Marketing Management

Sangeeta Singh
INDEX
1) What Is Marketing?
2) The Marketing Environment
3) Marketing Management
4) Marketing as Decision Making
5) Analyzing Consumer Behaviour
6) Organizational Buying Behaviour
7) Market Segmentation
8) Targeted Marketing
9) The Marketing Mix
10) The Product
11) New Product Development
12) Marketing Channels
13) Physical Distribution
14) The Promotion Effort
15) Price Determination
16) Price Administration
 Chapter -
1

WHAT IS MARKETING?
WHAT’S MARKETING IS ALL ABOUT
A HUMAN ACTIVITY DIRECTED AT SATISFYING
NEEDS AND WANTS THROUGH EXCHANGE
PROCESSES

PHILIP KOTLER

IT IS THE PERFORMANCE OF BUSINESS ACTIVITIES

THAT DIRECT THE FLOW OF GOODS AND SERVICES
FROM PRODUCER TO CONSUMERS

AMERICAN MARKETING ASSOCIATION

 MARKETING CONTINUED…
IT IS THE PROCES OF

• IDENTIFYING CUSTOMER NEEDS

• CONCEPTUALISING THOSE NEEDS IN TERMS OF AN

ORGANISATION’S CAPACITY TO PRODUCE.

• CONCEPTUALISING THE CONSEQUENT OUTPUT IN TERMS

OF THE CUSTOMER NEEDS EARLIER IDENTIFIED, AND

• COMMUNICATING THAT CONCEPTUALISATION TO

THE CUSTOMER

JOHN.A. HOWARD
COLUMBIA UNIVERSITY 1973
What is Marketing?
Marketing is the process of planning
and executing the conception, pricing,
promotion, and distribution of ideas,
goods, and services to create exchanges
that satisfy individual and organizational
objectives.

More simply: Marketing is all about

satisfying needs (...profitably and
fairly)!!!
Marketing is an Exchange of
Value

An exchange is the process by which

some transfer of value occurs between a
buyer and a seller.
◦ At least two people or organizations must be
willing to make a trade, and
◦ Each must have something the other values.
◦ Most exchanges occur in the form of a
monetary transaction.
Marketing is an Exchange of
Value

An exchange is the process by which

some transfer of value occurs between a
buyer and a seller.
◦ At least two people or organizations must be
willing to make a trade, and
◦ Each must have something the other values.
◦ Most exchanges occur in the form of a
monetary transaction.
Why is Marketing
Important?
Marketing Creates Utility
◦ Place Utility
◦ Time Utility
◦ Possession Utility
Marketing’s Role in the Firm
◦ A firm’s marketing-related decisions must
affect and be affected by its other operations
such as accounting and manufacturing.
Why is Marketing
Important?
 Marketing’s Role in Our Daily Lives

 Marketing’s Role in Society

Company Orientations
Towards the Marketplace

Consumers prefer products that are

Production
Production Concept
Concept widely available and inexpensive

Consumers favor products that

Product
Product Concept
Concept offer the most quality, performance,
or innovative features

Consumers will buy products only if

Selling
Selling Concept
Concept the company aggressively
promotes/sells these products

Focuses on needs/ wants of target

Marketing
Marketing Concept
Concept markets & delivering value
better than competitors
When Did Marketing Begin?
Product •Most Efficient Production &
Product Orientation
Orientation Distribution
•Seller’s Market

Selling •Marketing as a Sales

Selling Orientation
Orientation
Function
•Buyer’s Market

Customer
Customer Orientation
Orientation •Satisfies Customers’
Needs and Wants
•Total Quality

•Benefits to Customers, Plus

New
New Era
Era Orientation
Orientation Firm’s Employees,
Shareholders, and
Communities.
Needs, Wants &Demands Products

Mktg is a social process by which

individuals & groups obtain what they Value & satisfaction
need and want through creating &
exchanging products &values with
others.

Markets & marketers Exchange & transactions

The PILLSBURY
First Era in 1869 - 1930s.
The idea for the formation of the company
came from the availability of high quality
wheat and the proximity of water power –
NOT from the availability and proximity of
growing major market areas or the demand
for better less expensive, more convenient
flour products.
The principal concern here was with
PRODUCTION
The PILLSBURY
In this Era The company’s Philosophy might
have been stated as: “ We are professional
flour millers. Blessed with a supply of the
finest North American wheat, plenty of
water power, and excellent milling
machinery, we produce flour of high quality.
Our basic function is to mill high quality
flour, and of course we must hire salesman
to sell it just as we hire accountants to keep
our books.”
The PILLSBURY

Second Era in 1930s – 60s (Sales Orientation).

This was the era of sales when for the first
time the co began to be highly conscious of the
consumer, her wants and her prejudices as a
key factor in business equation. The first step
along the road to become a marketing
company has been taken.
The principal concern here was with SALES.
The PILLSBURY
In this Era The company’s Philosophy might have
been stated as: “ We are a flour milling company,
manufacturing a number of products for the
consumer market. We must have a first rate sales
organization which can dispose of all the products
we can make at a favorable price. We must back up
this sales force with consumer advertising and
market intelligence. We want our salesman and our
dealers to have all the tools they need for moving
the output of our plants to the consumer.”
The PILLSBURY
Second Era in 60s and beyond (Marketing
Orientation).
This was the era of product research and for the first
time co felt the need to select the best new products.
The first step the co took to set up a marketing
department which developed criteria for determining
which products to market. The criteria was nothing
more or less than those of the consumer itself.
The principal concern here was with Consumer
Markets
The PILLSBURY

In this Era The company’s Philosophy might have

been stated as: “ We make and sell products for
consumers.”
Needs, Wants &Demands Products

Mktg is a social process by which

individuals & groups obtain what they Value & satisfaction
need and want through creating &
exchanging products &values with
others.

Markets & marketers Exchange & transactions

Customer Delivered Value
Starting
point Focus Means Ends

Existing Selling and Profits through

Factory products promotion sales volume

(a) The selling concept

Customer Integrated Profits through

customer
Market needs marketing satisfaction

(b) The marketing concept

 Difference Between Selling And
Marketing
 Selling stats with the seller.
Selling is preoccupied all the  Marketing starts with the
time with the needs of the buyers and focuses
seller; seller is the center of constantly on the needs of
the business universe; the buyers; buyer is the
activities start with seller’s centre of the business
existing products. universe; activities follow
the buyer and his needs.
 Emphasises on saleable
surpluses available with in the
corporation; seeks to quickly
convert ‘product’ into ‘cash’;  Emphasises on
concerns itself with the tricks identification of a market
and techniques of getting the opportunity; seeks to
customers to part with their convert customer ‘needs’
cash for the products available into ‘products’; emphasises
with the salesman. on fulfilling the needs of
the customers.
 Difference Between Selling And
Marketing

 View business as a  View business as a

‘goods producing ‘customer satisfying
process’. process’.
 Over emphasises the  Concerns itself primarily
‘exchange’ aspect and truly with the ‘value
without caring for the satisfactions’ that
‘value satisfactions’ should flow to the
inherent in the customer from the
exchange. exchange.
 Seller’s convenience  Buyers determines the
dominates the shape the ‘marketing
formulation of the mix, should take.
‘marketing mix’
Difference Between Selling And Marketing

 What is to be offered as a ‘product’

is determined by the customer; the
firm makes a ‘total product offering’
that would match and satisfy the
identified needs of the customers;
the ‘product’ is the consequence of
the marketing effort; the marketing
effort leads to products that the
customers would actually want to
buy in their own interest.

 Emphasis on innovation in every

sphere; on providing better value to
the customer by adopting the most
innovative technology.

