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MARKETING MANAGEMENT
UNIT – I
DEFINITION OF MARKETING - MARKETING MANAGEMENT- MARKETING
CONCEPT – MEANING IMPORTANCE OF MARKETING IN DEVELOPING
COUNTRIES - FUNCTIONS OF MARKETING – MARKETING ENVIRONMENT:
VARIOUS ENVIRONMENTAL FACTORS AFFECTING THE MARKETING
FUNCTION.
DEFINITION OF MARKETING:
Definition of American Marketing Association Marketing (Management) 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 goals.
The Chartered Institute of Marketing define marketing as 'The management
process responsible for identifying , anticipating and satisfying customer
requirements profitably'
Philip Kotler defines marketing as 'satisfying needs and wants through an
exchange process'
Within this exchange transaction customers will only exchange what they value
(money) if they feel that their needs are being fully satisfied, clearly the greater the
benefit provided the higher transactional value an organisation can charge.
Marketing objectives, goals and targets have to be monitored and met,
competitor strategies analysed, anticipated and exceeded. Through effective use of
market and marketing research an organisation should be able to identify the needs
and wants of the customer and try to delivers benefits that will enhance or add to
the customers lifestyle, while at the same time ensuring that the satisfaction of
these needs results in a healthy turnover for the organisation.
MARKETING MANAGEMENT:
Marketing management - the process allocating the resources of the organization
toward marketing activities
Marketing management takes place when at least one party to a potential exchange
thinks about the means of achieving desired responses from other parties.
Marketing management has the task of influencing the level, timing, and
composition of demand in a way that help the organization achieve its objectives.
Marketing management is essentially demand management.
The planning, Organizing, Implementing and Controlling the marketing activities to
facilitate and expidite exchanges effectively (NEED TO ACHIEVE ORGANIZATIONAL
OBJECTIVES) and efficiently (MINIMIZING ORGANIZATIONAL RESOURCES).
Therefore to facilitate highly desirable exchanges and to minimize the cost of doing
so. Effective planning reduces/eliminates daily crises.
According to Philip Kotler, “Marketing Management is the process of planning and
executing the conception, pricing, promotion and distribution of goods and services
and ideas to create exchanges with target groups that satisfy customer and
organizational objectives”.
To make this definition,
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Marketing Management is goal directed. It attempts to satisfy the needs of
customers by offering them want satisfying products and generate revenue
for the business.
Marketing Management is a functional area of management. As a managerial
function, it includes analysis, planning, implementation and control of
activities concerned with development and distribution of products for
satisfying the needs of customers.
Marketing Management is a specialized job. Efficient handling of marketing
activities require specialized knowledge of markets, products, consumers
tastes and behavior, government policies and business environment.
Marketing Management determines the appropriate marketing mix of the
firm. Product design, its promotion, its pricing, its pricing and its distribution
are properly harmonised so that goods are accepted by the customers.
Marketing Management is the marketing concept in action. It includes all
activities which are necessary to know the needs of customers and suppliers
goods and services to satisfy the needs of the customers. The marketing
concept is based on the philosophy that all activities of the business
enterprises should be oriented towards the satisfaction of the requirements
or needs of the customers.
OBJECTIVES OF MARKETING MANAGEMENT:
Marketing Management is concerned with all those activities which are
essential to determine and satisfy the needs of customers so as to achieve the
objectives of business. Thus, the prime objective of marketing management is to
achieve the objectives of business. A business predominantly aims at earning
reasonable long-term profits by satisfying the needs of the customers. The
objectives of marketing management are,
1. To satisfy the customers: The marketing management must scientifically
study the demands of customers before offering them any goods or services.
Selling the goods or services is not that important, as the satisfication of the
2.
3.
4.
5.
6.
customer’s needs. Modern marketing always begins and ends with the needs
of customers.
To increase profit for the growth of business: The marketing department is
the only department which generates revenue for the business. Sufficient
profits must be earned as a result of sale of want-satisfying products. If the
firm is not earning profits, it will not be able to survive in the market.
Moreover, profits are also needed for the growth and diversification of the
firm.
To generate customers base for the business: The marketing manager must
attract more and more customers to buy the firms products and services.
This will result into increased sales.
To determine marketing mix that will satisfy the needs of the customers.
Product, pricing, promotion and physical distribution should be so planned as
to meet the requirements of different kinds of customers.
To increased the quality of life of people. Marketing management attempts to
increase the quality of the life of the people by providing them better
products at reasonable prices. It facilities production and distribution of a
wide variety of goods and services for use by the customers.
To create good image. To build up the public image of firm over a period is
another objective of marketing. The marketing department provides quality
products to the customers at reasonable price and thus creates its impact on
the customers. The marketing manager attempts to increase the goodwill of
the business by initiating image building activities. If a firm enjoys goodwill
in the market, it will increase the morale of its sales-force. They will show
greater loyalty and will develop a sense of service to the customers. This will
further enhance the reputation of the business.
MARKETING CONCEPT:
According to Kotler the “Marketing concept is the key to achieving organizational
goals consist in determining the needs and wants of target markets and delivering
the desired satisfaction more effectively and efficiently than competitors”.
Marketing concept is “a way of thinking” or “management philosophy” about an
organization’s total marketing activities. When the philosophy is adopted, it affects
not only marketing activities but also all the organization’s activities-including
planning of action, control, objectives, follow-through etc., finance and other
activities which are geared toward satisfying customer’s needs, wants and desires.
Marketing concepts means “developing a strategy to get the product in front of
customers so they have the opportunity to buy it.. determining scientifically what
product or services to make and how best to market them to meet consumers
needs”. Planning, developing strategy systematically and scientifically selecting
among available alternatives and controlling the operation in order to provide
customer satisfaction are relatively new implications in the marketing concept. The
marketing concepts are.,
Rest of the
Consumer
Integrating
Organisation
Orientation
Marketing Efforts
Financial Measures
Result Orientation
Profit or Return on
Investment
Dynamics of Marketing Concept
Ingredients or Components of Marketing Concept:
The marketing concept has the following main basic features;
(i)
(ii)
(iii)
Adoption of a predominantly market or customer orientation.
A coordinated set of activities that allows the organization to achieve the
goals.
Result oriented marketing.
(1) Market Orientation:
This is the principal element in the concept. Its meaning would be clear
from the following objectives accepted by a company.
“Our objective is to increase profitability….to produce maximum long-term
profit growth consistent with the balanced best interest of customers. Shareholders,
employees, suppliers and society at large…. In achieving this goal we will….
Recognize that the primary purpose of our business is to perform a necessary
economic service by creating, stimulating and satisfying customers”.
Marketing originates with the recognition that a need exists and terminates
with the satisfaction of that need by the delivery of a usable product; at the right
place and at an acceptable price. Marketing starts with the determination of
consumer wants and ends with the satisfaction of these wants. Consumer oriented
firm also recognizes the need to monitor the post purchase behavior of its
customers by determining who purchased the product, whether the product was
satisfactory, and what changes in the firm’s market offering would offering would
make its products more successful.
(2) Integration of Management Function:
This element aims at integrating and coordinating the diverse functions of
marketing- viz., such activities as product development, physical distribution,
control, forecasting, pricing, advertising, selling and marketing research. To carry
on these activities successfully, their integration is a must. These activities must
also be coordinated closely with other functional areas of a business like finance,
personnel, administration, research, advertising and other departments. This
means, in other words, the formulation of a set of company goals to which
individual goals are subordinated, intending thereby that the company exists to
achieve something as a company rather than as a collection of uncoordinated
individual departments. For eg; achieving a certain percentage of profit on a certain
investment may be the company goal. In working towards the achievement of this
goal, the finance department decides how much and from which source the needed
capital is to be raised. The personnel department lays down the personnel policies
for all departments on personnel matters. Research and development will take up
only one project at a time. The production department is made aware that
obtaining low manufacturing costs is not enough, quality improvement will also be
needed. The marketing department will see that less emphasis is placed on “ high
sales volume”. And more on “ making profitable sales”. The advertising department
will launch a campaign for a new product when it is a definite that the production
department has a adequate stock. Thus, an integration and coordination of different
functions become necessary.
(3) Result-Oriented Marketing:
The new concept assumes that marketing must be result oriented. The
traditional concept was that the measure of marketing success is an increase in
sales volume. Under the new concept, sales are made more profitable by dropping
unprofitable products, territories or consumers; or devising better methods of
marketing and closely matching these to the profit potential of a particular market.
It may be stated that marketing concept constitutes the three basic
ingredients, customer orientation, integrated effort, and result direction. This is the
modern concept of marketing.
Marketing concept assumes that “the purpose of the business is to create the
satisfied customer and that profit is not a meaningful objective by itself but rather
the reward for delivering customer satisfaction. It recognizes that marketing is
more than selling, it is the total business seen from the customers view point”. It
brings customer’s needs into all areas of business decision-making as the major
criterion of business action and effectiveness. It is based on a realization that shortterm sales volume objectives are most easily achieved when all other elements of
the marketing mix have been integrated with in a longer term view of business
purpose. In Ansoff’s Phraseology, “the marketing concept takes the firm from
lagged response to anticipatory or self-triggered responses to environmental
change”.
Planning, developing strategy, systematically and scientifically selecting among
available alternatives, and controlling the operation in order to provide customer
satisfaction is also an important and essential element of marketing concept.
Other Key Marketing Concepts:
Further, Kotler has highlighted the following concepts for carrying marketing
activity and these are the (i) Production concept, (ii) Product concept, (iii) Selling
concept, and (iv) Societal-marketing concept.
(1) The Production Concept:
The production concept is one of the oldest concepts guiding the sellers.
The production concept holds that consumers will favour those products
that are widely available and low in cost. Managers of production-oriented
organizations concentrate on achieving high potential efficiency and wide
distribution coverage.
This orientation of organization is practiced in situation where demand
exceeds supply or product cost is low due to mass production.
(2) The Product Concept:
The product concept hold that consumers will favour those products that
offer most quality performance, or innovative features. Managers in these productoriented organization form their energy on making superior products and improving
them over time.
These managers follow the assumption that buyers admire well-made products
and can appraise product quality performance. A simple love affair with the
product, without adopting to the market situation, would fail to appreciate that the
market for the product might be less receptive to the new products that are tagged
with high price, but not easily available, or customer does know about them.
The product concept leads to “Marketing Myopia”, focus on the product rather
than on the customer’s need.
(3) The Selling Concept:
The selling concept holds that consumers, if left alone, will ordinarily not
biuy enough of the organization’s product. The organization must therefore
undertake an aggressive selling and promotion effort.
The selling concept is practiced most aggressively with “unsought goods,”
those goods that buyers normally do not think of buying such as donations for
voluntary organization, club membership, credit card, insurance, etc.,
(4) The Societal Marketing Concept:
The societal marketing concept holds that the organisation’s task is to
determine the needs, wants and interests of target markets and to deliver the
desired satisfactions more effectively and efficiently than competitors in a way that
preserves or enhances the consumer’s and the society’s well-being.
In recent years the emphasis is on bringing balance into three consideration
in marketing policies namely: company profits, consumer’s want satisfaction and
public interest.
Concepts
or
Philosophi
es
Production
Concept
Stage 1
Stage 2
Stage 3
Result
of Profits
Stage 1-3
Mass
production
Mass
Distribution
Product
Concept
Vague ideas
about
customer
wants
Vague ideas
about
customer
wants
Superior
Distribution
Products by without
R&D
proper
marketing
mix
Vague ideas Mass
Maximum
about
Production
use
of
customer
&
selling
wants
Distribution techniques
Analyses
Know-what Integrated
target Market customer
marketing
needs
Product
availability
at
a
low
price
Superior
performance
product
availability
Profits through
mass
Standardisatio
n
Profits through
‘marketing
myopia’
Product
availability
buyer
inertia
Product as
per
customer
requirement
s
Analyses
Study
Integrated
Product as
target Market customer
market with per
&
know needs
in ecological
customer
customer
the light of constraints
requirement
needs
ecological
s
and
impurities
ecological
constraints
Profits through
hard sell
Selling
Concept
Marketing
Concept
Societal
Marketing
Concept
Marketing Management process in the Marketing Philosophies
Profits through
customer
satisfaction
Profits through
human
satisfaction
MEANING IMPORTANCE OF MARKETING IN DEVELOPING COUNTRIES:
There is following importance of marketing in developing countries.
1. Marketing impact on people: there is no doubt all over the world that making
activities are affected by people’s beliefs, lifestyles, consumption pattern, purchase
behavior, income ,etc., Marketers help organization and businesses to develop
products, promote, price and distribute them. Consumer’s satisfaction or
dissatisfaction with these products and activities will go a long way in determining
their consumption behavior. The importance of marketing can, therefore, be felt by
the extent to which it affects mentioned demographic variables.
2. Improved Quality of Life: the activities performed by marketers and others in
the
economy of most countries, especially developed ones, help to identify and satisfy
consumer’s needs. This is because most consumers can always trace their
knowledge and persuasion stimuli as advertising, personal selling, E-commerce,
sales promotion, etc., by presenting consumers with new, better and different
brands, and option of products which can meet their needs, and helping them to
easily obtain and safely enjoy these products. Marketers principally and functionally
help to improve consumers awareness and quality of life.
3. Improved Quality of product: the importance of marketing is not being overemphasized, because contemporary firms and multinationals have now seen the
need to produce quality products. The business climate is quite different from what
it used to be in the past. Competition has become more intense, such that only fast
moving companies and multinational are surviving the heat. This is because they
have really capitalized on quality improvement in products to enhance the dynamic
consumers quest for goods and services. The advertising of own brands which
began some years back is fast becoming vogue, and compels manufactures to
improve on the quality of their products, or be prepared to be extinct.
4. Contribute to Gross National product: the strength of any economy is
measured in
terms of its ability to generate the required income within a given fiscal year or
period. Thus such a country’s GNP must appreciate overtime. Marketing is the pivot
and life-wire of any economy, because all other activities of an organization
generate costs, and only marketing activities bring in the much needed revenues.
Available data showed that advanced countries accounted for 69.1% of world
output while developing countries accounted 30.9%.
5. Acceleration of Economic Growth: marketing encourages consumption by
motivating people in a country to patronize goods produced to meet their identified
needs. When people buy goods that are produced in a country, there is the
tendency that produces will equally increase production to meet-up with future
demands. In so doing, marketing increases the tempo of economic activities,
creates wealth for serious minded entrepreneurs and accelerates the economic
growth of a nation. Thus, the more marketing philosophy is institutionalized in a
country, the more developed and wealthy the country becomes, all things being
equal.
6. Economic Resuscitation and Business Turnaround: the economy of most
developing countries have suffered a lot, passing through one economic hardship to
the next business upheaval, told and untold stories of business distress or economic
recession to mention a few. Marketing is the most meaningful means for achieving
economic resuscitation and business turnaround strategy when such occur. By
practically adopting the modern marketing philosophy ( consumer satisfaction
through integrative effort) fine-tuning its offering to meet consumer’s changing
taste or counter-competition, developing new and better products and exploiting
new markets at home or abroad; industrial and organizations can achieve economic
resuscitation and a more viable open windows for business prosperity.
7. Provide Job Opportunities: marketing provides job opportunities to millions of
people over the world. This is mostly experienced in well-industrialized countries
and emerging markets. Most people in these economies are engaged in private
endeavors as investors and entrepreneurs. Some of these marketing opportunities
are abound in areas like advertising, retailing, wholesaling, transportation,
communication, public relations, services, manufacturing, agents and brokers, etc.
it is gratifying to note that the number of jobs being created by marketing has been
increasing just as the developing process of modern technology is a contributing
factor.
FUNCTIONS OF MARKETING:
1. Determining Objectivies:
A firms activity must be goal directed. Since the objectives from the
foundation of its marketing management must first determine the goals carefully.
These goals are interpretation by management of its particular need at a given time
and place, and they guide the company’s progress in future. The main objectives
are to attain a certain amount or percentage of profit, over the long run, so that the
interests of all could be served, and also the increase in the sales. It is necessary
that these goals should be set forth clearly in writing and communicated to the
persons concerned. The goals should be realistic and relevant. Finally, the planning
and operating decisions must be in line with the goals set up by the management.
2. Planning:
After setting the goals, the next step is to determine the manner in which
these goals are to be achieved. This activity is known as planning. Without
planning, a company’s operations have no meaning and no direction. There can be
no orderly procedure in management’s pursuit of its goals. This planning may be for
short or long period and may cover a single area or many areas. Planning is
concerned with laying plans for a new product or sales forecast, or the product
distribution channel and promotional programmes. When an overall plan of action is
adopted to achieve a pre-determined marketing objective, it is known as a strategy.
To implement this strategy detailed methods and techniques are employed. This is
known as tactics.
3. Organising:
It is the process of arranging activities and the people engaged in them in
such a way as to achieve the maximum output with highest degree of efficiency.
The marketing manager must be sure that organizational policies and practices are
compatible with marketing plans and that the organization has the necessary
capabilities for achieving the marketing goals. Under his direction and guidance, the
organization drafts promotional programmes and campaigns, sets up marketing
methods and procedures and makes other decisions and takes other actions for
executing the policies and implementing the marketing plans.
4. Coordination:
The marketing concept implies coordination of all company activities which
impinge on the consumer. Within the marketing department, activities in sales,
advertising, marketing research, customer service, new product development all
require more effective coordination tying these more closely to the overall
corporate programme. Marketing can furnish sales estimates so that the production
department can better plan its work. On the other hand production department can
help marketing by manufacturing the proper quantity and quality of products at the
right time. It can also provide product information for sales training and advertising
programmes. Outside the marketing department and the company, coordination is
needed with advertising, transportation and other agencies.
5. Staffing:
One of the important functions of marketing management is to assemble
the human resources, for proper selection of personnel is the key to elimination or
substantial reduction in many management problems. Good selection may bring
about successful results even if the original planning is mediocre.
6. Operating:
Under this, the plan or the programme is implemented, for no plan is worth much
unless it is carried out effectively. This is particularly important in marketing
because success depends upon the way the business is operated. This function of
operating and directing includes operating a sales force and directing an advertising
progremme. The results of the company’s activities are analysed and evaluated to
determine whether they have been successful. This activity comprises four areas;
(i)
(ii)
(iii)
(iv)
Analysis of marketing cost by territories, products or customer groups.
The performance of the individual salesman may be evaluated.
Both manufactures and middlemen may evaluate the effectiveness of
other advertising programmes.
Individual manufacturers may want to evaluate the performance of
their middlemen.
7. Establishment of Marketing Policies:
Establishment of marketing policies is very essential for guidance executives in their
decision on marketing problems that frequently arise. Such policies afford uniform
executive action and uniform treatment to all customers, and save the executive
from unnecessary botheration. The policies, to be adopted, are made stable, yet
flexible.
MARKETING ENVIRONMENT:
According to Kotler, “Marketing Environment is the totality of forces and entities
that surround and potentially affect the marketing of a particular product”.
Marketing environment is composed of four layers;
(i)
Organisational Environment, which includes company department,
company
division, its organizational structure and company channels.
(ii)
Market Environment, which consists of all actual and potential
consumers or
Purchasers of the product. This includes the number of buyers, their purchasing
power, their needs and wants and their buying habits.
(iii)
Macro-Environment, which consists of the relevant forces and institutions
that
affect transactions between the firm and the markets, this includes the economic,
political and legal forces, social and ethical influences, technology and culture.
(iv)
Extra-Environment, which forms that part of the environment which the
Organization usually does not scan because it seems to be of “negligible or zero
relevance to the organization.
