Marketing Management

RANDY, Dept. of Commerce, Loyola College, Chennai-34.

Unit 1: Introduction
Marketing:
It is not mere selling & advertising. Marketing is managing profitable customer relationships. Twofold goal of marketing is a) to attract new customers & b)to keep growing current customers. Ex: Wal-Mart Always low prices. Always!
Dell Be direct (Customers designing computers)

Definitions
The process by which companies value for customers and build strong customer relationships in order to capture value from customers in return Philip Kotler The management process which identifies, anticipates and supplies customer requirements efficiently and profitably
Charted Institute of Marketing

The Marketing Process

Understanding the market place & customer needs & wants

Design a customerdriven marketing strategy

Construct an integrated marketing program that delivers superior value

Build profitable relationships & create customer delight

Capture value from customers

Understanding the Marketplace & Customer Needs

Customer Needs, Wants & Demands:
Need: States of felt deprivation Want: A need shaped by the culture & personality Demand: A want backed by buying power

Market Offerings: Products, Services & Experiences

Marketer needs to come out with apt products that caters to the need/want of the customers.

Contd
The marketer should not pay more attention to the specific products than the benefits and experiences produced to the customers. When the marketers fail to do so, they suffer from Marketing Myopia( Shortsightedness).
Ex: Drill Machine. The marketer thinks only about the product, price, place & promotion. Whereas the customer looks at the product form solution(hole), Cost, Convenience & Communication.

Designing a Customer Driven Marketing Strategy

A marketer needs to answer two questions:
What customers will we serve?/ whats our target market? How can we serve these customers best?

The solution is to
Segment the entire market Target a particular market Position the message in minds of target group

Contd

Contd
Dividing a market into distinct groups with distinct needs, characteristics, or behavior who might require separate products or marketing mixes. Markets are comprised of buyers and they differ in wants, resources, locations and buying patterns. Market segmentation is the process that marketers use to divide up the market into smaller segments that can be efficiently addressed.

Contd

Contd
There is no single way of segmenting a market. Different market segmentation variables to develop the most effective segmentation method. Major variables used are geographic, demographic, psychographic and behavioural.

Customer Driven Marketing Strategies

The Production Concept
The idea that consumers will favour products that are available and highly affordable and that the organisation should therefore focus on improving production and distribution efficiency. This concept can lead the marketer to marketing myopia.

Contd
The Product Concept
It believes in the idea that consumers will favour products that offer the most quality, performance, & features. Therefore the organisation should devote its energy in making continuous product improvements.
Ex: Mousetrap to solve mouse problem, but customers may look for chemical spray or something better than mousetrap.

Contd
The Selling Concept
It believes that consumers will not buy enough of the firms products unless it undertakes a large- scale selling and promotion effort. It focuses on creating sales transactions rather than on building long-term profitable customer relationships.

Contd
The Marketing Concept
Achieving organisational goals depends on knowing the needs and wants of target markets and delivering the desired satisfactions better than competitors do. Marketing is sensing & responding. Its not hunting but gardening. The job of the marketer is not to find the right customers for his products but right products to the customers.

Contd
The Societal Marketing Concept
It holds that a company should make good marketing decisions by considering consumers wants, the companys requirements, consumers long-run interests and societys long-run interests.

Preparing an Integrated markeitn Plan & Programme

A right Product at the right Price, at the right Place and through a right Promotion. There should be a blend of all the marketing mix ( 4 Ps)

Building Customer Relationships

It is the process of building and maintaining profitable customer relationships by delivering superior value and satisfaction to the customer. Rule 1: The customer is always right. Rule 2: If the customer is ever wrong, reread Rule 1. Steve Leonard.

Contd
Customer Equity: the total combined customer lifetime values of all the companys customers. Sales & Market share reflect the past, whereas customer equity reflects the future.

Marketing Environment

Contd
Market Environment: It refers to all the forces outside of marketing that affect marketing managements ability to build and maintain successful relationships with target customers. It consists of both the macro environment and the micro environment.

Micro Environment
It refers to the forces that are close to the company and affect its ability to serve its customers. It includes the company itself, its suppliers, marketing intermediaries, customer markets, competitors, and publics. Company: The internal environment of the company includes all departments, such as management, finance, research and development, purchasing, operations and accounting. Each of these departments has an impact on marketing decisions.