 Marketing communications is looked

upon as the tool for communicating
the benefits/satisfactions provided
by the product.
Difference Between Selling And
Marketing
 Costs determine price.  Consumer determines price;
price determines costs.

 They are seen as vital services to

 Transportation, storage and be provided to the customer,
other distribution functions are keeping customer’s convenience
in focus.
perceived as mere extensions
of the production function.
 Emphasis is on integrated
marketing approach, an
 Emphasis is on ‘somehow integrated strategy covering
selling’; there is no product, promotion, pricing and
coordination among the distribution.
different functions of the total
marketing task.
Difference Between Selling And Marketing

All departments of the business operate in a

 Different departments of the 
highly integrated manner, the sole purpose
business operate as separate being generation of consumer satisfaction.
watertight compartments.  In firms practicing ‘marketing’, marketing is
the central function of the business; the
entire company or business is organized
 In firms practicing ‘selling’ around the marketing function.
production is the central  ‘Marketing’ views the customer as the very
function of the business. purpose of the business; sees the business
from the point of view of the customer;
customer consciousness, all departments
and all people in the organization, all the
time.
 ‘Selling’ views the customer
as the last link in the
business.
How is Marketing
Done?
Marketers Develop and Implement a Marketing
Plan Based on the Following Information:

Organization’s
Organization’s Strengths
Strengths
and
and Weaknesses
Weaknesses

Opportunities
Opportunities and
and Threats
Threats to
to the
the
Organization
Organization in
in the
the Marketplace
Marketplace

Organization’s
Organization’s Overall
Overall Objectives
Objectives
Needs, Wants and
Benefits
Difference Between a
Consumer’s Actual State
Needs
Needs and Some Ideal or Desired
State. I’m Hungry!

Desire to Satisfy Needs in

Wants Ways That are Culturally
and Socially Influenced.
Let’s go eat a
cheeseburger.
Outcome Sought by a
Benefits Consumer That Motivates
Buying Behavior. Now I’m
full; I feel better.
Markets, Consumers and
Demand
Market
Customers Customers
who share a common
need that can be
satisfied by a
specific product DEMAND
AND
who are willing, able Potential
and have the authority Customers
to make the exchange.
Traditional Organization Chart

Top
Management

Middle Management

Front-line people

Customers
Customer-Oriented Organization
Chart

Customers

Front-line people

Middle management

s
C

er
us

om
t

Top
om

t
us
manage-
er

C
s

ment
Evolving Views of Marketing’s
Role

Finance
Production
Production Finance
Human
resources
Marketing Human
resources Marketing

a. Marketing as an b. Marketing as a more

equal function important function
 Evolving Views of Marketing’s
Role

Production on
cti

Fi
du

na
ro

nc
P

e
Marketing Customer
re
Hu ur

ce M
so

ur an
ar

s
m ces

ce
n ke

so m
an

Fi tin

re Hu
g

c. Marketing as the d. The customer as the

major function controlling factor
Evolving Views of
Marketing’s Role

Production

Marketing

Customer
re
Hu ur
so

e
m ces

n c
an

n a
Fi

e. The customer as the controlling

function and marketing as the
integrative function
 Changing Marketing
Architecture
INDUSTRIAL AGE
INFORMATION AGE
(Past)
Customer Driven
(Current and Future)
Customer Driving
One-way
Infinite Reach
Finite Reach
Time Saving
Time Delay
Information
Information
Abundance
Constraints
How Marketing is Changing?

From Exchange / Transaction to Customer Value

From Suppliers Making Marketing Decisions to
Customers Driving Those Decisions
From Physical Channels to Seamless Channels
From Market Segments to Segments of Size One
From Personal Based Communication Campaign
to Permission Based Communication Campaign
Views on the Marketing Processes

5-C
S-T-P 4 P’s Marketing
Analysis
Marketing Plan
Customer
Segmentation Product
Competitor
Targeting Pricing
Company
Positioning Promotion
Context
Place
Collaborat
ors

The Functional View

Views on the Marketing Processes

Understanding Capturing Delivering Sustaining

Creating
Customer Customer Customer Customer
Customer
Value Value Value Value
Value

The Process View

 Understanding Customer
Value
Value is defined as the perceived worth in
monetary units of the of the set of
economic functional / technical and
psychological benefits received by the
customer in exchange for the price paid
for a product offering, taking into
consideration the available offerings and
prices.
- Anderson, Jain and Chintagunta(1993)
Understanding Customer
Value

Psychological

Functional Economic
MARKETING’S
CONTRIBUTION WITHIN
THE FIRM
Corporate / Business Unit
Level
The Policy Question: How to develop a
Customer Focus?
Marketing’s Answer: Bring the Voice of
the customer in the organization
Tools: Mkt Research, Customer Visits,
Market Orientation Audits
MARKETING’S
CONTRIBUTION WITHIN
THE FIRM
Product Level
The Policy Question: How to best adapt to
the market?
Marketing’s Answer: Develop a value
proposition and competitive positioning
based on customer needs
Tools: Customer and Competitor analysis
MARKETING’S
CONTRIBUTION WITHIN
THE FIRM
Product Level
The Policy Question: How to best adapt to
the market?
Marketing’s Answer: Develop a value
proposition and competitive positioning
based on customer needs
Tools: Customer and Competitor analysis
Plea From an Anonymous
Customer
 Don’t Sell me Clothes, Sell me a sharp appearance, style
and attractiveness.
 Don’t Sell me a House, Sell me comfort, contentment, a
good investment and a pride of ownership.
 Don’t Sell me Toys, Sell my children happy moments.
 Don’t Sell me Insurance, Sell me peace of mind, and a
great future for my family and me.
 Don’t Sell me Books, Sell me pleasant hours and the
profits of knowledge.
 Don’t Sell me Computers, Sell me the pleasure and profits
of the miracles of modern technology.
The Moral is…..

 Don’t Sell me THINGS, Sell me Ideas,

Feelings, Self-respect, Home, Life and
Happiness.

PLEASE DON’T SELL ME

THINGS
 CORE MARKETING CONCEPTS

PRODUCTS AND
SERVICES
VALUE, UTILITY
NEEDS, WANTS SATISFACTION
AND DEMANDS

MARKETS QUALITY

EXCHANGE
RELATIONSHIPS

TRANSACTIONS
FUNDAMENTAL TERMINOLOGIES
NEEDS : FELT DEPREIVATION

WANTS : FORM TAKEN BY HUMAN NEEDS AS THEY ARE SHAPED BY

CULTURE AND PERSONALITY.

DEMAND : WANTS BACKED BY PURCHASING POWER.

PRODUCT : ANY OFFERING TO SATISFY NEEDS AND WANTS MAINLY

PHYSICAL OBJECTS, SERVICES, INFORMATION, PROPERTIES
EXPERIENCES, EVENTS, PLACES, ORGANISATIONS, IDEAS,
PERSONS.

FEATURES : PHYSICAL ATTRIBUTES OF THE PRODUCT

ADVANTAGES : OPERATIONAL FEATURES OF THE PRODUCT

BENEFITS : IMPLICIT, SUBJECTIVE OUTCOME AFTER USE OF THE PRODUCT

WHICH LEADS SATISFACTION.

VALUE : IT IS (FUNCTIONAL BENEFIT+ EMOTIONAL BENEFIT)/

(MONEY + TIME+ ENERGY + PSYCHIC COSTS)

SATISFACTION : PERFORMANCE VS EXPECTATION FUNCTION

EXCHANGE : OBTAINING OF SOMETHING BY OFFERING SOMETHING ELSE IN

RETURN.
 CONCEPTS IN MARKETING
• PRODUCTION CONCEPT : WIDELY AVAILABLE &INEXPENSIVE
PRODUCTS WILL BE PREFERRED.