Kinds of Marketing Environment:
The marketing environment can be categorized into,
(i)
Economic or Business
(ii)
Non-Economic on Business Environment
Marketing Environment
Economic or Business
or NonEnvironment
(i) Structural anatomy of economy in
the country
cultural
(ii) Nature of economic system
(iii) Government policies
- Industrial
- Trade
- Fiscal
- Forex, economic etc.
(iv) Markets
(v) International Relations
(vi) International Trade Organizations.
Non-Economic
Business
(i) Politico-legal
(ii) Socio-political(iii) Technological
(iv) Educational
(v) Demographic
(vi) Historical
(vii) Psychographic and
psychobiological etc.
Controllable and Uncontrollable Marketing Environment Forces:
The marketing system of a firm operates within the constraints/forces of the
environment. These forces are either,
(a) External
(b) Internal to the firm
(a) The External forces are those which are generally uncontrollable, and these
must be fully given weight when marketing decisions are taken. These
external forces consist of two board categories:
(i)
Macro-Environmental forces, which lie outside the firm and generally exit
in the Surrounding environment. These forces have considerable
influences on the company’s marketing system. They relate to:
(a) Demography, (b) Economic Conditions, (c) Social and culture forces, (d) legal
and political forces, (e) science and technology, (f) Competition and (g)
Ecology. These external forces, which influences marketing opportunities,
consumer behavior and business action must be reflected in marketing
policies, plans, strategies, programmes and decisions.
(ii)
Micro-Environmental forces, are closely related to a specific company and
are Included as part of the firm’s total marketing system. They are the
suppliers, marketing intermediaries, company’s market organization, and
the market or customers.
(b) The Internal forces or non-marketing resources of the firm consist of two
groups. Viz (i) Corporate resources (human and non-human) i.e., financial
and personnel capability. R&D strength, location of the business, public
image, etc and (ii) the components of “Marketing Mix” a combination of
inputs that constitute the core of a company’s marketing system, viz., the
product, the price structure, the promotional activities, and the physical
distribution system. To these should also be added two more factors:
perception and persistence.
MACRO ENVIRONMENTAL FORCES:
1. Demography
2. Economic conditions
3. Social and Cultural Forces
4. Legal and Political Forces
5. Science & Technology
6. Competition
7. Ecology
MICRO-ENVIRONMENT FORCES:
1. Suppliers
2. Marketing Intermediaries
3. Company’s Marketing Organisation
4. Customers or Market
The internal forces are generally controllable, and known as controllable factors. By
successfully assigning different roles to these ingredients, the company is able to
influence purchases.
MACRO ENVIRONMENTAL FORCES:
1. Demography:
It consists of the details about population structure, age-groups, sexdistribution,
Income brackets, occupation, etc., and its area distribution. Without knowing this,
the marketer cannot market his product successfully-because it is the people whose
needs have to be satisfied, keeping in view their wherewithal to spend, and their
willingness to spend. Moreover, different people need different products at
particular ages, hence production has to be geared to meet the specific demand.
Demographic study offers consumer profile which is essential in market
segmentation and determination of target markets. Quantitative and qualitative
analysis of the country’s population proves the nature of consumer demand and its
quality. Therefore, usually a combination of both analysis is done which enables
marketing executives to understand the bases of market differentiation and
segmentation, and to determine marketing or people’s reaction to a new product or
an advertising campaign.
2. Economic Conditions:
Economic conditions influences the marketing organization and marketing
bothe
directly and indirectly, Directly these conditions affect marketing because such
organizations are themselves a part of the market place. In order to produce goods
and services they must first buy and consume goods and services (such as raw
materials and labour) and the prices of these are determined by economic
conditions. Indirectly, these conditions influence the individual consumers in the
market place when they purchase product and services, for consumer habits are
affected by economic conditions. Purchasing power and willingness to spend result
in effective demand, which in turn, is influenced by economic conditions.
Marketing plans and programmers are also influenced by such other
economic factors as the interest rates, money supply, price level, consumer credit,
etc., Higher interest rates adversely affect real estate market and markets for
consumer durable goods sold on hire purchase or instalment basis. Exchange
fluctuations. Current devaluation, changes in political set-up influence international
marketing, the net amount of take-home pay determines disposable personal
income, which directly influences marketing programmes.
Economic Conditions
Market
Marketing
How Economy Influences Marketing
Prosperity, recession, inflation, scarcity and stagflation also influences both
the marketing place and marketing, prosperity and recession refer to the general
state of economy: inflation, scarcity and stagflation are specific conditions that
affect the economy of a nation. Each of these economic conditions may create an
opportunity or threat to an industry.
In a period of prosperity, consumers have more disposable income and
expect to live a “good life” by making purchases of a greater variety of higher
quality and higher priced goods than before. This opportunity is seized by the
marketers who expand product lines, present different varieties of the same
product. Producers are concerned more with maximizing quality than with
minimizing operating costs, because costs can be passed on to the consumers in
the form of high price. It is assumed that with attractive advertisements an d
increased sales, profit will also rise.
PROSPERITY
RECOVERY
RECESSION
Recession is a period of decrease in the rate of growth of the economy, credit
becomes less available, the money supply decreases, and production goes down so
that demand for raw materials and labor is reduced and the purchasing power goes
down so that people buy less. Market for luxury goods and high price is hardly hit.
In Inflation period, price rise abruptly when the demand exceeds supply and
when purchasing power is greater than the goods and services in the market. Under
such conditions, only absolutely necessary products are purchased. If market
demand remains strong enough, the organization may offset the increase in its
costs by raising its prices still further, or lower down the price or improve its
product.
Scarcity refers to the condition of shortages of essential goods like cement,
edible oil, sugar, onions, petroleum or natural gas, etc. Their scarcity results in an
increased price for that commodity and for those products that can be used as an
ingredient in the production process of another product. The effect of scarcities on
marketing is both short-term (as when the demand is reduced through price rise(
and long-term (as when substitutes have to be found for the scarce produce).
Stagflation is a term which represents a combination of stagflation and
inflation. When such a situation occurs, marketing strategy has to be prepared with
great caution so that demand neither nor decreases excessively.
3. Social and Cultural Forces:
The socio-cultural environment is a broad term, encompassing within its fold
the
economic, political, legal and technological forces. The people and their values and
social patterns-life-styles, social values, beliefs, desires, knowledge, etc- are the
fundamental elements that shape the nation’s economy. Political-legal system and
the technology used.
There are three aspects of social environment:
(a) Changes in life-styles and social values of the people:
(i)
Changing role of women (from that of a house wife to a worker),
(ii) Shift
from a thrift and savings ethnic to spending freely and buying on credit, (iii)
Emphasis on quality of goods instead of quantity of goods, (iv) Greater reliance on
government and other institutions instead of self-reliance, (v) Sexual freedom and
belief in permissive society rather than in sex chastity, (vi) Greater preference to
recreational facilities rather than work, (vii) Immediate gratification instead of
postponed gratification.
(b) Major Social problems:
(i)
Greater concern for our natural environment, (ii) Need for safety in
occupations and products, (iii) Conservation of irreplaceable resources, (iv)
Marketing to slum and rural areas and other low-income group people, and (v)
Maintenance of an ethical and socially responsible marketer.
(c) Growing consumerism indicating consumer dissatisfaction since 1960.
The social and cultural forces usually influences the welfare of a business
concern in the long run. The society is always dynamic, with changing social norms
and values-as a result of which ever-increasing new demands are created, whereas
the old ones go into oblivion. To cope with these changes, marketing management
is required to make necessary adjustments in its marketing programme and
producers.
The marketers are subjected to a variety of societal forces that express what
the society wants and what it does not want. Society members expect a “high
standard of living” and a “high quality of life” (i.e., environment free from all types
of pollution). People expect business to help them get what they need; and the
marketer must supply the need. On the other hand, society does not want faculty
and unsafe products, untruthful advertising, misleading and unsupported
warranties, deceptive packages, and labels, short weight, fraudulent selling
practices, and unfair and exploitative prices. This means, that the marketer has to
be socially responsible.
Consumerism is a term applied to a whole range of activities with the basic
purposes of improving the satisfaction that the consumer gets from participation in
an exchange. Consumers are increasingly demanding more information about
product performance; protection against product failures and malfunctions; access
to alternative products for satisfying a given want and a hearing before responsible
official organizations/ government bodies when they have grievances.
Consumerism has been the result of two factors. One, rising educational
levels among consumers which have enabled them to investigate carefully and
make rational choices about product alternatives when information is available.
Two, science and technology have demonstrated that virtual miracles are possiblemen have landed on moon; human organs are transplanted, human babies can be
had in test tubes, where the parents are unfit for procreation, or voice
communication is possible with another human being almost anywhere on the earth
and so on and so forth.
Both education and technology have contributed to rising consumer
expectations concerning the ability of the products to satisfy consumer’s unitedly
resist and are increasingly vocal and militantly active about pressing for reforms.
4. Legal and Political Forces or Public Policy:
The marketing environment contains political, legal and regulatory forces/
policies including network of laws and regulations, policy decisions, government
bureaucracy, government planning, and legislative enactments and processes. All
these are referred to as the “public policy environment”.
Public policy is determined by the complex interaction of legislative
committees, government agencies, special interest groups (such as industries,
trade unions, consumer advocates, etc) and the general public. It is necessary that
marketer must understand the impact of these forces and policies. Due to improved
technology, transportation and communication, economic system has become more
complex and those who assume the risk and management of business seeks more
and more profits and larger share of markets for themselves so that consumers
begin to be hit hard. Under such circumstances, the government has to interfere
through a large number of legal and protective legislations, regulatory actions, case
decisions by the supreme/ high courts. These influences many aspects of marketing
such as product development, packaging, pricing, whole-selling, retailing, personal
selling, advertising and sales promotion. The role of monetary and fiscal policies,
import, export policies, customs duties, monopoly and trade restriction policies, and
the legislation controlling physical environment in influencing marketing is very
substantial.
Besides, court rulings and regulatory agencies also seek to provide for the
welfare of both the competitive market and the society as a whole. The increasing
complexity of this situation makes it important for marketers to understand the
public policy and develop strategies for responding to it.
The public policy affects the basic structure of marketing organizational
system. In some instances, marketing opportunities may be enhanced, in others
limited. The main effect of such a policy is to prohibit many practices that had
earlier been common regardless of their ethics. However, now unethical activities of
marketing are not looked with favour by the society and hence, every marketing
action has to be taken in conformity with the public policy.
5. Science and Technology:
Science and technology is the knowledge of how to accomplish tasks and
goals most efficiently. Technological knowledge arises from research and has a
great impact on society and on the marketing decisions and activities. They have
transformed life and living conditions, for most aspects of individual life are
influenced by results of scientific and technological developments, including work,
recreation, eating, drinking, travelling, sleep and sexual behavior. Technology has
brought a change in the life styles, and consumption patterns such as the increased
use of digital watches instead of ordinar Technology has brought a change in the
life styles, and consumption patterns such as the increased use of digital watches
instead of ordinary watches, television and video(which affected the radio and
movie industries), canned and frozen readymade foods, computers and aeroplanes,
artificial fibre textiles, anti biotic and birth control pills, etc. but at the same time
technology has also created some unwanted effects such as polluted atmosphere
and other health hazards, unemployment, mental retardation, traffic congestion
and the like.
Product development, packing, promotion, prices and distribution systems
are all influenced directly by technology. But how a particular business would make
use of how much technology, will depend upon the firms ability to use it, the
consumers ability and willingness to by technology improved products, the extent
to which it is technologically based, the degree to which technology is used as a
competitive tool, and the extent to which the business can protect resulting
technological application through patterns.
6. Competition:
Competition is regarded as essential to a healthy market and a democratic
society, for then there are many small firms which compete for business, rather
than only one firm. This situation is known as perfect or pure competition. this type
of competition is preferred because concentration of power in one
company(monopoly) or only in few companies(oligopoly) can lead to practices that
are harmful to both the economic and the political well being of a society.
In pure competition, the economist thinks often ideal market structure. The
assumptions underlying pure competition are:
(1) Product homogeneity. Product offered to the market by all suppliers are
exactly alike.
(2) Rational consumers. Consumers act so as to maximize their total satisfaction,
given their wants and buying power levels. Which are stable.
(3) Rational suppliers produces act as to maximize their profits, they do this by
making price changes since their products are exactly like the product of every
other supplier. No other marketing effort is necessary.
(4) Perfect knowledge. both suppliers and consumers have full, complete and
accurate knowledge of all prices and market conditions that obtain this
knowledge instantaneously at no cost.
(5) Market stability. There are so many producers and consumers that no
individual can affect supply or demand curves, if no major disruptions(eg:
natural disaster, war, explosive population growth) occur.
(6) Perfect mobility of resources. there are no barriers to enter into market: no
scale economics, government licenses, cost or time lapses.
Under perfect competition a market is characterized by perfect competition,
where many small firms compete, and consequently there is active price
competition. There are many buyers and sellers to react to the market changes.
The market is easy to get into and out of as supplied and demand create new
oppurtunities.
However, there are no such market in the real world.
Monopoly:
A monopoly market is characterized by a situation in which there is only one
seller, who possesses a product which consumers must accept because it has no
substitutes. The monopolists enjoy this position by virtue raw materials, or large
economies of sale. He makes marketing effort not as a competitive device, but to
expand consumer demand for his product. His market structure is unstable.
Pure monopolistic tendencies rarely occur these days.
Monopolistic competition
Under such condition, there are many sellers of relatively homogeneous
products. However, there are some product differences, so marketing efforts are
generally adopted, eg: advertising, sales promotion, branding etc. since the
consumer may respond to these non-price competitive tactics as well as changes in
price. Moreover, knowledge on the part of both consumers and suppliers is less
than perfect in this market, therefore, the intelligent, innovative and fast moving
suppliers or consumers can improve his satisfaction at the expense of other
sellers,suppliers and competitors in the market. This makes the market structure
dynamic. i.e, susceptible to change.
Oligopoly
It is a market structure in which there are few sellers whose products are
rather different from other products that might be used as substitutes. The
oligopolists generally eschew price competition-price changes are highly visible and
easily and quickly countered.
Oligopolistic situations are a reality for a large part of industry today, in
which minimum of price competition occurs.
No marketing manager would make major decision without assessing the
degree of competition in the market, for the product. Therefore, he recognizes the
force of competition in the economy, and then frames the strategic plans based on
the anticipated move of the opponent. Competitors considerably influence the
company’s choice of marketing strategies particularly in relation to its products mix,
price mix, and promotion mix. Marketing strategies are formulated to fight against
competition.
(7)Ecology
It is the study of relationship between living things and their surroundings. In
a
marketing context, it means the way in which the marketer, the producer and the
consumers relate to the environment, especially so far as the utilization of natural
resources are concerned, since the acceptance of the Societal Marketing Concept in
the sixties, responsibility rests upon the marketer and the consumer to pay due
attention to the conservation and allocation of the scarce resources properly; and
to show active and increasing interest in the improvement and welfare of
community life-through development of solutions to the problems of both
population and natural resource depletion to avoid ecological imbalances in future.
It also needs the development of improved energy-conversion systems, the
creation of efficient of mass-transit forms, and the development of effective
recycling processes.
UNIT 1
1 MARKS
1.
2.
3.
4.
5.
Marketing management is the process of -------------------Components of marketing concepts includes ---------------Write the key factors of marketing concepts ---------------Write 3 points of functions of marketing -------------------Write few points of macro environmental forces affecting the marketing function--------------
5 MARKS
1
2
3
4
5
Explain the marketing concept
Write about the Function of marketing
Explain marketing environment
What are all the micro environmental forces affecting the marketing function
Explain objectives of marketing management
8 MARKS
1
2
3
4
Explain the marketing concept with its components
Explain Function and objectives of marketing management
Write the importance of marketing management in developing countries
Explain the kinds of marketing environment
UNIT – II
BUYER BEHAVIOUR - BUYING MOTIVES - EXPLANATION OF MOTIVATION –
MARKET SEGMENTATION OF DIFFERENT BASES - MARKETING STRATEGY MARKET STRUCTURE - DEFINITION AND TYPES OF CHANNEL - CHANNEL
SELECTION & PROBLEMS.
BUYER BEHAVIOUR:
According to Webster, “Buyer behavior is all psychological, social and
physical behavior of potential customer as they become aware of, evaluate,
purchase, consume and tell other people about products and services”.
Buyer behavior is a process, which through Inputs (buying power, intra-and
inter-personal influences marketing effort, and environmental factors) and their use
through process (perfection of wants, search, purchase decision, product use, and
evaluation) and actions leads to satisfaction of needs and wants.
Walters and paul say that “Consumer behavior is the process whereby
individuals decide what, when, how and from whom to purchase goods and
services”.
Buyer behavior may by viewed as an orderly process whereby the individual
interacts with his environment for the purposes of making market decisions on
products and services.
Thus, the chief characteristics of buyer behavior are:
1. It consists of the mental and physical activities which consumers undertake
to
acquire goods and services and obtain satisfaction from them.
2. In includes both observable physical activities, such as walking through the
market
to examine merchandise, and making a purchase and mental activities- such as
forming attitudes, perceiving advertising materials and learning to prefer particular
brands.
3. Consumer behavior is very complex and dynamic too-constantly changing;
and
therefore, managements need to adjust with the change, otherwise market may be
lost.
4. The individuals specific behavior in the market place is affected by internal
factors, such as needs, motives, perception and attitudes as well as by external or
environmental influences such as the family, social groups, culture, economic and
business influences.
To achieve a better understanding of the consumer behavior, study of those
disciplines, which may provide some explanations as to “why people behave as they
do” is required. Such disciplines are economics, sociology, psychology and
anthropology. Economics explains consumer behaviour in relation to economic
factors. Sociologists and cultural anthropologists advance explanations concerning
the influences of family and group behavior upon individual behavior, the diffusion
of new products and ideas
(Innovation); among various groups, and the
impact of culture on its members. Psychologists explanations of how people learn
about products and services, the motivation that underlines buying behavior, and
the perceptions individuals have of themselves and the products they buy, lie in the
realm of psychology. The internal and external forces and influences interact in
highly complex ways, affecting the individuals total pattern of behavior as well as
his buying behavior.
BUYING MOTIVES:
Motives which induces an ultimate consumer or user, organizational
consumer or merchant buyer to purchase a product are known as buying motives.
These motives are controlled by the socio-economic and psychological and
other factors some of which operate from outside and some of which from within a
person and which impel/ stimulate him to realize his need or want; choose a
product or service that will satisfy it; select the place from where to purchase it;
and decide upon the price he will be willing to pay; and also decide upon the time
when he may actually purchase it.
The motives may range from satisfying hunger to seeking protection against
clemencies of weather and attack of wild animals, to gratification of sex urge or
that for love, curiosity, prestige, status, etc., social status, personal advancement,
and convenience may be other motives. Some of these motives may be instinctive,
while others are acquired as a result of environment, education, social status, age,
etc.,
INDIVIDUAL CONSUMER AND HIS BUYING MOTIVES:
An individual consumer is one who buys goods or services to satisfy his
personal or household wants. Such persons comprise of public or private
institutions, housewives, men and children, etc. the individual consumer is the most
important class of buyer and among it the principal customer is the family.
Individual consumers are located in villages, towns and cities.
An individual consumer purchase product for three important reasons:
(i)
He has a desire which needs to be satisfied.
(ii)
He has an urge which induces him to purchase.
(iii)
He has a reasoning.
Broadly speaking, individuals are motivated to buy by external and internal
forces.
Accordingly, the motive may be: external and internal.
