CLASS NOTES

OF
MARKETING MANAGEMENT II
(MHA 308)

ANIS CHATTOPADHYAY
ASST. PROFESSOR

TECHNO INDIA
EM-4/1, SECTOR – V,
KOLKATA -700091

1
 PAPER CODE – MHA 308: Marketing Management II
Total Hour - 30

1. Marketing Research (5L)

1.1 Importance of Marketing research in healthcare sector, research objectives.
1.2 Proposal
1.3 Data Collection – primary and secondary data
1.4 Observational techniques
1.5 Analysis, interpretation and decision.

2. Marketing segmentation (5L)

2.1 Bases of segmentation
2.2 STP concept
2.3 Developing positioning strategy with example of hospitals with various
packages of operations

3. Consumer behaviour in services (6L)

3.1 Factors influencing consumer behaviour
3.2 Service expectation
3.3 Service perception
3.4 Consumer purchase decision
3.5 Post purchase evaluation
3.6 Dissonance
3.7 Handling of patient and publicity management

4. Marketing strategy – evaluation and control (4L)

5. Consumer relationship management (6L)

5.1 Definition.
5.2 Management and relationship marketing
5.3 Customer retention (relation to hospitals)

6. Medical tourism (4L)

6.1 Concept
6.2 Scope of India as Medical Travel Destination
6.3 International Accreditation.

Definition of Marketing Research

2
Marketing research can be defined as is the systematic gathering, recording, and analyzing of
information about specific issues related to the marketing of goods, services, organizations, people,
places, and ideas.
An outside party or the firm itself may undertake such research.

Inherent Characteristics of Marketing Research

Several points about marketing research need to be emphasized.
1. It must not be haphazard.
2. It involves a sequence of tasks: data gathering, recording, and analysis.
3. Data may be available from different sources: the firm itself, an impartial agency, or a research
specialist working for the firm.
4. It may be applied to any aspect of marketing that requires information to aid decision-making.
5. Research findings and their implications must be communicated to the appropriate decision
maker(s) in the firm. A firm’s decision to use marketing research does not mean it must engage in
expensive projects (test marketing, consumer attitude surveys). It may get enough data by
analyzing internal reports or from informal meetings with customer service personnel.

Difference between “Market Research” and “Marketing Research”

Parameters Market Research Marketing Research
1. Concept ‘Market’ research is ‘Marketing’ research is much broader. It not
research into a only includes ‘market’ research, but also
specific market. It is areas such as research into new products, or
a very narrow modes of distribution
concept.
2. Definition Market research Marketing research is the function that links
deals specifically the consumer, customer, and public to the
with the gathering of marketer through information - information
information about a used to identify and define marketing
market’s size and opportunities and problems; generate,
trends. refine, and evaluate marketing actions;
monitor marketing performance; and
improve understanding of marketing as a
process. Marketing research specifies the
information required to address these issues,
designs the methods for collecting
information, manages and implements the
data collection process, analyzes, and
communicates the findings and their
implications.

Definition
Market research deals specifically with the gathering of information about a market’s size and trends.
Marketing research is the function that links the consumer, customer, and public to the marketer
through information - information 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. Marketing research specifies the information required to
address these issues, designs the methods for collecting information, manages and implements the
data collection process, analyzes, and communicates the findings and their implications.
Marketing Research Process

3
There are 6 steps in the marketing research process, it is an overall approach, not a rigid set of rules.
1. Defining and locating the problem (problem definition):
2. Assess the decision factors (Secondary Data Analysis):
3. Collect Relevant Information or Primary Research:
1. Analysis of Data (primary data)
2. Conclusion, Recommendation and Project report presentation:
3. Implementation of findings
Step 1: Defining and locating the problem (problem definition)
 In order to solve any problem, i.e., to solve the conflicts in attaining objectives. (goals
may be unrealistic) Need to look in to insight of the symptom
 Research objective specifies what information is needed to solve the problem.
 Marketing Plan...to determine the unfulfilled needs/wants within specified target
market(s). (University students/local residents)
 May need to use exploratory research here, before conclusive research.

Step 2: Assess the decision factors (Secondary Data Analysis)

Different sets of variables, alternatives and uncertainties that combine to give the outcome of a
decision.
Alternatives---decision maker has control
Uncertainties--uncontrollable factors
Decision maker must:
(i) Determine the principal alternatives that can be considered reasonable approaches to
solving the problem...i.e. reasonable outcomes of research.
(ii) The major uncertainties that can affect particular alternative and result in it being a good
or poor solution to a problem.
Step 3: Collect Relevant Information or Primary Research
Developing Hypothesis and Generation of Primary Data Drawn from previous research and
expected research findings. It is an informed guess or assumption about a certain problem or a set of
circumstances.
Methods of collecting the data
There are two types of data, - Primary, Secondary.

Secondary Data Collection:

Data from Internal database (MIS). Accounting data, government data, magazines, survey of buying
power, syndicated data services, Marketing Research Corporation of America.
Primary Research: Primary research refers to information that is directly collected from the source.
Another simple method of primary research would be to directly talk to your customers and get their
feedback. Primary research can be both qualitative and quantitative.
i. Qualitative primary research
Qualitative primary research involves gathering information from interviews or focus groups.
 Open-ended interviews include questions that cannot be answered with a yes or no. You can get a
lot of information from such interviews and also find out about the dislikes, likes, requirements,
trends and emotional motivators of your primary market
 A focus group should ideally be led by experienced professionals who can lead a group of 6 or
more people and ask them both general and specific questions. Since trained professionals are
required to handle focus groups, they are very expensive
ii. Quantitative primary research
Quantitative primary research involves the collection of numerical information from surveys. This
information is then analyzed.

4
 Surveys can provide you with the information you require if the survey has meaningful questions.
More people would be willing to take a survey as it takes less time. The cheapest and easiest way
of conducting a survey is through the telephone and on the place where your product is being sold
Primary data collection Information "collected specifically for the purpose of the investigation at
hand", Dictionary of Marketing Terms. It is required when thorough analysis of secondary research
provides insufficient information for a marketing decision to be made.
a) Research Design
The frame work or plan for a study that guides the collection and analysis of data, it includes:
 Who collects the data?
 What should be collected?
 Who or what should be studied?
 What technique of data collection should be used?
 How much will the study cost?
 How will data be collected (personnel)?
 How long will data collection be?
Research Design Involves
 Problem definition: In order to solve any problem, i.e., to solve the conflicts in attaining
objectives. (goals may be unrealistic) Need to look in to insight of the symptom Research
objective specifies what information is needed to solve the problem.
 Study objective: after defining the problem, next task is set clear objective
which will in turn solve the problem. Without objective no research (in fact everything)
project will be solved effectively.
 Information to be collected: depending on the objective researcher has to
concentrate on the information to be collected. If the objective wrongly determined then
information will be coming out wrongly.
 Target audience (sample): sample should be selected on the basis of the
problem and information needed.
 Methodology: it includes different methods of data collection and analysis,
which have been stated below.
 Sample size.

Types of Research Types of research

A) Exploratory B) Evaluative
Research Research

1) Descriptive 2) Causal

A) Exploratory Research: This research identifies the problem more in depth, more
precisely evaluating the problem and identifies the variable. It is mainly used in the introductory
stage of research and result of which is used in the next phase.
B) Evaluative research: This research concerns with the “evaluate” some thing or make
relation between cause and effect.
1) Descriptive research: precisely it describe something, i.e.,
 It portrays the characteristics of features of marketing phenomenon.
 Degree of association of variable.
 Prediction of occurrence of marketing phenomenon.
Descriptive research is more rigid than exploratory research and seeks to describe users of a product,
determine the proportion of the population that uses a product, or predict future demand for a product.

5
As opposed to exploratory research, descriptive research should define questions, people surveyed,
and the method of analysis prior to beginning data collection. In other words, the who, what, where,
when, why, and how aspects of the research should be defined. Such preparation allows one the
opportunity to make any required changes before the costly process of data collection has begun.
2) Causal research: It is used to evaluate the cause. The value of independence variable causes the
value of dependant variable.
Types of research design
(According to stage)

1) One stage 2) Two stage

1) One stage:
When the problem is well defined then this type of research design is applicable to evaluate the
hypothesis. It consists of exploratory research.
2) Two stage:
a) When the problem is not well defined.
b) When the problem need to be explored in more depth.
c) When any aspect of the problem needs to be explored in more depth.
d) Two stage research designs consist of both exploratory and evaluative. First
exploratory then it is followed by evaluative.
b) Gathering Data
Sampling
 To select representative units from a total population.
 A population "universe", all elements, units or individuals that are of interest to
researchers for a specific study. IE all registered voters for an election.
 Sampling procedures are used in studying the likelihood of events based on
assumptions about the future.
Introduction
Sampling is the procedure a researcher uses to gather data on people, places, or things to study.
Sampling allows statisticians to draw conclusions about a whole by examining a part.
It enables us to estimate characteristics of a population by directly observing a portion of the entire
population.
Selection of a Sample
(i) The sample design
(ii) The target population
(iii) The sampling frame
(iv) The sampling units
(v) The sample size
(vi) The sampling method

Methods of Data Collection

1) Observation 2) Survey/interview 3) FGD 4) Projective technique

a) Manual b) Mechanical a) Exploratory b) Clinical c) Experiencing

a) Personal b) c) Mail
Telephone d) Internet

i)Formal ii) Depth interview

A) True in depth B) Non directive C) Semi structured

6
1) Observation Method:
 In this method information are collected by observing the behavior of an individual under a given
situation
(a) Manual Observation: Information are collected by investigators’ own observation without asking
any question to the respondent.
Advantages:
 Information about current happening only recorded.
 Totally unbiased
 Avoid incapability and unwilling ness to answer.
Disadvantages:
 Time consuming.
 Only expressive behavior can be gathered.
 Interference of other things.
(a) Mechanical observation: Information are collected through different mechanical/ electronic
gazette.

2) Survey / Interview Method:

(a) Personal Interview
Information is collected from respondent in one to one situation.
i) Formal Personal (face to face) interview:
Information is collected from respondent in one to one situation with the help of structured and semi-
structured questionnaire.
Advantages:
 The sample is controlled i.e., it represents the target audience.
 The interview is controlled
 Personal evaluation is possible.
 Exaggerated responses can be checked.
 Versatility.
Disadvantages:
 Fake interview
 Biased – Interviewer bias, questionnaire bias, respondent bias
 Unwilling ness to answer.
 Inability to answer.
Depth Interview:
It may be defined as unstructured personal interviews which uses extensive probing to get a single
respondent to talk freely and to express detailed belief and feeling on a topic.

Types of Depth Interview:

(A) True in Depth or, Clinical Interview: Based on psychological free association techniques mostly
outside the purview of marketing research and used for therapy
(B) Non-directive Interview: Here, respondent is given maximum freedom to respond within the
bound of topic of interest.
(C) Semi Structured or, Focused Interview: Here, the interviewer attempts to cover specific list of
topics or, sub areas. This mode of interviewing is especially effective with busy executives, technical
experts and thought leaders.
Advantages:
 It brings out the information that would be obtained in a normal interview.
 Flexible, so interviewer stimulate respondent to reveal more.
Disadvantages:

7
 It depends on the skill and experience of interviewer.
 If interviewer is biased then total result will be biased.
 Time consuming and costly.

(b) Telephone Survey:

This interview is conducted through telephone. Respondents are asked question through telephone.
But, in this type of interview probing and psychological question cannot be asked.
Condition of Telephone Interview: Time constraints, large sample size, Large area covered.
Advantages:
 Less time consuming.
 Large sample size can be covered.
 Large geographic area can be covered.
Disadvantages:
 Respondents don’t want to hang up in a call for long time.
 Interviews tend to be a lot shorter.
 Visual aids cannot be used.
 Expression cannot be observed.

(c) Mail Survey:

Mail the questionnaire with request to answer the questions and send them with in stipulated time
period.
Condition:
 In Industrial survey
 Sample size is small
 busy respondents
 small questionnaire
 No explanatory question.
Advantages:
 Cost effective
 In case of busy respondent it is more effective.
 Effective small group.
Disadvantage:
 Attitudinal question cannot be asked.
 Impersonation
 Low response
 Non- representative
Qualitative – questions may be filled by the non respondent
Quantitative – response is very low.

(d) Internet
The Internet can be used in a number of ways to collect primary data. Visitors to sites can be asked to
complete electronic questionnaires. However responses will increase if an incentive is offered such as
a free newsletter, or free membership. Other important data is collected when visitors sign up for
membership.
Advantages of the Internet
 Relatively inexpensive
 Uses graphics and visual aids
 Random samples can be selected
 Visitors tend to be loyal to particular sites and are willing to give up time to complete the
forms

8
Disadvantages of the Internet
 Only surveys current, not potential customers.
 Needs knowledge of software to set up questionnaires and methods of processing data.

3) Focus Group Discussion (FGD):

A FGD is a process of obtaining possible ideas or, solution to a marketing problem from a group of
respondents.
Process:
In this method usually 8-10 members from target audience are invited together for few hours and
discuss a problem. The common techniques for successful FGD include Chain reaction, Devils
Advocate and False termination.
Chain reaction – The moderator build a cumulative effect by encouraging each member of the focus
group.
Devils Advocate – The moderator expresses extreme view point, which usually provoke reaction from
members.
False termination – Falsely concludes the discussion by thanking all of members.
Types of Focus Group:
(a) Exploratory FGD - it is commonly used at the exploratory phases of the market research
process to know and define the problem in to more depth.
(b) Clinical FGD – Research is conducted in the premises that a person’s true motivation and
feeling are associated with but in subconscious in nature.
(c) Experiencing FGD – It allows researcher to experience the emotional frame work in which
the product is being used.

4) Projective Techniques:
The theory behind these techniques is that all individuals describe a situation and interpret it. The
description they provide is the mixture of their belief, feeling, attitude and motivation.
Types of Projective Techniques
(a) Word Association: A series of word is read once at a time to respondent. After each word the
respondent is asked a word which is most appropriately associated with the previous word.
Ex. Maruti : ---------
(b) Sentence Completion: It requires respondent to complete partial sentence. Ex: “People who
drive Maruti _____________”
(c) Story Telling: In this case respondents are shown pictures or, given description and asked to
tell a story about them.
Advantages:
1) Ability to uncover subconscious attitude and motives.
2) Results are more complete and less bias.
3) Commissioning marketers often observe the group from behind a one-way screen
4) Visual aids and tangible products can be circulated and opinions taken
5) All participants and the researchers interact.
6) Areas of specific interest can be covered in greater depth
Disadvantages of Focus Groups
1) Highly experienced researchers are needed. They are rare.
2) Complex to organize.
3) Can be very expensive in comparison to other methods.
4) Apart from above mentioned methods, there are some other methods of data collections.
These are as follows:
 Mystery shopping: Companies will set up mystery shopping campaigns on an organizations
behalf. Often used in banking, retailing, travel, cafes and restaurants, and many other customers

9
 focused organizations, mystery shoppers will enter, posing as real customers. They collect data
on customer service and the customer experience. Findings are reported back to the
commissioning organization. There are many issues surrounding the ethics of such an approach
to research.
 Product tests: Product tests are often completed as part of the ‘test’ marketing process.
Products are displayed in a mall of shopping center. Potential customers are asked to visit the
store and their purchase behavior is observed. Observers will contemplate how the product is
handled, how the packing is read, how much time the consumer spends with the product, and so
on.
 Diaries: Diaries are used by a number of specially recruited consumers. They are asked to
complete a diary that lists and records their purchasing behavior of a period of time (weeks,
months, or years). It demands a substantial commitment on the part of the respondent. However,
by collecting a series of diaries with a number of entries, the researcher has a reasonable picture
of purchasing behavior.
 Omnibus Studies: An omnibus study is where an organization purchases a single or a few
questions on a ‘hybrid’ interview (either face-to-face or by telephone). The organization will be
one of many that simply want to a straightforward answer to a simple question. An omnibus
survey could include questions from companies in sectors as diverse as health care and tobacco.
The research is far cheaper, and commits less time and effort.

Step 4: Analysis of Data

Data analysis consists of the following:
1. Coding—the process by which each completed data form is numbered and response categories are
labeled.
2. Tabulation—the calculation of summary data for each response category.
3. Analysis—the evaluation of responses as they pertain to the specific issue or problem under
investigation.

Step 5: Conclusion, Recommendation and Project report presentation

A. Recommendations are suggestions for a firm’s future actions, based on marketing research
findings.
B. The report must be written for the audience that reads it.
C. Once the recommendations are passed on to the proper decision makers, the research report should
be warehoused in the marketing intelligence network.

Step 6: Implementation of findings

(A) The research report represents feedback to marketing managers, who are responsible for using
findings.
(B) Marketing managers are most likely to implement research findings under these conditions:
1. They have input into the research design.
2. They have broad control over marketing decisions.
3. They have confidence that results are accurate.

Project Report presentation

1) Cover Page

10
 i) Title
ii) Name of the candidate
iii) Name of the organization
iv) Name of supervisor with his/her designation and office.
2) Certificate from supervisor (if possible)
3) Acknowledgement
4) Content ( from next page to Bibliography)
5) Summary of the result / Executive summary: Objective of the study ( very brief), findings,
conclusion and recommendation.
6) Introduction ( Nature of the study)
7) Objective of the study: researcher has to clear cut describe objective of the study, it means the
reason(s) behind this study. In the case of starting up a new business this part and executive
summary is very much important to sell your project before lone sanction committee.
8) Company profile ( if the person is entrepreneur then he/ she has to give a vivid description of
proposed OR already existing company)
9) Product profile.
Nature of the product
Existence of the product
Ingredients of the products and its cost
Start up price
Profit /unit
Break even analysis.
Present market demand, etc Secondary Census
10) Research methodology
Sources
i) Types of Data of Data
Avoid
ii) Nature of Data
Ambiguity Primary
iii) Sources of Data Sampl
e
(a) Secondary Data sources Data
Specific Collection
Problem (b) Primary but, Data sources
Techniques
Definition
iv) Data collection procedure.
not too
Observation
right
v) Data Collection tools.
vi) Communication Media.
Watch for Experimentation
vii) Sample size.
symptoms
viii) Area of Sampling.
ix) Sampling procedure Survey
x) Obstacles faced in the time of data collection.
Measurabl
11) Brief discussione about questionnaire ( If it is used)
Research Focus
12) Findings and analysis from study/Data
Objective survey.
Analysis Group
13) Conclusion. Specific (Primary, Secondary
and Advanced)
14) Suggestion OR recommendation OR feasibility comments Tools
15) Limitations.
16) Appendix. Questionnaire
Exploratory
i) questionnaire
ii) Name of the respondent addresses.PresentatioReport Interview
Schedule
Resear n
h Descriptive
Design Mechanical
and
Electronic
Instrument

Causal
Association
and
Projective
techniques
11

Pictorial representation of Marketing Research

Components of errors
Total error has two distinct components: Total Error = Sampling Error + Non Sampling Error.
Sampling Error refers to the variable error resulting from chance select ion of elements from
population as per the sampling plan.
Non Sampling Error consists of all other error associated with the research project. Such errors are
diverse in nature. They are often thought of as bias. However bias is a type of systematic error which
enters into the process because of un-calibrated instruments or prejudices of the researcher.
Example: a mis recording of a response during data collection represents a random non-sampling
error.
Types of errors
1. Population Specification Error: It is defined as the “non correspondence of the required
population to the population selected by the investigator”. It occurs when a researcher selects an
inappropriate population from which to obtain data.
2. Sampling Error: It is defined as the “non correspondence of sample selected by probability
means and the representative sample selected by the researcher”. It occurs when a probability
sampling method is used to select a sample and this sample is not representative of the population
concerned.

12
3. Selection Error: It is defined as the “Non correspondence of sample selected by non probability
means and the representative sample sought by the researcher.”
4. Frame Error: It is defined as the non-correspondence of the sought sample with the required
sample. A sampling frame is a means of accounting for all the elements of the population. I t is
usually a listing of all the elements that identify a population.
5. Non Response Error: A non-response error occurs, when the obtained sample differs from the
original selected sample. Non response can occur in two ways – (a) Non-Contact i.e. the inability
to contact (or reach) all the members of the sample and (b) Refusal i.e. the non- response of some
or all the items of the measurement instrument.
6. Surrogate Information Error: This is defined as the non-correspondence of the information
being ought by the researcher and that is required to solve the problem. Or in other words,
information is obtained from substitutes rather than original sample. The necessity to accept
surrogate information arises from either the inability or the unwillingness of the respondent to
provide the desired information.
7. Measurement Error: This may be defined as the non correspondence of information obtained by
measurement process and the information sought by the researcher. I t is generated by the
measurement process itself and represents the difference between information generated and
information wanted by the researcher
8. Experimental Error: I t can be defined as the non correspondence of the “true impact of” and
the impact attributed to” the independent variable.

 Marketing segmentation (5L)

13
 o Bases of segmentation
o STP concept
o Developing positioning strategy with example of hospitals with various packages of
operations

Defining of Market Segmentation:

A market segment is a group of people or organizations sharing one or more characteristics that cause them to
have similar product and/or service needs. A true market segment meets all of the following criteria: it is distinct
from other segments (different segments have different needs), it is homogeneous within the segment (exhibits
common needs); it responds similarly to a market stimulus, and it can be reached by a market intervention. The
term is also used when consumers with identical product and/or service needs are divided up into groups so they
can be charged different amounts. These can broadly be viewed as 'positive' and 'negative' applications of the
same idea, splitting up the market into smaller groups.
Definition: Process of defining and sub-dividing a large homogenous market into clearly identifiable segments
having similar needs, wants, or demand characteristics.

