing a product with low
price and low-level promotion. Low price will encourage product acceptance,
and low promotion can help realization of more profits, even at a low price.
5.Market Modification: This strategy is aimed at increasing sales by raising the
number of brand users and the usage rate per user. Sales volume is the product
(or outcome) of number of users and usage rate per users.

EXERCISE:
POINTS TO PONDER:

Answer the following Questions given below:

1. This strategy is aimed at increasing sales by raising the number of
brand users and the usage rate per user. Sales volume is the product (or
outcome) of number of users and usage rate per users----------------
2. The process of strategizing ways to continuously support and maintain
a product is called---------
3. The ---------shows low sales numbers as the product is being introduced
in the market.
4. The strategy to ensure the purchase of new product or high-quality
product by the customer is called----------
5. The strategy to ensure the purchase of new product or high-quality
product by the customer is called--------------

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Notes
SELF ASSESSMENT QUESTIONS:
SHORT ANSWER QUESTIONS:
1. What is product Life cycle?
2. What is product line?
3. What is marketing mix?
4. What is product mix
5. Define saturation stage in PLC.
LONG ANSWER QUESTIONS:
1. Suggest suitable strategies for growth and maturity stage of PLC.
2. How do marketing strategy and marketing mix strategy change across the
PLC stages.
3. Explain the different stages of product life cycle stages with example.
4. Define product line. What are the important decisions to be taken related
to product line?
5. Discuss the importance of product mix decision.

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Notes
LESSON 19 – NEW PRODUCT
DEVELOPMENT & MANAGEMENT
CONTENT:
LEARNING OBJECTIVE
LEARNING OUTCOME
19.1 INTRODUCTION
19.2 NEW PRODUCT PLANNING
19.3 CHALLENGES IN NEW-PRODUCT DEVELOPMENT
SUMMARY
CASE STUDY
KEYWORDS
EXERCISE
SELF ASSESSMENT QUESTIONS

LEARNING OBJECTIVE:
• To understand how to build products with sustainable competitive
advantage.
• To learn to priorities new product ideas based on business strategic
alignment, return on investment and ability to execute.
• To identify the different approaches to generate new product ideas.
LEARNING OUTCOME:
• To Appraise the various steps in a structured new product development
program and critique its usefulness for various types of innovation
• To Design a food NPD project up to the concept and business plan stage.
• Critically evaluate the types of consumer / marketing tests / surveys for
NPD and defend the selection and running of appropriate test
• To Develop and write an effective concept and business plan including
financial evaluation
19.1 INTRODUCTION:
In order to stay successful in the face of maturing products, companies have to
obtain new ones by a carefully executed new product development process. But

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Notes they face a problem: although they must develop new products, the odds weigh
heavily against success. Of thousands of products entering the process, only a
handful reach the market. Therefore, it is of crucial importance to understand
consumers, markets, and competitors in order to develop products that deliver
superior value to customers. In other words, there is no way around a systematic,
customer-driven new product development process for finding and growing new
products. We will go into the eight major steps in the new product development
process.
What is a Product?
A good, service, or idea consisting of a bundle of tangible and intangible attributes
that satisfies consumers which they receive in exchange for money or some other
unit of value.
NPD is a process which designed to develop, test and consider the viability of
products which are new to the market in order to ensure the Growth or survival
of the organisation.
The stages a firm goes through to identify business opportunities and convert
them to a saleable good or service.
What is a new product?
• A product that opens an entirely new market
• A product that adapts or replaces an existing product
• A product that significantly broadens the market for an existing product
• An old product introduced in a new market
• An old product packaged in a different way
• An old product marketed in a different way
Why develops NPD?
• To add to product portfolio
• To create stars and cash cows for the future
• To replace declining product
• To take advantage of new technology
• To defeat rivals
• To maintain/increase market share
• To keep up with rivals
• To maintain competitive advantage
• To full gap in the market
• New product can be used

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• Increase/defend market share by offering more choice or updating older Notes

products
• Appeal to new segments
• Diversify into new markets
• Improve relationship with distributors
• Maintain the firm’s reputation a leading-edge company
• Even out peaks and troughs in demand
• Make better use of the organization’s resources
19.2 NEW PRODUCT PLANNING:
This is to study the strategic stage : The firm assesses .It current product portfolio
.Opportunities and threats .The firm then determines the type of product which
would best fit in with the corporate strategy

New Product Development Process

• Idea Generation
• Idea Screening
• Concept development and testing
• Market strategy development
• Business development
• Test marketing
• Commercialization
• Idea Generation
1. Idea generation – The New Product Development Process
The new product development process starts with idea generation. Idea
generation refers to the systematic search for new-product ideas. Typically, a
company generates hundreds of ideas, maybe even thousands, to find a handful
of good ones in the end. Two sources of new ideas can be identified:

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Notes Internal idea sources: the company finds new ideas internally. That means
R&D, but also contributions from employees.
External idea sources: the company finds new ideas externally. This refers to
all kinds of external sources, e.g. distributors and suppliers, but also competitors.
The most important external source are customers, because the new product
development process should focus on creating customer value.
2. Idea screening – The New Product Development Process
The next step in the new product development process is idea screening. Idea
screening means nothing else than filtering the ideas to pick out good ones. In
other words, all ideas generated are screened to spot good ones and drop poor
ones as soon as possible. While the purpose of idea generation was to create a
large number of ideas, the purpose of the succeeding stages is to reduce that
number. The reason is that product development costs rise greatly in later stages.
Therefore, the company would like to go ahead only with those product ideas that
will turn into profitable products. Dropping the poor ideas as soon as possible is,
consequently, of crucial importance.
3. Concept Development & Testing – The New Product Development Process
To go on in the new product development process, attractive ideas must be
developed into a product concept. A product concept is a detailed version of the
new-product idea stated in meaningful consumer terms. You should distinguish
• A product idea à an idea for a possible product
• A product concept à a detailed version of the idea stated in meaningful
consumer terms
• A product image à the way consumers perceive an actual or potential
product.
• Let’s investigate the two parts of this stage in more detail.
4. Concept development
Imagine a car manufacturer that has developed an all-electric car. The idea
has passed the idea screening and must now be developed into a concept. The
marketer’s task is to develop this new product into alternative product concepts.
Then, the company can find out how attractive each concept is to customers and
choose the best one. Possible product concepts for this electric car could be:
Concept 1: an affordably priced mid-size car designed as a second family car to
be used around town for visiting friends and doing shopping.
Concept 2: a mid-priced sporty compact car appealing to young singles and
couples.
Concept 3: a high-end midsize utility vehicle appealing to those who like the
space SUVs provide but also want an economical car.

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As you can see, these concepts need to be quite precise in order to be meaningful. Notes
In the next sub-stage, each concept is tested.
5. Concept testing
New product concepts, such as those given above, need to be tested with
groups of target consumers. The concepts can be presented to consumers
either symbolically or physically. The question is always: does the particular
concept have strong consumer appeal? For some concept tests, a word or picture
description might be sufficient.
However, to increase the reliability of the test, a more concrete and physical
presentation of the product concept may be needed. After exposing the concept
to the group of target consumers, they will be asked to answer questions in order
to find out the consumer appeal and customer value of each concept.
6. Marketing strategy development – The New Product Development Process
The next step in the new product development process is the marketing strategy
development. When a promising concept has been developed and tested, it is
time to design an initial marketing strategy for the new product based on the
product concept for introducing this new product to the market.
The marketing strategy statement consists of three parts and should be formulated
carefully:
A description of the target market, the planned value proposition, and the sales,
market share and profit goals for the first few years.An outline of the product’s
planned price, distribution and marketing budget for the first year.The planned
long-term sales, profit goals and the marketing mix strategy.
7. Business analysis – The New Product Development Process
Once decided upon a product concept and marketing strategy, management can
evaluate the business attractiveness of the proposed new product. The fifth step
in the new product development process involves a review of the sales, costs and
profit projections for the new product to find out whether these factors satisfy
the company’s objectives. If they do, the product can be moved on to the product
development stage.
In order to estimate sales, the company could look at the sales history of similar
products and conduct market surveys. Then, it should be able to estimate
minimum and maximum sales to assess the range of risk. When the sales forecast
is prepared, the firm can estimate the expected costs and profits for a product,
including marketing, R&D, operations etc. All the sales and costs figures together
can eventually be used to analyse the new product’s financial attractiveness.
8. Product development – The New Product Development Process
The new product development process goes on with the actual product
development. Up to this point, for many new product concepts, there may exist

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Notes only a word description, a drawing or perhaps a rough prototype. But if the
product concept passes the business test, it must be developed into a physical
product to ensure that the product idea can be turned into a workable market
offering. The problem is, though, that at this stage, R&D and engineering costs
cause a huge jump in investment.
The R&D department will develop and test one or more physical versions of the
product concept. Developing a successful prototype, however, can take days,
weeks, months or even years, depending on the product and prototype methods.
Also, products often undergo tests to make sure they perform safely and
effectively. This can be done by the firm itself or outsourced.
In many cases, marketers involve actual customers in product testing. Consumers
can evaluate prototypes and work with pre-release products. Their experiences
may be very useful in the product development stage.
9. Test marketing – The New Product Development Process
The last stage before commercialization in the new product development process
is test marketing. In this stage of the new product development process, the
product and its proposed marketing programmer are tested in realistic market
settings. Therefore, test marketing gives the marketer experience with marketing
the product before going to the great expense of full introduction. In fact, it allows
the company to test the product and its entire marketing programmer, including
targeting and positioning strategy, advertising, distributions, packaging etc.
before the full investment is made.The amount of test marketing necessary varies
with each new product. Especially when introducing a new product requiring a
large investment, when the risks are high, or when the firm is not sure of the
product or its marketing program, a lot of test marketing may be carried out.
10. Commercialization
Test marketing has given management the information needed to make the final
decision: launch or do not launch the new product. The final stage in the new
product development process is commercialization. Commercialization means
nothing else than introducing a new product into the market. At this point, the
highest costs are incurred: the company may need to build or rent a manufacturing
facility. Large amounts may be spent on advertising, sales promotion and other
marketing efforts in the first year.
Some factors should be considered before the product is commercialized:
Introduction timing. For instance, if the economy is down, it might be wise to
wait until the following year to launch the product. However, if competitors are
ready to introduce their own products, the company should push to introduce the
new product sooner.
Introduction place. Where to launch the new product? Should it be launched
in a single location, a region, the national market, or the international market?

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Normally, companies don’t have the confidence, capital and capacity to launch Notes
new products into full national or international distribution from the start. Instead,
they usually develop a planned market rollout over time.
In all of these steps of the new product development process, the most important
focus is on creating superior customer value. Only then, the product can become a
success in the market. Only very few products actually get the chance to become
a success. The risks and costs are simply too high to allow every product to pass
every stage of the new product development process.
In product screening poor, unsuitable or otherwise unattractive ideas are weeded
out form further actions

The new product planning is the function of the top management personnel and
specialists drawn from sales and marketing, research and development, manufacturing and
finance.

New Product Development Strategy:

_ Original products
_ Acquisition
_ Product improvements
_ Product modifications
_ New brands through the firm’s own R&D efforts
Types of new product:
• New product the world products – innovative products
• New product lines – to allow the firm to enter an existing market
• Addition to product line – to supplement the firm’s existing product line
• Improvements and revisions of existing product
• Repositioned products – existing products targets at new market
• Cost reduction new product that provides similar performance at lower
cost
Examples of new products
• New to the world – high definition TV, iPod, flat screen TV
• New products lines – Mars ice creams
• Addition to the products line – weetabix launched fruitibix
• Product improvement & replacement new car model

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Notes
19.3 CHALLENGES IN NEW-PRODUCT DEVELOPMENT:
Considering the extreme competition in contemporary business, companies are
exposed to greater risks than fail to develop new products.
Changing needs and tastes of consumers, new technologies, shorter product
life cycles, and increased competition at home and abroad have made existing
products vulnerable. Side-by-side new-product development can be very risky.
It was found in a study that the new-product failure rate was 40% for consumer
goods, 20% for industrial goods, and 18% for service products.
Several reasons are responsible for this high rate of failure.
They may be as follows:
• If a high-level executive pushes a favorite idea through disregarding
negative research findings of the marketing department.
• If there is an overestimation of the market size of a good product idea.
• If the actual product is not designed appropriately.
• If it is overpriced, not positioned correctly, or advertised ineffectively.
• If development costs go beyond the expected costs.
• If competition is found stronger than anticipated.
• New product development may be affected by several other factors in
addition to the factors mentioned above;
• Faster Development Time
• Shortage of Important New-Product Ideas in Certain Areas
• The costliness of New-Product-Development Process

SUMMARY
New product development is about converting new and untried ideas into
workable products. This product will be your brainchild, which will give you a
competitive advantage and help monopolize the market.
Summing up the seven stages of New Product Development — idea
generation, idea screening, concept development and testing, market strategy/
business analysis, product development, market testing, and market entry/
commercialization.
The thumb rule of the New Product Development is to focus on innovating while
delivering value.
In the words of Steve Jobs, “The people who are crazy enough to think that they
can change the world are the ones who do.”

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Notes
CASE STUDY :
PRODUCT DEVELOPMENT IN THE FOOD SYSTEM:

The four basic stages in the PD Process are the same for all food product
development, but there are significant differences in the activities, techniques
and timings for new product development in the primary production,
industrial food processing, and food manufacturing industries.

Primary production’s product development is based on either a breeding

process from cultivated varieties or capturing a new species from the wild.
The development of new plants, animals and fish takes a great deal of time and
depends on times of growing and harvesting. There can be a general product
concept based on perceived consumer or industrial wants and needs, and on
technical knowledge to identify the possible parents for the new varieties.
But it takes generations to develop the suitable variants. This is described in
the first Case Study on starting a new apple variety. The industrial ambience
is of a farmers’ cooperative fruit processing and exporting enterprise working
with a national horticultural research institution. The second Case Study looks
at another fresh fruit project, on mangoes. This time the emphasis is strongly
on the consumer, using statistical and other quantitative techniques to build
up the consumers’ preference image, and then to use this consumer image and
information in assessing current varieties, and moving towards improvements.
This is in the framework of government/university research, a national growers’
organisation and private exporters and marketers.
Industrial food processing’s product development is very strongly processing-
based, both in the ingredient supplying and the buying companies. Food
manufacture is usually directed towards providing a wide variety of products for
consumers, which is continually changing. There are major differences between
the activities in the PD Process for industrial and consumer products, as shown
in
The industrial product, a food ingredient, is usually developed in collaboration
with the processors or manufacturers who are going to use the ingredient in the
production of their product. These companies may provide the product design
specifications or may indicate some of the qualities they need; therefore the PD
Process is highly concentrated on process development and the customer does
the field-testing. This is illustrated in the third Case Study in which development
of an ingredient, a whey protein isolate, sophisticated both in its processing and
in its market, is described. Research is carried out by an industry-wide research
institute working with a university and a large farmers’ cooperative dairy
company and dairy marketing organisation.
The fourth Case Study is the development of a consumer product, a new variety of
sauces. The development was to establish a new product platform with a number
of individual lines, in a large factory unit of a multinational food manufacturing

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Notes company, and to sell these sauces initially locally, and then for export to major
international markets. This product development was totally private enterprise.
In studying these case studies, differences in activities in the four stages of the
PD Process can be seen, caused by:
• Markets for which the products are designed;
• Technology available and used;
• Time taken for product development;
• Costs of product development;
• Priorities set by the various parts of the food system.
The Case Studies cannot be taken as typical of PD Processes because each has
its own special features, but they do illustrate generic features.

KEYWORDS:
Product design is the development of both the high-level and detailed-level
design of the product:
Product implementation often refers to later stages of detailed engineering
design (e.g. refining mechanical or electrical hardware, or software, or goods or
other product forms), as well as test process that may be used to validate that the
prototype actually meets all design specifications that were established.
New Product Strategy – Innovators have clearly defined their goals and
objectives for the new product.
Idea Generation – Collective brainstorming ideas through internal and external
sources.
Screening – Condense the number of brainstormed ideas.
Concept Testing – Structure an idea into a detailed concept.
Business Analysis – Understand the cost and profits of the new product and
determining if they meet company objectives.
Product Development – Developing the sample, this involves the putting
together of ideas and materials to form a testing product to the market.
Market Testing – Marketing mix is tested through a trial run of the product.
Commercialization – Introducing the product to the public.
Evaluation – Involves research to monitor the progress of new service offering
in relation to organizational goals.

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EXERCISE: Notes

POINTS TO PONDER:

SELF ASSESSMENT QUESTIONS:

SHORT ANSWER QUESTIONS:
1.Define new product.
2.What is idea generation?
3.Define idea screening.
4.What is market testing?
5.What is business analysis?
LONG ANSWER QUESTIONS:
1.Explain the new product development strategy.
2.Outline stages in new product development.
3.Explain the different ways of conducting test marketing.

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Notes
LESSON 20 – MARKET SEGMENTATION

CONTENT:
LEARNING OBJECTIVE
LEARNING OUTCOME
20.1 INTRODUCTION
20.2 MARKET SEGMENTATION
20.3 BASES FOR SEGMENTING CONSUMER MARKETS
20.4 BASES FOR SEGMENTING BUSINESS MARKETS
20.5 MARKET SEGMENTATION IN VARIOUS INDUSTRIES
20.6 HOW TO IMPLEMENT MARKET SEGMENTATION
SUMMARY
CASE STUDY
KEYWORDS
EXERCISE
SELF ASSESSMENT QUESTIONS

LEARNING OBJECTIVE:
• To understand the importance of segmenting the market.
• To identify the ways a market can be segmented.
• To describe the bases commonly used to segment consumer market.
• To become familiar with the major segmentation variables.
LEARNING OUTCOME:
• To gain knowledge in eight criteria used to determine the viability of
market segments.
• To select specific target markets based on evaluation of potential market
segments.
• The outcome market segmenting is to separate marketing mix should be
used for different market segments.
20.1 INTRODUCTION:
Market segmentation is based on the generally true concept that the market for
a product is not homogenous as to its needs and wants. The opposite of market
segmentation is market aggregation, which is looking into one mass market.

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Coca- Cola practiced mass marketing when it sold only one kind of coke in a Notes
6.5 ounce bottle. The arguments for mass marketing is that it creates the largest
potential market, which leads to the lowest costs, which in turn can lead to lower
prices or higher margins. Long run production runs are more economical than
short runs.
However, many critics point to the increasing splintering of the market, which
makes mass marketing more difficult. The more that market may be aggregated,
the lower the cost per thousand in buying advertising to reach that mass market,
at least within the range of certain promotional budgets. However, in order
to attract more local and specialised markets, it becomes necessary that the
companies need to segment the market. Thus segmentation involves substantial
use of advertising and promotion. This is to inform market segments of the
availability of goods or services produced for or presented as meeting their needs
with precision.
Market segmentation is the process of disaggregating the total market for a given
product into a number of sub-markets. The heterogeneous market is broken up in
the process into a number of relatively homogenous units. The process is based
on the recognition that (a) any given market or consumer group is made up of a
number of sub-groups distinguished by varying needs and buying behavior; and
(b) it is feasible to disaggregate the consumers into suitable segments in such a
manner that the characteristics of the segmented groups would vary significantly
among segment but would almost be identical within segments.
Segmentation may also be practiced through specialisation in sales force in one
market or the greater diversification of distribution channels. Segmentation is
based upon developments on the demand side of the market and represents a
rational and more precise adjustment of product and marketing effort to consumer
or user requirements. According to Wendell Smith, market segmentation consists
of heterogeneous market (one characterised by divergent demand) as a number
of smaller homogenous markets in response to differing product preferences
among important market segments.
20.2 MARKET SEGMENTATION:
A company can segment its market in many different ways. And the bases for
segmentation vary from one product to another. However, the first step is to
divide a potential market into two broad categories; ultimate consumers and
business users. The sole criterion for this first cut at segmenting a market is the
customer’s reason for buying.
Ultimate consumers buy goods or services for their own personal or household
use and are satisfying strictly non-business wants. Business users are business,
industrial, or institutional organizations that buy goods or services to use in their
own organizations, to resell, or to make other products.
Micro-marketing:

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Notes The focus of mass marketing is on mainstream brands. Typically, these appeal
to a broad cross section of demographic groups. They are promoted using mass
distribution media using simple, undifferentiated messages. Promotional effort
is shared evenly across the country and little effort is made to customize the
product to reflect the particular needs of individual consumers or the localities in
which they live. The focus of micro-marketing is quite different. Less interested
in market share than in customer lifetime value, the micro-marketer uses profiling
tools to build a careful picture of the target audience for the product.
The micro-marketer is keen to recognise the different motivations that lead
different demographic segments to buy each variant of the brand and through
different channels. Reliance is one media, which is highly targeted - direct mail,
telephony, the Internet, through door-to-door distribution - many of which can
be customised on an one-to-one basis.
Micro-marketers are completely aware of differences in local culture and seek
to customize their proposition, incentives and distribution mix by location.
Quantitative techniques such as profiling, mapping, scoring and clustering are
used to define and reach target audiences efficiently. The major objectives of
micro-marketing are:
• Understand the characteristics of their customers
• Identify the value and profitability of different customer segments
• Identify the size and characteristics of the market in which they operate.
• Some of the possible micro-segments, which are attractive for marketers,
include:
Segment Marketing
A market segment consists of a large identifiable group within a market with
similar wants, purchasing power, geographical location, buying attitudes, or
buying habits. For example, an auto company may identify four broad segment;
car buyers who are primarily seeking basic transportation, or high performance,
or luxury, or safety.
Segment marketing offers several benefits over mass marketing. The company
can create a more fine-tuned product or service offering and price it appropriately
for target audience. The choice of distribution channels and communication
channels becomes easier. The company also may face fewer competitors in the
particular segment.
Niche Marketing
A niche is a more narrowly defined group, typically a small market whose needs
are not well served. Marketers usually identify niches by dividing a segment into
sub-segments or by defining a group seeking a distinctive mix of benefits. For
example, the segment of heavy smokers includes those who are trying to stop
smoking and those who don’t care.

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An attractive niche is characterized as follows: the customers in the niche have Notes
a distinct set of needs: they will pay premium to the firm that best satisfies their
needs; the niche is not likely to attract other companies (competitors); the niche
gains certain economics through specialization; and the niche has size, profit and
growth potential. Both small and large companies can practice niche marketing.
Local Marketing
Target marketing is leading to marketing programs being tailored to the needs
and wants of local customers groups (trading areas, neighborhoods, even
individual stores). Citibank provides different mixes of banking service in its
branches depending on neighbourhood demographics. That favouring localizing
a company’s marketing see national advertising as wasteful because it fails to
address local needs.
Individual Marketing
The ultimate level of segmentation leads to “segments of one”, “customized
marketing”, or “one-to-one marketing”. For centuries, consumers were served
as individuals. The tailor made the suit and the cobbler designed shoes for the
individual. Much business-to-business marketing today is customized, in that a
manufacturer will customize the offer, logistics, communication, and financial
terms for each major account.
Steps involved in segmentation process:
According to Philip Kotler, the main steps involved in the segmentation process
are as follows.
• Asses the differences between one customer group and the other in terms
of their needs and their likely responses to the product and other marketing
inputs of the firm.
• Find out the descriptive characteristics on the basis of which the consumers
of a particular disposition can be tagged on to a specified segment.
• Based on the above, disaggregate the consumers into suitable segments.
• Analyse and establish whether it is desirable and possible to formulate
separate marketing programs and marketing mixes for the different
segments.
• Find out which segments would be happy with the offerings of the firm and
could therefore be considered as the natural targets of the firm.
• Select those segments which offer high potential and which would be
amenable to the offerings of the firm.
Three stages are there for identifying market segments
• Survey
• Analysis
• Profiling

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Notes Survey stage: The researcher conducts exploratory interviews and focus groups
to gain insight into consumer motivations, attitudes, and behavior. Then the
researcher prepares a questionnaire and collects data on attributes and their
importance ratings; brand awareness and brand ratings; product usage patterns;
attitudes towards the products category; and demographics, geo graphics,
psychographics and media graphics of the respondents.
Analysis stage: The researcher applies factor analysis to the data to remove
highly correlated variables then applies cluster analysis to create a specified
number of maximally different segments.
Profiling stage: Each cluster is profiled in terms of its distinguishing attitudes,
behavior, demographics, psychographics, and media patterns. Each segment is
given a name based on its dominant characteristics. One way to discover new
segments is to investigate the hierarchy of attributes that consumers examine in
choosing a brand. 1) Brand-dominant hierarchy, 2) Nation dominant hierarchy,
3) Price dominant and 4) Type dominant.
20.3 BASES FOR SEGMENTING CONSUMER MARKETS:
Two broad groups of variables are used to segment consumer markets. Some
researchers try to form segments by working at “consumer characteristics”:
geographic, demographic and psychographic. Then they examine whether these
customer segments exhibit different needs or product responses. Other researchers
try to form segments by looking at consumer responses to benefits sought, use
occasions, or brands. Once the segments are formed, the researcher sees whether
different characteristics are associated with each consumer response segment.

The five basic forms of consumer market segmentation are demographic,

geographic, psychographic, benefit, and volume.

Geographic Segmentation:
Geographic segmentation calls for dividing the market into different geographical
units such as nations, states, regions, counties, cities or neighborhoods. The
company can operate in one or few geographic areas or operate in all but pay
attention to local variations. For example, Godrej – Sara Lee identified two
different geographical segments, the south India and the other regions for its
mosquito repellent products. For South India, the brand “Jet” was popular and
throughout India the “Good Knight” brand was the popular brand. So ‘Good
Knight’ was made the national brand while ‘Jet’ was made a regional brand.
Demographic Segmentation:
Segmentation based on age of the customer group, sex, family size, race, religion,
community, language, occupation, educational level, social level, family life
cycle, nationality and income level comes under demographic segmentation. To
consider an example, the market for consumer goods in India has been segmented

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by marketers broadly into three segments; the high-income group, the middle Notes
class and the lower income group.
Psychographic Segmentation:
In psychographics segmentation, buyers are divided into different groups on the
basis of life style or personality and values. People within the same demographic
group can exhibit very different psychographic profiles.
Behavioural Segmentation:
In behavioral segmentation, buyers are divided into groups on the basis of their
knowledge of, attitude toward, use of, or response to a product. Many marketers
believe that behavioural variables such as occasions, benefits, user status, usage
rate, loyalty status, buyer readiness stage, and attitude are the best starting points
for consulting market segments.
Multi-Attribute Segmentation (Geo-clustering):
Several variables are combined to identify smaller, better-defined target groups.
Thus, a bank may not only identify a group of wealthy retired adults, but also
within that group distinguish several segments depending on current income,
assets, savings, and risk preferences. One of the most promising developments
in multi attribute segmentation is called geoclustering.
Geoclustering yields richer descriptions of consumers and neighbourhoods
than traditional demographics. The groupings take into consideration 39 factors
in 5 broad categories. (1) Education and affluence, (2) family life cycle, (3)
urbanization, (4) race and ethnicity and (5) mobility.
20.4 BASES FOR SEGMENTING BUSINESS MARKETS:
Some of the bases for segmenting the consumer markets are also useful bases for
segmenting business markets. For example, business markets can be segmented
on the geographic basis. Some industries are geographically concentrated.
For example, firms that process natural resources locate close to the source to
minimize shipping costs. Also, businesses can be segmented on the basis of
demographics. For example, the size of the firm, the firm’s type of business,
firm’s method of buying, etc. Sellers also can segment on the benefits desired
by the buyer and on product usage rates. To get a feel for business market
segmentation, let’s look at segmenting by,
Type of customer
Size of customer
Type of buying situation
For segmentation to be useful, the segments must be relevant, accessible,
sizeable, measurable, and profitable.

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Notes Benefits of market segmentation:

• One customer group can be distinguished from another within a given
market and enables to decide which segment of the market should form as
target market.
• Facilitates in-depth study of the characteristics of the buyers.
• Help marketing man to develop marketing programme on a predictable
and reliable base.
• More suitable ‘marketing offers’ for a particular segment can be easily
developed.
• Suitable marketing mix can be achieved.
• Due to concentrated efforts most productive and profitable segments of
markets can be achieved.
• It helps to assess competitors’ stand in the market.
• Customers and companies can choose each other for mutual benefit and
satisfaction.
20.5 MARKET SEGMENTATION IN VARIOUS INDUSTRIES:
Soap industry:
Laundry soap: Very expensive detergents to wash things. General application,
broad distribution, low cost and medium advertising. Examples: Nirma. OK, Rin
Special laundry soap: To wash fancy things with stress cleaning effect, and
‘will do not harm the expensive garments’ as selling points. Distribution only to
high income customers and retailers. High priced much advertising. Examples:
Surf Excel, Tide
Low grade toilet soap: For washing the body. Broad application, low price, low
quality, medium advertising and wide distribution. Examples: Nima, Lifebuoy
Premium toilet soap: For the luxury customer group, particularly women and
high bracket income groups. Stress ‘beauty’ as a selling point. Distribution only
to high income customers and retailers. High price, high quality and heavy
advertising. Examples: Dove, Aramusk, Lux international
Toilet soap for stores, offices and restaurants: For customers and employees
to wash their hands. Sell direct to the businesses. Packaged in large numbers per
box, no individual wrapping, no advertising and low priced.
Industrial soap: For washing hands after very dirty work. Higher cleansing
power than ‘commercial’ soap. Sold directly to industry and packaged in large
numbers.

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Watch industry: Notes

The Titan Company segments its market on the basis of Geographic location of
customers. Quite common is the rural and urban divide in the consumer market.
Sonata range is segmented for smaller towns and rural areas where the company
is looking at brand switches.
Life style pattern: Digital ‘fast track’ is designed especially for the trendy and
sporty. So far digital watches have always had a stereotyped image either around
specification of sports. With 22 variants in four series, Titan’s new collection
aims to provide a wide choice for the fashion conscious 15-24 age group.
Based on age: Titan produces watches for children in the brand ‘Dash” and youth.
Based on sex: Company produces variety of products aiming and beefing its
presence in the women market Titan has launched variety of products like sonata,
regalia, for, men and has new range of fast-track watches for woman aged 18-30,
a fashion branch to match the aspirations of woman.
Based on income: Titan launches variety of products based on the purchasing
power of people the Titan sold it its products for the range from 450/- on wards
to 30,000.
How to Get Started with Segmentation
Market segmentation doesn’t need to be complicated to be effective. There are
five primary steps of segmentation.
Conduct Preliminary Research – Get to know your customers better by asking
some initial, open-ended questions.
Determine How To Segment Your Market – Decide which criteria (i.e.
demographics/firmographics, psychographics, or behaviour) you want to
segment your market by.
Design Your Study – Ask a mix of demographic/firmographic, psychographic,
and behavioural questions. Be sure to make your questions quantifiable.
Create Your Customer Segments – Analyse your responses either manually or
with statistical software to create your segments.
Test and Iterate – Evaluate your segments by ensuring they are usable and
helpful. If they aren’t, try segmenting based on other criteria.
20.6 HOW TO IMPLEMENT MARKET SEGMENTATION:
Market segmentation is simply the process by which we sub-divide a large
potential market into smaller groups that have different buying criteria and needs,
thereby enabling marketing strategies which appeal to the needs of particular
segments.
Identify your market: What are the overall boundaries of the market that you
intend to segment? In many traditional marketing operations this is done at the

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Notes product development stage, in newer business (e.g., the software market) this is
often not done at all with many software products developed on a hunch or as a
result of the drive of one leading personality. However, get as much information
about your intended target as possible.
Establish a segmentation matrix: Establish key market segmentation drivers for
a product, this could be based on age, spending power, usage of other products,
demographics, geographic, preferred payment method, the list is endless. Use
those, which you consider to be most important to define a few ‘master’ segments.
Prioritize: Prioritize in line with the resources that you are able to devote to
your marketing effort and the likely impact of addressing each segment on any
supporter spare parts services.
Ensuring Effective Segments
After you determine your segments, you want to ensure they’ll be useful. A good
segmentation analysis should pass the following tests:
Measurable: Measurable means that your segmentation variables are directly
related to purchasing a product. You should be able to calculate or estimate how
much you segment will spend on your product. For example, one of your segments
may be a coupon maven, who is more likely to shop during a promotion or sale.
Accessible: Understanding your customers and being able to reach them are
two different things. Your segment’s characteristics and behaviour should help
you identify the best way to meet them. For example, you may find that a key
segment is resistant to technology and rely on newspaper or radio ads to hear
about store promotions, while another segment is best reached on your mobile
app. One of your segments might be a male retiree who is less likely to use a
mobile app or read email, but responds well to printed ads.
Substantial: The market segment must have the ability to purchase. For example,
if you are a high-end retailer, your store visitors may want to purchase your
goods but realistically can’t afford them. Make sure, an identified segment is not
just interested in you, but can be expected to purchase form you. In this instance,
your market might include environmental enthusiasts who are willing to pay a
premium for eco-friendly products, leisurely retirees who have can afford your
goods, and successful entrepreneurs who want to show off their wealth.
Actionable: The market segment must produce the differential response when
exposed to the market offering. This means that each of your segments must be
different and unique from each other. Let’s say that your segmentation reveals
people who love their pets and people who care about the environment have the
same purchasing habits. Rather than have two separate segments, you should
consider grouping both together in a single segment.

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Notes
SUMMARY
Segmentation emphasizes the importance of knowing and targeting current
customers. Most companies do not have a proper balance of targeting current
customers for retention and prospective customers for acquisition. Because of
the traditional emphasis on transactions rather than relationships and acquiring
new customers rather than retaining and growing current ones, many marketing
programs have not been as cost-efficient as they could be.
Market segmentation is not an exact science. As you go through the process, you
may realize that segmenting based on behaviours doesn’t give you actionable
segments, but behaviour does. You’ll want to iterate on your findings to ensure
you’ve found the best fit the needs of your marketing, sales and product
organizations.
CASE STUDY :
INTRODUCTION
The Lego Group provides a prime example of how insightful market
segmentation and a fundamental understanding of different consumer
personas can lead to successful social media marketing. By carefully targeting
its intended audiences and using the social media platforms where these
consumers actively participate, The Lego Group is able to effectively reach its
customers and offer them the kind of online experience that helped win their
Lego Brick the “Toy of the Century” award, one of most coveted honours in
the toy industry.
HISTORY
The Lego Group began in a carpentry workshop in Billund, Denmark, purchased
in 1916 by the founder of the company, Ole Kirk Christiansen.28 However, it
wasn’t until furniture sales slumped during the Great Depression that the company
moved away from making chairs and tables to manufacturing toy versions of the
furniture. When plastics become available in Demark after World War II, the
company began producing plastic toys.
In 1949, the Lego Group developed blocks that could be stacked upon each
other, much like wooden blocks, except the plastic ones, initially dubbed “The
Automatic Binding Brick,” had round studs on top and hollow holes on bottom,
which allowed them to lock together, but not so securely that they couldn’t be
pulled apart and reassembled in another configuration. In 1953, these plastic
bricks were renamed “Lego Mursten” or “Lego Bricks.”
The company’s line of Lego Bricks continued to expand in both type and
popularity in the coming decades, employing innovative marketing techniques,
such as featuring building block contests and tie-ins with Hollywood themes
like Star Wars® and Harry Potter®. As a consequence, the Danish toy maker
produced double-digit sales gains and swelling earnings during the mid-2000s,
as well as a loyal following of enthusiasts.

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Notes CHALLENGE
With the advent of social media, the Lego Group faced the challenge of how to
market their Lego Bricks on the social web. Jake McKee, a former social media
practitioner at Lego, recalls that initially, “We as a company were walled off
like crazy [from the social web] . . . I always joked that my task was really to
jackhammer holes in that wall.”
McKee eventually was able to help change the culture within the organization,
so they could use the social web to build relationships with customers, generate
new product ideas by sharing proprietary information, and better understand
their customers.
STRATEGY:
Understanding consumer behaviour in regards to its products give the Lego
Group an edge in developing social media strategies. In fact, it enables the toy
maker to effectively use personas to segment its markets. According to Conny
Kalcher, a Lego Group representative, the company uses six distinct personas to
categorize their customers based on purchase and usage rates:
1. Lead Users—people LEGO actively engages with on product design
2. 1:1 Community—people whose names and addresses they know
3. Connected Community—people who have bought LEGO and [have] also
been to either a LEGO shop or a LEGO park
4. Active Households—people who have bought LEGO in the last 12 months
5. Covered Households—people who have bought LEGO once
6. All Households—those who have never bought LEGO
These six personas range from consumers who are highly involved with the
Lego Group’s products, such as those who help shape product design to those
having no experience with the brand. The persona category of Lead Users has
the fewest members, while All Households has the most. However, the first three
personas represent the most fertile ground for social media interaction because
of their deeper involvement with the brand.
Indeed, the Lego Group focuses its social media marketing initiatives on the
upper three segments by co-creating products online with the Lead Users, and
interacting with the Connected Community and 1:1 Community, using online
communities and social networks. By actively engaging these people and giving
them special attention, the Lego Group stands the best chance of encouraging
them to be the company’s most ardent advocates.
Moreover, proper customer segmentation and persona profiling enable the Lego
Group to concentrate its efforts on the social media platforms with the highest
number of brand active residents. In the words of Lars Silberbauer, the first global
social media strategist for the Lego Group, “What platform you use depends on
your target audience and the product you are marketing.”

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RESULT Notes
In 2010, the Lego Group became the world’s fourth largest toy manufacturer,
capturing approximately 6.9% of the global market share of toy sales and
continues to sustain a high growth rate, as well as showing a net profit of about
688 million dollars for the year.
According to Jake McKee (now the chief innovation officer of the social media
consultancy, Ant’s Eye View), “the Lego Group has never seen such tremendous
success as they have in the past few years, since they began taking advantage
of their most valuable resource – their fans. Not only have they received more
coverage on the Internet, through the proliferation of cool LEGO pictures and
fan-made viral videos, but have also turned feedback into new products.”
EXERCISE:
POINTS TO PONDER:
Answer the following Questions Given Below:
1.Market for automobiles needs to be segmented on the basis of-------------
2.-------------marketing is one of the most popular strategic marketing modules
used by businesses today, and for good reason.
3.The companies that targets market very narrowly is called----------------
4.Niche marketing helps more in----------
5.The Toyota corporation which produces several different brands of cars is
an example of----------

SELF ASSESSMENT QUESTIONS:

SHORT ANSWER QUESTIONS:
1. Defne Market segmentation.
2. Write the bases of segmentation?
3. What is Geographical segmentation?
4. List out the factors influencing, selection of segments.
5. What are the requirements for effective segmentation?
LONG ANSWER QUESTIONS:
1. Briefly describes the nature and characteristics of market segmentation.
2. Discuss the steps involved in segmentation process.
3. Distinguish between psychological basis of segmentation and social basis
of segmentation.
4. Explain the levels of market segmentation.
5. Explain the factors influencing selection of segments.

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Notes
LESSON 21 – TARGETING & POSITIONING

CONTENT:
LEARNING OBJECTIVE
LEARNING OUTCOME
21.1 INTRODUCTION
21.2 TARGETING
21.3 PRODUCT POSITIONING & DIFFERENTIATION
21.4 DIFFERENT TYPES OF POSITIONING STRATEGIES
21.5 MOST COMMON POSITIONING STRATEGIES IN THE
CONSUMER DURABLE SECTOR
21.6 POSITIONING PARADIGMS
21.7 ADVANTAGES & DISADVANTAGES OF POSITIONING
21.8 PERCEPTUAL MAPPING
SUMMARY
CASE STUDY
KEYWORDS
EXERCISE
SELF ASSESSMENT QUESTIONS

LEARNING OBJECTIVE:
• The Interrelationship among market segmentation, targeting and
positioning and how to select the best target market.
• To understand behavioural targeting and its key role in today’s marketing.
• To understand how to position, differentiate and reposition products.
LEARNING OUTCOME:
• Positioning and differentiation offer something of a road map for marketing
a product or service to the customers you’re targeting.
• Illustrate how the use of perceptual maps can assist in the positioning
process.
• Describe different targeting and positioning strategies and its concept.

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21.1 INTRODUCTION: Notes

Al Ries and Jack Trout, proponents of the concept, defined positioning as

“Positioning starts with a product. A piece of merchandise, a service, a company,
an institution or even a person. But positioning is not what you do to your product.
Positioning is what you do to the mind of the prospect. That is, you position the
product in the mind of the prospect”.
Positioning is the art of designing the company’s offering and image to occupy a
distinctive place in the target markets’ mind. The end result of positioning is the
successful creation of a market- a focused value proposition, cogent reasons why
the target market should buy the product.
The significance of product positioning can be understood from David Ogilvy’s
words:
“The results of your campaign depend less on how we write your advertising
than on how your product is positioned. Often factors like luxury, economy,
quality and fashion form planks for positioning. While positioning a brand the
leader’s position has to be reckoned. Product differentiation in a way is the
prelude to product positioning. They are interrelated strategies and are employed
in close alignment with each other.
21.2 TARGETING:
After having distinguished between the separate segments in a market, the
company can select one or more of these segments to enter. Before doing this
blindly, each segment should be assessed. Therefore, targeting is concerned
with evaluating each segment’s attractiveness for the company and selecting
one or more segments to enter. The evaluation of segments is based on the
question which segment the company can serve best. In other words, we should
concentrate on and enter those segments in which we can generate the greatest
customer value over time.
Whether a company decides to enter one or more segments may also depend on
its resources. If these are limited, it may be better served to focus on one or a few
smaller segments, which we call market niches. In the best case, the company
should look for segments’ competitors overlook or ignore. Alternatively, a
company can decide to enter several segments. This may be based on a strong
relation between the segment in terms of resembling needs, or on the company’s
widespread resources. For instance, clothing companies often target more than
only one segment: males, females, children and so on. A large company such
as a major car manufacturer might even decide to serve all market segments by
offering a complete range of products.
However, the usual case is that a company first enters a new market by serving
one single segment. Later, if that proves successful, it may add more segments
to serve.

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Notes
A target market is a group of people with some shared characteristics that a
company has identified as potential customers for its products.

21.3 PRODUCT POSITIONING & DIFFERENTIATION:

The product can be positioned for an exclusive well to do segment of the market,
it can be positioned for men, for children, for fun loving youth, for health-
conscious market, it can be a claim on luxury, a claim on distinctiveness, a claim
of convenience, economy, novelty, usage.
The marketer cannot invent a positioning theme when he is ready to enter the
market with his product. He should have already decided what his ‘cash on’
point should be, where he should introduce his product, for whom and on what
distinctive claim, he should go around and promote his product.
Thus, as a comprehensive definition positioning can be viewed as
• The position of a brand is the perception it brings about in the mind of the
target customer.
• This perception reflects the essence of the brand in terms of functional and
non-functional benefits in the judgment of that consumer.
• All products can be differentiated to some extent. But not all brand
differences are worthwhile or meaningful. A difference is worth establishing
to the extent that it satisfies any of the following criteria.
• Important- the difference delivers a highly valued benefit to a sufficient
number of buyers.
• Distinctive- the difference is delivered in a distinctive way.
• Superior – the difference is superior to other ways of obtaining the benefit.
• Pre-emptive- the difference cannot be easily copied by competitors.
• Affordable- the buyer can afford to pay for the difference.
• Profitable – the company will find it profitable to introduce the difference.
Some of the principles of positioning are:
It is better to be the first than to be late. The selectivity of the mind is such
that the pioneer will always have a presence in the mind-set of the consumers.
Hence, companies like Thums up, Amul, Xerox etc., are still in the minds of the
consumers.
In case not the first, then the company should be able to create a new category
by making even a small change in the marketing mix elements. AIWA and AKAI
created a pricing strategy through replacement market and got into the minds of
the consumers. Maruti created a small car market through product innovation.