External Motives: are outside oneself. Since a consumer is the product of his
environment, hence man’s attitude and behavior influences his culture and various
factors like income, occupation, religion, culture, family and social environment act
as motives.
Internal Motives: often originate in the minds of the people and are both
physical and psychological in nature. They are broadly classified into two classes:
rational, which are based on logical reasoning or thinking and emotional, which are
based on personal feelings.
CLASSIFICATION OF BUYING MOTIVES:
Various classifications are available. The simplest one is that based on
primary,
selective and patronage motives.
(a) Primary Buying Motives relate to the reasons why consumers buy one class
of goods rather than another. Such motives results directly from the needs and
wants, and include the desire to achieve recognition, physical well-being,
preservation of self-image, relaxation, beauty creation, knowledge, money gain,
etc., The seller must discover the customer’s primary motives (for they are often
unaware of these) and then direct his appeal as effectively as possible.
(b) Selective Buying Motives, relate to causes that includes a consumer to
purchase certain class or quality goods. Selection is based on such selectives as
the desire for both economy and convenience. Some of the most common selective
buying motives include desire for convenience, versatility, economy, dependability
and durability.
(c) Patronage Buying Motives are those that causes a customer to buy products
from a particular manufacturer or retailer. Important patronage motives are those
concerned with fashion, exclusiveness, dependable repairing services, convenience
of location, quality, large selections, price, friendship for or reliability of the seller,
punctuality in delivery, variety of selection, etc.
(1) Rational Motives:
These motives are based on a man’s reasoning, logic and ability and a
consideration of economic consequences. They include the immediate monetary
cost, and long-range cost affecting the buyer such as durability, depreciation,
length of usage, degree of labour needed and ultimate benefit achieved.
Prof.Copeland enumerates under such motives; handiness; depend ability
in quality and use; durability; happiness; healthfulness; efficiency in operation and
use; reliability; of auxiliary service; economy in purchase and use; enhancement of
earnings; and enhancing productivity of property.
The most important motives that are generally included under this broad
head are:
(i)
The desire for economy. The purchase that buyers make enable them to
gain
monetary gain or personal benefits or to acquire better product at a comparatively
low cost, such as when housewife goes to a cooperative store to buy a “Nutan”
Stove and the grocery needed for the family, she may also purchase ‘candles’ at a
concessional price. Purchase of Shares, and securities; and clearance sales of the
X’mas, Id, Holi, Diwali, and Dashera or any other festival are done to satisfy this
motive.
-
The appeals made are:
“Buy now-only 10% above cost”
- “Save by buying this large economy size of SURF”
- “A bumper sale at 15% discount”
- “Shop at ours, get the choicest product at the cheapest price”
- “Special Diwali discount of 50%”
(ii)
Efficiency for doing a task. Through use of mechanical device, which
reduce
the physical or mental tiresomeness in completing a task. Electric can opener, knife
sharpeners, blenders, mixers, razors, crushers and grinders in the kitchen and
automatic bottlers, sealers, stampers, packaging machines, etc., and in offices,
electric typewriters, copiers, pencil sharpeners and long-distance communication
devices are sold on this count.
Usual appeals made are:
- “Fabric that never needs ironing(for saris)”.
- “Fabrics that never shrinks if they have sanforized mark”.(suitings)
- “Push button control” (for electrical appliances)
(iii)
Dependability motive, which compels an individual to buy to satisfy his
desire to obtain “quality” goods of “reliable” and durable nature. For eg, people go
to a particular restaurant over and over again because its service and eatables
satisfy them.
The appeals made are:
- “The Firestone tyres rolls at least 3000 miles” (for car tyres).
- “It is most dependable for nutrition and purity” (Amul Ghee).
(2) Emotional Motives:
Emotional buying motives, which are based on personal feelings and cover
a wide range of irrational motives including impulses, instincts, habits and drives
and are varied in nature.
According to Prof. Copeland these motives are: emulation, pride and
ambition, economic emulation, social achievement, happy selection of gifts,
maintaining and preserving health, satisfaction of appetite, proficiency, expression
of artistic taste, ambition, romantic instinct, securing personal comfort, security
from danger, securing comfort and obtaining greater leisure, distinctiveness, desire
for-recreation and entertainment, cleanliness, pride of personal appearance,
satisfaction of physical and emotional appetites, alleviation of laborious task; and
pleasing sense of taste.
Some of the common emotional buying motives are:
(a) Attraction for opposite sex. This motive occurs in both young and old and
involves pleasing or flattering the opposite sex, or appearing attractive before the
other. Men dress in their best to appeal to women; and women put attractive
hairdos, jewellery and use pleasing perfumes on their sari and make-up in a
modern style actress only to appeal to men.
Appeals to this motive of ‘sex’ are made in marketing of almost every-thing
perfumery, cosmetics, lipsticks, deodorants, shampoos, shaving lotions, toiletries.
Corsets, imitation or real jewellery, birthday presents, clothing, automobilies, soft
drinks and even cigarettes. These appeals are usually indirect, implying that if you
buy a particular product you will be more popular with the opposite sex.
The appeals made are:
- “Every woman has a right to look younger than she is”
-
“Bold, defiant- the male scent”.
“It gives your face sex appeal”.
(b) Love and affection for others, includes a sense of duty, love for family
members and society and a desire to see justice done to oneself and others. Baby
food, ready made baby suits, toys, children’s books and insurance for children,
labour saving kitchen appliances, beautiful birth-day or marriage anniversary
presents of costly jewellery, beauty preparations, fashion goods, perfumes,
romantic and sexy novels, costly furniture and prize bonds for wife are generally
purchased to satisfy buyer’s affection motive.
Persuasive appeals such as these are often made:
- “Don’t leave your family helpless”.
- “Because you love them, protect them”.
- “Wise parents give their children good education and breeding”.
(c) Social Acceptance Motives, every individual wants to have respect and
conformation from the group to which he belongs and to escape rejection and
loneliness. The marketers take advantage of this motive and issue appeals such as
these:
- “Your neighbours shop here-you too should”.
- “It makes you nice to be near all day”.
- “It’s the ‘in’ thing to do”.
(d) Recreation and relaxation motive, vacations, sports and leisure-time
activities (indoor games or going to cinema shows, music concerts, mushairas and
kavi sammelans) are activities of the good life desired by many people. People
purchase sports and games materials, indoor games, tickets for cinema shows or
horseracing, boxing; they buy bathing suits, radio, television sets, record players,
light books and magazines to satisfy this motive.
Appeals such as the following are usually made to attract buyers:
- “Quiet heaven for you to spend your holidays-come and stay at Shalimar”.
- “Relieves all pains and brings safe and restful sleep”.
(e) Conquering Fear Motive: Fear may be for physical or psychological harm to
oneself (e.g., loss of life, health, job, reputation, friends, property). On this count,
people are included to buy seat belt, burglar alarms, door locks, lockers in banks:
life insurance or general assurance policy; home fire extinguisher pistol, exercising
machines, woolen clothings, medicines and tonics, etc.
One often comes across such appeals as:
- “Colgate ka Suraksha Chakra”.
- “Save now for the rainy day”.
- “Safety first, speed nex”.
(f) Curiosity Motive: adolescent boys and girls and even adults are curious about
certain things-such as curious, old paintings, old coins, or to know about something
which is termed as “taboo” or is prohibited-such as nude films, cabaret dances, or
sex literature.
To satisfy this urge, appeals are issued by marketers such as these:
- “For Adults only”.
- “Something new has been added-come and see”.
- “Be in the know of the Eighth wonder of the World”.
(g) Satisfaction of pride and vanity motives: People like to feel important in the
society, among friends, in associations and clubs, to get admiration and achieve
status symbols which feed their vanity. For all this, ladies purchase costly
costumes, jewellery or join expensive clubs; go to theatres and purchase products
of arts; have improvements and expensive home decoration objects. Men purchase
television, refrigerators, costly furnitures, coolers, scooters and cars, fancy ties,
after shave lotions, perfumes, and other variety goods.
This motive is appealed through use of such advertisements:
- “Be the first to own one”.
- “Here is something for you lady who want to win your hub”.
- “Designed exclusively with you in mind”.
(h) Emulate Motive, many people are motivated to buy what is reported to be
used by persons whose opinions people honour. For eg, a new company may try to
hire highly respected leaders as Corporate Directors to entrap the investors to buy
its shares. Five star hotels may imply that film artists patronize them. Popular
entertainers, atheletes, film actors/ actresses or some important personality may
be requested to give testimonial about the use of the product and that is utilized for
creating demand for that product.
(i) Comfort and Convenience Motive plays an important part in the sale of luxury
articles, labor savings devices and innumerable conveniences at home, at work and
in recreation, such as gas oven; stoves, pressure cookers, electric irons, lounge
chairs, sofa set, sofa bed, good nourishing and tasty food, some type of
conveyance, air conditioners, washing machines etc.
Mortimer gives ten kinds of convenience to be reckoned with in marketing:
(1) From, i.e., products must be available in a wide variety of form. The drug
products, for eg, may come in liquid, paste, syrup, powder, pill or inhalant form.
(2) Quantity or units: Goods must be offered in all sizes, quantities or units
desired by the consumer.
(3) Time: Products must be available at the time the consumer wants them.
(4) Place: Sellers must offer opportunities to consumers for shopping in the mos
convenient locations possible.
(5) Packaging: Packages must be easy to find, open, use and store.
(6) Combination or “packaging” convenience is found in service industries.
(7) Automation: Many consumers dream of push button home.
(8) Credit: Instalment and credit purchases of furniture, appliances, radios, and
other time saving devices, where products are purchased now and paid in
furure.
(9) Selection: A seller must offer his products at convenient prices and in an
assortment of colours, materials, or flavours.
(10)
Readiness: Everthing one purchases must be ready and easy to use.
(3) Patronage Motives:
These motives explain why a consumer purchases a product only from one
seller
rather than another. The key patronage motives are:
(1) Price: The budget of an individual being limited, he would like to purchase
cheap
or at discount. So “price appeals” attract them, such as:
- “price slashed by 50%”
- “Old price Rs.135/- Today’s price Rs.50/- only. Rush and make a choice
before the stock runs short”.
- “price right for quick sale”.
(2) Location: Being nearer to one’s residence or at a walkable distance, induces
people to buy from a particular store which may say:
- “Five conveniently located cooperative stores watiting to serve you. Come
and be satisfied”.
- “Located in the heart of city, accessible from all sides”.
(3) Quality Consciousness appeals to some customers to buy standard quality
goods, even if costly. The appeals usually made are:
- “Our products are priced bit higher because quality is so much better”.
- “We guarantee money back, if quality is found inferior”.
- “The quality goes in before the name goes on”.
- “we guarantee every product we sell”.
(4) Services like credit, home delivery, good gift, attractive wrapping, easy
returns, guarantees, and free installations, maintenance and technical
assistance help in attracting and holding a clientele.
Appeals such as these appear:
- “All this at no extra cost”.
- “We services what we sell”.
- “Free home delivery within the town”.
(5) Integrity of the merchant also attracts buyers, especially in case when the
product is an intangible( such as insurance, security or pest control), or when
Post-sale service is likely to be needed (as in the case of automobiles) e.g.,
“Bajaj’s Scooters the most trusted name in scooters”.
(6) Variety of goods at one place, saves time and energy in marketing.
Appeals like these attract buyers:
- “We have the largest selection in town”.
- “See our complete line of latest fashions in maxis, bikinies and bras”.
(7) Likeable and competent personnel. i.e., sympathetic and helpful salesmen
and clerks do attract customers. Many marketers stress that services of
trained experts are available, and they assure the buyers by saying.
- “You are never a stranger when you shop with us”.
- “The friendliest place in town to shop for you-visit once and be convinced”.
EXPLANATION OF MOTIVATION:
Motivation is an intrinsic response; it comes from inside and cannot be
imposed from the outside, and comes from wanting to do something of one's own
free will. It is the most overlooked aspect of instructional strategy, and perhaps the
most critical element needed in individual's life.
Motivation is a driving force. In order to accomplish anything, you need a
driving force, otherwise nothing will happen. It is cultivated by actively practicing
the skill of positive (non-critical) thinking. It is a powerful tool to help you succeed
in your life or business. And how motivated you are and continue to make forward
progress will determine whether you succeed or not.
A motivating condition may be defined as an emotion, desire, physiological
need, or similar impulse that acts as an incitement to action. And is the set of
processes that moves a person toward a goal. Thus, motivated behaviors are
voluntary choices controlled by the particular individual.
Most theories of learning are a concept of motivation and are closely related
to arousal, attention, anxiety, and feedback/reinforcement. It is inducing others in a
specific way towards goals specifically stated by the motivator and is an energizer
of behavior plus mother of all action. It results from the interactions among
conscious and unconscious factors such as the (1) intensity of desire or need, (2)
incentive or reward value of the goal, and (3) expectations of the individual and of
his or her significant others.
Extrinsic Motivation
Extrinsic motivation can help you get through the day-to-day efforts, but it should
be used sparingly. A child gets much more out of intrinsic motivation which is
closely related and long-term in nature. Extrinsic motivators are not as effective as
intrinsic ones, so being self-motivated gives you a better chance at succeeding.
Extrinsic motivators, on the other hand, involve prior assessment of the
environment each time in order to determine the activity needed to achieve the
desired end. But if an individual is unable to identify the necessary "trigger"
activity, extrinsic motivators are the logical first-step.
Motivation is intrinsic (internal); it comes from within based on personal interests,
desires, and need for fulfillment. However, extrinsic (external) factors such as
rewards, praise, and promotions also influence motivation. It is an individual matter
and one needs to know and understand the individuals that are to be motivated
because most individuals have their own goals and aspirations.
Motivation and Motivation Theory
The term motivation is derived from the Latin word movere, meaning "to move."
Motivation can be broadly defined as the forces acting on or within a person that
cause the arousal, direction, and persistence of goal-directed, voluntary effort.
Motivation theory is thus concerned with the processes that explain why and how
human behavior is activated.
The broad rubric of motivation and motivation theory is one of the most frequently
studied and written-about topics in the organizational sciences, and is considered
one of the most important areas of study in the field of organizational behavior.
Despite the magnitude of the effort that has been devoted to the study of
motivation, there is no single theory of motivation that is universally accepted. The
lack of a unified theory of motivation reflects both the complexity of the construct
and the diverse backgrounds and aims of those who study it. To delineate these
crucial points, it is illuminating to consider the development of motivation and
motivation theory as the objects of scientific inquiry.
HIERARCHY OF NEEDS:
Abraham Maslow developed a theory of motivation- Holistic-Dynamic theory,
which focuses the points of view of different schools of psychological thought, and
which conforms to know clinical observational and experimental facts. He identified
a hierarchy of needs. He postulated that “ At any given time a person may be faced
with a number of motives, but that he probably cannot act on all of them at the
same time. Therefore, each person has a hierarchy of motivates, with the motivates
arranged in assending order according to their importance. The most urgent
motivates in acted upon first. Motivates representing wants and desires, lower in
hierarchy, remain unsatisfied atleast temporarily”. Maslow list human needs.,
(i) The Physiological Needs, which include needs for satisfying hunger, thirst,
sleep, shelter and sex gratification. These are the most basic needs and until
they are satisfied, other needs are of little importance.
(ii) The Security Needs, are related to economic and social security such as
economic security, production and family stability.
(iii)
The Social Needs, to be satisfied to avoid frustration and
maladjustments in life. These relate to affection and belongings to a group,
love, acceptance by some one.
(iv)
The Esteem Needs, comprise of self esteem, a high evaluation of selfrespect, prestige, status and esteem of others in society, fulfillment of these
needs provides a feeling of self confidence and usefulness to the group,
failure to fulfill these needs produces felling of inferiority and helplessness.
(v) The Need for Self-Actualisation, in the desire to achieve the maximum of
one’s capabilities its fulfillment depends upon the prior fulfillment of the more
basic needs.
(vi)
The desire to know and understand refers to the process of searching
for meaning in things around us.
(vii)
The Aesthetic Need which may not appear to the present among many
individuals because of their failure to satisfy mare basic needs but among
others the need for beauty in important.
The marketing manager may be successful in making good business if his
products have the ability to satisfy several needs of an individual. Therefore,
marketing both encomphasis and address itself to the full range of human
needs. The most basic needs are directly related to the immediate function of
the products and services that marketers provide. As one ascents the ladder of
needs, one finds that the input of marketing becomes more and more subtle.
Product design and advertising for every thing promise love and acceptance;
and the need of self-actualisation is encouraged with cultural programs of
various sorts.
The basic creative, natural or existence bonds are the starting point of the
economic progress. Theses wants are generally recurring. Soon after being
stilled appetite develops a new. Satisfaction of such wants is necessary in the
life of the individual and of the group is to continue, unhampered. These wants
vary according to age, sex, mode of life habitat, individual, constitution and
racial characteristics.
On the other hand, cultural and social needs add more refined and
sophisticated desire to the basic wants. Such wants are neither subject to
minima or maxima set by nature nor are consist are recurring. Wants related to
enjoyment, love, affection, respect, reputation, prestige, esteem, beauty, color,
luster, taste, recreation, etc., All belong to this type.
In terms of physiological development, “Physiological needs”, are more
important, but as they are fulfill they began to tapper of, and attention turns to
“safety needs”. As they are fulfilled, ”belongingness and love needs” become
potent. In industrial societies, most of the physiological and safety needs are
largely fulfilled. On the other hand, few people reach self-actualisation.
MARKET SEGMENTATION OF DIFFERENT BASES:
MARKET SEGMENTATION:
Market segmentation is the identification of portions of the market that are
different from one another. Segmentation allows the firm to better satisfy the needs
of its potential customers.
THE NEED FOR MARKET SEGMENTATION:
The marketing concept calls for understanding customers and satisfying their
needs better than the competition. But different customers have different needs,
and it rarely is possible to satisfy all customers by treating them alike.
Mass marketing refers to treatment of the market as a homogenous group
and offering the same marketing mix to all customers. Mass marketing allows
economies of scale to be realized through mass production, mass distribution, and
mass communication. The drawback of mass marketing is that customer needs and
preferences differ and the same offering is unlikely to be viewed as optimal by all
customers. If firms ignored the differing customer needs, another firm likely would
enter the market with a product that serves a specific group, and the incumbant
firms would lose those customers.
Target marketing on the other hand recognizes the diversity of customers
and does not try to please all of them with the same offering. The first step in
target marketing is to identify different market segments and their needs.
REQUIREMENTS OF MARKET SEGMENTS:
In addition to having different needs, for segments to be practical they should
be evaluated against the following criteria:
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Identifiable: the differentiating attributes of the segments must be
measurable so that they can be identified.
Accessible: the segments must be reachable through communication and
distribution channels.
Substantial: the segments should be sufficiently large to justify the resources
required to target them.
Unique needs: to justify separate offerings, the segments must respond
differently to the different marketing mixes.
Durable: the segments should be relatively stable to minimize the cost of
frequent changes.
A good market segmentation will result in segment members that are internally
homogenous and externally heterogeneous; that is, as similar as possible within the
segment, and as different as possible between segments.
BASES FOR SEGMENTATION IN CONSUMER MARKETS:
Consumer markets can be segmented on the following customer characteristics.
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Geographic
Demographic
Psychographic
Behavioralistic
1. Geographic Segmentation
The following are some examples of geographic variables often used in
segmentation.
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Region: by continent, country, state, or even neighborhood
Size of metropolitan area: segmented according to size of population
Population density: often classified as urban, suburban, or rural
Climate: according to weather patterns common to certain geographic
regions
2. Demographic Segmentation
Some demographic segmentation variables include:
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Age
Gender
Family size
Family lifecycle
Generation: baby-boomers, Generation X, etc.