• PRODUCT CONCEPTS : MOST QUALITATIVE, HIGH

PERFORMING & INNOVATIVE
FEATURES ORIENTED PRODUCTS WILL
BE PREFERRED.

• SELLING CONCEPTS : IF LEFT ALONE, CONSUMERS AND

BUSINESS WON’T BUY ENOUGH OF
PRODUCTS SO DO AGGRESSIVE SELLING

• MARKETING CONCEPT : MEETING NEEDS PROFITABLY;

FIND WANTS AND FILL THEM;
LOVE THE CUSTOMER, NOT THE
PRODUT; HAVE IT YOUR WAY…
BURGER KING ->YOU’RE THE
BOSS…
 SELLING MARKETING
CONCEPT CONCEPT
STARTING
POINT ORY
CT MARKET
FA

T ING S CUSTOMER
X IS CT NEEDS
FOCUS E
OD
U
PR

ING/ G
E LL OTIN INTEGRATED
S
MEANS R OM MARKETING
P

FITS H PROFITS THROUGH

O
PR OUG CUSTOMER
R
TH ES
ENDS L
SA LUME SATISFACTION
VO
 Chapter
-2

THE MARKETING ENVIROMENT

MARKETING ENVIRONMENT
All companies operate with in a marketing environment.

 Micro Environment

 Macro Environment
Micro Environment
Five Components

 Internal Environment

 Marketing Intermediaries

 Group of Customer

 Competitors

 Group of publics
Macro Environment

 Demographic Environment

 Economic Environment

 Natural Environment

 Technological Environment

 Political Environment

 Cultural Environment
 A COMPANY’S COMPLETE MARKETING ENVIRONMENT

ECONOMIC
CONDITIONS
DEMOGRAPHY

COMPETITION

CO’S MKTG PROGRAMME

SUPPLIERS FINANCIAL
RESOURCES
PRO- HUMAN
DUCTION
RESOURCE INTER MARKET
FACILITIES
MEDIARIES
INTER CO’S
LOCATION IMAGE
NEDIARIES
R&D

SOCIAL &
CULTURAL
FORCES

POLITICAL & TECHNOLOGY

LEGAL FORCES
THE BUSINESS CYCLE
•Prosperity (Boom)
•Recession ( Slow Down)
•Depression (Bust)
•Recovery (Upswing)
STYLES FASHIONS FADS

BASIC AND DISTINCTIVE MODE OF

STYLE EXPRESSION
CLOTHING – FORMAL VS. CASUAL

CURRENTLY ACCEPTED OR POPULAR

FASHION
STYLE IN A GIVEN FIELD

FASHION THAT ENTER QUCKLY,

FADS PEAK EARLY AND DECLINES VERY
FAST
 STYLE FASHION FAD

SALES

SALES
SALES

TIME TIME
TIME

(A) (B) (C)

 PHASE- I INTRODUCTION

•STAGE JUST AFTER THE LAUNCH

•SALES GROWTH SLOW

•PROFITS MAY BE LACKING

•BECAUSE OF:
LOW SALES VOLUME

HIGH DISTRIBUTION AND

PROMOTION EXPENSES

HIGH COST OF MARKET

DEVELOPMENT
TYPICAL FEATURES:
 HIGH PRODUCT FAILURE RATE
 LITTLE COMPETITION
 FREQUENT PRODUCT MODIFICATION
 HIGH PRODUCTION AND MARKETING COST
 HIGH DEALER MARGINS
DIFFERENT PRICE/ PROMOTION LEVELS CAN BE COMBINE
PROMOTION
HIGH LOW

RAPID SLOW
HIGH
SKIMMING SKIMMING
PRICE

RAPID SLOW
LOW PENETRATION PENETRATION
STRATEGY

DEVELOP PRODUCT AWARENESS

INTENSIVE PERSONAL SELLING

SALE TO HIGH INCOME GROUPS

HEAVY SAMPLING / COUPENING FOR CONVE-

NIENCE GOODS EDUCATIONAL ADVERTISING +
PERSONAL SELLING FOR SPECIALITY PDT.

LIMITED DISTRIBUTION
 PHASE – II GROWTH
IF PRODUCT SATISFIED MARKET ….. IT WILL ENTER
GROWTH PHASE

SALES GROW AT INCREASING RATE

COMPETITION BUILDS UP FAST

NO. OF DISTRIBUTION OUTLETS GO UP

PROFITS HEALTHY ….. REACH AT PEAK

PROMOTION/ SALES RATIO GO DOWN
STRATEGY

•EFFORT IS TO SUSTAIN RAPID MARKET GROWTH RATE

•AND CAPTURING A DOMINANT POSITION

•IMPROVING PRODUCT QUALITY AND ADDING NEW

•FEATURES AND MODELS

•MORE PRODUCT EXPOSURE

•ENTRY INTO NEW MARKET SEGMENTS
•AGGRESSIVE DISTRIBUTION STRATEGY

•SWITCH FROM CATEGORY RELATED PROMOTION TO

•BRAND PROMOTION
 PHASE – III MATURITY
LONGEST STAGE OF PLC MOST PRODUCTS … IN THIS
STAGE MOST MARKETING STRATEGIES FOR MATURE
PRODUCTS

THREE SUB- STAGES:

•GROWTH MATURITY

•RATE OF SALES GROWTH BEGINS TO DECLINE

BECAUSE OF DISTRIBUTION SATURATION

•FULLEST POSSIBLE TAPPING OF MARKET

ALREADY OVER
STABLE MATURITY

SALES FLATTEN ON PER-CAPITA BASIS

FUTURE SALES – BY POPULATION GROWTH
AND REPLACEMENT DEMAND

DECAYING MATURITY

•ABSOLUTE LEVEL OF SALES STARTS DECLINING

•CUSTOMERS MOVE TO RIVAL PRODUCTS/

SUBSTITUTES
 GENERAL FEATURES:

 CUT- THROAT COMPETITION

 PROFIT – EROSION

 WEAK AND MARGINAL COMPETITORS DROP OUT

 STRONG COMPETITORS TRY FOR COMPETITIVE

ADVANTAGE

 PRICES AND PROFITS CONTINUE TO FALL

 DEALERS MARGINS SHRINK AND RELUCTANCE

TO PUSH THE PRODUCTS
BASIC STRATEGIES IN MATURITY STAGE

(A) MARKET MODIFICATION

•LIFE OF PRODUCT CAN BE EXPANDED BY MARKET

STRETCHING
•CONCENTRATING ON MARKET SEGMENTS YET
UNTAPPED
•STIMULATING INCREASED USAGE AMONG
CURRENT USERS
•PROMOTING MORE VARIED USAGE AMONG
CURRENT USERS

- INCREASING NO. OF USE SITUATIONS USE OF

BOROLINE FOR MANY PURPOSES
REPOSITIONING THE BRAND

CHANGING THE CUSTOMER’S PERCEPTIONS OF

THE PLACE A PRODUCT OR BRAND OCCUPIES IN
A GIVEN MARKET

 MILKMAID

 JOHNSON’S BABY LOTION

 COMPLAN

 CHOCOLATE – CADBURY’S
(B) THE PRODUCT MODIFICATION

PRODUCT RELAUNCH TO BOOST UP SALES

QUALITY IMPROVEMENT
INCREASING FUNCTIONAL PERFORMANCE OF
PRODUCT – DURABILITY, RELIABILITY ETC.