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It is important to understand the position and strategies of the competitors. It Notes

is clear that the competitors’ strengths and weaknesses should be known to the
company. Britannia did the repositioning exercise to overcome the competition
and similarly, Tata Indica gave a scare to Maruti when they introduced their
small car in the market. Certain strategies usually adopted by competitors for
positioning are:
• Strengthen its own current position in the customer’s mind.
• The famous advertising line from Avis acknowledged its position in the car
rental business and claimed “We are number two. We try harder.”
• Grab an unoccupied position.
• Complain is advertised as the “complete food for the growing children”.
• Deposition or reposition the competition.
• Exclusive club strategy which is the ‘Three Big idea’ and implies that those
in the club are the best.
• Positioning using an easy name is very important in this context. Names
like LG is easy to pronounce as compared to the earlier name, “Goldstar”.
Similarly, Bata is found to be recalled better than LeeCooper.
Positioning errors:
As companies increase, the number of claims for their brand, they risk disbelief
and a loss of clear positioning. In general, a company must avoid four major
positioning errors.
Under positioning: Some companies discover that buyers have only a vague
idea of the brand. The brand is seen as just another entry in crowed market place.
Over positioning: Buyers may have to narrow an image of the brand. Thus, a
consumer might think that diamond rings at Tiffany start at $5000 when in fact
Tiffany now offers affordable diamond rings starting at $1000.
Confused positioning: Buyers might have a confused image of the brand
resulting from the company’s making too many claims or changing the brand’s
positioning too frequently.
Doubtful positioning: Buyers may find it hard to believe the brand claims in
view of the product’s features, price, or manufacturer.
21.4 DIFFERENT TYPES OF POSITIONING STRATEGIES:
Attribute positioning: A company positions itself on an attribute, such as size or
number of years in existence. Raymond’s and other companies, with long period
of service, appealing to the customer that they had been serving the customer for
quite a long time. Philips launched tube lights stating that it will consume only
less electricity. Some having an attractive attribute, such as “environmentally
friendly,” e.g., Hero Honda launched its two-wheeler vehicle stating that it is

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Notes environment friendly. This strategy is widely used now for food products. For
example, Sunflower and Saffola introduced oil with one common denominator
– they contain no cholesterol
Benefit positioning: The product is positioned as the leader in a certain benefit.
Various automobile products like Hero Honda position themselves as better in
mileage. Hero Honda’s advertisement “Fill it, Shut it and forget it” is evidence
to the benefit offered to the customers.
Use or application positioning: Positioning the product as best for some use or
application. The Suzuki Samurai “no problem bike” is a classic example in this
category. D‘Cold was positioned as a vapourub for adults.
User positioning: Focussing the product as best for some user group. Business
today, position itself as a business magazine used by the top managers.
Competitor based positioning: The product claims to be better in some way
than a named competitor. For example, Pepsodent position itself as being able to
reduce the number of germs in the teeth of the users when compared to the other
brands of toothpaste. Pepsi used “nothing official about it” to counter the official
drink status of Coca-Cola during the Cricket World Cup in 1996.
Product category positioning: The product is positioned, as the leader in a
certain product category. Aqua fresh position its dental paste not as toothpaste
but rather a mouth paste.
Quality or price positioning:
The product is positioned as offering the best value. Bajaj scooters position itself
as a product that offers value to the customers’ money. In the automotive field,
positioning by price and quality is common. In recent years, “luxury” cars that
accentuate quality and carry comparatively high prices have proliferated; Infiniti
and Lexus are the latest noteworthy entries. However, the makers of luxury
cars are having trouble differentiating themselves from each other with respect
to important attributes such as performance, comfort, and safety. As a result,
consumers are confused.
Positioning in relation to a target market: Regardless of which positioning
strategy is used, the needs of the target market always must be considered. This
positioning strategy doesn’t suggest that the other ones ignore target markets.
Rather, with this strategy, the target market – rather than another factor such as
competition – is the focal point in positioning product. Nestle, offers different
products using this strategy, those address different consumers’ desires regarding
taste, calories and price.
How to position the brand:
To position the brand a technique called perceptual mapping is commonly used.
This technique involves studying the consumers’ perception of the product and
competitors’ brands and based on it identifying vacant slots. Specifically, this

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involves the following: Notes

Studying the ideal product perception – this involves studying both tangible and
intangible attributes that a customer looks for while buying a product. Among
the tangibles are product features, performance levels, style and aesthetics of the
product packaging, product components and even price and distribution. The
intangibles will include the services that a customer looks for, like after sales
service, training on how to use the product, financing assistance etc.
Get the customers to rank these attributes in the order of importance to them.
Customer’s knowledge of the competitors’ brands.
How do the competitors brand favour in the ideal product map? Here, the
customers are asked to assess competitor brands and specify how close or far
they are on each attribute to the ideal product.
Based on the assessment of competitor brands on the ideal product map, product
managers identify vacant slots and then build the positioning strategy by filling
these up. It is important to note here that if an attribute sought by a customer
is not high on his/her priority and the firm feels it has the strength in it and
should be considered by the customers, the firm can adopt a strategy to help
change this perception. But the customer perceptions should be continued for,
changing customer perceptions in a long-drawn-out strategy involves substantial
resources. After this perceptual mapping is done, the marketer uses statistical
techniques to arrive at a position.
21.5 MOST COMMON POSITIONING STRATEGIES IN THE
CONSUMER DURABLE SECTOR:
Benefit/use positioning:
The positioning strategies adopted by consumer durable depend a lot on ‘usage’,
‘economy’ and ‘corporate identity’ of which a well-established brand surely
projects the identity of the product in terms of ‘which corporate house the
product is from’. Benefit or usage is the next positioning strategy used. For e.g.,
BPL Convert projects out the multi usage of the product.
This strategy is based on identifying the possible uses to which the firm’s brand
can be put to. In a way, it may appear same as use situations but differs from
it because this talks on all the possible uses of a product or brand. For e.g.,
since video cassette recorders (VCRs) could be used in playing, recording and
regulating the pace at which the different scenes can be watched (like pause,
forward etc) most customers saw it as a distinct development over the video
cassette player and the demand for VCR boomed.
Competitor related positioning:
This is the strategy of placing a firm’s brand next to the leader in the market and
trying to uproot it on a specific tangible variable. . To fend off rival makers of

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Notes microprocessors, Intel corp. launched a campaign to convince buyers that its
product is superior to its competitors.
The company even paid computer makers to include the slogan, “Intel inside”, in
their ads. Coca-Cola and Pepsi-Cola compete directly with each other in virtually
every element of the marketing mix (even celebrity endorsers).
For e.g., Onida was positioned against the giants in television industry through
this strategy. For Onida colour TV was launched on the message that all others
were clones and only Onida was the leader and the message said “the boss wasn’t
late; it was others who arrived in a hurry” and later followed it with the envy
concept. Today Onida has been able to uproot all the yesteryear leaders in the
TV market.
Lifestyle positioning:
A firm may even position the brand as a lifestyle contemporary or futuristic.
Many of today’s new kitchen appliances like microwave ovens are positioned
accordingly.
Positioning by corporate identity:
This type of positioning is seen very much with consumer durables when a tried
and trusted corporate identity or source which has become a household name
for products like Philips for radios and lamps is used to imply the competitive
superiority of newer products bearing that name: Philips mixes, Philips electric
irons, Philips refrigerator. Godrej Company also often uses this strategy in
positioning their product.
By stressing on the “Godrej product”. BPL too uses this corporate identity. It
says “From BPL”.
Positioning by versatility of usage:
Many consumer durables are positioned on the basis of the versatility of usage.
For e.g., the Prestige pressure pan is positioned in such a way that the product is
designed specifically to give the benefit of versatile usage to the consumer.
Surrogate positioning:
In this kind of positioning the product can’t be positioned differently on the
basis of attributes but differentiated by positioning them on the surrogates for the
attributes. The claim would be that our product is better than or different from
others. For e.g., the Futura pressure cooker is advertised based on these surrogate
ideas. It uses two kinds of surrogate ideas – ‘predecessor’ – the popular and
trusted Hawkins association and ‘Endorsement’ because Indians admire Western
designs and are impressed by the western names.
21.6 POSITIONING PARADIGMS:
Monopolistic competition is prevailing in the contemporary markets. Product
differentiation and price differentiation are the main features of the monopolistic

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competition. The marketer must reinterpret the product differentiation as a Notes

meaningful consumer benefit. Suppose a company has identified four alternative
positioning platforms technology, cost quality and service as shown in the
following table.
It has one major competitor. Both companies stand at 8 as technology (1=low
score, 10=high score), which means they both have good technology. The
competitor has a better standing on cost (8 instead of 6). The company offers
higher quality than its competitor (8 compared to 6). Finally, both companies
provide below average service.
It would seem that the company should go after cost or same to improve its market
appeal. However, other considerations arise. The first is how target consumers
feel about improvements in each of these attributes. Column 4 indicates that
improvements in cost and service would be of high performance to customers.
But can the company afford to make the improvements in cost and service, and
how fast can it provide them? Column 5 shows that improving service would
have high affordability and speed. But would the competitor be able to match
the improved service? Column 6 shows that the competitor’s ability to improve
service is low.
(1) (2) (3) (4) (5) (6) (7)

Competitive Company Competitor Importance Affordability Competitor’s Recom-

advantage standing standing of and speed ability to mended
improving H-M-L improve action
standing standing
H-M-L H-M-L

Technology 8 8 L L M Hold
Cost 6 8 H M M Monitor
Quality 8 6 L L H Monitor
Service 4 3 H H L Invest

Based on this information, column 7 shows that the appropriate actions to take
with respect to each attribute. The one that makes the most sense is for the
company to improve its service and promote this improvement.
Positioning through differentiation
*H-high, M-medium, L-low
21.7 ADVANTAGES OF POSITIONING:
• It helps to focus the product on a specific target customer.
• It offers the product a new appeal in the market.
• A distinctive place can be occupied in the target markets’ mind.
• Successful creation of the market.

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Notes DISADAVANTAGES OF POSITIONING:

• It is not possible to offer a product wholly for a specific type of customers.
• The wrong positioning has affected a number of products.
EXAMPLES OF POSITIONING IN THE INDIAN CONTEXT:
The Positioning of Great shake
-Health drink,
-Against milk
-Soya milk was positioned against a universal product; milk, appealing to a
health-conscious market. However, unpalatability to Indian tastes made the
product a failure.
The Positioning of Complain:
Against milk and as a health builder, superior over milk.The Positioning of Amul
Milk powder:
-Against milk,
-Convenient and ready substitute to milk and not as one superior to milk
The Positioning of Maruti Udyog:
As a vehicle that displays the customer’s personality. A car which is young and
energetic
- A vehicle which had comfort and reliability and low cost of operation
21.8 PERCEPTUAL MAPPING:
Perception is the meaning added by an individual to the information that has
been obtained from the environment. This forces a consumer to create his own
ideas or say, perception about a brand/product. If consumer feels that branded
footwear are costly, he/she will always try to buy from unorganised market.
Similarly, a customer might feel that Raymond’s products are of high quality
without even having an experience of the product.
When a brand creates a proposition, it chooses a position, which will enable it to
differentiate itself from other brands. As consumers get used to this position, a
close association develops between the brand and the proposition. Subsequently,
this association defines what the brand stands for and it is important for a brand to
continue and nurture that proposition or develop on it. This can be done through
mapping the perceptual thinking of the prospective customers. This method is
known as perceptual mapping.
In order to construct a perceptual map for say readymade garments, it is necessary
first to identify the features that are more widely expected by the customer. Based
on the market research and from the inputs of the experts/executives, following
ten dominant features have been identified:

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• Wrinkle free Notes

• Fashion
• Perfect fit
• Quality fabric
• Good looks
• Attractiveness
• Colour options
• Popularity
• Stitching and
• Economical
With the above features, the perceptual map can be constructed by taking the two
outstanding features in the two axes as in the following figure. Those features
can be Quality and Price.
From the perceptual map, it is clear that the brands bearing foreign impressions
are falling in the first quadrant where the features like Wrinkle free, fashion,
quality fabric etc., are found. Color plus, Provouge brands are lying in the second
quadrant which denotes the features like perfect fit, color options, popularity etc.
This quadrant gives less consideration to quality. The features like economical
is taken in fourth quadrant where the brands like Excalibur and Parx are plotted.
This plotting of the perceptual map gives a direction for any new entrant in
the readymade garments about the consumer psyche. Features must essentially
translate into benefits in the consumer’s mind, and be offered at a price where
the price-value equation meets, is the lesson for the new entrant in this sector.
Characteristics of differentiation strategies:
There are a variety of ways to differentiate. Whatever the route, the successful
differentiation strategy should have three characteristics.
• Generate customer value.
• Provide perceived value.
• Be difficult to copy.
Differentiation strategy needs to add value for the customer. A distinction is
needed between apparent value and actual value. Too often a point of difference
with apparent value is not valued by the customer. The one stop financial service
vision was not valued by customers, they wanted excellence and competence
from investment managers, and aspirin products had much less value in the
market than was hoped.
The value of the Bayer name did not transfer to new product classes. One key
to a successful differentiation strategy is to develop the point of differentiation

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Notes from the customer’s perspective rather than from the perspective of the business
operation. How does the point of differentiation affect the customer’s experience
of buying and using the product? Does it serve to reduce cost, add performance,
or increase satisfaction?
Another method for differentiating a product is to employ market research to
systematically understand the customer and to test ideas and assumptions. One
role of market research is to ensure that the value added will justify the price
premium involved. A differentiation strategy is often associated with higher
price, because it usually makes price less critical to the customer and because
differentiation usually costs something. The question is whether that price
premium works in the marketplace.
The perceived value problem is particularly acute when the customer is not
capable of evaluating the added value. Consider the airline safety or the skill of
a dentist. The customer is unable to evaluate them without investing a significant
time and effort. Rather than expand such effect, the customer will look for
the signals such as the appearance of the aircraft or the professionalism of the
dentist’s front office.
The task is then to manage the signals or the cues of value added. User association
and endorsements can help. Oral B is the toothbrush recommended by the dentists
and Air Jordan is endorsed by Michel Jordan.
The point of differentiation needs to be sustainable. A value added such as 24-
hour support is relatively easy to copy if it proves successful. The challenge is
to create differentiation in strategies that are difficult to copy. One reason to
identify two strategic thrusts – synergy from the previous chapter and first mover
advantage in the next – is that when they are combined with a differentiation
thrust, sustainability is more likely.
When the point of differentiation involves a total organizational effort with a
complex set of assets and skills, it will be difficult and costly to copy, especially if
there is a dynamic, constantly evolving quality to it. A creative organization with
heavy R&D investment, such as that of Microsoft, will inhibit duplication. The
quality option and building strong brands can also require a total organizational
effort.
SUMMARY
Many kinds of efforts that were given to produce differentiation in the product
being offered have failed. For example, Westin Stamford hotel in Singapore
advertises that it is the world’s tallest hotel. But the tourists were least bothered
about the height of the hotel. Hence, each firm needs to develop a distinctive
positioning for its market offering which is very much relevant in the benefit
being provided by the product.
Take the case of an excellent positioning strategy being used by Volvo (station
wagon). They are aiming at the safety conscious upscale families and the
positioning strategy is very much related with the benefits being offered which

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are durability and safety. They position the product as the “safest, most durable Notes
wagon in which your family can ride.”
Differentiation is the act of designing a set of meaningful difference to
distinguish the company’s offering from competitor’s offerings. Most profitable
strategies are built on differentiation; offering customers something they value
that competitor don’t have. But most companies in seeking to differentiate them
focus their energy only on their products or services.
In fact, a company has the opportunity to differentiate itself at every point where
it comes in contact with its customers – from the moment customers realize that
they need a product or service to the time when they no longer want it and decide
to dispose of it. It is believed that if companies open up their creative thinking to
their customers’ entire experience with a product or service – what the company
call consumption chain – they can uncover opportunities to position their
offerings in ways that they, and their competitors, would never have thought
possible.
Physical products vary in their potential for differentiation. Product differentiation
has a close linkage with product positioning. It is in a way a prelude to product
positioning. At one extreme, we find products that allow little variation: salt,
steel, paracetamol. Yet even here, some differentiation is possible. HLL makes
several brands of laundry detergent, each with a separate brand identity. At the
other extreme are products capable of high differentiation, such as automobiles,
commercial buildings, and furniture.
Duplication by competitors requires not only ability, but will. Increasing the
investment or risk involved will discourage competitors. If, for example,
multiple points of differentiation are involved, duplication will be more
expensive. Duplicating only one aspect of this differentiation strategy would be
inadequate. Over investment in a value-added activity may pay off in the long
run by discouraging competitors from duplicating a strategy.
For example, the development of a superior service back up system might
discourage competitors. The same logic can apply to a broad product line. Some
elements of that line might be unprofitable, but if they plug holes that competitors
could use to provide value, then the analysis looks different.

CASE STUDY :
This case discusses about the target marketing strategies of New York-
based information technology major IBM Corporation (IBM), directed
toward the LGBT community. The company pitched its products to the LGBT
customers by using advertisements targeted at them. The target marketing
strategies included advertising in gay publications, online marketing,
sponsoring events and conferences supporting LGBT people, etc. It also set
up an LGBT sales team dedicated to serve the LGBT customers. The company
extended its LGBT diversity initiatives to its suppliers by choosing to do
business with vendors belonging to the LGBT community.

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Notes Experts felt that with the increasing competition, mainstream marketers like
IBM were targeting this niche segment since LGBT customers were affluent,
educated, and had more disposable income than other customers. Moreover, they
felt that the risk of alienating the existing mainstream customers outweighed
since LGBT customers were more loyal toward a brand.
In April 2009, the Armonk, New York-based International Business Machines
Corporation (IBM), one of the leading information technologies (IT) companies
in the world, ranked 4th in DiversityInc.’s4 list of “Top 10 Companies for LGBT
Employees” in the US. The ranking was based on criteria such as strong diversity
training programs, benefits to same-sex partners of employees, and recruiting
LGBT people (Refer to Exhibit I for diversity Inc.’s list of top 10 companies for
LGBT employees).
In addition to fulfilling the criteria, the companies also had to receive a 100
percent rating on Human Rights Campaign’s5 (HRC), Corporate Equality Index6
(CEI) to figure on the list (Refer to Exhibit II for CEI ratings of Fortune 500
companies in 2009). IBM was recognized for its efforts toward employing LGBT
people and providing equal workplace benefits to the LGBT. The company’s
target marketing strategies directed toward the LGBT community also caught
the attention of the analysts.
The history of diversity at IBM dates back to 1899 when it employed the first
black employee and the first black employee and the first three women employees.
It extended its diversity initiatives by employing the first employee with disability
in 1914. In 1984, IBM became the first major company to add sexual orientation
to its non-discrimination policy. Since then, IBM had been focusing on recruiting
LGBT employees in its workforce.
ISSUES:
• Analyze the marketing strategies of IBM for targeting the LGBT segment.
• Discuss the benefits in targeting a niche segment.
• Examine the risks involved in targeting a niche segment.
• Appreciate IBM’s diversity initiatives directed toward its employees and
its suppliers.
KEYWORDS:
Accessible: Each segment must be accessible to your team and the segment must
be able to receive your marketing messages

Product positioning: Positioning maps are the last element of the STP process.
For this to work, you need two variables to illustrate the market overview.

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STP marketing is an acronym for Segmentation, Targeting, and Positioning Notes

– a three-step model that examines your products or services as well as the way
you communicate their benefits to specific customer segments.

Positioning: The final step in this framework is positioning, which allows you
to set your product or services apart from the competition in the minds of your
target audience. There are a lot of businesses that do something similar to you,
so you need to find what it is that makes you stand out.
Prestige-based positioning – This calls for proving that your products supply a
certain boost in status to those who purchase.
Attribute-based positioning – Competitors, price, and benefits aside, this calls
for zeroing in on a unique selling proposition that makes your product or service
stands out from the rest.
Category-based positioning – This calls for determining how are your products
or services better than the existing solutions on the market.
Consumer-based positioning – This calls for aligning your product/service
offering with the target audience’s behavioural parameters.
Competitor-based positioning – This is a pretty straightforward approach that
calls to prove you are better than competitor X
Benefit-based positioning – This calls for proving the benefits that customers
will get from purchasing your product or service.
EXERCISE:
POINTS TO PONDER:

Answer the following Questions Given Below:

1.---------------is a group of customers for which an organization
designs, implements and maintains a marketing mix suitable for the
needs and preferences of that group.
2.The marketing term for how a target market perceives a brand in
relation to competing brands--------------
3.The marketing term for a relatively small, well -defined and very
focused target market-------------
4.Targeting two or more market segments and delivering a different
marketing programme to each would be a-----------targeting strategy.
5.The brand’s -----------is the place a brand is perceived to occupy in
the minds of the target market relative to competing brands.

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Notes
SELF ASSESSMENT QUESTIONS:
SHORT ANSWER QUESTIONS:
1. Define Targeting.
2. What is positioning?
3. What is meant by under positioning?
4. Mention about over positioning.
5. State the meaning of confused positioning.
6. Write a short note on doubtful positioning.
LONG ANSWER QUESTIONS:
1. Explain about the product positioning & differentiation.
2. Mention some of the principles of positioning.
3. Explain different types of positioning strategies.
4. State some of the most common priority in the consumer durable sector.
5. List out the advantages and disadvantages of perceptual mapping.

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Notes
LESSON 22 – CHANNEL MANAGEMENT

CONTENT:
LEARNING OBJECTIVE
LEARNING OUTCOME
22.1 INTRODUCTION
22.2 CHANNEL DESIGN PROCESS
22.3 ECONOMIC PERFORMANCE
22.4 CHANNEL MANAGEMENT DECISION
22.5 MANAGING INTEGRATED MARKETING CHANNELS
22.6 MANAGING RETAILING
22.7 WHOLESALING
22.8 LOGISTICS
SUMMARY
CASE STUDY
KEYWORDS
EXERCISE
SELF ASSESSMENT QUESTIONS

LEARNING OBJECTIVE:
• To Identify the growth opportunities for retailers and determine appropriate
entry strategies for different business situations.
• To increase the availability of the product to the potential customers.
• To fulfil customer’s requirements by providing quality rich services.
• To obtain promotional support from channel members.
• To procure timely and detailed market information.
LEARNING OUTCOME:
• The main objective, distribution channel has other objectives like
production and safety of the product, quick disposal of the product at the
low cost, low inventory control of the channel and marketing intelligence.
• To focus on Channel of dis¬tribution has thus become a very important
link between the producers and the consumers.

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Notes • The distribution channels used by the competitors also influence firms
channel selection.
22.1 INTRODUCTION:
It is very important that a distribution channel is properly aligned to satisfy the
needs of channel members and also for the success of any industrial marketing
strategy. A good industrial channel creates the communication and physical
supply linkages with existing and potential customers. Channel designing is a
dynamic process that consists of either developing the new channels or modifying
the existing ones.
22.2 CHANNEL DESIGN PROCESS:
Designing an appropriate industrial channel and managing it is a tough and
continuing task. A well-designed channel structure helps to achieve the desired
marketing objectives. A channel structure consists of types and number of
middlemen, terms and conditions of channel members, number of channels.
The various steps that are involved in channel design are given in the following
figure.
Channel Design Process

Steps involved in channel design process

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Let us understand each of the stages of design process in detail: Notes

a. Analyzing the needs of the customer:
When a marketer designs a marketing channel, he must understand the service
output levels desired by the target customers. Different customers have different
levels of service requirements. A high potential customer needs to be offered
effective and professional service backup, ensured availability of varied products
compared to the low potential customer. The marketing channel designer has to
know at this stage itself that providing superior service output means increased
channel costs and higher prices for customers.
b. Establishing channel objectives:
Channel objectives are a part of and result from the company’s marketing
objectives that need to be stated in terms of targeted service output levels. Profit
considerations and asset utilization must be reflected in channel objectives
and the resultant design. It should be the endeavour of the channel members
to minimize the total channel costs and still provide with the desired level of
service outputs.
Channel objectives keep varying depending on the characteristics of the products.
For example, while a customized non-standard product requires company
sales force to sell directly, products like HVAC (Heating, Ventilation and Air-
conditioning) are either sold by the company or its franchised dealers.
c. Considering channel constraints:
The industrial marketer develops his channel objectives keeping into consideration
various constraints like the company, competition, the environment, product
characteristics and the level of service output desired by the target customers.
Company: If a company has financial limitation as constraint, then it may
restrict its direct distribution approach through company sales force to few high
potential customers.
Competition: If a competitor has been very successful through direct service,
then it may force all other firms also to adopt the same strategy of direct selling.
Environment: Economic conditions, legal regulations are the environmental
factors that affect channel design. During recession, producers use economical
ways to sell the products to avoid additional costs. Similarly, the law looks
down upon those channel arrangements that tries to build a monopoly market or
minimize competition.
Product characteristics: As already mentioned, complex and non-standard
products require direct distribution without any intermediaries. Eg. If an
industrial marketer is providing customized machinery to his customer, then he
deals directly with him rather than involving any intermediary to understand the
customer needs better.

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Notes Customer: The industrial marketers depend on intermediaries to offer services

to customers who are either giving less business or are located at far-off places
and prefers to serve the nearby or high potential customers by themselves.
d. Listing channel tasks:
The industrial marketers have to creatively structure the necessary tasks or
functions to meet customer requirements and company goals. They have to first
make a list of various tasks to be performed, identify the critical tasks, and take
objective and realistic decisions on which tasks can be effectively performed by
the company and which cannot be performed due to certain constraints.
For instance, a company manufacturing pump sets depend on distributors to sell
them to customers who are located at distant locations but they would use their
own sales force to serve those customers who are of high potential.
The careful analysis of customer needs, establishing objectives, considering
constraints and listing the channel tasks form the backbone of channel design
process. Once these aspects are delineated individually, the next step of
identifying and evaluating channel alternatives starts.
e. Identifying channel alternatives:
There are four issues that are involved in identifying the channel alternatives.
They are: the types of business intermediaries, the number of intermediaries, the
number of channels and the terms and responsibilities of each channel members.
The types of business intermediaries: There are different types of intermediaries
that the industrial marketers should identify. They have to consider various
factors like the tasks to be performed, product and market conditions before
selecting either manufacturer ‘s representatives or agents, industrial distributors,
brokers, commission merchants or value-added resellers. The marketers should
search for innovative or combination of marketing channels.
Number of intermediaries: The manufacturers have to settle on the number of
intermediaries they wish to use in their channel structure. They may either go for
intensive, selective or exclusive distribution.
Intensive distribution: In this strategy, standard products that are purchased
more frequently and have less unit value like raw materials and other convenience
goods are distributed intensively i.e. products are stocked in numerous outlets so
as to make them available to varied customers on demand.
Selective distribution: The industrial marketer selects few intermediaries to
distribute the products to the target customer. This gives the marketer to develop
a good working relation with the selected intermediaries, have better control,
incur less costs and finally expect a better than average selling effort.
Exclusive distribution: This strategy helps to enhance the product image and is
more prevalent in consumer markets where some intermediaries exclusively deal
and distribute the products of one manufacturer. They are not allowed to handle

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the competitor ‘s products. The manufacturer expects aggressive selling by the Notes
intermediaries and tries to have control over their pricing policies, promotion
strategy, credit terms and other services.
Number of channels: Industrial marketers need to serve various market
segments. This necessitates them to use more than one channel for distributing
and marketing their products. This multi-channel approach helps them not only
to increase their market share but also reduce their costs. However, the industrial
marketers need to take care of possible channel conflicts like proper demarcation
of territory to channel members to sell and serve the customers in their respective
areas.
Terms and responsibilities of Channel Members: There are various terms and
conditions which the industrial marketer must make clear to the participating
channel members like the responsibilities and tasks, conditions of sale and
territorial rights that would enable both of them to enhance their performance.
Responsibilities and tasks: In order to avoid any future disagreements, there
should be clarity in the roles of both the industrial marketers and the channel
partners. Each should comply with the commitments about their individual
responsibilities and tasks to be performed.
Conditions of sale: It should be clearly mentioned well in advance about the
discounts offered by the manufacturers to the distributors, the commission
to be paid to the agents or brokers. Other terms relating to warranty period,
replacement of defective parts also should be appropriately stated.
Territorial rights: The territory between the distributors should be well demarcated
so as to avoid any future confusion that may lead to legal issues.
f. Evaluating alternate channels:
There are several channel alternatives available to the industrial markets. They
have to determine the best among the alternatives by evaluating them based on
the following criteria:
• The economic performance of the channel.
• The degree of control exercised on them.
• degree of adaptability of channels to the market situations.
22.3 ECONOMIC PERFORMANCE:
Different channel alternatives generate different levels of sales and incur
different levels of costs. An industrial marketer has to pose a question whether
sales generation would be more by direct selling through company sales force
or through the channel members. Many of the industrial marketers believe that
sales will be more from company sales force as they exclusively concentrate on
company’s product, they are given proper training to sell the product, they show
more aggressiveness as their career depends on company’s success and finally
customers prefer to deal with the company directly.

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Notes But it may also happen that the intermediary can sell more than the company
sales force. The possible reasons for this could be the agency having many sales
people with it or its sales force are much motivated with the commission offered
by the company or the customers prefer to deal with agents who have extensive
contacts.
The marketing manager has to similarly estimate the total costs of selling through
different channel members. As shown in the given figure the Selling Cost of
having channel members is lower than setting up a company‘s sales force. But
as channel member keeps getting more commission with increased sales, its cost
to company keeps rising.
There is one level of sales (LB) where the total selling costs for both are same.
This level is called as the breakeven level. The channel member is the most
preferred and appropriate choice if the sales volume is below LB as it involves
lower selling costs. Otherwise, the company should have its own sales force if
sales level crosses LB to reduce the selling costs.

Fig: Comparing alternative channels based on economic factors

Degree of control:
This is another important factor while evaluating the channel alternatives. An
industrial marketer exercises different levels of control over different channel
members. The degree of control is more on company sales force and least on
distributors. The distributor may concentrate more on those products that earn
him high products rather than following the instructions of the manufacturer
to push less preferred products. Similarly, an agent entertains his potential
customers most rather than concentrating on manufacturer ‘s product.
Degree of adaptability of channel members:
With the market changing dynamically, the channel members should have
the capacity to adapt themselves to the changing environment. The industrial

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marketer must be able to control as well as modify the channel structure. Each Notes
channel member should be committed to the agreement they have with other
members.
22.4 CHANNEL MANAGEMENT DECISION:
After a company completes the task of choosing a channel alternative, it has
to start the process of selecting the intermediaries, motivate them, control any
channel conflicts and evaluate the performance of channel members.
Selecting the intermediaries:
Selecting the intermediaries is not part of channel design as some intermediaries
leave the channel while others are terminated by the manufacturer. Selecting the
best intermediary is a continuous process that is sometimes a more difficult task
as producers have to work hard to get qualified middlemen.
It involves finding out the distinct characteristics possessed by the intermediaries.
Such evaluation is generally based on the experience possessed by the
intermediaries, their number of years in the line of business, exposure in other
fields, their past history, growth and profit records, their reputation, future growth
potential, type of clientele possessed, etc., Thus, a channel that effectively
satisfies the needs of a customer better than the competitors should find a place
in the manufacturer ‘s priority list.
Motivating the channel members:
After selecting the middlemen, the industrial marketer needs to continuously
motivate them to do their job better to achieve long-term success. Though the
terms and conditions that made them join the channel is a motivating factor, it
must be further supplemented by training and encouragement.
Understanding the needs and wants of the middlemen is the first step of motivation
process. Depending on the motivational technique used by the manufacturer,
there would be varying levels of support from the middlemen. Manufacturers
generally try to maintain relationship with their distributors by motivating through
cooperation, partnership, discounts/commission, and distributor councils.
Cooperation: Most of the manufacturers use the carrot and stick approach to
gain cooperation from middlemen. Positive motivators like higher margins,
special prices, allowances etc., along with threats like reduction in margins,
slow delivery, terminating the contracts etc., are used to increase business. The
manufacturer has to do a SWOT analysis of the distributors before implementing
this approach.
Partnership: Manufacturers enter into an agreement or partnership with their
intermediaries that list the objectives, policies and terms of jobs to be performed
by both the parties in order to avoid any future conflicts. A good example of
partnership is Vendor Managed Inventory System (VMI) where effective
communication happens between the vendor and channel members through the
assistance of electronic data interchange (EDI).

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Notes The EDI helps the company to fill up the stock automatically at the channel
member once it reaches the minimum reorder level. All relevant invoices,
acknowledgements are electronically processed and sent to the distributors. The
system also helps to check the slow-moving products at the distributor ‘s end,
generates a purchase return order based on which the products are returned back
to the company. This digital revolution helped in reducing costs and improving
customer service both by the manufacturer and distributor thus nurturing their
partnership.
Offering discounts/commissions: Another motivating factor for intermediaries
is the offering of discounts/commissions by the manufacturers. The compensation
is offered taking into account the expenses incurred and the services provided by
the intermediaries.
Establishing distributor councils: Manufacturers establish distributor councils
to get closer to their distributors through the company executives. These councils
help both the manufacturer and the middlemen to mutually plan various activities
like sharing market information, conducting training programs, planning
promotional schemes and then implementing them.
The middlemen should be considered by the manufacturers as their working
partners rather than as customers. Apart from above motivators, several other
practices should also be considered like arranging seminars, sponsorships for
annual retreats, immediate response to queries through call centres etc., With the
advancement in information technology, newer techniques should be used that
helps to increase the business and strengthen the relationship among both.
Managing Channel Conflicts: A well designed distribution channel though has
several benefits as observed; it is not the ultimate for the manufacturers. There
are several differences and problems that still exist between the manufacturers
and the distributors due to various simple and intricate reasons like
Dissimilar objectives: If the objective of manufacturer is to offer good customer
service to develop long-term relationship while that of distributor is to somehow
make short-term profits, then it gives rise to conflict among the two.
Less interest on products by the distributors: If distributors concentrate on those
manufacturer ‘s products where they earn more profits or which are fast moving
in the market, then it creates a conflict between him and the other manufacturers
on whose products the distributors do not focus.
Customer dealings: This is another common source of conflict that generally
happens where the manufacturer tries to cater to large customers directly and
makes the distributors serve the small customers thus making them earn less
profit and hampering their business growth.
Dissimilar views: If the manufacturer is of the view that a promotional scheme
would increase the business while the distributor feels that it would decrease
their margins as it involves cost, then conflict arises.

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Commission to distributor: If the distributor demands more commission while Notes

the manufacturer feels the existing commission is too high and denies the same,
then it causes conflict.
Territorial problems: When the areas among the distributors are not properly
demarcated then it leads to conflict as one tries to enter the other‘s territory to get
business. A dispute in the channel network can seriously affect the performance
of channel members. It instigates a need for the industrial marketers to assess the
areas of conflict and take corrective measures. There are different ways in which
channel conflict can be controlled. They include
Creating an effective communication set-up: There should be effective
communication between the manufacturer and the other members of the channel
network. This can happen through frequent interactions with the channel
members where they can discuss the common issues and sort them out.
Setting joint goals: All the channel members jointly set the goals they wish
to achieve by coming to a common agreement. The goals set by them can be
anything in common that range from customer satisfaction, increasing market
share, increasing profits, reducing costs, improving quality of service etc.,
Involving mediators: A third party in the form of arbitrator or mediator enters
in between the two parties among whom conflict arises and tries to solve their
problems by eliminating disagreement.
Evaluating Channel Performance:
The performance of the channel is said to be effective if the channel members are
able to reach the overall objectives smoothly. This calls for periodic evaluation
of their performance where various parameters like meeting the sales target,
maintaining the required inventory levels, on time delivery to customers, their
cooperation and service levels, generation of new customers, etc., are taken into
consideration.
The aspects where the middlemen scoreless during the evaluation process are
analyzed and discussed with them where they are motivated to improve upon
those areas. Sometimes, manufacturers terminate their services with middlemen
if they are unable to meet their expectations or shape up as required.
22.5 MANAGING INTEGRATED MARKETING CHANNELS:

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Notes Successful value creation depends on successful value delivery. Holistic

marketers are increasingly taking a value network view of their business,
examining the entire supply chain that links raw materials, components, and
manufactured goods and shows how they move toward the final consumers.
Marketing Channels and Value Networks
Most producers do not sell their goods directly to the final users; between them
stands a set of intermediaries performing a variety of functions. These are
marketing channels (also called trade channels or distribution channels), sets of
interdependent organizations participating in the process of making a product or
service available for use or consumption.
The Importance of Channels
A marketing channel system is the particular set of marketing channels a firm
employ, and decisions about it are among the most critical ones management
faces. In managing its intermediaries, the firm must decide how much effort to
devote to push versus pull marketing.
A push strategy uses the manufacturer’s sale force, trade promotion money,
or other means to induce intermediaries to carry, promote, and sell the
product to end users. In a pull strategy the manufacturer uses advertising and
other communications to persuade consumers to demand the product from
intermediaries, thus inducing the intermediaries to order it.
Hybrid Channels and Multichannel Marketing
Hybrid channels or multichannel marketing occurs when a single firm uses
two or more marketing channels to reach customer segments. In multichannel
marketing, each channel targets a different segment of buyers, or different need
states for one buyer, and delivers the right products in the right places in the right
way at the least cost. Companies must make sure their multiple channels work
well together and match each target segment’s preferred ways of doing business.

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Value Networks Notes

The company should first think of the target market, however, and then design the
supply chain backward from that point, a strategy called demand chain planning.
A value network is a system of partnerships and alliances that a firm creates to
source, augment, and deliver its offerings.
The Role of Marketing Channels
Through their contacts, experience, specialization, and scale of operation,
intermediaries make goods available and accessible to target markets, and usually
more effectively and efficiently than the producer can achieve on its own.
Channel Functions & Flows
A marketing channel performs the work of moving goods from producers to
consumers. It overcomes the time, place, and possession gaps that separate
goods and services from those who need or want them.
Channel Levels
The producer and the final customer are part of every channel. A zero-level
channel, also called a direct marketing channel, consists of a manufacturer
selling directly to final customers through door-to-door sales, home parties, mail
order, telemarketing, TV selling, Internet selling, manufacturer-owned stores,
and other methods. A one-level channel contains one selling intermediary. A two-
level channel contains two intermediaries typically a wholesaler and a retailer. A
three-level channel contains three intermediaries. Obtaining information about
end users and exercising control becomes more difficult for the producer as the
number of channel levels increases.
Service Sector Channels
As Internet and other technologies advance, service industries such as banking
and travel are operating through new channels. Marketing channels also keep
changing in “person marketing.”
Channel-Management Decisions
After a firm has chosen a channel system, it must select, train, motivate, and
evaluate individual intermediaries for each channel. It may also modify channel
design and arrangements over time
22.6 MANAGING RETAILING:
The act through which goods and services reach the end customer for individual
or business usage is known as retailing. The players involved in this act are
known as retailers. Retailers can be manufactures, distributors or wholesalers.
They can reach the end customer through the internet or physical stores. Retail
organizations are divided into three categories store retailers, non-store retailers
and retail organization. Store retailing, the best example is the department store
like Macy or Sears. Store retailers are further divided on the service level with

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Notes self-service, self-selection, limited service and full service stores. Store retailing
comprises over 90% in way products reach the end customer.
Over the years non-store retailing has garnered a market share. Non-store
retailing includes direct selling, direct marketing, automatic vending and buying
service. Avon is an example of direct selling. Internet retail giant Amzon.com
is an example of direct marketing. Soft drink vending machines are a form of
automatic vending.
Every retailer needs to have a business or marketing strategy for success. Retailer
needs to analyze its target market and customers for an in-store promotion and
product assortment. Services form a big part of retailing business, so retailers
have to finalize level of service. Services include pre-purchase, post purchase
and supporting services.
With the advent of technology and unprecedented economic growth, retailing
has its own share of change in business ways.
22.7 WHOLESALING:
The act of purchasing goods for consumer and industry for further resale is
referred to as wholesaling. Here, manufactures and farmers are not considered
as wholesalers.
Wholesaler is an important part of the marketing channel. Wholesaler increase
reach of the company products and the risk of selling to the customers.
Wholesaler can store inventory of various assortment of product thus helping
cost for company and time for customers. Wholesaler can serve as ears and eyes
for the company in understanding competition and customer.

A wholesaler is a company or individual that purchases great quantities of products

from manufacturers, farmers, other producers, and vendors.

22.8 LOGISTICS:
The supply chain management is essential for companies to improve productivity
and reduce costs. The purpose of marketing logistic is to design and implement
infrastructure, which will deliver goods from the point of origin to point of
sell in an effective and least cost manner. This objective mix of high customer
satisfaction and lowest cost possible are asymmetrical. The major decision
involved with marketing logistic relate to order processing, warehousing,
inventory and transportation.
Companies look forward to shortening order to payment cycle. A long cycle will
lead to decrease in customer satisfaction and company’s profit. Companies have
to set benchmarks at each level from sales people receiving orders to receiving
payment from creditors.

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Warehousing for finished goods is another important hub for companies. Notes
There has to be a right balance between sales order and quantity of finished
goods. Warehousing at strategic locations increases timely delivery of goods
and reducing in inventory. Technology has helped in improving warehousing
standards.
Transportation and freight cost plays an important role in final pricing, delivery
and condition of raw materials as well as finished products. Here companies
need to make the decision, whether to use a private carrier (company ownership),
contractual (Outside agency) or common carrier (service shared at standard
rates).

SUMMARY
Channel designing is resorted to by the industrial marketer when he has to develop
either a new channel system or modify an existing one. As channel design and
management is a difficult and an incessant task, an industrial marketer has to
go through certain stages that are involved in designing a superlative channel
system.
The various steps that are involved in channel design process are analysing
needs of the customer, establishing channel objectives, considering channel
constraints, listing channel tasks, identifying channel alternatives, evaluating
alternate channels and selecting the intermediaries.
The industrial marketer also has to take appropriate decisions on channel
management by selecting the right intermediaries based on the various steps.
The intermediaries need to be continuously motivated by means of offering them
various benefits and facilities. Any conflicts arising between the intermediaries
due to various reasons need to be solved by the industrial marketer.
Finally, the entire channel performance has to be evaluated and necessary control
measures need to be taken in order to enhance the performance of the entire
channel network.
CASE STUDY :
It was early 2015, and Sudevan Manickam (Sudevan), Head of Business
Planning and Analysis at Godrej Appliances Division (GAD), was excited
to receive the letter of appreciation and an invitation for the annual event
where he and his team would be acknowledged for their achievements in
front of the Business Executive Committee. He had a sense of satisfaction as
he remembered the journey leading up to the execution of the new channel
strategy. Competition from MNCs, the proliferation of products, consumers’
changing preferences, uncertain demand due to seasonal effects, and the rise
of new channels in the digital arena had resulted in a complete overhaul of
the channel strategy at GAD. Sudevan had spearheaded the initiative over the
last three years and implemented the revised strategy by experimenting with

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Notes
innovative ideas. The event would be attended by board members, top
management and all functional heads. He was contemplating his speech as
he wanted to utilize the occasion to lay down his plans for future scope of
improvements in the company’s channel strategy. He was aware of digital
marketing, and it’s potential. He wanted to leverage the digital platforms such
as smartphones and social media to stay in touch with customers throughout
their decision and purchase journey.
The GAD case provides a comprehensive overview of channel management
strategy. Case discussion is expected to revolve around:
• Channel productivity and performance
• Channel expansion and integration
• Channel conflict management

KEYWORDS:
Availability of Middlemen – The existing channel system may not be interested
in selling the products of the manufacture.
Competitors’ Channels – The distribution channels used by the competitors also
influence firms channel selection.
Type of Middleman – Choosing the right middleman is important for smooth
distribution of the goods.
Market Position – Established product and products of the reputed manufacturers
can be easily sent through various channels
Concentration of Buyers – When buyers are concentrated in few areas only,
short channels will be sufficient.
EXERCISE:
POINTS TO PONDER:
Answer the following Question Given Below:

1.The distribution channel a small textile company would most likely use in marketing
its products-------------

2.Of the four Ps of marketing, the ---------------decision relates to distribution.

3.The most likely channel of distribution used by manufacturers of flower, candy and
stationery-------------------

4.The first decision that marketers must make when managing channel is------------------

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Notes
SELF ASSESSMENT QUESTIONS:
SHORT ANSWER QUESTIONS:
1.Define channel Management.
2.List out the functions of middleman.
3.List out the factors affecting the channel management.
4.What are the levels of channel.
5.What is retailers.
LONG ANSWER QUESTIONS:
1.Briefly list out the functions of marketing channel.
2.Explain why marketing intermediaries are used.
3.What is a channel level? Explain the different levels.
4.Explain the factors affecting the channel distribution.
5.Explain the services rendered by wholesalers

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Notes
LESSON 23 – ADVERTISING & SALES
PROMOTION
CONTENT:
LEARNING OBJECTIVE
LEARNING OUTCOME
23.1 INTRODUCTION
23.2 EVOLUTION OF ADVERTISING
23.3 DEFINITION OF ADVERTISING
23.4 ADVERTISING OBJECTIVES
23.5 IMPORTANCE OF ADVERTISING
23.6 TYPES OF ADVERTISING
23.7 AIDA MODEL
23.8 MEANING AND DEFINITION OF SALES PROMOTION
23.9 CONCEPT AND NATURE OF SALES PROMOTION
23.10 FOLLOWING ARE THE OBJECTIVES OF SALES PROMOTION
SUMMARY
CASE STUDY
KEYWORDS
EXERCISE
SELF ASSESSMENT QUESTIONS

LEARNING OBJECTIVE:
• To Describe the history of the advertising industry and its relation to
today’s marketplace.
• The objectives of a sales promotion are to increase consumer demand,
stimulate market demand, to get potential buyers to heed a call to action,
increase the size of purchases and improve product availability using
media and non-media marketing communications.
• The main goal of sales promotional tactics includes contests, coupons,
freebies, loss leaders, point-of-purchase displays, premiums, prizes,
product samples, and rebates.