Contd
Suppliers: The suppliers of a company are also an important aspect of the microenvironment because even the slightest delay in receiving supplies can result in customer dissatisfaction. Marketing managers must watch supply availability and other trends dealing with suppliers to ensure that product will be delivered to customers in the time frame required in order to maintain a strong customer relationship.

Contd
Intermediaries: It refers to resellers, physical distribution firms, marketing services agencies, and financial intermediaries. These are the people who help the company promote, sell, and distribute its products to final buyers.

Contd
Customers: There are different types of
customer markets including consumer markets, business markets, government markets, international markets, and reseller markets. The consumer market is made up of individuals who buy goods and services for their own personal use or use in their household.

Contd
Business markets include those that buy goods and services for use in producing their own products to sell. This is different from the reseller market which includes businesses that purchase goods to resell as is for a profit. The government market consists of government agencies that buy goods to produce public services or transfer goods to others who need them. International markets include buyers in other countries and includes customers from the previous categories

Contd
Competitors: Competitors are also a factor in
the microenvironment and include companies with similar offerings for goods and services. To remain competitive a company must consider who their biggest competitors are, while considering its own size and position in the industry. The company should develop a strategic advantage over their competitors.

Contd
Publics:
The final aspect of the microenvironment is publics, which is any group that has an interest in or impact on the organizations ability to meet its goals. For example, financial publics can hinder a companys ability to obtain funds affecting the level of credit a company has. Media publics include newspapers and magazines that can publish articles of interest regarding the company and editorials that may influence customers opinions. Government publics can affect the company by passing legislation and laws that put restrictions on the companys actions. Citizen-action publics include environmental groups and minority groups and can question the actions of a company and

Contd
Local publics are neighborhood and community organizations and will also question a companys impact on the local area and the level of responsibility of their actions. The general public can greatly affect the company as any change in their attitude, whether positive or negative, can cause sales to go up or down because the general public is often the companys customer base. And finally those who are employed within the company and deal with the organization and construction of the companys product.

Macro environment
Demographic Environment:
Demography refers to studying human populations in terms of size, density, location, age, gender, race, and occupation. This is a very important factor to study for marketers and helps to divide the population into market segments and target markets. Demography covers many aspects that are important to marketers including family dynamics, geographic shifts, work force changes, and levels of diversity in any given area.

Contd
Economic Environment:
Another aspect of the macro environment is the economic environment. This refers to the purchasing power of potential customers and the ways in which people spend their money.

Contd
Natural Environment:
The natural environment is another important factor of the macro environment. This includes the natural resources that a company uses as inputs and affects their marketing activities. The concern in this area is the increased pollution, shortages of raw materials and increased governmental intervention. As raw materials become increasingly scarcer, the ability to create a companys product gets much harder. Also, pollution can go as far as negatively affecting a companys reputation if they are known for damaging the environment. The last concern, government intervention can make it increasingly harder for a company to fulfill their goals as requirements get more stringent.

Contd
Technological
The technological environment is perhaps one of the fastest changing factors in the macro environment. This includes all developments from antibiotics and surgery to nuclear missiles and chemical weapons to automobiles and credit cards. As these markets develop it can create new markets and new uses for products. It also requires a company to stay ahead of others and update their own technology as it becomes outdated. They must stay informed of trends so they can be part of the next big thing, rather than becoming outdated and suffering the consequences financially.

Environment:

Contd
Political Environment: The political environment
includes all laws, government agencies, and groups that influence or limit other organizations and individuals within a society. It is important for marketers to be aware of these restrictions as they can be complex. Some products are regulated by both state and federal laws. There are even restrictions for some products as to who the target market may be,
For example, cigarettes should not be marketed to younger children.

Contd
Cultural Environment:
It consists of institutions and basic values and beliefs of a group of people. The values can also be further categorized into core beliefs, which passed on from generation to generation and very difficult to change, and secondary beliefs, which tend to be easier to influence. As a marketer, it is important to know the difference between the two and to focus the marketing campaign to reflect the values of a target audience.

Consumer Behaviour
Consumer behaviour is the study of when, why, how, and where people do or do not buy a product. It blends elements from psychology, sociology, social anthropology and economics. It attempts to understand the buyer decision making process, both individually and in groups. It studies characteristics of individual consumers such as demographics and behavioural variables in an attempt to understand people's wants. It also tries to assess influences on the consumer from groups such as family, friends, reference groups, and society in general.