Income
Occupation
Education
Ethnicity
Nationality
Religion
Social class
Many of these variables have standard categories for their values. For example,
family lifecycle often is expressed as bachelor, married with no children (DINKS:
Double Income, No Kids), full-nest, empty-nest, or solitary survivor. Some of these
categories have several stages, for example, full-nest I, II, or III depending on the
age of the children.
3. Psychographic Segmentation
Psychographic segmentation groups customers according to their lifestyle.
Activities, interests, and opinions (AIO) surveys are one tool for measuring lifestyle.
Some psychographic variables include:
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Activities
Interests
Opinions
Attitudes
Values
4. Behavioralistic Segmentation
Behavioral segmentation is based on actual customer behavior toward
products. Some behavioralistic variables include:

Benefits sought
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Usage rate
Brand loyalty
User status: potential, first-time, regular, etc.
Readiness to buy
Occasions: holidays and events that stimulate purchases
Behavioral segmentation has the advantage of using variables that are closely
related to the product itself. It is a fairly direct starting point for market
segmentation.
BASES FOR SEGMENTATION IN INDUSTRIAL MARKETS:
In contrast to consumers, industrial customers tend to be fewer in number
and purchase larger quantities. They evaluate offerings in more detail, and the
decision process usually involves more than one person. These characteristics apply
to organizations such as manufacturers and service providers, as well as resellers,
governments, and institutions.
Many of the consumer market segmentation variables can be applied to
industrial markets. Industrial markets might be segmented on characteristics such
as:
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Location
Company type
Behavioral characteristics
1. Location
In industrial markets, customer location may be important in some cases. Shipping
costs may be a purchase factor for vendor selection for products having a high bulk
to value ratio, so distance from the vendor may be critical. In some industries firms
tend to cluster together geographically and therefore may have similar needs within
a region.
2. Company Type
Business customers can be classified according to type as follows:
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Company size
Industry
Decision making unit
Purchase Criteria
3. Behavioral Characteristics
In industrial markets, patterns of purchase behavior can be a basis for
segmentation. Such behavioral characteristics may include:
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Usage rate
Buying status: potential, first-time, regular, etc.
Purchase procedure: sealed bids, negotiations, etc.
MARKETING STRATEGY:
Marketing strategy is a process that can allow an organization to concentrate its
limited resources on the greatest opportunities to increase sales and achieve a
sustainable competitive advantage.
Types of strategies:
Marketing strategies may differ depending on the unique situation of the individual
business. However there are a number of ways of categorizing some generic
strategies. A brief description of the most common categorizing schemes is
presented below:
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Strategies based on market dominance - In this scheme, firms are classified
based on their market share or dominance of an industry. Typically there are
four types of market dominance strategies:
o Leader
o Challenger
o Follower
o Nicher
Porter generic strategies - strategy on the dimensions of strategic scope and
strategic strength. Strategic scope refers to the market penetration while
strategic strength refers to the firm’s sustainable competitive advantage. The
generic strategy framework (porter 1984) comprises two alternatives each
with two alternative scopes. These are Differentiation and low-cost leadership
each with a dimension of Focus-broad or narrow.
o Product differentiation (broad)
o Cost leadership (broad)
o Market segmentation (narrow)
Innovation strategies - This deals with the firm's rate of the new product
development and business model innovation. It asks whether the company is
on the cutting edge of technology and business innovation. There are three
types:
o Pioneers
o Close followers
o Late followers
Growth strategies - In this scheme we ask the question, “How should the
firm grow?”. There are a number of different ways of answering that
question, but the most common gives four answers:
o Horizontal integration
o Vertical integration
o Diversification
o
Intensification
A more detailed scheme uses the categories:
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Prospector
Analyzer
Defender
Reactor
Marketing warfare strategies - This scheme draws parallels between
marketing strategies and military strategies.
Strategic models:
Marketing participants often employ strategic models and tools to analyze
marketing decisions. When beginning a strategic analysis, the 3Cs can be employed
to get a broad understanding of the strategic environment. An Ansoff Matrix is also
often used to convey an organization's strategic positioning of their marketing mix.
The 4Ps can then be utilized to form a marketing plan to pursue a defined strategy.
There are many companies especially those in the Consumer Package Goods
(CPG) market that adopt the theory of running their business centered around
Consumer, Shopper & Retailer needs. Their Marketing departments spend quality
time looking for "Growth Opportunities" in their categories by identifying relevant
insights (both mindsets and behaviors) on their target Consumers, Shoppers and
retail partners. These Growth Opportunities emerge from changes in market trends,
segment dynamics changing and also internal brand or operational business
challenges. The Marketing team can then prioritize these Growth Opportunities and
begin to develop strategies to exploit the opportunities that could include new or
adapted products, services as well as changes to the 7Ps.
Developing a marketing strategy
Marketing strategies serve as the fundamental underpinning of marketing
plans designed to fill market needs and reach marketing objectives. Plans and
objectives are generally tested for measurable results. Commonly, marketing
strategies are developed as multi-year plans, with a tactical plan detailing specific
actions to be accomplished in the current year. Time horizons covered by the
marketing plan vary by company, by industry, and by nation, however, time
horizons are becoming shorter as the speed of change in the environment
increases. Marketing strategies are dynamic and interactive. They are partially
planned and partially unplanned. See strategy dynamics.
Marketing strategy involves careful scanning of the internal and external
environments which are summarized in a SWOT analysis. Internal environmental
factors include the marketing mix, plus performance analysis and strategic
constraints. External environmental factors include customer analysis, competitor
analysis, target market analysis, as well as evaluation of any elements of the
technological, economic, cultural or political/legal environment likely to impact
success. A key component of marketing strategy is often to keep marketing in line
with a company's overarching mission statement. Besides SWOT analysis, portfolio
analyses such as the GE/McKinsey matrix or COPE analysis can be performed to
determine the strategic focus.
Once a thorough environmental scan is complete, a strategic plan can be
constructed to identify business alternatives, establish challenging goals, determine
the optimal marketing mix to attain these goals, and detail implementation. A final
step in developing a marketing strategy is to create a plan to monitor progress and
a set of contingencies if problems arise in the implementation of the plan.
MARKET STRUCTURE:
In economics, market structure (also known as the number of firms producing
identical products).
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Monopolistic competition, also called competitive market, where there are a
large number of firms, each having a small proportion of the market share
and slightly differentiated products.
Oligopoly, in which a market is dominated by a small number of firms that
together control the majority of the market share.
Duopoly, a special case of an oligopoly with two firms.
Oligopsony, a market, where many sellers can be present but meet only a
few buyers.
Monopoly, where there is only one provider of a product or service.
Natural monopoly, a monopoly in which economies of scale cause efficiency
to increase continuously with the size of the firm. A firm is a natural
monopoly if it is able to serve the entire market demand at a lower cost than
any combination of two or more smaller, more specialized firms.
Monopsony, when there is only one buyer in a market.
Perfect competition is a theoretical market structure that features unlimited
contestability (or no barriers to entry), an unlimited number of producers and
consumers, and a perfectly elastic demand curve.
The imperfectly competitive structure is quite identical to the realistic market
conditions where some monopolistic competitors, monopolists, oligopolists, and
duopolists exist and dominate the market conditions. The elements of Market
Structure include the number and size distribution of firms, entry conditions, and
the extent of differentiation.
These somewhat abstract concerns tend to determine some but not all details of
a specific concrete market system where buyers and sellers actually meet and
commit to trade. Competition is useful because it reveals actual customer demand
and induces the seller (operator) to provide service quality levels and price levels
that buyers (customers) want, typically subject to the seller’s financial need to
cover its costs. In other words, competition can align the seller’s interests with the
buyer’s interests and can cause the seller to reveal his true costs and other private
information. In the absence of perfect competition, three basic approaches can be
adopted to deal with problems related to the control of market power and an
asymmetry between the government and the operator with respect to objectives
and information: (a) subjecting the operator to competitive pressures, (b)
gathering information on the operator and the market, and (c) applying incentive
regulation.
Quick Reference to Basic Market Structures
Seller
Entry Seller
Market Structure
Barriers
Number
Perfect Competition No
Many
Monopolistic
No
Many
competition
Oligopoly
Yes
Few
Oligopsony
No
Many
Monopoly
Yes
One
Monopsony
No
Many
Buyer
Barriers
No
Entry Buyer
Number
Many
No
Many
No
Yes
No
Yes
Many
Few
Many
One
The correct sequence of the market structure from most to least competitive
is perfect competition, imperfect competition, oligopoly, and pure monopoly.
The main criteria by which one can distinguish between different market
structures are: the number and size of producers and consumers in the market, the
type of goods and services being traded, and the degree to which information can
flow freely.
DEFINITION AND TYPES OF CHANNEL:
MARKETING CHANNEL’S DISTRIBUTION:
American Marketing Association defines a channel of distribution as “the
structure of intra company organization units and extra ordinary company agents
and dealers, wholesale and retail, through which a commodity, product or service in
marketed”. In other words, it is the sequential linkage of institutions and
relationships through which a product flows from the producer to the consumer.
Distribution is concerned with various activities, such as the movement and
shortage of goods, the legal, promotional, and financial activities involved in the
transfer of ownership from the producer to the consumer or user. A channel of
distribution for a product is the route taken by the route taken by the title to goods
they move from the producer to ultimate consumer or industrial user.
We can define the distribution channel as the movement of goods and
services between point of production and the point of consumption through
organization that perform a variety of marketing activities. The major participants
in the distribution channel are: products, intermediaries and consumers. The
producers produce the food and services of the type needed by the consumers or
industrial users. The intermediaries (wholesalers, retailers and facilities) direct the
products and service to consumers. The consumers are the ultimate link in the
channel for whom goods are produced, and who purchase them. Each of these
three participants has a state in the distribution channel and contributes to its
operation.
TYPES OF CHANNEL:
The structure of a marketing channel describes the arrangement and linkage
of its members. The number of distribution paths that consumer wants and the
company can design is very large. The various stages in a channel are composed of
merchants (including producers and agents who have managerial responsibility for
a product as it moves to the channel. The manufacturer or producer may select, are
for his use, any channel.
Channels of Distribution may be of Two types:
1. Conventional and
2. Vertical.
1. Conventional Marketing Channels:
Conventional distribution channels are the channels so called because it is
assumed that each enterprise in the channel is separately owned and operated
concern in other words, these are the channels in which the participants operate on
the basis of self-interest, concerned only with the organization from when the buy
and to whom they sell. The conventional channel of distribution could again be
categorized into two categories,
(a) For consumer products
(b) For industrial products.
(a) Conventional Channel for Consumer Products:
In conventional channel of distribution, generally four channel designs are
important, which are involved in distribution., viz.,
i.
Producer manufacturer-Consumer or zero level channel are direct channel, in
which there is no intermediary. Sales are made directly to consumers, either by
mail or by house-to-house visits of the producers salesmen. This channel is
frequently used in; (a) Perishable goods (Bakery goods, Fruits, Vegetables, Eggs)
(b) High priced products (Encyclopaedias, Expensive Electrical or other household
appliances), for eg., Pagers, Cell phones or Aquaguard by Eureka Forbes and (c)
Cosmetics and perfumes, for eg., when lakme introduced new range it used
extensive direct sales approach. Direct distribution is used when aggressive selling
in needed to push up a new product. When product benefits can be effectively
demonstrated and to reach specific target markets.(as housewives).
ii.
Producer-Retailer-Consumer Channel or One Level Cannel, is used where the
goods to be sold are speciality goods (such as high fashion clothing) or high-class
shopping goods. Distribution here takes place, through retail shops of the
manufacturer, as in case of Bata Shoe Company, or Bombay Dyeing Mills., or Tata
Steel. In this type of distribution channel, the manufacturer is always in constant
touch with trends in the demand, so that it could be immediately fulfilled; and if the
demand happens to be high and supply, short the manufacturer often dictates the
retailer’s pricing. Promotional and personal selling policies.
Consumer
Manufacturer
Manufacturer
Manufacturer
Consumer
Retailer
Manufacturer
Wholesaler
Agent
Middlemen
Wholesaler
Retailer
Retailer
Consumer
Consumer
iii.Manufacturer-Wholesaler-Retailer-Consumer Channel or Two level channel which
is the most widely used channel which is often used by relatively small
manufacturers with a limited product line who sell to a widely dispersed market.
Here the manufacturer uses the services of the intermediaries to reach the retail
market.
(b) Channel for Industrial Products:
Industrial goods are distributed by manufacturers through four important
channels, although they may also use their sales branch or sales offices for the
purpose.
1. Producers-Industrial User, through this direct channel are sold large installations
like generators, heating plants, etc., to the users.
2. Producer-Industrial distributor-User, through which channel are sold operating
suppliers and small accessory equipment, such as building materials, construction
equipment, air-conditioning equipment.
3. Producer-Agents-Users, channel is often used when a new product in introduced,
or a new market in entered.
4. Producer-Agents-Industrial distributors- Users.
Before choosing a channel design, the marketers must know what factors affect
the marketing of a product and what institutions are available to perform marketing
tasks.
Channel normally describe a forward movement of products. One can also talk
about backward channels.
2. Vertical Integrated Marketing Channels (VMS):
These channels are so termed because they involve the coordination of various
organizational levels. Such channels are managed by professionals.
They save money for marketers by virtue of their large size, bargaining power
and elimination of duplication of services. The best eg., of such channels is the
travel industry, which have alliances with chains of hotels (of all types) and airlines.
According to MC Cammon Vertical Marketing System could be categorized as
“Professionally managed and centrally programmed networks, pre-engineered to
achieve operating economics and maximum market impact.
There are three types of vertically integrated marketing channels:
Corporate system, contractual system, and administered system.
i). Corporate System, in which a single firm owns both production and distribution
facilities, Bata, Modis or Tatas with their own production units and retail shops are
the best representative of the system. This system gives maximum control over
marketing of its products.
ii). Contractual System, under which independent firms are employed on a
voluntary basis to develop a more efficient distribution system. This system works
through franchises or retail co-operatives, or voluntary chains. If herein one of the
members of the system develops a total marketing approach that can be used by
all other members of the system to handle such support services as central buying,
advertising and financing.
iii). Administrative Systems, where a manufacturer controls the marketing of a
particular line of merchandise rather than a complete store operation. Thus it is
possible to do because of its financial strength, its management talent or popularity
of its product line. The system reduces friction within the distribution network.
UNIT 2
1MARKS
1.
2.
3.
4.
5.
What do you mean by buyer behavior?
Write the three reason for purchasing the product
Explain the term motivation
Write the steps in hierarchy needs
What do you mean by market segmentation
5 MARKS
1. Explain about Maslow’s hierarchy of need
2. Write the requirements of market segmentation
3. Write about the bases for segmentation in consumer markets
4. Write about the bases for segmentation in industrial markets
5. write the types of market strategy
8 MARKS
1.
2.
3.
4.
5.
Explain the market structure
Explain the marketing channels and its types
Explain market segmentation
Explain the kinds of buying motives
Write about the bases for segmentation in consumer and industrial
markets
UNIT – III
THE PRODUCT-MARKETING CHARACTERISTICS -CONSUMER GOODSINDUSTRIAL GOODS- PRODUCTION POLICY - PRODUCT LIFE CYCLE (PLC) PRODUCT MIX - MODIFICATION & ELIMINATION – PACKING DEVELOPING NEW PRODUCTS- STRATEGIES.
THE PRODUCT:
A product is central to the marketing operation in any organization. The term
‘product’ has defined in narrow as well as broad sense. In a narrow sense, it is
simply a set of tangible physical and chemical attributes assembled in an identified
and readily recognizable form. In a broader sense, it recognizes each separate
brand as a separate product.
According to Stanton, “a product is a set of complex of tangible and
intangible attributes, including packaging, color, price, manufacture’s prestige,
retailer’s prestige and manufacture’s and retailer’s services which buyer accept as
offering satisfaction of wants or needs.”
According to Kotler, “a product is anything that can be offered to a market
for attention, acquisition, user or consumption that might satisfy a want or a need.
A product is anything that one receives in an exchange transaction; a
complexity of tangible and intangible attributes including functional, social and
psychological utilities of benefits may be part of the product. The production can be
idea, service, goods or any combination of these three. This definition includes
goods and supporting services such as installation, guarantees, production
information and promises of a repair or maintenance. Goods assist with mechanical
and functional tasks. Ideas provide psychological stimulation and product images
may aid individuals in social integration and personal adjustment.
From these definitions it may be inferred that:
(i)
It can be a single commodity or a service; a group of commodities or a
group
of services; a product service combination or even a combination of several
products and services.
(ii)
The meaning of the product is determined by the needs and desires of
the
consumer. The purpose of a product is to satisfy some needs of the consumers such
as when the consumer buys perfumes or cosmetics he buys beauty, not ‘Intimate’,
‘ponds cold cream’ or ‘mascara’. The industrial buyers purchase problem- solving
and time for creativity not computer system.
(iii)
The product may be durable (such as those that are expected to deliver a
stream of satisfaction over a period of time. E.g., a watch, a radio or a typewriter)
or it may be non-durable (such as an apple, cream, a sports, shirt., etc).
(iv)
They may be luxuries (which might be needed as a symbol of prestige and
status such as a television, a well-furnished bungalow in a posh colony) or
necessities (which are needed to keep the body and soul together, such as bread).
MARKETING CHARACTERISTICS:
Most previous work on advertising in economics has not addressed what
information ads impart or congestion of the advertising channel used by firms to
reach prospective consumers. The intellectual contribution of the proposal is in
describing what is advertised and where and evaluating the corresponding
economic performance. The broader impact is in deepening the economics of
marketing.
The first part of the proposal focuses on congestion in advertising
communication. The model views a consumer as a common property resource that
is "fished" by advertisers vying for attention. Market interaction involves message
receivers responding to average consumer surplus in messages, while the number
of senders is determined by zero profit for the marginal sender. The equilibrium
implies a potentially large discrepancy with the optimal allocation. The framework
applies to unsolicited messages such as "junk" mail, "spam" email, and
telemarketing calls. Policy issues include postage rates on bulk mail and the Do Not
Call program for telemarketing. A rise in the message transmission price may
improve welfare by screening out the worst quality offers, and that this may make
the consumer more receptive to unsolicited offers, so leading to further welfare
improvements. Allowing households to opt out with a Do Not Call program is better
than an outright ban but may lead to excessive numbers opting out (since they do
not account for advertiser surplus in their private decisions). The model provides a
template for looking at which products are advertised through which media (e.g.,
bulk mail, telemarketing, email) and so to describe firms' choice of marketing
channel.
The second part assumes that advertising may enhance consumer valuation of
characteristics. However, when a firm advertises a characteristic of its product, this
also raises the perceived quality of other rival products that have the characteristic.
There are thus positive externalities in advertising (a "Raise-all-boats" effect) as
well as the more traditional negative externalities from business stealing that come
from advertising of products with dissimilar characteristics. One preliminary result
from this analysis is that at most one firm will advertise any characteristic. The
analysis is also useful for rephrasing the theory of product differentiation in terms
of patterns of complementary qualities: The "Lancaster" theory of demand can also
be
reframed
from
this
perspective.
The third part takes off from previous research with Renault on "Advertising
Content." That paper considers a (monopoly) firm's incentives to provide
informative advertising about the good it is selling and shows that a firm would like
to be sparing with the information communicated in an ad. The proposed research
looks at advertising used to help launch a new product and the response of an
incumbent that may indulge in "negative" advertising that informs prospective
consumers about features the entrant might rather not divulge. The welfare
economics of a ban on negative advertising are addressed here, and suggest that a
ban may be detrimental to welfare because it stifles information under some
circumstances despite possible adverse price effects. This research vein also adds
to earlier work by considering the type of characteristics advertised by firms. Initial
results suggest that vertical "quality" characteristics tend to be advertised before
horizontal characteristics and prices enter the equilibrium mix of characteristics
communicated.