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Notes
LEARNING OUTCOME:
• To Explain the use of advertising and sales promotion as a marketing tool.
• To Describe advertising and sales promotional appeal.
• To ensure appropriate selection of media.
• To discuss means of testing effectiveness of advertising and sales
promotion.
23.1 INTRODUCTION:
Advertising is as old as trade and commerce. The ancient Babylonians and
the Romans contributed significantly to the early growth of advertising. The
nineteenth century saw the introduction of magazines which also grew into a big
advertising medium. The modern day of advertisement agency has its origins
during this period.
Starting as agents for newspapers, the agency diversified into other services such
as copy-writing, and played the role of consultants to advertisers. This marked
the beginning of the modem-day, full service and agency. The early twentieth
century was the golden age of advertising. The great depression of the 1930’s
saw a temporary setback in advertising growth.
However, there were some positive developments during this period such as the
introduction of radio as an advertising medium and the application of research
in advertising. The positive developments during 1950’s were the emergence
of television, the application of psychology and research in advertising, and
invention of the concept of Unique Selling Proposition (USP) by Reeves.
The decade 1960-1970, ushered in a creative revolution in advertising.
Outstanding personalities like David Ogilvy, Leo Burnett and Bernbach etc.
emphasized the creative side of advertising and developed campaigns that stood
out for their creative brilliance.
The decade 1910-1980 is referred to as the positioning era, as it saw the emergence
of the concept of positioning developed by Ries and Trout. This concept has
wide application in advertising today. The present era is aptly named the era
of accountability. There is greater for truthful advertising for measuring the
effectiveness of advertising in general, and for socially responsible advertising.
In India, advertising, as a potent means of sales-promotion, was accepted
hardly three decades ago. This delay is obviously attributable to its late
“industrialization”. But today, India too has emerged into an industrial country,
giving boost to “advertisements” that appear regularly, in local and national
newspapers magazines, periodicals, TV etc. These days’ people use “Advertising”
in various walks of life.
Manufacturers use large-scale advertising for impressing people with the utility
of their products. Businessmen advertise inviting individuals to invest money

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Notes in their concerns. Employers advertise for applications for various vacancies in
their companies for selecting the best of the applicants. The unemployed persons
advertise their readiness to serve. In this manner, “advertising” has become
indispensable in modem life.
The present era is of mass production and mass distribution. Similar products
are taken to the market. This involves stiff competition amongst the producers.
Many firms adopt the vigorous means to maintain their existence in the market,
as there are many substitutes in the market.
This tendency is a struggle for the producers for their survival in the modern
business world. All businessmen aim to make profit by increasing the sales at a
remunerative price policy. When we manufacture good quality products or offer
expert services, these must be known to the public.
For this mass communication is needed as the population is great or the market
area is wide. We can adopt sales promotion and advertising as tools to mobilize
the marketing machinery. In the present business world, suitable publicity is
done through advertising, which is adopted by commercial and industrial
undertakings and almost all types of concerns. Therefore, advertisement is a
method of publicity:
23.2 EVOLUTION:
Advertisement has the prominent place among the techniques of mass education
and persuasion on the public. It is not a modem origin. It has been used from
immemorial period. In earlier periods, advertisement was displayed in the form
of sign boards, writing on historical buildings or inscriptions on stones, stone-
pillars, stone walls etc.
23.3 DEFINITION:
Littlefield defines it as “Advertising is mass communication of information
intended to persuade buyers as to maximize profits.”
It is stated that advertising indicates that:
(a) Advertisement is a message to large groups.
(b) It is in the form of non-personal communication.
(c) It persuades the general public to purchase the goods or services, advertised.
(d) It is paid for by advertiser to publisher.
(e) Advertising messages are identified with the advertiser.
23.4 ADVERTISING OBJECTIVES:
Personal selling and other forms of promotions are supported by advertisement.
It is the main objective. The long-term objectives of advertising are broad and
concerned with the achievement of overall company objectives.

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• To do the entire selling job (as in mail order marketing). Notes

• To introduce a new product (by building brand awareness among potential
buyers).
• To force middlemen to handle the product (pull strategy).
• To build brand preference (by making it more difficult for middlemen to
sell substitutes).
• To remind users to buy the product (retentive strategy).
• To popularize some change in marketing strategy (change in price,
improvement in the product etc.).
• To provide rationalization (i.e., socially acceptable excuses).
• To combat or neutralize competitor’s advertising.
• To improve the morale of dealers and/or sales people (by showing that the
company is doing its share of promotion).
• To acquaint buyers and prospects with the new uses of the product (to
extend the product’s life cycle).
23.5 IMPORTANCE OF ADVERTISING:
The standard of living of the public is raised by introducing modern products
and the latest techniques through advertising. Mass production followed by
large-scale consumption facilitates to earn more profits. Large- scale production
decreases the unit cost. The selling price is also reduced, but not to the extent of
decreased cost of production.
It means, the price of the product is decreased, thereby consumers are satisfied
and dividend rate is increased, thereby shareholders are satisfied. All these happen
because of advertising. Items like, pens, radios, scooters, watches, refrigerators,
television sets, cameras, foot-wares and many other modem amenities are
examples.
Advertising reaches the masses, whereas salesmen find it difficult. Advertising
covers a vast area. In the field of competition, advertising is a good helper to the
producer to boost his products.
23.6 TYPES OF ADVERTISING:
The following are the important types of advertising:
1. Brand Advertising:
This type of advertisements are done to build brands and develop unique brand
identity for the firm. This is the most popular form of advertising in all possible
media including TV: for examples, Pepsi, Coke etc.

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Notes 2. National Advertising:

These advertisements are uniform across the nation and are released through
national media covering the nation.
3. Local Advertising:
These advertisements are carried out in local and vernacular media to promote
the product in a local region.
4. Retail Advertising:
These advertisements are brought to promote retail outlets and dealer points.
5. Political Advertising:
These are done for political parties, politicians and individual candidates during
elections.
6. Social Advertising:
These advertisements are brought out for a social cause like against AIDS, child-
labour, women trafficking.
7. Directory Advertising:
These are the advertisements done in directories and yellow pages and followed
by people while collecting a telephone number or a home address.
8. Business-to-Business Advertising:
These kinds of advertisements are carried out targeting business and organizational
marketers. These messages are directed towards retailers, wholesalers and
distributors.
9. Institutional Advertising:
Institutions like colleges, universities, missionary of charities and large corporates
bring out these advertisements. The purpose of such advertising is to create a
positive goodwill, which will ultimately contribute towards achieving to overall
marketing and brand building goal of the organization.
10. In Film Advertising:
These are new forms of advertising in which brands are placed inside the film
and actors are shown using these products during the movie for increasing the
usage among the audience.
11. Electronic Advertising:
These forms of advertising use electronic media like, TV, radio, video, audio-
cassettes, etc.
12. Interactive Advertising:
These are typical internet-based advertisements, which are delivered to individual
consumers who have access to the World Wide Web.

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23.7 AIDA MODEL: Notes

The AIDA model, tracing the customer journey through Awareness, Interest,
Desire and Action, is perhaps the best-known marketing model amongst all the
classic marketing models. Many marketers find AIDA useful since we apply this
model daily, whether consciously or subconsciously, when we’re planning our
marketing communications strategy.

What is AIDA Formula? What is the AIDA model?

The AIDA Model identifies cognitive stages an individual goes through during
the buying process for a product or service. It’s a purchasing funnel where buyers
go to and from at each stage, to support them in making the final purchase.
It’s no longer a relationship purely between the buyer and the company since
social media has extended it to achieving the different goals of AIDA via
information added by other customers via social networks and communities.
23.8 MEANING & DEFINITION
Sales promotion is an activity used by the industrial marketer to boost the
immediate sales of a product or service. It is used to increase the sales by
impressing the customers, rewarding them and also motivating the sales force to
get more business.
There are different techniques used in a sales promotion activity like a free-
sample campaign, offering free gifts, arranging demonstrations or exhibitions,
organizing competitions with attractive prizes, temporary price reductions, door-
to-door calling, telemarketing, using personal letters, etc.
More than any other element of the promotional mix, sales promotion is about
“action”. It is about stimulating customers to buy a product. It is not designed to
be informative – a role which advertising is much better suited to.
23.9 CONCEPT AND NATURE OF SALES PROMOTION:
Sales promotion is an important tool of promotion which supplements personal
selling and advertising efforts. According to American Marketing Association,
“Sales promotion includes those marketing activities, other than personal
selling, advertising, and publicity, that stimulate consumer purchasing and
dealer effectiveness, such as displays, shows and expositions, demonstration,
and various non-recurrent selling efforts not in the ordinary routine.”

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Notes Sales promotion includes techniques like free samples, premium on sale, sales
and dealer incentives, contests, fairs and exhibitions, public relations activities,
etc. Sales promotions are those activities, other than advertising and personal
selling that stimulate market demand for products.
The basic purpose is to stimulate on the spot buying by prospective customers
through short-term incentives. These incentives are essentially temporary and
non-recurring in nature.
Sales promotion is different from personal selling which is persuasion of
customers by the sales persons to buy certain products. It is also different from
advertising. Except for advertising through direct mail, advertising deals with
media owned and controlled by the firm itself.
Usually, sales promotion deals with non-recurring and non-routine methods in
contrast to personal selling or advertising. As a matter of fact, sales promotion
activities aim at supplementing and co-ordinating personal selling and advertising.
Sales promotion includes activities of non-routine nature to promote sales, e.g.,
distribution of samples, discount coupons, contests, display of goods, fairs and
exhibitions, etc. But it does not include advertisement, publicity and personal
selling.

A sales promotion is a marketing strategy in which a business uses a temporary

campaign or offer to increase interest or demand in its product or service.

1. Interrelationship of Sales Promotion and Advertising:

Sales promotion includes all those activities which promote sales such as
distribution of samples, discount coupons, contests, display of goods, fairs and
exhibitions, etc. Advertising, on the other hand, is any paid form of non- personal
presentation and promotion of ideas, goods and services. The objectives of both
sales promotion and advertising are similar and they complement each other.
They are interrelated in the sense that they are integral parts of the ‘promotion mix’
of the business. Advertising supports sales promotion activities by informing the
public about such efforts of the company. Similarly, sales promotion activities
remind the people of the message advertised by the business firm.
2. Objectives of Sales Promotion:
The basic purpose of sales promotion is to increase the sales of a product by
creating demand. Sales promotion has a capability to complement and supplement
the advertising functions of the marketing. It helps marketers to realize a variety
of objectives. These objectives are for both marketers and traders.
23.10 FOLLOWING ARE THE OBJECTIVES OF SALES PROMOTION:
• It improves the performance of middlemen and acts as a supplement to
advertising and personal selling.
• It motivates sales force to give desire emphasis on new accounts, latent
accounts, new products and new territories.

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• It increases sales and makes sales of slow moving products faster and Notes
stabilize fluctuating sales pattern.
• It attracts channel members to participate in manufacturer promotion
effort.
• Motivating the dealers to buy high volumes of products and push more of
the brands that are on promotion.
• Supporting and supplementing the advertising and personal selling efforts.
• Making consumers to switch brands in favour of firm.
• To overcome the seasonal fluctuation of products.
• Inducing retailers to promote the brand by local advertising and POP
display.
• Sales promotions motivate the salesmen to sell more and to sell the full
line of products.
• To reduce the perception of risk associated with the purchase of a product.
• Sales promotions encourage the customers to try a new product. For
example, companies distribute free samples of their new product. To attract
new customers distribute free sachets to households.
• Some companies offer a free pack with purchase of a product like free
soap with purchase of detergent. Henko detergent introduced scratch card
scheme in which customers usually received discount coupons so that
customers buy the same product (Henko detergent) again. These encourage
the customers to use the product or service and make them brand loyal.
3. Components of Sales Promotion:
Sales promotion has two components consumer promotion and trade promotion:
1. Consumer Sales Promotion Methods:
Consumer promotion is for the common customer, this promotion is supported
by advertisements, publicity, direct selling etc. This type of sales promotion is
targeted at the end consumers. Customer sales promotion is a “pull strategy” and
encourages the customers to make a purchase.
Price-Off Promotions:
It means offering product at lower than its normal price. Company offers either
a discount on the normal selling price of the product or more of the product at
the same price. This type of promotion must be used with care as the increase in
sales is gained at the cost of a loss in the profit. It attracts non users and act as an
effective tool to counter competition.
Coupons:
It is a method of offering a discount offering. Coupons are the most widely used
customer sales promotion technique. A coupon is a certificate that offers a price
reduction for some specified items to the holder. Coupons are distributed with
purchase of a product, magazines, newspapers, etc.

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Notes A few examples of coupon distribution can be coupon pasted on a package, or

placed inside a package to encourage repeat purchase. Coupon books are sent
out in newspapers, or offered with the purchase of an item in a given time frame.
Premiums:
Marketers can offer an article of merchandise as an incentive in order to sell
product or service these are known as premiums, as the customer gets something
in addition to the main purchase. For example, if a customer buys toothpaste,
he gets a toothbrush free. Premiums are of different types like packed premium,
banded premium, personality premium and container premium.
Free Samples:
Offering free gifts or samples is the most expensive form of sales promotion.
Marketers use this technique to increase their sales volume in the early stages
of the product life cycle. It means offering a small quantity of a product free in
order to persuade customer to try the product.
Money Refund and Rebates:
In case of money refund, the customer receives a specific amount of money
(refund) after he submits a proof of purchase to the manufacturer. Manufacturers
devise the strategy such that the customer qualifies for a refund only when he
makes multiple purchases. It is a kind of offer of a refund of money to customer
for mailing in a proof of purchase of a particular product, it induce trial from
primary users and motivate several product purchase.
Frequent User Incentives:
Repeat purchases may be stimulated by frequent user incentives. Hence, firms
offer incentive schemes to reward their loyal customers. The best example of this
is the frequent flyer scheme offered by airlines.
Consumer Contest:
In this method of sales promotion, customers take part in small competitions on
the basis of their creative and analytical skills. Customers are invited to compete
on the basis of creative skill, such contests create brand awareness and stimulate
interest in the brand, and it acquaints consumers with brand usage and benefit.
Trade Shows:
A group of retailers or manufacturers conduct exhibitions and trade shows to
make the customer aware of the products offered by various firms. Industrial
shows and annual industrial exhibition, exhibition of home appliances, consumer
goods or gym equipment, etc. are examples of this type of sales promotion.
2. Trader’s Sales Promotion Methods:
Trade promotion is not advertised and publicised it is for the channel members,
company’s offers are for dealer, distributors, retailers and agents only main
purpose is to increase sales by offering incentives to them. It is a “push strategy”
and encourages the channel members to stock the product. This form of promotion
is usually not advertised, as it is an internal affair between the company and its
distribution network partners.

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Trade Buying Allowance: Notes

In this method there is temporary price reduction and reimbursement of expenses
incurred by the dealers in full or in part. Buying allowance is a temporary
price reduction offered to the retailer for purchasing specific quantity/units of
the product. Such an offer acts as an incentive to stimulate short-term profit
of the retailer and promote new products for the company. It encourages trade
cooperation and stimulates repurchase.
Buyback Allowance:
In this method, intermediaries are offered a monetary incentive for each
additional unit purchased after the initial deal. This method aims at stimulating
the channel members to purchase additional quantities of stock that is over and
above the normal stock, as the monetary incentive they receive is proportional to
the amount of additional stock they purchase.
Merchandise Allowance:
It is an allowance to trader for providing desired sales promotion and product
display. Middlemen are usually required to show the proof of the advertisement
carried out by them.
Free Merchandise Schemes:
In this sales promotion technique, an additional amount of the product is offered
without any additional cost, as an incentive to purchase a minimum quantity.
SUMMARY
Sales promotion is used by the industrial marketers to increase their sales by
offering benefits and facilities to the customers, intermediaries and employees.
There are various reasons why a company does sales promotion.
Sales promotion is carried by using various sources like trade shows and
exhibitions, catalogues, offering samples, writing promotional letters,
conducting sales contests, arranging seminars, offering promotional novelties
and entertaining the customers.
Creating awareness to the masses by using any media without involving any
promotional cost is called as publicity. A cheaper promotional tool compared to
others, publicity brings lot of credibility to a company or its product.
The art of maintaining good relationship with the internal and external
environment of an organization is known as public relations. The environment
of an organization consists of employees, shareholders, suppliers, customers,
government and press.
Direct marketing is the process where a company directly interacts with the
customers without involving any intermediary. The tools used are direct mail,
telemarketing and online marketing.

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Notes
CASE STUDY :
“Banglalink Digital Communications Limited” is the second
largest company in the telecom sector of Bangladesh Banglalink Digital
Communications Limited (previously Orascom Telecom Bangladesh Limited)
is fully owned by Telecom Ventures Ltd. (previously Orascom Telecom
Ventures Limited) of Malta, which is a 100% owned subsidiary of Global
Telecom Holding Since Banglalink’s launch in February 2005, its impact was
felt immediately: overnight mobile telephony became an affordable option
for customers across a wide range of market segments. Banglalink’s initial
success was based on a simple mission: “bringing mobile telephony to the
masses” which was the cornerstone of its strategy. Banglalink changed the
mobile phone status from luxury to a necessity, brought mobiletelephone to
the general people of Bangladesh and made a place in their hearts. The mobile
phone has become the symbol for positive change in Bangladesh. The brand
slogan of “start something new” is in essence derived from Banglalink’s
promise of empowering people with affordable communication solutions
so that theycan take new initiatives in life. The company believes that, it is
through such new initiatives that positive change will occur for the overall
development of the nation. Banglalink’s growth over the preceding years
have been fuelled with innovative products and services targeting different
market segments, aggressive improvement of network quality and dedicated
customer care, creating an extensive distribution network across the country,
and establishing a strong brand that emotionally connected customers with
Banglalink. After Orascom’s takeover the revenue of the company has grown
significantly every year. The organization has achieved milestones in terms of
revenue every year, although maximum portion of revenue was re-invested in
order to finance its network deployment project. In the year 2007 the revenue
of the company was BDT 13,398 million and in the year 2011 the revenue was
BDT 37,879 million. Although Banglalink has experienced stable growth in the
revenue every year, the average revenue per user (ARPU) has seen a declining
trend. In the year 2009, the ARPU was $2.5 and the declined ARPU in the
year 2010 & 2011 was $2.3 & $1.9 respectively. This is happening because of
the high rivalry among the operators and also because of low switching cost.
This must be alarming for Banglalink as while the customer base is increasing
significantly, the ARPU is declining; which implies the existing customers are
switching to other operators and to stop this Banglalink needs to focus more
on retaining existing customer more than creating new customers.

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Notes
KEYWORDS:
Brand Advertising: This type of advertisements is done to build brands and
develop unique brand identity for the firm. This is the most popular form of
advertising in all possible media including TV: for examples, Pepsi, Coke etc.
Publicity and public relations: Scope and importance. Methods of publicity,
Power of Publicity, advantages and disadvantages of Publicity, Process of Public
Relations-Marketing public relations functions; Public relations officer- role and
functions.
Organizing for Advertising: Objectives and functions - Role and functions
of advertisement agencies. Advertising agency and services, client agency
relationship. Visual layout, art work, production traffic copy, effective use of
words, devices to get greater readership interrelation.
DIRECT MARKETING: Business advertisers uses direct marketing such as
direct marketing vehicle direct mails send to customers datasheets etc. these are
used to share the information about the product price and availability in market.
RETAIL MARKETING: Retail advertising is the advertising by retailers who
usually sell goods direct to the customers. The main aim of the retailer is to
create awareness of different retail products and directly target the customers.
It is also helping the retailer effectively research their products to the existing
customers and also new ones.

EXERCISE:
POINTS TO PONDER:
Answer the following Questions Given Below:
1.A strength of radio advertising is-------------
2.In a ------------ advertising schedule, advertising is used during
every period of the campaign, but the amount of advertising varies
considerably from period to period.
3.All marketing activities that attempt to stimulate quick buyer
action or immediate sale of a product are known as------------
4.A detergent that advertise how clean it gets clothes is appealing to
the -----------------consumer need.
5.pointof purchase Ads are also known as--------------------

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Notes
SELF ASSESSMENT QUESTIONS:
SHORT ANSWER QUESTIONS:
1. What is Advertising?
2. Define Advertising Media.
3. List out the functions of Advertising.
4. Define media advertisement.
5. What is sales promotion?
LONG ANSWER QUESTIONS:
1. Explain the objectives of Advertising.
2. Explain the functions of advertising.
3. What are the types of advertising media? What are the factors to be
considered in choosing the media?
4. Explain the advantages and limitations of various media of advertisement.
5. Define Sales promotion. What are its objectives?

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 Lesson 24 – Pricing Objectives, Policies & Methods

Notes
LESSON 24 – PRICING OBJECTIVES,
POLICIES & METHODS
CONTENT:
LEARNING OBJECTIVE
LEARNING OUTCOME
24.1 INTRODUCTION
24.2 PRICING
24.3 BASIC PRINCIPLES OF PRICING
24.4 IMPORATANCE OF PRICING
24.5 FACTORS AFFECTING PRICING DECISION
24.6 PRICING METHODS
24.7 OTHER METHODS
SUMMARY
CASE STUDY
KEYWORDS
EXERCISE
SELF ASSESSMENT QUESTIONS

LEARNING OBJECTIVE:
• The pricing objective requires a different price-strategy in order to
successfully achieve your business goals.
• The pricing objective include maximizing profits, increasing sales volume,
matching competitor’s prices, deterring competitors-or just pure survival.
• The pricing goals that guide your business in setting the cost of a product
or service to your existing or potential consumers.
LEARNING OUTCOME:
• A pricing outcome underpins the pricing process for a product and it should
reflect your company’s marketing, financial, strategic and product goals,
as well as consumer price expectations and the levels of your available
stock and production resources.
• The pricing decisions are taken in such a way that enable your company to
achieve targeted market share.

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Notes • To face up to the competition today’s markets are characterised by intense

competition and companies set and modify their pricing policies so as to
respond to their competitors.

24.1 INTRODUCTION:
Most people simply use the word price to indicate what it costs to acquire a
product. The pricing decision is a critical one for most marketers, yet the amount
of attention given to this key area is often much less than is given to other
marketing decisions. One reason for the lack of attention is that many believe
price setting is a mechanical process requiring the marketer to utilize financial
tools, such as spreadsheets, to build their case for setting price levels. While
financial tools are widely used to assist in setting price, marketers must consider
many other factors when arriving at the price for which their product will sell.

24.2 PRICING:
Price is considered as a component of an exchange or transaction that takes
place between two parties and refers to what must be given up by one party (i.e.,
buyer) in order to obtain something offered by another party (i.e., seller). Price
means different things to different participants in an exchange. One is the buyer.
Their view for those making a purchase, price refers to what must be given up
to obtain benefits. In most cases, what is given up is financial consideration
(e.g., money) in exchange for acquiring access to a good or service. But
financial consideration is not always what the buyer gives up. Sometimes in a
barter situation a buyer may acquire a product by giving up their own product.
For instance, two farmers may exchange chicken for crops. In the case of the
seller, price reflects the revenue generated for each product sold and, thus, is an
important factor in determining profit. For marketing organizations price also
serves as a marketing tool and is a key element in marketing promotions. For
example, most discount retailers highlight product pricing in their advertising
campaigns. Price is what a buyer pays to acquire products from a seller. Cost
concerns the seller’s investment (e.g., manufacturing expense) in the product
being exchanged with a buyer. For marketing organizations seeking to make a
profit the hope is that price will exceed cost so the organization can see financial
gain from the transaction. While product pricing is a main topic for discussion
when a company is examining its overall profitability, pricing decisions are not
limited to for-profit companies. Not-for- profit organizations, such as charities,
educational institutions and industry trade groups, also set prices, though it is
often not as apparent.

Pricing is the process whereby a business sets the price at which it will sell its
products and services, and may be part of the business's marketing plan.

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24.3 BASIC PRINCIPLES OF PRICING: Notes

Before any discussion on pricing, it is important to know what really drives
pricing. Every organization is involved in a cost component before the ultimate
product comes to the market. Now we need to know how the cost is calculated.
The components that are considered in costing include cost of materials activity
you have performed in terms of labour hours (the rates for the labour vary,) and the
overhead as applicable with respect to that cost center based on a predetermined
cost centre planning and its rate.
24.4 IMPORATANCE OF PRICING:
For a buyer, value of a product will change as perceived price paid and/or
perceived benefits received change. But the price paid in a transaction is not
only financial it can also involve other things that a buyer may be giving up.
For example, in addition to paying money a customer may have to spend time
learning to use a product, pay to have an old product removed, and close down
current operations while a product is installed or incur other expenses. Pricing
decisions can have important consequences for the marketing organization and
the attention given by the marketer to pricing is just as important as the attention
given to more recognizable marketing activities. In most companies, prices are
tactically derived based on internal costs and gut reaction to competitive moves.
This is often the only element the marketer can change quickly in response to
demand shifts and it is directly related to total revenue. Profits can be made only
by knowing the difference between total revenue and total cost. Organizations can
use price symbolically, emphasize quality or bargain. The importance of pricing
depends on the image the organization wants to portray, competitive activity in
the market and the changing behaviour of the customer. From a strategic aspect,
pricing has more impact on positioning and ultimate profitability than any other
item in the overall marketing mix. Depending on market sensitivities and current
profit margins, a 1% increase in price could increase profitability by up to 10%.
The key to effective strategic pricing is to leverage market-based understanding
of how customer’s value new and existing offerings in a competitive marketplace.
Customers want the best value for their money, and thus they will almost always
do a quality comparison and make purchases based on the best price for the best
value. How customers view the product or service and what they are willing to
pay for it is based upon those perceptions. In the end, customers will tell through
their purchasing behaviour whether or not the prices are too high, too low or
right on the money.
24.5 FACTORS AFFECTING PRICING DECISION:
There are both internal and external factors that affect pricing.
Internal Factors:
These internal factors are controllable by the company and, if necessary, can be
altered. However, while the organization may have control over these factors

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Notes making a quick change is not always realistic. For instance, product pricing may
depend heavily on the productivity of a manufacturing facility. The marketer
knows that increasing productivity can reduce the cost of producing each
product and thus allow the marketer to potentially lower the product’s price.
But increasing productivity may require major changes at the manufacturing
facility that will take time and will not translate into lower price products for
a considerable period of time. Corporate objectives can be wide- ranging and
include different objectives for different functional areas (e.g., objectives for
production, human resources, etc). While pricing decisions are influenced by
many types of objectives set up for the marketing functional area, there are four
key objectives in which price plays a central role. In most situations, only one
of these objectives will be followed, though the marketer may have different
objectives for different products. The four main marketing objectives affecting
price include:
Return on Investment: A firm may set as a marketing objective the requirement
that all products attain a certain percentage return on the organization’s spending
on marketing the product.
Cash Flow: Firms may seek to set prices at a level that will insure that sales
revenue will at least cover product production and marketing costs. This objective
allows the marketer to worry less about product profitability and instead directs
energies to building a market for the product. This is most likely to occur with
new products where the organizational objectives allow a new product to simply
meet its expenses while efforts are made to establish the product in the market.
Market Share: The pricing decision may be important when the firm has an
objective of gaining a hold in a new market or retaining a certain percent of an
existing market. For new products under this objective the price is set artificially
low in order to capture a sizeable portion of the market and will be increased as
the product becomes more accepted by the target market. For existing products,
firms may use price decisions to insure they retain market share in instances
where there is a high level of market competition and competitors who are
willing to compete on price.
Profit maximization: Older products that appeal to a market that is no longer
growing may have a company objective requiring the price be set at a level that
optimizes profits. This is often the case when the marketer has little incentive
to introduce improvements to the product and will continue to sell the same
product at a price premium for as long as some in the market is willing to buy.
Marketing strategy concerns the decisions marketers make to help the company
satisfy its target market and attain its business and marketing objectives. Price,
of course, is one of the key marketing mix decisions and since all marketing
mix decisions must work together, the final price will be impacted by how other
marketing decisions are made. For instance, marketers selling high quality
products would be expected to price their products in a range that will add to the
perception of the product being at a high-level.

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Costing is yet another area of concern. While variable costs are often Notes
determined on a per-unit basis, applying fixed costs to individual products is less
straightforward. For example, if a company manufactures five different products
in one manufacturing plant how would it distribute the plant’s fixed costs (e.g.,
mortgage, production workers’ cost) over the five products? In general, a company
will assign fixed cost to individual products if the company can clearly associate
the cost with the product, such as assigning the cost of operating production
machines based on, how much time it takes to produce each item.
External Factors:
There are many influencing factors which are not controlled by the company but
will impact pricing decisions. Understanding these factors requires the marketer
conduct research to monitor what is happening in each market the company
serves since the effect of these factors can vary by market.
Marketing decisions are guided by the overall objectives of the company. The
pricing decision can be affected by factors that are not directly controlled by the
marketing organization.
When it comes to adjusting price, the marketer must understand what effect
a change in price is likely to have on target market demand for a product.
Understanding how price changes impact the market requires the marketer have
a firm understanding of the concept, economists call elasticity of demand, which
relates to how purchase quantity changes as prices change.
Elasticity deals with three types of demand scenarios:
Elastic Demand – Products are considered to exist in a market that exhibits
elastic demand when a certain percentage change in price results in a larger
percentage change in demand. For example, if the price of a product increases
(decreases) by 10%, the demand for the product is likely to decline (rise) by
greater than 10%.
Inelastic Demand – Products are considered to exist in an inelastic market when
a certain percentage change in price results in a smaller percentage change in
demand. For example, if the price of a product increases (decreases) by 10%, the
demand for the product is likely to decline (rise) by less than 10%.
Unitary Demand – This demand occurs when a percentage change in price
results in an equal percentage change in demand. For example, if the price of
a product increases (decreases) by 10%, the demand for the product is likely to
decline (rise) by 10%.
Firms within the marketer’s channels of distribution also must be considered when
determining price. Distribution partners expect to receive financial compensation
for their efforts, which usually means they will receive a percentage of the final
selling price.
This percentage or margin between what they pay the marketer to acquire the
product and the price they charge their customers must be sufficient for the

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Notes distributor to cover their costs and also earn a desired profit. Marketers will
undoubtedly look to market competitors for indications of how price should be
set.
For many marketers of consumer products researching competitive pricing is
relatively easy, particularly when Internet search tools are used. Price analysis
can be somewhat more complicated for products sold to the business market
since final price may be affected by a number of factors including if competitors
allow customers to negotiate their final price.
Marketers must be aware of regulations that impact how price is set in the
markets in which their products are sold. These regulations are primarily
government enacted meaning that there may be legal ramification if the rules are
not followed. Price regulations can come from any level of government and vary
widely in their requirements.
For instance, in some industries, government regulation may set price ceilings
(how high price may be set) while in other industries there may be price floors
(how low price may be set). Additional areas of potential regulation include:
deceptive pricing, price discrimination, predatory pricing and price fixing.
Pricing setting process:
Price setting process starts with understanding the company and marketing
objectives. Then an initial price is to be readied. We need to also understand
the standard price adjustments along with determining promotional pricing
and looking for payment options. First, the overall objectives of the company
guide all decisions for all functional areas (e.g., marketing, production, human
resources, finance, etc.).
Guided by these objectives the marketing department will set its own objectives
which may include return on investment, cash flow, market share and maximize
profits to name a few as stated in section 3.2. Pricing decisions like all other
marketing decisions will be used to help the department meet its objectives.
For instance, if the marketing objective is to build market share it is likely the
marketer will set the product price at a level that is at or below the price of
similar products offered by competitors.
For companies selling to consumers, this price also leads to a projection of the
recommended selling price at the retail level often called the manufacturer’s retail
price (MRP). The MRP may or may not be the final price for which products are
sold. For strong brands that are highly sought by consumers the MRP may in
fact be the price at which the product will be sold. But in many other cases, as
we will see, the price setting process results in the price being different based
on adjustments made by the marketer and others in the channel of distributions.
For firms that do make standard price adjustments, the possibilities include:
1. Quantity Discounts
2. Trade Allowances

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3. Geographic Pricing Notes

4. Special Segment Discounts
Quantity Discounts
This adjustment offers buyers an incentive of lower per-unit pricing as more
products are purchased. Most quantity or volume discounts are triggered when
a buyer reaches certain purchase levels. For instance, a buyer may pay the list
price when they purchase between 1-99 units but receive a 5% discount off the
list price when the purchase exceeds 100 units. The most common quantity
discounts exist when a buyer places an order that exceeds a certain minimum
level.
While quantity discounts are used by marketers to stimulate higher purchase
levels, the rational for using these often rests in the cost of product shipment.
There can be discounts offered to the products. This method allows the buyer
to receive a discount, as more products are purchased over time. For instance,
if a buyer regularly purchases from a supplier they may see a discount once the
buyer has reached predetermined monetary or quantity levels. The key reason
to use this adjustment is to create an incentive for buyers to remain loyal and
purchase again.
Trade Discounts
Manufacturers who rely on channel partners to distribute their products (e.g.,
retailers, wholesalers) offer trade discounts of list price. Essentially the difference
between the trade discounted prices paid by the reseller and the price the reseller
charges its customer will be the reseller’s profit.
Special Segment Pricing
In some industries special classes of customers within a target market are offered
pricing that differs from the rest of the market. The main reasons for doing this
include: building future demand by appealing to new or younger customers;
improving the brand’s image as being sensitive to customer’s needs; and
rewarding long time customers with price breaks.
For instance, many companies including railways, airways offer lower prices
to senior citizens. Some marketers offer non-profit customers lower prices
compared to that charged to for-profit firms. Other industries may offer lower
prices to students or children.
Geographic Pricing
Products requiring marketers to pay higher costs that are affected by geographic
area in which a product is sold may result in adjustments to compensate for the
higher expense. The most likely cause for charging a different price rest with
the cost of transporting a product from the supplier’s distribution location to the
buyer’s place of business.

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Notes Transportation expense is not the only cost that may raise a product’s price.
Special taxes or tariffs may be imposed on certain products by local, regional
or international governments which a seller passes along in the form of higher
prices. Now with the advent of VAT, these issues would be overcome.
They are:
Markdowns:
The most common method for stimulating customer interest using price is the
promotional markdown method, which offers the product at a price that is lower
than the product’s normal selling price. There are several types of markdowns
including:
Temporary Markdown – Possibly the most familiar pricing method marketers
use to generate sales is to offer a temporary markdown or “sale’ pricing. These
markdowns are normally used for a specified period of time, the conclusion of
which will result in the product being raised back to the normal selling price.
Permanent Markdown – Unlike the temporary markdown where the price will
eventually be raised back to a higher price, the permanent markdown is intended
to move the product out of inventory.
Seasonal – Products that are primarily sold during a particular time of the year,
such as clothing, gardening products, sporting goods and holiday-specific items,
may see price reductions at the conclusion of its prime selling season.
Loss Leaders:
An important type of pricing program used primarily by retailers is the loss
leader. Under this method a product is intentionally sold at or below the cost the
retailer pays to acquire the product from suppliers. The idea is that offering such
a low price will entice a high level of customer traffic to visit a retailer’s store
or website.
Sales Promotions:
Sales promotion may offer several types of pricing promotions to simulate
demand. These include rebates, coupons, trade-in, and loyalty programs. There
is a separate unit on sales promotions later on.
Bundle Pricing:
Another pricing adjustment designed to increase sales is to offer discounted
pricing when customers purchase several different products at the same time.
Termed bundle pricing, the technique is often used to sell products that are
complementary to a main product. For buyers, the overall cost of the purchase
shows a savings compared to purchasing each product individually. For example,
a TV retailer may offer a discounted price when customers purchase both 29’ TV
and DVD that is lower than if both items were purchased separately.
With the price decided, the final step for the marketer is to determine in what
form and in what timeframe customers will make payment. As one would

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expect payment is most often in a monetary form though in certain situations the Notes
payment may be part of a barter arrangement in which products or services are
exchanged.
Dynamic Pricing
The concept of dynamic pricing has received a great deal of attention in recent
years due to its prevalent use by Internet retailers. But the basic idea of dynamic
pricing has been around since the dawn of commerce. Essentially, dynamic
pricing allows for the point-of-sale (i.e., at the time and place of purchase) price
adjustments to take place for customers meeting certain criteria established by
the seller. The most common and oldest form of dynamic pricing is haggling; the
give-and-take that takes place between buyer and seller as they settle on a price.
Finally marketers must decide in what form payments will be accepted. These
options include cash; check, money orders, credit card, online payment systems
(e.g., PayPal) or, for international purchases, bank drafts, letters of credit, and
international reply coupons, to name a few. They can also offer the following:
1. Ownership Options
2. Early Payment Incentives
3. Auction Pricing
Ownership Options:
An important decision faced by marketers as they are formulating their marketing
strategy deals with who will have ownership of the product (i.e., holds legal title)
once an exchange has taken place. The options available include:
Buyer Owns Product Outright – The most common ownership option is for the
buyer to make payment and then obtain full ownership.
Buyer Has Right to Use but Does Not Have Ownership – Many products,
especially those labelled as services, permit customers to make payment in
exchange for the right to use a product but not to own it.
Early Payment Incentives
For many years marketers operating primarily in the business market offered
incentives to encourage their customers to pay early. Typically, business
customers are given a certain period of time, normally 30 or 60 days, before
payment is due. To encourage customers to pay earlier, and thus allow the seller
to obtain the money quicker, marketers have offered early payment discounts
often referred to as “cash terms”.
Auction Pricing:
Auction pricing is the reverse of bid pricing, since it is the buyer who in large part
sets the final price. This pricing method has been around for hundreds of years,
but today it is most well-known for its use in the auction marketplace business
models such as eBay and business-to-business marketplaces. While marketers

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Notes selling through auctions do not have control over final price, it is possible to
control the minimum price by establishing a price floor or reserve price. In this
way the product is only sold if someone’s bid is at least equal to the floor price.
24.6 PRICING METHODS:
Following are the pricing methods before the manufacturer.
Cost Pricing
Under cost pricing the marketer primarily looks at production costs as the key
factor in determining the initial price. This method offers the advantage of being
easy to implement as long as costs are known. But one major disadvantage is that
it does not take into consideration the target market’s demand for the product.
There are several types of cost pricing including:
Mark up Pricing
This pricing method used by many resellers, who acquire products from suppliers,
is one in which final price is determined by adding a certain percentage to the
cost of the product. For many resellers, such as retailers, who purchase thousands
of products it is far easier to use a markup pricing approach due to its simplicity
than it would be to determine what the market is willing to pay for each product.
Resellers differ in how they use markup pricing with some using the markup on
cost method and others using the markup on selling price method.
Markup on cost – Using this method price is determined by simply multiplying
the cost of each item by a predetermined percentage then adding the result to
the cost. A major general retailer, such as Bigbazzar, may apply a set percentage
for each product category (e.g., women’s clothing, automotive, garden supplies,
etc.) making the pricing consistent for all like-products. Alternatively, the
predetermined percentage may be a number that is identified with the marketing
objectives (e.g., required 20% ROI). The calculation for markup on cost is:
Item Cost + (Item Cost x Markup Percentage) = Price
Rs.500 + (500 x .30) = Rs.650
Markup on Selling Price – Many resellers, and in particular retailers, discusses
their markup not in terms of markup on product cost but as a reflection of price.
The calculation for markup on selling price is:
Item Cost = Price
(1.00 – Markup Percentage)
Rs.500 = Rs. 714.3
(1.00 – .30)
The astute reader should recognize that the information in markup of selling
price contains the same information in markup of cost.

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Cost-Plus Pricing Notes

In the same way markup pricing arrives at price by adding a certain percentage
to the product’s cost, cost-plus pricing also adds to the cost by using a fixed
monetary amount rather than percentage. For instance, a contractor hired to
renovate a homeowner’s bathroom will estimate the cost of doing the job by
adding their total labor cost to the cost of the materials used in the renovation.
Breakeven Pricing
Breakeven pricing is associated with breakeven analysis, which is a forecasting
tool used by marketers to determine how many products must be sold before the
company starts realizing a profit. Like the markup method, breakeven pricing
does not directly consider market demand when determining price, however it
does indicate the minimum level of demand that is needed before a product will
show a profit. From this the marketer can then assess whether the product can
realistically achieve these levels.
Market Pricing
Under the market pricing method cost is not the main factor driving price
decisions; rather initial price is based on analysis of market research in which
customer expectations are measured. The main goal is to learn what customers in
an organization’s target market are likely to perceive as an acceptable price. Of
course this price should also help the organization meet its marketing objectives.
Market pricing is one of the most common methods for setting price, and the one
that seems most logical given marketing’s focus on satisfying customers.
Bid Pricing
Not all selling situations allow the marketer to have advanced knowledge of
the prices offered by competitors. While the Internet has made researching
competitor pricing a relatively routine exercise, this is not the case in markets
where bid pricing occurs. Bid pricing typically requires a marketer to submit a
price to a potential buyer that is sealed or unseen by competitors. It is not until all
bids are obtained and unsealed that the marketer is informed of the price listed
by competitors.
Bid pricing occurs in several industries though it is a standard requirement when
selling to local, national and international governments. In these situations the
marketer’s pricing strategy depends on the projected winning bid price, which is
generally the lowest price. However, price alone is only the deciding factor if the
bidder meets certain qualifications. The fact that marketers often operate in the
dark in terms of available competitor research, makes this type pricing one of the
most challenging of all pricing setting methods.

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Notes

24.7 OTHER METHODS:

• Differentiated Pricing - Different prices are changed from different
customers on the Basis of Customer segments
• Time
• Location/Area
• Product Quantity
• Product attributes
• Affordability/ Social welfare - In case of essential commodities, prices are
set in such a way that all sections of people in the society can afford it.
• Price may Alsop be below the cost of product due to subsidies provided by
the government.
SUMMARY

Customers want the best value for their money, and thus they will almost always
do a quality comparison and make purchases based on the best price for the
best value. While the beat-the-competition pricing approach may work for some,
there are many other complexities involved in establishing a pricing strategy.
Many players have started to use multiple pricing methodology for getting across
to variety of customers. Hence, pricing is a major aspect of decision to be made
by organizations.

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Notes
CASE STUDY :
The case is about Starbucks’ pricing strategy in China under which the
company charged higher prices for its products than in Western countries.
Starbucks is considered a success story in China as it was able to convert
the traditional tea drinkers of the nation to coffee lovers through its premium
offerings. The premium pricing strategy of the company aimed at improving its
brand positioning in the Chinese market where the consumers’ perception was
that high price products offered higher quality. However, the pricing strategy
attracted criticism from the media outlets in China that accused the coffee
giant of “profiteering” and of discriminating against its Chinese consumers.
Starbucks defended it pricing strategy in China saying that its higher prices
were attributable to its higher cost of doing business in the country than in other
markets. Howard Schultz, CEO of Starbucks, saw China as a primary growth
market and had ambitious growth plans at a time when there was worldwide
anxiety over the country’s sluggish economy and market turmoil. However,
with competition growing in the market, can Starbucks sustain its high prices
in China?. .

ISSUES:
The case is structured to achieve the following teaching objectives:
• Examine the issues and challenges in pricing, particularly premium pricing.
• Understand the reasons for Starbucks high prices in China, why consumers
are willing to pay the higher price.
• Understand the nature of the coffee market in China.
• Discuss and debate whether Starbucks can sustain its pricing strategy in
China.
• Explore future strategies for Starbucks on the pricing front.
KEYWORDS:
Cost Oriented Pricing Method– It is the base for evaluating the price of the
finished goods, and most of the company apply this method to calculate the cost
of the product.
Cost-Plus Pricing- In this pricing, the manufacturer calculates the cost of
production sustained and includes a fixed percentage (also known as mark-up)
to obtain the selling price.
Markup Pricing- Here, the fixed number or a percentage of the total cost of a
product is added to the product’s end price to get the selling price of a product.
Target-Returning Pricing- The company or a firm fix the cost of the product to
achieve the Rate of Return on Investment.

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Notes Perceived-Value Pricing- In this method, the producer establishes the cost taking
into consideration the customer’s approach towards the goods and services,
including other elements such as product quality, advertisement, promotion,
distribution, etc. that impacts the customer’s point of view.
Value pricing- Here, the company produces a product that is high in quality but
low in price.
Going-Rate Pricing- In this method, the company reviews the competitor’s rate
as a foundation in deciding the rate of their product. Usually, the cost of the
product will be more or less the same as the competitors.
EXERCISE:
POINTS TO PONDER:
Answer the Following Question given below:

1.Two or more complementary products offered together at single price is known as---------

2.-------------------is the pricing strategy in which selling price is determined by adding a

specific mark up to a product ‘s unit cost.

3.A firm that produces highly substitute goods can adopt which one of the following
pricing strategies---------------

4.In principle, all goods and services are valued at---------------that is, inclusive of all taxes.

SELF ASSESSMENT QUESTIONS:

SHORT ANSWER QUESTIONS:
1. What is price?
2. List out the pricing objectives.
3. List out the factors influencing pricing.
4. Write down the pricing approaches.
5. What is psychological pricing?
LONG ANSWER QUESTIONS:
1. Explain the process of price determination of a product.
2. Discuss the pricing approaches.
3. Explain various types of pricing with suitable example.
4. Explain the pricing of new products.
5. What are the objectives for pricing decisions?
6. What are the methods of pricing decisions?

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 Lesson 25 – Understanding Industrial And Individual Buyer Behaviour

UNIT - IV Notes

LESSON 25 – UNDERSTANDING
INDUSTRIAL AND INDIVIDUAL BUYER
BEHAVIOUR
CONTENT
LEARNING OBJECTIVE
LEARNING OUTCOME
25.1 INTRODUCTION
25.2 INDUSTRIAL BUYER BEHAVIOUR THEORY
25.3 SITUATIONS AFFECTING THE INDUSTRIAL BUYER
BEHAVIOUR
25.4 BUYER DECISION PROCESS
25.5 FACTORS INFLUENCING THE BUYING CENTRE
25.6 PERSONAL CHARACTERISITICS
25.7 INDIVIDUAL OR CONSUMER BUYING BEHAVIOUR
SUMMARY
CASE STUDY
KEYWORDS
EXERCISE
SELF ASSESSMENT QUESTIONS

LEARNING OBJECTIVE:
• To understand clearly about business buying behaviour differs from the
consumer buying behaviour because of the specific differences between
consumer and business buyer.
• To analyze buying process when the company recognizing a problem or
need that can be met by acquiring goods.
• To gain more about that business buyer tries to identify the most appropriate
suppliers.