Consumer Behaviour Model

Contd

Consumer Purchase Decision Process

Contd
Information search: Once the consumer has recognised a problem, they search for information on products and services that can solve that problem. Consumers undertake both an internal (memory) and an external search. Sources of information include: Personal, Commercial, Public, Personal experience

Contd
Information evaluation: At this time the consumer
compares the brands and products that are in their evoked set. How can the marketing organization increase the likelihood that their brand is part of the consumer's evoked (consideration) set? Consumers evaluate alternatives in terms of the functional and psychological benefits that they offer. The marketing organization needs to understand what benefits consumers are seeking and therefore which attributes are most important in terms of making a decision. It also needs to check other brands of the customers consideration set to prepare the right plan for its own brand.

Contd
Purchase decision: Once the alternatives have been evaluated, the consumer is ready to make a purchase decision. Sometimes purchase intention does not result in an actual purchase. The marketing organization must facilitate the consumer to act on their purchase intention. The organization can use a variety of techniques to achieve this. The provision of credit or payment terms may encourage purchase, or a sales promotion such as the opportunity to receive a premium or enter a competition may provide an incentive to buy now.

Contd
Post Purchase Behaviour: The final stage is the post-purchase evaluation of the decision. It is common for customers to experience concerns after making a purchase decision. This arises from a concept that is known as cognitive dissonance. The customer, having bought a product, may feel that an alternative would have been preferable. In these circumstances that customer will not repurchase immediately, but is likely to switch brands next time. To manage the post-purchase stage, it is the job of the marketing team to persuade the potential customer that the product will satisfy his or her needs. Then after having made a purchase, the customer should be encouraged that he or she has made the right decision.

Factors Affecting Consumer Behaviour

Cultural Factor: Cultural factor can be divided into three sub factors
Culture: The set of basic values perceptions, wants, and behaviours learned by a member of society from family and other important institutions. Culture is the most basic cause of a persons wants and behaviour. Every group or society has a culture, and cultural influences on buying behaviour may vary greatly from country to country.

Contd..
Sub Culture : A group of people with shared value systems based on common life experiences and situations. Each culture contains smaller sub cultures a group of people with shared value system based on common life experiences and situations. Sub culture includes nationalities, religions, racial group and geographic regions. Many sub culture make up important market segments and marketers often design products.

Contd
Social Class: Almost every society has some form of social structure, social classes are societys relatively permanent and ordered divisions whose members share similar values, interests and behaviour.

Contd
Social Factor:
Groups : Two or more people who interact to accomplish individual or mutual goals. A persons behavious is influenced by many small groups. Groups that have a direct influence and to which a person belongs are called membership groups. Some are primary groups includes family, friends, neighbours and coworkers. Some are secondary groups, which are more formal and have less regular interaction. These includes organizations like

Contd
Family: Family members can strongly influence buyer behaviour. The family is the most important consumer buying organization society and it has been researched extensively. Marketers are interested in the roles, and influence of the husband, wife and children on the purchase of different products and services.

Roles and Status : A person belongs to many groups, family, clubs, organizations. The persons position in each group can be defined

Personal Factor:
Age and Life cycle Stage: People changes the goods and services they buy over their lifetimes. Tastes in food, clothes, furniture, and recreation are often age related. Buying is also shaped by the stage of the family life cycle.

Occupation : A persons occupation affects the goods and services bought. Blue collar workers tend to buy more rugged work clothes, whereas white-collar workers buy more business suits. A Co. can even specialize in making products needed by a given occupational group. Thus, computer software companies will design different products for brand managers, accountants, engineers, lawyers, and doctors.

Contd
Economic situation : A persons economic situation will affect product choice

Life Style : Life Style is a persons Pattern of living, understanding these forces involves measuring consumers major AIO dimensions.

Personality and Self concept : Each persons distinct personality influence his or her buying behaviour. Personality refers to the unique psychological characteristics that lead to relatively consistent and lasting responses to ones

Psychological Factor

Unit 2: Marketing Mix/ 4Ps of Marketing

Product Price Place Promotion

Product/Service
Product: Anything that can be offered to a market for attention, acquisition, use or consumption that might satisfy a want or need. Ford Car, Nokia Mobile. Service: A form of product that consists of activities, benefits or satisfactions offered for sale that are essentially intangible and do not result in the ownership of anything. Eg: Banking, Hotel, Airline. Product includes physical objects, services, events, persons, places, organizations, ideas or mixes of these.