CONSUMER GOODS:
These are those goods which are destined for use by the ultimate consumers
for their personal or household use and are in such form that they can be consumed
by them without their further commercial processing. Such goods are directly used
by individuals, firms and others. Ultimate consumers are satisfying strictly nonbusiness wants, and they constitute “Consumer Market”. A mother may buy food,
toffees, toys or clothing and the family members or child may use these. They may
be classified into three broad classes/types, viz.
(1) Convenience Goods. Two significant characteristics of convenience goods are
that
the consumer is completely aware/familiar with the particular product that he/she
wants before buying it; and that it is purchased with a minimum of effort. As he
purchases them frequently he wants them at places that are easily accessible. Such
goods typically have a low unit price, are not bulky, are not greatly affected by fad
and fashion. Among the well-known brands, one is not usually strongly preferred
over the often buys the one most accessible in the neighbourhood localities.
Groceries, magazines, stationery articles, biscuits, bread and staple canned juices,
candy, cold drinks, drug, cigarettes, sundries such as tooth paste, cosmetics, soap,
perfumery and shaving accessories, staple hardware items, such as light bulbs,
flashlight batteries, gasoline, etc.
(2) Shopping Goods. These goods are of such importance to the consumer that
he is
willing to devote some time in comparing their price, quality, style, etc, in different
shops before making the final selection. In other words, they are purchased after
some shopping. They are needed less frequently than consumer goods. Either they
involve a large cost per unit and thus represent an important outlay or they have a
special significance to the purchaser. They are generally available in a particular
shopping centre where the goods of the same type are sold. Eg., of shopping goods
are women’s apparel, men’s ready-to-wear, shoes, jewellery, furniture, articles of
decoration and gifts, etc.
(3) Speciality Goods. These are the goods which enjoy some unique
characteristics or
brand identification, for which a significant group of buyers are habitually willing to
make a special purchasing effort. For such goods, buyers have complete knowledge
before they purchase them.
The special feature of such goods is that buyers will accept only one brand.
They
are willing to forgo more accessible substitutes in order to find their choice brand,
even though this may require a significant expenditure of time and effort.
Speciality goods are generally high-priced and judged on the basis of their
quality
and reputation of the manufacturer. They include radios, cameras, refrigerators and
coolers, automobiles, fancy goods, televisions, pedestal or ceiling fans,
photographic equipment, fancy groceries, health foods, expensive man’s ready to
wear and home appliances, etc.
Such goods are marketed by costly departmental stores, resort and exclusive
five
star hotels, etc.
OTHER CLASSIFICATION OF CONSUMER GOODS:
Consumer goods may also classified as;
1. Impulse Goods. These are low unit value products with little or no
forethought.
Products displayed near bus stands, railway platforms, supermarkets, drug stores,
etc, are impulse goods. People see them, immediately make up their minds to buy
them and do buy them. A shoe shine is frequently an impulse services.
2. Emergency Goods. Are those which are not totally planned purchases but for
some
urgent reasons they are instantly purchased, such as when a traveler forgets a
tooth brush or a motorist purchases brake-oil.
3. Soft Goods. Are items such as clothing, fashion, accessories, sheets or towels
that
are derived from textiles or similar non-durable materials.
4. Durable or Hand Goods. Are those with a relatively high unit value, a long life
and
the purchase of which is usually pre-planned, such as home appliances-washing
and sewing machines, refrigerators, etc.
5. Seasonal Goods. Which are in demand only during the particular time of the
year,
such as woolen suits and shawls, ice, bathing suits, lawn mowers, etc.
6. Illegal Goods. Which are sold in the market secretly by smugglers and
bootleggers
such as foreign liquors, gold, cigarettes, suitings, cameras, watches, etc.
It should, however, be noted that no hard and fast classification of consumer
goods
can be made, for what is convenience goods for one may be a speciality goods for
another and vice versa. Much will depend on the attitude of the particular
consumer, as to which goods belong to which category for him.
INDUSTRIAL GOODS:
These are those goods which are destined to be sold primarily for use in
producing other goods or rendering services as contrasted with goods destined to
be sold primarily, to the ultimate consumers. “The distinguishing characteristic of
such goods”.
According to American Marketing Association, “is the purpose for which they
are primarily destined to be used, in carrying on business, or industrial activities
rather than for consumption by individual ultimate consumers or resale to them”.
Industrial users are business, industrial users are business, industrial of institutional
organizations who buy products or services to use in their own businesses or to
make other products. A manufacturer who buys chemicals to make fertilizer is an
industrial user. A super market, a hospital, bank or paper manufacturing firm which
buys accounting machines, pencils, etc., or wax is an industrial user of these
products. Industrial users in total constitute “Industrial Market”.
Industrial goods may be classified into six broad types, viz.,
1. Raw Materials. These are the basic materials derived from agriculture,
mining,
lumbering or other extracting industries. They have not yet undergone any
processing but enter physically into the product. Their eg., are raw jute, raw cotton,
iron ore, crude rubber, raw wool, timber, building stones, glass sand, etc.
2. Fabricating Materials. Like raw materials these goods also enter physically
into
the product; but these have already undergone some processing. As this processing
is not complete, so they require further fabrication. Eg., are leather, cotton yarn,
steel billets, bricks, zinc or copper sheets, etc.
3. Component Parts. Each such part has already undergone processing but
unlike a
fabricating material its processing is more or less complete. So the assembly of
several component parts leads to the finished product. Thus, boiler is a part of a
railway locomotive; and steering wheel, brake or a clutch that of an automobile.
4. Installations. These comprise machinery, buildings and heavy equipment
which do
not enter into the finished product and are. Thus exhausted only after repeated use
over long periods. But they are essential to production, whether industrial or
agricultural. Gas, water and power installations are examples.
5. Accessories. They are used in an ancillary capacity to installations and are
comparatively less durable and less costly. These are also smaller. This group is
illustrated by hand trucks, tools, gauges, etc.
6. Miscellaneous Suppliers. These do not enter into finished product; but are
necessary for operation, maintenance and repair of installations and accessories.
Unlike the latter, they are consumed and used up. Fuel, paint, cleaning compounds,
lubricating oil, etc.., belong to this category.
Industrial market comprises of the following;
(i)
Agriculture, forestry and fishing; (ii) mining and quarrying; (iii) contract
construction; (iv) manufacturing; (v) transportation, communication and other
public utilities; (vi) wholesale trade; (vii) retail trade; (viii) finance, insurance and
real estates; (ix) services and (x) government.
The industrial market is differentiated from the consumer market, on the
basis of four general market demand characteristics.
(a) The industrial market demand is derived, in its turn, from the demand for
consumer products that the industrial goods help to make. For eg, the demand for
steel is partly dependent on the demand for machinery or automobiles needed.
(b) The demand, for most industrial goods is inelastic. For eg, if the price of
spark plugs or cars or buttons for shorts suddenly rise or fall, there shall be no
appreciable change in demand.
(c) The demand for most industrial goods, fluctuates more considerably than the
consumer goods.
(d) The typical industrial buyer is usually well informed concerning his demand
for the make, quantity and limits on finance.
Production Policy:
Product level:
On the surface it seems a product is simply a marketing offering, whether
tangible or intangible, that someone wants to purchase and consume. In which
case, one might believe product decisions are focused exclusively on designing and
building the consumable elements of goods, services or ideas. For eg, one might
think the key product decisions for a manufacturing of floor cleaners is to focus on
creating a formula that cleans more effectively. In actuality, while decisions related
to the consumable parts of the product are extremely important, the total product
consists of more than what is consumed.
In planning its market offering, the marketer needs to think through five
levels of the product, each level adds more customer value, and the five constitute
a customer value.
The total product offering and the decisions facing the marketer can be
broken down into;
(1)
Core Benefit: the most fundamental level is the core benefit. The
fundamental services or benefit that the consumer is really buying. A hotel guest is
buying “rest and sleep”. The purchaser of a drill is buying “holes”. Marketers must
see themselves as benefit providers.
(2)
Basic Product: at the second level, the marketer has to turn the core
benefit
into a basic product. Thus a hotel room includes a bed, bathroom, towels, desk,
dresser and closet.
(3)
Expected Product: at the third level, the marketer prepares an expected
product, a set of attributes and condition buyers normally expect when they
purchase this product. Hotel guests expect a clean bed, fresh towels, working
lamps, and a relative degree of quietness. Because most hotels can meet this
minimum expectation, the traveler normally will settle for whichever hotel is most
convenient or least expensive.
(4)
Augmented Product: at the for the level, the marketer prepares an
augmented product that exceeds customer expectations, i.e a product containing
additional features, services and benefits so that customers is able to distinguish
his product from that of the competitive offers. For eg, a hotel can include a
remote-control television set, fresh flowers, rapid check-in, express checkout and
fine dining and room services.
(5)
Potential Product: at the fifth level stands the potential product, which
encompasses all the possible augmentation and transformation the product might
undergo in the future. Here is where companies search for new ways to satisfy
customers and distinguish their offer. All-suite hotels where the guest occupies a
set of rooms represent an innovative transformation of the traditional hotel product.
PRODUCT LIFE CYCLE (PLC):
INTRODUCTION
All products and services have certain life cycles. The life cycle refers to the
period from the product’s first launch into the market until its final withdrawal and
it is split up in phases. During this period significant changes are made in the way
that the product is behaving into the market i.e. its reflection in respect of sales to
the company that introduced it into the market. Since an increase in profits is the
major goal of a company that introduces a product into a market, the product’s life
cycle management is very important. Some companies use strategic planning and
others follow the basic rules of the different life cycle phase that are analyzed later.
The understanding of a product’s life cycle, can help a company to
understand and
realize when it is time to introduce and withdraw a product from a market, its
position in the market compared to competitors, and the product’s success or
failure.
For a company to fully understand the above and successfully manage a product’s
life cycle, needs to develop strategies and methodologies, some of which are
discussed later on.
PRODUCT LIFE CYCLE MODEL DESCRIPTION:
The product’s life cycle - period usually consists of five major steps or
phases: Product development, Product introduction, Product growth, Product
maturity and finally Product decline. These phases exist and are applicable to all
products or services from a certain make of automobile to a multimillion-dollar
lithography tool to a one-cent capacitor. These phases can be split up into smaller
ones depending on the product and must be considered when a new product is to
be introduced into a market since they dictate the product’s sales performance.
Product Life Cycle Graph
1. PRODUCT DEVELOPMENT PHASE:
Product development phase begins when a company finds and develops a new
product idea. This involves translating various pieces of information and
incorporating them into a new product. A product is usually undergoing several
changes involving a lot of money and time during development, before it is exposed
to target customers via test markets. Those products that survive the test market
are then introduced into a real marketplace and the introduction phase of the
product begins. During the product development phase, sales are zero and
revenues are negative. It is the time of spending with absolute no return.
2. INTRODUCTION PHASE:
The introduction phase of a product includes the product launch with its
requirements to getting it launch in such a way so that it will have maximum
impact at the moment of sale. A good example of such a launch is the launch of
“Windows XP” by Microsoft Corporation.
This period can be described as a money sinkhole compared to the maturity
phase of a product. Large expenditure on promotion and advertising is common,
and quick but costly service requirements are introduced. A company must be
prepared to spent a lot of money and get only a small proportion of that back. In
this phase distribution arrangements are introduced. Having the product in every
counter is very important and is regarded as an impossible challenge. Some
companies avoid this stress by hiring external contractors or outsourcing the entire
distribution arrangement. This has the benefit of testing an important marketing
tool such as outsourcing.
Pricing is something else for a company to consider during this phase.
Product pricing usually follows one or two well structured strategies. Early
customers will pay a lot for something new and this will help a bit to minimize that
sinkhole that was mentioned earlier. Later the pricing policy should be more
aggressive so that the product can become competitive. Another strategy is that of
a pre-set price believed to be the right one to maximize sales. This however
demands a very good knowledge of the market and of what a customer is willing to
pay for a newly introduced product.
A successful product introduction phase may also result from actions taken
by the company prior to the introduction of the product to the market. These
actions are included in the formulation of the marketing strategy. This is
accomplished during product development by the use of market research. Customer
requirements on design, pricing, servicing and packaging are invaluable to the
formation of a product design. A customer can tell a company what features of the
product are appealing and what are the characteristics that should not appear on
the product. He will describe the ways of how the product will become handy and
useful. So in this way a company will know before its product is introduced to a
market what to expect from the customers and competitors. A marketing mix may
also help in terms of defining the targeted audience during promotion and
advertising of the product in the introduction phase.
3. GROWTH PHASE:
The growth phase offers the satisfaction of seeing the product take-off in the
marketplace. This is the appropriate timing to focus on increasing the market share.
If the product has been introduced first into the market, (introduction into a
“virgin”1 market or into an existing market) then it is in a position to gain market
share relatively easily. A new growing market alerts the competition’s attention.
The company must show all the products offerings and try to differentiate
them from the competitors ones. A frequent modification process of the product is
an effective
policy to discourage competitors from gaining market share by copying or offering
similar products. Other barriers are licenses and copyrights, product complexity and
low availability of product components.
Promotion and advertising continues, but not in the extent that was in the
introductory phase and it is oriented to the task of market leadership and not in
raising product awareness. A good practice is the use of external promotional
contractors.
This period is the time to develop efficiencies and improve product
availability and service. Cost efficiency and time-to-market and pricing and discount
policy are major
factors in gaining customer confidence. Good coverage in all marketplaces is
worthwhile goal throughout the growth phase.
Managing the growth stage is essential. Companies sometimes are
consuming much more effort into the production process, overestimating their
market position. Accurate estimations in forecasting customer needs will provide
essential input into production planning process. It is pointless to increase customer
expectations and product demand without having arranged for relative production
capacity. A company must not make the mistake of over committing. This will result
into losing customers not finding the product “on the self”.
4. MATURITY PHASE:
When the market becomes saturated with variations of the basic product, and all
competitors are represented in terms of an alternative product, the maturity phase
arrives. In this phase market share growth is at the expense of someone else’s
business, rather than the growth of the market itself. This period is the period of
the highest returns from the product. A company that has achieved its market
share goal enjoys the most profitable period, while a company that falls behind its
market share goal, must reconsider its marketing positioning into the marketplace.
During this period new brands are introduced even when they compete with
the company’s existing product and model changes are more frequent (product,
brand, model). This is the time to extend the product’s life.
Pricing and discount policies are often changed in relation to the competition
policies i.e. pricing moves up and down accordingly with the competitors one and
sales and coupons are introduced in the case of consumer products. Promotion and
advertising relocates from the scope of getting new customers, to the scope of
product differentiation in terms of quality and reliability.
The battle of distribution continues using multi distribution channels2. A
successful product maturity phase is extended beyond anyone’s timely
expectations. A good example of this is “Tide” washing powder, which has grown
old, and it is still growing.
5. DECLINE PHASE:
The decision for withdrawing a product seems to be a complex task and there
a lot of issues to be resolved before with decide to move it out of the market.
Dilemmas such
as maintenance, spare part availability, service competitions reaction in filling the
market gap are some issues that increase the complexity of the decision process to
withdraw a product from the market. Often companies retain a high price policy for
the declining products that increase the profit margin and gradually discourage the
“few” loyal remaining customers from buying it. Such an example is telegraph
submission over facsimile or email. Dr. M. Avlonitis from the Economic University of
Athens has developed a methodology, rather complex one that takes under
consideration all the attributes and the subsequences of product withdrawal
process.
Sometimes it is difficult for a company to conceptualize the decline signals of
a product. Usually a product decline is accompanied with a decline of market sales.
Its recognition is sometimes hard to be realized, since marketing departments are
usually too optimistic due to big product success coming from the maturity phase.
This is the time to start withdrawing variations of the product from the
market that are weak in their market position. This must be done carefully since it
is not often apparent which product variation brings in the revenues.
The prices must be kept competitive and promotion should be pulled back at
a level that will make the product presence visible and at the same time retain the
“loyal” customer. Distribution is narrowed. The basic channel is should be kept
efficient but alternative channels should be abandoned. For an example, a 0800
telephone line with shipment by a reliable delivery company, paid by the customer
is worth keeping.
PRODUCT LIFE CYCLE PHASES QUICK REFERENCE:
INTRODUCTION STAGE:
PRICE
High, customers willing to pay premium for new product.
Early adopters.
PROMOTION
Limited. Highly targeted promotional efforts aimed at
specific customers
DISTRIBUTION
Direct (factory to customer) or limited distribution through
specific strategic partners.
SALES
Small team of highly skilled salesmen with good knowledge
of the market.
DEVELOPMENT
MANUFACTURING
Focus on time to market and uniqueness.
High expenditure for new production capacity.
SERVICE
High level of service for targeted customers.
SUPPORT
Direct factory support. Engineering involvement is required.
TRAINING
Focused on new product features, benefits, differentiation,
pricing and functionality.
TECHNOLOGY
New and innovative.
COMPETITION
Limited. May be offering different solution for the same
problem or application.
MARKET SHARE
Low overall.
GROWTH STAGE:
PRICE
PROMOTION
10% of market level. – 10% if the brand name is weak and
competition is severe, + 10% if sales are good and
competition does not have similar product to offer.
Heavy. Targeted promotions, trade shows, direct mail, sales
seminars, articles and press releases.
DISTRIBUTION
Highly skilled. Focused channels with strong technical skills
if needed, complementary products and services.
SALES
Everywhere possible. Retail shops, telephone, internet.
DEVELOPMENT
MANUFACTURING
Complete development. Market penetration is sustained with
variations and improvements of the product.
Addition of capacity and automation.
SERVICE
SUPPORT
Local and regional, fully staffed.
Phone support.
TRAINING
Transition to newer version of product.
TECHNOLOGY
Newer and leading edge.
COMPETITION
New appearing worldwide.
MARKET SHARE
High growth. All out market warfare with competitors.
MATURITY STAGE:
PRICE
Stable.
PROMOTION
Focused on reliability, quality, predictability, new
enhancements.
DISTRIBUTION
Many distributors, alternative channels, offshore sales.
SALES
Direct sales focused on hi-volume, high profit.
DEVELOPMENT
Focused on cost reductions.
MANUFACTURING
Focused on increasing yield and productivity.
SERVICE
Distributors take over the service efforts.
SUPPORT
Local channels lead support.
TRAINING
Competition differentiation.
TECHNOLOGY
Aging
COMPETITION
MARKET SHARE
Well established.
Predictable market share every year. Limited opportunities
for quick gains.
DECLINE STAGE:
PRICE
High compared to the demand.
PROMOTION
Limited – no promotion or advertising efforts.
DISTRIBUTION
Use of existing channels.
SALES
Maintenance and repair orientated for high-tech products.
DEVELOPMENT
Focused on cost reduction.
MANUFACTURING
No capital expenditures, outsourcing.
SERVICE
High prices on spare parts.
SUPPORT
Phone support.
TRAINING
None
TECHNOLOGY
Old and outdated.
COMPETITION
Limited.
MARKET SHARE
Shrinking fast.
PRODUCT MIX:
Most companies- whether large or small, whether in manufacturing, or
retailing generally handle a multitude of products and product varieties. In course
of time, the companies may expand new lines or contract the old lines, after the
existing product or develop new uses for the existing products. These activities
involve managerial strategies and policy making with respect to the company’s line
of products and services.