AMBASSADOR AMBASSADOR- NOVA

PREMIER NEW LATCHES

PADMINI UPHOLSTRY, ETC.
 FEATURE IMPROVEMENT

ADDING UP NEW FEATURES THAT EXPANDS

PRODUCT’S VERSTALITY, SAFETY, OR CONVENIENCE
FORHAN’S FORHAN’S FLOURIDE
COLGATE COLGATE FLOURIGUARD
ONE PROBLEM: FEATURES HIGHLY IMITABLE

STYLE IMPROVEMENT

INCREASING AESTHETIC APPEAL IN CONTRAST

TO FUNCTIONAL APPEAL

CHANGE IN COLOR / TEXTURE / PACKAGE

(C) MARKET – MIX MODIFICATION

•SALES STIMULATION BY ALTERING MARKETING

•MIX

•SLASHING PRICES TO ATTRACT NEW CONSUMERS

•MORE EFFECTIVE ADVERTISING CAMPAIGNS

•HEAVY USE OF SALES PROMOTION TECHNIQUES

•ALTERING DISTRIBUTION - CHANNELS

PROBLEM: ALL METHODS ARE HIGHLY IMITABLE

 PHASE-IV DECLINE
WARNING SIGNAL: PERMANENT DROP IN SALES
MOST PRODUCTS EVENTUALLY ENTERS IN DECLINE
PHASE
RATE OF DECLINE DEPENDS ON:
•CHANGE IN CONSUMERS’ TASTES AND ADOPTION
•OF SUBSTITUTE PRODUCTS

•TECHNOLOGICAL INNOVATIONS DEVELOPMENT

•OF EFFECTIVE SUSTITUTES

DECLINING DEMAND …. FORCE MANY COMPETITORS

OUT OF MARKET

PROMOTION BECOMES SELECTIVE LESS EXPOSURE

STRATEGY IN DECLINE PHASE

IDENTIFY WEAK PRODUCTS THROUGH

COMPREHENSIVE MARKETING RESEARCH

DETERMINE APPROPRIATE RESPONSE:

 TO STAY ON
OR
 TO DROP THE PRODUCT

IF DECISIONS IS TO STAY:

THREE OPTIONS:

(A) CONTINUATION - CONTINUE PAST

STRATEGY PRACTICES
(B) CONCENTRATION - CONCENTRATE RESOURCES IN
STRATEGY STRONGEST MARKETS
(C) HARVESTING - REDUCING EXPENSES TO
STRATEGY INCREASE PROFITS

IF DECISION IS TO DROP:
-WHEN PRODUCT’S RATING FAIL TO MEET
COMPETITION ON CERTAIN KEY CRITERIA

DROPPING IT
COMPLETELY
OPTION
SELLING OR TRANSFERING IT TO
OTHER COMPANY
TYPES OF MARKET STRUCTURE
 Pure Competition
◦ Many Small Buyers , Small Buyers, Homogeneous Product,
◦ Easy Entry & Exit, Perfect information
 Monopolistic Competition
◦ Many Sellers & buyers and each is offering something different.
◦ No close subsitute
 Oligopoly
◦ Few large independent firms account for bulk of the industry sales
◦ Each oligopolist has vast industry customers.
◦ Action of one firm tend to directly affect the others in the industry.
◦ Each firm tries to anticipate what the others will do.
 Pure Monopoly
◦ It’s the opposite of pure competition
 Chapter - 3

MARKETING
MANAGEMENT
THE BCG GROWTH-SHARE MATRIX
 Stars: High growth high share businesses or
productsrequire heavy investmenteventually they
will become cashcows.
Cash Cows: high share pproducts less investment
to hold their market shareand provides the
company with the money to support other SBUs
(Strategic Business Unit)
Question Marks: High Growth, they require a lot of
resources to hold their market sharemanagement
has to decide which Q mark can become stars &
which should be phased out.
 Dogs: Low growth low share SBUs They may
generate enough money to sustain themselves,
but cannot contribute to the corporate kitty.
 Chapter - 4
MARKETING AS
DECISION MAKING AND
INFORMATION
GATHERING
MARKETER’S PROBLEMS
Marketers need to find solution of two
problems

•Determining Goals

•Developing Plans to achieve them

Marketing Information Systems (MIS)

It’s a structured and interacting complex of persons, machines and

procedures designed to generate an orderly flow of pertinent information
collected from intra- and extra company resources, for use as the basis for
decision making in specific responsibility areas of marketing management.
MARKETING INFORMATION SYSTEM

Define the Problem or Available Information

opportunity.

Is the value of Additional

information worth the cost?
yes

no
Make Decisions
Gather Additional
Information
 MIS
External Data Process, Analyses
State of the Economy Data
Political Environment
Competitive Situation
Customer Data
Data Processing
Data Bank

Information Bank
Internal Data
Sales
Costs
Gather, Store, Evaluate, Disseminate
Marketing Objectives
Retrieve Data Information
Marketing Research
Marketing Mix
MARKET RESEARCH

“The systematic gathering and recording and analysing

of data about problems relating to the marketing of
goods and services.”
 THE CONSUMER RESEARCH PROCESS
DEVELOP
OBJECTIVES

COLLECT
SECONDARY DATA
DESIGN QUANTITATIVE RESEARCH
DESIGN QUALITATIVE RESEARCH
•METHOD •METHOD
•SCREENER QUESTIONNAIRE •SAMPLE DESIGN
EXPLORATORY •DATA COLLECTION
•DISCUSSION GUIDE STUDY
INSTRUMENT

CONDUCT RESEARCH COLLECT PRIMARY DATA

(USUALLY BY FIELD
(USING HIGHLY
STAFF)
TRAINED INTERVIEWERS)

ANALYZE DATA
ANALYZE DATA (OBJECTIVE)
(SUBJECTIVE)

PREPARE
PREPARE REPORT
REPORT
THE MARKETING RESEARCH
PROCESS
1) Identify & Define the Problem/Opportunity.
2) Conduct a Preliminary Exploration.
3) Determine the Research Process.
4) Determine Data Needs
5) Determine Data Sources.
6) Create the Research Design
A) Functional Categories
i) Exploratory Research
ii) Descriptive Research
iii) Casal Research
iv) Predictive Research.
B) Methodological Categories
i) Historical Research
ii) Survey Research
iii) Experimental Research
iv) Motivational Research
7) Collect the Data
A) Primary Data
B) Secondary Data
8) Analyse the Data and convert to Information
9) Communicate the information.
Defining the problem and Research Objectives

A marketing research project might have one of three

types of objectives. The objective of exploratory
research is to gather preliminary information that
will help define the problem and suggest hypotheses.
The objective of descriptive research is to describe
things such as the market potential for a product or
the demographics and attitudes of consumers who
buy the product. The objective of casual research is
to test hypotheses about cause-and-effect
relationship.
 Chapter - 5

ANALYZING CONSUMER
BEHAVIOUR
Consumer Behaviour
•The Behavior that consumer display in searching for purchasing using
evaluating & disposing of products and services that they expect will
satisfy their needs.

•Study of how individuals make decisions to spend their available

resources (Time….Money…Effort) on consumption related items.
The Substance of
Marketing

Want To Enter the Watch Business!!!

You Must Make A Set Of Important

(Marketing Related) Decisions!!!

WHAT ARE THESE DECISIONS???

The Probable Decisions are…!!!

To which consumer should I sell my watches?

How should I define the consumer I hope to

serve?
Should I think in terms of geography, perhaps
the country in which my consumer lives?
Or may be the consumer’s income or sex or
fashion orientation is more important?
The Probable Decisions are…!!!

To which consumer should I sell my watches?

How should I define the consumer I hope to

serve?
Should I think in terms of geography, perhaps
the country in which my consumer lives?
Or may be the consumer’s income or sex or
fashion orientation is more important?
The Probable Decisions are…!!!