Levels of Product/Services
1. Core Benefit: Solution to the Consumer problem 2. Actual Product: Consists of Brand name, Quality Level, Packaging, Design & Features 3. Augmented Product:Delivery& Credit, Installation, Warranty & After Sale Service.

Classification Products/Services

of

A. Consumer Product: Any Product bought by final consumer for personal consumption. B. Industrial Product: Product bought by individuals & organizations for further processing or use in conducting a business.

Types of Consumer Products

1. Convenience Product: Products that the customer usually buy frequently, immediately and with a minimum comparison.
Eg: Soaps, Newspapers.

2. Shopping Product: Less frequently purchased consumer products and services that customers compare carefully on suitability, quality, price & style.
Eg: Furniture, Clothing, Major Appliances.

Contd..
3. Specialty Product: Product & services with unique characteristics or brand identification for which a significant group of buyers is willing to make a special purchase effort.
Eg: Antique Product, Branded Cars.

4. Unsought Product: Products that the consumer either does not know about or knows about but does not normally think of buying.
Eg: Insurance Products, Funeral Services.

Industrial Products
1. Materials & Parts: It includes Farm Products(Wheat, Cotton), Natural Products(Fish, Crude Petroleum), Component Materials(Iron, Yarn), Component Parts(Tires, Small Motors). 2. Capital Items: Products that aid in the buyers production or operations, including installations(Buildings, Computers, Generators) and accessory equipment(Hand Tools, Lift Trucks). 3. Supplies & Services: It includes operating supplies(Lubricants, Coal), & repair and maintenance items(Paint, Nails, Brooms).

Product/Service Decisions
There are three Levels of Decisions taken by marketers about the product/service.
1. Individual Product Decisions 2. Product Line Decisions 3. Product Mix Decisions

1. Individual Product Decisions

Product Attributes Branding Packaging

Product Support Services

Labeling

Product Attributes
1. Quality: The ability of a product to perform its functions; it includes the products overall durability, reliability, precision, ease of operation and repair & other valued attributes. 2. Features: It has to be improved by asking these questions: How do you like the product?, Which specific features of the product do you like the most?, Which features could we add to improve the product? 3. Style & Design: Deeper understanding of customer needs will enable to come out with styles & designs.

Branding
A name, term, sign, symbol or design or a combination of these intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors.

Packaging
The activities of designing and producing the container or wrapper for a product. It was traditionally done for containing & protecting the product, but now its meant to attract, to describe the product and to increase sale. It is considered as the last chance to influence buyers.

Labeling
It tells the buyers about; who made it, where it was made, when it was made, its contents, how it is to be used & how to use it safely. Language to be used in the labeling.

Product Support Services

Its the third level(Augmented) of a product/service. Its effectively done today through phone, email, fax, Internet & interactive voice and data technologies.

2. Product Line Decisions

A group of products that are closely related because they function in a similar manner, are sold to the same customer groups, are marketed through the same types of outlets, or fall within given price ranges.
Eg: Nokia Mobiles, Colgate tooth-pastes, Loyola Group of Colleges.

3. Product Mix Decisions

It consists of all the product lines and items that a particular seller offers for sale.
Eg: TATA products & service(Steel, Automobiles, Salt, Consultancy Service) ITC Products(Notebooks, Soap)

New Product Development

The development of original products, product improvements, product modifications, and new brands through the firms own R&D efforts.

Stages in Development
Idea Generation Idea Screening

New

Product

Concept Development& Testing

Product Development

Business Analysis

Marketing Strategy

Test Marketing

Commercialization

Idea Generation
The systematic search for new-product ideas.
A. Internal Idea Sources: From ones own executives, scientists, engineers, manufacturing staff and sales people. B. External Idea Sources: Consumers, Competitors, Distributors & Suppliers, Resellers, Suppliers Trade Magazines, Shows, Seminars, Govt. Agencies, Consultants, Ad Agencies, Marketing Research Firms, Universities, Commercial Laboratories.

It can be effectively done by installing an Idea Management System.