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Notes LEARNING OUTCOME:

• To aim suppliers also can use product value analysis as a tool for positioning
themselves to win buyer by influencing him as per his specification.
• To ensure that buyer will analyze not only the product or services submitted
by the suppliers by the suppliers but also their information about the
suppliers.
• To determine organizational buyers, buy goods and services to make
money or to render operating costs or to satisfy a social obligation.
25.1 INTRODUCTION:
Buyer behaviour is the study of when, why, how, and where people do or do not
buy [[Product (business)|product).It blends elements from psychology, sociology,
social anthropology and economics. It attempts to understand the buyer decision
making process, both individually and in groups.
It studies characteristics of individual consumers such as demographics and
behavioural variables in an attempt to understand people’s wants. It also tries to
assess influences on the consumer from groups such as family, friends, reference
groups, and society in general.
Customer behaviour study is based on consumer buying behaviour, with the
customer playing the three distinct roles of user, payer and buyer. Relationship
marketing is an influential asset for customer behaviour analysis as it has a keen
interest in the rediscovery of the true meaning of marketing through the re-
affirmation of the importance of the customer or buyer.
A greater importance is also placed on consumer retention, customer relationship
management, personalisation, customisation and one-to-one marketing. Social
functions can be categorized into social choice and welfare functions.
Each method for vote counting is assumed as a social function but if Arrow’s
possibility theorem is used for a social function, social welfare function is
achieved. Some specifications of the social functions are decisiveness, neutrality,
anonymity, monotonicity, unanimity, homogeneity and weak and strong Pareto
optimality. No social choice function meets these requirements in an ordinal
scale simultaneously.
The most important characteristic of a social function is identification of the
interactive effect of alternatives and creating a logical relation with the ranks.
Marketing provides services in order to satisfy customers. With that in mind, the
productive system is considered from its beginning at the production level, to the
end of the cycle, the consumer (Kioumarsi et al., 2009).
Belch and Belch define consumer behaviour as ‘the process and activities people
engage in when searching for, selecting, purchasing, using, evaluating, and
disposing of products and services so as to satisfy their needs and desires’.’

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25.2 INDUSTRIAL BUYER BEHAVIOUR THEORY: Notes

It is considered as highly important to be aware of why a customer or buyer

makes a purchase. Without such an understanding, businesses find it hard to
respond to the customer ‟s needs and wants (Parkinson & Baker, 1986). It is
important to be aware of the differences between consumer buying and industrial
buying because the industrial buyer behaviour differs from consumer buying in
many aspects such as; using more variables and greater difficulty to identify
process participants (Moriarty, 1984).
The industrial buying is described by Parkinson & Baker (1986) as the buy of
a product which is made to please the entire organization instead of satisfying
just one individual. Industrial buying behaviour is considered as being a
elementary concept when it comes to investigating buyer behaviour in all types
of organizations (ibid).
Also, in industrial buying situations there is a perception of greater use of
marketing information, greater exploratory objective in information collection
and greater formalization. (Deshpande & Zaltman, 1987)
The article by Johnston & Lewin (1996) illustrates that the broad amount of
research conducted consolidated the existence and relevance of three important
dimensions when investigating industrial buyer behaviour.
1. How the buyer decision process looks like when organizations stands in
front of different buying situations.
2. The buying decision centre and factors influencing the buying process
within the organization
3. The different criterion’s used by industrial buyers when buying a product/
service.

Fig: Industrial buyer process [Authors creation]

These three dimensions are considered as highly relevant for this research and
will therefore be used throughout the study. In order to increase knowledge about
the industrial buyer behaviour, these three dimensions will be further described
in more detail in the coming chapters of the theoretical framework.
25.3 SITUATIONS AFFECTING THE INDUSTRIAL BUYER
BEHAVIOUR:
We consider it to be crucial to describe the essential circumstances that influence
the buyer behaviour and thereafter we will continue with describing other relevant

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Notes factors. Robinson et al. (1967) argues that there are some circumstances during
a purchase being more important than the actual product/service being bought.
Based on these assumptions the authors studies different buying situations and
present these situations in three main categories, so called “buy-classes”; (1)
new task; (2) straight re-buy; (3) modified re-buy (ibid). In a new task buying
situation the product/service is completely new to the organization.
Evaluating criterion’s, suppliers and other stages in the process are considered
as unnecessary in this situation since the same product has been bought
before. However, the first step of the process (need recognition) is taken into
consideration. On the other hand, a modified re-buy occurs after the buyer have
bought a new product or made a straight rebuy. The industrial buyer re-evaluates
the supplier, product, prices and services; however this doesn’t mean that the
buyer will change product or supplier.
According to Robinson et al (1967) there are four factors leading to a modified re-
buy; cost reductions, disaffection with current supplier, development of product
or better offerings from another supplier surrounding price, quality or service. In
this case the buying organization puts most focus in evaluating suppliers.

Industrial buying behavior is the pattern of actions by a company involved in

manufacturing, processing and other heavy industry. Many of these companies are required
to make regular purchases as a means of supplying their businesses.

25.4 BUYER DECISION PROCESS:

After defining the different circumstances influencing the buyer behaviour we
argue that it is important to define the actual buying decision process. In order
for a marketer to be successful [s]he needs to examine the complex subject
of buyer decision processes (Kotler et al, 2007). The buying process involves
different stages that organizations phase during and after a purchase. Yet, this
buying process may differ a lot depending on what type of product that will be
bought (ibid).
The authors Robinson et al (1967) illustrate this process by developing a model
which lays down how the process of deciding to buy a product looks like for
industrial organizations. This model is separated into eight different buy-phases.
These phases will be described in more detail below;
1. Need recognition: This is the first step in the buyer process where a
problem or need is identified by someone in the organization
2. Definition of the characteristics of the item needed: In this stage a
description of alternative solutions is presented and questions like; what
does the company need? Which service attributes and quantities are
needed?
3. Development of the specifications: A more detailed technical specification

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of the product/service is presented. This information will be vital for the Notes
coming stages.
4. Search for supplier; the buying organization searches for suppliers that can
offer them the wanted product/service. When dealing with more complex
and costly products/services the buying organization spends more time
finding their supplier.
5. Acquisition and analysis of proposals: The most qualifying suppliers
are chosen and their different proposals are analysed. If the buying
organizations are buying more complex and expensive products/services
the suppliers need to make formal presentations of alternative solutions
responding to the organizations need.
This stage is similar to the previous stage and occurs almost always in
parallel. However, if the buyers have very little information from the
beginning then these stages are more separable.
6. Evaluation of suppliers: The members of the buying decision centre
evaluate the supplier by the product/service attributes offered (which
attributes matter most?), brand belief
(Opinions about the brand)
7. Selection of an order routine: This phase starts by sending an order to
the supplier. However, the buying process is not finished until the product/
service has been delivered and the buying organization has accepted
it. Preparation of the order before it is sent to the supplier, control and
evaluation of the order are some of the activities done in this phase
8. Evaluation: Post purchase evaluation to see whether the supplier and the
product/service fulfilled the requirements and preferences.
Buyer decision center
A group of individuals within an organization form the buyer decision center.
According to Cyert & March (1992), all organizations have their own decision
center. However, this center might differ in terms of size and structure from
one organization to another. The term of decision center implies to all members
being a part of the industrial buying decision process (Robinson et al., 1967).
According to Cyert & March (1992), the decision center consists of individuals
having different goals such as profit, sales, market shares and production.
According to Parkinson & Baker (1986) when an organization identify their
buying center it is important to tackle two important factors:
1. Roles in the decision center
2. Factors influencing the members
Roles in the decision center
In every decision center there are different members having different roles and
authorities and according to Webster & Wind (1972) this decision center can be

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Notes a very complex environment consisting of initiators, buyers, users, influencers,

decision makers and gatekeepers. The initiators are the individuals within the
organization that first recognizes the need for a product or service. The buyers
have the formal authority and responsibility for choosing suppliers, deciding
buyer conditions and price negotiations. (ibid)
While the users are the actual individuals that will use the product and they are
best equipped with the right knowledge and experience to evaluate the product.
The influencer do not have any direct authority when it comes to the buyer
decision, however, they still affect the decision outcome.
The decision makers have a formal authority and responsibility to make the final
decision. Finally, the gatekeepers control the information flow in this decision-
making process and thereby they affect the process indirectly (Webster &Wind,
1972).
25.5 FACTORS INFLUENCING THE BUYING CENTRE
The variables are; (1) conditions of the buying situation, (2) personal
characteristics and (3) organizational structure characteristics. These variables
are illustrated in the model below:
Conditions of the buying situation
According to Samaniego & Cillian (2004) there are five different variables that
influences the buying center;
(1) Buy classes; have a direct influence on the buying center. According to the
industrial buying theory, the buying center searches for more information
if they are facing a new task and thereby it decreases uncertainty.
(2) Level of complexity; this variable consists of two types of areas; the
complexity of the buying situation and; the complexity of the product
(Dadzie, Johnson et al 1999). According to Bonoma (1982), the higher
the level of complexity (buying situation & product), the more individuals
involved in the buying center.
(3) Importance; the degree of importance is defined as how much the purchase
has influence on the organizations productivity and profitability. Bonoma
(1982) argues if the degree of importance and complexity is low, one single
individual can hold all roles in the decision center.
(4) Risk; if the industrial buyer experience greater risk with the purchase the
degree of influence and involvement in the buying center increases. This is
done in order to reduce and minimize potential risks.
(5) Time pressure; According to Speakman & Mariarty (1984) referred by
Samaniego & G.Cillian (2004) the degree of involvement and influence
reduces when there is a high time pressure.

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25.6 PERSONAL CHARACTERISITICS: Notes

According to Samaniego & Cillian (2004) there are two different variables related
to the personal characteristics that influences the buying center. (1) Personal
influence; the more an individual is involved in the buying process the greater
the possibility for the individual to feel motivated to participate and influence
the buying center. (2) Personal experience; the greater individual experience [in
terms of buying] increases the involvement and influence on the buying center.
According to Samaniego & Cillian (2004) there are five different variables
related to the organizational structure that influences the buying center;
(1) Size; Size and the structure of an organization determine the size and
complexity of the buying center,
(2) Specialization; higher degree of specialization within an organization
leads to higher involvement and influence on the buying center,
(3) Standardization; higher level of standardization increases the possibilities
to develop well-structured buying centers and thereby decreases the degree
of involvement and influence,
(4) Centralization; a higher degree of decentralization indicates that a larger
number of departments within the organization are involved, which in turn
signify that more individuals are involved and influence the buying center,
(5) Formality; Different types of formalities such as rules, policies and
different procedures for certain activities influence the buying center and
thereby the buying process.
25.7 INDIVIDUAL OR CONSUMER BUYING BEHAVIOUR:
I. Consumer Markets and Consumer Buying Behaviour
A. Buying behaviour is the decision processes and acts of people involved in
buying and using products.
B. Consumer buying behaviour refers to the buying behaviour of ultimate
consumers those who purchase products for personal use and not for
business purposes.
C. Understanding buying behaviour requires knowledge of the consumption
process and consumers ‘perceptions of product utility.
II. Consumer Buying Decision Process
A. The consumer buying decision process is a five-stage purchase decision
process which includes problem recognition, information search, and
evaluation of alternatives, purchase, and post-purchase evaluation.
1. The actual act of purchase is only one stage in the process and is not
the first stage.

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Notes 2. Not all decision processes, once initiated, lead to an ultimate purchase; the
individual may terminate the process at any stage.
3. Not all consumer buying decisions include all five stages.
B. Problem Recognition
1. This stage occurs when a buyer becomes aware of a difference between a
desired state and an actual condition.
2. Recognition speed can be slow or fast.
3. Individual may never become aware of the problem or need. Marketers
may use sales personnel, advertising, and packaging to trigger recognition
of needs or problems.
C. Information Search
1. After the consumer becomes aware of the problem or need, he or she
searches for information about products that will help resolve the problem
or satisfy the need.
2. There are two aspects to an information search:
a) In the internal search, buyers first search their memories for information
about products that might solve the problem.
b) In the external search, buyers seek information from outside sources.
(1) An external search occurs if buyers cannot retrieve enough information
from their memories for a decision.
(2) Buyers seek information from friends, relatives, public sources, such as
government reports or publications, or marketer-dominated sources of
information, such as salespeople, advertising, websites, package labelling,
and in-store demonstrations and displays. The Internet has become a major
information source.
3. Repetition, a technique well known to advertisers, increases consumers
‘learning. Repetition eventually may cause wear-out, meaning consumers
pay less attention to the commercial and respond to it less favorably than
they did at first.
D. Evaluation of Alternatives
1. A successful information search within a product category yields a
consideration set (aka evoked set), which is a group of brands that the
buyer views as possible alternatives.
a) The consumer establishes a set of evaluative criteria, which are objective
and subjective characteristics that are important to him or her.
b) The consumer uses these criteria to rates and ranks brands in the
consideration set.

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2. Marketers can influence consumers ‘evaluations by” framing” the Notes

alternatives that is, by the manner in which they describe the alternatives
and attributes.
E. Purchase
1. Purchase selection is based on the outcome of the evaluation stage and
other dimensions.
2. Product availability, seller choice, and terms of sale may influence the final
product selection.
3. The buyer may choose to terminate the buying decision process; in which
case no purchase will be made.
F. Post purchase Evaluation
1. After purchase, the buyer begins to evaluate the product to ascertain if the
actual performance meets expected levels.
2. Evaluation is based on many of the same criteria used when evaluating
alternatives.
3. Cognitive dissonance is a buyer ‘s doubts that arise shortly after a purchase
about whether it was the right decision.

SUMMARY

Buyer behaviour is what consumers and businesses do in order to buy and

use products. The consumer purchase decision-making process consists of the
following steps: recognizing a need, seeking information, evaluating alternatives,
purchasing the product, judging the purchase outcome, and engaging in post-
purchase behaviour.
A number of factors influence the process. Cultural, social, individual, and
psychological factors have an impact on consumer decision-making. The business
purchase decision-making model includes the following steps: need recognition,
setting specifications, information search, and evaluation of alternatives against
specifications, purchase, and post-purchase behaviour.
The main differences between consumer and business markets are purchase
volume, number of customers, location of buyers, direct distribution, and
rational purchase decisions. Companies learn more about their target markets
by conducting marketing research—the process of planning, collecting, and
analyzing data relevant to a marketing decision.
CASE STUDY :
This case deals with the debacle of Google Glass, a wearable technology
device launched by technology giant Google. Google Glass failed to capture
the smart eyeglass technology market segment and found difficult to sustain
itself in the long run. The failure of the device was a major debacle for Google

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Notes Google launched its ambitious Google Glass Explorer program with the
objective of building on the concept of projecting digital information into the
wearer’s field of vision. Critics pointed out that Google had made the mistake
of launching the prototype product without assessing customer feedback and
promoted it as a consumer device instead of targeting the B2B audience,
and said this was the reason for its failure. Besides, its poor-quality battery,
bulky design, product flaws, and privacy concerns seemed to be the major
challenges for Google Glass in a diversified competitive market. However,
the company committed to continuing the project by launching its new
enterprise edition of Glass in 2016.
On January 19, 2015, US-based tech giant Google Inc. (Google), took the
tech world by surprise when it withdrew its smart glass, Google Glass, from
sale in the markets. The company also discontinued the Explorer Program
under which users such as gadget enthusiasts and software developers,
whom Google called Explorers, purchased the device for US$1,500 and
gave the company valuable insights into the usage of the Glass as its beta
testers. According to Adrian Hon, CEO and founder of Six to Start, “Even if
Google didn’t admit it, it was clear from the start that Google Glass was not
consumer-ready. Google should have managed expectations by presenting
it as a developer prototype instead of showing it off at fashion events and
selling it for £1,000.”
ISSUES:
» Understand Google Glass’s objective of delivering hands-free information
to users and sharing the world through smart eye glass technology.
» Understand the faults in the product promotion and marketing strategy
undertaken by the company for Google Glass.
» Analyze the challenges faced by Google Glass to sustain itself in the smart
eyeglass technology market segment.
KEYWORDS:
Buying Grid: Buying grid framework is a conceptual model for buying processes
of organizations. The industrial buying is not a single event, but an organizational
decision-making processes where multiple individuals decide on a purchase.
New Tasks: The first-time buyer seeks a wide variety of information to explore
alternative purchasing solutions to his organizational problem.
Modified Rebuy: The buyer wants to replace a product the organization uses.
The decision making may involve plans to modify the product specifications,
prices, terms or suppliers as when managers of the company believe that such a
change will enhance quality or reduce cost.
Straight Rebuy: The buyer routinely reorders a product with no modifications.
The buyer retains the supplier as long as the level of satisfaction with the delivery,
quality and price is maintained.

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Initiator: Usually the need for a product/item and in turn a supplier arises from Notes
the users.
Influencers: Technical personnel, experts and consultants and qualified engineers
play the role of influencers by drawing specifications of products.
Decider: Among the members, the marketing person must be aware of the
deciders in the organization and try to reach them and maintain contacts with
them.
EXERCISE:
POINTS TO PONDER:
Answer the following Questions Given Below:

1.In the context of “consumption in B2B”, What does MRO stand for----------------

2.A buyer who increases the amount of product ordered is making-------------

3. In a-------------, the buyer reorders something without any modifications.

4. --------------Organizations that buy goods and services to use in the production of other
goods and services, or for the purpose of reselling them or renting them to others at a
SELF ASSESSMENT QUESTIONS:
SHORT ANSWER QUESTIONS:
1.Who is an Industrial Buyer?
2.What is the competition of the industry buying center?
3.Write down the roles in the buying center.
4.What are the factors influencing organizational buying?
5.Define online marketing.
LONG ANSWER QUESTIONS:
1.Explain the theories of industrial buying theory.
2.Briefly explain about buying Decision process.
3.Dicuss some of the factors influencing buying center.
4.Explain consumer buying behaviour process.
5.Write a short note on Individual or consumer buying behaviour.

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Notes
LESSON 26 – INFLUENCING FACTORS
OF BUYING BEHAVIOUR FACTORS
INFLUENCING BUYING BEHAVIOUR
CONTENT:
LEARNING OBJECTIVE
LEARNING OUTCOME
26.1 SITUATIONAL INFLUENCES ON THE BUYING DECISION
PROCESS
26.2 PSYCHOLOGICAL INFLUENCES ON THE BUYING DECISION
PROCESS
26.3 LEVEL OF INVOLVEMENT AND CONSUMER PROBLEM
-SOLVING PROCESSES
26.4 INFLUENCING BUYER BEHAVIOUR
SUMMARY
CASE STUDY
EXERCISE
KEYWORDS
SELF ASSESSMENT QUESTIONS

LEARNING OBJECTIVE:
• To gain basic knowledge in how factors can influence the buying decision
process.
• To understand the level of involvement in consumer buying process.
• To focus on certain psychological factors can influence buying decision
process of consumer.
LEARNING OUTCOME:
• A motive is an internal energizing force which directs a person‘s behaviour
toward satisfying needs or achieving goals.
• Marketers help customers learn about their products by helping them
gain experience with them, perhaps through free samples, in-store
demonstrations, and test drives.

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26.1 SITUATIONAL INFLUENCES ON THE BUYING Notes

DECISION PROCESS:
A. Situational influences are factors that result from circumstances, time,
and location that affect the consumer buying decision process.
1. Can influence a consumer ‘s actions in any stage of the buying process
2. Can shorten, lengthen, or terminate the buying process.
B. Situational factors can be divided into five categories:
1. Physical surroundings include location, store atmosphere, aromas, sounds,
lighting, weather, and other factors in the physical environment in which
the decision process occurs.
2. Social surroundings include characteristics and interactions of others who
are present during a purchase decision or who may be present when the
product is used or consumed (e.g. friends, relatives or salespeople), as well
as conditions during the shopping environment (e.g. an overcrowded store
may cause the buyer to terminate the buying decision process).
3. The time dimension influences the buying decision process in several
ways, such as the amount of time required to become knowledgeable about
a product, to search for it, and to buy and use it.
a) Time plays a role as the buyer considers the possible frequency of product
use, the length of time required to use the product, and the length of the
overall product life.
26.2 PSYCHOLOGICAL INFLUENCES ON THE BUYING
DECISION PROCESS:
Psychological influences are those which operate in part to determine people‘s
general behavior and thus influence their behaviour as consumers. Psychological
factors are internal, but are affected by outside social forces.
A. Perception
1. Perception is the process of selecting, organizing, and interpreting
information inputs to produce meaning.
a) Information inputs are sensations received through sight, taste, hearing,
smell, and touch.
b) Perception is highly complex, leading markets to increasingly take a multi-
sensory approach.
2. Perception is a three-step process.
a) Although we receive numerous pieces of information at once, only a few
reach our awareness.

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Notes (1) Only a few pieces of information reach our awareness through a process
called selective exposure, in which an individual selects which inputs will
reach awareness. A person‘s current set of needs affects selective exposure,
with preference given to one‘s strongest needs.
(2) The selective nature of perception may result in two other phenomena:
selective distortion and selective retention.
(3) Selective distortion is changing or twisting currently received information;
it occurs when a person receives information inconsistent with personal
feelings or beliefs.
(4) In selective retention, a person remembers information inputs that support
personal feelings and beliefs and forgets inputs that do not.
b) Perceptual organization is the second step in the perception process.
Information inputs that reach awareness must be organized by the brain in
such a way as to produce meaning. An individual mentally organizes and
integrate new information with what is already stored in memory.
(1) “Closure” is an organizational method in which a persona mentally fills in
information gaps to make a pattern or statement.
c) Interpretation, the third step in the perceptual process, is the assignment
of meaning to what has been organized. A person bases interpretation on
what he or she expects or what is familiar.
3. Marketers cannot control buyers ‘perceptions, but they try to influence
them through information. This approach is problematic.
a) A consumer ‘s perceptual process may operate so that a seller ‘s information
never reaches awareness.

Perception is the organization, identification, and interpretation of sensory

information in order to represent and understand the presented information or
environment.

b) A buyer may receive a seller ‘s information but perceives it differently

than intended.
c) A buyer may perceive information inputs to be inconsistent with prior
beliefs and therefore are likely to forget the information quickly (selective
retention).
B. Motives
1. A motive is an internal energizing force which directs a person‘s behaviour
toward satisfying needs or achieving goals.
a) A buyer ‘s actions are affected by a set of motives, some stronger than
others.

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b) Motives affect the direction and intensity of behaviour. Notes

2. Psychologist Abraham Maslow conceived a theory of motivation; Maslow‘s
hierarchy of needs organizes human needs into five levels. Humans try to
satisfy these needs starting with the most basic. Once needs at one level are
met, humans move on to fulfilling needs at the next level:
a) At the most basic levels are “physiological needs,” requirements for
survival such as food, water, sex, clothing, and shelter.
b) At the next level are “safety needs,” which include security and freedom
from physical and emotional pain and suffering.
c) Next are “social needs,” the human requirements for love and affection
and a sense of belonging.
d) At the level of “esteem needs,” people require respect and recognition
from others as well as self-esteem, a sense of one‘s own worth.
e) At the top of the hierarchy are “self-actualization needs,” which refer to
people‘s need to grow and develop and to become all they are capable of
becoming.
3. Patronage motives are motives such as price, service or friendly salespeople,
which influence where a person purchases products on a regular basis.
C. Learning
Learning refers to changes in an individual‘s thought processes and behaviours
caused by information and experience.
1. The learning process is strongly influenced by the consequences of an
individual‘s behaviour; behaviours with satisfying results tend to be
repeated.
2. Inexperienced buyers may use different, more simplistic, types of
information than experienced shoppers familiar with the product and
purchase situation.
3. Marketers help customers learn about their products by helping them
gain experience with them, perhaps through free samples, in-store
demonstrations, and test drives.
4. Consumers learn about products indirectly through information from
salespeople, friends, relatives, and advertisements.
D. Attitudes
An attitude is an individual ‘s enduring evaluation of, feelings about, and
behavioural tendencies toward a tangible or intangible object or idea.
1. Attitudes remain generally stable in the short term, but they can change
over time.

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Notes 2. An attitude consists of three major components:

a) cognitive (knowledge and information about an object or idea)
b) affective (feelings and emotions toward an object or idea)
c) behavioural (actions regarding an object or idea)
3. Consumers ‘attitudes toward a firm and its products strongly influence the
success or failure of the organization ‘s marketing strategy.
4. Marketers should measure consumer attitudes toward prices, package
designs, brand names, advertisements, salespeople, repair services,
store locations, features of existing or proposed products, and social
responsibility activities.
5. Seeking to understand attitudes has resulted in two major academic models
a) The Fishbein Model (the attitude toward the object) can be used to
understand a consumer ‘s attitude, including beliefs about product
attributes, strength of beliefs and evaluation of beliefs. These elements
combine to form the overall attitude toward the object.
b) The Theory of Reasoned Action (behaviour intentions model) focuses on
intentions to act or purchase. It considers consumer perceptions of what
other people believe is the best choice among a set of alternatives and
focuses on attitudes toward buying behaviour.
6. Several methods help marketers gauge consumer attitude.
a) Direct questioning of consumers.
(1) The Internet and social networking sites have become valuable tools.
b) An attitude scale is a means of measuring consumers‘ attitudes by gauging
the intensity of individuals‘ reactions to adjectives, phrases, or sentences
about an object.
7. Marketers may try to change negative attitudes toward an aspect of
a marketing mix to make them more favourable, but this is generally a
long, expensive, and difficult task and may require extensive promotional
efforts.
E. Personality and Self-Concept
1. Personality is a set of internal traits and distinct behavioural tendencies
which result in consistent patterns of behaviour.
a) Personality arises from unique hereditary characteristics and personal
experiences.
b) Studies of the link between buying behaviour and personality have been
inconclusive; although many marketers are convinced there is a link.
c) The VALS program is a consumer framework based on individual
personality characteristics.

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d) Advertisements may be aimed at certain personality types, usually focusing Notes

on positively valued personality characteristics.
2. Self-concept, or self-image, is a perception or view of oneself.
a) Buyers purchase products that reflect and enhance self-concept.
b) A person‘s self-concept may influence whether he or she buys a product in
a specific product category and may have an impact on brand selection.
F. Lifestyles
A lifestyle is an individual ‘s pattern of living expressed through activities,
interests, and opinions.
1. Lifestyle patterns include the way people spend time, extent of interaction
with others, and general outlook on life and living.
2. People partially determine their own lifestyle, but lifestyles are influenced by
other factors such as personality and demographics.
3. Lifestyles strongly impact the consumer buying decision process, including
product needs.
26.3 LEVEL OF INVOLVEMENT AND CONSUMER
PROBLEM -SOLVING PROCESSES:
A. To acquire and maintain products that satisfy their current and future
needs, consumers engage in different types of problem-solving processes
depending on the nature of the products involved. The amount of effort,
both mental and physical, that buyers expend in solving problems also
varies considerably.
B. A major determinant of the type of problem-solving process employed
depends on the customer ‘s level of involvement, the degree of interest in
a product and the importance the individual places on that product.
1. Levels of involvement may be classified as low, high, enduring, and situational.
a) High-involvement products tend to be those that are visible to others (e.g.,
clothing, furniture, or automobiles) and expensive, as well as issues of
high importance, such as health care.
b) Low-involvement products tend to be less expensive and have less
associated social risk, such as many grocery items.
c) A person‘s on going and long-term interest in a product or product category
is referred to as “enduring involvement.”
d) “Situational involvement” is temporary and dynamic, and results from a
particular set of circumstances, such as the need to buy a new car after
being involved in an accident.

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Notes e) Consumer involvement may be attached to product categories (e.g.,

sports), loyalty to a specific brand, interest in a specific advertisement
(e.g., a funny commercial) or a medium (such as a particular television
show), or to certain decisions and behaviours (e.g., a love of shopping).
2. Involvement level, as well as other factors, affects a person ‘s selection of
one of three types of consumer problem solving: routinized response behaviour,
limited problem solving, or extended problem solving.
26.4 INFLUENCING BUYER BEHAVIOUR:
Social influences are the forces other people exert on one‘s buying behaviour.
A. Roles
1. Every person occupies a position within groups, organizations and
institutions.
2. A role is a set of actions and activities an individual in a particular position
is supposed to perform based on the expectations of both the individual
and surrounding persons.
3. Each individual has many roles and each role affects both general behaviour
and buying behaviour.
B. Family Influences
1. An individual ‘s family roles directly influence their buying behaviour.
2. Consumer socialization is the process through which a person acquires the
knowledge and skills to function as a consumer.
3. The extent to which different family members take part in family decision
making varies between families and product categories. Traditional family
decision making processes are divided into four categories: autonomic,
husband dominant, wife dominant, and syncretic.

SUMMARY
Focus on factors that determine consumer perception of value (maximize
perception of benefits/minimize perception of costs/minimize perception of risk)
Consumers make purchase decisions to solve problems and reduce dissonance
(store choice and product choice). Marketing activities should aid consumer
decision making.
Purchase behaviour is driven by multiple motives and the marketing offer should
deliver multiple sources of satisfaction. A consumer’s level of exposure towards
foreign goods or lifestyles may influence his buying decisions and preferences.
Consumers tend to have an attitude when it comes to a particular product being
made in a particular country. This attitude might be positive, negative, and
neutral. Cross-cultural consumer analysis is defined as the effort to determine

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to what extent the consumers of two or more nations are similar or different. Notes
A major objective of cross-cultural consumer analysis is to determine how
consumers in two or more societies are similar and how they are different. Such
an understanding of the similarities and differences that exist between nations is
critical to the multinational marketer, who must devise appropriate strategies to
reach consumers in specific foreign markets. The greater the similarity between
nations, the more feasible it is to use relatively similar strategies in each nation.
If they differ in many aspects, then a highly individualized marketing strategy is
indicated. The success of marketing and servicing in foreign countries is likely
to be influenced by beliefs, values, and customs. Here we have listed some of the
best companies which are considered to be valuable, as they have understood the
pulse of consumers and their tastes.

CASE STUDY :
The case let examines the entry of Maruti Udyog Limited (MUL),

the leading Indian car manufacturer, into the used car market. Between
the late 1990s and early 2000s, MUL found its profit margins going
down. This made it imperative for it to look for other revenue generating
avenues, and this included the entry into the user car market in India. The
case let also examines how Maruti used its customer relations practices
to build customer loyalty and word-of-mouth awareness.

ISSUES:
1. » Evolution of the used car-market in India
2. » Role of word-of-mouth in developing new business for a company
3. » The role of changing demographics in developing new markets

KEYWORDS:
1. Perception: Perception is the process of selecting, organizing, and
interpreting information inputs to produce meaning.
2. A motive is an internal energizing force which directs a person ‘s behaviour
toward satisfying needs or achieving goals.
3. An attitude is an individual ‘s enduring evaluation of, feelings about, and
behavioural tendencies toward a tangible or intangible object or idea.
4. Learning refers to changes in an individual ‘s thought processes and
behaviours caused by information and experience.

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Notes EXERCISE:
POINTS TO PONDER:

Answer the following Questions given Below:

1. The purchase of goods or services for use by an organization in producing other

goods and services, to support the daily operations of the organization, or for
resale is called------------
2. B2B marketing is fundamentally different from consumer goods or services
marketing because----------
3. Three broad types of B2B organizations are identified as------------
4. When one company re-labels a product and incorporates it within a different
product, in order to sell it under its own brand name and offering its own
warranty, support and licensing, what is this referred to as-----------
5. These goods and services are 'consumables' as they are necessary to keep
production processes and the organization running. They are known as-------------

SELF ASSESSMENT QUESTIONS:

SHORT ANSWER QUESTIONS:
1.What are the factors influencing consumer behaviour?
2.Define buying decision process.
LONG ANSWER QUESTIONS:
1.Explain some of the factors influencing buying decision process.
2.Briefly discuss about the level of involvement and consumer problem -solving
processes.

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Notes
LESSON 27 – BUYER BEHAVIOUR
MODELS
CONTENT:
LEARNING OBJECTIVE
LEARNING OUTCOME
27.1 BUYER BEHAVIOUR-INTRODUCTION
27.2 BUYER BEHAVIOUR MODELS
27.3 SOME MODELS OF CONSUMER BEHAVIOUR
27.4 INDIVIDUAL DIFFERENCES
SUMMARY
CASE STUDY
KEYWORDS
EXERCISE
SELF ASSESSMENT QUESTIONS

LEARNING OBJECTIVE:
• The objectives of consumer behaviour analysis are mostly consumer
researches are undertaken to find out the attitudes of the consumer about a
product.
• Their preferences, likes and dislikes which lead to the further modernization
of the sales strategies by the marketer.
• The goal of consumer behavior models is to outline a predictable map of
customer decisions up until conversion, thus helping you steer every stage
of the buyer’s journey.
LEARNING OUTCOME:
• To Establish the relevance of consumer behaviour theories and concepts to
marketing decisions.
• To Implement appropriate combinations of theories and concepts.
• To Recognize social and ethical implications of marketing actions on
consumer behaviour.
27.1 BUYER BEHAVIOUR-INTRODUCTION:
According to Kotler (in Gould, 1979: 33), it is an extremely difficult task to
uncover the reasons why people buy, as they are subject to many influences. One
reason is that humans are greatly influenced by their psyche, which eventually
leads to overt purchase responses.
Runyon & Stewart (19B7: 694-695) explain the theory of human behaviour by

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Notes stating that it represents the beliefs held regarding the nature of human beings
as well as the causes of their behaviour. Human beings can therefore be viewed
from many perspectives. If, for instance, human beings are viewed from an
economic perspective, marketers may attempt to influence them with economic
incentives.
If, however, viewed from a social theory perspective, marketers may attempt
to influence people through appeals to group norms, references and values.
According to Runyon & Stewart (1987: 695), in discussing models of human
behaviour, it is important to note that the models proposed are viewed as being
an incomplete description of human beings, where different models may be
appropriate for different marketing situations.
27.2 BUYER BEHAVIOUR MODELS:
MODELS OF CONSUMER:
The models of human behaviour attempts to explain human behaviour as well as
its influence on consumer behaviour. These models had a very narrow approach
in terms of their explanations of human behaviour and the impact thereof on
consumer behaviour. It only focused on one subset of possible influences on
behaviour, for example the Marshallian model, focusing only on the influence of
financial resources on behaviour.
The shortcomings of models of human behaviour led to more complex models
of consumer behaviour appearing in the early 1960s. According to Runyon &
Stewart (1987: 698), models of consumer behaviour, in contrast to models of
human behaviour, attempted to describe and systemise the entire purchasing
process, thereby providing a guide for further study and research on the subject
of consumer behaviour.
This module will define of models of consumer behaviour, the purpose and
advantages thereof and finally, discuss a number of models of consumer behaviour
together with the importance thereof in understanding consumer behaviour.
This module will explain models of consumer behaviour before providing
a definition of models of consumer behaviour, it may be useful to first define
the term “model”. Schiffman & Kanuk (1997: 652) provide such a definition,
namely: “A simplified representation of reality designed to show the relationships
between the various elements of a system or process under investigation.”
Engel & Blackwell (1982: 677) add to the above by explaining that a model is a
replica of the phenomena it is intended to designate, meaning that it specifies the
elements portrayed within the model and represents the nature of relationships
among these elements.
A model can therefore be viewed as a testable “map of reality” and its utility lies in
the extent to which successful predictions and description of behaviour, together
with underlying influences, are made possible. A ‘final definition, specifying
models of consumer behaviour, is offered by Assael (1995: G-8): “Sequence
of factors that lead to purchase behavior and hypothesizes the relationship of
these factors to behavior and to each other.” The definitions above should prove

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sufficient in an attempt to clarify the meaning of models, and more specifically, Notes
models of consumer behaviour.
The purpose and advantages offered by models of consumer behaviour are listed
below:
a) Explanations are provided for behaviour: Engel et al. (1990: 475) list
probably the most obvious advantage - that it is possible to visually grasp
what happens as variables and circumstances change;
b) Explanatory variables are specified: According to Engel & Blackwell
(1982: 677) every person has a model of consumer behaviour in mind,
whether implicit or explicit. This implies that each person has a concept
of factors that shape motivation and behaviour. Without a held concept,
explanation and prediction will be impossible. The distinction is made with
respect to the comprehensiveness of competing models and the accuracy
with which predictions can be made;
c) Systematic thinking is encouraged: Runyon & Stewart (1987: 698) suggest
that forcing theorists to define the relevant elements in behavioural theory,
will result in systematic thinking. Lilien & Kotler (1983:204) support this
view by adding that all major variables that models comprise, are identified
and measured;
d) Fundamental relationships between variables and the exact sequence of
cause and effect of variables are specified: This view by Lilien & Kotler
(1983: 204) is supported by Runyon & Stewart (1987: 698), adding that
by showing explicit relationships between variables, a tentative view of
behavioural phenomena is offered;
e) Research findings can be integrated into a meaningful whole: Engel &
Blackwell (1982: 677) point out that most analysts of consumer behaviour
are familiar with behavioural sciences. A well-formulated model assists
analysts to differentiate between relevant and irrelevant literature that is
often a highly frustrating experience to examine;
f) Evaluations are provided for performance of the system: Part of the
requirements for a good model, according to Engel & Blackwell (1982:
678) is that they describe the functional relationships between variables,
resulting in the ability of the model to make behavioural predictions with
some degree of accuracy;
27.3 SOME MODELS OF CONSUMER BEHAVIOUR:
The objectives of discussing various models of consumer behaviour are to
attempt to indicate the evolution in thought patterns of different authors on
the subject of consumer behaviour over the past years as well as to show the
relevance and importance of models of consumer behaviour in the study of
consumer behaviour.
In an effort to achieve the objectives stated above, a number of models of
consumer behaviour will be discussed. Important to note is that the models

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Notes discussed will include historic versions by the same authors, often attached in
appendices, thereby attempting to show the change in thought patterns of authors
as more research on the subject is conducted.
The second, even more important, objective will be to indicate the relevance
and importance of these models on the subject of consumer behaviour. This will
be achieved by briefly discussing historic models on the subject of models of
consumer behaviour, as well as a detailed discussion on a more recent model,
namely that of Engel, Blackwell and Miniard.
The detailed discussion of the Engel, Blackwell & Miniard (EBM) model will
show the difficulty of understanding consumer behaviour due to the many
variables influencing the consumer decision process. Only by understanding
the influences on consumer decision-making, will the marketer be able to draft
effective strategies aimed at meeting consumer needs.
The discussion below will focus on four historic models of consumer behaviour,
namely
The Bettman information processing model The Bettman information processing
model, according to Runyon & Stewart (1987: 708), attempts to model a
specific field of consumer behaviour, namely information processing. Lilien &
Kotler (1983: 206) add that the model provides an analytical ‘framework for
understanding consumer behaviour in an environment where choice is made by
selecting between a set of alternatives.
The model focuses on the information processing perspective by viewing the
type of information used by consumers, how the information is evaluated and
finally, how decisions are made. The Bettman information processing model is
shown in Figure

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Lilien & Kotler (1983: 206) continue by stating that the model comprises two Notes
sub models, namely the basic hierarchy and the intermediate or modulating
processes. Before discussing the two sub models, it is noteworthy to mention
that there is no logical starting point or ending point for the process.
1.The basic hierarchy:
The first component of the basic hierarchy is motivation and goal hierarchy,
serving as mechanisms to control the movement from some critical state to a
desired goal or state within an individual. Runyon & Stewart (1987: 708) add
that these components together with information acquisition are, at least in part,
a Lilien & Kotler (1983: 206) continue by stating that the model comprises two
sub models, namely the basic hierarchy and the intermediate or modulating
processes. Before discussing the two sub models, it is noteworthy to mention
that there is no logical starting point or ending point for the process.
2.The basic hierarchy: The first component of the basic hierarchy is motivation
and goal hierarchy, serving as mechanisms to control the movement from some
critical state to a desired goal or state within an individual. Runyon & Stewart
(1987: 708) add that these components together with information acquisition
are, at least in part, a function of prior experience and information obtained by
the consumer. Attention, the second component, comprises voluntary attention
(implying the consumer’s allocation of the information-processing effort) and
involuntary attention.
The third component, information acquisition and evaluation, stipulates that
attention is influenced by the goals pursued and therefore activates the search for
information. The evaluation component of the model determines when sufficient
information is obtained for the purpose of decision-making. The next component
of the model, the decision process, is continuously active in the model by focusing
on the comparison of possible alternatives.
The final element of the basic hierarchy, namely consumption and learning,
focuses on the purchase and consumption of the product and offer a new source
of information to the consumer. The final stage in the basic hieramhy will,
therefore, affect the structure of future choices.
a) The intermediate process
The intermediate processes, also referred to as modulating processes, focus on
four elements, namely perceptual encoding, processing capacity, memory and
external search and finally, scanner and interrupt mechanisms.
The first component of the intermediate process, “perceptual encoding”,
comprises the interpretation process of an individual once being exposed to a
stimulus. Bettman argues that this process is influenced by memory, implying
the way things were, and by the stimulus itself, implying the way things are.
The implications of processing capacity, the second component, are that capacity
has to be allocated to a decision task since the complete information-processing

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Notes process is limited by capacity. Capacity is furthermore positively related to

effort and motivation. Runyon & Stewart (1987: 708) continue by pointing out
a relation between processing capacity and education, intelligence and previous
experience.
According to the memory and external search components, information may
be obtained, in a choice situation, through internal search of the memory and
external search, where attention and perceptual decoding is focused on stimuli
outside the consumer’s memory. Runyon & Stewart (1987: 710) continue by
listing advertisements, other people and other sources external to the consumer
as external sources. The cost of information search versus the benefits of the
information, together with the availability of information, time pressure and the
difficulty of the choice task, will determine the level of information search.
The final component, scanner and interrupt mechanisms, indicates that
consumers are interruptible and not single-minded when pursuing a goal. The
scanner monitors the environment in an effort to note conditions that may
warrant changes in current actions or beliefs. By reaching a theoretical scanner
threshold, an interrupt mechanism is triggered, resulting in the generation of
new responses. It is therefore suggested in the model that scanner and interrupt
mechanisms affect virtually the entire decision-making process.
Considering the Bettman information processing model, Lilien & Kotler (1983:
208) suggest that the model represents an attempt to develop a complete theory
on the consumer choice process. Knowledge obtained from the model, beneficial
for the development, presentation and timing of marketing communications,
includes insight into the information consumers desire, how information is
obtained and the probable processing of such information.
In addition to the above, the model offers a broad view of purchase decisions,
including choices among product classes as well as competing alternatives
within a specific product class. The theory of the model is therefore perceived
to position decision rules or choice heuristics within the broader concept of
decision making.
The main limiting factors to the model, according to Lilien & Kotler {1983: 208),
are that the model is not directly operational and does not provide quantitative
support for marketing decisions. Runyon & Stewart (1987: 710) add to the
above by stating that, while the schematic model suggests complex relationships
involving interactions and feedback, these are not specified in the model and
have not been empirically tested.
Despite the limitations, the model provides insight in terms of the structure of
the process and guidance on the kind of issues that can be expected to affect and
influence consumer choices. Runyon & Stewart (1987: 710) add that the model
has proven useful to managers concerned with effective communication with
consumers and also as a guide for further research on consumer information
processing.

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THE NICOSIA MODEL: Notes

According to Runyon & Stewart (1987: 699), the Nicosia model provides a
sophisticated attempt to show the interrelationship between attributes of the
consumer, the consumer decision-making process, the marketing communication
of an organization and feedback of the response of the consumer to the
organization.
Schiffman & Kanuk (1987: 653) provide a simplistic explanation of the model
by stating that it is interactive in design, where the organization attempts to
influence consumers through marketing actions and the consumers in return
influence the organization through their purchase actions (or lack of action if
products are not purchased).
Runyon & Stewart (1987: 701) continue by stating that the model consists of
four different fields, namely exposure of the organization’s message, search
and evaluation, purchase and feedback. These four fields, together with their
interaction, are visible in Figure
The first field comprises two subfields. The first subfield represents the output
of a commercial message from the organization to the consumer in the form of
advertising or other forms of promotions. For simplification purposes, the model
explicitly assumes that the consumer has no previous knowledge or experience
with the brand. The message from the organisation serves as input to subfield
two, representing the consumer’s unique psychological attributes.
At this stage of the model, the consumer reacts to the message, providing input
to the second field. Schiffman & Kanuk (1987: 654) indicate that the output of
field one is an attitude towards the product, as a result of the interpretation of the
organization’s message.
Runyon & Stewart (1987: 701) continues by stating that if the reaction or attitude
resulting from field one is favorable, the consumer will search for the product and
evaluate it in terms of other alternatives. Schiffman & Kanuk (1987: 654) add
that the output of the second field is motivation to purchase the organization’s
brand.
The evaluation could, however, also lead to rejection of the brand although the
model illustrates a positive response. The positive evaluation leads to purchase
of the product, the third field of the model.
According to Schiffman & Kanuk (1987: 654), the final field of the Nicosia model,
field four, consists of two types of feedback from the purchase experience. The
first type of feedback relates to the organisation where sales data will be obtained
and the second to the consumer in the form of experience, leaving the consumer
either satisfied or dissatisfied. The experience obtained by the consumer relating
to the product will affect the predisposition and attitudes with regard to future
messages from the organisation.