Bases for Market Segmentation

The bases (profilers or criteria) for market segmentation includes the following:
A. Demographic
􀂄 Age, sex, family size
􀂄 Income, occupation, education
􀂄 Religion, race, nationality
B. Geographic
􀂄 Region of the country
􀂄 Urban or rural
C. Behavioral
􀂄 Product usage - e.g. light, medium, heavy users
􀂄 Brand loyalty: none, medium, high
􀂄 Type of user (e.g. with meals, special occasions)
D. Psycho graphic
􀂄 Social class
􀂄 Lifestyle
􀂄 Personality
Now, I will explain these bases for segmentation to you, one by one.
Market segmentation - demographic segmentation
Bases for segmenting consumer
markets

Associative Consumer
Characteristics
Direct Consumer
Response
(Behavioural)

Geographi Psychographic
c
Demographic User Benefits User
statu rate
Occasions s Attitude
Socio-
economic Loyal Status Buyer
Readiness
Stage
Fig: Bases for segmenting consumer
markets

A) Demographic segmentation

14
  Consists of dividing the market into groups based on variables such as age; gender, family size,
income, occupation, family size, family life-cycle, education, generation, religion, race, social class and
nationality.
 Consumer wants, preferences and usage rates are often associated with demographic variables.
 Demographic variables are easier to measure.
 These characteristics are needed for estimating the size of the target market and in the time of
advertising media that should be used to reach it efficiently. Some of the demographic variable uses
are:
i) Age and Life-Cycle Stage:
Consumers needs and wants change with age. For consumers of different age groups, different types of
products are produced. Different types of ready-made garments are produced for consumers of different
age groups. A successful marketing manager should understand the age group for which the product would
be most suited and determine his marketing policy, pricing policy, advertising policy, etc, accordingly. On
the basis of age, a market can be divided into five phases i.e., Infants, Young child, Adolescent, Young
Adults, Old people.
The need for different goods vary with the age in following manner.
 Infants: Baby foods like Cerelac and Farex
 Young child: Leo toys, Barbie dolls (Again these can be segmented by gender basis for
small girls and boys)
 Adolescent: Trendy products and services like Jeans, T-shirts, and Coffee shops, mobile
phones.
 Young Adults: Music systems, mobile phones, Films
 Old people: Investment instruments, health packages for old
Whenever marketers talking about segmentation based on life cycle, they need to specify exact age groups.
ii) Gender:
 The gender segmentation is one of the most common forms of segmentation.
 Because, both man and woman have always been vocal about their separate needs.
 Gender segmentation has been applied in clothing, hairstyling, cosmetics and magazines.
 Today financial services are designed for women separately.
 Another trend has been found in India since mid ‘90s, woman plays significant role in decision making
process. Before ‘90s that was beyond imagination. In almost every house hold product, life style
product, fashion and apparel woman of the Indian urban and semi urban household has tremendous
control over decision making.
iii) Marital status:
 Life style of a person depends on marital status.
 An unmarried bachelor prefers to spend more money on food, entertainment, mobile phone, CD player
etc.
 But a married person will purchase house, furniture, invest more money to financial plan, etc.
iv) Income:
 In India income varies from few hundred rupees a month to millions a month.
 In this scenario the customers will behave differently according to income.
 Income segmentation is a very important factor to automobiles, clothing, cosmetics and travel industry.
 However, income alone can not be taken as main criteria. Because country like India, occupation,
living place, background, social status and roles also matter. That’s why along with income other
things should also be considered as the determinants, - called SEC (Socio- Economic Class).

B) Social-Economic Segmentation
Many Marketers believe that a consumer “perceived” social class influences their preferences for cars,
clothes, home furnishings, leisure activities and other products & services.
So, there is a clear link here with income-based segmentation.
i) Generation: It has been noticed that there has been a recent change in customer preferences, especially
of the younger age groups or those of the present generation and the older ones are yet to catch up.
Because of this one marketing strategy cannot be implemented for all. So many researchers are now

15
 turning to generation segmentation. Each generation is profoundly influenced by the times in which it
grows up – the music, movies, politics and events of that period.
ii) Social Class: It has a strong influence on preference in cars, clothing, home furnishings, leisure
activities, reading habits etc. Many companies design products and services for specific social classes.
iii) Family size: The size of the family affects the amount and size of purchases. The consumption pattern
of a big-sized joint family differs from a small-sized nucleus family.
iv) Family composition: The composition of families can be another base for segmentation. In rural or
joint family, the head of the family takes the majority of decisions whereas in urban small families,
more freedom in decision-making is given to the individual family members. Even the children have
become an important part of decision making nowadays because they are now aware about the
alternatives.
v) Occupation: Various occupations can influence the buying behaviour. People in sales and people in
academic training will have different purchase bahaviour. Those who are senior managers will need to
maintain the corporate status but a field representative will require other things which will make his
work easier like files, folders etc. A model or an airhostess will be more beauty conscious and spend a
lot in buying cosmetics and beauty care products.
vi) Educational level: The academic standard segments people with same income i.e with a similar ability
to buy into their different likelihood to buy. For example, an illiterate miner and an educated primary
teacher with same income may prefer different products due to their difference in educational
standards.
vii) Religion: Religious rituals, traditions and cultures also differentiate and segment the market. The
famous Nike “Swoosh” symbol is not used in some Arab countries for its resemblance with Islamic
scriptures.
viii) Race and ethnic background: The difference in races in terms of their tastes, beliefs, life styles are
very much significant. India, the presence of different castes, tribes, religions, and linguistic groups in
an example of this.
ix) Nationality: Different countries have different cultures, legislations and climatic conditions making the
nationality a significant segmentation variable. General Motor’s Nova car did not sell in Spain, as in
Spanish, “nova” means “no go”.
 The hybrid models of geographic and demographic segmentation methods are becoming popular.
This hybrid model assumes that people of similar social class frequently cluster in the same
neighborhood. One of such hybrid models named ACORN (A Classification of Residential
Neighborhoods) developed by CACI Information Services assume that there are six major categories of
neighborhoods viz. Thriving, Expanding, Rising, settling, Aspiring and Striving.

C) Geographic segmentation
 Geographic segmentation divides markets into different geographical units. These units include,
Regions: e.g. in West Bengal you can talk of North Bengal, South Bengal, as regions or zones and Kolkata,
Durgapur, Sliguri, Burdwan as Main cities and Bongaon, Barasat, and Basirhat as smaller cities.
 Countries categorized by size, development or membership of geographic region City / Town size
 Geographic segmentation is an important process - particularly for multi-national and global businesses
and brands.
 Many such companies have regional and national marketing programmes that alter their products,
advertising and promotion to meet the individual needs of geographic units.

D) Psychographic segmentation: According to Emmanuel H. Denby as “a measurement of consumers’

propensity to purchase under a variety of conditions, needs and stimuli”. The segmentation method represents a
merging of demographic characteristics with psychoanalytical approaches to consumer bahaviour. In
Psychographic segmentation buyers are divided into different groups on the basis of life-style or personality and
values.
i) Life-Style:
 People exhibit different life-styles and they want that goods they consume should express their life-
styles.
 The life-styles could be –

16
 - upwardly mobile (those who are ambitious people seeking a better life-style through better paid an
more interesting work),
- traditional and sociable (those who seek conformity and compliance with group norms),
- security and status seeking (those who purchase well-known brands and whose purchases emphasize
those products that confer status and make life more predictable) and
- Hedonistic (pleasure seeking or self gratifying) preference (those who believe in enjoying life for the
present with little thought given to the future).
Many companies use another segmentation system to exploit life style of individual is called sagacity life cycle
model. It assumes that people have four phases of different aspirations and bahaviour patterns as they go though
their life cycle. They are as under
i) Student or unemployed - under 24.
ii) Pre-family - under 35, own family with no children.
iii) Family- under 65, head or joint head of households with one or more children.
iv) Late - all adults whose children have left home or those childless adults above 35.
 Life-cycle segmentation is measured either through the clusters of products used or through Values,
Activities, Interests and Opinions (VAIO).
 There is a certain appeal to the life style approach.
 There are groups of people who buy certain brands to identify themselves as members of the groups
and may share similar values, activities, interests and opinions.
 Others (people of dissociative group) may buy the brands to show that they aspire to the desired group.
 This phenomenon is observed in fashion products such as clothes, jewellery, accessories etc. and now
has been extended to fields such as restaurants, cars and watches.
 Another way of segmenting the life style.
A- Activities: Work, hobbies, shopping style
I- Interests: In food, fashion, recreation
O- Opinions: About themselves, others, social issues
ii) Personality:
 Personality is the sum total of an individual’s enduring internal psychological traits that make him or
her unique. Self-confidence, dominance, autonomy, sociability, defensiveness, adaptability, and emotional
stability are selected personality traits.
 Marketers have used personality variables to segment markets.
 They provide their products with brand personality that corresponds to consumer personalities.
(Example: Raymonds – A complete man)
iii) Values:
 Some marketers segment by core values, i.e. belief that highlights consumer attitudes and bahaviour.
 Core values go much insight than bahaviour of attitude and determine.
 At a basic level, people’s choices and desires over the long term.
 Marketers who segment by values believe that by appealing to people’s inner selves it is possible to
influence their outer-selves, their purchase behaviour.
iv) Beliefs:
 This is one of the parameters of segmentation used by marketers to sell products.
 A belief is a descriptive thought that a person has about something. A person may believe that a
cooking oil ‘Dhara’ has the lowest fat content and is best for health. This belief may be based on some real
facts or it may merely be a notion or opinion that the person has. The beliefs constitute the brand image
about the brand. The marketer must ensure that consumers have relevant and correct information about the
brand to facilitate formation of a positive brand image.
 People according to their situation and bringing up development their own beliefs. Example: people
develop beliefs according to their religion.
 Their purchase bahaviour are greatly influenced by their beliefs.
v) Attitudes:
 Attitudes or opinions are positive, neutral, or negative feelings about goods, services, firms, people,
issues, institutions. Success cannot normally be attained without positive consumer attitudes.
 Attitude is a person’s enduring feeling, evaluation and tendency towards a particular idea or object.
Starting from childhood, attitude develops over the time with each fresh knowledge input, experience and
influence.

17
 People have different attitudes towards different aspects of life, which affect their consumption pattern
also.
 Some people who develop a very negative attitude towards life do not enjoy and hence behaves in a
very different manner from the person whose attitude is to always have fund and live life to the fullest.
Hence the marketing decision makers have taken this as a parameter to segment the population.
Behavioral Segmentation or Consumer Response Segmentation
In behavioral segmentation, buyers are divided into groups on the basis of their knowledge or attitude towards,
use of or response to a product. Some marketers believe that behavioral variables are the best starting points for
constructing market segments.
(a) Occasions:
According to the occasions buyers develop a need, purchase a product or use a product. It can help firms
expand product usage. A company can consider critical life events to see whether they are accompanied by
certain needs. There can be two types of occasions:
 Regular
 Special
Example: Men buy formal shirts and trousers and casual shirts for weekends. Women buy Sarees, Salwar
kameez or Western formal for office and other casual wears for holidays. This is regular occasion purchase. In
West Bengal, lots of home shopping takes place on the occasion of ‘Durga puja’. TV sets sales go up during
world cup cricket and World cup Football.

(b) Benefits:
 Buyers can be classified according to the benefits.
 On a purchase of same product different customer look for different benefit because of which they buy
products from different companies which satisfy their specific needs.
Example: The basic function of a car is transportation. But people prefer different cars because they seek
different benefits. The benefits can be of different types as follows -
 Quality: there are people for whom the quality matters most in any purchase. It covers following
points.
- Features: the parts and ingredients which are present in the product to make it total.
- Design: how features are arrange to give total shape of the product.
- Style: the appearance of the product.
- Performance: Degree of meeting the requirement of consumer.
 Service: At the inception of Maruti it did not have service station all over India. For that reason
people scared to buy Maruti car. But, with the passage of time they have developed their service station
all over India and intensify it.
 Economy: For most of the people belonging to the middle income group price is the most
important deciding factor in case of any purchase. These people look for the economy in every purchase.
 Speciality: People can be adventurous and sporty in purchase decisions for car and they would
prefer Ferari etc.
(c) User Status:
Markets can be segmented into following classes depending on the user status. It can be divided the users of
deodorant in different categories.
 Non-user: A 10 year child or 70 years old in our country generally do not use deodorant.
 Potential users: This is the category where the usage rate is expected to be highest. In our
example fashionable teenager, corporate people are the potential users of deodorant.
 First time users: The users who use it for the first time. For example the teenagers first
deodorant used, may be in his college days.
 Regular user: A corporate people, High School students, college guy and girls, a fashion
conscious lady are the regular users.
 Ex-user: Somebody who stopped using for some reasons may be due to allergies or due to
switching to some substitutes like perfume are the ex-users of the product.
Each market segment requires a different marketing strategy. The Company’s market position will also
influence its focus. Market-share leaders will focus on attracting potential users, whereas smaller firms will try
to attract current users away from the market leader.
(d) Usage Rate:

18
Markets can be segmented into various classes depending on usage rate. Considering the cosmetics usage the
different categories of usage rate are as follows:
 Light: These are the categories of the users who are very infrequent users. In case of cosmetics an
average housewife who is not very fashion conscious is a light user of the cosmetics.
 Medium: The fashion-conscious teenagers are the medium users of cosmetics i.e. they use it very
frequently.
 Heavy: There are people for whom the cosmetics are the most important purchase and they are heavy
users of it. Celebrities in entertainment world, the models etc. need cosmetics on a regular basis, as it is
the most important part of their profession.
Heavy users are often a small percentage of the market but account for a high parentage of total consumption.
Marketers prefer to attract one heavy user rather than several light; users and hey vary their promotional efforts
accordingly.
(e) Loyal Status:
Consumers have varying degrees of loyalty to specific brands, stores and other entities. Buyers can be divided
into four groups according to brand loyalty status.
 Hard-core Loyal: consumers who buy one brand all the time. People who have been purchasing
Colgate for years without caring which other brands are coming in and going out of the market.
 Split or soft Core Loyal: Consumers who are loyal to two or three brands. Pepsodent after its launch
found some customers of Colgate switching between the two brands.
 Shifting Loyal: Consumers who shift from one brand to another. Customers can be found to keep on
switching off from Colgate to Close up and then to Pepsodent without any consistency.
 Switching: Consumers who show no loyalty to any brand. These are the people who will buy any
brand that is available in the market.
 Each market consists of different number of the four types of buyers. In case of operating in a
brand-loyal market companies have to strive for getting in to it and gaining more market share.
 A company can identify its product’s strengths by studying in hard-core loyals.
 By studying its split loyals, the company can pinpoint which brands are most competitive.
 By looking at customers who are shifting away from its brand, the company can learn about
its marketing weaknesses and strengths.
(f) Benefits Sought:
 This is an important form of behavioral segmentation.
 Benefit segmentation requires Marketers to understand and find the main benefits customers looking
for.
 An excellent example is the toothpaste market where research has found four main “benefit segments”
- economic; medicinal, cosmetic and taste.
(g) Buyers-Readiness Stage:
A market consists of people in different stages of readiness to by a product. Various stages are:
 Unaware: People not following technology trend and completely unaware about its improvement and
new innovations.
 Aware: People who have seen the advertisements but do not have enough knowledge about the
technology.
 Informed: These people get into from friends colleagues, relatives who are users or technical people.
 Interested (Comprehended): People who have information and hence are variety-seekers.
 Desired (Convinced): There are the people who have gathered detailed knowledge, probably has taken
a trial, but may lack money to purchase the product.
 Intended to buy (Action): People who have the knowledge, has the purchasing capacity and desire
and are ready to buy.

19
 Target Market

Unaware Aware

Not tried Tried

Negative Favorable
Neutral
Opinion Opinion

Rejector Repeated
Not yet
repeated

Loyal to Loyal to
other brand Switcher brand

Light Regular Heavy

User User User

(h) Attitude:
Five attitude groups can be found in a market such as.
 Enthusiastic: These are people having tendency of impulsive purchase. Say, High school or college
student they are very much eager to buy Mobile phone.
 Positive: They are serious and very much mobile people who need to connect with their office and
home all the time. So, they need Mobile phone.
 Indifferent: There are some people who are technology averse with systematic purchasing pattern.
They would prefer to communicate through traditional land line.
 Negative people can be afraid of communicating with mobile due to its disadvantages (both physical
and social). They would never ever go for a credit card.
 Hostile People at times become very much annoyed either by sales people calling or meeting anytime,
giving false promise or by the service provided.

Blending Demographic and Lifestyle Factors

A. Market segments should be described in demographic and lifestyle terms. A more valuable analysis takes
place when a variety of factors are reviewed. There are two broad classification systems:
The list of segmentation variables
Consumer Markets Industrial Markets/Business Markets
Geographic Industry
Land or region Intermediary or final consumer
Rural or metropolitan area Type of corporation (public or private
Demographic sector)
Age, sex, marital status Size of corporation
Income, occupation, education Geographical location
Religion, nationality Intensity of product use
Psychographic: Organization of purchasing function
Social status Centralized or decentralized
Lifestyle-type Purchasing policies, rules and criteria
Personal type
Behavioral:
Intensity of product use
Brand loyalty
User behaviors

20
 Benefit

Single Variable vs. Multi-Variable Segmentation

 Single variable – achieved by using only one variable to segment
 Multi-variable – more than one characteristic to divide market. Provides more information about
segment. Able to satisfy customers more precisely. More variables create more segments reducing the
sales potential in each segment.
Will additional variables help improve the firms Marketing Mix. If not there is little reason to spend more
money to gain information from extra variables.
Importance of Market Segmentation
The market segmentation affords the following advantages to the seller or producer:
1. Coordination of product appeals with marketing effort
 Market segmentation helps organisation to distinguish and understand the nature of the market.
 By knowing and understanding characteristics of their market the sellers can adjust their attempt to
attract the maximum number of customers by using various marketing efforts such as appeals, promotional
means, media usage, distribution, etc.
 More resources should be allotted to more opportunistic market segment.

2. Spot marketing opportunities

 Through market research and demand analysis the producers can make estimate of the potential and
actual sales volume.
 Marketer can identify the regions where customer response is poor and set the strategy accordingly.

3. Allocation of marketing budget

 Marketing budget can be allotted or readjusted for a particular region or locality or a market on the
basis of market segmentation.

4. Combating the competition

It helps the producer to combat the competition of their competitors effectively by virtue of reading consumer
mind insightfully.
Through segmentation producer can adopt different policies, programmes and strategies for different markets
taking into account the competitors strategies, policies and programmes.

5. Effective marketing programme

 It helps organisation to set different marketing prorammes for different segments.
 It also helps the producer to adopt an effective marketing programme which will in turn help to serve
the consumer better at comparatively low cost.

6. Analysing and assessing Marketing Activities

 Market segmentation helps the manufacturer to analyse, assess and compare marketing potentialities of
the products.
 It helps to modify, and optimise production and using the resources in most profitable manner.
 As soon as the sale of the product is going to decline, the product could be modified (modification
consists market modification, product modification and marketing mix modification) or discontinued.

7. Increase in Sales Volume

 By segmenting, after knowing the demand of the market, producer can increase their sales volume.
 Each segment is different by virtue of their demand pattern. The producer has to satisfy the demand of
each segment, by offering improved their product.
 That market segmentation helps the producer to increase their sales volume.
 Market segmentation also helps the customer by choosing their desirable goods which are most suitable
for satisfying their needs and wants.

21
§ 5.3 Criteria Needed for Segmentation
1. Segments must have enough profit potential to justify developing and maintaining a Marketing Mix.
2. Consumer must have heterogeneous (different) needs for the product.
3. Segmented consumer needs must be homogeneous (similar)
4. Company must be able to reach a segment with a Marketing Mix.
5. Must be able to measure characteristics & needs of consumers to establish groups.

Example:
How media format changes due to changing population needs.
Market Segmentation Process
Step I: Identify Market segment bases
The process starts when a company looks at the potential customers and identifies those customers as having
particular characteristics - these characteristics will allow the marketing company to classify them into market
segments. The segments should be selected so that you can group together customers who have similar needs.

Step II: Develop Relevant Profiles for each Segment

Once the segments have been identified - should develop a profile of the relevant customer needs and behaviors
in each segment.
 What does your customer look like (profile)
 What do they like
 What do they do
Oganisation need this description in order to make your marketing “match” the needs of the customer

Step III: Forecast Market Potentials

Organisation must create a “Forecast” of the market potential within each segment. This is the “go, no-go”
stage. In this stage organisation has to gather the information on sales potential to determine whether they can
go further ahead and justify further analysis.

Step IV: Forecast Probably Market Share

Once the market potential has been estimated, organisations have to determine how much of that market they
can obtain. Then they develop specific marketing strategy for the segments they are trying to develop.

Step V: Select Specific Market Segments

Finally, by taking all this information, organisation has to identify specific target markets to which they can
offer the product or service.
Characteristics of Effective Segmentation
There are following requisites for an effective segmentation:
 Measurable and Obtainable:
- The size, profile and other relevant characteristics of the segment must be measurable and
obtainable in terms of data.
- This is important for demographic and geographic variables.
- For an organization without intermediaries (0-level), the own customer database could deliver
valuable information on buying behaviour (frequency / usage pattern), volume, product groups, mode
of payment etc.
 Relevant:
- The size and profit potential of a market segment have to be large enough to economically
justify separate marketing activities for this segment.
 Accessible:
- The segment has to be accessible and servable for the organization.
- The customer segments can be accessed through advertising media.
 Substantial:
- The segments should be substantial to generate required returns.
- Working with small segments will give a unwanted and negative results.
 Valid:

22
 - This means the extent to which the base is directly associated with the differences in needs
and wants between the different segments.
- Given that the segmentation is essentially concerned with identifying groups with different
needs and wants.
- It is vital that the segmentation base is meaningful and that different preferences show clear
variations in market behaviour and response to marketing mixes.
 Distinguishable or Differentiable:
- The market segments have to be that diverse that they show different reactions to different
marketing mixes.
 Appropriate:
- The needs and characteristics of each segment must be similar, otherwise the main objective
of segmentation will not be served.
- If within segment the behaviour of consumers at a different and that they react differently,
then a unique marketing strategy cannot be implemented for everyone.
- Then further segmentation is required for that group.
 Actionable or Feasible:
- It has to be possible to approach each segment with a particular marketing programme and to
draw advantages from that.
- The segments that a company wishes to pursue must be actionable and they have to ensure
that they must be capable to do the same.
 Some general considerations: Apart from the above mentioned characteristics, the segment must have
some other features:
 Growth potential
 Profitable
 Less risk prone
 Less competition intensive
Targeting (Developing a Target Market Strategy/ market targeting)
Division or grouping of any class or any subject, depends on certain grounds. The base is created after
considering the various fields and the characteristics of the students, merit, and so on. Similarly, market
segmentation is done on certain consistency that exists within the group.