To which consumer should I sell my watches?

How should I define the consumer I hope to

serve?
Should I think in terms of geography, perhaps
the country in which my consumer lives?
Or may be the consumer’s income or sex or
fashion orientation is more important?
The Probable Decisions are…!!!

Should I sell direct to consumers or through

stores, and if through stores, what type of
stores?
Do I want to offer my product in several types
of outlet or only in one type?
How do I select and service the particular
outlets I Chose?
Finally, How do I convince the store to carry
my brand?
The Probable Decisions are…!!!

How should I communicate to the

consumers to whom I wish to sell?
Do I use advertising, and if so in what
media?
How do I reach the stores? Do I use sales
people?
Should the salespeople visit the stores or
should they just telephone them?
 FRAMEWORK FOR ANALYZING
CONSUMER BEHAVIOUR
ENVIRONMENTAL
AND
INDIVIDUAL ANFLUENCES

O
U
TYPE
BUYER T
OF
DECISION PROCESS C
BUYING
O
SITUATION
M
E
 SOME CONSUMER BEHAVIOUR ROLES
Role Description
-----------------------------------------------------------------------
Initiator The person who determines that some need
or want is not being met.

Influencer The person who intentionally/unintentionally

influencesthe decision to buy the actual purchase
and/or use of product or service.

Buyer The person who actually makes the purchase.

User The person who actually uses or consumes the

product or service.
Studying consumer behaviour
EXTERNAL
ENVIRONMENT

SUBCULTURAL INFLUENCES
CULTURAL INFLUENCES

DETERMINANTS SO
INDIVIDUAL CI
AL
CL
M
INFORMATION PROCESSING` AS
OT S
LE IN
IV
AR FL
AT
PROBLEM NI UE
IO
RECOGNITION DE NG NC
OT N
CIS &
HE & ES
IO ME
R IN FE
INFORMATION N M
IN VO ED PR OR
FL LV BA SERACH &
EM OC Y
UE CK EVALUATION ES
NC EN
S
ES T
PURCHASING SO
CI
PROCESS AL
GR
OU
POST PURCHASE P
BEHAVIOUR IN
FL
PERSONALITY & SELF-CONCEPT UE
ATTITUDES NC
ES`

PERSONAL INFLUENCES

FAMILY INFLUENCES
FACTORS INFLUENCING CONSUMER
BEHAVIOUR

CULTURAL
Culture SOCIAL
Sub-Culture Reference PERSONAL
Social Class Groups Age & Life Cycle PSYCHOLOGICAL
Family Stage Motivation
Roles Occupation Perception
Status Economics Learning
Circumstances Beliefs
Life Style Attitudes
Personality & Self

BUYER
SOCIAL CLASSES
Upper-Upper
Lower-Uppers
Upper-Middles
Middle Class
Working Class
Upper Lowers
Lowers Lowers
FAMILY LIFE CYCLE
 FOUR TYPES OF BUYER BEHAVIOUR
HENRY ASSEL 2X2 MATRIX
HIGH INVOLVEMENT LOW INVOLVEMENT

SIGNIFICANT
COMPLEX IMPULSE
DIFFERENCES
DECISION MAKING PURCHASING
BETWEEN
BRANDS
MEDICAL SERVICES CEREALS
AUTO,FINANCIAL SNACKS
PLANNING SERVICES

FEW BRAND INERTIA

DIFFERENCES LOYALTY
BETWEEN
BRANDS LIGHT BULBES
PERFUMES
CIGARETTE SOAPS
BEVERAGES
TYPES OF PURCHASE DECISION
 CONSUMER BUYING
DECISION PROCESS

PROBLEM INFO. EVALUATION

RECOGNITION SEARCH BEHAVIOUR

POST-PURCHASE PURCHASE
BEHAVIOUR DECISION
 Chapter - 6

ORGANIZATIONAL
BUYING BEHAVIOUR
INDUSTRIAL MARKETING
“The decision-making process by which formal organizations establish the
need for purchased products and services and identify, evaluate and choose
among alternative brands & suppliers.”

Key Linkages
External Environment Internal Organization

External Linkages Internal Linkages

Customer Marketing Manufacturing

Derived Demand Emphasis on Technology

Complex Buying Process High Level of Customization
Concentrated Customer base Made to Order
 The External Linkages
 Derived Demand

Complex buying/selling process

The influence of the formal organization,
The strategic importance of the item being
purchased,
 The cost of the item being purchased, and
The complexity of the need being serviced

Concentrated customer base

 The Internal Linkages
Emphasis on Technology
High Level of Customization
Made to Order
Marketing section and development
Market segmentation
Advertising
Pricing
Product Policy
Channel of distribution
•There is a manageable (small)
number of customer
•Customers are concentrated
geographically
•The sales process is long and
complex
•Customer required a lot of
information and training in product
use.
Marketing research
CONTRASTING INDUSTRIAL MARKETING &
CONSUMER MARKETING
` INDUSTRIAL MARKETS CONSUMER MARKETS

Market structure geographically concentrated dispersed

Fewer buyers mass markets
Oligopolistic competition Monopolistic competition
Products Technical complexity Standardised
Customised
Service, delivery and availability
Very important somewhat important

Buyer behavior functional involvement family involvement

Rational/task motives dominate social/psychological
motives predominate
technical expertise less tech expertise
stable interpersonal relations nonpersonal relations
reciprocity
Decision making distinct, observable stages Unobservable, mental Stages
Channels Short, More direct, Fewer linkages Indirect, Multiple linkages
Promotion emphasis on personal selling emphasis on advttg.
Price Competitive bidding list prices
Negotiating on complex purchases
List prices on standard items
 ORGANISATIONAL CUSTOMER

Raw material Material Manufacturing of Final Distri-

Extraction Processing parts and assembly bution
Assembly

Stage 1 Stage 2 Stage 3 Stage 4 Stage 5

The chain Indicative of the Zone of the Organisational Customer

ORGANIZATIONAL BUYING
BEHAVIOUR

External
Environment Organizatioanl
Interpersonal Individual
* Economic * Objectives * Age
* Policies * Authority * Income
Organizational
* Infrastructural Buyer
* Procedures * Status * Education
* Social
* Organizational * Empathy * Job Position
* Political
structure * Persuasiveness * Risk Attitude
* Competition
* Regulatory * System
INDUSTRIAL MARKETING
THE INDUSTRIAL CUSTOMERS BUYER MOTIVES

The Industrial Buyer Is Motivated By Budgetary Considerations Like Profit Goals,

Expense
Quotas And The Cost Benefit Guidelines.

The Major Objective Variables Derived From The Above Are

QUALITY : Consistency Which Can Also Result In The Savings On The

Inventory,
Standardisation
SERVICE : Products And Materials, Technical, Sales & Replacement
Parts, Delivery,
Information.
PRICE : Evaluated Price / Perceived Prices
SAVINGS : Motivation Provided By Savings Even More In The Accelerating
Costs Times
ASSURANCE OF : The Confidence On Timely Supplies
SUPPLY
BUYER : Personal Feelings And Emotions As Well As Some
Extraneous
TEMPERAMENT Important Factors
The Reseller Market
Utilities Produced :-
 Time
Place
Possession

Buying Decisions in Reseller Make

•What Assortment to carry?
•What Vendors to buy from
•What prices & terms to negotiate?

Assortment Strategies
Exclusive Assortments
Deep Assortment
Broad Assortment
Scrambled Assortment
 Chapter - 7

MARKET
SEGMENTATION
MARKETERS-MARKET
To the marketer, the term market means:-

1. People ( as individuals or members of an organization.)

2. People with Desires

3. People with willingness and ability (Buying power) to satisfy their

desires.