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Notes

Limitations of the Nicosia model according to Runyon & Stewart (1987: 701),
are the questionable assumptions that the consumer has no prior knowledge or
experience of the product, as well as inadequate understanding of subfields two,
the influences and interrelationships among the consumer attributes. A final
limiting factor is that, for repetitive decisions (considered a significant part of
consumer purchases), the operation of the model is ambiguous.
Engel, Blackwell & Kollat (1978: 548) criticize the Nicosia model by claiming
that the model never received the necessary elaboration and empirical support
nor has it been revised to reflect changes.
THE HOWARD -SHETH:
The Howard-Sheth model of buying behaviour, according to Foxall (1990: 10),
presents a sophisticated integration of the psychological and various social and
marketing influences on consumer choice, into a coherent sequence of information
processing. Runyon & Stewart (1987: 704) and Foxall (1990: 10) add respectively
that the model attempts to explain rational brand choice behaviour within the
constraints of incomplete information and limited individual capacities, and
also that it provides an empirically testable description of behaviour in terms of
cognitive functioning together with its outcomes.
Schiffman & Kanuk (1987: 654) explain the Howard-Sheth model (depicted in
Figure 2.4) a model that explicitly distinguishes between three different stages
or levels of decision-making, also referred to as levels of learning, namely
extensive, limited and routinised problem-solving.
Extensive problem-solving implies that the consumer has very little or no
knowledge and beliefs about brands. The consumer actively seeks information

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on a number of alternatives at this point due to the lack of a brand preference. Notes
Foxall (1990: 12) adds that in order to reduce brand ambiguity, the consumer
is involved in a decision process and undertakes prolonged deliberation
contemplating which brand to purchase or whether to buy at all.
Limited problem-solving occurs when the consumer cannot fully assess the
brand differences to arrive at a preference, since knowledge and beliefs about
the brands are only partially established. According to Foxall (1990: 12), other
factors to be considered in limited problem-solving are that consumers have
formed choice criteria, know a few brands well and favour them equally because
they have already tried several brands at this stage.
Routinised response behaviour implies that the consumer has well-established
knowledge and beliefs regarding brands and that sufficient experience and
information with the brands will avoid confusion between various brands.
The consumer will therefore be predisposed to the purchase of one particular
brand. According to Foxall (1990: 12), routinised response behaviour is also
characterized by little or no external search and almost seems to be impulsive,
although such a conclusion is not true since it can be attributed to a well-
developed predisposition toward the available brands.
Table 2.1 provides a summary of the main characteristics, applicable to the
Howard-Sheth model, of the three stages/levels of decision-making discussed
above.
TABLE 2.1: CHARACTERSTICS OF THE THREE STAGES OF
DECISION-MAKING
Stage/Level Amount of information Spead of decision
needed prior to purchase
Extensive problem-solving Great Slow
Limited roblem-solving Moderate Moderate
Routinised response behaviour Little Fast
The Howard-Sheth model, presented in Figure 2.4, consists of four major sets of
variables. These variables, according to Schiffman & Kanuk (1987: 654-657),
used as the basis for the discussion on the Howard-Sheth model unless otherwise
stated, are inputs, perceptual and learning constructs, outputs and exogenous
(external) variables.
The first variable, inputs, consists of three distinct types of information
sources or stimuli in the consumer’s environment, namely significative stimuli,
symbolic stimuli and social inputs. Significative stimuli, implying physical
brand characteristics, and symbolic stimuli, descûbing verbal or visual product
characteristics, are provided by the marketer by means of product and brand
information. Significative stimuli, according to Foxall (1990: 10), include quality,
Price, service, distinctiveness and availability, while symbolic stimuli are
portrayed by the mass media and sales people and influence the consumer

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Notes indirectly. The third type of stimuli is provided by the social environment of the
consumer and includes social class, family and reference groups. The three types
of stimuli provide input to the consumer regarding the product class or specific
brands.
The second variable, perceptual and learning constructs, forms the central
component of the Howard-Sheth model. At this stage of the model, psychological
variables are assumed to operate when the consumer is contemplating a decision.
Although forming the so-called heart of the model, these constructs are treated
as abstractions that are not defined operationally or directly measured.
The perceptual constructs are concerned with how the consumer receives and
processes information obtained from input stimuli and ‘other parts of the model,
i.e., the function of information processing. For example, if the consumer is
unclear regarding information and its meaning received from the environment,
stimulus ambiguity occurs, while distortion of information received by the
consumer, to match established needs or experiences, results in perceptual bias.
Learning constructs, the second component of this variable, includes the
consumer’s goals, preferences, criteria for evaluating alternatives, information
regarding products in the evoked set and buying intentions. The proposed
interaction between the perceptual and learning variables together with variables
in other segments of the Howard-Sheth model ensures its distinct character.
Runyon & Stewart (1987: 704) provide additional information on the second
variable, combining perceptual and learning constructs into a single term, called
hypothetical constructs. These constructs are responsible for processing and
interpreting input stimuli and are characterized by the fact that changes in them
can only be inferred from output variables, since they are not observable.
The third variable in the model, outputs, represents the possible response to
stimuli by the consumer and includes five variables, namely attention, brand
comprehension, attitude, intention and purchase.
The final variable, exogenous variables, is not depicted in the model, since it is
not perceived to be directly part of the decision-making process. The reason for
mentioning this variable is that it should impact on the segmentation efforts of
the marketer, since the consumer is influenced by external variables.
Exogenous variables considered relevant in terms of impacting on consumer
behaviour include time pressure, consumer personality traits, financial status and
importance of the purchase.
The value of the Howard-Sheth model, according to Runyon & Stewart (1987:
706), is that the model attempts to identify and organize major variables that
may influence consumer behaviour. The model is also perceived to be dynamic
in nature, since it reflects the complexity of consumer behaviour in an attempt
to understand it. The consumer is portrayed to form generalizations as a guide to

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decision-making through an active information search from the environment by Notes

employing past experiences.
Criticism towards the model, highlighted by Runyon & Stewart (1987: 706),
is that the hypothetical constructs portrayed in the model are not operationally
defined in unambiguous terms and the specific interrelationships are therefore
somewhat speculative.
THE HOWARD MODEL:
The Howard model has been revised a number of times from the early 1970s to
the current version published in 1994. It should be noted that the original model
by Howard (1974 version), according to Engel et al. (1978: 553), was based
on revisions from the Howard-Sheth model. The model indicates the revisions
that reflect insights gained from testing the Howard-Sheth model, as well as
contributions of other authors who often approached consumer behaviour from
different theoretical perspectives.
The 1974 version of the Howard model specifies 12 primary functional
relationships (attached as Appendix 1) in such a way that it can be tested
empirically. The testable equations of the Howard model ensure that the model
can be evaluated in two different, yet related, ways. The model can first be
evaluated met theoretically, implying evaluation in terms of the internal structure
of the theory itself. Secondly, it can be measured empirically in terms of its
utility in describing real life behaviour.
According to Engel et al. (1978: 553), the 1974 version of the Howard model
was revised by other authors, based on what was learned from the model. The
revision was initiated due to some of the variables sited being difficult to define
operationally, while other variables were difficult to measure, as well as the fact
that the model presented a substantial measurement of error, resulting in a high
level of noise. The result of the revision of the 1974 model by Howard was the
1977 model, showing a scant relationship to the 1969 Howard-Sheth model. The
1977 version is characterised by an increase in the predictability of the variables
portrayed in the model, although noise of the data was still noted.
The 1974 and revised 1977 versions of the Howard model are shown in Appendix
2, together with the functional relationships applicable to both versions in
Appendix 1. As will be noted in the testable equations shown in Appendix 1, the
1974 model lists 12 functional relationships, whereas the 1977 version lists only
11 relationships. The difference in the thought pattern of the two versions of the
model is clearly visible in Appendix 2, where the models are depicted in figures.
Later revisions of the model by Howard resulted in the 1989 and 1994 versions.
The Howard model that will briefly be discussed below refers to the 1989
and 1994 versions, based on the findings of O’Shaughnessy (1992:68-72) and
Howard (1994: 128-161). The Howard model is illustrated in Figure

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Notes
ricuRE 2A: HOWARD1 GENERAL THEORY OF CONSUMER BEHAVIOUR

Source: Howard (1994: 158)

The Howard model views consumers to be in one of three different stages of
decision-making, corresponding to the first three stages of the product life cycle.
At the introductory stage of the product life cycle, the corresponding decision
state is called extensive problem-solving, followed by the growth stage, referred
to as limited problem-solving, and finally at the maturity stage, the decision state
is referred to as routine problem-solving.
According to the model, extended decision-making implies that the consumer
has not formed a concept of either the product class or the product category.
Limited decision-making implies that the consumer has a concept of the product
category but has not formed a concept of new brands falling into a familiar
product category.
Once the consumer has formed a concept of both the product category and all the
product brands within the category, routine problem-solving applies.
As discussed above, it is clear that basic to all three decision categories is the
concept of product category, defined as a group of brands viewed by consumers
as close substitutes for each other. In view of the product category, Howard
dismisses the utility of the product life cycle for brands. The movement from
extensive problem-solving to routine problem-solving, therefore, is a movement
towards a state of total understanding of a brand, although not implying that the
consumer becomes an expert on brands. The consumer does, however, know
the physical characteristics of the brand, leading to brand recognition, and feels
confident to the quality of a brand. In addition to the above, the consumer knows
the strengths of a brand based on the benefits thereof, as manifested in an attitude
towards a brand. This so-called understanding of brands by consumers, referred

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to by Howard as the ABC of marketing (comprising brand recognition, attitude Notes

and confidence), constitutes brand image.
As could be seen from Figure , the Howard model portrays the consumer decision
process, comprising six interrelated concepts, namely Information (F), Brand
recognition (B), Attitude (A), Confidence (C), Intention (I) and Purchase (P).
The six interrelated concepts will be briefly discussed to provide greater clarity
on the Howard model.
Information (F) refers to the precept that is caused by stimuli, for example
advertisements, where the precept is what the consumer perceives when exposed
to stimuli. The precept is measured by recall, implying that information comprises
of all that is recalled by the stimulus.
Brand recognition (B) involves categorization, resulting in the consumer needing
information on both the functioning of the product and the form. Brand recognition
is viewed as being causally linked to both Attitude (A) and Confidence (C).
Attitude (A) towards a brand refers to the measure of the extent to which
consumers expect the brand to meet certain expectations. The measure of attitude
is argued to be multidimensional, where each benefit is measured in terms of its
importance to the consumer and the multiplication of each weighting by the
corresponding envisaged performance of the brand, resulting in the overall sum
being the measure of attitude. Attitude is viewed as being causally linked to
Intention (I).
Confidence (C) refers to the degree of certainty experienced by consumers
regarding the correctness of their judgments about a brand and its benefits.
Confidence is suggested to be causally linked to Intention (I), especially when
Attitude (A) is high.
Intention (I) to purchase represents the mental stage reflecting the consumer’s
intention to purchase a specified quantity of a particular brand within a specified
period. Intention (I) is viewed as a predictor of Purchase (P).
Purchase (P), the final interrelated concept of the Howard model, occurs once
the consumer either has bought the brand or when the consumer has financially
committed to purchasing the brand.
As indicated in Figure , Intention (I) is influenced by Pr and PL, defined by
Howard (1994: 139) as Pacific (Pr) and Availability (PL). Price and availability,
directly influencing Intention (I), represent the regular price of the brand and the
Place (PL) where the brand can be purchased. Although price and availability are
considered important influencing factors of the purchase process, these variables
change often and Information (F) can therefore bypass the thinking process by
directly influencing Intention (I). As depicted in Figure , Intention (I) is not only
influenced by Price (Pr) and Place or availability (PL), but also by motives.
Howard (1994: 159) indicates that motives represent the motives operating in
each specific situation.

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Notes Drawing a conclusion from the Howard model, it should be noted that the variables
impacting on consumer behaviour changes for each of the three different stages
of decision-making. The discussion above provided a general overview of all the
variables that could impact on the model, implying that some variables would
be omitted, not changed, in the different stages of consumer decision-making.
THE ENGEL, BLACKWELL, MINIARD MODEL:
The Engel, Blackwell, Miniard model has its origin in decades of work on
the subject of consumer behaviour by Engel, Kollat, Blackwell, and Miniard.
These authors were responsible for the evolution of the model from 1968 to its
present form, namely the eighth edition of their book on the subject of consumer
behaviour.
Important to note, as stated by Engel, Blackwell & Miniard (1986: 27), is that
the name of the model is compiled from the names of the authors, and it can
therefore be concluded that the Engel, Blackwell, Miniard model is based on the
same model as that of Engel & Blackwell, and Engel, Kollat & Blackwell.
Although the eighth revision of the Engel, Blackwell, Miniard model will be
discussed in this section, it is important to briefly mention the evolution of the
model since 1978, from the third revision by Engel et at. (1978: 554-562), to the
eighth revision by Engel, Blackwell, and Miniard.
According to Engel et al. (1978: 555), the Engel, Kollat, Blackwell model
(referred to as the EKB model) was a revision of a previous version of the model
and had several distinct purposes, namely:
a) The interrelationship between stages in the decision-process and the
endogenous and exogenous variables which are highlighted;
b) To clarify the relationship between attitudes and behaviour as well as
the introduction of beliefs and intentions as explicit variables and the
introduction of normative compliance; and
c) To define variables with greater precision and specify functional relationship
for the purpose of empirical testing.
Engel & Blackwell (1982: 686) revised the 1978 version of the EKB model and
listed the same reasons for the revision as stated above. Interesting to note is that
both revisions listed 16 equations and variable definitions in an effort to compare
the EKB model to that of the Howard-Sheth and the Howard models.
The 1978 version of the EKB model, by Engel et al. (1978: 557-558), compares
the EKB model to the 1974 version of the Howard model, whereas the 1982
version, by Engel & Blackwell (1982: 686-689), compares the EKB model to
the 1977 version of the Howard model. The definitions and equations of the
1978 and 1982 versions of the EKB model are attached as Appendix 3, where
the changes in the model can be viewed. In addition to the equations, the two
revisions of the EKB model presented as figures, clearly indicating the changes
in the model, are illustrated in Appendix 4.

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27.4 INDIVIDUAL DIFFERENCES: Notes

The EBM model suggests that consumer behaviour is influenced by five major
categories of individual differences. These individual differences are consumer
resources; knowledge; attitudes; motivation; personality, values and lifestyle.
Consumer resources: Each decision situation is characterized by the involvement
of three different consumer resources. First, the consumer uses time, which is
valued since time is often more important to consumers than money due to the
increasing lack of time in a modern society. The second resource is money or
centric resource, and the third is information reception and processing capabilities.
The consumer’s perception regarding the availability of these resources may
affect the willingness to spend time and money on products, which causes the
consumer to carefully allocate these resources due to the limited availability
thereof.
Knowledge: Knowledge, defined as the information stored in memory,
encompasses a wide variety of information, including the availability and
characteristics of products and services. Information contained in memory
regarding products include awareness of the product category and brands within
the product category, attributes and beliefs of both the product category and
specific brands, and the availability of products in terms of the distribution
channels and competitors selling products within these channels. In addition to
the above, knowledge regarding products also includes when to purchase, since
the consumer may be aware of specials at certain times during the year and may
therefore delay the purchase decision. A final component of knowledge is the
information contained in memory regarding the uses and requirements to use a
product. Consumers may, therefore, be aware of the uses of products, although
they are not able to actually operate them.
Attitudes: An attitude can be defined as an overall evaluation of alternatives,
ranging from positive to negative. Attitudes are considered important in viewing
consumer behaviour, since behaviour is strongly influenced by attitudes towards
a given product or brand. In addition to the above, attitudes influence future
choice and are difficult to change, even though being a common marketing tool.
Motives: Heeds and motives, where need is a central variable in motivation,
influence all phases of the decision process. Activated needs, defined as a
perceived difference between an ideal and the present state that is sufficient to
activate behaviour, lead to energized behaviour or drive that is channeled towards
certain goals that have been learned as incentives. In addition to the above, it
should be noted that needs fall within two categories, namely the utilitarian or
functional category which has practical benefits, and the hedonic or subjective
category with emotional benefits.
Personality: Personality, values and lifestyle encompass what is known as
psychological research, where the emphasis is placed on individual traits,

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Notes values, beliefs and preferred behaviour patterns that combine to characterize
market segments. Personality, defined as consistent responses to environmental
stimuli, provides for orderly and coherently related experiences and behaviour.
Personality is also the component that makes one individual unique from all
others and provides consistency of responses.
Values: Values represent an individual’s beliefs about life and accepted behaviour,
therefore expressing both the goals that motivate people and appropriate ways to
achieve those goals. Values are classified as either being social, implying shared
beliefs that characterize a group of people and thereby defining behaviour for the
group that will be acceptable as “normal”, or personal, responsible for defining
“normal” behaviour for an individual.
i) Lifestyle: Lifestyle, reflecting an individual’s activities, interests and opinions,
represents certain patterns in which people live and spend their time and money.
Lifestyle can, therefore, be viewed as the result of all the economic, cultural and
social life forces that contribute to an individual’s human qualities.
B) Environmental influences: Environmental influences impacting on consumer
behaviour include culture, social class, personal influences, family and the
situation.
i) Culture: Culture, from a consumer behavior perspective, implies the
values, ideas, artefacts and other meaningful symbols assisting individuals to
communicate interpret and evaluate as members of society.
ii) Social class: The second environmental influence, “social class”, can be
defined as divisions within society where individuals share similar values,
interests and behaviours. Social classes are differentiated by socio-economic
status differences, often leading to consumer behaviour differences, for example
the make of a vehicle or the favourite style of dress. “The impact of social class
on consumer behaviour can often be observed when viewing consumer time
spent, products purchased, where, and how they purchase products, especially
since brands of products and services are associated with specific social classes.
iii) Personal influences: Consumers are often influenced by people they
associate with, where they conform to the norms and expectations of others or
simply value their opinions in the buying process. This influence can either be
the observation of others or alternatively the active seeking of advice, where the
person providing the advice becomes an influential or opinion leader.
iv) Family: The family is often the primary decision-making unit with diñerent
roles and functions, often resulting in simultaneous co-operation and conflict.
Two behavioural roles of the family can be distinguished, namely instrumental
or functional roles, involving financial, performance and other ‘1unctional”
attributes, such as conditions of purchase and expressive roles, involving the
support of other family members in the decision-making process by expressing
the family’s emotional needs and upholding of family norms.

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Notes
SUMMARY

• To provide a clearer understanding of human behaviour, four models will

be discussed together with marketing applications based on the findings of
Kotler.
• The models of human behaviour attempts to explain human behaviour as
well as its influence on consumer behaviour

CASE STUDY :
Martin Incorp. was a company carrying on business in cosmetics and
perfumes? It was not following the marketing concept and was catering to a
target market which was using its products. In other words, it only concentrated
on what it would make, and did not bother about changes in preferences of its
target market.
It was later joined by Mr. Ash, a marketing graduate who advised the company
regarding the changing consumer preferences, and the changes that were
necessary to be incorporated in the product. He emphasized upon the income
factors, and social factors only. He modernized the products to a great extent,
and invested about 30 lakhs on new packing, etc. Even after six months of
these changes brought about by him, the company did not seem to have a
proportionate increase in sales.
The assistant manager and the product manager were not very happy with
the changes, and thought that although an effort has been made in the right
direction, some important factors concerning consumer behaviour had been
neglected.

QUESTIONS:
1. Do you agree with the assistant and product managers, and why?
2. What other factors, if any, could have been considered? Elaborate in detail.
KEYWORDS:
Economic model: According to the economic model of buying behaviour, the
buyer is a rational animal and his buying decisions are totally depended on the
concept of utility. In other words, it explains an economic perspective of the
customer.
Learning model: Learning is an act of perception, reasoning, thinking and
information processing about a particular product. It refers to the changes in
consumer behaviour and also the central topic in the study of human behaviour.
Psychoanalytic model: This model draws from Freudian psychology. It states
that the individual consumer has some deep motives that drive him to make
certain buying decisions.

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Notes Sociological model: According to the sociological model, the individual buyer
behaviour is influenced by society, close groups, social classes, population,
income, castes, communities, family life cycle and other cultural aspects.
The Black Box model: sometimes called the Stimulus-Response model, says
that customers are individual thinkers that process internal and external stimuli.
EXERCISE:
POINTS TO PONDER:
Answer the following Questions Given Below:

1.The buying process starts when the buyer recognizes a-----------------

2.CDM stands for---------------

3.Second stage in the consumer decision making model-----------

4.When goods or services are purchased for use in the production or assembling of
products that are sold and supplied to other is known as----------
SELF ASSESSMENT QUESTIONS:
SHORT ANSWER QUESTIONS:
1. What is buyer behaviour model?
2. What Howard -sheth model?
3. What is Nicosia model?
LONG ANSWER QUESTIONS:
1. Describe Marshallian buyer behaviour model.
2. Analyze Howarth sheth model.
3. Discuss Nicosia buyer behaviour model.

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Notes
LESSON 28 – ONLINE BUYER BEHAVIOUR
CONTENT:
LEARNING OBJECTIVE
LEARNING OUTCOME
28.1 INTRODUCTION
28.2 ONLINE BUYER BEHAVIOUR
28.3 KEY FACTORS INFLUENCING ONLINE CONSUMER
BEHAVIOUR
28.4 ANALYSIS
SUMMARY
CASE STUDY
KEYWORDS
EXERCISE
SELF ASSESSMENT QUESTIONS

LEARNING OBJECTIVE:
• To identify Online consumer behaviour is the process of how consumers
make decisions to purchase products in ecommerce.
• The behaviours themselves such as identifying a problem or deciding to
make a purchase are based on ever-evolving expectations and needs.
• To described as the study of trends, including the influence of online
advertising, consumer willingness to click on links, the prevalence of
comparison shopping, among others.
LEARNING OUTCOME:
• The goal of consumer behaviour models is to outline a predictable map of
customer decisions up until conversion, thus helping you steer every stage
of the buyer’s journey.
• To understand buyer behaviour, marketers must understand how customers
make buying decisions.
• To attract and retain the customer, to analyses the buying behaviour and to
explore the reasons why potential customers do not prefer online shopping.
28.1 INTRODUCTION:
The internet has played a significant role in our daily life in that people can
talk through the internet to one who is actually on the other side of the Earth,

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Notes can send email around the clock, can search information, can play game with
others, and even can buy things online. Meanwhile, Internet shopping has been
widely accepted as a way of purchasing products and services It has become
a more popular means in the Internet world ((Bourlakis et al., 2008)). It also
provides consumer more information and choices to compare product and price,
more choice, convenience, easier to find anything online ((Butler and Peppard,
1998)). Online shopping has been shown to provide more satisfaction to modern
consumers seeking convenience and speed ((Yu and Wu, 2007)). On the other
hand, some consumers still feel uncomfortable to buy online. Lack of trust, for
instance, seems to be the major reason that impedes consumers to buy online.
Also, consumers may have a need to exam and feel the products and to meet
friends and get some more comments about the products before purchasing.
Such factors may have negative influence on consumer decision to shop online.
There is no denying that the increasing use of the internet by end consumers
has presented numerous challenges in the field of marketing research, and more
specifically in the field of consumer behavior (Pomerleau) as evidenced by a
growing number of studies (Cummins et al., 2014).
Understanding the psychology behind online consumer behavior is key
to compete in today’s markets which are characterized by ever increasing
competition and globalization. In an online context, consumer responses are no
longer dependent on the physical environment while at the same time entirely
new factors come into play such as the device through which consumers interact,
and the way products and services are sold and presented online which often
differs significantly from traditional offline marketing strategies.
It is for this reason that research into online consumer behavior has increasingly
started looking to other Understanding the psychology behind online consumer
behavior is key to compete in today’s markets which are characterized by
ever increasing competition and globalization. In an online context, consumer
responses are no longer dependent on the physical environment while at the
same time entirely new factors come into play such as the device through which
consumers interact, and the way products and services are sold and presented
online which often differs significantly from traditional offline marketing
strategies. It is for this reason that research into online consumer behavior
has increasingly started looking to other disciplines, including psychological
approaches and concepts.
Online shopping is available for customers around the clock comparing to
traditional store as it is open 24 hours a day, 7 days a week (Hofacker, 2001;
Wang et al., 2005). Research shows that 58 percent chose to shop online because
they could shop after-hours, when the traditional stores are closed and 61 percent
of the respondents selected to shop online because they want to avoid crowds and
wailing lines, especially in holiday shopping (The Tech Faq, 2008). . Consumers
not only look for products, but also for online services. Some companies have
online customer services available 24 hours.

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Consumers can find all kinds of products which might be available only online Notes
from all over the world. Most companies have their own websites to offer
products or services online, no matter whether they already have their front store
or not. . Many traditional retailers sells certain products only available online
to reduce their retailing costs or to offer customers with more choices of sizes,
colors, or features. Boccia Titanium, for instance, has stores in many states but
not in Connecticut. The company offers website to reach and to fulfill the need
of Connecticut customers to order online. . Similarly, Yves Rocher, a French
company, does not have the front store in the U.S. It offers the website so that
U.S. customers can just add products they want into the online shopping cart and
the product will be shipped to their house.
Moreover, online shopping sometimes offer good payment plans (Amin, 2009)
and options for customers. Customers can decide their payment date and amount
(Anonymous, 2009) in their own preference and convenience. Cost and time
efficiency: Because online shopping customers are often offered a better deal,
they can get the same product as they buy at store at a lower price (Rox, 2007).
Since online stores offer customers with variety of products and services. it gives
customers more chances to compare price from different websites and find the
products with lower prices than buying from local retailing stores (Lim and
Dubinsky, 2004).
Some websites, eBay for example, offer customers auction or best offer option,
so they can make a good deal for their product. It also makes shopping a real
game of chance and treasure hunt and makes shopping a fun and entertainment
(Prasad and Aryasri, 2009). Again, since online shopping can be anywhere and
anytime, it makes consumers’ life easier because they do not have to stuck in
the traffic, look for parking spot, wait in checkout lines or be in crowd in store
(Childers et al., 2001). As such, customers often find shop from the website
that is offering convenience can reduce their psychological costs (Prasad and
Aryasri, 2009).
28.2 ONLINE BUYER BEHAVIOUR:
With the existence of online environment, the basic principles of buyer behaviour
are changing. The following specifics of online buyer behaviour are
Internet environment:
Internet users can find objective and subjective information about the products
and companies easier than ever. Online companies compute not only to each
other but also with potential online customer (positive and negative references,
internet communities, social networks and social media etc.). Social media
provides an interactive communication between its users. With social media, the
marketing activities had to be reformulated.
Modern forms of marketing activities:
Traditional marketing forms are not in the Internet environment effective. With
the development of e-commerce, new marketing activities had to be created

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Notes – marketing on social networks and media, viral marketing, online word-of-
mouth and buzz marketing, online interactive communication. Online potential
shoppers are interested in only the marketing activities that can offer for them
the value added (online games and competitions, community identifying with
products and company, online sharing etc.).
Internet community:
Internet users discuss about their life style about products and companies, find
detail information about them. Opinion of internet community (in social media,
discussion forums i.e.) influence the final online buying decision process. The
internet
company in its marketing has to join the internet community and manage the
online communication.
Subject of online shopping:
Online shoppers buy the most – with electronics and techniques, books, tickets
or clothes and cosmetics. The online buying of food is at the moment the rarity
(during the time it is expected the increasing of online buying of goods). The
expectation is that the common buying will move the online environment.
Standardized products such as books, CDs and tickets are more likely to be
purchased online. Because quality uncertainty in such products is very low, and
no physical help is required (Grewal et al., 2002).
Demographic structure of online shoppers:
Today, online shoppers are the most often between 18 and 40 years and come
from the middle-income class. There are differences in online behaviour between
the “Facebook generation” and generation that lived most of their lives without
online communication. The older online generation (up to 50) is increasing – the
companies have to focus on them.
Approach a motive to the online shopping:
The main motives to the online shopping are lower costs, comfort of shopping
(nonstop and everywhere), saving time and buying of non-traditional and
exclusive goods. Another motives can be the increasing trends of online shopping
in general or changing life styles on consumers.
The question is if these motives are dependent on social status and role, age,
education or income of online shoppers. Older generation find and try the product
on traditional market, after that they do online shopping. Younger generation
make the all buying decision-making process online.

Online consumer behaviour is the process of how consumers make decisions to

purchase products in ecommerce.

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Notes
28.3 KEY FACTORS INFLUENCING ONLINE CONSUMER
BEHAVIOUR:
Forces influencing the online consumer’s behaviour

Source: Based on the P. Kotler’s framework (2003)

28.4 ANALYSIS OF CONSUMER BEHAVIOUR ONLINE:
This report will outline the most relevant behavioural characteristics of online
consumers and examine the ways they find, compare and evaluate product
information. Comparison of the newly collected survey data with the existing
consumer behaviour theory resulted in detection of a number of issues related to
a specific consumer group.
The purpose of this report is to translate these findings into a set of
implementation activities on strategic and technological level. Execution of
these recommendations will result in better conversion of visitors into customers
and encourage customer loyalty and referrals.
The focus group of this study will be young adults aged between eighteen and
thirty-four interested in buying a mobile phone or a related product.
Research by Shun & Yingjie (2006) showed that there are product types, which
are more likely to be sold online such as software, books, electronics and music.
Reason for this is that when purchasing these types of products, one does not
require personal inspection and most, if not all features, can be outlined in the
product description and images. Most products in the mobile phone family
belong to this category.
According to the recent research on consumer behaviour on the Internet users
(Cottee, Chowdhury, Ratenshwar & Ricci, 2006), there are four distinct consumer
groups with different intentions and motivations:
• Exploration
• Entertainment
• Shopping

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Notes • Information
• Music Videos, Lyrics - Daily updated collection of music videos and lyrics.
Majority of young adults interviewed for purpose of this research tend to be
active information seekers. A high level of technological confidence within this
group tends to be an encouraging factor when it comes to product information
research online.
The following analysis presents both, focus group results and behavioural theory
in a parallel fashion divided into two main research topics:
• Information Retrieval and Search Patterns
• Perception of Product Information Online
These two areas are mutually dependent and particularly important in a market
where consumers have the power to choose the right product from a number of
competing suppliers. Well-structured product information that cannot be found
easily online is as much of a problem as is having easily accessible information
that does not meet the consumer’s expectations. Factors that Impede Consumers
from online Shopping Major reason that impede consumers from online shopping
include unsecured payment, slow shipping, unwanted product, spam or virus,
bothersome emails and technology problem.
Business should be aware of such major problems which lead to dissatisfaction
in online shopping. Security: Since the payment modes in online shopping are
most likely made with credit card, so customers sometime pay attention to
seller’s information in order to protect themselves (Lim and Dubinsky, 2004).
Customers tend to buy product and service from the seller who they trust, or
brand that they are familiar with (Chen and He, 2003). Online trust is one of the
most critical 70 issues that affect the success or failure of online retailers (Prasad
and Aryasri, 2009). Security seems to be a big concern that prevent customers
from shopping online (Laudon and Traver, 2009). because they worried that the
online store will cheat them or misuse their personal information, especially
their credit card (Comegys et al., 2009).
For instance, report indicated that 70 percent of US web users are seriously
worried about their personal information, transaction security, and misuse of
private consumer data (Federal Trade Commission, 2001). Intangibility of online
product: Some products are less likely to be purchased online because of the
intangible nature of the online products. . For example, customers are less likely
to buy clothes through online channel (Goldsmith and Flynn, 2005) because they
have no chance to try or examine actual product (Comegys et al., 2009).
Customers viewing a product on computer screen can show a different effect
than actually seeing it in the store (Federal Trade Commission, 2003). In sum,
customers cannot see, hear, feel, touch, smell, or try the product that they want
when using online channel. In many cases, customers prefer to examine the

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product first and then decide whether or not they want to buy (Junhong, 2009). Notes
Some people think the product information provided in website is not enough to
make a decision. Online shoppers will be disappointed if the product information
does not meet their expectation (Liu and Guo, 2008). Social contact: While some
customers likely to be free from salesperson pressure, many online shopping
would feel difficult to make a choice and thus get frustrated if there is no
experienced salesperson’s professional assistance (Prasad and Aryasri, 2009).
Moreover, some customers are highly socially connected and rely on other
peoples’ opinions when making purchase decision tend. There are also
consumers who sometimes shop at traditional store because they want to fulfill
their entertainment and social needs which are limited by online stores (Prasad
and Aryasri, 2009).

SUMMARY
Online shopping is an important business model in e-commerce (Liu and Guo,
2008). If the online sellers want to persuade and retain online buyer, they need
to know what the issues online buyers use to decide their online purchase (Lim
and Dubinsky, 2004). To better understand online customer shopping behaviour,
seller can improve or create the effective marketing program for their customer
(Lim and Dubinsky, 2004). There are couple ways that company or seller can
do or should do to persuade those who do not shop online to become more
interested, and, finally, to be a potential customer.
After looking at major motivations that lead customers to shop online, online
sellers should keep those issues in mind and try to satisfy customer whenever
possible. Also, understanding 71 what make some customers hesitate to shop
online, sellers should find ways to reduce those negative aspects in order to gain
more customers by building trustable and securer website, attractive and useful
website, offering online service, and offering additional option.
Trustable and Securer website: Consumer willingness to buy and patronize
online store are affected by consumer’s trust in giving personal information and
security for payment through credit card transactions (Whysall, 2000). They
also concern about transaction security and data safety when purchase online
(Constantinides, 2004). Getting approved certificate from an organization such
as e-Trust is one of the ways to make a website more trustable (Korgaonkar and
Karson, 2007).

CASE STUDY :
The way customers perceive your products and service can change over
time. The COVID-19 pandemic is a great example. For most companies, if
they just treated customers the same way they did before the pandemic, they
would have overlooked customers’ changing motivations. And those changing
motivations affect how potential customers perceive your offer.

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Notes Dunkin’ is an example of a company that moved swiftly to tap into new
customer motivations. “As COVID-19 struck, Americans wanted to find
ways to help and to show support for the frontline heroes. Dunkin’ wanted
to give people a way to do so, even without being able to leave home,” said
Justin Unger, Director, Strategic Partnerships, Dunkin’.
Created in just days, the DunkinCoffeeBreak.com ecommerce site gave
customers a way to show appreciation by sending a virtual coffee break in
the form of a Dunkin’ e-gift card. Dunkin’ donated $1 (up to $100,000) for
every card purchased at this site to the Dunkin’ Joy in Childhood Foundation
emergency funds, specifically for non-profits helping families affected by
COVID-19.
“Since the initial launch, Dunkin’ has used the site for multiple moments that
matter to people, such as Teacher Appreciation Week, National Nurses Week,
and Mother’s Day,” Unger said.
The site is driving incremental digital gift card sales and has generated a
300% increase in year-over-year gift card sales for certain events.
“I think ecommerce, especially in the gift card space, is a key [you can use
to] unlock growth. We saw a tremendous lift in online gift card sales with
the addition of DunkinCoffeeBreak.com without any cannibalization to our
existing online gift card program. It allowed us to reach new guests and tap
into the wealth of information and targeting in the digital world, which you
just cannot do with plastic gift cards hanging on pegs,” Unger said.
“Online and mobile shopping surged when social distancing was introduced…
based on Blackhawk Network’s partners’ sales data, gift cards sales made
directly from a restaurants or merchant’s website since mid-March are
up 92% from last year,” said Brett Narlinger, Head of Global Commerce,
Blackhawk Network, Dunkin’s gift card program partner.

KEYWORDS:

• Quality: Consumers are now interested in items that deliver a variety of

features along with quality.
• Consumerism is the organized form of efforts from different individuals,
groups, governments and various related organizations which helps to
protect the consumer from unfair practices and to safeguard their rights.
• Protection of Rights − Consumerism helps in building business
communities and institutions to protect their rights from unfair practices.
• Prevention of Malpractices − Consumerism prevents unfair practices
within the business community, such as hoarding, adulteration, black
marketing, profiteering, etc.

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• Unity among Consumers − Consumerism aims at creating knowledge Notes

and harmony among consumers and to take group measures on issues
like consumer laws, supply of information about marketing malpractices,
misleading and restrictive trade practices.
• Enforcing Consumer Rights − Consumerism aims at applying the four
basic rights of consumers which are Right to Safety, right to be Informed,
Right to Choose, and Right to Redress.
EXERCISE:
POINTS TO PONDER:
Answer the following Questions Given Below:

1. Marketing is the activity, set off ___________ & processes for creating,
communicating, delivering & exchanging offerings that have value for customers,
clients, partners & society.
2. Today, marketing must be understood in a new sense that can be characterized
as _________
3.-----------Commercial online services offer on line information and marketing services
to subscribers who pay a monthly fee.
4.-------- allows consumers to search for evaluate and order products through the
internet.
5.Online consumer is a fully -----------consumer and is aware of various product offering
by all competitors.

SELF ASSESSMENT QUESTIONS:

SHORT ANSWER QUESTIONS:
1.What is online marketing?
2.List out the types of on-line advertising.
3.What are the methods of online buying behaviour?
LONG ANSWER QUESTIONS:
1.Explain online marketing.
2.Explain different types of online advertising.
3.Explain the features of online marketing.
4.Discuss the different online advertising options for a marketer.

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Notes
LESSON 29 – BUILDING AND MEASURING
CUSTOMER SATISFACTION
CONTENT:
LEARNING OBJECTIVE
LEARNING OUTCOME
29.1 INTRODUCTION
29.2 BUILDING CUSTOMER SATISFACTION, VALUE AND
RETENTION
29.3 DEFINING CUSTOMER SATISFACTION
29.4 OBJECTIVES OF A CUSTOMER SATISFACTION SURVEY
PROGRAM
29.5 UNDERSTANDING DIFFERING CUSTOMER ATTITUDE
29.6 WAYS TO MEASURE CUSTOMER SATISFACTION
SUMMARY
CASE STUDY
KEYWORDS
EXERCISE
SELF ASSESSMENT QUESTIONS

LEARNING OBJECTIVE:
• To identify that Customer satisfaction is a top indicator of customer loyalty
and it increases chances for repeat sales.
• To find out Customer satisfaction should be the main focus of an
organization because customers drive business.
• It is considered that customers judge products on a limited set of norms
and attributes.
LEARNING OUTCOME:
• Measuring customer satisfaction helps in identifying specific customer
information which is needed to run business smoothly.
• To determine customer satisfaction helps an organization to identify the
efficiency of its business strategies and marketing tactics and encompasses
if the organization is customer focused or not.
• If an organization is able to measure business related aspects of customer
satisfaction, then they become capable to bridge the gaps between them
and customers to enhance more customer satisfaction among their peer
customers.

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BUILDING CUSTOMER SATISFACTION, VALUE AND RETENTION: Notes

29.1 INTRODUCTION:
In this world of extreme competition, companies with a total focus on customer
are going to be the winner. Companies must understand importance of customer
satisfaction and then build process around it. A satisfied customer will be a loyal
customer.
There are large offering of products and services available in the market then
why the customer should choose a given company’s product. According to
various research and studies it has been confirmed that consumer will purchase
products, which given them maximum perceived value. This value comes from
calculating the cost associated with the emotional level decision like the brand
image, corporate brand, sales personnel image and functional image. This value
converts to total customer cost by including purchase cost, time-energy in
evaluation of product and intuitive cost.
Consumer will take decisions after considering the total cost associated with
purchase, perceived and otherwise. If after the purchase product performs as
expected than customer is considered satisfied. A completely satisfied customer
is likely to repurchase the product and even promote the product through a word
of mouth. Companies are aiming for total customer satisfaction, which can be
achieved after understanding customer expectation and then delivering as per the
expectation.

Customer satisfaction is defined as a measurement that determines how happy

customers are with a company's products, services, and capabilities.

29.2 BUILDING AND MEASURING CUSTOMER SATISFACTION:

Managing customers’ satisfaction efficiently is one the biggest challenge an
organization face. The tools or methods to measure customer satisfaction needs
to be defined sophisticatedly to fulfil the desired norms. There are following
methods to measure customer satisfaction:
1. Direct Methods: Directly contacting customers and getting their valuable
feedback is very important. Following are some of the ways by which customers
could be directly tabbed:
a. Getting customer feedback through third party agencies.
b. Direct marketing, in-house call centers, complaint handling department
could be treated as first point of contact for getting customer feedback.
These feedbacks are compiled to analyze customers ‘perception.
c. Getting customer feedback through face-to-face conversation or meeting.
d. Feedback through complaint or appreciation letter.
e. Direct customer feedback through surveys and questionnaires.

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Notes Organizations mostly employ external agencies to listen to their customers and
provide dedicated feedback to them. These feedbacks need to be sophisticated
and in structured format so that conclusive results could be fetched out. Face to
face meetings and complaint or appreciation letter engages immediate issues.
The feedback received in this is not uniformed as different types of customers
are addressed with different domains of questions. These hiders the analysis
process to be performed accurately and consistently.
Hence the best way is to implement a proper survey which consists of uniformed
questionnaire to get customer feedback from well segmented customers. The
design of the prepared questionnaire is an important aspect and should enclose
all the essential factors of business. The questions asked should be in a way that
the customer is encouraged to respond in a obvious way/. This feedback could
receive by the organizations can be treated as one of the best ways to measure
customer satisfaction.
Apart from the above methods there is another very popular direct method which
is surprise market visit. By this, information regarding different segment of
products and services provided to the customers could be obtained in an efficient
manner. It becomes easy for the supplier to know the weak and strong aspects of
products and services.
2. Indirect Method: The major drawback of direct methods is that it turns out to
be very costly and requires a lot of pre compiled preparations to implement. For
getting the valuable feedbacks the supplier totally depends on the customer due
to which they lose options and chances to take corrective measure at correct time.
Hence there are other following indirect methods of getting feedback regarding
customer satisfaction:
a. Customer Complaints: Customer ‘s complaints are the issues and problems
reported by the customer to supplier with regards to any specific product
or related service. These complaints can be classified under different
segments according to the severity and department. If the complaints
under a particular segment go high in a specific period of time, then
the performance of the organization is degrading in that specific area or
segment. But if the complaints diminish in a specific period of time, then
that means the organization is performing well and customer satisfaction
level is also higher.
b. Customer Loyalty: It is necessarily required for an organization to interact
and communicate with customers on a regular basis to increase customer
loyalty. In these interactions and communications, it is required to learn
and determine all individual customer needs and respond accordingly.
A customer is said to be loyal if he revisits supplier on regular basis for
purchases. These loyal customers are the satisfied ones and hence they
are bounded with a relationship with the supplier. Hence by obtaining
the customer loyalty index, suppliers can indirectly measure customer
satisfaction.