The Steps in Planning a Target Market

Strategy

1. Determine demand patterns

Analyze
2. Establish possible bases of Consumer
Demand
segmentation
3. Identify potential market segments

4. Choose a target market approach Target the

Market
5. Select the target market

6. Position the company’s offering

Develop
in relation to competition the
Marketing
7. Outline the appropriate marketing mix Strategy

(es)

Developing a target market strategy has three phases:

1. Analyzing consumer demand
2. Targeting the market(s)
A. undifferentiated
B. concentrated
C. multi segmented

23
3. Developing the marketing strategy

1. Analyzing consumer demand and determining demand pattern

Selecting Target Markets (Analyzing Demand)
Need to aggregate consumers with similar needs. Demand patterns: Do all potential customers have similar
needs/desires or are there clusters? Types of demand patterns are:
 Homogeneous Demand-uniform, everyone demands the product for the same reason(s). 1.
Homogeneous demand is when consumers have relatively uniform needs and desires for a good or
service category. Very rare in the US, staple foods...
 Clustered Demand-consumer demand classified in 2 or more identifiable clusters. With clustered
demand, consumer needs and desires for a good or service category can be classified into two or more
clusters, each with different purchase criteria
Santro Xing:
o Luxury
o Quality (Korean Brand Name)
o Sporty
o Spacious
o Made in India, but exported to European country ( Export quality)
 Diffused Demand-Product differentiation more costly and more difficult to communicate With
diffused demand, consumer needs and desires are so diverse that clear clusters cannot be identified. A
firm’s marketing tasks are more difficult because product differentiation is more costly and harder to
communicate.
Example: Cosmetic market, need to offer hundreds of shades of lipstick. Firms try to modify consumer
demand to develop clusters of at least a moderate size.
Alternative Consumer Demand Patterns for a
good or Service Category

Homogeneous Demand Clustered Demand Diffused Demand

Consumers have relatively Consumer needs and Consumer needs and

similar needs and desires desires can be grouped desires are so diverse that
for a good or service into two or more identical no clear clusters
category clusters (segments), each (segments) can be
with its own set of identified.
purchase criteria.
Niche Marketing
A niche is a more narrowly defined customer group seeking a distinctive mix of benefits. Marketers usually
identify niches by dividing a segment into subsegments. For example, Progressive, a Cleveland auto insurer,
sells "nonstandard" auto insurance to risky drivers with a record of auto accidents, charges a high price for
coverage and makes a lot of money in the process.
An attractive niche is characterized as follows: The customers in the niche have a distinct set of needs; they will
pay a premium to the firm that best satisfies their needs; the niche is not likely to attract other competitors; the
nicher gains certain economies through specialization; and the niche has size, profit, and growth potential.
Whereas segments are fairly large and normally attract several competitors, niches are fairly small and normally
attract only one or two.

2. Targeting the market

Identifying Potential Market Segment: A firm develops consumer profiles after establishing bases of
segmentation. These profiles identify potential market segments by aggregating consumers with similar
characteristics and needs, and separating them from consumers with different characteristics and needs.

24
 Contrasting Target Market Approaches
Undifferentiated Marketing (Mass Marketing)
The firm tries to reach a wide range of consumers with one
basic marketing plan. These consumers are assumed to
have a desire for similar goods and service attributes. One
product for everybody

Concentrated Marketing The firm concentrates on one

group of consumers with a distinct set of needs and uses a
tailor-made marketing plan to attract this single group.
One product to one market niche.

Differentiated Marketing (Multiple Segmentation)

The firm aims at two or more different market segments,
each of which has a distinct set of needs, and offers a
tailor-made marketing plan for each segment. Two or
more products to two or more groups.

A. Undifferentiated Approach (Total Market Approach)

Single Marketing Mix for the entire market:
All consumers have similar needs for a specific kind of product. Homogeneous market or demand is so diffused
it is not worthwhile to differentiate, try to make demand more homogeneous. Single Marketing Mix consists of:
 1 Pricing strategy
 1 Promotional program aimed at everybody
 1 Type of product with little/no variation
 1 Distribution system aimed at entire market
 The elements of the marketing mix do not change for different consumers, all elements are developed
for all consumers. Examples include Staple foods - sugar and salt.
 Popular when large scale production began. Not so popular now due to competition, improved
marketing research capabilities, and total production and marketing costs can be reduced by segmentation.
 Organization must be able to develop and maintain a single marketing mix. Major objective is to
maximize sales.

Market Segmentation Approach

√ Individuals with diverse product needs have heterogeneous needs.
Market segmentation is the process of dividing a total market into market groups consisting of people
who have relatively similar product needs, there are clusters of needs.
√ The purpose is to design a Marketing Mix(s) that more precisely matches the needs of individuals in a
selected market segment(s).
√ A market segment consists of individuals, groups or organizations with one or more characteristics that
cause them to have relatively similar product needs.
√ There are two Market Segmentation Strategies.
Characteristics:
A. An undifferentiated marketing approach aims at a large, broad consumer market through one basic marketing
plan.
B. Use of this approach has declined in recent years due to the following:
1. Growth of competition.
2. Stimulated demand by appealing to specific segments.
3. Improved marketing research that pinpoints desires of different segments.
4. A reduction in total production and marketing costs because of segmentation.
C. A major objective of undifferentiated marketing is to maximize sales.
D. For successful pure mass marketing, a large group of consumers must have a desire for the same product
attributes or consumer demand must be so diffused that it would not be worthwhile for a firm to aim
marketing plans at specific segments.
1. A firm sells items through all possible outlets.
2. Both total and long run profits should be considered.

25
B. Concentration Strategy
A single market segment with one Marketing Mix.
Market
|
|A Market Segment
|-------------------
One Marketing Mix------------------>A Market Segment
|-------------------
|A Market Segment
|
Advantages:
 It allows a firm to specialize
 can focus all energies on satisfying one group's needs
 A firm with limited resources can compete with larger organizations.
Disadvantages:
 Puts all Strategies in one Segment.
 Small shift in the population or consumer tastes can greatly effect the firm.
 May have trouble expanding into new markets (especially up-market).
 Objective is not to maximize sales, it is efficiency, attracting a large portion of one section while
controlling costs.
Examples: TOYOTA - COROLLA. Who are their target market?
Over MHI - Rs,20,00,000 and more
Characteristics:
A. A concentrated marketing approach aims at a narrow, specific consumer group through one specialized
marketing plan catering to the needs of that segment.
B. Concentrated marketing is popular for small firms for these reasons:
1. Mass production, mass distribution, and mass advertising are not necessary.
2. It can succeed with limited resources and abilities by concentrating efforts.
C. If concentrated marketing is used, it is essential for a firm to do a better job than competitors in several are
as.
1. The company needs to tailor its marketing program for its segment better than competitors.
2. Competitors’ strengths should be avoided and weaknesses exploited.
 The majority fallacy, appealing to a large segment that is laden with competition, should be avoided.
 A potentially profitable segment may be one ignored by other firms.
 Per unit profits can be maximized through market segmentation. Total profits are not maximized,
because only one segment is sought.
 A distinct niche can be carved out for a particular brand.
C. Multi-segment strategy or Differentiated Marketing (Multiple Segmentation)
Two or more segments are sought with a Marketing Mix for each segment, different marketing plan for each
segment. This approach combines the best attributes of undifferentiated marketing and concentrated marketing.
The core product is the same, use different Packaging, Brand Name, Price to differentiate and create a different
marketing mix.
Objective: Sales maximization, but can remain a specialist. Can get firmly established in one segment, then
pursue another.
Market
Marketing Mix--------------------->|A Market Segment
|_______________________
Marketing Mix --------------------->|A Market Segment
|_______________________
Marketing Mix --------------------->|A Market Segment
|_______________________
Marketing Mix --------------------->|A Market Segment

26
Example: Hindustan Unilever LTd
1. Dove – for premium segment out going female
2. Lux – middle income group female, who has aspiration to have the skin like celebrity.
3. Liril – once upon a time it was targeted to middle income group urban population teenage girl who has
tremendous energy and enthusiasm to enjoy the life. Now it has been targeted to newly married couple (ref:
“la ir la Advt”.) where both of them may use the soap.
4. Lifebuoy - once upon a time it was targeted to Football and outdoor sport savvy young male of urban,
suburban and rural male and off course who belong to lower middle and lower MHI group. Now it was
targeted to urban sports savvy children and young male
Advantages:
 Shift excess production capacity.
 Can achieve same market coverage as with mass marketing.
 Price differentials among different brands can be maintained Contact Lens!
 Consumers in each segment may be willing to pay a premium for the tailor-made product.
 Less risk, not relying on one market.
Disadvantages:
 Demands a greater number of production processes.
 Costs and resources and increased marketing costs through selling through different channels and
promoting more brands, using different packaging etc.
 Must be careful to maintain the product distinctiveness in each consumer group and guard its overall
image (Contact lenses)
Characteristics:
A. Differentiated marketing combines the best attributes of undifferentiated marketing and concentrated
marketing. It appeals to two or more distinct market segments, with a different marketing plan for each.
1) Firms such as Maruti-Suzuki use differentiated marketing to attract all segments. Others, such as
Hyundai, and Microsoft appeal to two or more segments, but not all segments.
2) Some companies, such as Time Inc., use both undifferentiated marketing and concentrated marketing
approaches in their multiple-segmentation strategy. They have one or more major brands for the mass
market and secondary brands geared toward specific segments.
B. Company resources and abilities must be able to produce and market two or more different sizes, brands, or
products. Costs vary, depending on modifications needed.
C. Differentiated marketing should enable the firm to achieve several objectives:
1. Sales maximization.
2. Recognition as a specialist.
3. Diversification.
D. Differentiated marketing can be achieved without involvement in the majority fallacy.
E. Two or more sizable and distinct consumer groups are necessary. The more clusters facing the firm, the
greater the opportunity for differentiated marketing.
F. Wholesalers and retailers usually find differentiated marketing to be desirable, because it enables them to
reach different consumers, offers a degree of exclusivity, allows orders to be concentrated, and encourages
private labels.
G. Total profits should rise as the number of segments serviced increases.
H. A firm must balance revenues obtained from selling to multiple segments against the costs.
I. A company must be careful to maintain product distinctiveness in each consumer segment and to guard its
image.

Consideration 1: No. of segment(s) Chosen for greatest opportunities

A company should consider its objectives and strengths, competition, segment size, segment growth potential,
distribution requirements, required expenditures, profit potential, company image, and its ability to develop and
sustain a differential advantage.

Consideration2: No. of segments a firm should pursue:

The firm decides whether to pursue one or more segments (or the mass market). Most likely, a firm new to an
industry would start with concentrated marketing.
Product Differentiation (Differentiating Market Offering)

27
Differentiation is the act of designing a set of meaningful differences to distinguish the company’s offering from
that of competition.
Definition: An act of designing a set of meaningful differences to distinguish the company’s offering from its
competitor’s offerings.
According to Theodore Levitt, all products can be differentiated to some extent. A differentiation strategy
should meet the following criteria:
1. Superior: The chosen strategy should be superior than other ways in order to obtain the required
benefits.
2. Preemptive: The difference should be crafted in such a way so that it is not easy to be copied by
the competitors.
3. Important: The difference should deliver a highly valued benefit to the customers.
4. Distinctive: The difference should be delivered in distinctive way.
5. Affordable: The difference should be available at affordable prices
6. Profitable: The difference should make the company profitable through it.
Companies can differentiate its market offering along five dimensions:

Differentiation Variables
The various differentiation variables are shown in the following table and described in details thereafter.
1. Product Differentiation: The products may or may not vary. In case of commodities like steel, salt, sugar
there are very small noticeable differentiations or no differentiation at all. On the other hand, the products like
cars, bikes and designer items have a very high degree of differentiation. The product differentiation can be
done by taking the following factors singly or in combination.
Various differentiation variables
 Features: Most products can be offered with varying features i.e. the characteristics that
support the basic function of the product.
Product Service Personnel Channel Image
Features Ordering ease Competence Coverage Symbols
Performance Delivery Courtesy Expertise Media
Quality Installation Credibility Performance Atmosphere
Conformance Customer Reliability Events
Quality training Responsiveness
Durability Customer
Reliability consulting
Reparability Maintenance Communication
Style and repair
Design Miscellaneous
Form services
Price

 Performance: It refers to the level at which the product’s primary characteristics operate.
There can be four performance levels:
i. Low ii. Average
iii. High iv. Superior
 Conformance: It is the degree to which all the produced units are identical and meet the
promised specification.
 Durability: It is the measure of the product’s expected operating life under natural or stressful
conditions.
 Reliability: It is the measure of the probability that a pro9duct will not malfunction or fail
within a specified time period.
 Reparability: It is the measure of the case of fixing a product when it malfunctions or fails.
 Style: This describes the product’s look and feel to the buyer.
 Design: It is the totality of features that affect how a product looks and functions in terms of;
customer requirements.
 Price: It is another basis for competition differentiation. Nirma, T series or Ronix position
their brands based on this.

28
  Form: Many products can be differentiated in form i.e. the size, shape or physical structure of
the product.
i. Size
ii. Shape
iii. Physical structure
2. Services Differentiation: When the physical product cannot be differentiated, the companies resort to service
differentiation through addition of new services or modification of older ones or the combination of both.
 Ordering ease: It refers to how easy it is for the customer to place an order with the
company.
 Delivery: It refers to how well the product-service is delivered to the customer.
 Installation: It refers to the work done to make a product operational in its planned location.
 Customer training: It refers to training the customer’s employees to use the vendor’s
equipment properly and efficiently.
 Customer consulting: It refers to data, information systems and advising services that the
seller offers to buyers.
 Maintenance and repair: It describes the service programme for helping customers keep
purchased products in good working order.
 Miscellaneous services: McMillan and McGrath suggest that the companies have
opportunities to differentiate at every stage of the consumption chain through miscellaneous services
like improved warranty, maintenance contract or reward system along with above mentioned options.
3. Personnel Differentiation: Companies can gain a strong competitive advantage through having better-trained
people. Better-trained personnel should exhibit following 6 characteristics:
 Competence: They should posses the required skill and knowledge
 Courtesy: They should be friendly, considerate and respectful
 Credibility: They should be trustworthy
 Reliability: They should perform the service consistently and accurately
 Responsiveness: They should respond quickly to solve the customer’s problems
 Communication: They should understand the customers and communicate properly.
4. Channel Differentiation: Companies can achieve competitive advantage through the way the design their
distribution channels’ coverage, expertise and performance.
5. Image Differentiation: Image is the way the customers perceive the company and its products. An effective
image does three things:
 It establishes the product’s character and value proposition
 It conveys the product’s character in distinctive way so as not to confuse with that of
competitors.
 It delivers emotional power beyond a mental image.
The image must be expressed in following ways:
 Symbols: Images can be identified by strong symbols. Apple
 Media: The chosen image must be worked into the ads and media that could convey a
distinctive story, mood, or claim
 Atmosphere: The physical space occupied by the company is powerful image generator
 Events: A company can build an identity through the events in sponsors. Film fare award
Positioning / Market Positioning
Positioning is defined as the act of designing the company’s offering and image to occupy distinctive place in
the target market’s mind
Once the organization has decided which customer groups within which market segments to target, it has to
determine how to present or position the product to this target audience. It is the final stage in the
Segmentation, Targeting and Positioning (STP) continuum.
The competitors may have following strategic alternatives:
1. The competitor can strengthen its current position in the consumer’s minds. Example,
LICI “ Zindagi ki saath vi, Zindagi ki Bad vi”.
2. The competitor can grab any unoccupied position. Example: Philips VCD player which
can play “Every thing”

29
 3. Another strategy should be repositioning the product. Amul had repositioned as Mithai
(sweet) maker from dairy whitner.
The three preliminary areas to be considered in the process of positioning are:
1. Relevant attributes:
 This stage establishes the relevant attributes, which are used by customers in the segment when
evaluating and choosing between brands in this market.
 In this stage company is seeking to establish the key attributes of the product within the market
segment.
 But in case of an existing brand is repositioned it might not be easy to change the name because of the
brand loyalty to the original name. Indeed, many manufacturers simply leave the old brand in its
present position, and then introduce the new brand as competition to the existing brand as well as
competitive brands. This is known as brand proliferation.
 Some of these attributes are objective (e.g. colour of liquid and smell) and some are subjective (e,g.,
the product’s name) .
 Purchasers might also think about more than one of these attributes when making a purchase, so it is
the key attribute(s) that must be emphasized most strongly. This is sometimes referred to as the
Unique Selling Proposition (USP).
2. Perceptual map:
 This stage assesses the current perceived position of existing brands in the market with the help of
above-mentioned attributes.
Best quality

Sony

Vediocon
LG
Least
Most
Costly
Costly
Ronix

Least quality
Perceptual Map
Marketing research has established the positions of existing brands in the market along the criteria illustrate for
Colour TV, and each brand currently in the market is represented by a circle.
3. Marketing mix strategy:
 It determines where the new brand is to be positioned against existing brands in the market and the
brand attributes, which will be emphasized in order to achieve this position.
 Once a positioning strategy has been defined, the final step is to develop a marketing mix strategy for
the new brand that is appropriate to the position chosen. The marketing Mix elements must be
supported by communication or promotional mix and price level.
The degree of differentiation in positioning
The company must decide how many differences to be incorporated its promotional strategy. The options are:
1. Unique Selling Proposition or Unique Benefit Positioning. According to Rosser Reeves.
Unique Selling Proposition (USP) should be attached with every product or brand. Before developing a
USP, it is important for markets to think over following questions:
 What is the nature of the company’s business and
 Who comprises the target audience?
 What is the benefit provided to end-users?
 What is the company’s claim?
 How will a customer perceive the claim and compare it with that of a competitor?
Once a company has the answers to these questions, it can create a USP. The benefits that accrue as a result of
creating a Unique Selling Proposition are:
 It helps in differentiating the company’s business and products from that of its
competitors.

30
  It ensures that employee focus is on the promises of the USP, thus improving team
performance.
2. Double Benefit Positioning: This becomes imperative when two or more firms claim to be the
best on the same attrribu4 of the product. For example, Colgate Total and Pepsodent claim themselves as
the toothpastes necessary for strong teeth and fresh breath.
3. Triple Benefit positioning: In case of some highly undifferentiated products, this strategy
becomes necessary. For instance, Glaxo Smith Kline Beccham’s Aqua fresh toothpaste offers 3 benefits
viz. anticavity protein, better breath and whiter teeth.
Approaches to Positioning Strategy
There are Seven approaches to positioning strategy:

User or
Price quality application Product
approach approach class
approach

Cultural Product Product user

symbol characteristi approach
approach cs or
customer
benefits
Competitor
approach

A. Using product characteristics or customer benefits: In this case, segmentation is done keeping in mind the
product characteristics or customer benefits. Sometimes, a new product is positioned with respect to a
product characteristic that competitors have ignored. Example, Mahindra & Mahindra Scorpio was
positioned as both reliable and trendy MUV.
1. Physical characteristics: These are the most objective criteria and can be measured on some
physical scale such as temperature, colour intensity, distance, strength of fragrance etc.
2. Pseudo physical characteristics: These reflect physical properties that are not easily
measured. The examples are spiciness, type of fragrance, shininess, creaminess etc.
3. Benefits: These refer to advantages that promote the well being of the consumer. Examples
are thirst quenching, hunger satisfying, not harming the skin etc.
4. Psycho-Physical Characteristics: it refers to physical comfort along with esteem need
satisfactory characteristics. Example: Chevrolet Optra is having glass roof top, which can be used to look at
sky and can satisfy the ego needs of the owner.
B. The price-quality approach:
 This approach justifies various price-quality categories of the products. Manufacturers deliberately
attempt to offer more in terms of service, features or performance in case of certain products known as
Premium products and in return, they charge higher price, partly to cover higher costs and partly to
help communicate the fact they are of higher quality. On the other hand, there are some products
known as mass product, where the main matter o concern is price keeping a minimum quality standard
commitment. .
 Because of perception, as most of us perceive that if a product is expensive will be a quality
 It is largely used in product positioning. In many product categories, there are brands that deliberately
attempt to offer more in terms of service, features or performance.
 So, they charge more, to let the consumers believe that the product is, certainly of higher quality.
 But everybody should understand that in the same product category, there are many other brands that
appeal on the basis of price, although they might also try to perceive as having comparable or at least
adequate quality.
 In many product categories, the price quality approach is so important that it needs to be considered in
any positioning decisions mainly in durable consumer goods. For example: Big Bazar is at the top end
and all other departmental stores are positioned under it in terms of price (“ isse sasta aur achcha koi
nehi”).

31
C. The use or applications approach:
 Another way to position is to consier the use or application. One good example is Itch Guard skin
ointment (cream base) from Paras Pharmaceuticals, which has been positioned as an Over The Counter
(OTC) medicine (i.e. the medicine that does not require prescription) to “relieve sweat itch”.
D. The product-user approach: This deals with positioning a product keeping in kind a
specific user or a class of users. Deodorant brand Rexona position itself to the attention seeking college
guy and girls.
E. The product-user approach: Some products need to make critical positioning
decisions that involve product-class associations. Example, Nescafe Bru positioned itself as instant coffee.
F. The cultural symbol approach: Many companies use deeply entrenched cultural
symbols to differentiate their brands from their competitors. Example: The use of a character named
Maharaja by Air India helps them to position itself as a brand that is always ready to help tourist who are
coming from different part of world in a very royal manner with a value of “Atithi Debo Vavo”
G. The competitor approach: The positioning can be made with an explicit or implicit
frame of reference of one or more competitors. There are 2 reasons behind this:
o The competitor may have a firm, well-defined image developed over many years and this
image can be used as a bridge to help to communicate another image referenced to it.
o Sometimes it is not only important how good the consumers think about the Brand, but also it
is important that they believe the Brand are better than a given competitor. Example: many TV brands
compare their features with the features of other available brands
Determining the Positioning Strategy
In order to determine the positioning strategy, following factors have to be considered.
 Identify the competitors
 Determine how the competitors are perceived and evaluated
 Determine the competitors’ positions
 Analyze the customers
 Select the position
 Monitor the position.
Not everyone areas that single-benefit positioning is always best. Double benefit positioning may be necessary
if two or more firms claim to be best on the same attribute. There are even cases of successful triple-benefit
positioning.
As the 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.
Positioning Error:
(1) Under positioning: Some companies discover that buyers have only vague idea of the brand.
The brand is seen as just another entry in a crowded marketplace.
(2) Over-positioning: Buyers may too narrow image of the brand.
(3) Confused positioning: Buyers might have a confused image of the brand resulting from the
company’s making too man hay claims or changing the brand’s positioning too frequently.
(4) Doubtful Positioning or confused positioning: Buyers may find it hard to believe the brand
claim in view of the product’s features, price or manufacturer.
Solving the positioning problem enables the company to solve the marketing problem. Thus seizing the high-
quality position” requires the firm to produce quality products, charge a high price, distribute through high-class
dealers advertise in high-quality magazines.
Different Positioning Strategies
1. Attribute Positioning: A company positions itself on an attribute such as size, Shape, Design,
Features, etc..
2. Benefit Positioning: The product is positioned as the leader in a certain benefit. Videocon
emphasizes on germ free quality.
3. Use or Application Positioning: In this positioning the product are positioned as best for some
use and application. Lafarg cement claims to be best in this category.
4. User Positioning: This involves positioning the product as best for some use group. Earlier Liril
soap positioned as a soap of a charming teenage girl where as they are repositioned as a soap of a newly
married couple.