Contd
In the Idea Management System a Company can do the following:
Appointing an Idea Manager. Creating Cross-functional idea management team consisting people form R&D, Engineering, Purchasing, Operations, Finance, Sales and Marketing. Setting up toll-free number of web site for anyone to send new ideas to the Idea Management. Encouraging all company stakeholders to send their ideas to the Idea Management. Setting up formal recognition programs to reward the best new ideas.

Idea Screening
Identifying the good ideas and dropping the poor ideas. It can be done by asking the following:
Is the product useful to consumers & society? Is it good for the company? Does it mesh well with the Companys objectives and strategies? Does the company have the people, skills & resources to make it succeed? Does it add more value to the customers than the competing products? Is it easy to advertise and distribute?

Concept Development & Testing

Product Idea: It is an idea for a possible product that the company see itself offering to the market. Product Concept: A detailed version of the newproduct idea stated in meaningful consumer terms. Concept Testing:
Testing new-product concepts with a group of target consumers to find out if the concepts have strong consumer appeal. It can either be done symbolically or physically. Today virtual reality programs have been used widely to explain the product to the consumers.

Marketing Strategy Development

Designing an initial marketing strategy for a new product based on the product concept. The marketing strategy statement consists of three parts. First Part: It describes the target market, positioning, the sales, market share, profit goals for initial years. Second Part: It outlines the price, distribution and marketing budget for the first year. Third Part: It describes the long-run sales, profit goals and marketing mix strategy.

Business Analysis
A review of the sales, costs and profit projections for a new product to find out whether these factors satisfy the companys objectives. Sales can be estimated by looking at the sales history of similar products in the market.

Product Development
Developing the product concept into a physical product in order to ensure that the product idea can be turned into a workable product. It will show whether the product idea can be turned into a workable product. Developing a successful prototype might take days, weeks, months, or even years.

Test Marketing
The stage of new-product development in which the product and marketing program are tested in more realistic market settings. It gives the experience to the marketer about the product before the product goes for full introduction.

Contd
A. Standard Test Markets: Doing full marketing campaign in a small number of representative test cities. B. Controlled Test Markets: Observing the behavior of the consumers from the television set to the checkout counter. C. Simulated Test Market: Using virtual reality and test markets to find out the reason for both purchase or non-purchase.

Commercialization
Introducing a new product into the market. The marketer decides the time and place of introduction of the product.

Product Life Cycle

The course that a products sales and profits take over its lifetime. It consists of Five Stages. 1. Product Development:
It begins from the finding and developing of a new product. The sales are zero and the cost is high.

2. Introduction:
The new product is distributed and made available for purchase. Slow sales growth. Nonexistence of profit because of heavy expenses involved in the introduction.

Contd
3. Growth Stage:
A life-cycle stage at which a products sales start climbing quickly. Meeting the competition and educating the market remains the priority to the marketer. The marketers move gradually from creating awareness to convincing and purchasing. Lot of money is spent for product improvement, promotion and distribution. Hence, hoping for highest profit is postponed to the next stage.

Contd.
4. Maturity Stage:
The stage at which the sales growth slows or levels off. Its the lasting stage because of the loyalty of its customers and the performance of the product. Since there are many products which try to last at this stage, the marketer has to spend more in researching and finding new versions of the product. This in turn leads to a drop in the profit.

5. Decline Stage:
The stage at which the products sales decline. The technological advancements, shifts in the consumer tastes and increased competition bring a product to this stage.

Unit 3: Pricing
Price:
The amount of money charged for a product or service. The sum of the values that consumers exchange for the benefits of having or using the product or service.

Fixed Price Vs Dynamic/Flexible Price

Pros & Cons are to be discussed.

Factors Affecting Decisions

Internal Factors Marketing Objectives
Marketing Mix Strategies

Pricing

External Factors
The Market & Demand

Costs Organizational Considerations

Competition Other Environmental Factors(Economy, Resellers, government, Social Concerns)

Marketing Objectives
A. General Objectives:
To Survive / to gain Maximum Current Profit/ to maintain the Market Share Leadership/ to maintain the Product Quality Leadership.

B. Specific Objectives:
To prevent competitors entering ones market segment. To stabilize the market by adopting the competitors pricing.

Marketing Mix Strategy

Decisions made for other marketing mix elements may affect pricing decisions.
Ex: Positioning a product as a high performance quality, demands higher pricing. When resellers are expected to support the promotion of the product, the resellers margin gets added to the price.