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BUILDING CUSTOMER SATISFACTION, VALUE AND RETENTION: Notes

Companies are able to achieve this state of total customer satisfaction by
incorporating good business practices. These practices are constructed
around stakeholders, business process, resource and organization. Company’s
stakeholders consist of employees, suppliers, distributors and customers. Earlier
focus has always solely been on shareholders, but now stakeholders need to
be satisfied for shareholder’s profit. Companies need to define boundaries
of relation with stakeholders as to get maximum value for every participant.
To ensure maximum value, companies need to develop business processes,
which understand and fulfill customer expectations. This can be achieved by
aligning cross functional teams across critical processes, to create one smooth
flow. Companies need to understand its core competencies and develop them,
thereby successfully managing its resources. Organizational structure, design
and policies have to be suitable to facilitate the introduction of total customer
satisfaction culture.
Companies through creating and delivering value can develop total customer
satisfaction. Company itself can be considered as a value chain consisting
of primary and secondary activities. Primary activities consist of inbound
materials, operation, delivering finished products, sales/marketing and servicing
clients. Secondary activities consist of functional departments like technology
department, procurement department, human resource and finance department.
This value created is delivered to customer through the distribution channel
under the principle of supply chain management.
Customers in the digital age are much more conscious and aware of their need and
wants, making them a difficult lot to please. Companies run marketing campaign
highlighting points of similarity and difference with competitor’s products. The
art is not at attracting the customer, but it is at retaining the customer and creating
long term relation with them. Companies usually suffer from churning effect
where customers do not make the repurchase. Companies need to work hard in
identifying reasons behind this churning. Once reasons are identified separate
them on the basis of manageable and non-manageable issues and then work hard
at eliminating manageable issues.
Companies need to develop policies and measure at retaining customers along
with attracting new customers. This art of retention can be achieved through
customer relationship management (CRM). In CRM the task is to develop strong
consumer-based brand equity, which is done by converting first time buyer to
repeat buyer to a client to a member to advocates and finally to partners. During
these course companies can look forward to offering financial benefits in terms
of discount for frequent buyers or also by association with a social cause.
29.3 DEFINING CUSTOMER SATISFACTION:
The concept of customer satisfaction is new to some companies, so it’s important
to be clear on exactly what’s meant by the term. Customer satisfaction is the state

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Notes of mind that customers have about a company when their expectations have been
met or exceeded over the lifetime of the product or service. The achievement of
customer satisfaction leads to company loyalty and product repurchase. There
are some important implications of this definition:
• Because customer satisfaction is a subjective, nonquantitative state,
measurement won’t be exact and will require sampling and statistical
analysis.
• Customer satisfaction measurement must be undertaken with an
understanding of the gap between customer expectations and performance
perceptions.
• There is a connection between customer satisfaction measurement and
bottom-line results.
“Satisfaction” itself can refer to a number of different facts of the
relationship with a customer. For example, it can refer to any or all of the
following:
• Satisfaction with the quality of a particular product or service.
• Satisfaction with an ongoing business relationship.
• Satisfaction with the price-performance ratio of a product or service.
• Satisfaction because a product/service met or exceeded the customer’s
expectations.
Each industry could add to this list according to the nature of the business and
the specific relationship with the customer. Customer satisfaction measurement
variables will differ depending on what type of satisfaction is being researched.
For example, manufacturers typically desire on-time delivery and adherence
to specifications, so measures of satisfaction taken by suppliers should include
these critical variables. Clearly defining and understanding customer satisfaction
can help any company identify opportunities for product and service innovation
and serve as the basis for performance appraisal and reward systems. It can also
serve as the basis for a customer satisfaction survey program that can ensure
that quality improvement efforts are properly focused on issues that are most
important to the customer.
29.4 OBJECTIVES OF A CUSTOMER SATISFACTION SURVEY
PROGRAM:
In addition to a clear statement defining customer satisfaction, any successful
customer survey program must have a clear set of objectives that, once met, will
lead to improved performance. The most basic objectives that should be met by
any customer surveying program include the following:
• Understanding the expectations and requirements of your customers.
• Determining how well your company and its competitors are satisfying
these expectations and requirements.
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• Developing service and/or product standards based on your findings. Notes

• Examining trends over time in order to take action on a timely basis.
• Establishing priorities and standards to judge how well you’ve met these
goals
Before an appropriate customer satisfaction surveying program can be designed,
the following basic questions must be clearly answered:
• How will the information we gather be used?
• How will this information allow us to take action inside the organization?
• How should we use this information to keep our customers and find new
ones?
Careful consideration must be given to what the organization hopes to accomplish,
how the results will be disseminated to various parts of the organization, and
how the information will be used. There is no point asking customers about a
particular service or product if it won’t or can’t be changed regardless of the
feedback.
Conducting a customer satisfaction survey program is a burden on the organization
and its customers in terms of time and resources. There is no point in engaging
in this work unless it has been thoughtfully designed so that only relevant and
important information is gathered. This information must allow the organization
to take direct action. Nothing is more frustrating than having information
that indicates a problem exists but fails to isolate the specific cause. Having
the purchasing department of a manufacturing firm rate the sales and service
it received on its last order on a survey scale of 1 (terrible) to 6 (magnificent)
would yield little about how to improve sales and service to the manufacturer.
29.5 UNDERSTANDING DIFFERING CUSTOMER ATTITUDE:
The most basic objective of customer satisfaction surveys is to generate valid
and consistent customer feedback (i.e., to receive the voice of the customer),
which can then be used to initiate strategies that will retain customers and thus
protect one of the most valuable corporate assets — loyal customers.
This highly subjective system that customers themselves apply to their decisions
is based primarily on input from two sources:
• The customers’ own experiences — each time they experience a product
or service, deciding whether that experience is great, neutral, or terrible.
These are known as “moments of truth.”
• The experiences of other customers — each time they hear something
about a company, whether it’s great, neutral, or terrible. This is known as
“word-of-mouth.”
There is obviously a strong connection between these two inputs. An

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Notes exceptional experience leads to strong word-of-mouth recommendations. Strong

recommendations influence the experience of the customer, and many successful
companies have capitalized on that link. How does a customer satisfaction
surveying program allow you to make the connection between the survey
response and the customer’s attitude or mind-set regarding loyalty? Research
conducted by both corporate and academic researchers shows a relationship
between customer survey measurements and the degree of preference or rejection
that a customer might have accumulated. When the customer is asked a customer
satisfaction question, the customer’s degree of loyalty mind-set (or attitude) will
be an accumulation of all past experiences and exposures that can be indicated
as a score from 1 (very dissatisfied) to 6 (very satisfied). Obviously, the goal of
every company should be to develop customers with a preference attitude (i.e.,
we all want the coveted preferred vendor status such that the customer, when
given a choice, will choose our company), but it takes continuous customer
experience management, which means customer satisfaction measurement, to
get there — and even more effort to stay there.
HOW TO MEASURE YOUR CUSTOMERS SATISFACTION LEVELS:
It takes continuous effort to maintain high customer satisfaction levels. As
markets shrink, companies are scrambling to boost customer satisfaction and
keep their current customers rather than devoting additional resources to chase
potential new customers. The claim that it costs five to eight times as much to
get new customers than to hold on to old ones is key to understanding the drive
toward benchmarking and tracking customer satisfaction.
Measuring customer satisfaction may be a new concept to companies that
have been focused almost exclusively on income statements and balance
sheets. Companies now recognize that the new global economy has changed
things forever. Increased competition, crowded markets with little product
differentiation, and years of sales growth followed by two decades of flattened
sales curves indicate to today’s sharp competitors that their focus must change
Competitors that are prospering in the new global economy recognize that
measuring customer satisfaction is key. Only by doing so can they hold on to
the customers they have and understand how to better attract new customers.
Successful competitors recognize that customer satisfaction is a critical strategic
weapon that can bring increased market share and increased profits.
The problem companies face, however, is exactly how to measure customer
satisfaction and do it well. They need to understand how to quantify, measure, and
track customer satisfaction. Without a clear and accurate sense of what needs to
be measured and how to collect, analyze, and use the data as a strategic weapon
to drive the business, no firm can be effective in this new business climate. Plans
constructed using customer satisfaction research results can be designed to target
customers and processes that are most able to extend profits.
Too many companies rely on outdated and unreliable measures of customer
satisfaction. They watch sales volume. They listen to sales reps describing their

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customers’ states of mind. They track and count the frequency of complaints. Notes
And they watch aging accounts receivable reports, recognizing that unhappy
customers pay as late as possible — if at all. While these approaches are not
completely without value, they are no substitute for a valid, well-designed
customer satisfaction survey program.
It’s no surprise to find that market leaders differ from the rest of their industry in
that they have programs in place to hear the voice of the customer and achieve
customer satisfaction. In these companies:
• Marketing and sales employees are primarily responsible for designing
(with customer input) customer satisfaction surveying programs,
questionnaires, and focus groups.
• Top management and marketing divisions champion the programs.
• Corporate evaluations include not only their own customer satisfaction
ratings but also those of their competitors.
• Satisfaction results are made available to all employees.
• Customers are informed about changes brought about as the direct result
of listening to their needs.
• Internal and external quality measures are often tied together.
• Customer satisfaction is incorporated into the strategic focus of the
company via the mission statement.
• Stakeholder compensation is tied directly to the customer satisfaction
surveying program.
• A concentrated effort is made to relate the customer satisfaction
measurement results to internal process metrics.
To be successful, companies need a customer satisfaction surveying system
that meets the following criteria:
• The system must be easy to understand.
• It must be credible so that employee performance and compensation can
be attached to the final results.
• It must generate actionable reports for management.
29.6 WAYS TO MEASURE CUSTOMER SATISFACTION:
No doubt, you have a method for dealing with customer complaints and the
issues that arise from time to time within your company. The Balanced Scorecard
customer leg is ideal for tracking these issues.
Here are other common ways you can gather information from customers:
• Evaluate communication at call centers and help desks.
• Check out product-return centers.
• Interview field service reps and technicians.
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Notes • Conduct surveys and send out questionnaires.

• Hire a third party (consultants, websites).
• Hold discussions with focus groups.
SUMMARY
To summarize, the customer satisfaction relies on the offer’s performance in
relation to the customer’s hope. Satisfaction is described as a person’s feelings
of happiness or dissatisfaction that results from comparing a product’s perceived
performance in relation to his or her expectations. Building customer relationships
are considered as major factor in Relationship Marketing to accomplish customer
satisfaction.

CASE STUDY :
This case discusses Amazon.com Inc. (Amazon) taking over one of the
leading e-commerce websites in the Middle East, souq.com (Souq), which
marked its entry into the Middle East e-commerce market. Amazon had
tasted success in most of the countries into which it had ventured but had
never explored the Middle East. Amazon usually adopted the organic growth
route wherever it stepped in for doing its business. However, for the Middle
East, it adopted an acquisition strategy. Industry watchers attributed this to
the growing market conditions for e-commerce in the Middle East as well
as the complexity involved in the market in relation to its culture, protocols,
purchasing patterns, and infrastructure.
As a company based in the US, Amazon did not try to experiment and
start from scratch in the Middle East but acquired Souq which had already
established a presence in the Middle East. Souq was one of the leading
companies to tap the growing class of consumers who were turning to the
internet and their mobile devices to buy goods and services. The acquisition
gave Amazon access to a total of 50 million consumers across several
Middle East countries, a largely untapped market. However, it looked like
success would not come easy as Amazon had to face several challenges like
competition from local e-commerce sites, a cash payment system, inadequate
logistics, data security concerns, etc.

ISSUES:
The case is structured to achieve the following teaching objectives:
• Understand, study, and assess the issues and challenges of running an
e-commerce company in the Middle East
• Evaluate the entry strategy of Amazon in the Middle East
• Understand the pros and cons of adopting organic and inorganic growth
• Analyze the challenges Amazon faces in winning over the key markets
like the Middle East

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• Explore strategies that Amazon could adopt to overcome these challenges Notes
and become the leading e-commerce company in the Middle East
KEYWORDS:
Customer Complaints: Customer ‘s complaints are the issues and problems
reported by the customer to supplier with regards to any specific product or
related service.
Customer Loyalty: It is necessarily required for an organization to interact and
communicate with customers on a regular basis to increase customer loyalty.
Customer retention is arguably the most important factor in long-term business
growth.
Customer satisfaction (or delight or loyalty or whatever word you use) is
incredibly important to the health of your business.
EXERCISE:
POINTS TO PONDER:
Answer the following Questions given Below:

1.----------is a function of perceived performance and expectation.

2.---------model of customer satisfaction is useful for identifying customer needs.

3.The customer needs that bring with them pleasant surprises and customer delight are
called------------

4.The expression of dissatisfaction with a product/ service, either orally or in writing,

from an internal customer or external customer is called-----------

SELF ASSESSMENT QUESTIONS:

SHORT ANSWER QUESTIONS:
1. What is customer satisfaction?
2. ist out the factors influencing customer satisfaction.
3. What are the steps of consumer decision making.
4. Who is satisfied customer?
5. What is customer delight?
LONG ANSWER QUESTIONS:
1. Explain measuring customer satisfaction.
2. Explain the factors influencing customer satisfaction.
3. Write a short note on understanding customer differing attitude.
4. Explain brief about objective of customer satisfaction survey program.

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Notes
LESSON 30 – CUSTOMER RELATIONSHIP
MANAGEMENT
CONTENT:
LEARNING OBJECTIVE
LEARNING OUTCOME
30.1 INTRODUCTION OF CRM
30.2 MEANING OF CRM
30.3 DEFINITION OF CRM
30.4 EVOLUTION OF CRM
30.5 CRM PROCESS
30.6 RELATIONSHIP MARKETING
30.7 EXPANDED MARKETING MIX
30.8 DEVELOPMENTAL RELATIONSHIP MARKETING
30.9 TYPES OF CRM
SUMMARY
CASE STUDY
KEYWORDS
EXERCISE
SELF ASSESSMENT QUESTIONS

LEARNING OBJECTIVE:
• CRM processes identify and target the best customers, generate quality
sales, and help organizations to plan and implement marketing campaigns
with clear goals and objectives.
• To define customer relationship management and collaborative CRM, and
identify the primary functions of both processes.
• To describe the two major components of operational CRM system, list
three applications used in each component.
LEARNING OUTCOME:
• To know the most important attributes of an effective technology
architecture for CRM.
• The origin of CRM technology and its sizes and dynamics of the market
for CRM application software.
• To analyse the structure of the CRM ecosystem and role that analytics
plays in CRM technology.

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Notes
30.1 INTRODUCTION OF CRM:
A long-term relationship with customers to nurture its stability in today ‘s
blooming market. Customer ‘s expectations are now not only limited to get
best products and services; they also need a face-to-face business in which
they want to receive exactly what they demand and in a quick time. CRM is a
business strategy directed to understand, anticipate and respond to the needs of
an enterprise’s current and potential customers in order to grow the relationship
value. The Customer Relationship Management is the procedure that is crucial
for every business.
Developing close, cooperative relationship with customers is more important
in the current era of intense competition and demanding customers, than it has
ever been before. Customer relationship management (CRM) has attracted
the expanded attention of scholars and practitioners. Marketing scholars are
studying the nature of and scope of CRM and developing the value and process
of cooperative and collaborative relationship between buyers and sellers.
They are interested in strategies and processes for customer classification and
selectivity; one-to-one relationship with individual customers; key account
management and customer business development processes; frequency
marketing, loyalty programs, cross-selling and up-selling opportunities; and
various forms of partnering with customers including co-branding, joint-
marketing, co- development and other forms of strategic alliances. Several
software tools and technologies claiming solutions for various aspects of
CRM have recently been introduced for commercial applications. A majority
of these tools promise to individuals and personalize, customer relationships
by providing vital information at every point of customer interface. Techniques
such as collaborative filtering, rules-based expert systems, artificial intelligence
and relational databases are increasingly being applied to develop enterprise
level solutions for managing information on customer interactions.
30.2 MEANING OF CRM:
• Customer relationship management is an upright concept or strategy to
solidify relations with customers and at the same time reducing cost and
enhancing productivity and profitability in business.
• A CRM system is implemented for small business, as well as large
enterprises also as the main goal is to assist the customers efficiently.
• The customer relationship management is the procedure that is crucial for
every business. as the customer is the most important part of the business
30.3 DEFINITION OF CRM:
Parvatiyar and sheth (2001) defined CRM is a comprehensive strategy and
process of acquiring, retaining and partnering with selective customers to create
superior value for the company and the customer.

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Notes According to Gartner‖ CRM is a business strategy designed to optimize

profitability, revenue, and customer satisfaction
A CRM system is not only used to deal with the existing customers but is also useful
in acquiring new customers. The process first starts with identifying a customer
and maintaining all the corresponding details into the CRM system which is also
called an Opportunity of Business ‘. The Sales and Field representatives then try
getting business out of these customers by sophistically following up with them
and converting them into a winning deal.
Customer Relationship Management strategies have given a new outlook to
all the suppliers and customers to keep the business going under an estimable
relationship by fulfilling mutual needs of buying and selling.
30.4 EVOLUTION OF CRM:
The modern concept of customer service has its roots in the Craftsman Economy
of the 1800s, when individuals and small groups of Manufacturers competed to
produce arts and crafts to meet public Demand. Individual orders were booked
for each customer and supplied according to his/her taste and demands. The
economies were small and so were the transactions. The manufacturer was able
to meet the customers on one-to-one basis and talk to customer to understand the
minute details. Customer care and service were highly personalized. But then
the economics swing was setting in. The technology was increasing and so was
it difficult to cater to the individualistic needs of the customer. Gradually, the era
of mass production came in. The advent of Mass Production in the early 20th
century, followed by an explosion in the demand for goods after World War II,
increased the power of suppliers at the expense of consumers, and thus reduced
the importance of customer service. History tells us that customer service as a
concept was kept aside in the cell.
In the marketing literature the terms customer relationship management and
relationship marketing as used interchangeably. Some of these themes offer a
narrow functional marketing perspective while others offer a perspective that
is broad and somewhat paradigmatic in approach and orientation. A narrow
perspective of customer relationship management is database marketing,
emphasizing the promotional aspects of marketing linked to database efforts.
Focus on individual or one-to-one relationship with customers that integrate
database knowledge with a long-term customer retention and growth strategy.
Developing closer relationship with these customers and turning them into
loyal ones are equally important aspects of marketing. Thus, it can be said
that relationship marketing is “attracting, maintaining, and - in multi-service
organizations-enhancing customer relationships”. A company must be selective
in tailoring its program and marketing efforts by segmenting and selecting
appropriate customers for individual marketing programs. In some cases, it could
level lead to “outsourcing of some customer” so that a company better utilize its
resources on those customers it can serve better and create mutual value.

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In CRM, marketing efficiency is achieved because cooperative and collaborative Notes

processes help in reducing transaction costs and overall development costs for
the company. Two important processes of CRM include proactive customer
business development and building partnering relationship with most important
customers. These lead to superior mutual value creation.In recent years, however,
several factors have contributed to the rapid development and evolution of CRM.
These include the growing de-intermediation process in many industries due to
the advent of sophisticated computer and telecommunication technologies that
allow producers to directly interact with end-customer.
For example, in many industries such as airlines, banks, insurance, computer
program software, or household appliances and even consumables, the de-
intermediation process is fast- changing the nature of the consequently marking
relationship marketing more popular. Databases and direct marketing tools give
them the means to individualize their marketing efforts.
As a result, producers do not need those functions formerly performed by the
middlemen. Even consumers are willing to undertake some of the responsibilities
of direct ordering, personal merchandising, and product use-related services
with little help from the producers. Another force driving the adoption of CRM
has been the total quality movement. Marketers are realizing that it cost less to
retain customers then to compete for new customers. On the supply side, it really
pays more to develop closer relationships with a few suppliers than to develop
more vendors. In addition, several marketers are also concerned with keeping
customers for life, rather than making a one-time sale.

Customer relationship management (CRM) is a technology for managing all your

company's relationships and interactions with customers and potential customers.

30.5 CRM PROCESS:

THREE STEPS OF CRM PROCESS:
1. Acquisition:
It comprises enquiry, interaction, exchange, co-ordination and adaptation.
2. Customer Interaction Management:
3. Customer Retention:
• Customer Acquisition
• Customer acquisition is a broad term that is used to identify the process
and procedures used to locate, qualify, and ultimately secure the business
of new customers.
• Customer retention effort is to identify and quality potential customers.
• Inputs for Acquisition
• The purpose of customer acquisition an organization is likely to focus its
attention on the following

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Notes 1. The suspects

2. The enquiries
3. The lapsed customers
4. The former customers
5. The competitors’ customers
6. The competitors lapsed customer ‘s
7. The competitor ‘s enquiries
8. The competitor’s former customers
9. The referrals
10. The existing customers

30.6 RELATIONSHIP MARKETING:

Traditionally, marketing has been from the perspective of managing relationship
with customer groups. However, a much broader viewpoint is appropriate in
relation- ship marketing. Generally, this can be done through two ways, viz., by
considering a wider range of markets; and by expanding the marketing mix.
WIDENING THE MARKETS:
In traditional form of marketing, managing relationships with customer groups
and new customers was given more importance than the existing ones. Later on,
companies realized the long-term advantage they would get by maintaining and
enhancing the relationship with their existing customers. For providing quality
products and best services, it is necessary to consider a wider range of markets.
So, in addition to formulating marketing activity directed at existing and potential
customers companies are now considering other markets which includes:

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a) Supplier market:The relationship between an organization and its suppliers Notes

is undergoing some fundamental changes mainly under the influence
of Japanese. The old adversarial relationship where a company tried to
squeeze its suppliers to its own advantage, is giving away to a relationship
based much more on partnership and collaboration.
b) Recruitment market: The key resource for business (and other)
organizations is no longer capital or raw materials but skilled people, a vital,
perhaps the most vital element in customer service delivery. Companies
maintain a good relationship with these markets, which assures a regular
supply of skilled labor.
c) Referral markets: The best marketing is that which is carried out by your
customer, that is why the customer loyalty ladder and the creation of
advocates is important. But existing customers are not the only sources
of referral. Referral markets go under many names’ intermediaries,
connectors, multipliers, agencies and so on.
d) Influence markets: Influence markets tend to vary according to the type
of industry or industry sector that an organization belongs to. Companies
involved in selling infrastructure we items will place government
departments and regulatory bodies high on the list of markets they may
address. Most companies also place the financial community, in its various
forms- brokers, analysts, and financial journalists and so on in influence
category.
e) Internal markets: Internal marketing involves two main concepts; the
first is that every employee and every department in an organization is
both an internal customer and an internal supplier. Specially formulated
internal marketing programs to communicate, train and motivate internal
market members are very important if the relationship is to be a positive
one. Service quality depends to a great extent on people, and developing
long- term relationships with the internal customers is just as important as
building relation- ships with external ones.The optimal operation of the
organization is ensured when every individual and department provide and
receive excellent service.
30.7 EXPANDED MARKETING MIX:
While considering relationship marketing across different sectors, we need to
identify more marketing mix elements, which are generic and have applicability
to all areas of marketing. The elements, which offer the customers same form of
value satisfaction can be included in the marketing mix. So, three more elements
have been included in marketing mix, i.e.,
-People-The employee of the organization whom they consider as their greatest
assets and can be categorized into contractors, modifiers, influences and isolated.

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Notes -Processes-Which involves the procedures, task schedules, mechanisms,

activities and routines by which a product or service is delivered to the customer.
-Provision of customer services-Which is considered as a crucial element in
the marketing mix and seen in the content of the supply marketing channel, i.e.,
service is providing not only to its immediate customers and suppliers but also
to its ultimate consumers and even the supplier’s suppliers.
Relationship marketing implies a consideration of not just better relationships
with customer markets, but also the development and enhancement of the
relationship with other markets. There is no need for a separate marketing plan
for each market. But the companies must develop some strategies to address
each of these markets. The strategies must be deeply ingrained and understood
by all staff within the organization. The following are the steps required for
establishing relationship marketing in a company:
1. Identify key customers for the relationship marketing. The company can
choose five to ten large customers and designate them for relationship
marketing. Additional customers can be added who show exceptional
growth.
2. Assign a skilled relationship manager to each key customer. The sales
person servicing the customer should receive training in relationship
marketing.
3. Develop a clear job description to relationship managers.
4. Appoint an overall manager.
The next stage of marketing excellence is the stage that follows distribution
excellence and dialogue excellence, will be in the field of relationship excellence.
The relationship marketing will be one of the key success factors in the next
couple of decades. We have already begun to move from mass marketing to
mass customization (e.g. customized jeans from Levi Strauss) in many sectors
and industries. This individualized marketing is one of the unique aspects of
relationship marketing.
John Nesbitt labeled the 1990s as “the age of the individual.” This age has
just begun and we are even seeing new “mass marketing” media such as the
Internet and cable television requires the application of individualized marketing
techniques. Freedom of choice is becoming the way of the world as customers
find opportunities to buy products and services from beyond their normal
geographic or product scopes.
These decisions are going to be based as much on the perceived relationships the
customers have with the supplying organizations as on product characteristics,
brand personalities, price, and delivery convenience. Think about it if we are
entering a world of parity products, parity branding, parity pricing, and parity
distribution, what factors are left for customers to use in deciding which products

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and services to purchase? The answer comes down to two highly interlinked Notes
factors: the relationship between the customer and the providing organization,
and the perceived corporate image of the organization.
The credit card industry is one that is quickly moving from dialogue excellence
to relation- ship excellence. Let’s look at how this industry has evolved through
the various stages of marketing excellence. The Gold MasterCard, created by
MasterCard International in 1981, was the first bankcard created especially for a
higher income market segment.
The product allowed customers to tell their banks that they desired a credit card
with a higher credit line or one with enhanced services over the bank’s standard
level card. Hence, product-positioning excellence was combined with service
excellence.
This product segmentation approach was taken a step further with the introduction
of co-branded and affinity card programs, such as the General Motors MasterCard,
the Shell MasterCard, the American Airlines Advantage MasterCard, and the
Hong-Kong Bank Care for Nature MasterCard programs. By choosing affinity
or co-branded credit card programs, consumers identify and align themselves
with programs and organizations they desire to support. These programs are
conceived and created through dialogue excellence skills that helped to identify
and quantify the types of co-branded and affinity relationships that would be
most meaningful to cardholders (and thus would result in the highest number of
credit cards issued).
A significant stride into the sphere of relationship excellence will be taken by
the card payments industry when the reloadable chip card becomes an ordinary
method of payment for millions of cardholders. By using integrated circuit
technology to replace the magnetic stripe found on the back of today’s plastic
cards, the industry will not only greatly reduce fraudulent and counterfeiting
abuses of credit cards, it will also have a system in place in which to delve deeper
into relationship marketing.
30.8 DEVELOPMENTAL RELATIONSHIP MARKETING:
A new approach to marketing that incorporates revolutionary new findings in
brain/ mind research gives marketers unique access to the three basic knowledges
of marketing: developmental relationship marketing (DRM). DRM has been
successfully employed in TV commercials, print ads, direct mail, and face-to-
face selling. Effective marketing and sales require three basic knowledge’s:
1. Knowledge of customers’ needs
2. Knowledge of customers’ motivations
3. Knowledge of how to activate consumers’ motivations in favor of product
purchase

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Notes Companies are finding it increasingly difficult to “push” products into the
marketplace using traditional approaches. Consumer resistance to “push” is
growing, along with their desire to be regarded on a 1:1 basis as individuals.
Relationship marketing also is changing consumer research which traditionally
has focused on discovering average characteristics of average consumers.
But “average” characteristics of a cluster of consumers tell little about the
characteristics of a single consumer. Relationship marketing requires knowledge
of single consumers. However, economic factors limit research on such a 1:1
basis. Even data base entries on individual consumers fail to fully satisfy the
three basic knowledge requirements of marketing. The heretofore unfulfilled
challenge in 1:1 or relationship marketing learning about individual consumers
without costly advance research can be met by DRM.
DRM revolves around the simplest definition of marketing: product-related
information processing. Marketers process information drawn from research,
experience and their own subjective dispositions to create a marketing message.
Consumers process information drawn from marketers’ messages, experiences,
and also from their subjective dispositions. Knowledge of the time table and
nature of these developmental changes enables a marketer to accurately
presume much about a consumer merely by knowing a consumer’s age, cultural
background and gender in some respects, providing more information than
traditional consumer surveys disclose. DRM communications first target the
brain and preconscious mind. The preconscious mind controls information flow
to the conscious mind by determining which information is most relevant to a
person’s interests. Preconscious screening of incoming information is necessary
because more data enters the brain from the five senses than the conscious
30.9 TYPES OF CRM:
CRM addresses elements like lifetime value, quality service, systems, customer
data, and leadership attitudes. There are three types of CRM. They are:
Collaborative CRM consists of technologies to ensure enterprise/customer
interaction across all contact channels such as in-person, phone, electronic and
wireless. The collaborative infrastructure provides access to people, processes
and data across the entire spider chart.
Operational CRM provides the biggest surprise, with its inclusion of back-
office and legacy applications under operational CRM. Customer relationship
management and front office have always been considered synonymous, with
the two terms being used interchangeably. They are all elements of an overall
customer-facing system.
Analytical CRM is what delivers the profitability payoff. Analytics takes the
mass of relationship data throughout the relational enterprise and puts it into
a form that can be used to add proactive value. This means that operational
results, product information, and marketing data must be integrated using data
warehousing and reporting tools.

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Notes
SUMMARY
Traditionally Relationship Marketing has involved knowing the customer very
well and focusing on their requirements over time. It involves approaching the
customer off and on, offering suggestions and addressing grievances. It is more
about customer management than product or brand management. Customers
today seek out brands that deliver experiences that appeal to customers’ senses,
heart, and mind.
When brands are seen as experience providers, equity is measured in their
sensory stimulation, emotional bonding, and lifestyle value. Strategy focuses
on creating and enhancing experiences for customers before, during, and
after purchase. To build and sustain a great brand, companies need to ensure
an integrated customer experience that is delivered through communications,
products, service, personnel, and every customer contact.

CASE STUDY :
CRM EXPERIENCES IN INDIA:
For the first time in the Indian skies, Kingfisher Airlines offers world-class
in- flight entertainment with personal video screens for every seat. There’s
a wide selection of 5 video channels and 10 audio channels available on-
board. Also on offer are extra- wide seats and spacious legroom, delicious
gourmet meals, international-class cabin crew and a whole host of comforts
and delights.
Kingfisher Airlines also facilitates doorstep delivery of tickets on guest request.
Kingfisher developed King Club, Jet airways came out with Jet Privilege
membership, tie in programs with dot coms, credit card companies etc., to
retain the customers who are shifting to discount airlines. Blue dart’s focus
was on providing customers with quality service and an enhanced customer
experience, they continued to upgrade and expand their infrastructure, by
adding new facilities in Lucknow, Mumbai, Pune, Ahmedabad, Meerut and
Jaipur, and moving to a new, state-of-the- art warehouse facility in Delhi.
Pizza Hut recognizes frequent callers and the context of their call enabling
the customer to be routed to the agent who can best fulfill their requirements,
whether its a new order, changes to an existing order or a status inquiry on
an existing order. Pizza Hut operators can access up-to-date information on
its outlets in the catchment area, enabling them to select the Pizza Hut store
that can fulfill the customer order quickest, thereby meeting its commitment
to deliver hot pizza quickly. The new service using IT offered by Hindustan
Unilever was intended to be friendly and personal. For this, an innovative
communication route was adopted. The entire service was branded as Infra
Jini to give users an idea of the friendly and personal nature of the service.”
This little “infrastructure genie” gave the service a personal touch and was

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Notes popularized by means of posters and mailers. The Infra Jini is also present
on the desktops as a clickable icon, which took the user to the website from
where he can log a call online. Taj Hotels Provide the ‘frequent customer
‘with much higher luxury facilities at no extra cost. Crossword bookstall
allows its customers to go through any book without any compulsion to
purchase the book.

KEYWORDS:
Lead management: Sales leads can be tracked through CRM, enabling sales
teams to input, track and analyse data for leads in one place.
Analytics: Analytics in CRM help create better customer satisfaction rates by
analysing user data and helping create targeted marketing campaigns.
Social media: In CRM involves businesses engaging with customers directly
through social media platforms, such as Facebook, Twitter and LinkedIn. Social
media presents an open forum for customers to share experiences with a brand,
whether they are airing grievances or promoting products.
Mobile CRM: CRM applications built for smartphones and tablets have become
a must-have for sales representatives and marketing professionals who want to
access customer information and perform tasks when they are not physically in
their offices.
Cloud-based CRM: With CRM that uses cloud computing, also known as SaaS
(software as a service) or on-demand CRM, data is stored on an external, remote
network that employees can access anytime, anywhere there is an internet
connection, sometimes with a third-party service provider overseeing installation
and maintenance.
EXERCISE:
POINTS TO PONDER:
Answer the following Questions Given Below:
1.In the context of CRM, what does the abbreviation SFA stands for-
--------------
2.----------rate measures the number of customers a company retains
over a given period of time.
3.--------------is a process of managing a company’s interactions and
relationship with customers and potential customers.
4.-----------is the present value of future cash flows of a customer
contributed towards a business over the entire lifetime of a company.
5.--------------involves the activities and strategies that companies
use to manage their interaction with current and potential customers.
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Notes
SELF ASSESSMENT QUESTIONS:
SHORT ANSWER QUESTIONS:
1. What is CRM?
2. Define CRM.
3. List out the areas of CRM.
4. What is customer loyalty?
5. What are the methods of measuring CRM.
6. List out different types of CRM.
LONG ANSWER QUESTIONS:
1. Why need for consumers buy online.
2. Explain the broad areas of CRM?
3. Explain strategies for customer loyalty development.
4. Explain CRM process.
5. Explain different types of CRM

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Notes
LESSON 31 – CUSTOMER ACQUSITION,
RETAINING, DEFECTION
CONTENT:
LEARNING OBJECTIVE
LEARNING OUTCOME
31.1 CUSTOMER ACQUSITION
31.2 STRATEGIES FOR CUSTOMER ACQUISITION
31.3 CUSTOMER RETENTION
31.4 SUPPORTING ACQUISITION
31.5 SUCCESSFUL STRATEGIES OF CUSTOMER ACQUISITION
31.6 CUSTOMER RETENTION
31.7 STRATEGIES FOR CUSTOMER RETENTIONS
31.8 CUSTOMER DEFECTION
31.9 TYPES OF DEFECTION
31.10STRATEGIES FOR PREVENTION OF DEFECTION
SUMMARY
CASE STUDY
KEYWORDS
EXERCISE
SELFASSESSMENT QUESTIONS

LEARNING OBJECTIVE:
• To find out a customer acquisition model helps maximize ROI by focusing
your efforts on prospects who are likely to convert for a reasonable cost to
you.
• The goal of this process is to create a systematic, sustainable strategy to
acquire new customers and grow revenue for the business.
• To understand Customer retention increases your customers’ lifetime value
and boosts your revenue
LEARNING OUTCOME:
• To identify the Leading companies are using customer retention as their
main marketing objective to ensure that they are acquiring the right kind of

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customers in the first place, to predict the return on marketing overall, and Notes
to drive sales and financial forecasting models.
• The reasons for defection and to use this information to improve the
product.
• The ultimate goal is to drive the receiver of the marketing campaign to
initiate action and purchase the product or service.
31.1 CUSTOMER ACQUSITION:
Many companies have adopted customer relationship management (CRM)
systems that can support both acquisition and retention by gathering data from
every contact with prospects and customers. Just collecting data should not be an
end unto itself, however. The real focus should be on developing a data strategy
and tuning the CRM system to help your company acquire and retain the right
types of customers.
31.2 STRATEGIES FOR CUSTOMER ACQUISITION:
1. FOCUSED APPROACH:
a) Knower
b) Preferer
c) Indifferent
d) Rejecters
2. PROVIDING A WIN-WIN PLATFORM
3. INTITATE FORUM FOR COMMUNICATION
4. ATTEMPT TO MINIMIZE ―FUD‖ (Fear, Uncertainity, Doubts)
5. PROJECTION OF BENEFITS AND NOT PRODUCTS
6. CONTEXTUAL APPLICATION
7. FOCUS ON DECISION PROCESS
31.3 CUSTOMER RETENTION:
Customer retention is the activity that a selling organization undertakes in order
to reduce customer defections.
Successful customer retention starts with the first contact an organization has
with a customer and continues throughout the entire lifetime of a relationship.
A company’s ability to attract and retain new customers, is not only related to
its product or services, but strongly related to the way it services its existing
customers and the reputation it creates within and across the marketplace.
31.4 SUPPORTING ACQUISITION:
The goal for the acquisition phase of your program should be deciding which
prospects most closely match your company’s “ideal prospect” profile, but you

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Notes should also decide which prospects don‘t meet your criteria for acquisition and
eliminate them up front. This simple decision helps focus your marketing and
acquisition efforts while saving costs and increasing your return on investment
(ROI).
Analysing your marketing campaigns to determine which are most effective
in bringing in new customers is also important. A CRM system that is able to
tag data (assigning each contact to a specific campaign) lets you analyse the
return on the investment you are making in your marketing effort as well as its
overall effectiveness in identifying likely prospects. Another benefit of tagging
is that it lets you look at marketing programs and their related expenses by
leads generated, customers acquired, and potential and realized revenue. This
will enable your company to better tailor campaigns to individual customers and
prospects based on response or effectiveness rates.
Acquiring customers is critical to the financial success of your business. Many
companies take the decision to land-grab customers in order to secure new
business; however a more sustainable approach is to strategically determine what
type of customer best suits your business needs. This more strategic approach
will guarantee you are able to engage high quality, profitable customers.
In order to secure new customers, companies will look to utilise a number of
individual acquisition channels such as direct mail and above the line advertising.
Nevertheless, in order to guarantee success, companies need to adopt a fully
integrated multi-channel approach.
By doing so, companies immediately become more available to their potential
customer base. Touch’s experience of delivering effective multi-channel
solutions including inbound and outbound telephony, DM fulfilment as well as
email and SMS marketing allows businesses to adopt an approach to acquisition
which embraces all available communication channels.
Furthermore, Touch’s knowledge and expertise in customer lifecycle management
allows us to advise our clients which ensures they are always utilising the most
cost-effective solution aligned to their business needs.
31.5 SUCCESSFUL STRATEGIES OF CUSTOMER
ACQUISITION:
Customer acquisition is a process of identifying, approaching and developing
new customer relationships. It is important that new relationships formed are
acquired from the right type of customer, in order to ensure a sustainable future.
Acquiring customers is one of the most important factors in the success of a
business. The importance of acquisition not only lies in the volume of customers
acquired, but the profitability and value that the customer will bring. Adopting a
strategic approach is advised when it comes to acquiring customers. Determining
what type of customer best suits the business needs, enables you to target
customers which will be profitable and add value to the organization.

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Some companies will take the decision of land-grab customers in order to secure Notes
new business. It is inevitable that this strategy will acquire customers but not
necessarily the customers who will best suit the business needs.
A successful customer acquisition strategy is that of which adopts a fully
integrated multi-channel approach. Giving customers the choice to utilize their
preferred channel, instantly creates a positive impact on potential customers.
Also, this fully integrated method means businesses increase availability to their
potential customer base.
Companies with successful acquisition strategies recognize that consumers;
communication channels evolve throughout the customer lifecycle. This enables
the company to prepare to adapt to such changes in a responsive manor.
Another important factor of customer acquisition is ensuring that a company’s
brand immersion methodology is aligned with their customer acquisition
strategies. Cultural beliefs and values of the company need to be highlighted in
any acquisition campaign a business implements in order to not only acquire but
retain high value and profitable customers.
This will not only create a positive experience for the customer, but have
a positive impact on the overall brand of the business, heightening it’s brand
awareness to the customers.
Acquiring New Customers
As I have said, customers are the life blood of your business. Without them, you
are out of business, fast. The majority of your energy will be expended acquiring
and keeping customers at your business.
In my book, “Don’t Be Afraid To Start Your Business”, I go into great detail
about marketing your business. Acquiring customers actually falls under the
heading of marketing; however I want to go into greater detail in this chapter
how to do it.
Customers come to our businesses in one of three forms. No, not Good, Bad, and
Ugly, but rather New, Repeat and Referral customers.
New customers are the hardest and most expensive to get. You will spend more
time, money and energy attracting new customers to your business. If you are
just starting a business, listen closely, because your success here will determine
whether you are in business two years from now. Once you’ve acquired some
new customers, you can quickly move to the other two levels.
How do you attract new customers to your business? If there was one simple
answer to that question, I would be worth millions of dollars. Although there
isn’t a single answer, there are techniques you can use that will make this task
easier and less expensive. Learn to avoid the mistakes others make and you’ll
increase your odds for success.

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Notes 31.6 CUSTOMER RETENTION:

Customer retention refers to the percentage of customer relationships that, once

established, a small business is able to maintain on a long-term basis. It is a major
contributing factor in the net growth rate of small businesses. For example, a
company that increases its number of new customers by 20 percent in a year but
retains only 85 percent of its existing customers will have a net growth rate of
only 5 percent (20 percent increase less 15 percent decrease). But the company
could triple that rate by retaining 95 percent of its clients.
“Of course, growth is just one of the benefits experienced by companies
with superior retention rates,” William A. Sherden explained in an article for
Small Business Reports. “Your profits also should improve considerably when
customers stay on board for longer periods of time.
The cost of acquiring customers and putting them on the books generally runs
two to four times the annual cost of serving existing customers. So, the longer
you keep customers, the more years over which these one-time costs can be
spread.”
A variety of strategies are available to small business owners seeking to improve
their customer retention rates. Of course, the most basic tools for retaining
customers are providing superior product and service quality.
High quality products and services minimize the problems experienced by
customers and create goodwill toward the company, which in turn increases
customers’ resistance to competitors’ overtures. However, it is important that
small business owners not blindly seek to improve their customer retention
rate. Instead, they must make sure that they are targeting and retaining the right
customers—the ones who generate high profits. “In short, customer retention
should never be a stand-alone program, but rather part of a comprehensive
process to create market ownership,” Sherden wrote.

Customer retention refers to the ability of a company or product to retain its

customers over some specified period.

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Some companies may be able to use electronic links to improve the service Notes
they provide to customers. For example, e-mail connections could be used to
provide updates on the status of accounts, electronic order systems could be
used to simplify reordering and reduce costs, and online services could be used
to provide general information.
Sherden noted that customer retention programs are particularly important in
volatile industries— those characterized by fluctuating prices and product values.
In this situation, superior service may discourage but not prevent customer
defections.
Some strategies that may be useful to companies in volatile industries include
providing stable prices over the customer life cycle, basing prices on the overall
cost and profitability of the customer relationship, and cross-selling additional
products and services.
All of these strategies are intended to minimize the changes and problems
customers’ experience, thus making them wants to maintain the business
relationship
31.7 STRATEGIES FOR CUSTOMER RETENTIONS:
1. PEOPLE
2. PRODUCT
3. PROCESS
4. ORGANISATION
5. SETTING SATISFACTORY SERVICE STANDARDS
6. CONCENTRATION ON COMPETITORS
7. CUSTOMER ANALYSIS
8. COST ANALYSIS
9. CONCENTRATION ON THE PAYING ABILITY OF CUSTOMERS
10. KNOWLEDGE ON PURCHASE BEHAVIOUR PATTERN
11. DIFFERENCIATION IN PRICES AND QUALITY STANDARDS
12. FOCUS ON REDUCING DISSATISFACTION
13. ATTENTION ON CHANGING REQUIREMENT OF CUSTOMERS
14. CONCENTRATION ON PERFORMANCE
15. TRAINING TO SUPPLY CHAIN EMPLOYEES
16. EMPOWERMENT TO SERVICE PROVIDERS
17. INCENTIVIZING SERVICE PROVIDERS
18. AUGMENTING INTANGIBLE BENEFITS
19. VISIT TO THE POINT OF USAGE OF THE PRODUCT
20. DEVELOP PARTNERSHIP WITH CUSTOMERS
21. ORGANIZING CUSTOMER CLUBS

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Notes 22. RELATIONSHIP BASED PRICING SCHEMES

23. EFFECTIVE CUSTOMER COMMUNICATION SYSTEM
24. CUSTOMER COMPLIANT MONITORING CELL
25. DEVELOPING CUSTOMER SATISFACTION INDEX
26. FOCUS ON PREVENTIVE ACTIONS
27. CONCENTRATION ON CUSTOMER SATISFACTION RESEARCH
28. FOCUS ON FOCUS GROUP
29. BUILDING SWITCHING BARRIERS
31.8 CUSTOMER DEFECTION:
Customer defection is the rate at which customers defect or stop the usage of
products of a company. business with high defection rate, would be losing their
existing customers.
In order to overcome this, they use another term of customer retention, in simple
words its to retain or prevent the existing customers to defect the product.
31.9 TYPES OF DEFECTION:
• PRICE DEFECTORS
• PRODUCT DEFECTORS
• SERVICE DEFECTORS
• MARKET DEFECTORS
• TECHNOLOGICAL DEFECTORS
• ORGANISATIONAL DEFECTORS
31.10 STRATEGIES FOR PREVENTION OF DEFECTION:
Every customer that you keep represents at least three that you don’t have
to attract. Numerous research studies indicate that the cost of acquiring a new
customer usually runs from two to four times the annual cost of keeping an
existing customer. Obviously, an effective customer retention strategy translates
into profits.
It has been estimated that most companies spend about 98 percent of their time
reacting to problems and less than 2 percent preventing them. The first, most
important, way to prevent customer defections is to identify and define each
problem from the customer‘s vantage point. This blog suggests several ways to
retain customers once you understand the problems and their ramifications.
Superior service and database management provide your best defense
against customer defections. Service provides the opportunity to solve customer
problems and build partnerships; the database serves as a vehicle to personalize
customer communication and enhance your relationships. The Key Points Are

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4 ANALYZE CUSTOMER DEFECTIONS AND MONITOR DECLINING Notes

ACCOUNTS
5 ADDRESS KEY CHURN DRIVERS
6 IMPLEMENT EFFECTIVE COMPLAINT-HANDLING AND SERVICE
RECOVERY PROCEDURES
7 INCREASE SWITCHING COSTS.

SUMMARY

CRM applications often track customer interests and requirements, as well as

their buying habits. This information can be used to target customer selectively.
Furthermore, the products a customer have purchased can be tracked throughout
the product’s life cycle, allowing customers to receive information concerning
a product or to target customer with information on alternative products
once a product begins to be phased out. Repeat purchases rely on customer a
satisfaction, which in turn comes from a deeper understanding of each customer
and individual needs. CRM is an alternative to the “one size fits all” approach. In
industrial markets, the technology can be used to coordinate the conflicting and
changing purchase criteria of the sector.

CASE STUDY :
A major services company had many customers churning to a competitor.
Insight was needed into which customers were at risk of leaving, why they
were leaving, and what customers to focus the retention effort on.A trend
was noticed that customers who contacted a call centre were more likely to
leave the company within the next 6 months.The company wanted to confirm
whether this trend was genuine and if so, was anything that a customer said or
their pattern of contacting call centre indicative of their propensity to leave?
The company also wanted to know at least two months in advance if a customer
was likely to leave so that their retention team could contact the customer and
attempt to persuade them to stay.

SOLUTION:
We used the company’s own data to deliver the solution.
• Applied text mining to the inbound call centre records of the conversations
between customers and staff.
• Uncovered early warning signs of customer churn, enabling successful
customer retention before they had committed to leaving the company.
• Built profiles of the different segments of at-risk customers, showing their
needs, motivations and their value to the company.

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Notes • Adding insights from text data improved accuracy of churn prediction by
12%
KEYWORDS:
Customer acquisition refers to bringing in new customers - or convincing people
to buy your products.
Customer retention refers to the ability of a company or product to retain its
customers over some specified period.
Customer Attraction marketing can be defined as a marketing strategy that helps
you gain customers and clients, or ‘attract’ them, who already want to buy what
you have to offer.
Customer Defection is the loss of users or consumers (churn/ attrition) or the
decrease in purchases by them, with the following impact on reducing the
Company’s business.
EXERCISE:
POINTS TO PONDER:
Answer the following Questions Given Below:

1.------------is the process of acquiring new customers for business or converting existing
prospect into new customers.

2.------------is the reaction by the organization to the queries and activities of the customer.