32
5. Competition Positioning: The product claims to be better in some way than a named. Example:
Anada Bazar Patrika, compare its circulation with other Bengali dailies.
6. Product Category Positioning: The product is positioned as the leader in a certain product
category. Aaj Tak claims to be leader in Hindi TV news.
7. Quality positioning: The product claims to be of best quality. Intel or claims to offer high
quality.
8. Price Positioning: In this case, the product offers best price to the consumers. Ronix adopts this
policy.
Steps for Positioning a Product
The following steps are required for determining and implementing the positioning of a product. Although they
focus on new product development, these steps are applicable to a relaunch with new features or for responding
of an existing product too.
1. Define the segments in a particular market.
2. Decide which segments to target.
3. Understand what the target consumers expect and believe to be the most important considerations
when deciding on the purchase.
4. Develop a product (or products) that caters specially for these needs and expectations.
5. Evaluate the positioning and images, as perceived by the target customers, of competing products
in the selected market segments.
6. Select an image that sets the product apart from the competing products, thus ensuring that the
chosen image matches the aspirations of the target customers.
7. Inform target customers about the product (promotion)
Procedure for Determining Positioning Strategy
There are basically six-step that are adopted in order to implement positioning strategy.
Identifying the competitors

Determining how the Competitors

are Perceived and Evaluated

Determining the competitor’s

positions

Analyzing the Customer

Making the positioning

Decision

Monitoring the position

In each of the steps, marketing research techniques can be employed to get the necessary information. These
steps now will be discussed:
(1) Identifying the Competitors – A first step is to identify the competition. This step is not as simple as it
seems to be. For example, ‘Dew ’ might define its competitors as follows:
(1) Other cola drinks
(2) Non-diet soft drinks
(3) All soft drinks
(4) Non-alcoholic beverages,
(5) All beverages except water
There are basically two types of competitors
 Primary competitors i.e., competitors belonging to the same product class
 Secondary competitors, those belonging to other product category.
In the above example other cola drinks are primary competitors and other drinks and beverages are
secondary competitors.
This can be done in number of ways the first approach can be to determine from buyers of a product, which

33
other brands or products they consider appropriate if suppose they do not get a brand of their choice. A buyer of
‘Dew’ may be asked to recall his or her last purchase of Dew and shelter any alternative went through his or her
mind or he may asked to name the alternative cola if Dew was out of stock. The resulting analyzed will identify
the primary and secondary groups competitive product.
Another approach that can be developed is related to consumers’ associations with the products. In this a
respondent may be asked to maintain a diary or to recall the use context for Dew. One might be with an
afternoon snack. The respondent may then be asked to name all the beverages, which might be appropriate to
drink with an afternoon snack. For each drink or beverage, a list of use context can be prepared. This process
would continue for 20 or 30 respondents. Then another group of respondent will be asked to make a judgment
on a seven point scale as to how appropriate each beverage would be for each use situations. Thus if ‘Dew’ was
regarded as appropriate with snacks, it would primarily compete with other beverages used with snacks.
(2) Determining how the Competitors are Perceived and Evaluated – The second step is related to determining
the product positioning; it is basically done to see, when the competitors products are purchased by the
customers. It is to see comparative view, an, appropriate set of product attributes should be chosen. The term
‘attributes’ includes not only product characteristics and consumer benefits but also product associations such as
product use or product users. In any product category, there are usually a host of attribute possibilities. Some
can be difficult to specify.
(3) Determining the competitor’s positions – A research can be taken up for getting the answer of the following
questions.
 What is the image that the customer has about the various product brands?
 How are they positioned in respect to each other?
 Which competitors are perceived as similar and which as different?
Such research is termed as multidimensional scaling because its goals it to scale objects on several dimensions
or attributes. Multidimensional scaling can be based upon either attribute data or no attribute data.
(4) Analysing the Customer –Next step concerned with analysis the customers habits and behaviour in a
particular market segment. In this stage again marketer has to answer following questions –
(i) How is market segmented?
(ii) What role does the product class pay in the customers life style?
(iii) What really motivates the customers?
(iv) What habits and behavior patterns are relevant?
All benefit segmentation is relevant here, which focuses upon the benefits or attributes that a segment believes
to be important. In order to specify that benefit segments, it is useful to highlight the role of ‘ideal object’ as a
tool. An ‘ideal object’ is an object, the customer prefer over all other objects including the object, which really
does not exist. It is a combination of all the customers preferred attribute level.
(5) Making the positioning Decision –The managers can carry these steps or exercises. After these four
exercises, the following guidelines can be offered to reach a positioning decision: -
(i) An economic analysis should guide the decision. This analysis depends upon two basic factors (a) the
potential market size, and (b) the penetration probability unless both these factors are favorable, the
success in unlikely.
(ii) Positioning usually implies a segmentation commitment. It concentrates only on certain segments
and ignores the parts of the market. Such an approach requires commitment and discipline to the
potential buyers.
(iii) If the advertising is working, the advertiser should stick to it. He should not get tired of a
positioning strategy and should not think of change in advertising used to implement it.
(iv) Do not try to be something, which are not (abstain from committing wrong claims). It is usually
fatal to decide on positioning strategy that exploits a market need or opportunity but assumes that the
product is something, it is not.
(v) Use of symbols: In making a decision on position strategy, symbols or set of symbols must be
considered. If any brand or symbol is already in use. That must be use in positioning strategy.
(6) Monitoring the position – An image objective, like an advertising objective should be measurable. It is
necessary to monitor the position overtime, for that marketer have variety of techniques that can be employed it
can be on the basis of some test and interviews which will help to monitor any kind of change in the image.
Product positioning in Advertising: Product positioning in Advertising Product positioning is a new term
developed in the advertising circles during 1970s. No generally accepted definition of the term has been
developed.

34
 Strategic Planning
Strategic planning is concerned about the overall direction of the business. It is concerned with marketing, of
course. But it also involves decision-making about production and operations, finance, human resource
management and other business issues.
The objective of a strategic plan is to set the direction of a business and create its shape so that the products
and services it provides meet the overall business objectives.
Strategic business plan: A strategic business plan describes the overall direction an organization will pursue
within its environment and also guides the allocation of resources. It provides the logic that integrates the
perspectives of functional departments and operating units, and points them all in the same direction.
Strategic marketing plan: A strategic marketing plan outlines the actions necessary, which is responsible, when
and where they will be completed, and how they will be coordinated.
The Corporate Level: corporate headquarters is responsible for designing a corporate strategic plan to guide the
whole enterprise; it makes decisions on the amount of resources to be allocated to each division, as well as on
which businesses to start or eliminate.
The Division Level: each division establishes a division plan covering the allocation of funds to each business
unit within the division. For example the marketing division would formulate strategies as to how the various
units within it would work.
The Business Level: each business unit develops a strategic plan to carry that business unit into a profitable
future. E.g. the units in the marketing division would be Sales, Advertising, Promotions, Public Relations,
Market Intelligence, etc.
The Product Level: each product line, brand within the business unit develops a marketing plan for achieving its
objectives in its product market.
Importance of marketing planning
Businesses operate in hostile and increasingly complex environment. The ability of a business to achieve
profitable sales is impacted by dozens of environmental factors, many of which are inter-connected. It makes
sense to try to bring some order to this chaos by understanding the commercial environment and bringing some
strategic sense to the process of marketing products and services.
 A marketing plan is useful to many people in a business. It can help to:
 Identify sources of competitive advantage
 Gain commitment to a strategy
 Get resources needed to invest in and build the business
 Inform stakeholders in the business
 Set objectives and strategies
 Measure performance
Kinds of Strategic Plans
1) Strategic plans can be categorized by their duration, scope, and method of development. They range from
short run, specific, and department generated to long run, broad, and management generated. Many firms,
such as Canon, rely on a combination.
2) The scope of strategic plans also varies. There may be separate marketing plans for each of a firm’s major
products; a single, integrated marketing plan encompassing all products; or a broad business plan with a
section devoted to marketing.
3) Strategic plans may be developed via a bottom-up, top-down, or combination approach.
 In bottom-up planning, there is input from salespeople, product managers, advertising people, and other
marketing areas.
 In the top-down approach, senior managers centrally direct planning.
 A combination approach could be used if senior executives set overall goals and policy and marketing
personnel form plans for carrying out marketing activities.
Steps in the Strategic Planning Process
The strategic planning process consists of the seven interrelated steps described below:
This process is applicable for small and large firms, consumer and industrial firms, goods and services-based
firms, domestic and international firms, and profit-oriented and nonprofit-oriented organizations.
The Strategic Planning Process consists of The Strategic
Planning
Planning, Implementation
Implementing
and Control Process these
Controlling
constitute seven steps which are enunciated below:
Corporate Organizing Measuring Result
Planning
Implementing Diagnosing Result
Division Planning 35
Taking Corrective Action
Business Planning

Product Planning
Step1: Defining organizational mission
Mission is a concepts for organizations. Defining the organizational mission refers to a long-term commitment
to a type of business and a place in the market. It “describes the scope of the firm and its dominant emphasis and
values,” based on a firm’s history, current management preferences, resources, and distinctive competence, and
on environmental factors.

Examples of mission statements: Mission and Vision of Samsung Electronics

Vision of SAMSUNG Electronics is “Leading the Digital Convergence Revolution” and their mission to carry
out this vision is “Digital-e Company.
A mission statement is a formal description of the mission of a business. Organizational mission refers to a
long-term commitment to a type of business and a place in the market.
It can be expressed in terms of the customer group(s) served, the goods and services offered, the functions
performed, and the technologies utilized.
It is considered implicitly when a company seeks a new customer group or Core Core Values Purpose
abandons an existing one, introduces a new product category or deletes an
old one, acquires another company or sells one of its own businesses,
Business
performs more (or fewer) marketing functions, or shifts its technological Mission
focus.
Advantages of mission statement
It can help in three main ways: Visionary Goals
 An outline of how the marketing plan should seek to fulfill the
mission
 A means of evaluating and screening the marketing plan
 An incentive to implement the marketing plan
Characteristics of a Mission Statement:
An effective mission statement should contain the following characteristics:
 Brief – it should be easy to understand and remember.
 Flexible – it should be able to accommodate change.
 Distinctive – it should make the business standout Importance of mission
A strategic marketing plan starts with a clearly defined business mission. Mintzberg defines a mission as
follows:
“A mission describes the organization’s basic function in society, in terms of the products and services it
produces for its customers”.
A clear business mission should have each of the following elements:
Purpose

Strategy & Values &

Scope Culture

Standards
&
Behaviour
(i) A Purpose:
Why does the business exist? Is it to create wealth for shareholders? Does it exist to satisfy the needs of all
stakeholders, including employees, and society at large. Answering all of the above questions related with the
purpose.
(ii) A Strategy and Strategic Scope:

36
A mission statement provides the commercial logic for the business and so defines two things:
 The products or services it offers (and therefore, its competitive position)
 The competences through which it tries to succeed and its method of competing. A business’ strategic
scope defines the boundaries of its operations. Management sets these.
These boundaries may be set in terms of geography, market, business method, and product etc. The decisions
management make about strategic scope define the nature of the business.
(iii) Policies and Standards of Behavior:
A mission needs to be translated into everyday actions. If the business mission includes delivering “outstanding
customer service”, then policies and standards should be created and monitored that test delivery. These might
include monitoring the speed with which telephone calls are answered in the sales call center, the number of
complaints received from customers, or the extent of positive customer feedback via questionnaires.
(iv) Values and Culture
The values of a business are the basic, often unstated, beliefs of the people who work in the business. These
would include:
 Business principles – it includes social policy, commitments to customers.
 Loyalty and commitment: it indicates employees’ degree of sacrifice their personal goals for the good
of the business as a whole. And level of commitment and loyalty of the organisation to its staff.
 Guidance on expected behavior – a strong sense of mission helps create a work environment where
there is a common purpose

Step 2: Establishing SBUs

SBU stands for Strategic Business Unit. A strategic business unit (SBU) is a self-contained division, product
line, or product department in an organization with a specific market focus and a manager with complete
responsibility for integrating all functions into a strategy.
Attributes of SBU:
Each of a firm’s Strategic Business Units (SBU) has six attributes:
i) A specific target market
ii) Its own senior marketing executive
iii) Control over its resources
iv) Its own marketing strategy
v) Clear-cut competition
vi) Distinct differential advantages
Examples of SBUs:
At Hindustan Lever (HLL) has a guiding principle for the SBUs would apply. Some SBUs of HLL would be its
foods business, detergents business and ice creams business. Its portfolio of SBUs is constantly reviewed
according to present viability and expected future returns.
Number of SBUs:
The proper number of SBUs depends on organizational mission, resources, and the willingness of top
management to delegate authority.
A small or specialized firm can have as few as one SBU; a diversified one, up to 100 or more. Example:
Johnson & Johnson has 190+ SBUs.
GOALS of SBUs:
1. A firm needs overall marketing objectives, as well as goals for each SBU.
2. Objectives should be stated in both quantitative and qualitative terms.
3. Small firms’ goals are often less ambitious, but no less important.

Business Portfolios, Boston Consulting Group (BCG) Model

In order to select a particular strategy for which they need to analyze their SBUs. There is a matrix given by the
Boston Consultancy Group, which can be used by the companies for the purpose of analysis.
BCG Model
The BCG Matrix, named after the Boston Consulting Group (BCG), is perhaps the most famous 2x2 matrix. The
matrix measures a company’s relative market share on the horizontal axis and its growth rate on the vertical
axis.
THE GROWTH SHARE MATRIX- the market growth rate on the vertical axis indicates the annual growth rate
of the market in which the business operates. It ranges from 0 to 20 percent. A market growth rate above 10

37
percent is considered high. Relative market share, which is measured on the horizontal axis, refers to the
SBU’s market share relative to that of its largest competitor in the segment. A relative market share of 0.1
means that the company’s sales volume is only 10 percent of the leader’s; a relative share of 10 means that the
company’s SBU is the leader and has 10 times the sales of the next-strongest competitor in the market. The
growth share matrix is divided into four cells, each indicating a different type of business:
This stresses on
i) Volume of sales of a business unit.
ii) Growth of market and market share of SBU.
iii) Whether the business unit generates cash and to what extent.
The approach seeks to develop a balance among business units that produces cash and those utilize cash.
1. Question Mark (Problem Child): Businesses that operate in high-growth markets but have low relative
market shares. A question mark requires a lot of cash because the company has to spend money on plant,
equipment and personnel to keep up with the fast-growing market, and because it wants to overtake the market
leader. The company has to decide whether to keep pouring money into the business or not.

2. Stars – The market leaders in the high growth market. A star does not necessarily produce a positive cash
flow for the company. The company must spend substantial funds to keep up with the high market growth and
to fight off competitors’ attacks.
Characteristics:
 Business having high growth rate and high market share.
 Business organisation or unit generate and use large amount of cash.
 The business in this category generates high profits.
 The business represent the best investment opportunities for future growth.

3. Cash Cows – Stars with falling growth rates that still have the largest relative market share and produce a lot
of cash for the company. The company does not have to finance expansions because the market’s growth rate
has slowed. Because the business is the market leader, it enjoys economies of scale and higher profit margins.
The company uses its cash cows to pay bills and support other businesses. If the cash cow starts losing relative
market share, the company will have to pump money back into it to maintain market leadership.
Characteristics:
 Business having low growth rate and high market share.
 It is profitable and its operation is the source of excess cash.
 To ensure long term success of the firm, alternate products need to be developed.
 Large positive cash flow.

4. Dogs: Businesses that have weak market share in low growth markets. A dog may not require substantial
cash, but it ties up capital that should be deployed elsewhere. The company should consider whether it is
holding on to these businesses for good reasons or not.
Characteristics:
 Business having low growth rate and low market share.
 Market consists of stagnant user or supplier of cash.
 Unless the category of this product can be changed, it should be eliminated from the range.
After plotting its various businesses in the growth-share matrix, a company must determine whether its portfolio
is healthy. An unbalanced portfolio would have too many dogs or question marks and too few stars and cash
cows.
Relative Market Share
High → Low
High 2. Star (*) 1. Question Mark (?)
Market Growth Rate

Modest Positive or Negative Large negative cash flow.

↓ Cash flow.

3. Cash Cow 4. Dog

Low Large positive cash flow. Modest positive or negative
cash flow.

38
Features of BCG matrix:
 The Boston Consulting Group matrix lets a firm classify each SBU in terms of market share relative to
key competitors and annual industry growth.
 With the matrix, it can be determined which SBUs are dominant and whether their industries are
growing, stable, or declining.
 The matrix’s major assumption is that the higher an SBU’s market share, the lower its per-unit costs
and the higher its profitability. The Boston Consulting Group matrix identifies four types of SBUs.
 A star is a leading SBU in an expanding industry. The major goal is to sustain differential advantages
in the face of rising competition. It generates substantial profits but requires large amounts of resources to
finance growth.
 A cash cow is a leading SBU in a mature or declining industry. It generates funds that can be used for
other SBUs.
 A question mark is an SBU that has had little impact (low market share) in an expanding industry (high
growth). It needs substantial cash to improve its position.
 A dog is an SBU with limited sales (low market share) in a mature or declining industry (low growth).
It has cost disadvantages and few growth opportunities.
 Children and Stars need to be kept in a kind of equilibrium. The funds generated by Cash Cows are
used to turn problem children into Stars, which may eventually become Cash Cows.
 Some of the Problem Children will become Dogs, and this means that marketer will need a larger
contribution from the successful products to compensate for the failures.

Disadvantages of Boston Matrix:

 There is an assumption that higher rates of profit are directly related to high rates of market share.
 It is normally applied to Strategic Business Units (SBUs). These are areas of the business rather than
products. For example, for LG in India, IT products have a separate focus and hence are an SBU and not
just a basket of products.
 There is another assumption that SBUs will cooperate. This is not always the case.
 The main problem is that it oversimplifies a complex set of decision.
The company’s next step is to determine what objective, strategy and budget to assign to each SBU. Four
strategies can be observed in this regard:
1) Build: this strategy is appropriate for question marks whose market shares must grow if they are to become
stars. As they are in a growing market, an inflow of resources would work wonders for them. But if the
company is doubtful about its growth even in a growing market then it divesting it would be a better decision.
An early decision to divest is likely to produce fairly good bids if the business is in relatively good shape now.
2) Hold: this strategy is appropriate for stars. As they are the market leaders with highest relative market share
and in a rapidly growing market, it is important for the firm to hold on to its current position for long. In this
stage the firm would be required to pump in resources in order to maintain its position as a star. In order to reap
the benefits from this star the firm would be required to continuously support it with resources.
3) Harvest: this strategy is appropriate for cash cows. The objective of harvest strategy is to increase short term
cash flow regardless of long term effect. In other words it involves ‘milking the businesses’. In this position the
firm does not spend money on R&D activities, reduces advertising expenditure and undertakes other cost cutting
measures for the concerned SBU. Harvesting can be also used for weak cows, question marks and dogs which
show some promise for future potential.
4) Divest: the objective is to sell or liquidate the business because resources can be better used elsewhere. This
strategy is appropriate for dogs and question marks that are acting as a drag on the company’s profits. In this a
strategy the firm does not plough resources into the business but just try to sell it off at a good price.

39
 Relative Market Share
High → Low

Growth
High 2. HOLD 1. BUILD
↓ ←
↓
3. HARVEST. 4. DIVEST
Market

Low → ↑
Rate

SBU Life Cycle

As shown in the figure every successful SBU follows a lifecycle. As time passes, SBU’s change their position in
the growth-share matrix. They start as question marks, become stars, then cash cows and if not taken care of ,
they finally become dogs.
For this reason, companies should examine not only their businesses’ current positions in the matrix but also
their moving positions. Strategies must be changed if the SBU is not on its expected trajectory.
The worst mistake a company could make would be to require all its SBUs to aim for the same growth rate or
return level. The very point of SBU analysis is that each business has a different potential and requires its own
objective. Other mistakes include:
i) Leaving cash cows with too little in retained funds in which case they grow weak.
ii) Leaving the cash cows with too much in retained funds in which the company fails to invest enough in
new businesses with growth potential.
iii) Making major investments in dogs in hopes of turning them around but failing each time.
iv) Maintaining too many questions marks and under investing in each. Question marks should either receive
enough support to achieve segment dominance or be dropped.
The BCG matrix provides a framework for allocating resources among different business units and allows one
to compare many business units at a glance. However, the approach has received some negative criticism for the
following reasons:
 The link between market share and profitability is questionable since increasing market share can be
very expensive.
 The approach may overemphasize high growth, since it ignores the potential of declining markets.
 The model considers market growth rate to be given. In practice the firm may be able to grow the
market.

Step3: Setting marketing objectives

Marketing objectives establish the firm’s goals for each SBU. Objectives are described in both
Quantitative terms L: Rupees sales, percentage profit growth, and market share. Qualitative terms: Image,
level of innovativeness, and industry leadership role. Without clearly identified objectives, firms often fail to
survive.

Step 4: Performing situation analysis

The situation analysis is also known as SWOT Analysis. SWOT analysis is the analysis of internal and external
environment of an organization. SWOT analysis is the systematic study and identification of Strength,
Weakness of firm and external Opportunities and threats which a company may likely to face.
Internal factors include:
 Strengths (S)
 Weaknesses (W)
External factors include:
 Opportunities (O)
 Threats (T)
The SWOT analysis is a continuous review of a firm’s market position. When any organisation is planning
strategically it is useful to complete an analysis that takes into account not only for their business, but for
competitor’s businesses and the current business environment as well.