Costs
It sets the floor for the marketer to set the price. The marketer intends for a price that would cover production, distribution and selling costs and a fair rate of return for the efforts and risks. If the total costs(Fixed+Variable) is more than their competitors, then the price for the product will be high and the product will fetch less profit.

Organizational Considerations
In small concerns the top level management without any consultation with the lower level management sets the price. In large companies, it is handled by divisional or product line managers. In industrial markets, the salespeople are permitted to negotiate price within certain price range.

External Pricing

Factors

Affecting

1. The Market & Demand:

A) Pure Competition:
Many Buyers & sellers trading uniform commodity like wheat, financial securities. Going Market Price is in practice.

B) Monopolistic Competition:
Many buyers & sellers trading over a range of prices rather than single market price.

Contd
C) Oligopolistic Competition:
Few sellers trading uniform or nonuniform products. The pricing highly depends on the nature of the competitors pricing strategies.

D) Pure Monopoly:
Pricing is done on the basis of the ability of the market to bear it.

2. Competition
A High price, high margin strategy will easily attract competition. However, low price, low margin strategy will stop competitors or drive them out of the market.

3. Other External Factors

A) Economic Condition:
Economic factors like boom/recession, inflation/deflation, interest rates affect pricing decisions because they affect the cost of production and the customers perception of price & value.

B) Resellers:
The price should give a fair profit to the resellers and encourage their support, and help them to sell the product effectively.

Contd
C) Government:
Govts interfere by setting the price range for certain commodities.

D) Social Concerns:
Pricing should be always done in consideration with societys welfare.

General Pricing Approaches

A. Cost based Approach
1. Cost-Plus Pricing 2. Break Even pricing/Target Profit Pricing

B. Buyer based Approach/Value based C. Competition based Approach

1. Going Rate Pricing 2. Sealed-bid Pricing

A. Cost based Approach

1. Cost-Plus Pricing/Markup
Adding a standard markup to the cost of the pricing. A marketer considers both the price floor and price ceiling. However, it is said that any pricing method that ignores demand and competitor prices is not likely to lead to the best price.

Contd
2. Break Even Pricing/Target Profit Pricing:
Setting price to break even on the costs of making and marketing a product; or setting price to make a target profit.

Total Revenue

Total Cost

Fixed Cost

B. Buyer based/Value based Approach

Setting price based on buyers perceptions of value rather than on the sellers cost. The marketer cannot set the price after designing a product and marketing program. Here pricing begins with analyzing consumer needs and value perceptions. Finally the marketer sees that the price matches consumers perceived value.

Cost Based Vs Value Based

A. Cost Based Pricing: Product Cost Price Value Customers

B. Value Based Pricing: Customers Product

Value

Price

Cost

C. Competition Based Approach

Going Rate Pricing:
The price largely based on the competitors prices with less attention paid to its own costs or demand. It is done to avoid harmful price wars.

Sealed Bid Pricing:

A firm setting the price on how it thinks competitors will price rather than on its own costs or on the demand.

New Product Pricing strategies

A. Market-Skimming Pricing
Setting a high price for a new product to skim maximum revenues layer by layer from the segments willing to pay the high price; the company makes fewer but more profitable sales.
Ex: Mobile Phones, Electronic Gadgets, etc.

Contd
B. Market-Penetration Pricing
Setting a low price for a new product in order to attract a large number of buyers and a large market share.
Ex: Reliance Fresh, Chinese Products, etc.

Product Mix Pricing Strategies

1. Product Line Pricing:
It is used to price the various products in a line. Ex: Hero Honda Bikes(CD100, Splendor, Splendor Plus, Passion, Passion Plus)

2. Optional-Product pricing:
It is used to price the optional or accessory products along with their main products. Ex: Diesel/Petrol Version Cars, Kick start/power start engine bikes.

Contd
3. Captive-Product Pricing:
It is used to price the products that must be used along with a main product. Ex: Batteries, Cartridges.

4. By-Product Pricing:
It is used to price the by products of a main product. Ex:Petroleum products, Coconut Oil

Contd
5. Product Bundle Pricing:
It is used to price a bundle consisting several products. Ex: Home Appliances, Food Items, Johnson & Johnsons baby kits.