4. People who can become customers because they have been authorized
to buy.
STRATEGIES FOR IDENTIFYING
TARGET MARKETS

Organization’s Single Mass

Mass Market Strategy
Marketing Mix Market

A E
Market
B F
Concentration Strategy
Organization’s Single C G Segmentati
Marketing Mix on
D H

A E Market
B F Segmentati
Multi Segment Strategy Organization’s Several C G on
Marketing Mixes D H
THE CONCENTRATION STRATEGY
Advantages

1. Can thoroughly research the segment’s wants and run a much lower risk
of not being able to satisfy its target market.

2. Long productions run may be possible.

3. Distribution, promotion and price can be keyed to satisfy one segment.

Disadvantages

1. The organizational cannot spread its risk. Thus, a decline in the selected
segment’s buying power, or a change in taste or the entry of rivals can
have a negative impact on profitability.

2. Sometimes a firm that focuses exclusively on one segment develops a

specialist image in that segment. As a result it may encounter difficulties
in directing its efforts to other segments.
MULTI-SEGMENT STRATEGY
Advantages

1. Can serve a greater number of potential consumers.

2. Can utilize excess capacity to serve additional segments.

Disadvantages

1. The Organizations may spread itself too thinly as a result.

2. Productions costs may go up

3. Marketing costs also tend to go up.

 SEGMENTING CONSUMER
MARKETS

GEOGRAPHY DEMOGRAPHICS PSYCHO- PRODUCT

GRAPHICS RELATED
CONSUMER
CHARACTERIST
ICS

POTEN Nation/ Region Age, Sex, Buying Social Class Amount of Usage
TIAL
CONS State/ Region Power, Expenditure Personality Types of usage
UMER City/ Nbhrhd Patterns, Occuptn, Life Style Brand Loyalty
SEGM Climate/Terain Eductn, Race, or Benefits Soughts
ENTS Nationality, Family
Population
Life Cycle
Density
Mkt Density
 Chapter - 8

TARGETED MARKETING
DEVELOPING MARKETING
STRATEGY
1. Define the relevant market
2. Analyze characteristics and wants of potential
customers.
3. Identify bases for segmenting the market
4. Define and describe market segments.
5. Analyze competitor’s positions
6. Evaluate market segments
7. Select the market segment (s)
8. Finalize the marketing mix (es)
1) Segmentation consists of marketers
identifying & profiling distinct groupsof
buyers who require separate market
offerings
2) Targeting consists of selecting one or
more of these segments.
3) Positioning consists of establishing&
communicating the products key
distinctive benefits in the market

123
SALES FORECASTING METHODS
1) Simple Trend Analysis

2) Correlation Methods

3) Executive Judgment

4) Sales Force Composite

5) Surveys of Buyers Intentions

6) Market Tests

7) Substitute Method
 The Four Ps: The Tools

The Four Cs: The Ends

Marketing
Mix

Place
Product

Conven-
Customer
Solution Price Promotion ience

Customer Communication
Cost
The Other 4Cs: The
Participants

The
Participants

Competitors
Company

Consumer Channel
Marketing’s Tools: The Marketing
Mix

Product
Product Price
Price
Good,
Good,Service,
Service,Idea,
Idea,Place,
Place,Person
Person Assignment
Assignment of
ofValue
Value

Tools
Tools that
that Are
Are Used
Used Together
Together toto Create
Create aa Desired
Desired
Response
Response Among
Among aa Set
Set of
of Defined
Defined Customers
Customers

Place
Place Promotion
Promotion
Availability
Availabilityof
of Product
Product Activities
Activitiesto
toInform
InformConsumers
Consumers
 Chapter - 9

THE MARKETING MIX

THE PRODUCT/ MARKET
EXPANSION GRID
 Marketer creates the product that will
meet the identified needs of the
consumer.
Carries out function as transportation so
that the
product can conveniently reach the
consumer.
Price that is acceptable to the consumer.
Communicates the benefits of the offer.
Nuts &bolts
 Sole Vehicle for Creating Customer
Value

James Culliton coined the term Marketing

Mix as marketing mgr is a mixer of
ingredients.
Jerome Mccarthy the American professor
first described the marketing mix in terms
of 4 P’s.
MARKETING MIX

4Ps 4Cs
Product Customer needs & wants

Price Cost to the Company

Place Convenience

Promotion Communication
 MARKETING MIX

The Four Ps of the Marketing Mix

MARKETING MIX

Quality
Features
Options Channels
Style Coverage
Brand Name Locations
Packaging PRODUCT PLACE Inventory
Sizes Transport
Services
TARGET
Warranties MARKET
Returns

PRICE PROMOTION
List Price Advertising
Discounts Personal Selling
Allowances Sale promotion
Payment Period Public Relations
Credit terms
 MARKETING MIX STRATEGY
Promotion Mix

Sales
Promotion

Offer Mix Advertising

Products
Company Services Sales force Channels Customers
Prices

Public
relations
Direct mail
and
telemarketing
Environmental Variables Of Marketing

Competition
Consumer
Government of the land
Forces of nature
MM can control the marktg mix but not these.
He can not dictate what the competitor should
or should not do.
Environmental Variable is also known as non
controllable variables & Marktg Mix is
controllable variables
Marketing can basically be looked upon as
interaction between the MarktgMix & EV.
MMix elements can be combined in an
infinite number of ways.
MMix in effect signifies the manner in
which the mrktg effort or mrktg budgets
distributed.
MMix expressed in Rs terms becomes the
marketing budget.
 Chapter - 9

PRODUCT
THREE LEVELS OF PRODUCT
Installation Augmented
Product

Packaging
Tangible
Product
Core
Delivery benefit
After
Brand Features
and name or Sale Core
credit service service Product

Quality Styling

Warranty
PRODUCTS CLASSIFICATION
SYSTEMS

 Consumer Products
◦ “ Used by ultimate consumers or households and can be used
without any commercial processing”

 Industrial Products
◦ “Sold Primarily for use in producing other goods or rendering
services”
Maggie
Bas 2 mints, Fast to cook & good to eat.
Health bhi taste bhi no MSG group
Maggie is Nestle Flagship brand& globally
also
Maggie came to India 25 years ago1983 as
2mts noodles In the80s market was
beginning to change with the noodles
category& consumer fancy was Chinese
Noodles.Maggie understood what was
happening with the consumer.
Key need for a product that provides good
quality & convenience.This allowed mother
to add her own inputs like vegetables.
Tagline fast to cook & good to eat
was also to educate the consumer
about the advantages of using it.
The jingle for the Maggie was was
pretty catchy & went down well with
Children
In some areas they were ahead of their times
like the launch of sweet noodles.
Not that everything always workbut what
pulled them through is the fact that they
have been able to be ahead of their times.
Nestle gauged the needs & requirements of
the consumer in depth.
Evolve the instant noodles categorywhile
retaining the companys DNA focus of
wellness & nutrition.
Improving further the goodness Quotient
in the products
Company moved away from not so healthy
maida to Atta & Rice noodles.
Also enriched traditional range with Protien
& Calcium
Push was mainly on Taste bhi health bhi
After noodles it launched
Ketchup& maggie hot N sweets
Nestle world widespends a lot of money on
research & development in terms of taste
health & convenience.
 CONSUMER PRODUCT
CLASSIFICATIONS

Consumer
Products

Convenience Shopping Specialty Unsought

Products Product Product Product

Homogeneou Heterogeneou
Staples Impulse Emergency Regularly New
s s
SERVICES
Characteristics of Services

1) Sold Exclusively on the basis of benefits

2) Can not produce in anticipation of demand.