40
Completing a SWOT analysis helps marketer to identify ways to minimize the effect of weaknesses in the
business while maximizing strengths. Ideally, organisation will match their strengths against market
opportunities that result from their competitors’ weaknesses.
Basic SWOT
Organisation can develop a basic SWOT analysis in a brainstorming session with members of the
company. To begin a basic SWOT analysis firm should create a four cell grid or four lists, one for
each SWOT component:
Strengths(S) Weaknesses (W)
-Technical -Technical
- Financial. - Financial.
-Marketing. -Marketing.
-R&D -R&D
Opportunities(O) (S-O) Strategy or (W-O)
- Present and Future Maxi – Maxi Strategy Mini- Maxi Strategy
condition of business. Example:
- Govt. policy. Developmental
- Legal systems. Strategy
-regulation
Threats (T)
- Present and Future (S-T) (W-T)
condition of business. Maxi – Mini Strategy Mini – Mini Strategy.
- Govt. policy.
- Legal systems.
- Regulation

Strengths:
 Strength is power and excellence with resources, skill and advantages over competitions.
 It is the distinct technical superiority with technical know -how, financial resource and skilled human
resource, good will and image in the market for product and service.
Weaknesses -
 It is the incapability, limitation and deficiencies in resources, such as technical, financial, manpower,
skills, brand image and distribution power.
Opportunities –
 These are external factors such as government policies, monetary policies, industrial policy, political
situation, rules and regulations, etc.
 It is major favourable to a company provided the same can be available strategically.
Threats -
 Threats are unfavourable condition of business environment for a company.
 Slow market growth, entrance of resources, increased bargaining power of buyer.

Advanced SWOT:
A more in-depth SWOT analysis can help to have better understand company’s competitive situation. One way
to improve upon the basic SWOT is to include more detailed competitor information in the analysis. Often,
opportunities arise as a result of a changing business environment.
Marketer can also enhance a SWOT analysis through surveys. Marketer can learn more about their own as well
as competitor sites and businesses. Areas they can research include:
1) Customer awareness, interest, trial, and usage levels.
2) Brand, site, and/or company image.
3) Importance of different site or product attributes to the customers.
4) Product and/or site performance.
Whether using a basic or more advanced approach to SWOT analysis. Use these to increase company’s
effectiveness and as input into business or marketing plan.
This step can be divided in to two sub steps:
i) Internal Environment and Resource analysis.

41
 ii) Competitive Analysis.

i) Internal Environment Analysis: After doing SWOT analysis every organisation has to analyse
their internal environment to look deeply the problems and strength arising out from it. In order to analyse
they have to follow Porter’s Generic Value Chain Model, which is enunciated below.
Firm’s Infrastructure

Human Resource Development

Technological Development
Procurement

Inbound Marketing Service

Operations Outbound
Logistic Logistics and Sales

Primary Activities

Porter’s Generic Value Chain Model

Organisation produces goods and services gives in terms of value. To create value organisation need the help of
primary activities and supportive activities. In producing value the symbiotic relationship between two activity
give the idea of value chain.

1. Primary Activities:
The activities which directly involves in physical production of producing goods and services. Over arching
supportive activities help primary activity in providing input and infrastructure to make operation ongoing.
a) In bound Logistics: it is related with receiving, storing, disseminating the inputs. It includes
storing, warehousing, inventory control, vehicle scheduling, etc.
b) Operation: It converts the input in to finished goods and services as output.
c) Out bound Logistics: it is related to distribute the finished goods and services to the
customer.
d) Marketing and Sales: it relates to persuade customer and convert product and services in to
hard cash.
e) Services: Activities associated with giving the service for maintaining. It provides maintained
value of goods and services.

2. Supportive Activities:
a) Procurement: It involves procure the input to produce final product.
b) Technological development: It is associated with continuously development of technology of
production process of goods and services.
c) Human Resource development: It involves recruiting, selection, placement, appraisal,
induction of human resource.
d) Firm’s infrastructure: It includes administrating financial work of organisation.

ii) Competitive Analysis:

Next sub step concerned with analyzing the competitive scenario. In order to do this company has to consider
Porter’s Competitive analysis model or Porter’s five force analysis. This model is enunciated below:

Threats of New Entrants

Maneuvering
Bargaining power of position within Bargaining power
customers competition of Supplier

Threats of Substitute 42
product or service

Fig: Porter’s five-force analysis

Maneuvering position within Competition is influenced by
i) Threats of new entrants.
ii) Bargaining power of Supplier.
iii) Threats of substitute products or service.
iv) Bargaining power of customer.
i) Threats of new entrants: it is influenced by the following factors.
a) The scale of economy.
b) Capital requirement.
c) The level of product differentiation.
 More differentiated products have less competition.
 Less Differentiated products have more competition.
d) Access to distribution channel.
ii) Bargaining power of Supplier:
 If the supplier-source is dominating a few company the leverage of competition favourable to the
supplier.
 If the product is uniquely differentiated, the supplier posses an imminent threats of forward
vertical integration.
 If the suppliers enjoy the advantages of switching cost benefit in reference to product, the
bargaining power is favourable to the supplier.
iii) Threats of substitute products or service:
 Product performance could be traded off against availability of service.
 If the customers are aware about the substitute product then they can buy those products instead of
this product.

iv) Bargaining power of customer:

 If the customers are concentrated or /and buy in large quantities
 Standardisation: if the product standardized then the bargaining power of customer is more and
competition is high.
 Differentiation: if the product is highly differentiated then competition is less and customer has
less bargaining power.
 If the significance of quality of product is very little to the customer then competition is very high
and bargaining power of customers are also very high.
 The product which is bought in fabricated form, the competition is very less.
The Porter Generic Strategy Model
The Porter generic strategy model identifies two key planning concepts and the alternatives available for each:
i) Competitive scope (broad or narrow target).
ii) Competitive advantage (lower cost or higher cost).
The following four basic strategies are identified:
i. Cost leadership: broad market and low cost position.
ii. Differentiation: large market and unique strategy.
iii. Focus: narrow target segment and either
Competitive low cost position or a unique strategy.
Advantage
Cost leadership and differentiation strategies are alternatives for large firms; a focus strategy is
Competition Scope

Low Cost Higher Cost

available to smaller firms.
iv. Differentiation focus
Broad

Overall cost Differentiation

leadership
Narrow

Cost focus Differentiation

focus 43

Porter’s Generic Strategies

i. Cost Leadership strategy: this generic strategy calls for being the low cost producer in an industry for a given
level of quality. The firm sells its products either at average industry prices to earn a profit higher than that of
rivals or below the average industry prices to gain market share. The cost leadership strategy usually targets a
broad market.
Some of the ways by which firms acquire cost advantages are by improving process efficiencies, gaining unique
access to large source of lower cost materials, making optimal outsourcing and vertical integration decisions or
avoiding some costs altogether. If competing firms are unable to lower their costs by a similar amount, the firm
may be able to sustain a competitive advantage based on cost leadership.
Firms that succeed in cost leadership often have the following internal strengths:
 Access to the capital required making a significant investment in production assets; this investment
represents a barrier to entry that many firms may not overcome.
 Skill in designing products for efficient manufacturing.
 High level of expertise in manufacturing process engineering.
 Efficient distribution channel.
Each generic strategy has its risks, even the low cost strategy. For example, other firms may be able to lower
their costs as well. As technology improves, the competition may be able to leapfrog the production capabilities,
thus eliminating the competitive advantage. Additionally, several firms following a focus strategy and targeting
various narrow markets may be able to achieve an even lower cost within their segments and as a group gain
significant market share.

ii. Differentiation Strategy: This strategy calls for the development of a product or service that offers a unique
attributes that are valued by the customers and customers perceive to be better than or different from the
products of the competition. The value added by the uniqueness of the product may allow the firm to charge a
premium price for it. The firm hopes that the higher price will more than cover the extra costs incurred in
offering the unique product.
Firms that succeed in differentiation strategy often have the following internal strengths:
 Access to leading scientific research.
 Highly skilled and creative product development team.
 Strong sales team with the ability to successfully communicate the perceives strengths of the product.
 Corporate reputation for quality and innovation.
 The risks associated with differentiation strategy include imitation by competitors and changes in
customer tastes. Additionally various firms pursuing focus strategies may be able to achieve even
greater differentiation in their market segments.

iii. Focus Strategy: this strategy focus on narrow segment and within that segment attempts to achieve either a
cost advantage or differentiation. The premise is that the needs of the group can be better serviced by focusing
entirely on it. A firm using a focus strategy often enjoys a high degree of customer loyalty and this entrenched
loyalty discourages other firms from competing directly. Because of their narrow market focus, firms pursuing a
focus strategy have lower volumes and thus less bargaining power with their suppliers.

iv. Differentiation- focused strategy: firms pursuing a differentiation-focused strategy may be able to pass
higher costs on to customers since close substitutes do not exist.
Firms that succeed in a focus strategy are able to tailor a broad range of product development strengths to a
relatively narrow market segment that they know very well.
Some risks of focus strategy include imitation and changes in the target segment. Furthermore, it may be fairly
easy for a broad-market cost leader to adapt its product in order to compete directly. Finally, other focusers may
be able to carve out sub-segments that they can serve even better.

44
Step 5: Developing a marketing strategy
A marketing strategy outlines the way in which the marketing mix is used to attract and satisfy the target
market. Thus a marketing strategy would develop from two components i.e. the marketing mix, and the target
market. Marketing mix, consists of mainly the 4 Ps of marketing.
The 4 Ps are Product, Price, Promotion and Place. For services business, three additional 3 Ps become
important. They are People, Process and Physical evidence. Some texts also refer to other Ps like Packaging, and
Public Relations because of their importance.
 A marketing strategy outlines the way in which the marketing mix is used to attract and satisfy the
target market(s) and achieve an organization’s goals.
 A strategy should be as explicit as possible.
 In planning its marketing strategy, a firm should consider these key factors for each
 SBU:
 The firm’s mission, resources, abilities, and standing in the marketplace.
 The status of the firm’s industry and the product groups in it.
 The domestic and global competitive situation.
 The environmental situation.
 The best opportunities for growth.
 A separate strategy is necessary for each SBU.

There are four strategic planning approaches:

A. Product/Market Opportunity Matrix
B. Boston Consulting Group Matrix
C. General Electric Business Screen
D. Porter Generic Strategy Model it is covered in the above

The Product/Market Opportunity Matrix(Product –market Grid)

The product/market opportunity matrix identifies four alternative marketing strategies to maintain and/or
increase sales of business units and products: market penetration, market development, product development,
and diversification.
Current New
Product Product

Current (1) Market (3) Product

Market Penetration Development
Strategy Strategy

New (2) Market

(4) Diversification
Market Development
Strategy
Strategy

1. Market Penetration Strategy: In this strategy, a firm seeks to expand the sales of its present products in its
present markets through more intensive distribution, aggressive promotion, and competitive pricing.
2. Market Development strategy: According to this strategy, a firm seeks greater sales of present products
from new markets or new product uses. It can enter new markets, appeal to segments it is not yet satisfying,
reposition products, and use new distribution methods.
3. Product development: in this strategy a firm develops new or modified products to appeal to present
markets. It emphasizes new models, better quality, and other minor innovations and markets them to loyal
consumers.
4. Diversification (Growth strategy): In this strategy, a firm becomes involved with new products aimed at
new markets. The products may be new to the industry or to the company. Distribution and promotion
orientations are different from those traditionally used by the firm. While the corporations are faced with ever
increasing strategic planning gap, three strategies have been formulated to overcome this gap.

45
 Growth Strategy

1. Intensive Growth 2. Integrative Growth 3.

Diversification
Growth

A. Forward B. Backward
integration integration

A. Concentric B. Horizontal C. Conglomerate

1. Intensive Growth: Corporate management’s first course of action should be a review of whether any
opportunities exist for improving its existing businesses’ performance. Ansoff model propounded by Igor
Ansoff is a useful framework for detecting new intensive growth opportunities called a “Product-Market
Expansion Grid”.
The company first considers whether it could gain more market with its current products in their current markets
(market penetration strategy). This can be done by either increasing the usage among
 New Products
 Current Products
 Current Markets
 New Markets
The existing customers or switching of competitor’s customers or by adding non consumers in the consumer
list. Next it considers whether it can find or develop new markets for its current products (market-development
strategy). This can be either based on demographic or geographic or psychographic factors. Then it considers
whether it can develop new products of potential interest to its current markets(product-development strategy).
They can be either completely new products or existing product extensions. Later it will also review
opportunities to develop new products for new
markets(diversification strategy). But here the company should take care as this involves high risk and the firm
might loose focus.
By examining these three intensive growth strategies, management may discover several ways to grow. Still,
that growth may not be enough. In that case, management must also examine integrative growth opportunities.

2. Integrative Growth: Often a business’s sales and profits can be increased through backward, forward or
horizontal integration within the industry.
A. Back ward integration: A company may acquire one or more of its suppliers to gain more control over its
raw materials at entry point or generate more profits. Example: ITC acquired Tribeni Tissues.
B. Backward Integration: It might acquire some wholesalers or retailers, especially if they are highly
profitable. Example: Bata’s Retail outlet.
C. Horizontal Integration: If the company decides to acquire one or more competitors, provided that the
government does not bar this move (horizontal integration).
However, these new sources may still not deliver the desired sales volume. In that case company must consider
diversification.

3. Diversification Growth: When good opportunities which are highly attractive are found to be outside the
present business and the company has a mix of business strengths to be successful in them, the company goes
for diversification. This is possible in three kinds:
A. Concentric Diversification Strategy: The Company could seek new products that have technological or

46
marketing synergies with existing product lines, even though the new product themselves may appeal to a
different group of customers.
B. Horizontal Diversification Strategy: The Company might search for new products that could appeal to
current customers even though the new products are technologically unrelated to its current product line.
C. Conglomerate Diversification Strategy – The Company might seek new businesses that have no
relationship to its current technology, products or markets.

4. Downsizing Older Businesses: Companies must not only develop new businesses, but must also carefully
cut, harvest or divest tired old businesses in order to release needed resources and reduce costs. Managers
should focus on growth opportunities, not fritter away energy and resources trying to salvage hemorrhaging
businesses.
The General Electric Model
Market Attractiveness

High

Medium

A SBU’s appropriate objective cannot be determined solely by its position in the growth-share matrix. If
Low
additional factors are considered, the growth-share matrix can be seen as a special case of a multifactor portfolio
matrix such as that pioneered by General Electric. The model is based on the company’s seven businesses. It
Strong Medium Week for the purpose of strategic planning on the
holds that a company can appropriately rate its different businesses
Businessand
basis of two main parameters – Market Attractiveness Position
Business Strength.
The above two factors make excellent marketing sense for rating a business. Companies are successful to the
extent that they enter attractive markets and possess the required business strengths to succeed in those markets.
If one of these factors is missing, the business will not produce outstanding results. Neither a strong company
operating in an unattractive market nor a weak company operating in an attractive market will do very well.
The General Electric Approach
 This model has been give by General Electric to analyse SBU, and it is even known as Market
attractiveness and Company strength matrix. Both axes are divided into three segments, forming nine
cells. The nine cells are grouped into three zones:
 The block with the Lateral Zone consists of the three cells in the upper left corner. If the enterprise
falls in this zone the business is in a favorable position with relatively attractive growth opportunities. This
indicates a “green light” to invest in this product and service.
 The blocks with plain Zone consists of the three diagonal cells from the lower left to the upper right.
A position in the yellow zone is viewed as having medium attractiveness. Organisation must therefore
exercise caution when making additional investments in this product/service. The suggested strategy is to
seek to maintain share rather than growing or reducing share.
 The blocks with a Diagonal Zone consists of the three cells in the lower right corner. A position in the
red zone is not attractive. The suggested strategy is that management should begin to make plans to exit the
industry.
1. Market Attractiveness Consists:
 Overall market size
 Annual market growth rate
 Historical profit margin
 Competitive intensity
 Technological requirements
 Inflationary vulnerability
 Energy requirements
 Environmental impact
 Social, political, legal

47
2. Business Strength
 Market share
 Share growth
 Product quality
 Brand reputation
 Distribution network
 Promotional effectiveness
 Productive capacity
 Productive efficiency
 Unit costs
 Material supplies
 R & D performance
 Managerial personnel
Strategies
Protect Position Invest to Build Build Selectively
1. Investment grow at 3. Challenge for 6. Specialize around
maximum digestible leadership limited strengths
rate 4. Build selectively on 7. Seek ways to overcome
2. Concentrate effort on strengths weaknesses
maintaining strength 5. Reinforce vulnerable 8. Withdraw if indications
areas of sustainable growth are
lacking
Build Selectively Selectivity/Manage for Limited Expansion or
9. Invest heavily in Earnings Harvest
most attractive 12. Protect existing  Look for ways to
segments program expand without high risk;
10. Build up ability to 13. Concentrate otherwise, minimize
counter competition investments in segments investment and
11. Emphasize where profitability is rationalize operations
profitability by raising good and risks are
productivity relatively low
Protect & Refocus Manager for Earnings Divest
14. Manage for current 17. Protect position in  Sell at time that
earnings most profitable segments will maximize cash value
15. Concentrate on 18. Upgrade product line  Cut fixed costs
attractive segments 19. Minimize investment and avoid investment
16. Defend strengths meanwhile.

The GE matrix is divided into nine cells. The three cells in the upper-lrft corner indicate strong SBUs in which
the company should invest or grow. The diagonal cells stretching from the lower left to the upper right indicate
SBUs that are medium in overall attractiveness.
The three cells in the lower-right corner indicate SBUs that are low in overall Attractiveness. Management
should also forecast each SBU’s expected position in the next three to five years given the current strategy.
Making this determination involves analyzing where each product is in its product life cycle as well as expected
competitor strategies, new technologies, economic events, etc. the company’s objective is not always to build
sales in each SBU. Rather, the objective might be to maintain the existing demand with fewer marketing dollars
or to take cash out of the business and allow demand to fall. Thus, the task of marketing management is to
manage demand or revenue to the target level negotiated with corporate management. Marketing contributes to
assessing each SBU’s sales and profit potential, but once the SBU’s objective and budget are set, marketing is to
carry out the plan efficiently and profitably.
Evaluation of Strategic Planning Approaches
Many firms assess alternative market opportunities; know which products are stars, cash cows, question marks,
and dogs; recognize what factors affect performance; understand their industries; and realize they can target
broad or narrow customer bases.

48
The major strengths of the approaches are that they allow a firm to do the following:
 Analyze each of its SBUs and products.
 Study various strategy effects.
 Learn the opportunities to pursue and which threats to avoid.
 Compute marketing and other resources needs.
 Focus on meaningful differential advantages.
 Compare performance with designated goals.
 Discover principles for improving performance.
 Study competitors’ actions and trends.
Weaknesses:
 They may be difficult to implement.
 They may be too simplistic and omit key factors.
 They are arbitrary in defining SBUs and evaluative criteria.
 They may not be applicable to all firms and situations.
 They may not adequately consider environmental factors.
 They may overvalue market share.
 They are often used by staff planners rather than line managers.
 These techniques only aid planning. They do not replace the need for managers to engage in hands-on
decisions by studying each situation and basing marketing strategies on the unique aspects of their
industry, firm, and SBUs.

Analysis of the Enterprise Position-BCG Matrix

Stars Cash Cows Question Market Dogs
High Growth Low growth High growth Low growth
High Share High share Low share Low share
Business is likely to Business can be Business requires Business is a cash
generate enough used to support a lot of cash to trap.
cash to be self- other business maintain market
sustaining. units share.
Recommended
tactics:
? promote ? invest more cash ? focus on short
aggressively ? defend & term
? expand your maintain ? or, divest ? avoid risky
product or service project
? invest in R & D ? limited future

Analysis of the Enterprise Position-GE Matrix

Leader: Growth: Improve or Quit:
Higher Attractiveness High Attractiveness High Attractiveness
Strong Competitive Average Competitive Weak Competitive
Position Position Position
The strategy advice for The strategy advice for The strategy advice for
this cell is to invest for this cell is to invest for this cell is to
growth. Consider the growth. Consider the opportunistically invest
following strategies: following strategies: for earnings. However, if
 Provide  Build selectively you can’t strengthen
maximum investment on strength your enterprise you
 Diversify  Define the should exit the market.
 Consolidate your implications of Consider the following
position to focus your challenging for market strategies:
resources leadership  Ride with the
 Accept moderate  Fill weaknesses market growth
near-term profits to to avoid vulnerability  Seek niches or

49
 build share specialization
 Seek an
opportunity to increase
strength through
acquisition
Harder: Proceed with Care: Phased Withdrawal:
High Attractiveness Medium Attractiveness Medium Attractiveness
Weak Competitive Average Competitive Weak Competitive
Position Position Position
The strategy advice for The strategy advice for The strategy advice for
this cell is to this cell is to selectively this cell is to preserve for
opportunistically invest invest for earnings. harvest. Consider the
for earnings. However, if Consider the following following strategies:
you can’t strengthen your strategies:  Act to preserve
enterprise you should exit  Segment the or boost cash flow as
the market. market to find a more you exit the business
Consider the following attractive position  Seek an
strategies:  Make opportunistic sale
 Ride with the contingency plans to  Seek a way to
market growth protect your vulnerable increase your strengths
 Seek riches or position
specialization
 Seek an
opportunity to increase
strength through
acquisition

Generation Phased Withdrawal:

Low Attractiveness Low Attractiveness
Strong Competitive Strong Competitive
Position Position
The strategy advice for The strategy advice for
this cell is to selectively this cell is to selectively
invest for earnings. invest for earning
Consider the following Consider the following
strategies: strategies:
 Defend
 Defend strengths
strengths  Shift resources
 Shift resources to attractive segments
to attractive segments  Examine ways
 Examine ways to revitalize the
to revitalize the industry
industry  Time your exit
 Time your exit by monitoring for
by monitoring for harvest or divestment
harvest or divestment timing
timing

Strength-weakness-opportunities-threat (SWOT) analysis, Marketing process, marketing plan SWOT

analysis
Company should complete an analysis that takes into account not only their own business, but their competitor’s
businesses and the current business environment as well. A SWOT is one such analysis. Completing a SWOT
analysis helps them to identify ways to minimize the effect of weaknesses in the business while maximizing

50
strengths.
Ideally, company will match strengths against market opportunities that result from their competitors’
weaknesses.
Environmental Scan

Internal Environment External Environment

Analysis Analysis

Strengths Weakness Opportunities Threats

SWOT ANALYSIS
Performing SWOT or Situation Analysis
In situation analysis, also known as SWOT analysis, an organization identifies internal strengths and
weaknesses, as well as external opportunities and threats. It seeks to answer two general questions:
 Where is the firm now?
 In what direction is it headed?