Price Adjustment Strategies

1. Discount & Allowance Pricing:
A straight reduction in price on purchases during a stated period of time. Promotional money paid by manufacturers to retailers in return for an agreement to feature the manufacturers products in some way.

2. Segmented Pricing:
The company selling a product or service at two or more prices, even though the difference in price is not based on differences in costs. Customer-segment pricing(Museums), Location Pricing(Theatre).

Contd
3. Psychological Pricing:
A pricing approach that considers the psychology of prices and not simply the economics. The price is used to say something about the product. It is done based on the consumers perception that higher-priced products have higher quality.

4. Promotional Pricing:
Pricing products below the list price and sometimes even below cost, to increase short-run sales.

Contd
5. Geographical Pricing:
a) FOB-origin Pricing: A geographical pricing strategy in which the customer pays the freight from the factory. b) Uniform-delivered Pricing: A geographical pricing strategy in which the company charges the same price plus freight to all customers, regardless of their location. c) Zone Pricing: A geographical pricing strategy in which the company sets up two or more zones. All customers within a zone pay the same total price; the more distant the zone, the higher the price.

Contd
d) Basing-point Pricing: A geographical pricing strategy in which the seller designates some city as a basing point and charges all customers the freight cost from that city to the customer. e)Freight-absorption Pricing: A geographical pricing strategy in which the seller absorbs all or part of the freight charges in order to get the desired business.

6. International Pricing:
a) Uniform Pricing: The same price everywhere irrespective of the differences in the market. b) Unique/Specific Pricing: Depending upon the economic conditions, competitive situations, laws & regulations, consumer perceptions and preferences the prices would vary.

Marketing Channels
A set of independent organizations involved in the process of making a product or service available for use or consumption by the consumer or business user. A firms success not only depends on how well it performs, but also on how well its entire supply chain and marketing channel competes with competitors channels.

Contd
The supply chain consists of upstream and downstream partners. Upstream consists of people who supply raw materials, components, parts, information, finances and expertise. Downstream consists of people like wholesalers, retailers and customers.

Value of Channel (Importance)

Members

Intermediaries reduce the work of producers and consumers. They match supply and demand in different quantities required by the consumers. They add value by bridging the major time, place, and possession gaps that separate goods and services from those who would use them.

Contd
They gather and distribute information about the actors and forces to the marketers. They develop and spread persuasive communication about the product to the market. They find and communicate with prospective buyers. They bear the physical distribution costs.

Number of Channel Levels

Consumer Marketing Channel Producer Producer Producer

Wholesaler

Retailer
Consumer

Retailer

Consumer

Consumer

Channel Behaviour
Channel behaviour is a complex system in which people and companies interact to accomplish individual, company and channel goals. Each channel member depends on the others.
I.e. On the one hand, the dealer depends on the producer to design the product that meets consumer needs and on the other hand the producer depends on the dealer to attract and persuade potential consumers in buying his products.

Channel Conflict
It is the disagreement among marketing channel members on goals and roles-who should do what and for what rewards. A. Horizontal Conflict:
It occurs among firms at the same level of the channel. Ex: Advertising outside ones territory, quoting a low price.

B. Vertical Conflict:
It occurs between the different levels of the same channel. Ex: introduction of new/alternative level in the channel.

Channel Design Decisions

Marketers struggle between the ideal and practical channel decisions. The modern era is moving towards intermediation(the displacement of traditional resellers from a marketing channel by radical new types of intermediaries). Ex: Online Direct Selling.

Steps Involved Design Decision

in

Channel

1. Analyzing Consumer Needs:

Do consumers want to buy from nearby locations or are they willing to travel to more distant centralized locations? Would they rather buy in person, over the phone, through the mail, or via the internet? Do consumers want many add-on services like home delivery, credit, repairs & installation? Or will they obtain these elsewhere?

2. Setting Channel Objectives:

Channel objective should be stated in terms of targeted levels of customer services.

Contd
The nature of the company, products and the economic conditions of the consumers let the marketers set the channel objectives.

3. Identifying Major Alternatives:

Companys sales force/Agents/Wholesalers Retailers/Directly to retailers. &

4. Evaluating Major Alternatives:

Using the economic criteria, the company should choose the channel by comparing the likely sales, costs, and profitability of different channel alternatives.

Channel Management Decisions

1. Selecting channel members 2. Managing and motivating members 3. Evaluating channel members

channel

Retailing
All activities involved in selling goods or services directly to final consumers for their personal, non-business use.