The proliferation of products within the company means that product policy
decisions are made at three different levels of product aggregation, viz., product
item, product line and product mix.
(a) Product Item. is a specific version of a product that has a separate
designation in
the seller’s list. For eg., Hindustan Motor’s Ambassador Mark II is a product item.
(b) Product Lines. A group of products that are closely related either because
they
satisfy a class of need, or used together, are sold to the same customer group, are
marketed through the same types of outlets, or fall within given price ranges or
that are considered a unit because of marketing, technical or end-use
considerations. In other words, a broad group of products, which are meant for
essentially similar uses and posses reasonably similar physical characteristics,
constitute product line. For eg., Kodak camera, or weaving apperal is a product
line; or non food product line for babies include baby clothes, nursery equipment ,
vaporizes and toiletries.
(c) Product Mix. Products offered for sale by a firm or a business unit. In other
words,
product mix is the full list of all products offered for sale by a company. For eg.,
Kodak’s cameras, photographic, suppliers, chemicals, plastics and fibres are its
product mix; or Tata’s hair oil, cosmetics, locomotives, textiles, iron and steel
goods, Mercedes trucks, etc are product mix.
ORGANISATIONAL GOALS AND PRODUCT MIX:
The efficient fulfillment of the marketer’s goal to supply goods and services
to consumer for satisfaction of their needs can be possible if due attention is given
to three issues which govern the product mix-sales growth, sales stability and
profits.
Sales growth can be achieved either by increasing its share in existing
markets or by finding new markets. Four ways can be adopted by which product
mix can by adjusted to achieve goals. These are: (i) Market penetration, under
which market share is increased by expanding sales of present product in existing
uses. (ii) market development under which markets are expanded by creating new
uses of present products. (iii) product development where market share is
increased by developing new products to satisfy existing needs; and (iv)
diversification, whereby market is expanded by developing new products to satisfy
new consumer needs.
Sales stability. Stable sales allow for more efficient planning in all phases of
production and distribution. It is also desirable to maintain a proper balance in total
sales and production mix so that a product losing marketing may be another selling
high.
Profits are determined by the components of the product mix. Some items
are usually more profitable than others. Low profit items may be performing a
valuable part in helping to sell company’s more profitable product; and they may
also prove as insurance against an unforeseen failure in profitable products.
STRUCTURE OF PRODUCT MIX:
The structure of product mix has dimensions of both ‘width’ and ‘depth’.
By ‘width of the product mix’ is meant the number of different product lines
found within the company. In other words, breadth is measured by the number of
product lines carried. For eg., Bajaj Electricals produces bulbs, fluorescent lights,
mixies and grinders, toasters, scooters, pressure cookers and a host of other
electrical appliances.
<--------------------- Depth ------------------------>
Product Line 1
1-a
Product Line 2
Width
2-a
1-b
1-c
1-d
1-e
2-b
Product Line 3
3-a
Product Line 4
4-a
3-b
3-c
Product Mix items = 12
Number of Lines = 4
Average Depth = 3
The ‘depth of the product mix’ refers to the average number of items offered
by the company within each product line. In other words, the depth is measured by
assortment of sizes, colors, models, prices and quality offered within each product
line.
The ‘consistency of product mix’ refers to how closely related the various
product lines are in terms of consumer behavior, production requirements,
‘distribution channels or in some way’. For eg., the products produced by the
General Electric Company have an overall consistency in that most products involve
electricity is one way or the other.
Kotler observes, “all three dimensions of product mix have a market
rationale. Through increasing the width of the product mix, the company hopes to
capitalize on its good reputation and skills in present markets, through increasing
the depth of its product mix, the company hopes to entice the patronage of buyers
of widely differing tates and needs. Through increasing the consistency of its
product mix, the company hopes to acquire an unparalleled reputation in a
particular area of endeavor.
The dimensions of the product mix, and the ways in which they relate to
each other are important for marketing management. Changing the product item
involves the issues whether to modify, or add or drop product items. Changing the
width of the product mix involves altering policy at the product-line level, whether
to deepen or shorten an existing product line. Changing the product mix involves
the issues what markets the marketer should enter or leave; and how to handle
communications for the various product line or items.
MODIFICATION & ELIMINATION:
Product modification is the deliberate alternation in the physical attributes of
a product or its packaging or its functions. It refers any substantial change made to
the attributes (size, shape, color, style, price, etc) of a product, modification of a
product is usually undertaken in an attempt to revitalize it in order to increase
demand.
“sometimes just a cosmetic modification may be required in the existing
product-line or product item. these changes may be tangible or intangible and may
achieved byre-formulation, re-design, changing unti sizes and adding or removing
features. ‘pan parag’ the famous pan masala, introduced new sachet packs of
different sizes and at different prices. This helped it to penetrate and expand the
market. Whan the firm decided to add tobacco to the pan masala, the effect was a
manifold increase in its market share. Most often these changes are dictated by a
firm’s long-term goals, customer performances, and competitive developments in a
particular product market.
The object of product modification is either to stimulate new sales or to
attract new users. In the case of a firm with an uneven product line, modification
can be justified as a viable alternative to develop new products. This approach is
less expensive and often shows a high rate of success. The modification are
generally grouped into the following categories:
1. Functional changes: all changes which make the product work better or
satisfy additional needs are known as functional changes. Sometimes, the right
change can bring a big jump in the product sales. While proposing functional
changes, a company should consider the cost of changes and whether the changes
will appeal to a broad segment of the market.
2. Quality Changes: a product quality can be changed either by introducing
changes in the materials from which it is constructed or by modifying the
engineering process. There are two types if quality changes;
(i)
Upgrading: when the quality of product is made more attractive to
attract a more sophisticated market, it is known as upgrading.
(ii)
Downgrading: on the other hand, downgrading the quality of
product
involves lowering the price of the product to serve lower income groups.
3. Style changes: when the appearance of the product is changed, it is known
as style change, although changes in style have no effect on the performance of a
product, they often have visible effect on the reaction on the consumers.
4. Environmental-Impact Changes: such changes are generally carried-out on
account of the consumer’s pressure of the firm’s commitment to social
responsibility. These changes either improve a product’s safety or lesson its impact
on the environment.
PRODUCT ELIMINATION:
There are some products which cannot be improved or modified to suit the
market. Here, the profitable alternative would be to withdraw the product form the
market. The process of withdrawal is technically called product elimination. This
involves discontinuing or deleting either the individual product of the entire-product
line.
Generally, products that are abandoned are those for which demand is low
leading to uneconomical short production runs or frequent uneconomical price and
inventory adjustments. These products could also be consuming excessive
management time not justified by their profit contribution. At times, these products
are outdated, and therefore detract from the company’s image. In brief, these
products have either lived their life or are unprofitable.
According to Richard T. Hise and Thomas, the following are the warning
signals tha a product is weak and in trouble:
(i)
Declining absolute volume of sales.
(ii)
Decreasing market share.
(iii)
Future market potential not favourable
(iv)
Variable cost exceed the revenue.
(v)
Return on investment below the minimum acceptable level.
(vi)
Variable cost as percentage of sales consistently increasing.
(vii)
Increasingly, greater percentage of executive time required.
(viii)
Consistent need to lower the price to maintain sales, and
(ix)
Consistent need to increase the promotional budget to maintain sales.
PACKING:
Packaging is often called as the Fifth ‘P’ of Marketing. ‘Packaging’ is the
general group of activities which concentrate in formulating the design of a
package, and producing an appropriate and attractive container or wrapper for the
product. Packing means “the wrapping compressing filling and creating of goods
before they are transported or stored”. It is merely a physical action and provides a
handling convenience, e.g., rice, cotton, wheat or any other agricultural produce. It
is necessary to prevent flowing out of such liquids as milk, drinks, sauces, etc. it is
essential to maintain freshness, and quality, e.g., of butter, ghee, cream, cheese,
etc. it can prevent the danger of adulteration, especially in edible oils, spices, ghee,
drugs and medicines and other eatables. For eg., liquids are placed in barrels,
bottles or cans but cotton and jute are compressed into bales. Other goods may be
packed in boxes or bags as the case may be.
Package means a container, wrapper, case or other receptacle for packing
goods. It can be made of plastics, metal, paper, glass, laminated, polyster or HDPE
etc.
‘Packaging’ is the sub-division of the packing function of marketing. It
involves more than simply placing products in containers or covering them with
wrappers. ‘Packaging’ has been defined as “an activity which is concerned with
protection, economy, convenience and promotional considerations”. The Indian
Institute of Packaging has defined packaging as “the embracing functions of
package, selection, manufacture, filling and handling”. Packaging is closely related
to labeling and branding because the label appears on the package and the brand is
typically on the label.
Packaging may be ‘primary’ which refers to the product’s immediate
container, such as the can or a box; or secondary, which refers to additional layers
of protection that are removed once the produce is ready for use such as the tube
of tooth paste, which comes in a card board box.
FUNCTIONS OF PACKAGING:
A package defines the space in which a product is contained. The package
contents may be pre-measured, pre-weighted, pre-stored, pre-assembled, then
placed in a specially designed, wrapper, box, carton, can, crate, bottle, jar, tube,
barrel, drum or pallet for convenient distribution.
Basically, packaging fulfills three functions, viz., (1) Containment, (2)
Protection, and (3) Identification. But additional packaging functions are (4)
Convenience, (5) Attractiveness, (6) Promotional appeal, (7) Economy, (8) Easy
Handling and (9) Preventing Adulteration.
(1) Containment. Packaging provides space in which product is contained, e.g,
vegetables can be boiled in the bags in which they are packaged. Beer cans can be
made easy to open. Salt and spices are packed for table use or for convenient use
in the kitchen. Hair preparations can be sprayed in. facial powders and cosmetics
are packaged in containers of pleasing designs and in a choice of colors suitable for
use in bath or bedroom. Aerosol containers are used to spray or to apply such
diverse products as paint, baby powders, room air freshers, shaving lather, hair
preparations, bug killers, wax, colognes, deodorants and mosquito repellants.
(2) Protection. Packaging protects its contents on its route from the
manufacturer to
the consume and even during its life with the consumers. Product, if kept in open,
may be adversely affected by weather, too hot or too cold; temperature; shock,
light, water or dampness; passage of time or by insects, pests- as may be the case
with sugar, gur, honey, tea, salt, etc. they may spoil, discolor or lose flavor,
damage, break or contaminate, or lead to physical deterioration of the product. The
idea of protection is that the product will reach its ultimate consumer in sound
condition and may be kept so till it is used up.
Protection starts at the factory, moves to the point of purchase in
retail
stores and then continues in the home, proper packaging can protect the consumer
against: (i) such hazards as leaky cartons and cut-fingers; (ii) breakage (of
glassware), spoilage of food, volatile or gaseous articles like spirit, gases and acids;
for eg, cardboard package for the washing machine, thermocol package for
compute, TV, VCRs etc. (iii) Contamination with external elements such as dirt or
chemicals etc. for eg, Sunflower Oil comes in sealed bottles/packs so that no
external object may (dust or chemical) destroy the purity of the product. (iv)
Pilferage and theft. For eg: Coco cola one litre bottles are packed in plastics
containers which are fully covered and placed over one another to prevent pilferage
of the bottle in transit. (v) Deterioration in the quality of goods, because of the
effect of light, air or other weather conditions. For eg package for the AMUL butter
includes information for keeping the product in refrigerator. (vi) Loss of liquid
vapour. For eg, perfumes and spray are packed in airtight containers for preventing
any loss of product quantity, deterioration due to oxidation with air.
(3) Identification. When goods are stored in warehouses or in godowns, till they
are
transported elsewhere or used, they need to be identified as to type and make, and
be clearly distinguished from one brand to another. Most packages, therefore, bear
the name of the product, its maker, and its ingredients (in case of medicines and
food preparations) instructions for use (as “Glass with care”, “Handle with care”)
safety warning or limitations on use. Product of one manufacturers can be easily
identified by the consumer from the rival’s packaging creates individually and helps
quick identification.
(4) Convenience. All people- wholesalers, retailers, middlemen, warehouse
keepers
and consumers-demand convenience in package i.e, they should be light enough to
be hand carried ( such as carton carrying 10 cigarettes or a strip of 10 analgin tabs)
easy to open and close and easy to dispose off or reuse. Formerly soft drinks were
packaged in glass bottles with lift-off caps that required a can or bottle opener (as
in case of Coca-cola or Fanta or Gold Spot etc) Later on ,these were substituted by
aluminium can, which were light-weighted, unbreakable, and non-returable but
opening still required a special tool. Ultimately, now they are packaged in pop-tap
can which can be opened even by hand. For eg, Dalda used to con=me it tin packs,
now it comes in plastics packs with handle grip so that, the package not only stores
the product, it is handly and therefore, can be kept near cooking place.
(5) Attractiveness. Packaging enhances the appearance of the product. The
design and
the label on the package, printed matter, picture, layout or get up of the package,
color combination all are special means of attracting consumers. Colors are often
used to improve the appearance and appeal of a product. For eg, some producers
of oranges, package them in transparent plastic bags with an orange tint which give
the appearance of having a fresher, deeper color. Certain colors are repeated
throughout the product line so that distinctiveness is maintained. For eg, cosmetic
manufacturers, who may package an entire line in a particular shade of lemon
yellow or soft pink, lest the consumer recognize the maker of the various products
in the line. They also create impressions of richness, luxury and exclusiveness by
using packages that have certain colors, designs, shapes and textures.
(6) Promotional Appeal. Products must sell themselves. This is possible only if
they
are placed in more attractive and eye-appealing packages. Several factors
contribute to a package’s promotional appeal. The package must be of suitable size,
shape, texture, or a startling color. It should be large enough to hold the product. It
may be taller or shorter. Vertical thin lines make a package appear taller, while
horizontal wide strips make a package appear shorter because many people view
something that is taller as being bigger. Successful marketers offer men packages
with angular shape and wood or burlap textures, while women’s packages have
rounded, curved shapes, and soft, fuzzy textures. For ex, Maltova comes with
advertisement “Reusable PET JAR” worth Rs.30 is free with one kilogram pack.
Colors on packages often attract people, who associate certain
feelings
and connotations with specific colors. For ex, red is associated with fire, blood,
danger, and anger; yellow suggests sunlight, caution, warmth, and vitality, blue
can imply coldness, sky, water, sadness. Different sale promotion technique are
adopted for packaging the product like; “Money off pack”, “Pack-in-premium”, and
“Premium-pack” etc.
(7) Economy. Packaging cost range from 3 percent to 80% of the “total product”
selling price. Representative of 80% would be aerosol tooth paste, and that of 30%
would be men’s hosiery. Other illustrative packaging costs within range are; lamp
shades 6%, cereals 13%, beer 27%, bar shop 50%, and cleaning compounds,
53%. Naturally, the consumers would prefer economical packages.
(8) Easy Handling. Packaged goods are very easy to handle and transport. Even
the glassware instruments, TV, VCR, etc. can be easily handled by mentioning
“HANDLE WITH CARE”. Furthermore, packaging is a must for several goods like,
Ghee, Butter, Acids, Chemicals, Medicine etc.
(9) Preventing Adulteration. Packaging is also necessary for prevention of
adulteration by the unscrupulous traders, For ex, oils, medicine, ghee etc.
Other functions of packaging are;
1. Packaging makes a positive and significant contribution to the sale of the
product.
In other words, it result in sales appeal because consumers dictate which products
are to be stocked be retailers. “Packages which rate well on appeal are eyecatching and provocation, capturing the buyer’s attention and arousing his interest.
Good packaging promotes both impulse buying and repeat, planned purchases.
2. Packaging can be used effectively to help introduce a new product or to help
increase or maintain the market for existing products. Sometimes a packaging
change can rejuvenate an old product by giving it a new image.
3. Packaging may also lead to increased profit possibilities. A package may be
so attractive that customers will pay more just to get the special package.
Thus, in sum, it may be noted that: (1) Packaging is a powerful
merchandising
tool. (2) It identifies the maker as well as the product and carriers the brand name.
(3) The package label informs the buyer about inner contents and how to use them.
(4) It is the biggest advertising medium. (5) It moves the product at the point of
purchases. (6) It encourages impulse buying. (7) It establishes a product image.
(8) It identifies the product with advertising.
ATTRIBUTES OR REQUISITE OF A GOOD PACKAGE:
A well designed and attractive package is “shelf-salesman” for the retailer,
for the package design itself works as a brand. The package must have informative
labeling. The headlines, illustrations, guidelines and selling points on the package
must be clear and prominent so that the matter is readable by every shopper at a
glance. Visibility of the product in the package helps to sell the product better.
Hence, glass, cellophane and plastic package have become very popular these
days.
Packages to be effective are made great caution and design. It must posses
the following qualities;
(i)
It must attract attention.
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
(ix)
(x)
(xi)
(xii)
It
It
It
It
It
It
It
It
It
It
It
must tell the product story-what is it? What size? How much?
must build confidence.
much look clean and sanitary.
must be convenient to handle, to carry out of the store and to use.
must look like good value.
must look like a fast seller.
must deserve a preferred display.
must minimize the clerk’s time.
must be convenient to stock and display.
must prevent spoilage during the selling period.
must resist soiling.
According to Seibet a good package must: (i) protect the contents; (ii) meet
retailer requirements; (iii) meet consumer requirements; (iv) meet trade characters
and (v) be easily identifiable.
Food packages must be designed in a special manner as the housewife is
interested in the functional performance of the package in the kitchen as a part of
the house keeping operations. Beauty aids and other convenient goods are
attractively packed in suitable cartons. Jewellery and presentation articles are often
packed in elaborate costly packages.
NEW PRODUCT PLANNING AND DEVELOPMENT STRATEGIES:
The competitive pressure leads to the displacement of existing products and
forces management to look around for alternative sources of income through the
development of new products to replace existing product, or through diversification
and extension of the product line itself. Continued growth, not to mention survival,
demands systematic planning of the development and testing of new product ideas.
Such an approach to product development is generally called product planning; the
determination of the extent and nature of the product line is called product policy.
According to Stanton, “Product planning consists of activities which enable
producers to determine what should constitute a company’s line of products”.
Product Planning is the starting for entire marketing programme in a firm. It
embraces all activities, which enable producers and middlemen to determine what
should constitute a company’s line of products. Product planning has been defined
as “the act of marketing out and supervising the research, screening, development,
commercialization of new products; the modification of existing line and the
discontinuance of marginal or unprofitable items”. In other words, product planning
involves three important considerations. Viz.,
(a) The development and introduction of new products;
(b) The modification of existing lines to suit the changing consumer needs and
preferences;
(c) The discontinuance or elimination of unprofitable or marginal products.
(d) Product plans provision in light of changing market situations.
Product development embraces the technical activities of product research,
engineering and design. It requires the collective participation of production,
marketing, engineering and research departments.
The scope of product planning and product development activities covers the
decision making and programming in the following areas;
1.
2.
3.
4.
5.
6.
Which product should the firm make and which should it buy?
Should the company expand or simplify its line?
How each new item could be more useful?
Is the quality right for the intended use and market?
What brand, package and label should be used for each product?
How should the product be styled and designed, and in what sizes and
colours, and
what materials should it produce?
7. In what quantities should each item be produced and what inventory control
should be established?
8. How should the product be priced?
Of the above areas one of the most important is the taking of decision to make
or buy a product. Some firms may assemble a series of pre manufactured parts;
others may decide to make some parts and buy others and then assemble to given
an end product. Yet others may assemble pre-manufactured parts and then paint,
polish or otherwise finish the end product.