Situation analysis accomplishes the following:

 It recognizes strengths and weaknesses relative to competitors.
 It searches the environment for opportunities and threats.
 It assesses an organization’s ability to capitalize on opportunities and to minimize threats.
 It anticipates competitors’ responses to company strategies.

Strengths & Weaknesses

The analysis of the internal environment of the firm reveals its strengths and its weaknesses which helps the
firm to analyse how to turn its weaknesses in to strengths.
Firms strengths consists of its resources and capabilities that can be useful in developing its competitive
advantage over its competitors. Some of the examples of firms strengths are –Its access to high grade natural
resources, strong brand name, strong distribution network, brand name, patents, strong information network, etc.
Firms weaknesses is absence of certain strengths which is the necessity for its business to fight competition.
Some of the examples of it are – poor reputation among customers, lack of access to natural resources, lack of
coordination with the suppliers and distributors, dissatisfied employees, demotivated marketing staff, etc
Opportunities & Threats
The analysis of the external environment reveals to the firm the opportunities available for it in the market and
what are the threats it is facing, which helps it analyse the various strategies what to select. Some of the
examples of opportunities are – arrival of new technology, removal of some trade barriers or government
regulations, an unfulfilled customer need, etc. The changes that take place regularly in the external environment
gives rise to certain threats to the business like shift in consumer tastes, new regulations, increased trade
barriers. Now the firm has to identify the best fit between its strengths and the opportunities available and try to
overcome its weaknesses and ready to face the challenges / threats.
Strength: Opportunities strategies: pursue those opportunities which best fit Companies strengths.
Weaknesses: opportunities strategies: pursue opportunities to overcome weaknesses.
Strengths: Threats strategies: identify ways through which firm can use its strength to reduce the degree of
external threats.
Weaknesses – Threats: Establish a defensive plan to prevent the firm’s weaknesses from making it highly
susceptible to external threats
Opportunity can be classified according to their attractiveness and their success probability. It has been
Success probability
elucidated below:
High Low

A
Low

T
1.Best
T 2. The
R marketing
opportunities
A opportunity
C
T
I
V 51
E 3.Attractiveness 4. Opportunity
High

N and success too minor to

E probabilities consider
S
S
Threat Matrix:
Environmental threat is a challenge posed by an unfavourable trend or development that would lead, in the
absence of defensive marketing action, to deterioration in sales or profit. Threats should be classified according
to seriousness and probability of occurrence.
Probability of
occurrence
High Low
S
Low

E
R 1 2
I
O
U
S
High

N 3 4
E
S
S

1. Major threats to deal with the company needs to prepare contingency plans that spell out changes the
company.
2. Do not require contingency planning but need to be monitored care fully in the event that they grow more
seriously.
3. Do not require contingency planning but need to be monitored carefully in the event that they grow more
seriously.

52
 Consumer relationship management (6L)
 Definition.
 Management and relationship marketing
 Customer retention (relation to hospitals)
CRM is the abbreviation for customer relationship management.Customer relationship management
entails all aspects of interaction that a company has with a customer, whether it is sales or service-
related. While the phrase customer relationship management is most commonly used to describe a
business-customer relationship, CRM systems are also used to manage business contacts, clients,
contract wins and sales leads.

How CRM is Used Today

CRM solutions provide you with the customer business data to help you provide services or products
that your customers want, provide better customer service, cross-sell and up-sell more effectively,
close deals, retain current customers and better understand who your customer are. Organizations
frequently look for ways to personalize online experiences (a process also referred to as mass
customization) through tools such as help-desk software, email organizers and different types
of enterprise applications.

The CRM Strategy

Customer relationship management is often thought of as a business strategy that enables businesses
to improve in a number of areas. The CRM strategy allows you to to following:
 Understand the customer
 Retain customers through better customer experience
 Attract new customers
 Win new clients and contracts
 Increase profitably
 Decrease customer management costs
The Impact of Technology on CRM
Technology and the Internet have changed the way companies approach customer relationship
strategies. Advances in technology have changed consumer buying behavior, and today there are
many ways for companies to communicate with customers and to collect data about them. With each

53
 new advance in technology — especially the proliferation of self-service channels like the Web and
smartphones — customer relationships are being managed electronically.
Many aspects of customer relationship management rely heavily on technology; however, the
strategies and processes of a good CRM system will collect, manage and link information about the
customer with the goal of letting you market and sell services effectively.

Characteristics of CRM
 Relationship management is a customer-oriented feature with service response based on
customer input, one-to-one solutions to customers’ requirements, direct online communications
with customer and customer service centers that help customers solve their issues.
 Sales force automation. This function can implement sales promotion analysis, automate
tracking of a client’s account history for repeated sales or future sales, and also сoordinate sales,
marketing, call centers, and retail outlets in order to realize the salesforce automation.
 Use of technology. This feature is about following the technology trend and skills of value
delivering using technology to make “up-to-the-second” customer data available. It applies data
warehouse technology in order to aggregate transaction information, to merge the information
with CRM solutions, and to provide KPI (key performance indicators).
 Opportunity management. This feature helps the company to manage unpredictable growth
and demand and implement a good forecastingmodel to integrate sales history with sales
projections.
 CRM in developing and maintaining client relationships

The Benefits of CRM

The biggest benefit most businesses realize when moving to a CRM system comes directly from
having all your business data stored and accessed from a single location. Before CRM systems,
customer data was spread out over office productivity suite documents, email systems, mobile phone
data and even paper note cards and Rolodex entries. Storing all the data from all departments (e.g.,
sales, marketing, customer service and HR) in a central location gives management and employees
immediate access to the most recent data when they need it. Departments can collaborate with ease,
and CRM systems help organization to develop efficient automated processes to improve business
processes.
Other benefits include a 360-degree view of all customer information, knowledge of what customers
and the general market want, and integration with your existing applications to consolidate all
business information.

The Difference Between Relationship Marketing & CRM

CRM activities such as automated record-keeping identify previous issues and potential new services
as part of a relationship management strategy.

Related Articles
 Great CRM Marketing Examples
 How to Start a Business Selling Human Hair for Weaving
 How to Transfer Photos From a Galaxy S3 to a Computer

54
 5 Different Types of Leadership Styles
 How to Calculate Retained Earnings on a Balance Sheet
 CRM & Marketing

As a small-business owner, you work hard to get new customers, and once they walk in the door, you
should do everything you can to make sure they return. Relationship marketing and customer
relationship management are two phrases you'll come across as you search for ways to manage and
increase your sales. Understanding how to use them can help you grow your business. Though they're
different, implementing both of these concepts can help you to establish mutually beneficial
relationships with customers, which in turn leads to long-term repeat business.

Relationship Marketing
Relationship marketing is a sales approach focusing on building a long-term relationship that benefits
both the customer and the business. Some of the techniques businesses use in relationship marketing
include providing consistently excellent customer service, getting to know the individual and
anticipating their future needs, and offering discounts and special perks through loyalty programs for
repeat customers. The rise of the internet gives small businesses ample opportunity to build
relationships and engage with customers by inviting them to visit their websites and comment on
blogs, as well as interact on social media sites such as Facebook, Twitter, Pinterest, YouTube and
LinkedIn.

CRM
CRM is the acronym for customer relationship management, a phrase describing web-based computer
systems or software that helps businesses organize and provide marketing, sales and customer service
assistance. Data collected includes information about customers' purchasing history, demographics,
details of purchases and returns, and anything that will help salespeople assist the customer in future
interactions. Much of this data must be entered by the sales team. CRM systems are also mined to
identify new sales leads and potential new product or service areas.

Related Reading: Ways to Increase Revenue With CRM

Main Differences
While relationship marketing is a sales and marketing concept, CRM refers to the tools used to carry
out the concept. Relationship marketing is implemented as a strategy and includes activities such as
identifying long-term sales and retention goals, public relations, marketing and advertising
campaigns.
CRM includes the operational tasks that support the relationship marketing strategy. Acitivities may
include gathering data about the customers, then organizing and analyzing it to create target customer
profiles. CRM data is also effective in finding opportunities to create special offers to reward long-
time customers for their loyalty, further building the relationship.

Using CRM and Relationship Marketing

Relationship marketing seeks to increase sales by building trust and engaging customers. Using a
CRM system effectively allows a salesperson to quickly and consistently deliver what customers are
looking for with each and every interaction, because their preferences and buying history are
recorded. The system benefits the customers, because they see the business "knows" them. CRM
systems coordinate, automate and deliver online and offline advertising and marketing activities that
help build the long-term customer relationships that are crucial to a successful relationship marketing
strategy

Marketing Benefits of CRM

55
CRM will gradually reduce organization’s dependence on periodic surveys to gather data. Collection
of data related to buying and consumption behavior will be an ongoing process. In many cases, the
transaction data is automatically collected some times real time as in the e-commerce transaction. This
rich repository of customer information and knowledge updated through regular interactions and
actual customer transactions and purchase behavior will help marketers to develop and market
customer centric products successfully. Customized promotions-based customer preferences and
purchase patterns will substantially reduce the wasteful expenditure of mass communication and even
direct mailing. As a customized promotion are more focused and are based on a deeper insight of
existing customers, they have a greater chance of conversion to sales.

Service Benefits of CRM

Research findings conducted across industries as a part of a Technical Assistance Research - 95 per
cent of the customers do not bother to complain, the just take their business else where. - Most loyal
customers take time to complain. This enables the product / service provider to improve and ensure
that such mistake does not recur. - A typical dissatisfied customer will tell an average of 14 others
about a bad experience while she will tell only six about a satisfying experience with an organization.
- 70 per cent of customers who complain will do business with a company again if it quickly takes
care of a service problem.

ENABLES FOR THE GROWTH OF CRM

The tremendous growth of interest and investment in CRM across the globe can be attributed to the
following macro – environmental factors:
(a) Emergence to service economy,
(b) Emergence of market economy
(c) Global orientation of businesses, and
(d) Aging population of the economically advanced economies.
Emergence of Service Economy
The emergence of service economy is a global phenomenon. In the US, the service sector accounts for
over 75 per cent of GNP and employees 80 per cent of the work force. The service sector contribute to
60 – 70 per cent of the GDP of economically advanced nations of Western Europe, Canada and Japan.
The increasing contribution of service sector is not limited to develop countries. Developing
economies like China, Indonesia and Thailand employ about 40 per cent of the work force in the
service sector. In the year 2001, the service sector contributed to 48 per cent of GDP in India, 54 per
cent in Philippines and 33 per cent in China. The average annual growth rate of the services during the
decade of 1990s was 8 per cent in India, 9 per cent in China and 4.1 per cent in Philippines (Statistical
Outline of India, 2002 – 2003). Advanced countries progressed from agriculture to industrial and then
to post – industrial economies. The shift from manufacturing to services was spread over a few
decades of the last century. However, in developing countries, the growth is lead by all three sectors
of the economy in varying proportions.

The growing importance of services resulted in greater customer orientation as services are
characterized by simultaneity / inseparability. It implies that the production and consumption of
services are inseparable. In services, one needs to be closed to customers to deliver the service
offering. The factory is where the customer is and services offered in real time. The customer
perceives the production process as part of service consumption, not just the outcome of production
process as in traditional marketing of physical goods. Therefore, it is not surprising that service
businesses like hotels, airlines, banking, financial services, telecom and retailing where the early
adopters of CRM.

Emergence of Market Economy

In addition to the shift towards service, there is a global emergence of the market economy. The
power is more to the market as compare to the controlled economy. Market regulation was in place all
over the world including the US, Europe, USSR, China and India. The 1990s witnessed acceleration

56
in the deregulation of many large industries including banking, telecommunications, broadcasting and
airlines across the world. As a result, market – orientation firms operating intensely competitive
market now takes decision that was once controlled by the government. The focus have shifted from
capacity creation under control to the markets. Market – oriented economy necessitated a customer
focus and boosted the importance of CRM.

Global Orientation of Businesses

National boundaries are giving way to either a borderless world or atleast a regional world resulting in
the emergence of trading blocks like North American Free Trade Agreement (NAFTA), European
Union and the Association of South – East Asian Nations (ASEAN). The abolishment of the General
Agreement on Tariffs and Trade (GATT). And the emergence of World Trade Organization (WTO)
helped create a global orientation for business establishment. Increasing international trade became
the growth engine for the global economy. Liberalisation of markets and trade proved to be a far
stronger growth engine. It has eased the entry into foreign markets. Firms need stronger customer –
orientation to be able to tab opportunities in new markets while defending themselves in their home
markets.

Aging Population in Economically Developed Countries

The economically advanced nations are witnessing an aging of their population. In 2000, 12.6 per cent
of the US population was 65 years of age or older. The comparative figures for Sweden and Japan
were 17.2 per cent and 17 per cent of their respective population (Sheth and Mittal, 2004). This trend
is visible in most part of Europe, except in Ireland (Leeflang and Raij, 1995). Aging of population has
been attributed to the combined effects of a slow down in birth rate and an increased in life
expectancy. While an aging population creates new opportunities for wellness, financial wellbeing,
safety and security and recreation (Sheth and Mittal, 2004), it has also slowed the markets for
traditional goods and services designed for a younger population. Therefore, in these markets, growth
is being achieved by increasing the ‘share of wallet’ and not through ‘growth of markets’ driven by a
growing population. Marketers are now forced to develop a deep understanding of their existing
customers and meet their ever changing needs through suitable products and services. Indeed, most
large companies, especially the services sector, wants to become One-Stop-Shop for the customers.
After identifying and discussing the factors responsible for the growth of CRM across the globe, we
now evaluate the reasons as to why managing customer relationship has become critical for business.
1. CRM in Marketing
The concept of managing relationships with customers is not new. Companies have been
interfacing with customers since the beginning of trade. However, the focus has always been to sell
the products or services, as opposed to focusing on Customer Retention. Competition, driven by
globalization and the Internet, has changed the face of business. Customers now have a variety of
choices and, most importantly, they are becoming far more knowledgeable and demanding. The
power has truly shifted to the customer. With this scenario, most companies realize that they need
to treat their customers with more care. Companies are now desperately searching for different
ways to manage customer relationships effectively, not only to acquire new customers, but also to
retain the existing ones. According to a Harvard Business Review Study, some companies can boost
their profits by almost 100% by retaining just 5% or more of their existing customers.

CRM: A Business Strategy for growth

CRM is not a product or service; it is an overall business strategy that enables companies to manage
customer relationships effectively. From the business perspective, it provides an integrated view of a
company's customers to everyone in the organization so that the customer can be serviced effectively.
For example, if marketing runs an outbound campaign, all the information about the customers and
the program should be retained for the sales people to follow up, the customer service people to
answer any queries, and technical support to provide any field support. The idea is to have the same
information shareable with all in the company. This will enable the company to present a uniform face
to its customers when called upon to serve their needs. Such a CRM strategy also implies that the
enterprise is customer-centric.

57
Customer relationship management (CRM) Defined
CRM is a discipline as well as a set of discrete software and technologies that focus on automating
and improving the business processes associated with managing customer relationships in the areas of
sales, marketing, customer service and support. CRM applications not only facilitate multiple
business functions but also coordinate multiple channels of communication with the customer - face
to face, call centre and web. CRM covers methods and technologies used by companies to manage
their relationships with clients. Information stored on existing customers (and potential customers) is
analyzed and used to this end. Automated CRM processes are often used to generate automatic
personalized marketing based on the customer information stored in the system.

Implementing CRM
Customer relationship management is a corporate level strategy, focusing on creating and maintaining
relationships with customers. Several commercial CRM software packages are available which vary
in their approach to CRM. However, CRM is not a technology itself, but rather a holistic approach to
an organisation's philosophy, placing the emphasis firmly on the customer. CRM governs an
organization's philosophy at all levels, including policies and processes, front of house customer
service, employee training, marketing, systems and information management. CRM systems are
integrated end-to-end across marketing, sales, and customer service

A CRM system should-

• Identify factors important to clients
• Promote a customer-oriented philosophy
• Adopt customer-based measures
• Develop end-to-end processes to serve customers
• Provide successful customer support
• Handle customer complaints
• Track all aspects of sales
Uses of CRM
In its broadest sense, CRM covers all interaction and business with customers. A good CRM program
allows a business to acquire customers, provide customer services and retain valued customers.
Customer services can be improved by:
• Providing online access to product information and technical assistance around the clock
• Identifying what customers value and devising appropriate service strategies for each customer
• Providing mechanisms for managing and scheduling follow-up sales calls
• Tracking all contacts with a customer
• Identifying potential problems before they occur
• Providing a user-friendly mechanism for registering customer complaints
• Providing a mechanism for handling problems and complaints
• Providing a mechanism for correcting service deficiencies
• Storing customer interests in order to target customers selectively
• Providing mechanisms for managing and scheduling maintenance, repair, and ongoing support

Business Objectives of CRM

CRM applications, often used in combination with data warehousing, E-commerce applications, and
call centers, allow companies to gather and access information about customers' buying histories,
preferences, complaints, and other data so they can better anticipate what customers are looking for.
The other business objectives include:
• Increased efficiency through automation
• The ability to provide faster response to customer inquiries
• Having a deeper knowledge of customer needs
• Generating more marketing or cross-selling opportunities
• Better information for better management
• Reduced cost of sales and increased productivity of Sales Representatives

58
• Receiving customer feedback that leads to new and improved products or services
• Conducting more one-to-one marketing
Essence of a CRM solution
In many companies, sales, marketing and customer service/support organizations work as
decentralized functions. This forces customers to run from pillar to post when trying to meet their
demands, creating a good deal of dissatisfaction. CRM provides a common platform for customer
communication and interaction. The use of CRM applications can lead to improved customer
responsiveness and a comprehensive view of the entire Customer Life Cycle. While CRM
applications provide the framework for executing the best practices in customer-facing activities, ERP
provides the backbone, resources and operational applications to make organizations more efficient in
achieving these goals. CRM also acts as an enabler for e-business by developing web-based
collaborations between the company, its suppliers, partners and customers. It can extend the
traditional channels of interaction such as direct sales force or tele-business to the Web by providing a
framework for managing the interactions and transactions. It also enables the customers to purchase
products or services on-line and receive web-based services and support; with everything personalized
to the individual customer.

CRM Applications
The genesis of CRM is Sales Force Automation (SFA). Current CRM applications are a convergence
of functional components such as sales, marketing, and customer service, advanced technologies &
communication channels. Sales Applications - The thrust of sales applications is automating the
fundamental activities of sales professionals. Common applications include:
• Calendar and scheduling
• Contact and account management
• Compensation
• Opportunity and pipeline management
• Sales forecasting
• Proposal generation and management
• Pricing
• Territory assignment and management
• Expense Reporting

Marketing Applications - Marketing Applications form the newest breed of applications in the CRM
space. These applications complement sales applications and provide certain capabilities unique to
marketing. Common applications include:
• Web-based/traditional marketing campaign planning, execution and analysis
• Collateral generation and marketing materials management
• Prospect list generation and management
• Budgeting and forecasting
• A marketing encyclopedia (a repository of product, pricing and competitive information)
• Lead tracking, distribution and management
Marketing applications primarily aim to empower marketing professionals by providing a
comprehensive framework for the design, execution and evaluation of marketing campaigns and other
marketing related activities. For example, a successful marketing campaign typically generates
qualified sales leads that need to be distributed to sales professionals who need to act upon them.
Marketing and sales automations are therefore complementary.

2. One-to-one Relationship Marketing

It is an approach that concentrates on providing services or products to one customer at a time by
identifying and then meeting their individual needs. It then aims to repeat this many times with each
customer, such that powerful lifelong relationships are forged. As such it differentiates customers
rather than just products

One to One Marketing is more than a sales approach. It's an integrated approach that must
permeate all parts of an organisation: marketing, sales, production, service, finance, etc. In

59
fact, One to One Marketing needs to become the guiding vision that drives the whole
company. One to One Marketing recognises that lifetime values of loyal customers who
make repeat purchases far exceed that of fickle customers who constantly switch suppliers

Personal touch
In 1985, the FMCG giant Nestle had only 20% of the baby food market in France. They regularly
mailed information on childcare to young mothers. Qualified dieticians were employed to help
mothers chalk out a nutrition schedule for their children. By 1992, its share shot up by 40%.

Cementing bonds
Birla Super Shoppes seeks to build relationships by offering free consultancy to cement buyers such
as masons, civil engineers and contractors. Each Super Shoppe has a civil engineer and a taskforce to
assist him. Travelling to the customer’s site to give a demonstration or solve their problem helped
them to build relationships with the customers.

Banking on relationships
ANZ identified a gap between what customers expected (in the form of advisory services and
investment banking) from the bank and the perceived delivery. It is for this crème de la crème, that
the Captain Grindlays Club was formed. The bank pushes the whole customer bank relationship
beyond the ordinary functional spheres of banking, to something more one–to–one and exclusive.

How to use your customer database

For Customers
• Send timely reminders of needed services: doctor's/dentist's appointments, oil change/tune up, "your
letterheads/memo pads will be depleted soon. Order now with the attached reply form..."
• Send customers' kids birthday cards, if you can get that on your database.
• Invite customers/prospects to a product demonstration or educational seminar.
(Free to customers, small fee for prospects.)
• Using careful segmentation, send:
_ Information about price changes
_ Information about product changes
_ Product samples to customers.
_ Newsletter (especially as part of a Frequent Buyer program).

For Business-To-Business
• Case studies of successful implementation of your product. IT companies include case studies of
solutions developed for their clients in their sales brochures.
• Send press releases on new product announcements to customer/prospect segments.
Include information for requesting product brochures.
• Reprints of your ad campaign with note. (In case you missed our ads when they ran
in ...xyz...and ...abc..., we're sure you'd want to see them.)
• Contests (customers only). Integrate with sales incentive contest for sales.
• Send them a copy of the annual report.
Conclusion:
If a firm is to implement relationship marketing, it has to understand the objective and nature of such
a strategy. In the competitive situation that is emerging in almost all industries and markets, a
relationship marketing strategy is crucial for survival.