Types of Retailers
1. Specialty Store: A retail store that carries a narrow product line with a deep assortment within that line. 2. Department Store: A retail organization that carries a wide variety of product lines- typically clothing, home furnishings and household goods; each line is operated as a separate department managed by specialist buyers or merchandisers. 3. Supermarket: Large, low-cost, low-margin, high-volume, self-service store that carries wide variety of food, laundry and household products.

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4. Convenience Store: A small store, located near a residential area, that is open long hours 7 days a week and carries a limited line of high turnover convenience goods. 5. Superstore: A store much larger than a regular supermarket that carries a large assortment of routinely purchased food products, non-food items, and services. 6. Discount Store: A retail institution that sells standard merchandise at lower prices by accepting lower margins and selling at higher volume.

Wholesaling
All activities involved in selling goods and services to those buying for resale or business use.

Types of Wholesalers
1. Merchant Wholesalers:
Independently owned business that takes title to the merchandise it handles.

2. Brokers:
A wholesaler who does not take title to goods and whose functions is to bring buyers and sellers together and assist in negotiation.

3. Agents:
A wholesaler who represents buyers or sellers on a relatively permanent basis, performs only a few functions, and does not take title to goods.

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4. Manufacturers Sales Branches and Offices: Wholesaling by sellers or buyers themselves rather than through independent wholesalers.

Unit 4: Promotion
Just developing a good product, pricing it attractively, and making it available to target customers is not enough in modern marketing. Marketer needs to communicate effectively to the current and prospective customers. Hence, a marketer needs to use an effective Marketing Communication Mix.

Marketing Communication Mix or Promotion Mix

It is the specific blend of advertising, sales promotion, public relations, personal selling, and direct-marketing tools that the company uses to pursue its marketing objectives. A. Advertising: Any paid form of non-personal presentation and promotion of ideas, goods, or services by an identified sponsor. B. Sales Promotion: Short-term incentives to encourage the purchase or sale of a product or service.

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C. Public Relation: Building good relations with the companys various publics by obtaining favourable publicity, building up a good corporate image, and handling or heading off unfavourable rumors, stories, and events. D. Personal Selling: Personal presentation by the firms sales force for the purpose of making sales and building customer relationships. E. Direct Marketing: Direct connections with carefully targeted individual consumers to both obtain an immediate response and cultivate lasting customer relationships the use of telephone, mail, fax, e-mail, the internet, and other tools to communicate directly with specific consumers.

Steps in Developing Effective Communication

1. Identifying the Target Audience 2.Determining the Communication Objectives 3. Designing a Message 4. Choosing Media 5. Selecting the Message Source 6. Collecting Feedback

Contd
1. Identifying the Target Audience:
Need to identify the people those who make buying decisions and those who influence in it. Decisions regarding What will be said, how it will be said, when it will be said, where it will be said and who will say it, can be arrived at only when there is a clear idea about the target audience.

Contd
2. Determining Objectives: the Communication
The marketer here decides the response he wants to get from the target audience. Consumers normally pass through stages like Awareness, Knowledge, Liking, Preference, Conviction and Purchase in making a purchase. Hence, the marketer has to find out the stage at which the consumer actually is.

Contd
3. Designing a Message:
At this stage, the marketer tries to develop an effective message to get Attention, Hold Interest, Arouse Desire and Obtain Action. Two major decisions like What to say(Message Content) and How to say(Message structure & format) should be taken here.

Contd
4. Choosing Media/Channel of Communication:
Personal & Nonpersonal are two major types of communication. Personal Communication: Two or more people communicate directly with each other. It may be done either face to face, over the telephone, through the mail, or through an internet chat. Personal influence is more effective for products that are expensive, risky, or highly visible. Eg: Word-ofmouth or Buzz marketing. Non Personal Communication: Message being carried without personal contact or feedback. Eg: Print Media, Broadcast media, Display Media and Online Media.

Contd
5. Selecting the Message Source:
Message delivered by highly credible sources are more persuasive. Eg: Doctors, Dentists and Health Care Providers are used as credible sources to promote food and personal care products.

Contd
6. Collecting Feedback:
The market has to study the effect of the message on the target audience by asking,
whether they remember the message, how many times they saw it, what points they recall, how they felt about the message and the past and present attitude towards the product and company.