The decision to “make or buy” a product depends upon the managements’
analysis of several issues, such as the following:
(1) Relative cost of making or buying.
(2) Extent to which specialized machinery, techniques and production resources
are needed.
(3) Availability of production capacity.
(4) Managerial time and talents required- the amount of production supervision
needed.
(5) Secrecy of design, style and materials- the extent to which the company
wants its processing methods kept secret.
(6) Attractiveness of the investment necessary to make a product.
(7) Willingness to accept seasonal, cyclical and other market risks.
(8) Risk of depending upon outside resources- will they raise the price cut off
relationship.
(9) Extent of reciprocity present. Is the supplier of item also as a customer of the
firm’s other products?
DEVELOPMENT OF NEW PRODUCTS:
NEED FOR PRODUCT OBJECTIVES:
Before developing a new product, the product objectives should be decided.
It is the market accepts or rejects the product, and therefore, project objectives
serve as guide lines for product innovation. A firm’s product objectives are usually
oriented towards satisfaction of the customer’s needs, and as the market or its
needs change, the company adjusts its product accordingly. The other product
objective is to state the firm’s philosophy with regard to the desired degree of
product leadership. Other product objectives are derived from each major company
objectives, whose attainment depends upon the product line in any way. All product
objectives must be consistent with other components of marketing strategy, such
as company objectives with respect to marketing channels and distribution,
promotion and price. When either company objectives or marketing strategy
changes, product objectives should be reappraised for their continued suitability
and if necessary, revised.
NEED FOR PRODUCT POLICIES:
Product policies are the general rules that management sets up to guide itself
in making product decisions. They derive directly from product objectives and
should be wholly consistent with them. These are stated in the form of series of
either short definitions or of questions arranged as a check-list.
Product policies are a statement of the common elements that bind products
together in a product line. They identify the underlying logic of the product line,
such as a basic technology, a production liability, a distribution strength, a focus in
a well-defined set of market-needs, a common raw material etc. production policies
can help in evaluating new product ideas by comparing the new product with
existing product line in terms of:
(a) Inter-relationship of demand characteristics:
(i)
The comparative advantages of having a complete line in securing
distribution outlets;
(ii)
Complementary products, where sales of one help generate sales of
others;
(b) Use of company know-how by spreading a unique competence over multiple
products.
(c) Use of common production facilities.
(d) Use of excess or idle production capacity.
(e) Use of common distribution channels.
(f) Improving salesmen’s effectiveness and efficiency by giving them more
product to sell on each call.
(g) Use of common raw materials.
NEW PRODUCT PLANNING PROCESS:
New product planning process consists in the creation of new ideas, their
evaluation in terms of sales potentials and profitability, production facilities,
resources available, designing and production testing and marketing of the product.
The main task of the product planners is to identify specific customers needs and
expectations and align company’s possibilities with the changing market demands.
In each of these stages, the management must decide: (a) whether to move on to
the next stage, (b) to abandon the product, (c) to seek additional information.
The product planning is the function of the top management personnel and
specialists drawn from sales and marketing, research and development,
manufacturing and finance. This group considers and plans new and improved
products in different phases,
1. Idea Formulation.
2. Evaluation or Screening of ideas.
3. Concept Development and Testing.
4.
5.
6.
7.
Business Analysis.
Product Development.
Test Marketing.
Commercializations or Market Introduction.
1. Idea Formulation:
The beginning of a successful product is a creative idea. For the generation of
now ideas knowledge about. The unfulfilled needs of the consumer, their attitudes,
the attributes that may be needed in a product to be of use to the customer, some
useful information has to be gathered. The step starts with a sound need-oriented
analysis and assessment of market opportunities and company resources. For this
purpose a careful inventory of a company’s resources along the lines given below
has to be made. Every company is unique. As a result of its history, experience and
personnel it has certain strength and certain weaknesses that distinguish it from
other organizations.
New ideas for the generation of a production may come from company’s own
research and development studies, technicians, scientists, management’s
judgment, company’s salesman, employees, consumers of industrial users,
middlemen, company suppliers of raw materials, governmental agencies,
company’s competitors and their products, trade associates, private research
organizations, inventors, exhibits and trade fairs, wholesalers and retailers,
advertising agencies, commercial laboratories and trade journals, etc. Ideas may
also come from “brainstorming” sessions of management, suggestions from
employees, engineers and their outside sources, both solicited and unsolicited.
Consumer’s complaints or dissatisfaction can also be the source of new ideas. The
consumers are said to be one of the best sources. As would be clear from the
observation made by Cannon and Wichert, “A meat packer began producing onion
soup at the suggestion of a company executive’s wife. A pottery manufacturer
produced a new vase after viewing museum exhibit. A producer of office machinery
developed an envelop opening devices as a result of thorough examination of a
wholesaler’s catalogues and several interviews with office managers. A chemical
firm began manufacturing a detergent after extensive laboratory research”.
Through contact with consumers, the extent and importance of market need is
determined and then an appraisal is made of the extent to which present products
fulfill the demand; and then efforts are made to go to the next phase of product
planning.
2. Evaluation or Screening of Ideas:
The next phase is that of screening of the new product ideas against a perdetermined set of criteria. This involves evaluating the company’s capabilities with
respect to scientific knowledge and engineering skills in terms of possible new
products and product improvements. The basic idea is to find out whether and
which ideas warrant further study. The screening should be rigorous enough to
eliminate poor stuff, but not so rigorous as to eliminate potentially good
possibilities. The list of information required in evaluating new product possibilities
should be drawn up in such a way as to throw some light on the profit possibilities,
the risk and cost of capital involved.
Two types of techniques are used for screening new products. Both
involve a comparison of potential product idea against criteria of acceptable new
products. The first technique is simple check-list techniques; and the second is the
rating chart.
The check list enumerates product characteristics on a rating scale
(Excellent, Good, Fair, Poor, Very poor) that guide the screener. Those are widely
used by marketers in the screening process. The qualities to be screened may be:
benefits to target consumers; significantly different from rival products, can be
produced economically, fits in with company image, company personnel have
needed expertise to produce and sell it, company personnel have time needed to
produce and sell it, will not consume excess amount of funds, and is economically
sound.
In rating chart, the marketer screens the ideas regarding marketing
characteristics ( such as distribution, relationship to present product lines, pricequality comparison with competitive products, merchandising potential, effect on
present products, etc); demand (durability, market dimensions, dependence on
economic climate, social stability); and potential (originality, market position, future
customers, etc)
All departments- production, technical, sales and finance- devote full
attention to screen the ideas by making a through investigation into various
questions, such as whether new product is to produced or not; in what quantities it
should be produced and what facilities are available within the plant to produce this
quantity, what new plants/ machinery would be needed, whether packaging
materials is available and if so, what size and shape the packages should be,
through which marketing channels it should be promoted, and decide upon the
products profitability.
The answer to these questions would provide the company with rough
ideas of the prospective profitability of various possible of various possible
alternatives. ‘Screening Phase’ involves a thorough investigation of the competitive
market situations and company resources with respect to each idea. This stage
embodies what is known as Concept Testing or Pre-Testing of Product Idea.
Three facts may be noted about screening;
1. Poor or impractical ideas should not be allowed to go any further in the
development process.
2. All new ideas cannot be actually put into practice fir it will not only be
very costly affair but it will also be difficult for a company to handle more
than a few projects at a time.
3. The cost of screening increases as the process continues.
3.Business Analysis:
At this stage the new product ideas are carefully evaluated for their economic
worth. Estimates of sales, costs and profits are important components of business
analysis, and forecasts of market penetration and market potential are essential.
More precise estimates of environmental and competitive that may influences the
product’s life cycle or its replacement or repeat sales are also needed to develop
and launch a product. A complete cost appraisal (both manufacturing and
marketing costs) is necessary besides judging the profitability of the project.
While making business analysis the following questions may be posed:
 Is the company capable of developing and producing the product idea?
 How quickly new facilities for producing a new product could be built up?
 Does the product fir in with the company’s exiting ‘product mix’ and ‘product
lines’?
 Is the necessary finance available at terms consistent with a favourable
return on investment?
At this stage, the ‘idea on paper’ should be converted into a ‘working model’
i.e., a physical product. The idea should be converted into an exact prototype that
should reveal tangible and intangible attributes associated with the product in
consumers mind. ‘pilot models’ or small quantities of the product are manufactured
as per the specification and characteristics. Laboratory tests and other technical
evaluations necessary to determine the engineering and production feasibility of the
articles are made. Steps are also taken to review copy rights, preliminary
advertising copy, packaging and labeling to determine legal ramifications and to
plan personal selling and distribution to ensure the effective integration of all
elements in the ‘marketing mix’. Marketing research is also done to ascertain the
potential sales level for the prospective product. The market research makes
possible the establishment of production volume, cost and quality, goals and hence
the scheduling of men, materials and machine.
4. Test Marketing:
Often inter-twined with the process of product development is the process
of ‘product testing’. In a broad sense, this involves not only internal laboratory
testing of the proposed product in terms of characteristics and pilot testing of
production processes but also consumer(or mini-market testing) in which the
product is tested under conditions existing, in the field.
Both these test marketing’s allow for greater control and faster results than
the actual test market. They save time and money and also enable the company to
maintain a high degree of secrecy. Secrecy is important because competitors can
cause a considerable amount of marketing distribution.
Test marketing is generally done by consumer goods companies rather than
by industrial goods firms who usually try out new products with selected customers
or obtain general reactions by having their sales people demonstrate products when
they make their rounds.
Test marketing provides these benefits to the marketers.
i.
It provides an opportunity to examine a product in a natural marketing
environment to obtain a measure of its sales performance.
ii.
While the product is being marketed in a limited area, it is possible to
identify weaknesses in the product or in the overall marketing plan.
iii.
It helps the management to develop a profile of potential customers and
their purchasing habits.
iv.
It enables marketers to evaluate alternative marketing strategies, if need
be.
v.
It offers an opportunity to measure consumer reactions to the test
product and competing products.
However, there are two dangers in test marketing. One, the data collected may
be distorted by the actions of competitors in the test market who cut prices, and
promote their own product their own products heavily. Second, there is every
likelihood that competitors may copy a popular product and snatch away the
market.
5. Commercialization or Market Introduction:
This is the last stage, which involves the launching of the product with a
full- scale marketing programme. This introduction should be guided by a complete
marketing plan which establishes sales, share-of-market, and profit goals for the
introductory campaign: map out the strategies and tactical approaches which are to
be taken to reach these goals and provide for the yardsticksts by which the results
of the introductory programme can be measured and corrective action taken, if
necessary. Channels of distribution must be filled with the product and all selling
agencies fully informed about the new product, the planned marketing programme
and their roles in it.
While launching a product in the market, marketer has to make a choice
from two alternatives:
(i) whether to market to a selected market or to approach the entire market;
and
(ii) whether to place the product market-by-market (known as rollout) or to
get an immediate entry in the state’s national market.
OVERVIEW OF THE PROCESS:
At each stage, except for the last, management has three alternative
decisions: (1) move the proposed product on to the next stage for evaluation there;
(2) terminate (drop from further consideration) the product; and (3) send the
proposed product back to an earlier stage for further development or evaluation
there.
IDEA FORMULATION
Terminate
SCREENING
(Eliminating Ideas not having
potential value)
BUSINESS ANALYSIS
(Evaluate Economically)
DEVELOPMENT
(Prepare Prototype)
Terminate
Terminate
Terminate
TEST MARKETING
(Determining Revenue
producing Ability)
COMMERCIALISATION
(Introduce Product to the
market)
Terminate
Continue offering
OVERVIEW OF THE NEW PRODUCT DEVELOPMENT PROCESS.
UNIT 3
1 MARKS
1.
2.
3.
4.
5.
Explain the term product
Write the view of kotler –product
What do you mean by specialty goods
What do you mean by industrial goods
Write steps in product life cycle
1.
2.
3.
4.
Explain product life cycle
Explain industrial goods
Explain consumer goods and its types
Write any three definitions of product
5marks
8MARKS
Explain consumer and industrial goods and its types
Explain the new product planning process
Explain packing and its functios
Explain the modification process of a product in market
UNIT - IV
PRICING: MEANING TO BUYER & SELLER - PRICING POLICIES – OBJECTIVE
FACTORS INFLUENCING PRICING DECISIONS - COMPETITORS ACTION TO
PRICE CHANGES - MULTIPRODUCT PRICING. PHYSICAL DISTRIBUTION MANAGEMENT OF PHYSICAL DISTRIBUTION - MARKETING RISKS.
PRICING:
Pricing is the process of determining what a company will receive in
exchange for its products. Pricing factors are manufacturing cost, market place,
competition, market condition, and quality of product. Pricing is also a key variable
in microeconomic price allocation theory. Pricing is a fundamental aspect of
financial modeling and is one of the four Ps of the marketing mix. The other three
aspects are product, promotion, and place. Price is the only revenue generating
element amongst the four Ps, the rest being cost centers.
Pricing is the manual or automatic process of applying prices to purchase and
sales orders, based on factors such as: a fixed amount, quantity break, promotion
or sales campaign, specific vendor quote, price prevailing on entry, shipment or
invoice date, combination of multiple orders or lines, and many others. Automated
systems require more setup and maintenance but may prevent pricing errors. The
needs of the consumer can be converted into demand only if the consumer has the
willingness and capacity to buy the product. Thus pricing is very important in
marketing.
MEANING TO BUYER & SELLER:
BUYER:
A buyer is any person who contracts to acquire an asset in return for some
form of consideration.
When someone gets characterised by their role as buyer of certain assets,
the term "buyer" gets new meaning:
A "buyer" or merchandiser is a person who purchases finished goods,
typically for resale, for a firm, government, or organization. (A person who
purchases material used to make goods is sometimes called a purchasing agent.)
In product management, buyer is the entity that decides to obtain the
product.
A buyer's primary responsibility is obtaining the highest quality goods at the
lowest cost. This usually requires research, writing requests for bids, proposals or
quotes, and evaluation information received.
SELLER:
Sellers obviously want to sell a product for as much as possible, while buyers
would love to get the products they want for free. Somewhere between these two
extremes, sellers and buyers must find a way to meet. Marketers also look at the
relationship between pricing and revenue, which is an important consideration in
pricing strategy.
WHAT A PRICE SHOULD DO:
A well chosen price should do three things:




achieve the financial goals of the company (e.g., profitability)
fit the realities of the marketplace (Will customers buy at that price?)
support a product's positioning and be consistent with the other variables in
the marketing mix .
price is influenced by the type of distribution channel used, the type of
promotions used, and the quality of the product
 price will usually need to be relatively high if manufacturing is
expensive, distribution is exclusive, and the product is
supported by extensive advertising and promotional campaigns
 a low price can be a viable substitute for product quality,
effective promotions, or an energetic selling effort by
distributors
From the marketer's point of view, an efficient price is a price that is very
close to the maximum that customers are prepared to pay. In economic terms, it is
a price that shifts most of the consumer surplus to the producer. A good pricing
strategy would be the one which could balance between the price floor (the price
below which the organization ends up in losses) and the price ceiling (the price
beyond which the organization experiences a no demand situation).
PRICING POLICIES:
1. Uniform pricing.
(a) Uniform pricing: a pricing policy where a seller charges the same price for
every
unit of the product.
(b) Profit maximizing price (incremental margin percentage rule): a price
where
the incremental margin percentage (i.e., price less marginal cost divided by the
price) is equal to the reciprocal of the absolute value of the price elasticity of
demand. This is the rule of marginal revenue equals the marginal cost.
i.
Price elasticity may very along a demand curve, marginal cost changes
with scale
of production. The above procedure typically involves a series of trials and errors
with different prices.
ii.
Intuitive factors that underlie price elasticity: direct and indirect
substitutes,
buyers’ prior commitments, search cost.
(c) Price adjustments following changes in demand and cost.
i.
ii.
To maximize profits, a seller should consider both demand and costs.
A seller should adjust its price to changes in either the price elasticity or
the
marginal cost.
iii.
It must consider the effect of the price change on the quantity
demanded.
iv.
If demand is more elastic (price elasticity will be a larger negative
number),
the seller should aim for a lower incremental margin percentage, and not
necessarily a lower price, and likewise.
v.
If demand is less elastic, the seller should aim for a higher incremental
margin percentage, and not necessarily a higher price.
vi.
A seller should not necessarily adjust the price by the same amount as a
change in marginal cost.
(d) Special notes.
1. Only the incremental margin percentage (i.e., price less marginal cost
divided by
the price) is relevant to pricing.
i.
Contribution margin percentage (i.e., price less average variable cost
divided by the price) is not relevant to pricing.
ii.
Variable costs may increase or decrease with the scale of production,
and hence, marginal cost will not be the same as average variable
cost.
2. Setting price by simply marking up average cost will not maximize profit.
Problems of cost plus pricing:
i.
ii.
In businesses with economies of scale, average cost depends on
scale, but scale depends on price. It is a circular exercise.
Cost plus pricing gives no guidance as to the markup on average cost.
(e) Limitations of uniform pricing (incremental margin percentage rule).
i.
The infra marginal buyers do not pay as much as they will be willing to
pay. A
seller could increase its profit by taking some of the buyer surplus.
ii.
Economically inefficient quantity of sales. By providing the product to
everyone
whose marginal benefit exceeds marginal cost, the seller could earn more profit.
3. Price discrimination. Pricing policy where a seller sets different incremental
margins on various units of the same or similar product.
(a) To earn a higher incremental margin from buyers with higher benefit, and a
smaller margin from buyers with lower benefit.
4. Complete price discrimination: the pricing policy where a seller prices
each unit
of output at the buyer’s benefit and sells a quantity where the marginal benefit
equals the marginal cost.
(a) All the buyer surplus is extracted. Every buyer is charged the maximum she
is
willing for pay for each unit.
(b) Economically efficient quantity: all the opportunity for additional profit
through
changes in sales is exploited.
(c) Extracts a higher price for units that would be sold under uniform pricing
and
extends sales by selling additional units that would not be sold.
(d) Requires information about each potential buyer’s entire individual demand
curve.
5. Direct segment discrimination: The pricing policy where a seller charges a
different incremental margin to each identifiable segment (with uniform pricing
within each segment). A segment is a significant group of buyers within a larger
market.
(a) Profit maximizing price: set prices so that the incremental margin
percentage of
each segment equals the reciprocal of the absolute value of that segment’s price
elasticity of demand; i.e., applies the rule for uniform pricing to determine the
profit maximizing prices for each segment.
(b) When marginal cost is increasing, any change in price for one segment that
affects sales will affect (a) marginal cost, and (b) the incremental margin
percentage for the other segment. Accordingly, the seller must conduct the trial and
errors search for the prices to both segments at the same time.
(c) A seller can discriminate on the basis of a buyer’s location.
1. Free on board (FOB) price is a price that does not include delivery.
i.
FOB pricing ignores the differences between the price elasticities of
demand in various markets.
ii.
The differences among prices at various locations equal the differences
in costs of delivery.
2. Delivered pricing is the pricing policy where the seller’s price includes
delivery. A cost including freight (CF) price is one that includes delivery.
i.
The seller can implement direct segment discrimination, aim for
different incremental margin percentages in each market, and obtain
higher profit.
ii.
The differences among prices at various locations are the result of the
different incremental margin percentages and the different marginal
costs of supplying the various markets, and may be larger or smaller
than the costs of delivery.
(d) Requirements.
1. Must directly identify the members of each segment. The identifiable buyer
characteristic must be fixed.
2. Must prevent buyers from reselling the product among themselves.
i.
Generally, resale of services is more difficult than resale of goods, hence
there is
more price discrimination in services than goods.
ii.