Benefits of One-to-One Marketing

• Higher Profits
• One to One Marketing delivers economies of scope. Not economies of scale.
• It initially concentrates on those 20% or even 10% of customers who are your most profitable.

60
• By providing tailored products to meet particular needs, you make comparative shopping difficult
and you shift the focus from price to benefits.
• It aims for lifetime share of customer, not a share in an often static and crowded market.
• By developing Mass Customisation capabilities, you can then extend the service to more customers.
You then gain an ever increasing market share without the need to match the lowest price mass
market supplier.
• Lower Costs
• The cost of keeping profitable customers far outweighs the acquisition cost of new customers.
• With an intimate knowledge of individual customers, products and services can be more accurately
targeted (right specification at the right time in the right way).

3. Cross and Up Selling

Cross selling and up selling are two of the best ways to develop your customer base and increase your
average customer value. Cross selling is the strategy of selling your customers a wider range of your
products and services. This can be done by identifying which products to target at which consumers
based on their past purchases and behavior. E.g. if they have a bank account would you try to sell
them a mortgage, a pension or an ISA? To understand what products your customer may be in the
market for you need to understand more about them. If they are older they may not be interested in a
mortgage or a pension but they may be interested in savings products. To do this you need to
understand:
• Demographics such as age, income, family composition
• Product history
• Responses to previous campaigns/offers
All this information can then be combined to build a propensity model for your different products to
be used in campaign selections.

4. Customer Retention, Behaviour Prediction,

Customer Retention
Customer Retention marketing is a tactically-driven approach based on customer behavior. It's the
core activity going on behind the scenes in Relationship Marketing, Loyalty Marketing, Database
Marketing, Permission Marketing, and so forth. Here’s the basic philosophy of a retention-oriented
marketer:

A. Past and Current customer behavior is the best predictor of Future customer behavior. Think
about it. In general, it is more often true than not true, and when it comes to action-oriented activities
like making purchases and visiting web sites, the concept really shines through.

B. Active customers are happy (retained) customers; and they like to "win." They like to feel
they are in control and smart about choices they make, and they like to feel good about their behavior.
Marketers take advantage of this by offering promotions of various kinds to get consumers to engage
in a behavior and feel good about doing it. These promotions range from discounts and sweepstakes to
loyalty programs and higher concept approaches such as thank-you notes and birthday cards.
Promotions encourage behavior. If you want your customers to do something, you have to do
something for them, and if it’s something that makes them feel good (like they are winning the
consumer game) then they’re more likely to do it. Retaining customers means keeping them active
with you. If you don't, they will slip away and eventually no longer be customers. Promotions
encourage this interaction of customers with your company, even if you are just sending out a
newsletter or birthday card. The truth is, almost all customers will leave you eventually. The trick is to
keep them active and happy as long as possible, and to make money doing it.

C. Retention marketing is all about: Action – Reaction – Feedback – Repeat.

Marketing is a conversation, Marketing with customer data is a highly evolved and valuable
conversation, but it has to be back and forth between the marketer and the customer, and you have to

61
LISTEN to what the customer is saying to you. For example, let's say you look at some average
customer behavior. You look at every customer who has made at least purchases, and you calculate
the number of days between the first and second purchases. This number is called "latency" - the
number of days between two customer events.

Perhaps you find it to be 30 days. Now, look at your One-Time buyers. If a customer has not made a
second purchase by 30 days after the first purchase, the customer is not acting like an "average" multi-
purchase customer. The customer data is telling you something is wrong, and you should react to it
with a promotion. This is an example of the data speaking for the customer; you have to learn how to
listen.

D. Retention Marketing requires allocating marketing resources. You have to realize some
marketing activities and customers will generate higher profits than others. You can keep your budget
flat or shrink it while increasing sales and profits if you continuously allocate more of the budget to
highly profitable activities and away from lower profit activities. This doesn't mean you should”get
rid" of some customers or treat them poorly. It means when you have a choice, as you frequently do
in marketing, instead of spending the same amount of money on every customer, you spend more on
some and less on others. It takes money to make money. Unless you get a huge increase in your
budget, where will the money come from?

If you always migrate and reallocate marketing costs towards higher ROI efforts, profits will grow
even as the marketing budget stays flat. You have to develop a way to allocate resources to the most
profitable promotions, deliver them to the right customer at the right time, and not waste time and
money on unprofitable promotions and customers. This is accomplished by using the data customers
create through their interactions with you to build simple models or rules to follow.

5. Customer Profitability & Value Modeling,

Firms have been interested in customer profitability for many years. However, about seven to ten
years ago, customer profitability as a measurable component of marketing really started to evolve for
three main reasons. First, we now have the technology that enables us to store millions of data points.
Second, in the last ten years the sophistication in analytics and modeling has increased many folds.
These models allow us to turn customer data into knowledge. The third catalyst is the push for
marketing to be more accountable. The emphasis on marketing metrics has greatly increased. More
and more managers are asking themselves, how do we know we're getting a return on our marketing
expenditure? Before these three changes, businesses paid attention to profitability – just not on a
customer-by customer basis. The attention and analysis was focused on either product-level
profitability or on broad customer segments. Now, because of increased data storage and analytical
and modeling capabilities, we can drill down to customer level detail. And because of the need
for marketing to be more accountable, we know we need to. Early on, CRM programs simply
collected data at the customer level. There is a huge difference between that and converting CRM-
based data into customer profitability.

6. Channel Optimization
Placing the power of predictive analytics right into the hands of marketers, Channel optimisation is an
application for campaign optimization and execution. Channel optimisation uses advanced techniques
to increase the profitability of campaigns. The application helps marketers determine to whom to send
offers, which offers to send, when to send them and which channels to use. The objective is to
enhance customer targeting across multiple campaigns. Unlike traditional marketing campaign
approaches, which focus on choosing the best customers for each campaign, Channel optimisation
optimizes across the entire set of campaigns, and selects the best one for each customer. This
customer focused approach can result in 25 to 50 percent increases in campaign revenue. Predictive
analytics carries a significant potential for mainstream business processes, such as marketing and
sales. The most important factor that will determine the success of predictive analytics is the ability

62
for business users to deploy these analytics in their day-to-day activities and incorporate the results
directly into the actions they are taking. Companies can use multiple direct channels -- direct mail,
call center and the Web – to market its products.

Cross-Campaign Optimization - Combining predictive analytics and advanced business logic,

Channel optimisation enables marketers to anticipate how individual customers will respond to
specific campaigns and channels, and calculates which campaigns will provide the greatest revenue.
During campaign creation, users can perform what-if analyses by adding business rules, such as
specific sales targets or budget restrictions, to immediately see the impact on campaign expenses and
revenues.

Cross-Channel Optimization
Channel optimisation generates campaigns for all outbound channels, such as direct mail, email and
the call center, using predictive analytics to select the best channel for each customer, from both a
customer and cost point of view. The application will automatically select backup channels when the
capacity of a channel is exceeded, to ensure completion of the campaign. Enforcement of Customer
Contact Restrictions enforces internal contact restrictions and interaction policies such as “do-not-
call” lists, ensuring that customers are not over contacted or contacted through restricted channels.
These restrictions are enforced across all campaigns and channels.

Event-Driven Campaigns - The application monitors individual customer behavior to identify

changes or “events” that indicate an unmet need or potential loss of value, and then selects the best
campaign for each particular situation. As a result, customers receive timely offers that address their
actual needs.

Seamless Integration - As a complement to an existing campaign management system, it will enable

marketers to improve their campaign results. While the application can support every step of the
campaign management process, it will seamlessly integrate with existing campaign management
systems and processes, as well as existing marketing databases or data warehouses. Marketers have
often had to rely on a hit-or-miss approach to campaign management, meaning offers are often
targeted too broadly, while the manual approach to customer selection makes executing multiple
campaigns complex, time-consuming and hard to get right. Channel optimisation adds an automated
precision to customer contact that improves individual campaign effectiveness and scales to large
customer bases and complex, multi campaign operations. The application allows marketers to
leverage their business knowledge and expertise, but it takes the guesswork and risk out of marketing
campaigns, enabling greater efficiency, effectiveness and profitability.

8. CRM and Customer Service

Customer service is the provision of labour and other resources, for the purpose of increasing the
value that buyers receive from their purchases and from the processes leading up to the purchase.
With the rising dominance of the service sector in the global economy, customer service has grown in
importance, as its impact on individuals, households, firms, and societies has become widespread. As
a database marketer, you understand that some customers present much greater profit potential than
others. But, how will you find those high-potential customers in a database that contains hundreds of
data items for each of millions of customers? 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. 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. A shift in this balance began in the 1970s, as international competition increased, and the
dominance of western manufacturers was challenged, first by Japan, then by Korea, China and other
developing economies. Producers responded by improving the quality of their products and services.
The economic boom of the 1990s again increased the power of suppliers who, while not completely
reverting to lower standards of service, were able to be more selective of which customers to serve,

63
and of what levels of service to provide. The overall quality of customer service - in society and in
specific industries - will continue to be determined by the relative balance of power between suppliers
and consumers; it will improve as competition becomes more intense, and decline as competition
decreases.

Strategic advantage
A company can outperform rivals only if it can establish a difference that it can preserve.Customer
service can be such a difference. It is very difficult to control, and therefore difficult to imitate. It is
difficult to control because of its variability. The level of service may vary greatly between two
providers in the same organization. It may also vary from one moment to another, even as delivered
by the same provider.

Culture
For an organization’s members to deliver superior service consistently, they must be acculturated, i.e.
instilled with the values, traits, patterns, and behaviors associated with a service culture. The
mechanisms of this acculturation include recruitment, training, empowerment, and accountability,
within the framework of an organization’s ideology of service.

Service Ideology
An organization’s ideology comprises its purpose (Why are we here?) and values (What do we stand
for?). Organizations renowned for providing excellent customer service have typically defined their
purpose in terms of service – to serve their customers, and to serve their members. Their values
typically include integrity, trustworthiness, reliability, personal responsibility, industriousness,
continuous improvement, respect, and consistency.

Recruitment
The challenge of recruiting and retaining qualified customer service focused employees becomes
painfully apparent when one is presented with a (not so uncommon) case in which a large company
situates itself within a small rural area. This has been a tradeoff some companies have made in order
to save a few dollars on real estate costs. The difficulty comes when employees are discharged during
seasonal down cycles and the same talent is desired three or four months later. This model is not ideal
and is risky, thus companies find themselves utilizing talent oveseas needs longer term.

Training & Empowerment

Training is focused on enabling personnel to deliver service in manner that is beneficial to both the
organisation’s customers, and to itself.

Accountability
Whereas outstanding service organisations allow their people to make mistakes and learn from their
failures, there is little or no tolerance for violations of its core service values. People who do not fit
into the culture are removed.

What customers want

Delivering customer service begins with understanding what customers want. And this understanding
begins with the understanding that they do not always know what they want, or why they want it.
Traditional market research assumes that they do. Newer methods recognize that as much as 95% of
our decision making is subconscious. Common research methods (e.g. surveys and focus groups)
more often reveal what customers think their motivations are, rather than what their motivations truly
are. When respondents do not comprehend their true motivations, they tend to state how they think
they ought to be motivated.

Recent progress in neuroscience and in observational technologies have yielded more reliable, less
biased, results. Companies have Interaction Designers that use User Centred Design methods, among
others, to understand what customers need. They often use Personas to represent the research
outcomes, i.e., to describe the customer they are designing for. Regardless of how they arrived at their

64
findings, most researchers agree on the factors listed in this table to the right. Suppliers that meet
these requirements are likely to give their customers a satisfactory experience. In a competitive
environment, however, satisfaction may not be enough. To stay in business, firms must be at least as
satisfactory as their competitors. Moreover, firms that aim to gain profitable growth must increase the
number of their customers, while reducing the cost of customer acquisition. This is particularly true of
companies that compete in mature industries. The objective then is not merely to satisfy customers,
but to convert them into promoters (customers who recommend a company to others). Promoters
serve to increase a firm’s clientele, without increasing its cost of acquisition – i.e. with no additional
marketing or promotional expense. But customers do not make recommendations lightly. When they
make a recommendation, they put their own reputations on the line. Firms must earn that
recommendation through the consistent delivery of outstanding customer service

Good People
• Friendly, helpful, courteous
• Empathetic
• Knowledgeable, accurate, thorough
• Resourceful, empowered
• Able to recommend solutions
• Able to anticipate needs
• Efficient
• Trustworthy, authentic
• Reliable
• Responsible
• Appropriate appearance and demeanor
Good Offering
• Good selection
• Good quality
• In stock
• Available demos
• Clear descriptions & pricing
• Competitive prices
• Financing, deferred payments
Convenience
• Convenient locations
• Long hours
• Available help, fast service
78
• Signage that facilitates self-service
• Fast checkout
• Shipping/delivery
• Installation
• Phone/web support
• On-site repair
• Hassle-free returns
• Quick resolution of problems
Good Environment
• Clean
• Organized
• Safe
• Low-pressure
• Energy level appropriate to clientele
Benefits of customer service Providers
• Higher income (more sales, repeat business, referred business)
• Recognition
• Personal satisfaction & fulfillment

65
• Less stress
• Higher self-awareness and self-control
• Greater authenticity
• Happier life at work
• Stronger social networks, family ties
• Happier life outside work
• Organizations
• Quality sales (more add-ons, more service sales)
• More repeat business
79
• More referred business
• Fewer returns
• Better reputation
• Higher morale, happier employees
• Lower employee turnover
• Higher caliber of job applicants
• Fewer complaints
• Higher productivity
• Better work environment
• Higher inventory turnover
• Higher profits
Society
• Higher income from individuals and firms.
• Higher productivity
• Stronger families and social networks
• Greater civility
Customer Complaints
Complaints are often treated as a nuisance. Indeed, many organisations are so determined to avoid
them that they exclude any means by which customers can make complaints! Yet they have
considerable value for a number of reasons: Although there will always be a small proportion of
'frivolous complaints', a complaint usually highlights something which has gone wrong with a part of
the overall marketing operation; usually the high quality, which should be a fundamental requirement
for most organisation, has not been achieved. Whatever the reason, the sensible marketer will want to
know exactly what has gone wrong - so that remedial actions may be taken. The strength of good
organisations is that its interactive nature enables the necessary conversations with the complainant to
take place easily, and in good time, and the flexible nature of the 'product' allows for remedies to be
quickly applied. The way a complaint is handled is often seen by customers, and their

Satisfaction Surveys
It is essential that an organisation monitors the satisfaction level of its customers. This may be, all else
failing, at the global level; as measured by market research. Preferably, though, it should be at the
level of the individuals or groups - especially where this is easy to achieve in the case of e-commerce,
by simply asking customers, after they have used the service, how satisfied they are. IBM, at the peak
of its success, every year conducted a survey of all its direct customers. The results were not just
analysed to produce overall satisfaction indices, though that was done (and senior management
viewed any deterioration with alarm), but they were also provided to field management so that they
could rectify any individual problem situations - where the customer was dissatisfied with any aspect
of the IBM service and the IBM representative (presumably in 97% of the occasions if the above
results - of the numbers who do not complain - hold true in this field) did not realise this to be the
case! Much the same can be done with individual e-commerce customers - something which is much
more difficult in conventional marketing.

9. The Call Centre,

66
Customer satisfaction and loyalty have become key objectives for organizations as they recognize that
long-term customers cost less to service and are more likely to spend more with the organization. The
call center is the place where many of these objectives are carried out — one contact at a time.
Customers are more and more important. We can observe a transition from increasing market share to
increasing “customer share”. Every new technology makes it easier for customers to change the
suppliers. Hence, competition amongst suppliers increases. They are forced to exploit new ideas and
solutions to gain customers. The call centre is a centralized office used for the purpose of receiving
and transmitting a large volume of requests by telephone. A call centre is operated by a company to
administer incoming product support or information inquiries from consumers. Outgoing calls for
telemarketing, clientele, and debt collection are also made.

Medical tourism (4L)

 Concept
 Scope of India as Medical Travel Destination
 International Accreditation.

Medical tourism can be defined as the process of traveling outside the country of residence for the
purpose of receiving medical care. Growth in the popularity of medical tourism has captured the
attention of policy-makers, researchers and the media. Originally, the term referred to the travel of
patients from less-developed countries to developed nations in pursuit of the treatments not available
in their homeland.
Today we are experiencing both qualitative and quantitative shifts in patient mobility, as people travel
from richer to less-developed countries in order to access health services. Such shift is mostly driven
by the relative low-cost of treatments in less developed nations, the availability of inexpensive flights
and increased marketing and online consumer information about the availability of medical services.
What really puts the word "tourism" in medical tourism concept is that people often stay in the foreign
country after the medical procedure. Travelers can thus take advantage of their visit by sightseeing,
taking day trips or participating in any other traditional tourism activities.
Cost
Medical tourism represents a worldwide, multibillion-dollar phenomenon that is expected to grow
considerably in the next decade. For the individual interested in health services, cost is the key factor
involved in the decision to receive medical care abroad.
As healthcare costs in the US and other parts of the world are excessively soaring, many employers
and insurance companies started to view medical tourism as a way to lower them. More and more
countries around the globe start to see the financial benefits from this emerging market, so they offer
premium medical services at notably lower prices.
The primary reason that clinics and hospitals in the developing countries are able to lower their prices
is directly related to the nation's economic status. The direct correlation with per capita gross domestic
product of the country is observed, which is a proxy for income levels. As a consequence, surgery
prices are from 30% to 70% lower in the countries that are promoting medical tourism when
compared to the US.
Quality
There are two major components of the service quality in the health care sector - technical or
mechanical quality and serviceable or functional quality. Technical equipment is at the core of the
patients' diagnostic algorithm, while the functional quality is measured by the service offered in the
healthcare centers (such as the services of staffs, nurses and, most importantly, the doctors towards
the patient and their assistants). The service quality in medical tourism industry is a vital part in
attracting customers.
One of the fundamental barriers in accepting medical tourism is the perception of inadequate quality.
A key to overcome it is using adequate marketing strategies and quality assessment via accreditation

67
from an internationally recognized institution. Such accreditation is pivotal for strengthening
confidence in the quality of healthcare.
This confidence can be even stronger if accreditation is followed by an affiliation with reputable
hospitals or health care systems in industrialized countries. Once healthcare providers are accredited
and become a part of international referral networks, they can be appropriately rated for risks.
Treatment types
Categories of different treatments and their availability also represent an important factor in decision
to engage in medical tourism. The most common types of procedures that patients pursue during
medical tourism trips are elective cosmetic surgery, dentistry, organ transplantation, cardiac surgery
and orthopedic surgery.
However, a wide variety of services can be obtained through medical tourism, ranging from various
essential treatments to different kinds of traditional and alternative treatments. Reproductive tourism
and reproductive outsourcing are growing in popularity, which is the practice of traveling abroad to
engage in surrogate pregnancy,in vitro fertilization and other assisted reproductive technology
methods.
In addition to cost, other major factor responsible for the increase of medical tourism is access. The
lack of it, either due to the unavailability of the technology or the prohibition in the home country, can
subsequently lead to medical tourism. The common examples are cytoplasmic transfer or stem cell
therapy.
Medical Tourism History
The practice of travelling for health and medical reasons has a long history. Even the ancient
civilizations recognized the therapeutic effects of mineral thermal springs and sacred temple baths.
For example, the Sumerians constructed health complexes around hot springs more than four
thousand years ago, which included temples with flowing pools.
Ancient Romans built resorts with thermal health spas, and therapeutic temples thrived during the
Greek domain. Ancient Greeks were known for their travels to the sanctuary of the healing god,
Asklepios, believed to reveal remedies for different ailments in the dreams. This sanctuary was in fact
a small territory in the Saronic Gulf named Epidauria – today considered as the birthplace of medical
tourism as we know it.
Europe
It was the Europeans in the sixteenth and seventeenth century that are responsible for the development
of a modern pleasure resort concept. Seaside resorts in the United Kingdom (such as Blackpool or
Margate) were built due to the belief of the British elite that there are real curative powers in sea
waters and sea air. Very quickly England saw a boom of different spa towns and sanatoriums
accommodating those who could afford to make the trip.
Spas and mineral water were used to cure illnesses such as various skin infections, poor digestion and
rheumatism. In mainland Europe, Switzerland offered a plethora of towns grown up around mineral
springs (St. Moritz, Lausanne, Interlaken and Baden). People also flocked to Austria (Vienna),
Hungary (Budapest) and Germany (Baden-Baden and Wiesbaden).
The formation of the railways increased the flow of people to more remote coastal and seaside resorts,
providing in turn a unique and escapist environment from urbanization, as well as the opportunity to
practice what was viewed as a healthy pleasure of sun-seeking.
North America
The discovery of the New World revealed new destinations for medical travelers from Europe. Dutch
and English colonists assembled log cabins alongside mineral springs in the 1600s. During this
period, Native Americans in the New World were notably adept in the healing arts.
In the United States and Canada, mineral springs were used for the development of spa tourism,
around which the first national parks have been established. The physical morphology of springs can
result in distinctive natural landscapes that also helped draw visitors from all corners of the world
(e.g. Yellowstone National Park in Wyoming, USA).
In the nineteenth century, wealthy tuberculosis sufferers from Europe often travelled to (and lived) in
south-west United States, seeking different climate conditions in order to improve their health. That

68
 kind of behavior arguably predates modern-day lifestyle retirement and second home migration for
similar reasons of extending quality of life.
However, traveling with the intention of receiving treatments, such as cosmetic surgery, dental care
and other complex procedures is a relatively new phenomenon, having begun only several decades
ago throughout the world.
Asia
Asia has a history of medical tourism as well. Japan’s affluence of natural mineral springs (also
known as onsen) has represented a favorite health retreat for centuries, and they are also a central
feature of Japanese tourism today. These springs are known to have healing powers derived from its
mineral content. Different warrior clans also took notice of these springs and used them to heal
wounds, alleviate pain and recuperate from their battles.
Yoga and Ayurvedic medicine grew in popularity five thousand years ago in India, wherein constant
streams of medical travelers and spiritual students flocked to pursue the benefits of these alternative-
healing methods. India procured reputation as the center of Eastern spiritual, cultural and medicinal
progress when Buddhism came along 2500 years later. Today it is one of the most popular
destinations for medical tourists.