3. These types of customers are less in numbers but promote more sales and profit as
compared to other customers as these are the ones which are completely satisfied-----------

4. ------------are also frequent visitors but they are only a part of business when offered with
discounts on regular products and brands or they buy only low cost products.
SELF ASSESSMENT QUESTIONS:
SHORT ANSWER QUESTIONS:
1.What is customer retention?
2.Define customer Acquisition.
3.What is meant by customer defection?
4.List some of the strategies for customer acquisition.
5.State the meaning of AIDA formula.
LONG ANSWER QUESTIONS:
1.Discuss the strategies for building customer relationship.
2.Describe the strategies to prevent customer defection.
3.Briefly explain about the customer acquisition.

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UNIT - V Notes

LESSON 32 – MARKETING INFORMATION

SYSTEM

CONTENT:
LEARNING OBJECTIVE
LEARNING OUTCOME
32.1 MARKETING INFORMATION SYSTEM-DEFINITION
32.2 MARKET INFORMATION FORM
SUMMARY
CASE STUDY
KEYWORDS
EXERCISE
SELF ASSESSMENT QUESTIONS

LEARNING OBJECTIVE:
• Explain the situations in which marketing research should be used versus
market intelligence.
• The basic objective of MIS is to provide the right-information at the right-
time to the right-people to help them take right decisions.
• Describe the limitations of market intelligence and its ethical boundaries.
LEARNING OUTCOME:
• It helps the controlling of marketing activities. It helps effective tapping of
marketing opportunities and effective defense against marketing threats.
• It helps the firm to adjust its product and services to the needs and taste of
customers. It provides market intelligence to the firm.
• A marketing information system is a computer software program that
collects data about consumers’ spending habits and uses it to target
32.1 MARKETING INFORMATION SYSTEM-DEFINITION:
Definition: The Marketing Information System refers to the systematic
collection, analysis, interpretation, storage and dissemination of the market
information, from both the internal and external sources, to the marketers on a
regular, continuous basis.

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Notes The marketing information system distributes the relevant information to

the marketers who can make the efficient decisions related to the marketing
operations viz. Pricing, packaging, new product development, distribution,
media, promotion, etc.
Every marketing operation works in unison with the conditions prevailing both
inside and outside the organization, and, therefore, there are several sources (
viz. Internal, Marketing Intelligence, Marketing Research) through which the
relevant information about the market can be obtained.
Components of Marketing Information System

1. Internal Records: The Company can collect information through its internal
records comprising of sales data, customer database, product database, financial
data, operations data, etc. The detailed explanation of the internal sources of data
is given below:
• The information can be collected from the documents such as invoices,
transmit copies, billing documents prepared by the firms once they receive
the order for the goods and services from the customers, dealers or the
sales representatives.
• The current sales data should be maintained on a regular basis that serves as
an aide to the Marketing Information System. The reports on current sales
and the inventory levels help the management to decide on its objectives,
and the marketers can make use of this information to design their future
sales strategy.
• The Companies maintain several databases such as*Customer Database-
wherein the complete information about the customer’s name, address,
phone number, the frequency of purchase, financial position, etc. is saved.
* Product Database- wherein the complete information about the product’s
price, features, variants, is stored.
* Salesperson database, wherein the complete information about the
salesperson, his name, address, phone number, sales target, etc. is saved.
• The companies store their data in the data warehouse from where the
data can be retrieved anytime the need arises. Once the data is stored,

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the statistical experts mine it by applying several computer software and Notes
techniques to convert it into meaningful information that gives facts and
figures.
2. Marketing Intelligence System: The marketing intelligence system provides
the data about the happenings in the market, i.e. data related to the marketing
environment which is external to the organization. It includes the information
about the changing market trends; competitor’s pricing strategy, change in
the customer’s tastes and preferences, new products launched in the market,
promotion strategy of the competitor, etc.
In order to have an efficient marketing Information System, the companies should
work aggressively to improve the marketing intelligence system by taking the
following steps:
• Providing the proper training and motivating the sales force to keep a
check on the market trends, i.e. the change in the tastes and preferences of
customers and give suggestions on the improvements, if any.
• Motivating the channel partners viz. Dealer, distributors, retailers who
are in the actual market to provide the relevant and necessary information
about the customers and the competitors.
• The companies can also improve their marketing intelligence system by
getting more and more information about the competitors. This can be
done either by purchasing the competitor’s product, attending the trade
shows, reading the competitor’s published articles in magazines, journals,
financial reports.
• The companies can have an efficient marketing information system by
involving the loyal customers in the customer advisory panel who can
share their experiences and give advice to the new potential customers.
• The companies can make use of the government data to improve its
marketing Information system. The data can be related to the population
trends, demographic characteristics, agricultural production, etc. that help
an organization to plan its marketing operations accordingly.
• Also, the companies can purchase the information about the marketing
environment from the research companies who carry out the researches on
all the players in the market.
• The Marketing Intelligence system can be further improved by asking the
customers directly about their experience with the product or service via
feedback forms that can be filled online.
3. Marketing Research: The Marketing Research is the systematic collection,
organization, analysis and interpretation of the primary or the secondary data to
find out the solutions to the marketing problems. Several Companies conduct
marketing research to analyze the marketing environment comprising of changes

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Notes in the customer’s tastes and preferences, competitor’s strategies, the scope of
new product launch, etc. by applying several statistical tools. In order to conduct
the market research, the data is to be collected that can be either primary data
(the first-hand data) or the secondary data (second-hand data, available in books,
magazines, research reports, journals, etc.)
The secondary data are publicly available, but the primary data is to be collected
by the researcher through certain methods such as questionnaires, personal
interviews, surveys, seminars, etc.

Marketing research is the systematic gathering, recording, and analysis of qualitative

and quantitative data about issues relating to marketing products and services.

Marketing research contributes a lot in the marketing information system as it

provides the factual data that has been tested several times by the researchers.
4. Marketing Decision Support System: It includes several software programs
that can be used by the marketers to analyze the data, collected so far, to take
better marketing decisions. With the use of computers, the marking managers
can save the huge data in a tabular form and can apply statistical programs to
analyze the data and make the decisions in line with the findings.
Thus, the marketers need to keep a check on the marketing environment, i.e. both
the internal (within the organization) and the external (outside the organization,
so that marketing policies, procedures, strategies can be designed accordingly.
A Marketing Information System (MIS) consists of people, equipment, and
procedures together, sort, analyze, evaluate, and distribute needed, timely, and
accurate information to marketing decision makers.

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A marketing information system (MIS) is a set of procedures and methods Notes

designed to generate, analyse, disseminate, and store anticipated marketing
decision information on a regular, continuous basis. An information system
can be used operationally, managerially, and strategically for several aspects of
marketing.
A marketing information system can be used operationally, managerially, and
strategically for several aspects of marketing. We all know that no marketing
activity can be carried out in isolation, know when we say it doesn‘t work
in isolation that means there are various forces could be external or internal,
controllable or uncontrollable which are working on it.
Thus to know which forces are acting on it and its impact the marketer needs
to gathering the data through its own resources which in terms of marketing
we can say he is trying to gather the market information or form a marketing
information system.
This collection of information is a continuous process that gathers data from a
variety of sources synthesizes it and sends it to those responsible for meeting the
market places needs. The effectiveness of marketing decision is proved if it has a
strong information system offering the firm a competitive advantage. Marketing
Information should not be approached in an infrequent manner.
If research is done this way, a firm could face these risks:
1. Opportunities may be missed.
2. There may be a lack of awareness of environmental changes and competitors
‘actions.
3. Data collection may be difficult to analyse over several time periods.
4. Marketing plans and decisions may not be properly reviewed.
5. Data collection may be disjointed.
6. Previous studies may not be stored in an easy to use format.
7. Time lags may result if a new study is required.
8. Actions may be reactionary rather than anticipatory.
The total information needs of the marketing department can be specified and
satisfied via a marketing intelligence network, which contains three components.
1. Continuous monitoring is the procedure by which the changing environment
is regularly viewed.
2. Marketing research is used to obtain information on particular marketing
issues.
3. Data warehousing involves the retention of all types of relevant company
records, as well as the information collected through continuous monitoring
and marketing research that is kept by the organization.
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Notes Depending on a firm‘s resources and the complexity of its needs, a marketing
intelligence network may or may not be fully computerized. The ingredients
for a good MIS are consistency, completeness, and orderliness. Marketing plans
should be implemented on the basis of information obtained from the intelligence
network.
A Marketing Information System offers many advantages:
1. Organized data collection.
2. A broad perspective.
3. The storage of important data.
4. An avoidance of crises.
5. Coordinated marketing plans.
6. Speed in obtaining sufficient information to make decisions.
7. Data amassed and kept over several time periods.
8. The ability to do a cost-benefit analysis.
The disadvantages of a Marketing information system are high initial time and
labour costs and the complexity of setting up an information system. Marketers
often complain that they lack enough marketing information or the right kind, or
have too much of the wrong kind.
The solution is an effective marketing information system.
The information needed by marketing managers comes from three main sources:
1) Internal company information – E.g. sales, orders, customer profiles, stocks,
customer service reports etc
2) Marketing intelligence – This can be information gathered from many
sources, including suppliers, customers, and distributors. Marketing intelligence
is a catchall term to include all the everyday information about developments
in the market that helps a business prepare and adjust its marketing plans. It is
possible to buy intelligence information from outside suppliers (e.g. IDC, ORG,
MARG) who set up data gathering systems to support commercial intelligence
products that can be profitably sold to all players in a market.
(3) Market research – Management cannot always wait for information to arrive
in bits and pieces from internal sources. Also, sources of market intelligence
cannot always be relied upon to provide relevant or up-to-date information
(particularly for smaller or niche market segments). In such circumstances,
businesses often need to undertake specific studies to support their marketing
strategy – this is market research.
Evidence of inadequate Marketing Information Systems
In addition to not seeing them in companies for which I have studied and
consulted, it is obvious from the ads and commercials that most companies run

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in the media. When is the last time you saw an ad or commercial that has a built- Notes
in mechanism, or code, for the advertiser to track the success of the ad?
Over many years, my students at USC continuously analyze ads and commercials
of Fortune 1000 companies as part of their homework assignments. As they have
discovered, too many ads in various media (print, broadcast, and even online)
have no such mechanisms.
Further evidence is provided in marketing industry publications that complain
about the lack of specific cradle-to-grave information that ties together marketing
efforts with sales and profit results. CEOs of major companies complain about
the lack of definitive data all the time.
The ultimate evidence is that marketing budgets are slashed in economic
downturns. If CEOs and other executives believed that marketing worked
efficiently and effectively, they would not look at marketing as a cost item but an
investment on which they would realize a return.
Downturns should prompt marketing increases not cuts. Furthermore, there are
so many articles that talk about CMOs losing credibility. The primary way a
CMO can prove his or her worth is to collect the data on the return the company
is realizing on its marketing investment. To do that, a comprehensive marketing
information system is required.
32.2 MARKET INFORMATION FORM:
To minimize paperwork, marketers can collect a lot of the information from
the above list on a Market Information Form (or its electronic equivalent). The
information collected and how this information is used is summarized below.
1. Complaints: Once collected, complaints are distributed to those that can
solve the problem quickly. The objective is to turn the negative into a
positive and build a stronger relationship with the offended party. The way
companies handle complaints can mean the difference between success
and failure in an increasingly competitive marketplace.
2. Compliments: After obtaining permission, marketers use compliments in
their marketing communications. Nothing is more effective than bona fide
testimonials from customers. Copies are also given to sales people so they
can put them in their sales notebooks and use them to impress prospects
and close business.
3. New Product ideas: These are fed into the company’s new product
development system.
4. Competition Information: This is given to sales people to put in their
sales notebooks so they can use the data to answer objections and close
business (with the caveat of not disparaging competitors) and is fed into
the company’s new product development system so that new products can
be designed to beat competitors.

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Notes 5. Strategy feedback: This information is organized by the marketing building

blocks (1) corporate image, (2) positioning, (3) product, (4) pricing, (5)
distribution, (6) promotion, and (6) marketing information system (yes we
need to collect information as to how well our MIS strategies are working).
Based on feedback, strategies are adjusted as necessary.
A pad of these forms (or an electronic version) is provided to all the contact
points including
(1) Receptionists and secretaries that answer the phone, (2) Sales people, (3)
Customer service people, (4) Repair people, (5) Personnel that respond to
inquiries and complaints online and on social media, and (6) accounts receivable
(since they often hear about complaints when they try to collect on late invoices).

SUMMARY
Marketing information systems are intended to support management decision
making. Management has five distinct functions and each requires support from
an MIS. These are: planning, organizing, coordinating, decisions and controlling.
Information systems have to be designed to meet the way in which managers
tend to work. Research suggests that a manager continually addresses a large
variety of tasks and is able to spend relatively brief periods on each of these.
Given the nature of the work, managers tend to rely upon information that is
timely and verbal (because this can be assimilated quickly), even if this is likely
to be less accurate then more formal and complex information systems.
Managers play at least three separate roles: interpersonal, informational and
decisional. MIS, in electronic form or otherwise, can support these roles in varying
degrees. MIS has less to contribute in the case of a manager’s informational role
than for the other two.
Three levels of decision making can be distinguished from one another: strategic,
control (or tactical) and operational. Again, MIS has to support each level.
Strategic decisions are characteristically one-off situations. Strategic decisions
have implications for changing the structure of an organization and therefore the
MIS must provide information which is precise and accurate. Control decisions
deal with broad policy issues and operational decisions concern the management
of the organization’s marketing mix.
A marketing information system has four components: the internal reporting
system, the marketing research systems, the marketing intelligence system and
marketing models. Internal reports include orders received, inventory records
and sales invoices. Marketing research takes the form of purposeful studies
either ad hoc or continuous. By contrast, marketing intelligence is less specific
in its purposes, is chiefly carried out in an informal manner and by managers
themselves rather than by professional marketing researchers.

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Notes
CASE STUDY :
A waiter takes an order at a table, and then enters it online via one of the
six terminals located in the restaurant dining room. The order is routed to a
printer in the appropriate preparation area: the cold item printer if it is a salad,
the hot-item printer if it is a hot sandwich or the bar printer if it is a drink. A
customer’s meal check-listing (bill) the items ordered and the respective prices
are automatically generated. This ordering system eliminates the old three-
carbon-copy guest check system as well as any problems caused by a waiter’s
handwriting. When the kitchen runs out of a food item, the cooks send out an
‘out of stock’ message, which will be displayed on the dining room terminals
when waiters try to order that item. This gives the waiters faster feedback,
enabling them to give better service to the customers. Other system features
aid management in the planning and control of their restaurant business. The
system provides up-to-the-minute information on the food items ordered and
breaks out percentages showing sales of each item versus total sales. This
helps management plan menus according to customers’ tastes. The system
also compares the weekly sales totals versus food costs, allowing planning
for tighter cost controls. In addition, whenever an order is voided, the reasons
for the void are keyed in. This may help later in management decisions,
especially if the voids consistently related to food or service. Acceptance of
the system by the users is exceptionally high since the waiters and waitresses
were involved in the selection and design process. All potential users were
asked to give their impressions and ideas about the various systems available
before one was chosen

QUESTIONS:
1. In the light of the system, describe the decisions to be made in the area
of strategic planning, managerial control and operational control? What
information would you require to make such decisions?
2. What would make the system a more complete MIS rather than just doing
transaction processing?
3. Explain the probable effects that making the system more formal would
have on the customers and the management.
KEYWORDS:
Internal records. This is the first and most easily obtainable type of information
you can get inside your organization.
Marketing research. This essential marketing information system component
allows you to state a specific problem as your current business goal and investigate
all the details necessary for developing its solution.

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Notes Marketing intelligence. This type of data makes it possible to understand the
current situation and changes in the market, trends, competitors’ strategies,
recent innovations in the market, and consumers’ preferences.
Marketing decision support system (MDSS). This data can be retrieved from
special analytics software and services that help marketers collect, store, and
analyze data to make better decision.
Management control decisions: Such decisions are concerned with how
efficiently and effectively resources are utilised and how well operational units
are performing.
Operational control decisions: These involve making decisions about carrying
out the “ specific tasks set forth by strategic planners and management.
Marketing intelligence systems: Whereas marketing research is focused, market
intelligence is not. A marketing intelligence system is a set of procedures and data
sources used by marketing managers to sift information from the environment
that they can use in their decision making.
EXERCISE:
POINTS TO PONDER:
Answer the following Questions given below:

1.Four basic or main components of marketing information system are----------

2.-----------is a collection of hardware, software, data, people and procedures that work
together to produce quality information for marketing decision makers.

3.The following can provide regular information about the daily activities of business
to managers---------

SELF ASSESSMENT QUESTIONS:

SHORT ANSWER QUESTION:
1.What is marketing Information system?
2.Define lead card.
3.What is marketing information Form?
4.What is marketing Intelligence?
5.Define marketing decision support system.
LONG ANSWER QUESTIONS:
1.Explain about components of marketing Information system.
2.Explain in detail about marketing Intelligence system.
3.Briefly discuss about evidence of inadequate marketing Information system.

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Notes
LESSON 33 – MARKETING RESEARCH
PROCESS
CONTENT:
LEARNING OBJECTIVE
LEARNING OUTCOME
33.1 MARKETING RESEARCH
33.2 MARKETING RESEARCH IS SYSTEMATIC AND OBJECTIVE
33.3 OVERVIEW OF THE MARKETING RESEARCH PROCESS
33.4 THE MARKETING RESEARCH PROCESS IS COMPRISED OF
THE FOLLOWING STEPS
33.5 MARKETING RESEARCH IS SYSTEMATIC AND OBJECTIVE
33.6 EXPERIMENTAL RESEARCH AND NON-EXPERIMENTAL
RESEARCH
SUMMARY
CASE STUDY
KEYWORDS
EXERCISE
SELFASSESSMENT QUESTIONS

LEARNING OBJECTIVE:
• To learn the steps in the marketing research process.
• To understand how the steps in the marketing research process are
interrelated and that the steps may not proceed in order.
• To be able to know when market research may be needed and when it may
not be needed.
• To know which step is the most important in the marketing research
process.
LEARNING OUTCOME:
• To Define the basic concepts related to marketing research.
• To explain the concepts about contemporary marketing research.
• To explain relationship and differences between marketing research and
marketing information systems.

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Notes • To interpret development of marketing research.

• To list the marketing research process.
33.1 MARKETING RESEARCH
Marketing research is a process that identifies and defines marketing opportunities
and problems, monitors and evaluates marketing actions and performance, and
communicates the findings and implications to management
33.2 MARKETING RESEARCH IS SYSTEMATIC AND OBJECTIVE:
• Systematic planning is required at all the stages of the marketing research
process. The procedures followed at each stage are methodologically
sound, well documented, and, as much as possible, planned in advance.
Marketing research uses the scientific method in that data are collected and
analysed to test prior notions or hypotheses.
• Marketing research aims to provide accurate information that reflects
a true state of affairs and, thus, should be conducted impartially. While
research is always influenced by the researcher’s research philosophy, it
should be free from the personal or political biases of the researcher or the
management.
33.3 OVERVIEW OF THE MARKETING RESEARCH PROCESS:
• Step 1: Problem Definition
• Step 2: Development of an Approach to the Problem
• Step 3: Research Design Formulation
• Step 4: Field Work or Data Collection
• Step 5: Data Preparation and Analysis
• Step 6: Report Preparation and Presentation
Step 1: Problem Definition
Define the problem and research objectives. The first step in any marketing
research study is to define the problem, while taking into account the purpose of
the study, the relevant background information, what information is needed, and
how it will be used in decision making. This stage involves discussion with the
decision makers, interviews with industry experts, analysis of secondary data,
and, perhaps, some qualitative research, such as focus groups. There are three
types of objectives that can be deployed in marketing research:
1. Exploratory research
• Used to better define a problem or scout opportunities.
• In-depth interviews and discussions groups are commonly used.
2. Descriptive research
• Used to assess a situation in the marketplace (i.e., potential for a specific
product or consumer attitudes).

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• Methods include personal interviews and surveys. Notes

3. Causal research
• Used for testing cause and effect relationships.
• Typically, through estimation.
Plan the Research Design
The research design is a framework or blueprint for conducting the marketing
research project.
33.4 THE MARKETING RESEARCH PROCESS IS COMPRISED OF
THE FOLLOWING STEPS:
• Step 1: Problem Definition
• Step 2: Development of an Approach to the Problem
• Step 3: Research Design Formulation
• Step 4: Field Work or Data Collection
• Step 5: Data Preparation and Analysis
• Step 6: Report Preparation and Presentation
Step 2: Development of an Approach to the Problem
Step two includes formulating an objective or theoretical framework, analytical
models, research questions, hypotheses, and identifying characteristics or factors
that can influence the research design. This process is guided by discussions
with management and industry experts, case studies and simulations, analysis of
secondary data, qualitative research, and pragmatic considerations.
Step 3: Research Design Formulation
A research design is a framework or blueprint for conducting the marketing
research project. It details the procedures necessary for obtaining the required
information, and its purpose is to design a study that will test the hypotheses
of interest, determine possible answers to the research questions, and provide
the information needed for decision making. Decisions are also made regarding
what data should be obtained from the respondents (e.g., by conducting a survey
or an experiment). A questionnaire and sampling plan also are designed in order
to select the most appropriate respondents for the study. The following steps are
involved in formulating a research design:
• Secondary data analysis (based on secondary research)
• Qualitative research
• Methods of collecting quantitative data (survey, observation, and
experimentation)
• Definition of the information needed

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Notes • Measurement and scaling procedures

• Questionnaire design
• Sampling process and sample size
• Plan of data analysis
• Developing the research plan for collecting information:
• The research plan outlines sources of existing data and spells out the specific
research approaches, contact methods, sampling plans, and instruments that
researchers will use to gather data. This plan includes a written proposal
that outlines the management problem, research objectives, information
required, how the results will help management decisions, and the budget
allocated for the research.
• Collecting Data
• Data collection is a crucial step in the research process because it enables
the generation of insights that will influence the marketing strategy.
Step 4: Field Work or Data Collection
Field work, or data collection, involves a field force or staff that operates either
in the field, as in the case of personal interviewing (focus group, in-home,
mall intercept, or computer-assisted personal interviewing), from an office
by telephone (telephone or computer-assisted telephone interviewing/CATI),
or through mail (traditional mail and mail panel surveys with pre-recruited
households). Proper selection, training, supervision, and evaluation of the field
force help minimize data-collection errors. In marketing research, an example
of data collection is when a consumer goods company hires a market research
company to conduct in-home ethnographies and in-store shop-along in an effort
to collect primary research data.
33.5 MARKETING RESEARCH IS SYSTEMATIC AND
OBJECTIVE:
• Systematic planning is required at all stages of the marketing research
process, especially in the data collection step. The procedures followed
at each stage are methodologically sound, well documented, and, as much
as possible, planned in advance. Marketing research uses the scientific
method in that data are collected and analysed to test prior notions or
hypotheses.
• Marketing research aims to provide accurate information that reflects a true
state of affairs and thus, should be conducted impartially. While research
is always influenced by the researcher’s philosophy, it should be free from
the personal or political biases of the researcher or the management. This
is especially important in the data collection phase. The data collected will
be analysed and used to make marketing decisions. Hence, it is vital that
the data collection process be free of as much bias as possible.

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Primary versus Secondary Research Notes

There are many sources of information a marketer can use when collecting data.
The Nielsen Ratings is an audience measurement system that provides data on
audience size and the composition of television markets in the United States.
The Gallup Polls conduct public opinion polls with its results published daily
in the form of data driven news. The U.S Census Bureau, directed by the U.S.
Government is the principal agency that is responsible for producing data about
American people and the economy. Population, housing and demographic
characteristics are gathered to help plan and define transportation systems, police
and fire precinct, election districts and schools.
Analysing Data
Data Analysis is an important step in the Marketing Research process where data
is organized, reviewed, verified, and interpreted.
Step 5: Data Preparation and Analysis
Analysis of data is a process of inspecting, cleaning, transforming, and modelling
data with the goal of highlighting useful information, suggesting conclusions, and
supporting decision making. Data analysis has multiple facets and approaches,
encompassing diverse techniques under a variety of names in different business,
science, and social science domains. Data mining is a particular data analysis
technique that focuses on modelling and knowledge discovery for predictive
rather than purely descriptive purposes. Marketers use databases to extract
applicable information that identifies customer patterns, characteristics and
behaviours.
Step 6: Report Preparation & Presentation
During the Report Preparation & Presentation step, the entire project should be
documented in a written report that addresses the specific research questions
identified; describes the approach, the research design, data collection, and data
analysis procedures adopted; and present the results and the major findings. This
permanent document is also helpful because it can be easily referenced by others
who may not have been part of the research.
The findings should be presented in a comprehensible format so that they can
be readily used in the decision-making process. In addition, an oral presentation
should be made to management using tables, figures, and graphs to enhance
clarity and impact.
Four steps of Marketing Research Process
1. Define the problem and research objectives
2. Develop the research plan
3. Implement the research plan
4. Interpret and report the findings

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Notes Research Approaches

• Observational research
• Survey research
• Experimental research
Contact Methods in Research
• Mail
• Telephone
• Personal Interview
• Individual (intercept) interview
• In-depth interview
• Internet surveying
• Electronic mail
• Web page
• Focus groups

A sampling plan is a term widely used in research studies that provide an

outline on the basis of which research is conducted.

Stage 1: Formulating the Marketing Research Problem

Formulating a problem is the first step in the research process. In many ways,
research starts with a problem that management is facing. This problem needs to
be understood, the cause diagnosed, and solutions developed.
However, most management problems are not always easy to research. A
management problem must first be translated into a research problem. Once
you approach the problem from a research angle, you can find a solution. For
example, sales are not growing is a management problem.
Translated into a research problem, we may examine the expectations and
experiences of several groups: potential customers, first-time buyers, and repeat
purchasers. We will determine if the lack of sales is due to:
• Poor expectations that lead to a general lack of desire to buy, or
• Poor performance experience and a lack of desire to repurchase.
What then is the difference between a management problem and a research
problem? Management problems focus on an action. Do we advertise more?
Do we change our advertising message? Do we change an under-performing
product configuration?

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If so, how? Notes

Research problems, on the other hand, focus on providing the information you
need in order to solve the management problem.
Stage 2: Method of Inquiry
The scientific method is the standard pattern for investigation. It provides an
opportunity for you to use existing knowledge as a starting point and proceed
impartially.
The scientific method includes the following steps:
1. Formulate a problem
2. Develop a hypothesis
3. Make predictions based on the hypothesis
4. Devise a test of the hypothesis
5. Conduct the test
6. Analyze the results
The terminology is similar to the stages in the research process. However, there
are subtle differences in the way the steps are performed. For example, the
scientific method is objective while the research process can be subjective.
Objective-based research (quantitative research) relies on impartial analysis. The
facts are the priority in objective research. On the other hand, subjective-based
research (qualitative research) emphasizes personal judgment as you collect and
analyse data.
Stage 3: Research Method
In addition to selecting a method of inquiry (objective or subjective), you must
select a research method.
There are two primary methodologies that can be used to answer any research
question:
33.6 EXPERIMENTAL RESEARCH AND NON-
EXPERIMENTAL RESEARCH:
Experimental research gives you the advantage of controlling extraneous
variables and manipulating one or more variables that influences the process
being implemented. Non experimental research allows observation but not
intervention.
You simply observe and report on your findings.
Defining the Problem and Research Objectives
• Exploratory research – gather preliminary information to help define the
problem and suggest hypotheses

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Notes • Descriptive research – describe the size and composition of the market
• Causal research – tests hypotheses about cause-and-effect relationships
Developing the Research Plan
• Determining Specific Information Needs – translate research objectives
into specific information needs
• Gathering Secondary Information – collect information that is already in
existence
• Planning Primary Data Collection – information being collected for the
specific purpose at hand
Stage 4: Research Design
The research design is a plan or framework for conducting the study and
collecting data. It is defined as the specific methods and procedures you use to
acquire the information you need.
Stage 5: Data Collection Techniques
Your research design will develop as you select techniques to use. There are
many ways to collect data. Two important methods to consider are interviews
and observation.
Interviews require you to ask questions and receive responses.
Common modes of research communication include interviews conducted face-
to-face, by mail, by telephone, by email, or over the Internet. This broad category
of research techniques is known as survey research.
These techniques are used in both non-experimental research and experimental
research.
Another way to collect data is by observation. Observing a person‘s or
company‘s past or present behaviour can predict future purchasing decisions.
Data collection techniques for past behaviour can include analysing company
records and reviewing studies published by external sources.
In order to analyse information from interview or observation techniques, you
must record your results. Because the recorded results are vital, measurement
and development are closely linked to which data collection techniques you
decide on.
The way you record the data changes depends on which method you use.
Stage 6: Sample Design
Your marketing research project will rarely examine an entire population. It‘s
more practical to use a sample a smaller but accurate representation of the
greater population. In order to design your sample, you must find answers to
these questions:

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1. From which base population is the sample to be selected? Notes

2. What is the method (process) for sample selection?
3. What is the size of the sample?
Once you‘ve established who the relevant population is (completed in the
problem formulation stage), you have a base for your sample. This will allow
you to make inferences about a larger population. There are two methods of
selecting a sample from a population: probability or non-probability sampling.
The probability method relies on a random sampling of everyone within the
larger population.
Non- probability is based in part on the judgment of the investigator, and often
employs convenience samples, or by other sampling methods that do not rely on
probability.
The final stage of the sample design involves determining the appropriate sample
size. This important step involves cost and accuracy decisions. Larger samples
generally reduce sampling error and increase accuracy, but also increase costs.
Stage 7: Data Collection
Once you‘ve established the first six stages, you can move on to data collection.
Depending on the mode of data collection, this part of the process can require
large amounts of personnel and a significant portion of your budget. Personal
(face-to-face) and telephone interviews may require you to use a data collection
agency (field service).
Internet surveys require fewer personnel, are lower cost, and can be completed
in days rather than weeks or months.
Regardless of the mode of data collection, the data collection process introduces
another essential element to your research project: the importance of clear and
constant communication.
Stage 8: Analysis and Interpretation
In order for data to be useful, you must analyse it. Analysis techniques vary and
their effectiveness depends on the types of information you are collecting, and
the type of measurements you are using. Because they are dependent on the data
collection, analysis techniques should be decided before this step.
Stage 9: The Marketing Research Report
The marketing research process culminates with the research report. This report
will include all of your information, including an accurate description of your
research process, the results, conclusions, and recommended courses of action.
The report should provide all the information the decision maker needs to
understand the project.
It should also be written in language that is easy to understand. It‘s important to

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Notes find a balance between completeness and conciseness. You don‘t want to leave
any information out; however, you can‘t let the information get so technical that
it overwhelms the reading audience.
One approach to resolving this conflict is to prepare two reports: the technical
report and the summary report. The technical report discusses the methods and
the underlying assumptions.

SUMMARY
This module focused on interviewing. First, we examined the various types
of information that can be obtained through interviews. We then considered
communication as a means to obtain information from respondents and discussed
the types of respondent interviews structured-direct, unstructured-direct, and
structured indirect and unstructured-indirect. The next section introduced the
concepts of inaccuracy and ambiguity as the major sources of response and non-
response bias. Predictive and concurrent sources of inaccuracy were discussed
in the context of respondent inability or unwillingness to respond. Methods of
reducing non-response error were then discussed in the context of theories of
survey response. Finally, our discussion focused on how to reduce coverage,
sampling, non-response and measurement errors in online surveys. This chapter
has stressed the need to improve the research process by reducing errors in the
research process. New technologies continue to be developed, but each must be
tested for sources of potential response error and compared to current modes of
data collection, all this as researchers apply them to research projects.

CASE STUDY :
The Brentford Square Shopping Centre is located in the eastern suburbs
of Melbourne, on Canterbury Road, Forest Hill, and comprises a large
supermarket, branches of two major banks, chain liquor and food outlets and
over thirty specialty shops. There has been trading at Brentford Square since
the late 1950s and in 1963 the Brentford Square Traders Association was
established.
Over the last decade the traders have been experiencing a slow decline in
trade and number of customers. A primary reason for this is believed to be the
expansion and promotion of nearby regional shopping centers, such as Forest
Hill Chase, located a few kilometers to the west.
Many ‘strip’ shopping areas have been adversely affected by activities of the
large regional shopping centers. Apart from the physical benefits of building
and location these shopping centers have also been aggressive marketers.
To provide some counter to this, many communities shopping centers have
developed and implemented their own marketing and urban development
programs. Some examples are Centre Road, (East Bentleigh), Maling Rd.
(Canterbury) and Melton Township (Melton).

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Notes
KEYWORDS:
Marketing Research: The function that links the consumers, customers, and
public to the marketer through information.
Ethnographic research: information regarding cultural phenomena
Exploratory research: Used to better define a problem or scout opportunities.
Descriptive research: Used to assess a situation in the marketplace (i.e., potential
for a specific product or consumer attitudes).
Causal research: Used for testing cause and effect relationships.
Survey research: information from a predetermined set of questions that is given
to a sample and is used to assess thoughts, opinions, and feelings
Qualitative research: A method of inquiry employed in many different academic
disciplines, traditionally in the social sciences but also in market research and
further contexts.
Secondary Research: This process involves the summary, collation, and synthesis
of existing research rather than primary research, where data is collected from
subjects or experiments.
EXERCISE:
POINTS TO PONDER:
Answer the following Questions Given Below:
1.The first step in marketing research process is--------------
2.In sampling plan, the question “To whom should we survey? Is the part of
------------
3.Data that is freshly gathered for a specific purpose is called------------
4.The last step in the marketing research process is----------
5.Research that is designed to capture cause -and effect relationship by
eliminating competing explanations of observed findings is called-------------

SELF ASSESSMENT QUESTIONS:

SHORT ANSWER QUESTIONS:
1. What is sampling plan?
2. Define sampling design.
3. What is mean by data collection?
4. What is research instrument?
5. What is exploratory research?

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Notes 6. Define descriptive research.

LONG ANSWER QUESTIONS:
1. Explain the overview of marketing research process.
2. Explain the marketing research process is comprised of the following
steps.
3. Briefly discuss about experimental and non-experimental research.
4. Discuss about the detailed findings of research project

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Notes
LESSON 34 – CONSUMER BEHAVIOUR &
RETAIL RESEARCH
CONTENT:
LEARNING OBJECTIVE
LEARNING OUTCOME
34.1 INTRODUCTION
34.2 PRICING RESEARCH
34.3 PRODUCT RESEARCH
34.4 CONSUMER MARKETS AND CONSUMER BUYING BEHAVIOUR
34.5 RETAIL RESEARCH
34.6 WHEEL OF RETAILING
34.7 FUNCTIONS OF A RETAILER
34.8 FACTORS INFLUENCING THE RETILE SHOPPERS
34.9 TYPES OF RETAIL LOCATION
SUMMARY
CASE STUDY
KEYWORDS
EXERCISE
SELF ASSESSMENT QUESTIONS

LEARNING OBJECTIVE:
• The objectives of consumer behaviour analysis are mostly consumer
researches are undertaken to find out the attitudes of the consumer about a
product.
• To apply relevant consumer behaviour theories in understanding the impact
of marketing strategies.
• To Develop critical and reflexive understandings of the nature of
consumption, markets and culture
• To apply appropriate research techniques. Appreciate the complexity of
consumer behaviour.
LEARNING OUTCOME:
• Describe retailing, the entities involved, and the impact of decisions on a
retail business

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Notes • Describe the overall change in the structure of the retail industry over the
past 60 years
• Discuss the role information systems have played in the changing retail
industry
• Recognize career opportunities available in the retail businesses
34.1 INTRODUCTION:
Consumer behaviour is the study of how people buy, what they buy, when
they buy and why they buy. It blends elements from psychology, sociology,
socio psychology, anthropology and economics. It attempts to understand the
buyer decision making process, both individually and in groups. It studies
characteristics of individual consumers such as demographics, psychographics,
and behavioural variables in an attempt to understand people’s wants. It also
tries to assess influences on the consumer from groups such as family, friends,
reference groups, and society in general. Belch and Belch (2007) define consumer
behavior as the process and activities people engage in when searching for,
selecting, purchasing, using, evaluating, and disposing of products and services
so as to satisfy their needs and desires. The study of consumer behavior helps
firms and organizations improve their marketing strategies by understanding
issues such as,
• The psychology of how consumers think, feel, reason, and select between
different alternatives (e.g., brands, products);
• The psychology of how the consumer is influenced by his or her environment
(e.g., culture, family, signs, media);
• The behavior of consumers while shopping or making other marketing
decisions Limitations in consumer knowledge or information processing
abilities influence decisions and marketing outcome;
• How consumer motivation and decision strategies differ between products
that differ in their level of importance or interest that they entail for the
consumer; and
• How marketers can adapt and improve their marketing campaigns and
marketing strategies to more effectively reach the consumer
34.2 PRICING RESEARCH
We provide pricing strategy consulting backed by strong pricing research
capabilities. Our perspective is broad when dealing with pricing research and
pricing strategy decisions, and focus on finding for your business optimum price-
product-feature configurations in the context of market positioning opportunities.
We employ both qualitative and quantitative pricing research tools.

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34.3 PRODUCT RESEARCH Notes

Product market research serves several goals: new product design and market
validation research, or assessing existing product strength and line extension
potential. We follow the product development cycle integrating research with
creative positioning and technical product design efforts.
34.4 CONSUMER MARKETS AND CONSUMER BUYING
BEHAVIOUR
A. Buying behaviour is the decision processes and acts of people involved in
buying and using products.
B. Consumer buying behaviour refers to the buying behaviour of ultimate
consumers those who purchase products for personal use and not for
business purposes.
C. Understanding buying behaviour requires knowledge of the consumption
process and consumers ‘perceptions of product utility.
II. Consumer Buying Decision Process
A. The consumer buying decision process is a five-stage purchase decision
process which includes problem recognition, information search, and evaluation
of alternatives, purchase, and post-purchase evaluation.
1. The actual act of purchase is only one stage in the process and is not the
first stage.
2. Not all decision processes, once initiated, lead to an ultimate purchase; the
individual may terminate the process at any stage.
3. Not all consumer buying decisions include all five stages.
B. Problem Recognition
1. This stage occurs when a buyer becomes aware of a difference between a
desired state and an actual condition.
2. Recognition speed can be slow or fast.
3. Individual may never become aware of the problem or need. Marketers
may use sales personnel, advertising, and packaging to trigger recognition
of needs or problems.
C. Information Search
1. After the consumer becomes aware of the problem or need, he or she
searches for information about products that will help resolve the problem
or satisfy the need.
2. There are two aspects to an information search:
a) In the internal search, buyers first search their memories for information
about products that might solve the problem.

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Notes b) In the external search, buyers seek information from outside sources.
(1) An external search occurs if buyers cannot retrieve enough information
from their memories for a decision.
(2) Buyers seek information from friends, relatives, public sources, such as
government reports or publications, or marketer-dominated sources of
information, such as salespeople, advertising, websites, package labelling,
and in-store demonstrations and displays. The Internet has become a major
information source.
3. Repetition, a technique well known to advertisers, increases consumers
‘learning. Repetition eventually may cause wear-out, meaning consumers
pay less attention to the commercial and respond to it less favourably than
they did at first.
D. Evaluation of Alternatives
1. A successful information search within a product category yields a
consideration set (aka evoked set), which is a group of brands that the
buyer views as possible alternatives.
a) The consumer establishes a set of evaluative criteria, which are objective
and subjective characteristics that are important to him or her.
b) The consumer uses these criteria to rates and ranks brands in the
consideration set.
2. Marketers can influence consumers ‘evaluations by framing the alternatives
that is, by the manner in which they describe the alternatives and attributes.
E. Purchase
1. Purchase selection is based on the outcome of the evaluation stage and
other dimensions.
a) Product availability, seller choice, and terms of sale may influence the final
product selection.
2. The buyer may choose to terminate the buying decision process, in which
case no purchase will be made.
F. Post purchase Evaluation
1. After purchase, the buyer begins to evaluate the product to ascertain if the
actual performance meets expected levels.
a) Evaluation is based on many of the same criteria used when evaluating
alternatives.
34.5 RETAIL RESEARCH:
Retailing in India is one of the pillars of its economy and accounts for about 22
percent of its GDP. The Indian retail market is estimated to be US$ 500 billion

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and one of the top five retail markets in the world by economic value. India is Notes
one of the fastest growing retail markets in the world, with 1.2 billion people.
The recent economic downturn has taught discipline to the customers. In today’s
rapidly changing and digitally connected world, customers are more value-
conscious while making purchase decisions. India’s retail market is expected to
touch a whopping Rs. 47 trillion (us$ 782.23 billion) by 2016–17, expanding at
a compounded annual growth rate (CAGR) of 15 per cent, according to a study
by a leading industrial body. The total organized retail supply in 2013 stood at
approximately 4.7 million square feet (sqft), witnessing a strong year-on-year
(y-o-y) growth of about 78 per cent over the total mall supply of 2.5 million
sqft in 2012.The foreign direct investment (FDI) inflows in single-brand retail
trading during the period April 2000–January 2014 stood at us$ 98.66 million,
as per data released by department of industrial policy and promotion (DIPP). As
of 2013, India’s retailing industry was essentially owner manned small shops. In
2010, larger format convenience stores and supermarkets accounted for about 4
percent of the industry, and these were present only in large urban centres. India’s
retail and logistics industry employs about 40 million Indians (3.3% of Indian
population. On 7 December 2012, the federal government of India allowed 51%
FDI in multi brand retail in India. The Indian retail experience has gone beyond
the traditional brick–and-mortar store and includes numerous touch points
such as online stores, social networks, call centres, etc. Changing economic
dynamics, diverse choices in products and services, numerous shopping formats
and unparalleled access to information has empowered customers to expect more
from their retail experience.

Retailing is defined as any company involved in the sale of product or services.

Proper research can allow small businesses to expand their reach by creating an
ecommerce store front or selling online.

MODEL OF RETAIL FORMAT

34.6 WHEEL OF RETAILING:

A better-known theory of retailing wheel of retailing‖ proposed by Malcomb
McNair says,

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Notes 1. New retailers often enter the market place with low prices, margins, and
status. The low prices are usually the result of some innovative cost-cutting
procedures and soon attract competitors.
2. With the passage of time, these businesses strive to broaden their custom
base and increase sales. Their operations and facilities increase and become
more expensive.
3. They may move to better up market locations, start carrying higher quality
products or add services and ultimately emerge as a high cost price service
retailer.
4. By this time newer competitors as low price, low margin, low status emerge
and these competitors to follow the same evolutionary process.
5. The wheel keeps on turning and department stories, supermarkets, and
mass merchandise went through this cycles.
34.7 FUNCTIONS OF A RETAILER
1. Form: First is utility regarding the form of a product that is acceptable to
the customer.
• The retailer does not supply raw material, but rather offers finished goods
and services in a form that the customers want.
• The retailer performs the function of sorting the goods and providing us
with an assortment of product in various categories.
2. Time: He creates time utility by keeping the store open when the consumers
prefer to shop.
• Preferable shopping hours.
3. Place: By being available at a convenient location, he creates place utility.
4. Ownership: Finally, when the product is sold, ownership utility is created.
Apart from these functions retailer also performs like:
5. Arranging Assortment: manufacturers usually make one or a variety of
products and would like to sell their entire inventory to few buyers to
reduce costs. Final consumers, in contrast prefer a large variety of goods
and services to choose from and usually buy them in small units.
I Amount of Services:

Self-service retailer Limited service retailer Full service retailer

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Self-service retailer: Notes

Customers who are willing to perform their own ―locate-compare-select
process to save money
Ltd service retailer:
Retailer provides more sales assistance because they carry more shopping goods.
They fix higher price due to higher operation cost
Full-service retailer:
II Product Line:
1) Specialty stores: A retail stores that carries a narrow product line with a
deep assortment within that line. Ex. Apparel stores, Sporting goods stores,
Furniture stores, books stores
2) Department stores: A retail organization that carries a wide variety of
product lines– typically clothing, home furnishing, and house hold goods:
each line is operated as a separate department managed by specialist buyers
or merchandisers.
3) Supermarkets: A supermarket is a large self-service retail store that carries
a wide variety of consumer products under one roof, such as complete line
of food products, laundry requirement, and household maintenance items.
Here large, low – cost, low margin, high volume
4) Convenience stores: A relatively small store located near residential areas,
open long hours 7 days a week, and carries a limited line of high turnover
convenience goods at slightly higher price.
5) Super stores: A store much larger than a regular supermarket that carries
a large assortment of routinely purchased food and non-food it4ems and
offers services such as dry cleaning, post offices, photo finishing, check
cashing, bill paying, lunch counters, car cares, and pet care.
6) Category killer: Giant specialty stores that carriers a very deep Assortment
of a particular line and is staffed by knowledgeable Employees. Ex. Book,
Baby gear, toys, home improvement products.
III Relative Price:
1) Discount stores: these stores are self-service, standard general merchandise
retailers regularly offering brand name and private brand items at low price,
earn lower margins and push for high sales turnover. The characteristics of true
discount stores include
• Selling products at discounted price
• Carry standard international, national, or store brand to build image
• Self-service stores to minimize operational costs

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Notes • Preferred store locations are low rent areas.