3) Time Utility is crucial

4) Cannot be produced in one location for consumption in another.

5) Perishing upon offering

6) Once consumed it can not be returned to seller.

7) Quality control.
Product Mix & Product Line

 They are two expressions denoting the range &

variety of the products of the firm.
Product mix- Denotes the complete set of all
products offered for sale by a company
Product Line- It is the number of item brands in
the line. Line stretching is a measure firms under
take frequently in to enter a new price slot & a
new market segment.
Eg HLL, Ariel , Parker , Prestige ,
 PRODUCT MIX

Width - number of
different product
lines
Consistency

Length - total Product Mix -

number of items all the product
within the lines lines offered

Depth - number of
versions of each
product
 Chapter - 10
NEW PRODUCT
DEVELOPMENT
AND
LIFE CYCLE STRATEGIES
STAGES IN NEW PRODUCT
DEVELOPMENT
SIX CATEGORIES OF NEW PRODUCTS

 New-to-the-world product.

 New-product line.

 Additions to existing product lines.

 Improvements in/revisions to existing products.

 Repositioning.

 Cost reductions.
 Chapter - 12

MARKETING CHANNELS
MARKETING CHANNELS
Marketing channels can be viewed as sets of interdependent organizations involved
in the process of making a product or service available for use of consumption.

Functions and Flows

Information
 Promotion
 Negotiation
 Ordering
 Financing
 Risk Taking
 Physical Possession
 Payment
 Title
 NUMBER OF CHANNEL LEVELS

Zero-level
channel
(M-C)
Manufacturer Retailer

Consumer
One-level
channel
(M-R-C)
Wholesaler Retailer
Two-level
channel
(M-W-R-C)
Wholesaler Jobber Retailer
Three-level
channel
(M-W-J-R-C)

(a) Consumer marketing Channels

NUMBER OF CHANNEL LEVELS

Industrial
distribution
Industrial
Manufacturer consumer
Manufacturer’s
representative

Manufacturer’s
sales branch

(b) Industrial marketing channel

CHANNEL-DESIGN DECISIONS
Establishing the
Analyzing channel Objectives
and Constraints
Consumer  Product Characteristics
Needs for  Middlemen Characteristics
 Competitive Characteristics
Service  Company Characteristics

Outputs  Environmental
Characteristics

Lot size
Waiting time
Spaital convenience
 Product variety
CHANNEL PLANNING
The Types of Middlemen
◦ Dual Distribution
◦ Facilitating Distribution

Determining the Number of Middlemen

◦ Intensive Distribution
◦ Selective Distribution
◦ Exclusive Distribution

Determining which specific middlemen to use

Determining how to motivate middlemen

WHOLESALING
Nature and Importance :
Wholesaling includes all activities involved in selling goods or
service to those who buy for resale or business use.

Function of Wholesalers

•Selling and promoting

•Buying and assortment building
•Bulk-breaking
•Warehousing
•Transportation
•Financing
•Risk bearing
•Market information
•Management services and counseling
TYPE OF WHOLESALERS

FULL-SERVICE WHOLESALERS
 Wholesale merchants
 Industrial distribution

LIMITED-SERVICE
WHOLESALEERS
 Cash-and-carry wholesalers
 Truck wholesalers
 Producers’ cooperatives
 Mail-order wholesalers
 Chapter - 13

PHYSICAL
DISTRIBUTION
PHYSICAL DISTRIBUTION
It Involves

1) Moving raw material from their source destination

to the beginning of the production process.

2) Moving raw materials, semi finished products &

finished products through warehouse

3) Moving finished products to Middleman or final

buyers as required.
Systems View of Physical Distribution
The Total Cost Concept

The Cost Trade-Off Concept

The Optimization Concept

THE SUBSYSTEMS OF PD
 Warehousing
◦ Number
◦ Location
◦ Size

 Inventory Control
◦ Order Timings
◦ Order Quantity

 Materials Handling

 Order Processing

 Transportation
MODES OF TRANSPORTATION
Rail Roads

Motor Carriers

Air Freight

Pipelines

Water Transportation
PHYSICAL DISTRIBUTION

• Transportation
Determining
Optimal
Cost per Unit (Rupees)

Total cost per unit Order

Quantity
Inventory carrying
cost per unit

Order-processing
cost per unit
Q*
Order Quantity
 Chapter - 14

THE PROMOTION
EFFORT
 THE COMMUNICATION PROCESS

Sender Encoding Message Decoding Receiver

Media

Noise

Feedback Response
 ◦ Positioning is the platform for the brand
◦ Positioning is the fact of fixing locus of the
product offer in the minds
◦ Al Ries & Jack Trout “ Positioning is what you do
to the mind of the prospect.That is you position
the product to the mind of the prospect.”
◦ To create a perception of brand in consumers
mind

Positioning
 MARKETING COMMUNICATION

Major tools
Advertising
Sales promotion
Publicity
Personal selling
Packaging
Public Relation
 COMMON
COMMUNICATION/PROMOTION
TOOLS
---------------------------------------------------------------------------
Sales Personal
Advertising Promotion Publicity Selling
---------------------------------------------------------------------------
Print and Contests,games Press kits Sales presentations
broadcast ads sweepstakes, Speeches Sales meetings
Packaging-outer lotteries Seminars Telemarketing
Packaging inserts Premiums and gifts Annual reports Incentive programs
Mailings,Catalogs Sampling Salesmen samples
Motion pictures Fairs and trade show donations Fairs and trade
shows
House magazines Exhibits Public relations
Brochures and Demonstrations
booklets Couponing,Rebates
Reprints of ads Low-interest financing
Billboards Entertainment
Display signs Trade-in allowances
Point-of-purchase Trading stamps
display Tie-ins
Audiovisulas material
OBJECTIVES OF PROMOTIONAL
ACTIVITIES
1) Creating Awareness

2) Providing Information

3) Explaining Company Actions

4) Inducing Product Trials

5) Inducing Middlemen to Stock Product

6) Retaining Loyal Customers

7) Increasing Amount & Frequency of use

8) Learning about Customers

9) Reducing Sales fluctuations

 Public presentation

Pervasiveness

Amplified expessiveness

Impersonality

ADVERTISING
Personal selling
Personal confrontation
Cultivation
Response

Sales Promotion
• Communication
• incentive
• invitation
Publicity
• High credibility
• Off guard
• Dramatization
 Major Decisions in Advertising
Management

Message decision

Message generation
Message evaluation
and selection
Message execution
Objectives setting Budget decisions Advertising evaluation
Communication Affordable approach Communication
Objectives Percent of sales
Sales impact
Competitive parity Sales impact
Objectives
Objectives and task
Media decision

Reach, frequency, impact

Major media types
Specific media vehicles
Media timing
 Chapter - 15

PRICE
DETERRMINATION
 NINE MARKETING-MIX STRATEGY
ON PRICE

Price
High Medium Low

1. Premium 2. High-value 3. Superb-value

High Strategy Strategy Strategy
Product Quality

4. Overcharging 5. Average 6. Good-value

Medium Strategy Strategy Strategy

7. Rip-off 8. False economy 9. Economy

Low Strategy Strategy Strategy
SELECTING THE PRICE
OBJECTIVE
 Survival

 Maximum Current Profit

 Maximum Current Revenue

 Maximum Sales Growth

 Maximum Market Skimming

 Product-Quality Leadership
DETERMINING DEMAND
1. Unique value effect. Buyers are less price-sensitive when the
product is more unique.
2. Substitute awareness effect. Buyers are less price-sensitive when
they are less aware of substitutes.
3. Difficult comparison effect. Buyers are less price-sensitive when
they cannot easily compare the quality of substitutes.
4. Total expenditure effect. Buyers are less price-sensitive the lower
the expenditure is as a ratio to their income.
5. End-benefit effect. Buyers are less price-sensitive the less the
expenditure is to the total cost of the end product.
6. Shared cost effect. Buyers are less price-sensitive when part of
the cost is borne by another party.
7. Sunk investment effect. Buyers are less price-sensitive when the
product is used in conjuction with assets previously bought.
8. Price-quality effect. Buyers are less price-sensitive when the
product is assumed to have more quality, prestige, or exclusiveness.
9. Inventory effect. Buyers are less price-sensitive when they cannot
store the product.
 INELASTIC AND ELASTIC
DEMAND