Importance of Medical Tourism

With the advent of globalisation, the world has shrunk into a global village. Countries now appear
closer than they have ever been. The concept of ‘medical tourism’ was devised to help global citizens
enjoy their tourist sojourns while under cost-effective, world-class quality medical care. Over the last
decade, India has emerged as the preferred destination for medical (healthcare) tourism, capitalising
on its strengths of “lower cost skilled personnel, cultural factors, natural endowments and unique
forms of medicine.”
Some of the main factors contributing to the growth of Medical Tourism include :

 Higher Costs
 Long Waiting Lists
 Medical Insurance Policies In Some Developed Countries
 Stringent Visa Regulations Which Makes Treatment In Some Countries More Difficult
 Strain On Healthcare Infrastructure

We also realise that providing superlative medical care is essential. However, providing such medical
care is rarely possible without a sound understanding of the different cultural backgrounds of medical
tourists. Non-verbal communication, which is influenced by culture, is also an important part of
diagnosis. Further, a good cultural understanding can help in speedy patient recovery. We firmly
believe that a satisfied patient is the best source of referral to the hospital.
Medical tourism is a provision of `cost effective` private medical care in collaboration with the
tourism industry for patients needing surgical or other forms of specialized treatment.
Medical or health tourism has become a common form of vacationing, and covers a broad spectrum of
medical services. It mixes leisure, fun and relaxation together with wellness and healthcare
Medical tourism in India is one the best options available to people across the globe. Millions come
every year to get treated and then enjoy their recuperative holidays across India. People from different
walks of life cut across the entire span of the globe come to India to have their treatments done with
peace of mind.
Prince Aly Khan Hospital provides world class medical facilities with expertise in the areas of Dental
care, Heart Surgeries, Coronary Bypass , Health Check up, Valve Replacements, Eye Surgeries, KTP
Laser treatment, Renal transplant etc.
Key Features Of Medical Tourism At Prince Aly Khan Hospital :

 Top Quality Healthcare Services At Low Cost

 Expert Team Of Professional Doctors
 High End Medical & Health Care Facilities

69
 Personalized Care

Services That We Provide For International Patients :

 We Take Care Of All Your Transportation From The Air Port, Accommodation And The
Travel Needs.
 Consultations With The Specialist Doctors.
 Health Checkups.
 Post Surgical Care Till Discharge From The Hospital.
 Cars For Transport.
 Luxury Rooms , Budget Guest Houses.
 Separate Accommodation For Attendants Or Accompanying Family Members.
 Cashless Facilities For Insured Patients.

The Current Tie-Ups :

Corporate

 Aden Refinery Company - Yemen

 Jamati Medical Programme-Nairobi, East Africa
 New Medical Centre-Dubai
 Oman Consulate-Oman
 Mediplus-Dubai

Medical Tourism Company :

 Aarex India
 Amazon Health And Medical Tourism

Insurance Companies :

 Bupa International
 Aar Healthcare
 Jubilee Insurance

India today has copious opportunities to compete with developed nations and build a quality
healthcare system of its own. This paper accentuates the prospects of medical tourism as a ”cost-
effective” means of private medical care for patients needing surgical and other forms of specialized
treatment. This escalation is facilitated by the corporate and hospitality sectors involved in medical
care. There is also an unvarying effort taken up by corporate hospitals to support medical tourism to
its fullest. Patrons across India look forward to high-end medical facilities with value-added or
coordinated services. These coordinated services are offered by the hospitality sector to diversify
tourism products, from general travel and tourism, and ensure quality and enhance customer
satisfaction in South India. Hence, the paper attempts to understand the role and contribution of
medical tourism toward building the Indian economy.

1. Introduction

Travel is a global phenomenon. In the past few years, the travel and tourism industry has been taken
by storm due to its vulnerable nature. Addressing its mounting challenges, the travel industry remains
a vital economic sector with significant potential for global growth and development, particularly

70
within emerging countries (Woodman, J., 2007). The demands and expectations of travelers who are
endlessly in search of different experiences, adventures and lifestyles which pave the way for various
concepts that define paradigms in the tourism arena are constantly in flux. Attention is given to new
frontiers for meeting the demands. India has been offering varied niches to its tourists and, to a large
extent, shares a comparatively competitive edge. This emerging sector offers an array of travel
services, benchmarking India at a global level through products including adventure, wildlife,
historical monuments, culture and heritage, nature and pilgrimage. Medical tourism is a promising
concept and a growing phenomenon meeting the need of the hour (Theobald, F.,T., 1998). India, to a
large extent, has also been branded for its wellness and surgical competency. Medical patrons across
India look forward to high-end medical facilities with value-added or coordinated services.

“Medical patrons across India look forward to high-end medical facilities with value-added or
coordinated services.”

Coordinated services are offered by the hospitality sector to diversify tourism products from the
general travel and tourism arena. Coordinated services can also be termed as an all-inclusive package
offered by travel facilitators to the medical tourist who wants transportation, transfers, medical
treatment, holidaying, leisure and all allied services (Gan, Lydia, James & Frederick, R., 2011).
Medical tourism is backed by corporate hospitals offering high-end medical services and an effective
healthcare network with the hospitality sector. Private hospitals have gone one step ahead in
commercializing their services through high-end sophistication in the international market. Medical
tourism is a rapidly budding sector in the global market, which is now actively developed by both
public and private tourism sectors and healthcare organizations. Increased foreign arrivals in India
have compelled stakeholders to consider tourism at a much higher level. The following graph reflects
foreign arrivals in India before 2010.

2. Review of Literature

Existing medical tourism promises tremendous growth and synergy for taking the healthcare segment
global while making it easily accessible. The literature reflects upon various aspects and areas of

71
medical tourism. This imminent arena covers the prospects of medical tourism, emerging trends and
the future of upcoming healthcare hubs.

Bookman & Bookman, in their book, discussed western patients who are increasingly traveling to
developing countries for healthcare where they are offered the best skills and facilities that cater to
their needs. This international trade of medical services has huge economic potential for developing
countries and serious implications for healthcare across the globe. It is successful only in countries
with economic and political advantages that enable them to navigate around international and
domestic obstacles to trade in medical services.

Brotman, Billie, Ann (2010), examines factors demanding sophisticated medical treatments offered by
private hospitals operating in India. The article classifies three types of medical tourism: Outbound,
Inbound and Intra bound. Increased profitability and positive growth trends by private hospital chains
can be attributed to rising domestic income levels within India.

Cooperman, S. (2007), builds upon the search for quality healthcare at discounted prices in foreign
hospitals which offer proficient services and state-of-the-art facilities including complete luxury
suites, on-call concierges and personal chauffeurs. Today, India, Thailand, Singapore and Hong Kong
are popular medical travel destinations. For negotiating in the world of discount medical care, an
entire industry of middlemen has emerged. Though the options are seemingly endless, buyers ought to
beware.

Melani, G., focuses on medical tourism growth in Colorado. The author claims that healthcare
providers are expanding on medical tourism by attracting more patients to the state. Medical tourism
also helps employers reduce medical expenses while offering employees a wider range of treatment.

Carlson, G., and Greeley, H., highlight issues in macro-environment that affect historic relationships
that have existed between hospitals and their medical staffs. Rising costs, deteriorating relationships,
unexplained variations in clinical outcomes, transparency in healthcare outcomes, medical tourism,
competition between hospitals and physicians, and reluctance by facilities and physicians to change
are among the issues challenging the sustainability of the current business model. This article
highlights barriers to maintaining traditional relationships and concludes with strategies to preserve
and strengthen them between physicians and hospitals.

Horowitz, Michael, D., and Rosensweig, Jeffrey, A., accentuate on tourist travel outside their country
for surgical reasons. A changing scenario was found in medical tourism that involved the traditional
form of international healthcare where patients typically voyage from less-developed nations to highly
developed countries for advanced medical treatment. The most sought-out destinations for Medicare
today are developing nations, offering advanced medical treatments. There are potentially two
categories: working class adults who require elective surgery, but have no health insurance and
patients who want procedures not covered by insurance, such as cosmetic surgery, dental
reconstruction, gender reassignment operations, or fertility treatment. Also, most importantly, a
faraway country provides privacy and confidentiality for patients undergoing plastic surgery or sex-
change procedures.

“…Medical tourism represents a major challenge for healthcare delivery in the United States
and offers an opportunity to integrate and improve the system globally.”

72
Nakra, Prema, discusses the significance of medical tourism in the western healthcare delivery
system. Medical tourism represents a major challenge for healthcare delivery in the United States and
offers an opportunity to integrate and improve the system globally. Highlighting impacts of healthcare
and education reconciliation serve U.S. healthcare providers with an estimation of the potential effects
of increased coverage, operational capacity and procedures for handling the millions of people
seeking medical care. It finds that recruiting foreign-born physicians and nursing staff to the United
States will be more challenging as medical tourism grows.
Sack, C., Scherag, A., Lütkes, P., Günther, W., Jöckel, K., H., and Holtmann, G. (2011), reveal that
countries where hospitals are undergoing mandatory or voluntary accreditation are more acceptable
because formal licensing influences quality of care and patient satisfaction. The article states the
relationship between patient satisfaction and accreditation status.
Cooperman, Stephanie, addresses the search for quality healthcare at discounted prices in foreign
hospitals which offer proficient services in state-of-the-art facilities with complete luxury suites, on-
call concierges and personal chauffeurs.
Today, India, Thailand, Singapore and Hong Kong are popular medical travel destinations.
Oswald, S., and Clewett, J., comment on key policy recommendations and operational implications
for stakeholders involved in delivering health services in fragile states and difficult environments.
Their paper highlights several key principles for policymakers and implementers to improve the
delivery of health services. Develop accountability mechanisms and to facilitate an appropriate mix of
aid modalities; thereby, focusing on health systems as a whole.
3. Concept of the Study
Healthcare is a booming component of the Indian economy. Increasing health awareness coupled with
a rise in the standard of living has led to increases in demand for quality healthcare services. Thus,
research focuses on the prospects of the hospitality sector considering four prominent cities of South
India and, thereby, increasing the visibility of India on the global map as a medical tourism hub.
4. Need of the Study
India offers world-class healthcare that costs substantially less than that in developed countries, using
the same technology delivered by competent specialists attaining similar success rates. Indian
hospitals do not face problems with technical skills because they are acquired through education and
training, but difficulty lies in leveraging the soft skills of employees. Soft skills are one of the
underlying principles that trademark a hospital for professionalism and excellent customer service.
There is also a need to identify the role of various stakeholders in promoting healthcare and building
the Indian economy. Further, the necessity is toward creation of an effective environment and
network; thereby, building professional competency through healthcare managers. Considering all
these factors is imperative to undertaking the present study of various independent variables
impacting the growth of medical tourism in South India.
5. Research Methodology
Research includes two broad segments of data collection. The primary data was gathered through
structured questionnaires and interviews from the service provider and medical tourist. Secondary
data was gathered from research centers, universities, management institutes, books, journals,
magazines, travel guides, travelogues and monographs.

6. Objectives
Research was conducted with the following objectives:
 To establish the relationship between quality and standardization norms and the demand for
medical tourism in South India.
 To recognize the balance between quality of assured and coordinated services allied with the
hospitality sector.

7. Hypotheses
The following study reveals consequent hypotheses, which were tested respectively.
 H1 Significant role upon quality and standardization norms and demand for medical tourism.
 H1 Significant relationship between coordinated service and the images portrayed in the
international market.

73
8. Sampling Technique
Non-probability samplings are techniques — namely judgmental – that select items deliberately; since
the choice concerning the items remains supreme.
9. Sample Distribution

10. Testing of Hypotheses

H1 significant role upon quality and standardization norms and demand for medical tourism.

Interpretation
Analysis represents no difference in the importance of various parameters of quality assurance among
medical tourism destinations. The above analysis projects the p-value, which is more than 5 percent
and, hence, there are no significant differences in the factors for quality assurance among locations,
and the null Hypotheses are accepted.
H1 Significant relationship between coordinated service and the brand image portrayed in the
international market.

74
Interpretation

Analysis corresponds to significant differences in the perception of poor networks affecting the
accessibility of coordinated services among locations; hence, the null Hypotheses could be rejected.
There were no significant differences in the perception of other factors affecting the accessibility of
coordinated services among locations and, hence, the null Hypotheses are accepted.
The following analysis is carried out after a thorough investigation at popular hospitals in South India
to determine various factors in the healthcare sector.

Reason for South India as a Healthcare Destination

Interpretation

Medical tourists gave equal importance to cost and healthcare advancements, as hospital authorities
reveal. The above analysis shows that 46.7 percent of the sample grade-cost to be a significant factor
and the healthcare advancements are graded as 53.3 percent.

Specialized Treatments Offered

Interpretation

75
The above analysis shows that the most frequent forms of medical treatment were “major surgeries,”
which made up 51.1 percent, followed by “minor surgeries” with 35.5 percent. Also, 13.3 percent
opted for alternative treatments. The “major surgeries” include organ transplants, cardiac surgeries,
and hip/ knee replacement. “Minor surgeries” include dental treatments, cosmetic and scans and
investigations. Alternative treatments were preferred compared to wellness and rejuvenation. The
most popular destination for alternative treatments in South India was Kerala.

Factors Considered for Quality Assurance

Interpretation

The most important factors perceived by hospitals for quality assurance were physicians’ credentials,
followed by global competency and accreditations. Online communities (word-of-mouth) and
affiliations were also moderately important.

Result of Cross Tabulation Test

76
Table 6.43.3 – Table showing Result of Anova Test

Interpretation
There were significant differences in the perception of the importance of affiliations of hospitals for
quality assurance among locations. Affiliations were perceived to be significantly more important for
hospitals in Bangalore and Kerala than in Chennai and Hyderabad. There were no significant
differences in the perception of importance of other factors for quality assurance among locations.
11. Outcomes of the Study
The study foresees certain challenges facing healthcare organizations in South India. An integrated
pedagogy in the management of quality and productivity, and between quality and technology is one
of the crucial challenges for South India. Experts deem that upgrading quality leads to a productivity
increase. Healthcare administrators are frequently misled to spend enormous amounts of money
without any care for continuous improvements.
An additional challenge facing South India is the recent management concerns regarding quality, cost
and competitiveness. It is imperative that a hospital with a poor current status must improve rapidly
for its survival. Hospitals with a superior status must improve in order to preserve their competitive
edge. A hospital, which is average, must improve to prevent its status from regressing to poor and to
make it superior.
Total service and quality control are business management philosophies applied to healthcare
organizations in South India. They are sustained by numerous directorial processes including quality
control teams and policy developments.
Policy development is when management works together to focus resources on achieving customer
satisfaction for patients and other customers (Juran, J.M., and Godfrey, A.B., 1999). Application of
quality control systems is a vital aspect that hospitals in South India cannot disregard.
12. General Findings
 Overall perception of the quality of assured and coordinated services was high and positively
correlated. Further, analysis confirms that the overall perception of the quality of service of
assured services is significantly higher than the overall perception of the quality of coordinated
services.
 Research affirms significant differences in the overall perception of service quality offered
and overall level of satisfaction with associated and coordinated services among locations.
 Importance of different parameters of quality assurance among various medical tourism
destinations reveals that patrons considered a physician’s credentials as the predominant factor in
assuring quality compared with hospital accreditation and affiliations.

77
 The study also confirms the most important factors perceived by hospitals for quality
assurance to be physicians’ credentials, global competency and accreditations.
 Coordinated services including travel assistance, language translators, post-operative care and
insurance assistance are facilitated by the hospitals to differentiate from competitors.
13. Suggestions
Stakeholders and other intermediaries can mull over the following suggestions for building
professional competency and better healthcare management. A new paradigm in the healthcare
segment gives a broader space for government to play the role of facilitator with effective trade
policies to ensure a seamless value chain.
 The policymakers need to focus on Indian healthcare businesses that are receiving medical
tourists from developing countries who travel for proficient procedures with cost and surgical
competency being a prime focus.
 The administrative authorities should undertake capacity building programs to train in the
medical tourism framework.
 South Indian healthcare segments can also focus on alternative forms of treatments like
ayurveda, unani and siddha to tap potential global markets; thereby, creating a niche for itself.
 Homogeneity in medical aspirants and heterogeneity in medical service demands would be
challenging for South India from the healthcare provider’s perspective.
 The private hospitals can network with the international embassies to influence the
government and tap into funded medical tourists by globalizing its healthcare services.
 Exhibitions, trade fairs and associations with international bodies can be a mode to enhance
medical tourism.
 The healthcare segments can thrive efficiently if hospital managers are directly implicated in
promoting services globally, leaving no space for further ambiguity in the minds of medical
aspirants.
14. Scope for Further Research
Medical tourism can be transversely diagnosed to foster its prospects by changing market
expectations. The complexity of international rules and norms influence the medical tourist’s decision
to travel abroad for treatment and can provide perspectives for further research.

78
15. Conclusion Medical tourism has drastically changed through the divergent role played by
stakeholders over the years. Augmented competition has pulled various other stakeholders
into the trade. Principally, policymakers, community and other private participants have
played noteworthy roles in globalizing South Indian healthcare systems. Proficiency in
delivering healthcare services and lesser perplexity in the healthcare network can enhance
the capacity building process. Quality and standard assurance are prime parameters in
benchmarking medical hubs to prosper. The South Indian metros have largely outreached
into developed countries and have benchmarked themselves with amplified goodwill and
globally competitive brand images. Equally challenging is the cultural and regulatory barriers
which can affect significantly the healthcare globalization in Southern India.

International healthcare accreditation

International healthcare accreditation is the process of certifying a level of quality for healthcare
providers and programs across multiple countries. International healthcare accreditation
organizations certify a wide range of healthcare programs such as hospitals, primary care centers,
medical transport, and ambulatory care services.
The oldest international accrediting body is Accreditation Canada, formerly known as the Canadian
Council on Health Services Accreditation, which accredited the Bermuda Hospital Board as soon as
1968. Since then, it has accredited hospitals and health service organizations in ten other countries.
In the United States, the accreditation group Joint Commission International (JCI) was formed in
1994 to provide international clients education and consulting services. Many international hospitals
today see obtaining international accreditation as a way to attract American patients.
Joint Commission International is a relative of the Joint Commission in the United States. Both are
US-style independent private sector not-for-profit organizations that develop nationally and
internationally recognized procedures and standards to help improve patient care and safety. They
work with hospitals to help them meet Joint Commission standards for patient care and then accredit
those hospitals meeting the standards.
The different international healthcare accreditation schemes vary in quality, size, cost, intent and the
skill and intensity of their marketing. They also vary in terms of cost to hospitals and healthcare
institutions making use of them.

79
Increasingly, some hospitals are looking towards dual international accreditation, perhaps having both
JCI to cover potential US clientele, and Accreditation Canada. As a result of competition between
clinics for American medical tourists, there have been initiatives to rank hospitals based on patient-
reported metrics
Other organizations providing contributions to quality practices include:
 The United Kingdom Accreditation Forum (UKAF) is an established network of accreditation
organisations with the intention of sharing experience good practice and new ideas around the
methodology for accreditation programmes, covering issues such as developing healthcare quality
standards, implementation of standards within healthcare organisations, assessment by peer
review and exploration of the peer review techniques to include the recruitment, training,
monitoring and evaluation of peer reviewers and the mechanisms for awards of accredited status
to organisations.

Medical Tourism Accreditation

Excellent health-care facilities exist around the world that can provide services in the domain of
medical tourism. Since it is now easier than ever to cross national borders and receive high-quality
care at international clinics and hospitals, all parties involved must be held to high standards of legal
practice and clinical care. Accreditation is the best way to ensure strict external evaluation.
In general, accreditation represents a voluntary process by which institutions meet standards
established by an external accrediting body. Standardization through accreditation can also be viewed
as a risk reduction and quality optimization strategy. In the context of medical tourism, institutions
encompass various clinics and hospitals, while the accrediting body refers to any organization
recognized by the International Society for Quality (ISQua) in Health-Care-accredited organizations.
Hence ISQua can be viewed as "the accreditor of accreditors", which accredits international
accreditation organizations such as Joint Commission International, Accreditation Canada, Trent
Accreditation Scheme and Malaysian Society for Quality in Health. Their aim is the delivery of safe
and high quality health care, based on standards and processes devised and developed by health care
professionals for health care services.
It is important to note that accreditation should not be based simply on paying a business registration
fee, but instead on meeting (or even exceeding) transparent and well-defined standards of practice.
The majority of health-related international accreditation organizations currently accredit medical
clinics, hospitals and laboratories.
On the other hand, new accreditation standards are also needed for critical assessment of medical
tourism agencies. Although their primary involvement is to arrange travel to other nations, they are
also active in coordinating the provision of health services. Such coordinators, agents or medical
facilitators need recognized training that will enable them to discharge such tasks in a competent
manner.
International accreditation of health-care facilities
When establishing international networks of health-care providers, involved medical tourism parties
should be restricted to arranging health services at clinics and hospitals that have undergone
international accreditation by ISQua in Health-Care-accredited organizations. As growing numbers of
patients cross borders in search of a specific health care, this is becoming increasingly important.
The whole idea behind accreditation and licensing is to offer interested parties a testament of external
quality evaluation against unanimous healthcare standards. In other words, medical tourism patients
are ensured of standardized healthcare practices, regardless of where in the world the facility in
question is located.
Core aspects of patient care are in the focus of the international accreditation standards, and a
fundamental requirement is to establish a protocol for the continuity of care, with appropriate
measures in place for the discharge, referral, follow-up and transfer of patients. The fact that
accreditation standards require the medical facility to identify and evaluate the healthcare needs of the
patient before admission is important.
Clinics and hospitals interested in attracting international patients should undergo an international
accreditation process prior to joining the global health-care networks. Medical tourism companies that
provide care at unaccredited international health-care facilities should have their licenses revoked.

80
Potential problems with accreditation
One of the biggest potential problems with accreditation for the medical tourism parties is the fear that
the commercial aspirations and needs of the accreditation schemes may become ends in themselves.
Many accreditation schemes that operate internationally are indeed private companies and
corporations.
In addition, poorer countries that are usually heavily involved in providing medical tourism services
may not have adequate access to the accreditation process, or engaging in it would lead them to
financial hardship. Accreditation processes often do not tackle ethically contentious areas (i.e. organ
and tissue donation, organ trafficking, surrogate pregnancy, selective gender abortion, use of
unproven therapies and operations).
Accreditation can sometimes also be used as a marketing tool by medical tourism facilitators,
wealthier hospitals or even governments of the provider countries, seeking for their slice of the
lucrative medical-tourism business.

81