• Like best known discount store is Wal-Mart. In India almost all retail
• Stores offer discounts, subhiksha
2) Off – price retailers: Retailer that buys at less than regular whole sale prices
and sells at less than retail. Examples are factory outlets, independents and
warehouse club
3) Independent off – price retailers: Off-price retailer that is either owned and
run by entrepreneurs or is a division of a larger retail corporation.
4) Factory Outlet: Off-price retailing operation that is owned and operated by a
manufacturer and that normally carries the manufacturer’s surplus, discontinued,
or irregular goods.
5) Warehouse club: Off-price retailer that sells a limited selection of brand name
grocery items, appliances, clothing, and hodgepodge of other goods at deep
discounts to members who pay annual membership fees.
IV Organizational Approach:
1) Chain stores: Two or more outlets that are owned and controlled in Common,
have central buying and merchandising, and sell similar lines of merchandise.
2) Franchise: A contractual association between a manufacturer, wholesaler, or
service organization (a franchiser) and independent business people(franchisees)
who buy the right to own and operate one or more units in the franchise system.
34.8 FACTORS INFLUENCING THE RETAIL SHOPPERS:
1. Range of Merchandise:
• The range of merchandise is one of the most important reasons for
customers to patronize a particular outlet.
• Initial curiosity about the store draws a consumer to retail store.
• But convert the customer into buyer and retain them over a period of time
is dependent on the quality and the range of merchandise offered by the
store.
• Range of merchandise includes categories like Books & Music, apparel
and other lifestyles products
2. Convenience of shopping at a particular outlet.
• This element is fast gaining prominence in the world of organized retail.
• Example patient prefer medicine shops, fresh juice and fruits shops near
clinic or hospitals.
3. Time of Travel:
• Time requires to reach a particular location is again become critical.

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• big cities where traveling takes too much time like Delhi, Mumbai because Notes
of this we can see many local areas developing in terms of shopping to
facilitate buying
4. Socio economic background and culture:
• Background of the consume largely determines his /her lifestyles. And this
influences the kind of store that he may be comfortable shopping in.
• Consumer buying behaviour varies largely market to market influence by
culture and environment.
5. The stage of the family life cycles.
• The stage of the family life cycles the customer belongs to also influences
their needs.
• Example need for young bachelors differ from the requirements of the old
age or senior citizen.
6. Retail Location
“A store is place, real or virtual, where the shoppers come to buy goods &
services. The sales transaction occurs at this junction.
• The location of retail store has for a long time been considered the most
important P in retailing.
• Locating the retail store in the right place was considered to be adequate
for success.
34.9 TYPES OF RETAIL LOCATION:
Typically, a store location may be:
1) Freestanding /Isolated store.
2) Part of Business District/Centers (unplanned Business Districts).
3) Part of a Shopping Centre (Planned Shopping Centers)
Freestanding /Isolated store
• Where there are no other outlets in the vicinity of the store and therefore
store depends on its own pulling power and promotion to attract customers.
• A biggest advantage for freestanding stores is that there is no competition
around.
• This type of location has several advantages including no competition,
low rent, and often better visibility from the road, easy parking and lower
property.
Part of Business District/Centres (unplanned Business Districts)
• A retail store can also be located as a part of a business district. Or we can
refer this as unplanned business centres

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Notes • A business district is place of commerce in a city which developed

historically as the centre of trade and commerce in the city or town.
• A business districts can be a central, secondary or a Neighbourhood
business district.
Part of a Shopping Centre (Planned Shopping Centers)
• A shopping centre has been defined as a group of retail and other commercial
establishments that is planned, developed, owned and managed as a single
property
• The basic configuration of a shopping Centre is a Mall or Strip Centre.
• A mall is typically enclosed and climate controlled. A walkway is provided
in front of the stores.
• A strip Centre is a row of stores with parking provided in the front of the
stores.
• In India we can planned shopping Centre can categorize in two categories
regional shopping centers or Mall: Regional shopping centers or mall are
the largest planned shopping centers.
Step involved in choosing a Retail Location
• In order to arrive at the decision on where to locate the retail store a retailer
needs to first on the region that he wants to locate the store.
• After identifying the region the following steps have to be followed.
• Identifying the market in which to locate the store.
• Evaluate the demand and supply within that market. i.e. determine the
market potential.
• Identify the most attractive sites
• Select the best site available.
1. Market Identification:
• The first step in arriving at a decision on retail location is to identify the
market attractiveness to a retailer.
• This is important that retail needs to understand the market well.
2. Determining the market Potential:
• The retailer needs to take into consideration various elements as shown in
format. (Features of population)
• Demographic features of the population
• The characteristics of the household in the area (average household
income)

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• Competition and compatibility (Need to know compatibility & competition Notes

in market)
• Laws & regulations:( good understanding of the laws

SUMMARY
Modern retailing, despite its cost-effectiveness, has come to be identified with
lifestyles particularly the affluent one, thereby excluding an important and larger
segment of consumers. In fact, in order to appeal to all classes of society, organized
retail stores would have to identify with different lifestyles and socioeconomic
strata and respond to their respective requirements and shopping patterns. To
some extent, this trend is already visible with the emergence of stores with an
essentially ‘value for money’ image. Consumer expectations are very high from
the organized retail stores and such expectations have also rubbed off on the
conventional retailers.
While insisting on value for money and cost effectiveness, today consumers want
a better shopping experience, recreation, friendly interactions and a wide choice
of products and services. Retail stores have to live up to these expectations in
order to flourish, prosper and grow in the Indian market. The retailer in order to
satisfy customer needs must have a thorough understanding of how customers
make store choice and purchase decisions. Customer’s behaviour provides some
valuable insights into the process and therefore is useful for retail management
decision making. It is important to realize that the purchase of product involves
motivational, social, psychological and economic factors. There are also
important stages involved in the purchase process and the type of purchase and
the users of the purchase that will affect the buying behaviour.

CASE STUDY :
The case is about JioMart, an e-commerce venture of Reliance Retail
Limited, the retail arm of leading business conglomerate in India, Reliance
Industries Limited. JioMart, launched in December 2019, aimed to integrate
digital and neighborhood physical retail stores to help customers get easy
access to household essentials. The JioMart platform aimed to connect local
grocers through an offline-to-online business model that would help consumers
to place orders online and get groceries delivered from a store located nearby.
Reliance started signing up small Kirana stores (mom-and-pop stores) to
empanel them. JioMart acted as the digital storefront, representing a blend
of Reliance Retail’s distribution centres, Reliance Jio’s customer base, the
neighborhood mom-and-pop stores, and other organized retail outlets owned
by Reliance.Reliance partnered with Facebook’s WhatsApp messaging service
in April 2020 to pilot its online food and grocery channel JioMart. JioMart
expected the partnership to lead to WhatsApp being used by small businesses
to connect with customers. Later, the online grocery platform extended its

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Notes services to 200 cities and towns across India. The soft launch of JioMart took
Reliance one step closer to taking on e-commerce companies like Amazon,
Flipkart, Paytm, Swiggy, and Zomato, which had already established
themselves in the Indian e-commerce market. However, it remained to be
seen whether Reliance Retail would be able to revolutionize the e-commerce
industry with JioMart.
ISSUES
The case is structured to achieve the following teaching objectives:
• Understand O2O e-commerce.
• Examine the retail industry in India and highlight the role of e-commerce
players in Indian retail.
• Understand the impact of Covid-19 on Indian retail and how it has changed
the industry.
• Analyze how e-commerce players can change the retailing scenario in a
given situation.
KEY WORDS:
Market analysis requires an understanding of the 4 Cs which are consumer,
conditions,
Market analysis requires an understanding of the 4 Cs which are consumer,
conditions,
Reflects status: The consumer behaviour is not only influenced by the status of
a consumer, but it also reflects IT.
Consumer protection: Many Agencies at all levels of government are involved
with regulating business practices for the purpose of protecting consumers
welfare.
Demarketing: The term “demarketing” refers to all such efforts to encourage
consumers to reduce their consumption of a particular product or services.
Consumer’s rational behaviour: It is foremost important for a marketer to
understand the situations where consumers behave rationally.
Impulse Buyers: Impulse buyers are consumers who make unplanned buying
decisions.
Consumer credit takes number of shapes like deferred payment, instalment
purchasing, hire-purchase arrangements and the like.
Organizational consumers purchase products for organizations, governments or
businesses, They often buy in bulk and may place long-term recurring orders.

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EXERCISE: Notes

POINTS TO PONDER:
Answer the following Questions given Below:
1.CDM stands for ----------
2.In the basic model of consumer Decision making is----------
3.Second stage in the consumer decision making model------------
4.The customer or consumer---------when actual performance exceeds the
expected performance of the product.
5.When goods or services are purchased for use in the production or
assembling of products that are sold and supplied to others is known as-----
-----

SELF ASSESSMENT QUESTIONS:

SHORT ANSWER QUESTIONS:
1. Define consumer Behaviour.
2. What is pricing Research?
3. What is product Research?
4. State about the Retail research.
5. Mention the types of retail location.
LONG ANSWER QUESTIONS:
1. Explain in detail about consumer market & consumer buying behaviour.
2. Briefly discuss about the retail research in detail.
3. Discuss about the wheel of Retailing.
4. List out some of the functions of Retailing.
5. Describe about the factors influencing the retail shoppers.
6. Explain the types of retail location with suitable example

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Notes
LESSON 35 – CUSTOMER DRIVEN
ORGANIZATION
CONTENT
LEARNING OBJECTIVE
LEARNING OUTCOME
35.1 DRIVEN ORGANIZATION-INTRODUCTION
35.2 THE CUSTOMER FOCUSED ORGANIZATION -INTRODUCTION
35.3 CUSTOMER -CENTRICITY DEFINED
35.4 ELEMENTS OF CUSTOMER -DRIVEN ORGANIZATION
35.5 KNOWLEDGE DRIVEN AND CUSTOMER FOCUSED
ORGANIZATION
SUMMARY
CASE STUDY
KEYWORDS
EXERCISE
SELF ASSESSMENT QUESTIONS

LEARNING OBJECTIVE:
• To Identify the factors that prevent maximizing customer value. Understand
how to look at the customer service levels.
• To Establish if a company is customer-driven. Identify different customer
types and how to interact with them.
• To Describe the three essential activities of customer- and market-driven
organizations.
LEARNING OUTCOME:
• To Explain Drucker’s guiding ideas on the customer and the business.
• To Explain what it means to be a customer-driven organization.
• To Explain what it means to be a market-driven organization.
• To Utilize tools and techniques for assessing and enhancing your company’s
customer- and market-driven performance

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35.1 DRIVEN ORGANIZATION-INTRODUCTION: Notes

Business today has taken a whole new direction where competition has become
stiffer, and margins have become smaller. Success currently not only depends
on technological advancements, size or superiority of the organization. It is all
dependent on the customer.
In a bid to stay at the top, businesses now realize the importance of customers
in achieving their bottom line. They realize that building a customer driven
organization is key to improving profits and maintaining market position in the
competitive industry.
35.2 THE CUSTOMER FOCUSED ORGANIZATION -
INTRODUCTION:
Leading transformation, renewal and growth
Customers are more empowered than ever before, due to a global marketplace,
social networks and the rise of mobile. As a result, the pace of business is
changing how businesses are led, develop strategy and build their customer focus.
Ultimately, it is those who rise to the challenge and create a robust customer-
centric strategy that succeeds.
A customer-centric management cares the most about the satisfaction of its
customers, their needs and expectations from the product. Over the last few
years, organizations have adopted effective organizational structures, where
people implement policies that revolve around impressing more customers and
getting customer satisfaction.
Gone are the days when the main goal was to create more demand and sell more
products. At that time, the customer wasn’t involved even as a third person in
this process. Today, a company that does not communicate with its customers is
quickly deserted.
This is in sharp contrast to those times, when daily activities were handled in the
background by human resources and accounting department, with virtually no
interaction with the customer, either directly or indirectly.
To be customer-centric, organizations have to pre-analyse all the expectations a
consumer has from a product of a particular segment. This phase involves asking
three crucial questions −
• What is the company’s definition of a satisfied customer?
• What are the customer’s expectations from us?
• What is the desired customer experience?
As you can see, the central focus of the organization now is the satisfaction
of the customer. Organizations that are truly customer-focused, instruct every
department to think in terms of increasing acceptance in the customer’s mind. This

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Notes means that the organization will not directly make contact with the customer, but
will generate some strategies and processes to increase the customer experience.
Successful organizations have their customer-centric processes defined to all
their employees, so that they also can participate in the supply chain and meet
the standards of excellence, communications, latest technology and other factors.
The following steps help companies to enhance the quality of its output, increase
customer satisfaction, save costs and deliver high profit margins. There are
numerous advantages that an organization has over others, if it has a customer-
centric sales team −
• Loyal Customer Base − If you impress your customers and satisfy them
with your services, then it is difficult for your competitors to take away
your clients because they rely on your services.
• Competing on Overall Value − If the price of your product is so high that
only a few customers can afford it, then the product will flop in the end.
The price of a product indicates many factors like quality, availability, etc.
• Benefits to End-Users − The end-users or customers that receive the final
services will look to get all the benefits including cost, quality and the
corresponding services. Once it is given to them, the customers remain
loyal to the organization and have a long-term relationship with them.
• Benefits to the Organization’s Staff − If your organization has more sales
and builds numerous long-term customers, then it gives profits to your
team. If your company gets good profits, then you and your staff also
receive more benefits.
With the help of a customer-focused organization and all the other departmental
synergies, it is time to analyses more positively on how to divide appropriate
work among other departments. This will also help in knowing the significance
of all of the other departments in the sales planning process.
In organizations, where the cooperation and integration between employees is
weak, marketing teams are often found at odds with the sales teams. In such
companies, it is a common occurrence to find that the marketing team hasn’t
attached the key benefits of products, before sending them to the Sales Team.
Sometimes, the Sales Department has some documentation and follow-up issues
with the marketing department. In such cases, often the managers have to enter
the picture and sort out all the problems between them.
35.3 CUSTOMER -CENTRICITY DEFINED:
What distinguishes customer-centric organizations from other companies that
proclaim their customer focus? In short, they’ve moved beyond lip service
and re-oriented their entire operating model around the customer, increasing
customer satisfaction and their own profitability in the process.

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Customer-centric companies understand not only what the customer values, Notes
but also the value the customer represents to their bottom line. They align
their operating models behind a carefully defined and quantified customer
segmentation strategy and tailor business streams — product development,
demand generation, production and scheduling, supply chain, customer care,
etc. — to delivering the greatest value to the best customers for the least cost.
35.4 ELEMENTS OFCUSTOMER -DRIVEN ORGANIZATION:
The proper place of the customer in the organization’s hierarchy is illustrated in
Figure 3.1.
Note that this perspective is precisely the opposite of the traditional view of the
organization. The difficulties involved in making such a radical change should
not be underestimated.
Figure 3.1. The “correct” view of the company organization chart.

From Marketing Management: Analysis, Planning, Implementation, and Control,

Figure 1–7, p. 21, by Philip Kotler, copyright © 1991 by Prentice-Hall, Inc.
Reprinted by permission.
A Knowledge-driven and customer focused Organization simplified schematic
representation
35.5 KNOWLEDGE DRIVEN AND CUSTOMER FOCUSED
ORGANIZATION:
A Knowledge-driven Organization sees its customers at the top of the pyramid
with the whole Organization at their service. The goal is to co-create with the
knowledgeable customers valuable and personalized experiences. In other
words, such an organization does not sell only products and services anymore
but sells experiences.
The Promotional monologue of advertising at the supplier’s convenience has
given way to dialogue at the customer’s convenience and the market Place

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Notes has evolved into the market space of the Internet where customers have the
opportunity to benchmark any suppliers of choice.
Customers have become more informed, savvy, demanding, cynical, price-
conscious, and empowered. Semiconductors who fail to recognize and respond
to this reality are in for rough times. The first step toward success in the customer
driven economy is to determine who your customers are and how they define
value. While this may seem overly simple, many Semiconductors do not really
know who their customers are.

SUMMARY
A good organization listens to its customers and attends to their needs in the best
and fastest way possible. You, therefore, need to develop practices and processes
that guarantee that you keep up a precise comprehension of what the needs of
your customers are react quickly to these requirements.
In the majority of your dealings with others, recall that the vital capacity of
business is to pull in and look after customers.
To become a great, enduring organization, you should make an aggregate sense
of duty regarding being a customer driven organization

CASE STUDY :
The Problem: When Five9, providers of cloud contact centre software,
first started investing in content, they went with a product-cantered approach
that didn’t provide much value. The two videos they made, which were oriented
around detailing the benefits of Five9 products, stopped producing leads and
engagement after two or three weeks when the promotion budget died off.
The Approach: Five9 knew they needed to stop making content in a vacuum
and start listening to what their customers actually wanted. And listening, it
turned out, wasn’t so hard. In a survey, they asked their audience what kind of
content they were most interested in receiving from Five9.

KEYWORDS:
• Loyal Customer Base − If you impress your customers and satisfy them
with your services, then it is difficult for your competitors to take away
your clients because they rely on your services.
• Competing on Overall Value − If the price of your product is so high that
only a few customers can afford it, then the product will flop in the end.
The price of a product indicates many factors like quality, availability, etc.
• Benefits to End-Users − The end-users or customers that receive the final
services will look to get all the benefits including cost, quality and the
corresponding services. Once it is given to them, the customers remain
loyal to the organization and have a long-term relationship with them.

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• Benefits to the Organization’s Staff − If your organization has more sales Notes
and builds numerous long-term customers, then it gives profits to your
team. If your company gets good profits, then you and your staff also
receive more benefits.
• Customer loyalty describes an ongoing emotional relationship between
you and your customer, manifesting itself by how willing a customer is to
engage with and repeatedly purchase from you versus your competitors.
• Employee branding can be defined as an employer’s reputation among
its workforce, or in other words, it is about how your employees value
you as an employer. It can make companies more acceptable in the talent
marketplace, thus hiring and retaining talented employees matching your
company’s culture and values.
EXERCISE:
POINTS TO PONDER:
Answer the following Questions Given Below:

1.Companies that targets market very narrowly is called ---------------

2.Segment that could be reached easily and well served is considered as---------

3.Division of market on basis of separate needs and behaviour is called----------

4.A company’s target strategy depends on -----------

SELF ASSESSMENT QUESTIONS:

SHORT ANSWER QUESTIONS:
1.What is Customer driven organization?
2.Define customer centricity.
3.List out the elements of customers driven organization.
4.How to build customer loyalty.
5.Write about employee branding.
LONG ANSWER QUESTIONS:
1.Explain about the knowledge of customers driven organization.
2.Write a short note on customer spot light.
3.Discuss about the customer engagement tool.

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Notes
LESSON 36 – CAUSE RELATED MARKETING
AND ETHICS IN MARKETING
CONTENT:
LEARNING OBJECTIVE
LEARNING OUTCOME
36.1 INTRODUCTION
36.2 CAUSE-RELATED MARKETING
36.3 CAUSE MARKETING OR CAUSE -RELATED
36.4 CONCEPT OF CAUSE RELATED MARKETING
36.5 TYPES OF CAUSE MARKETING
SUMMARY
CASE STUDY
KEYWORDS
EXERCISE
SELF ASSESSMENT QUESTIONS

LEARNING OBJECTIVE:
• To identify Cause-related marketing (CRM) is a mutually beneficial
collaboration between a corporation and a non-profit designed to promote
the former’s sales and the latter’s cause.
• To focus on cause related marketing is one of the phenomenal tools of
marketing practice.
• To determine cause related marketing build employee morale and loyalty.

LEARNING OUTCOME:
• The main outcome of cause related marketing can directly enhance sponsor
sales and brand.
• To know cause related marketing can heighten customer loyalty.
• To understand cause related marketing can boost a company’s public image
and helps distinguish it from the competition.

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Notes
36.1 INTRODUCTION:
The growth of cause-related marketing (CRM) has been phenomenal; however,
the question remains whether or not this technique is “strategic” philanthropy or
only exploitive business self-interest. Consideration of whether CRM is ethical,
or can be ethical, has important implications for how this tool is used by marketers
and not-for-profit organizations and for the establishment of public policy to
regulate it. Arguments about whether CRM practices are appropriate and ethical
should be considered separately. First, critics claim that CRM reduces traditional
corporate philanthropy. A related question is how firms should fulfil their roles
as socially responsible citizens and whether traditional philanthropy or CRM is
the most appropriate means of meeting such responsibilities. Secondly, critics
question whether widespread use of CRM will result in a transfer of responsibility
for supporting charitable causes from private individuals to business institutions.
Finally, the debate swirls around aspects of CRM itself and the ethical standards
which should be used to judge it. Criticisms include claims that CRM programs
exploit the constituencies of charities, that they turn human suffering into a
commercially saleable commodity, that they pressure charities to modify their
programs so that they are more marketable, that only popular, visible causes
receive corporate support, and that they promote overly simplistic solutions to
complex social problems.

36.2 CAUSE-RELATED MARKETING:

Cause-Related Marketing Defined Cause-related marketing has been defined as
“a co-alignment of marketing strategy and corporate philanthropy” (Varadarajan
and Menon 1988, p. 58). More specifically, typical cause-related marketing
campaigns require that the consumer buy a specific product or service, in
return for which the firm makes a donation to a specific cause. As is the case
with corporate philanthropy, money is not the only form of donation that firms
make through their CRM programs. As a byproduct of the affiliation, they may
provide the charitable organization with some form of business expertise such
as advice on how to design promotional material more effectively or improve
administration of programs; corporate personnel assigned IS to help run a fund-
raising event; and products or services such as computers, transport, or fund-
raising prizes. Cause-Related Marketing and Philanthropy Many critics of CRM
claim that CRM reduces traditional philanthropy (Gurin 1987).
They point out that CRM provides a more tangible, direct return to firms
and, unlike traditional giving, often places constraints on the charity such as
the purpose for which the donation will be used. Yet many businesses have
both donations’ programs and CRM programs and the use of CRM does not
necessarily mean that firms will no longer make other charitable gifts. Two
assumptions underlie the fear that CRM will replace traditional philanthropy: (i)
that traditional philanthropy is more “ethical”, and thus, preferable to CRM, and

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Notes (ii) that CRM has caused a shift away from philanthropy. We suggest that neither
CRM nor philanthropy are inherently ethical; each has to meet the criteria of
independent ethical standards derived from the realm of moral philosophy.

36.3 CAUSE MARKETING OR CAUSE -RELATED:

Cause Related Marketing is defined as ― (A) strategic positioning and marketing
tool that links a company or a brand to a relevant social cause or issue, for mutual
benefit.
―A commercial activity by which business and charities or causes form a
partnership with each other to market an image, product or service for mutual
benefit.

36.4 CONCEPT OF CAUSE RELATED MARKETING:

Cause related marketing can be understood as a strategic positioning and
marketing tool which links a company or a brand to a relevant social cause or
issue for mutual benefit. It is the initiation and funding of deserving causes.
Cause related marketing is a strategic marketing activity a way for a company
to do well by doing good-distinct from sales promotion, corporate philanthropy,
corporate sponsorship, corporate Samaritan acts and public relations, though it is
often an amalgam of such activities. Nothing builds brand loyalty among today’s
increasingly hard to please consumers like a company’s proven commitment to
a worthy cause.
Other things being equal many consumers would do business with a company
that stands for something beyond profits. In nutshell, cause related marketing
results in increased sales, visibility, and consumer loyalty and enhanced company
image along with positive media coverage.

36.5 TYPES OF CAUSE MARKETING:

Cause marketing can take on many forms, including:
• Product, service, or transaction specific
• Promotion of a common message
• Product licensing, endorsements, and certifications
• Local partnerships
• Employee service programs
Real-World Cause-Related Marketing Success
Cause-related marketing yields mutual benefit. Look for partners with a similar
agenda whose goals can be better achieved by partnering with your business.

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Take inventory of the assets that make you an appealing partner in a cause- Notes
related venture.
There are many types of mutually beneficial relationships you can form with
your cause related partner, including special events, sales promotions and
collection plans. An easy way to embrace a cause is to team up with a charity.

SUMMARY

To sum this all up, in order to be ethical in marketing attempts, businesses

should make honest claims, and excel at satisfying the needs of their customers.
This practice over time builds trust and customer confidence in your brand’s
integrity and therefore leads to loyalty, customer and employee retention, greet
public relations and increase in business from customers spreading the word.
Unethical marketing behaviors will achieve the exact opposite and in time could
even lead companies into legal troubles and dissemination of a bad reputation
and worse customer experience. Below are practices of unethical marketing,
which you should avoid in order not to ruin your company.

CASE STUDY :
In 2016, ice cream company Ben & Jerry’s introduced a new flavour to
promote democracy: Empower Mint. Along with the flavor came a campaign
— “Democracy Is in Your Hands”, which educated ice-cream lovers about
barriers placed in low-income communities to prevent them from voting,
like strict ID laws Empower Mint is a fudgy mint flavor that reflects the
company’s belief that “voting gives everyone a taste of empowerment”. To
emphasize everyone deserving an equal serving of democracy, the campaign
included a video that outlined the injustices low-income communities face
when casting ballots.
“Democracy Is In Your Hands” isn’t just a one-off campaign, though. While
the ice cream flavor was limited edition, the message isn’t.So during election
season, Ben & Jerry’s ramps up the campaign. Currently, the campaign’s
web page has recent articles about voter suppression and information about
how, and where, to vote.Even though Ben & Jerry’s is an ice cream company,
the marketers use their company beliefs to form a basis for their campaigns.
Democracy is heavily supported by the business, so they chose to highlight
that with a product launch.
Takeaways: If it fits your company, tie in product launches with a cause.
Maybe it’s a line of pink socks for Breast Cancer Awareness Month or
an app redesign for Pride Month. By integrating a product launch with a
bigger cause, you’re spreading awareness about an important cause while
encouraging customers to buy your product and do something good for the
world at the same time.

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Notes

KEYWORDS:
• Transactional Campaigns: A corporate donation triggered by a consumer
action (e.g. sharing a message social media, making a purchase, etc.)

• Non-Transactional Campaigns: A corporate donation to a cause such as in

cause sponsorship is not contingent on an explicit action of the consumer.

• Point of Sale Campaigns: A donation solicited by a company at the point

of sale but made by the consumer (e.g., consumers are asked to round up
their purchase or donate a dollar when they check out online or in-stores)

• Message-Focused Campaigns: Business resources are used to share

a cause-focused message. For example, a campaign that encourages
behaviour change (e.g. don’t text and drive), drives awareness about
an important cause (e.g. talking with elderly parents about driving) or
encourages consumer action.

• Portion of Purchase: Businesses donate a portion of their sales to a non-

profit or cause.

• Pin Ups: Primarily for in-house use. Customers will donate and fill their
name on paper icon, which will then be hung up in the store.

EXERCISE:
POINTS TO PONDER:

Answer the following Questions given below:

1.Cause related marketing is an----------
2.Cause related marketing was introduced by---------------
3.Related marketing creates experiences by taking into account individual ‘s
desire to be a part of the social context.
4.--------is the following is important in pressure group campaign.
5.The global environmental organization green peace campaigns against
nuclear policy globally is an example of---------

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Notes

SELF ASSESSMENT QUESTIONS:

SHORT ANSWER QUESTIONS:
1. What is cause related marketing?
2. Define cause marketing.
3. State the concept of cause related marketing.
4. How we can make cause related marketing.
5. Mention the types of cause marketing.
LONG ANSWER QUESTIONS:
1. Explain the cause related marketing with suitable example.
2. Outline Tata Salt with CRM initiatives.
3. Explain about Ethics in marketing.
4. Discuss about Ethical Norms in marketing.
5. Describe about the Ethical Values.

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Notes
LESSON 37 – ONLINE MARKETING &
E-COMMERCE

CONTENT:
LEARNING OBJECTIVE
LEARNING OUTCOME
37.1 INTRODUCTION
37.2 ONLINE MARKETING
37.3 DIFFERENCE BETWEEN PHYSICAL MARKETING AND
ONLINE MARKETING
37.4 COMPONENTS OF INTERNET MARKETING
37.5 ONLINE ADVERTISING
37.6 E-COMMERCE
37.7 ELEMENTS OF E-COMMERCE
37.8 SOCIAL MEDIA
37.9 DIGITAL MARKETING
SUMMARY
CASE STUDY
KEYWORDS
EXERCISE
SELF ASSESSMENT QUESTIONS

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Notes
LEARNING OBJECTIVE:
• The objective of marketing is to reach potential customers through the
channels where they spend their time reading, searching, shopping and
socializing online.
• The primary goal of e-commerce is to reach maximum customers at the
right time to increase sales and profitability of the business.
• The Functions of e-commerce include buying and selling goods,
transmitting funds or data over the internet.

LEARNING OUTCOME:
• To understand the successes and failure of E-commerce.
• To identify the several factors that will define the E-Commerce era.
• To describe the major themes underlying the study of e-commerce.
• To identify the major academic disciplines contributing to e-commerce
research.

37.1 INTRODUCTION:
On-line marketing is otherwise known as web marketing. Considering the number
of people who are entering the domain of Internet worldwide, it is important that
companies embrace this marketing which does not require physical facilities.
Future is only going to be for the companies who will be doing more business
through the web than the real physical infrastructure.
On-line marketing has been proven to be the most cost-effective investment in
capturing targeted product enquiries and online sales, resulting in a growth of
the business. In fact many companies which were doing badly through physical
infrastructure have shown how effectively they can market the products through
the web. This unit will delve into all the issues in web or on-line marketing.

37.2 ONLINE MARKETING:

On-line marketing is the one which allows products and brands to be displayed
in the Internet space. As in physical infrastructure, there is a need for websites to
attract the user to return to the website and continue the purchases. The success of
a website is based on the interactivity, attractiveness and also on the importance
attached by the user in terms of keeping their privacy. The primary purpose of
marketing an online business is the promotion of a good or service.

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Notes On-line marketing makes extensive use of the available tools for getting web
users to purchase a product or service from a website. In marketing an online
business, one needs to use good online marketing activities. In marketing an
online business, one needs to use good online marketing activities.

37.3 DIFFERENCE BETWEEN PHYSICAL MARKETING

AND ONLINE MARKETING:
Let us first look at the difference between physical product and that of a digital
or web product. With a physical product people love things that they can
actually hold in their hands. They get a feeling of real value when they purchase
a physical product. So, its easier time, in some cases, of making a sale with a
physical product. Selling a physical product also will, in many cases, cut down
on refunds.
For most people, it’s a real hassle to have to send back a product. So, unless there
is something really wrong with it, they’re not going to take the time to do this.
Certainly, there is more work involved with selling physical products, such as
packing and shipping. Because the cost of making a physical product is greater,
you either have to charge more for it or accept a smaller profit margin. This is
another drawback to selling physical products. With digital products, there is no
shipping.
Download is immediate and you can make a ton of sales in a short period of time
and literally do no physical work at all. Plus, many customers like the ability
to get a product right away instead of having to wait for it to come in the mail.
Digital products are as easy as it is to get them; it is just as easy to return them.
The refund rates for digital products are much higher than for physical products.

37.4 COMPONENTS OF INTERNET MARKETING:

Components of Internet marketing (also referred to as online marketing) may
include, a Web site, consisting of text, images and possibly audio and video
elements used to convey the company’s message, to inform existing and potential
customers of the features and benefits of the company’s products and/or services.
The Web site may or may not include the ability to capture leads on potential
customers or directly sell a product or service online.

A Web site can be the offline equivalent of a brochure or a mail order catalogue
and is a great way to establish your business identity. Search Engine Marketing
(SEM), which is marketing a Web site via search engines, either by improving
the site’s natural (organic) ranking through search engine optimization (SEO),
buying pay-per-click (PPC) ads with search engines which are based on selected
keywords and then displayed on search engine results pages when those keywords
are used in a search, and/or on other Web sites whose content includes the

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keywords specified, pay-for-inclusion (PFI) listings in Web site directories. PFI Notes
listings are similar to offline yellow page listings.

Email marketing, which is a method of distributing information about a product

or service or for soliciting feedback from customers about a product or service
through Email. Email addresses of customers and prospective customers may be
collected or purchased. Various methods are used, such as the regular distribution
of newsletters or mass mailing of offers related to the company’s product or
services. Email marketing is essentially the online equivalent of direct mail
marketing. Banner advertising, which is the placement of ads on a web site for
a fee. Offline this would be similar to traditional advertising in newspapers or
magazines.
On-line promotion, including press release distribution, which involves placing
a newsworthy story about a company, its website, its people, and/or its products/
services with on on-line wire service, or blog (Web log) activity, which is the
act of posting comments, expressing opinions or making announcements in a
discussion forum. Marketing can be accomplished in blogs either by hosting
your own blog or by posting comments and/or URLs in other blogs related to
your product or service.

Internet marketing refers to the strategies used to market products and services
online and through other digital means.

37.5 ONLINE ADVERTISING:

The successful promotion of a produce requires that, at a minimum, a positive
message be received by potential customers. And advertising is the main and
most commonly used source of communication to convey the message to the
ultimate customers. On-line advertising is also known as Web advertising,
Internet advertising and e-advertising. Information technology has pervaded the
advertising industry also. It has become highly skilled and dynamic profession.
With the escalating cost of producing advertising films for about 30-60 seconds,
computer graphics, and morphing are now the way out. In this context, no
advertiser can ignore the 100 million netizens for whom the advertisements
could be the right target. As in the diffusion of innovation cycle, now it is easier
to target the innovators as they are none-other than the netizens. Hence, this
webvertising is proving to be a lucrative affair. Floating URLs on the Internet
are the sites for advertising. On-line advertising worth nearly $1 billion in 1998
expected to be around $ 10 billion by 2008 is growing much faster than any other
conventional media.
As Internet users are growing day by day; so are Internet advertisers because they
can easily, effectively and efficiently communicate their products or services to

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Notes targeted mass audience. Add to this the fact that Internet users are well educated
with high incomes, it is only logical to conclude that Internet surfers are a desired
target for advertisers. On-line or web advertising is growing very fast. The
reasons are manifold. Advertisements can reach very large number of potential
buyers globally. There is web superiority over other advertising medium.
Web page (advertisement) can be updated any time and changes or corrections
are painless. On-line advertisement works 24 hours a day, 7 days a week, 365
days a year. In on-line advertisement specific interest groups or individuals
can be targeted. On-line advertisement can effectively use the convergence of
text, audio, graphics, and animation. On-line advertisements are cheaper in
comparison to traditional advertisement. There is no printing costs, no postage
costs etc.
Some of the advertisements that can be seen on the web are e-mail sponsorship
advertising, newsletter and E-zine advertising, flash ads, Interstitials &
Superstitials, streaming audio/video, pop-up/pop -under advertising, online
banner advertising, sponsorship (web sites, e-mails, sweep stakes) and advertorial
(paid-for editorial) placements. Currently finance sector is most dominating
sector in on-line advertising and accounted about 40% of total online advertising
in India.
Some of the leading companies from this sector are HDFC, Citibank, SBI,
and UTI etc. FMCG goods have just started to come in led by companies like
Hindustan Lever, Procter and Gamble etc. FMCG accounted about 20% of total
online advertisement spending in India. Consumer durables companies are also
coming and accounted 15% of total online advertisement.
Share of media sector is about 10% and rest comes from other. In India, most
popular form of online advertising is banner advertising. The reason, it is easy to
create, place and use. E-mail advertising follows it. Online advertising facilitates
the advertiser to reach an absolutely pinpointed and targeted audience. The
Internet as a medium knows no demographic boundaries and gives the advertiser
a huge audience to tap and build brand image if not sell products.
Internet’s interactive nature allows for greater flexibility than traditional media
in the type of information transmitted and the method of transmission. On-line
advertisement can facilitate purchase decision. It enhances customer company
relationship. On-line advertising expands the company’s market to global market.
It is easy to create, and place, it saves time, labour and money. There is no loss of
quality even after a very long period of time.

37.6 E-COMMERCE:
E-Commerce is the use of technology to automate business transactions and
work flows. In 1997-98, experts predicted the e-commerce trade to be worth
$200- 250 billion and next year it rose to $3 trillion of volume transacted. The

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method of doing business in the e-commerce medium differs from traditional Notes
commerce because it combines information technology and business process.
It is estimated that in 1999, 100 million shoppers would have spent $15 million
in the cyber market place. This is only expected to increase substantially paving
way for managerial talent to hook on. The subject may have topics like Electronic
Data Interchange, barcodes, electronic mails, Internet, product data exchange
and electronic forms. The programming part of it is not going to be the job of
managers as is widely speculated. Since financial services, entertainment, travel
and groceries going to have more presence through this mode and the need for
educated managerial pool in this sector are beckoning the need for this subject.
E-commerce:
• E Business is the use of electronic means and platforms to conduct a
company’s business.
• E Marketing describes company efforts to inform buyers, communicate,
promote and sell its products and services over the internet. E commerce is
that a company or site offers to transact or facilitate the selling of products
and services on- line. It is the subset of e-business focused on transactions.

37.7 ELEMENTS OF E-COMMERCE: PRODUCT:

ITEMS SOLD IN E-COMMERCE:
• Software
• Books
• Toys
• Music
• Travel
• Video
• Magazines
• Electronics
• Apparel
• Flowers
• Autos
Place: It is primarily website
Some of the examples of websites are:
1. Cyber CD stores:

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Notes • www.Cdnow.com
• www.ktel.com
2. Digitized products:
• www.intraware.com
• www.softwarebuyline.com
• www.egghead.com
3. Cyber flower stores:
• www.1-800-flowers.com
B2B marketing as mentioned earlier is the most prominent in the web space.
The benefits of having a website are:
1. Eliminates paper and reduces administrative costs.
2. Expedites cycle time e.g., BHEL
3. Lowers search costs and time for buyers e.g., GE
4. Increases productivity of employees dealing with buying and/or selling
5. Reduces errors and improves quality of services.
6. Reduces inventory levels and costs e.g., Toyota
7. Increases production flexibility, permitting just-in-time delivery e.g., TVS
8. Facilitates mass customization e.g., Tata Timken
9. Increases opportunities for collaboration
Promotion:
People coming to a website need to be attracted. Higher the traffic to a website more
will be acceptance among the customers. There are many websites which quote
the viewer number also. There are many providers who give the list of number
of people who have hooked on. One aspect of promotion is personalization. The
goal for any personalization model is to earn a user’s trust, and convince him/her
in the value of providing intimate details in order to better the experience. Some
of the personalization done by Amazon.com is
• Special Occasion Reminders
• Customer defined gift-giving occasion
• ‘Purchase Circle Favourites’

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• Permission-enabled Community-based Profiling mechanism Notes

• A dynamic ‘best-seller list’
• ‘Holiday Wish Lists’
• Personally selected products
• Registry-like service to keep track of all purchases
Pricing:
Normally the pricing is supposed to be attractive. There are many provisions
for the provider to offer different slabs of prices according to the product and its
class. However, the following strategies are quite commonly used:
1. Everyday Low Pricing by on line retailers
2. Rs.0 or Rs.1 pricing by airliners
3. Psychological pricing (Rs.999 by Rediff.com) etc.
37.8 SOCIAL MEDIA:
Social media marketing is the process of promoting a product or service through
various social media channels. In general, there are two ways to perform a social
media marketing campaign. The first way is free and has to do with building
followers, fans, or connections by sharing useful content, running contests, and
generally engaging with your users. The second way is through paid advertising.
You can use Facebook ads, Google Ads or Twitter promoted accounts to advertise
your product or services on Facebook, Google, and Twitter respectively.
37.9 DIGITAL MARKETING:
Digital marketing is the marketing process of building awareness and promoting
a brand or product online using all available digital channels.
The major components of digital marketing are:
Online Marketing Channels – Website marketing, SEM (search engine
marketing – includes SEO and Pay per click advertising), mobile marketing (i.e.
Google Play, Apple Store), email marketing, online banner advertising, video
marketing, and Social Media marketing.
Offline Digital Channels – Television, Radio, SMS, digital billboards (indoor
and outdoor)

SUMMARY

Online marketing is here to stay on account of the following aspects:

• Power shift from sellers to buyers
• Death of distance

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Notes • Time compression

• Knowledge management is key
• Intellectual capital rules
Considering the fact that India is leading in the field of IT, it is only natural
that the new generation of customers belonging to the below 20 age group will
encase utilize the benefits of online marketing.
The concept of E-Commerce first came about in the early 1970s with the
development of E-Commerce applications such as the innovation of Electronic
Funds Transfer (EFT). Electronic Funds Transfer allowed funds to be sent
electronically from one organization to another.
However, this was limited to large, corporate businesses and financial institutions.
Next in line came Electronic Data Interchange (EDI) which allowed not only
large, corporate businesses and financial institutions to send funds electronically,
but also allowed manufacturers, retailers, services and many other types of
businesses to electronically transfer routine documents.
Many other ECommerce applications such as stock trading and travel
reservation systems evolved out of Electronic Data Interchange until finally the
commercialization of the Internet brought about the introduction of Ecommerce.
Business deals with the models and strategies of the business itself. E-Commerce
is a result of E-business, and deals with the technology- mediated physical
transactions and exchanges between parties as well as electronically based intra-
or inter-organizational activities that facilitate such exchanges. One thing is clear
that e-commerce is here to stay as world becomes wired on a daily basis.

CASE STUDY :
Mosaic services is an young and upcoming on-line marketing company
India, nurtured by a team of fresh as well experienced team members. The
company is setting commendable benchmarks for on-line marketing in India.
The on-line marketing company offers customized solutions to individual
client’s technical, marketing and business-related problems.
Mosaic services offer a wide range of services like Web consultancy, technical
consultancy and Search Engine Optimization. This is an example for on-line
marketing agency in India. As for the on-line marketing companies, all those
in tangible business have entered the virtual business, thereby making use of
online marketing. Let us look at some of the case studies:

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Notes
1. Korea’s LG group has set up a new company in India, ‘LG Commerz
Now’ for venturing into e-commerce-related activities in the country.
Mr. Rupert Murdoch’s News Corp group is picking up a 10 per cent
stake in this e- commerce software foray by LG worldwide. The LGSI
subsidiary has made an investment of Rs. 45 crores. Initially, LG Soft
invested around Rs. 3.6 crores (90 per cent) and Star E-buy pump in
around Rs. 40 lakhs (10 per cent) in the company’s paid-up capital
of Rs. 4 crores. A total investment of $185 millions planned for the
entire LG Electronic business in India over the same period. They
launched the website called www.lgezbuy.com for their presence in
the e-business world.
2. To increase its on-line presence, bookstore chain Landmark plans to
tie up with various e-commerce portals in the country to become their
exclusive bookstore. Landmark currently has its on-line presence
only as part of the sify website and is hosted on the latter’s server. The
company started its on-line business about six years back. Under the
new system, the payment gateway would still be of the e-commerce
portals and a revenue sharing system would be worked out.
3. Estimating the online lottery business to be between Rs 5,000 and Rs
6,000 crore, Play win has entered the Indian lottery business which is
under the control of the government.
4. Considering the boom in the Indian aviation market, many online
marketing companies have entered. They are yatra.com, makemytrip.
com, ezeego1.com etc., apart from ticketing being done by the airliners
themselves which have started to provide the e-ticketing initiatives.

KEYWORDS:
Web Analytics: The ultimate goal of analytics is to identify actionable insights
on monthly basis which can help to make favourable changes to the website
gradually. This in turn ultimately leads to strong profits in long term.
Online Advertising: It is placing crisp, simple, and tempting Ads on the websites
to attract the viewers’ attention and developing viewers’ interest in the product
or service.
Mobile Advertising: It is creating awareness about the business and promoting it
on smart phones that people carry with them inseparably.
Search Engine Optimization (SEO): It is the activity of optimizing web
pages or complete website in order to make them search engine friendly, thus
getting higher position in the search results. It contributes to overall rankings

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Notes of the keywords through influencing factors such as appropriate titles, meta
descriptions, website speed, links, etc.
Social Media Marketing: It includes creating profiles of your brand on social
media platforms such as Google Plus, LinkedIn, Pinterest, Twitter, Facebook,
etc. It assures that you remain connected to the existing or potential customers,
build awareness about the products and services, create interest in and desire
to buy your product, and interact with the customers on their own terms and
convenience.
Email Marketing: You can interact with the customers to answer their queries
using automatic responders and enhance the customer experience with your
website.
You can offer the options such as signing-in to subscribe to your newsletter.
You can make the emails catchy and crisp, so that they don’t make recipients
annoyed. Also, you can use selected best words in the subject line to boost the
open rate.
Content Marketing: It includes creation and sharing of media and publishing the
content in order to acquire and retain customers.
Blogs: Blogs are web pages created by an individual or a group of individuals.
They are updated on a regular basis. You can write blogs for business promotion.
Banners: Banners are long strips of cloth with a slogan or design. They are
carried for demonstration, procession, or hung in a public place. There are
internet banners in parallel to tangible banners for advertising.
Internet Forums: They are nothing but message boards of online discussion
websites, where people post messages and engage into conversation.

EXERCISE:
POINTS TO PONDER:
Answer the following Questions Given Below:
1.------------is the correct depiction of digital marketing.
2.How many types of pillars do we have in digital marketing----------
3.---------is involved in the digital marketing process.
4.----------is the name of the process in which marketing is achieved by
incorporating tools, techniques, electronic devices, technologies or system.
5.The affinity of audience can be defined as----------

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Notes

SELF ASSESSMENT QUESTIONS:

SHORT ANSWER QUESTIONS:
1. What is online marketing?
2. Difference between physical marketing and online marketing.
3. Mention the components of Internet marketing.
4. Define Online Advertising.
5. What is E-Commerce.
LONG ANSWER QUESTIONS:
1. Explain the elements of E-commerce.
2. Discuss the Electronic payment options.
3. Briefly discuss about the Indian E-Commerce success and failure.
4. Explain about the social media.

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