P’2
P2
Price

P1
P’1 D

Q2 Q1 Q’2 Q’1

Quantity Demanded per Period Quantity Demanded per Period

(a) Inelastic demand (b) Elastic demand
 ESTIMATING COSTS

1
2
Cost per Unit

Cost per Unit

3 4 SRAC
SRAC

LRAC

1,000 1,000 2,000 3,000 4,000

Quantity Produced per Day Quantity Produced per Day

(a) Cost behaviour in a fixed-size plant (b) Cost behaviour over different
size plants
PRICING METHOD
 Markup Pricing
Unit Cost
Markup Pricing =
-----------------------------------
(1 - Desired return on
sales)
 Target Return Pricing
Desired return x
Invested Capital
Target return price = Unit +
---------------------------------------
cost Unit
Sales
 Perceived - Value Pricing
 Sealed-Bid Pricing
 PRICING METHOD
Low Price High Price
------------- Competitor’s prices Unique
-------------
No possible Product and product
No possible
profit at costs prices of substitutes features
demand at
this price this price

Major Considerations in Setting a Price

1,200
D o l l o r s ( I n `0 0 0 )

Total revenue
1,000 Target Profit
} Total Cost
800

600

400
Fixed Cost
200

0 10 20 30 40 50 (Sales Volume in unit ‘0000)

Break-even Chart for Determining Target Return Price & Break-Even Volum
Promotional Pricing & Discriminatory
Pricing

PROMOTIONAL DISCRIMINATORY
PRICING PRICING
Customer-
Special event segment pricing
pricing Product-form
Cash rebates pricing
Low-interest Image pricing
financing Location pricing
Psychological Time pricing
discounting
 HOW TO ADD VALUE THROUGH
DIFFERENTIATED PRICING

Set price Ensure

Plan for well above
premium matching
highest value
pricing price-point

Check whether Convey Reinforce

Determine extraordinary positioning
product price
pricing is through
benefits possible
differential marketing mix

Plan Set price Ensure

well below Ensure increase in
predatory matching
pricing lowest customer
price point benefits value
BREAKEVEN ANALYSIS
COSTS
 Costs
Anything incurred during the production of the good or
service to get the output into the hands of the customer

The customer could be the public (the final consumer) or

another business

Controlling costs is essential to business success

Not always easy to pin down where costs are arising!

Cost Centres
 Parts of the business to which particular costs can
be attributed
In large businesses this can be a particular
location, section of the business, capital asset or
human resource/s
Enable a business to identify where costs are
arising and to manage those costs more effectively

Cost Centres
 A method of allocating indirect costs to a range of
products produced by the firm.
◦ e.g. if a firm produces three products - a, b, and c - and
has indirect costs of £1 million, assume proportion of
direct costs of 20% for a, 55% for b and 25% for c
◦ Indirect costs allocated as 20% of 1 million to a, 55% of
£1 million to b and 25% of £1 million to c

Full Costing
 All costs incurred are allocated to particular cost
centres – direct costs, indirect costs, semi variable
costs and selling costs

Allocates indirect costs more accurately to the point

where the cost occurred

Absorption Costing
 The cost of producing one extra unit of output (the
variable costs)

Selling price – MC = Contribution

Contribution is the amount which can contribute to

the overheads (fixed costs)

Marginal Costing
 The expected level of costs associated
with the production of a good/service
Actual costs – Standard costs =
Variance

Monitoring variances can help the

business to identify where inefficiencies
or efficiencies might lie

Standard Costing
Total Revenue
  Total Revenue = Price x Quantity Sold
Price can be raised or lowered to change revenue –
price elasticity of demand important here
◦ Different pricing strategies can be used – penetration,
psychological, etc.

Quantity Sold can be influenced by amending the

elements of the marketing mix – 4Ps

Total Revenue
Break Even
Costs/Revenue TR Total
The Initially
break
revenue even
a firm
is
TR TC The lower the
determined
point
Aswill
price, occurs
incur
output
the by
where
is
lessfixed
VC The
the
total
total
costs,
price
costs
revenue
steep
therefore thecharged
generated, these the
total
and
equals
do
firm the
revenue not
total
quantity
will depend
costs –
incur
curve.
(assuming
sold
the on
firm,
– output
variableagain
incosts
this
this
or –
accurate
will
example,
sales.
be vary
these would
forecasts!) is the
determined
have to sell by
Q1 to
sum of FC+VC the
directly with
expected
generate
amount sufficient
forecast
revenue
produced. sales
to cover its
initially.
costs.

FC

Break Even
Q1 Analysis Output/Sales
 Break Even Analysis
Costs/Revenue If the firm
TR (p = £3) TR (p = £2) TC chose to set
VC price higher
than £2 (say
£3) the TR
curve would
be steeper –
they would not
have to sell as
many units to
break even

FC

Q2 Q1 Output/Sales
 Break Even Analysis
TR (p = £1)
Costs/Revenue TR (p = £2) If the firm
TC chose to set
VC prices lower
(say £1) it
would need to
sell more units
before
covering its
costs.

FC

Q1 Q3 Output/Sales
 Break Even Analysis
TR (p = £2)
Costs/Revenue TC

Profit VC

Loss
FC

Q1 Output/Sales
 Break Even Analysis
TR (p = £3) TR (p = £2)
Costs/Revenue TC

VC Assume
current sales
at Q2.

Margin of Safety A higher price

would lower the
FC
break even
point and the
margin of safety
would widen.

Q3 Q1 Q2 Output/Sales
 •Importance of Price Elasticity of Demand

•Higher prices might mean fewer sales to break even

but those sales may take a longer time to achieve

•Lower prices might encourage more customers but

higher volume needed before sufficient revenue
generated to break even

Break Even Analysis

 Links of break even to pricing strategies and
elasticity

Penetration pricing – ‘high’ volume, ‘low’ price –

more sales to break even

Market Skimming – ‘high’ price ‘low’ volumes –

fewer sales to break even

Elasticity
– what is likely to happen to sales when
Break
pricesEven Analysis
are increased or decreased?
 Chapter - 15

PRICE
ADMINISTRATION
 1) Quantity Discount
 Cumulative Quantity Discounts
 Non-Cumulative Quantity Discounts
1) Trade Discounts
2) Seasonal Discounts
3) Cash Discounts
4) Trade-in Allowances
5) Damaged good Allowances
6) Brokerage Allowances
7) Promotional Allowances

DISCOUNTS & ALLOWANCES

 GEOGRAPHICAL PRICE POLICIES
FOB Shipping Point Pricing
(Free On Board)

Delivered Pricing
◦ Uniform Delivered Pricing
◦ Zone Pricing

Freight Absorption Pricing

 Prestige Pricing

Leader Pricing

Odd Pricing

Competitive Bidding
 Expected Profit =P (Bid Price – Cost Estimate)
P = Probability of winning the bid

PSYCHOLOGICAL PRICING
Thank you!!!

Any Queries?