Sellers can limit resale of goods by restricting warranty service to the
location of
purchase.
(e) Limitations. For each segment, same limitations as uniform pricing.
6. Indirect segment discrimination: Pricing policy where a seller (who
cannot
directly identify the customer segments) structures a choice for buyers so as to
earn different incremental margins from each segment.
(a) Profit maximizing price.
i. There is no simple rule to find the profit maximizing prices.
ii. Buyers might substitute among the various choices. Accordingly, the seller
must analyze how changes in the price of one product affect the demand for other
choices, and set the prices of all products at the same time. The seller must not
price any product in isolation.
(b) Requirements.
i. Buyers must be differentially sensitive to some variable that the seller can
control. The seller then uses this variable to structure a set of choices that will
discriminate among the segments.
ii. Buyers must not be able to circumvent the differentiating variable. The seller
must strictly enforce all conditions of sale to prevent switching.
iii.
Cannibalization occurs when the sales of one product reduce the
demand for
another with a higher incremental margin.
(1). Mitigate cannibalization by degrading the quality of the low margin
product.
(c) Less profitable than direct price discrimination.
i. Products provide less benefit than those with direct discrimination.
ii. Involves relatively higher costs.
iv.
Leakage: indirect discrimination relies on various segments to voluntarily
identify
themselves through the structured choice. But consumers in one segment may buy
the item aimed at another segment.
6. Profit ranking.
Policy
Profitability
Information
requirement
Complete price
discrimination
Highest
Direct segment Seller discriminates
discrimination
directly on the buyer’s
attributes. Seller can
identify each buyer
segment and prevent
one
segment
from
buying the product
targeted at another
segment.
Indirect segment
Discrimination
Uniform pricing
Lowest
(Exception: when all
buyers within the same
segment are identical. In
such a case, profit equals
that with complete price
discrimination.)
Uses product attributes
to discriminate
Indirectly among
Various buyer
segments
Highest
Lowest
7. Bundling.
(a) Bundling: one method of indirect segment discrimination that
deliberately
restricts buyer choices. This is the combination of two or more products into one
package with a single price.
i.
Pure bundling: the pricing policy where the seller offers the products
only
as a bundle.
ii.
Mixed bundling: the seller offers the products as a bundle and also
separately.
(b) There is no simple general rule to set the prices.
(c) Bundling is more profitable where:
i. The benefits of the segments from the products are negatively correlated,
i.e., a product that is extremely beneficial to one segment provides relatively little
benefit to another (the benefit from the bundle will be relatively less disparate
across the segments than the benefits from the separate products); and
ii. The marginal cost of the product is low (relatively little economic inefficiency
will accrue from providing the bundle to all buyers).
(c) When marginal cost is substantial, mixed bundling should be considered. By
structuring a choice among the bundle and the separate products, various
segments will identity themselves by their product choice. The economic
inefficiency of providing a product for which the marginal cost is less than the
buyer’s benefit can be avoided.
OBJECTIVE FACTORS INFLUENCING PRICING DECISIONS:
Pricing decisions are influenced by numerous factors. Such decisions must be
consistent with company’s desired public image, i.e. they should derive directly
from company’s objectives. Secondly, price policies should be consistent with
pricing objectives and pricing strategies should be in conformity with both price
policies and pricing objectives. Thirdly, pricing decisions as require a knowledge of
the company’s over-all marketing environment viz., the internal factors ( such as
company objectives, company brand image, nature and objectives of promotional
effort, marketing channels and the physical distribution system) and the
environmental factors ( such as competition, economic climate and government
controls/regulation etc).
1. Internal Factors:
Theses are the factors which can be controlled by a firm to a certain extent.
Suchforces are;
i.
Organizational Factors.
ii.
Marketing Mix
iii.
Product Differentiation
iv.
Costs
v.
Objectives.
i.
Organisational Factors:
It is the top management who generally has full authority over pricing. The
marketing manager’s role is to administer the pricing programme within guidelines
laid down by top management. Pricing have such direct effect on sales volume and
profit that the marketing manager cannot keep himself aloof from pricing policy
making and strategy formulation. However, in many companies, some authority is
also granted to subordinate executives for setting prices, specially where pricing
varies in different markets, or where there are numerous products and frequent
pricing decisions are require. But it is the top management who should retain
primary responsibility for determining pricing objectives, policies and strategies.
ii.
Marketing Mix:
Price in one of the important elements of the marketing mix and therefore,
must be
coordinated with other three elements: production, promotion and distribution. In
some industries, a firm may use price reduction as a marketing technique; others
may raise prices as a deliberate strategy to build a high-prestige product line. In
either case, the effort will fail if the price change is not commensurate with the total
marketing strategy that it supports.
iii.
Product Differentiation:
Generally, the more differentiated a product is from competitive products,
the firm
has more leeway in setting prices. When a firm’s product is basically the same as
that of his competitors, the firm can differentiate its own image by building a solid
reputation among customers, by charging different prices.
iv.
Costs:
Often cost plays an important part in influencing through enabling the
marketer to
decide what prices are realistic in view of the demand and competition.
v.
Objectives:
The enterprise may have various objectives and pricing contributes in
achieving
them. The organization May pursue a variety of objectives, such as maximizing
sales, increasing market share, foster customer satisfaction, building favorable
image, stabilizing price etc. the objectives set for pricing will determine what prices
would be fixed for a particular product. Thus, pricing policy should be established
only after proper consideration of the objectives of the enterprise.
2. External Factors:
These are the factors over which the firm has no control, and therefore,
marketers
have to face many difficulties while determining the price of a product. Such factors
are;
i.
Demand
ii.
Competition
iii.
Suppliers
iv.
Buyers
v.
Economic conditions
i.
vi.
Government Regulations
Demand:
It has a large impact on pricing. Since demand is affected by such factors as
the
number and size of competitors, what they are charging for similar products, the
prospective buyers, their capacity and willingness to pay, and their preferences,
therefore, these factors need be taken into consideration while fixing the price.
ii.
Competition:
The knowledge what price the competitors are charging for similar product
and
what possibilities lie ahead for raising or lowering prices also affect pricing.
iii.
Suppliers:
The price of a finished product is intimately linked up with the price of the
raw materials, etc. hence, if the suppliers raise the price, the inevitable result is a
raise in price by the manufacturer, who ultimately passes it to the consumers.
Scarcity or abundance of the raw material also determines pricing.
iv.
Buyers:
The nature and behavior of the consumers and users for the purchase of a
particular product, brand or service, do affect pricing, particular if their number is
large.
v.
Economic Conditions:
This is a very important factor is as much as prosperity or depression
influences
the demand to a very great extent. The inflationary or deflationary tendency also
affects pricing. To meet shortages or rising prices and decreased demands, several
pricing decisions are available such as: (i) prices can be boosted to protect profit
against rising costs, (ii) price protection systems can be linked with the price on
delivery to current costs; or (iii) the emphasis can be shifted from sales volume to
profit margin and cost reduction.
vi.
Government Regulations:
The regulatory pressures, anti-price rise and control measures effectively
discourage companies from cornering too large a share of the market and
controlling prices.
Among the most important forces that affect the general price level are:
pressure for
higher wages, competition, business productivity, buyer resistance, seller
resistance, speculation and government policy.
COMPETITORS ACTION TO PRICE CHANGES:
Price war is a term used in economic sector to indicate a state of intense
competitive rivalry accompanied by a multi-lateral series of price reduction. One
competitor will lower its price, then others will lower their prices to match. If one of
them reduces their price again, a new round of reductions starts. In the short term,
price wars are good for consumers, who can take advantage of lower prices. Often
they are not good for the companies involved. The lower prices reduce profit
margins and can threaten their survival.
In the medium to long term, they can be good for the dominant firms in the
industry. Typically, the smaller, more marginal, firms cannot compete and must
close. The remaining firms absorb the market share of those that have closed. The
real losers then, are the marginal firms and their investors. In the long term, the
consumer may lose too. With fewer firms in the industry, prices tend to increase,
sometimes higher than before the price war started.
CAUSES:
The main reasons that price wars occur are:







Product differentiation: Some products are, or at least are seen as,
commodities. Because there is little to choose between brands, price is the
main competing factor.
Penetration pricing: If a merchant is trying to enter an established market, it
may offer lower prices than existing brands.
Oligopoly: If the industry structure is oligopolistic (that is, has few
competitors), the players will closely monitor each others' prices and be
prepared to respond to any price cuts.
Process optimization: merchants may incline to lower prices rather than shut
down or reduce output if they wish to maintain the economy of scale.
Similarly, new processes may make it cheaper to make the same product.
Bankruptcy: Companies near bankruptcy may be forced to reduce their
prices to increase sales volume and thereby provide enough liquidity to
survive.
Predatory pricing: A merchant with a healthy bank balance may deliberate
price new or existing products in an attempt to topple existing merchants in
that market.
Competitors: A competitor might target a product and attempt to gain
market share by selling its alternative at a lower price. Some argue that it is
better to introduce a new rival brand instead of trying to match the prices of
those already in the market.
REACTIONS TO PRICE CHALLENGES:
The first reaction to a price reduction should always be to consider carefully.
Has the competitor decided upon a long-term price reduction? Is this just a shortterm promotion? If it is the latter, then the reaction should be that relating to
short-term promotional activity, and the optimum response is often simply to
ignore the challenge. Too often, price wars have been started because simple
promotional activities have been misunderstood as major strategic changes.
But if it seems that it is a long-term move then there are many possible reactions:

Reduce price: The most obvious, and most popular, reaction is to match the
competitor's move. This maintains the status quo (but reduces profits pro
rata). If this route is to be chosen it is as well to make the move rapidly and



obviously - not least to send signals to the competitor of your intention to
fight.
Maintain price: Another reaction is to hope that the competitor has made a
mistake, but if the competitor's action does make inroads into a merchant's
share, this can soon mean customers lose confidence and a subsequent a
loss of sales.
Split the market: Branch one product into two, selling one as a premium and
another as a basic. This effective tactic was notably used by Heublein, the
owner of the Smirnoff brand of vodka).
React with other measures - Reducing price is not the only weapon. Other
tactics can be used to great effect: improved quality, increased promotion
(perhaps to improve the idea of quality).
HOW TO FIGHT A PRICE WAR
IN THE BATTLE TO CAPTURE THE CUSTOMER companies use a wide range of
tactics to ward off competitors. Increasingly, price is the weapon of choice – and
frequently the skirmishing degenerates into a price war.
Creating low price appeal is often the goal, but the result of one retaliatory
price slashing after another is often a precipitous decline in industry profits. Look
at the airline price wars of 1992. When American Airlines, Northwest Airlines, and
other U.S. carriers went toe-to-toe in matching and exceeding one another’s
reduced fares, the result was record volumes of air travel-and record losses. Some
estimates suggest that the overall losses suffered by the industry that year exceed
the combined profits for the entire industry from its inception.
Price wars can create economically devastating and psychologically debilitating
situations that take an extraordinary toll on an individual, a company, and industry
profitability. No matter who wins, the combatants all seem to end up worse off
than before they joined the battle. And yet, price wars are becoming increasingly
common and uncommonly fierce. Consider the following two examples:


In July 1999, Sprint announced a nighttime long-distance rate of 5 cents per
minute. In August 1999, MCI matched Sprint’s off-peak rate. Later that
month, AT & T acknowledged that revenue from its consumer long-distance
business was falling, and the company cut its long-distance rates to 7 cents
per minute all day, every day, for a monthly fee of $ 5.95. AT & T’s stock
dropped 4.7% the day of the announcement. MCI’s stock price dropped 2.5%;
Sprint’s fell 3.8%.
E-Trade and other electronic brokers are changing the competitive terrain of
financial services with their extraordinarily low-priced brokerage services. The
prevailing price for discount trades has fallen from $30 to $ 15 to $ 8 in the
past few years.
There is a little doubt, in the first example, that the major players in the longdistance
phone business are in a price war. Price reductions per-second billing, and free
calls are the principal weapons the players bring to the competitive arena. There is
little talk from any of the carriers about service, quality, brand equity, and other
nonprice factors that might add value to a product or service. Virtually every
competitive move is based on price, and every countermeasure is a retaliatory price
cut.
Price wars are becoming more common because
managers tend to view a price change as an easy,
quick, and reversible action
In the second example, the competitive situation is subtly different – and yet
still very much a price war. E-Trade’s success demonstrates how the emergence of
the Internet has fundamentally changed the cost of doing business. Consequently,
even businesses such as Charles Schwab, which used to compete primarily on lowprice appeal, are chanting a “quality” mantra. Meanwhile, Merrill Lynch and
American Express have recognized that the emergence of the Internet will affect
pricing and are changing their price structures to include free online trades for highend customers. These companies appear to be engaged in more focused pricing
battles, unlike the “globalized” price war in the long-distance phone market.
Most managers will be involved in a price war at some point in their careers.
Every price cut is potentially the first salvo, and some discounts routinely lead to
retaliatory price cuts that then escalate into a full-blown price war. That’s why it’s
a good idea to consider other options before starting a price war or responding to
an aggressive price move with a retaliatory one. Often, companies can avoid a
debilitating price war altogether by using a set of alternative tactics. Our goal is to
describe an arsenal of weapons other than price cuts that managers who are
engaged in or contemplating a price war may also want to consider.
MULTI PRODUCT PRICING:
Almost all the firm have more than one product in their line of product. Even
the most specialized firms produce a commodity in multiple models, styles. Each so
much differentiated from the other that each model or size of the product may be
considered a different product. E.g the various models of television, refrigerators,
etc., produced by the same company may be treated as different product for at
least pricing purposes. The various models are so differentiated that consumers
view them us different products. Hence each model or product has different
Average Revenue (AR) and Marginal Revenue (MR) curves and that one product of
the firm concepts against the other product. The pricing under this condition is
known as multiproduct pricing or product line pricing. In multiproduct pricing, each
product has a separate demand curve. But, since all of them are product under one
organization by interchangeable production facilities, they have only one inspirable
marginal cost curve. That is, while revenue curves, AR and MR are separate for
each product, cost curves AC and MC are inseparable.
With multiproduct pricing, the strongly discounted sale of the main product is
linked to a longer-term agreement to purchase complementary products or services
exclusively from that suppliers, such as buying a copier at a discount and agreeing
to purchase toner cartridges, paper and services in return. In some cases, the main
product is even sold as a loss leader. This method ensures a regular stream of
income to offset the discounted product, and is an effective tool or ward off
potential low-price, unbranded competition because the customer is tied to the
long-term agreement. The loyalty effect is very strong, although additional action
will be required at the end of the agreement.
PHYSICAL DISTRIBUTION:
Physical distribution is the set of activities concerned with efficient movement
of finished goods from the end of the production operation to the consumer.
Physical distribution takes place within numerous wholesaling and retailing
distribution channels, and includes such important decision areas as customer
service,
inventory
control,
materials
handling,
protective
packaging,
order
procession, transportation, warehouse site selection, and warehousing. Physical
distribution is part of a larger process called "distribution," which includes wholesale
and retail marketing, as well the physical movement of products.
Physical distribution activities have recently received increasing attention
from business managers, including small business owners. This is due in large part
to the fact that these functions often represent almost half of the total marketing
costs of a product. In fact, research studies indicate that physical distribution costs
nationally amount to approximately 20 percent of the country's total gross national
product (GNP). These findings have led many small businesses to expand their
cost-cutting efforts beyond their historical focus on production to encompass
physical distribution activities. The importance of physical distribution is also based
on its relevance to customer satisfaction. By storing goods in convenient locations
for shipment to wholesalers and retailers, and by creating fast, reliable means of
moving the goods, small business owners can help assure continued success in a
rapidly changing, competitive global market.
MANAGEMENT OF PHYSICAL DISTRIBUTION:
A SYSTEM APPROACH
Physical distribution can be viewed as a system of components linked together
for the efficient movement of products. Small business owners can ask the following
questions in addressing these components:

Customer service—What level of customer service should be provided?

Transportation—How will the products be shipped?

Warehousing—Where will the goods be located? How many warehouses
should be utilized?

Order processing—How should the orders be handled?

Inventory control—How much inventory should be maintained at each
location?

Protective packaging and materials handling—How can efficient methods be
developed for handling goods in the factory, warehouse, and transport
terminals?
These components are interrelated: decisions made in one area affect the
relative efficiency of others. For example, a small business that provides
customized personal computers may transport finished products by air rather than
by truck, as faster delivery times may allow lower inventory costs, which would
more than offset the higher cost of air transport. Viewing physical distribution from
a systems perspective can be the key to providing a defined level of customer
service at the lowest possible cost.
CUSTOMER SERVICE
Customer service is a precisely-defined standard of customer satisfaction
which a small business owner intends to provide for its customers. For example, a
customer service standard for the above-mentioned provider of customized
computers might be that 60 percent of all PCS reach the customer within 48 hours
of ordering. It might further set a standard of delivering 90 percent of all of its units
within 72 hours, and all 100 percent of its units within 96 hours. A physical
distribution system is then set up to reach this goal at the lowest possible cost. In
today's fast-paced, technologically advanced business environment, such systems
often involve the use of specialized software that allows the owner to track
inventory while simultaneously analyzing all the routes and transportation modes
available to determine the fastest, most cost-effective way to delivery goods on
time.
TRANSPORTATION
The United States' transportation system has long been a governmentregulated industry, much like its telephone and electrical utilities. But in 1977 the
deregulation of transportation began with the removal of federal regulations for
cargo air carriers not engaged in passenger transportation. The deregulation
movement has since expanded in ways that have fundamentally altered the
transportation landscape for small business owners, large conglomerates and,
ultimately, the consumer.
Transportation costs are largely based on the rates charged by carriers.
There are two basic types of transportation rates: class and commodity. The class
rate, which is the higher of the two rates, is the standard rate for every commodity
moving between any two destinations. The commodity rate is sometimes called a
special rate, since it is given by carriers to shippers as a reward for either regular
use or large-quantity shipments. Unfortunately, many small business owners do not
have the volume of shipping needed to take advantage of commodity rates.
However, small businesses are increasingly utilizing a third type of rate that has
emerged in recent years. This rate is known as a negotiated or contract rate.
Popularized in the 1980s following transportation deregulation, contract rates allow
a shipper and carrier to negotiate a rate for a particular service, with the terms of
the rate, service, and other variables finalized in a contract between the two
parties. Transportation costs vary by mode of shipping, as discussed below.
TRUCKING—FLEXIBLE AND GROWING The shipping method most favored by
small business (and many large enterprises as well) is trucking. Carrying primarily
manufactured products (as opposed to bulk materials), trucks offer fast, frequent,
and economic delivery to more destinations in the country than any other mode.
Trucks are particularly useful for short-distance shipments, and they offer relatively
fast, consistent service for both large and small shipments.
AIR FREIGHT—FAST BUT EXPENSIVE Because of the relatively high cost of air
transport, small businesses typically use air only for the movement of valuable or
highly-perishable products. However, goods that qualify for this treatment do
represent a significant share of the small business market. Owners can sometimes
offset the high cost of air transportation with reduced inventory-holding costs and
the increased business that may accompany faster customer service.
WATER CARRIERS—SLOW BUT INEXPENSIVE
There are two basic types of water carriers: inland or barge lines, and oceangoing
deep-water ships. Barge lines are efficient transporters of bulky, low-unit-value
commodities such as grain, gravel, lumber, sand, and steel. Barge lines typically do
not serve small businesses. Oceangoing ships, on the other hand, operate in the
Great Lakes, transporting goods among port cities, and in international commerce.
Sea shipments are an important part of foreign trade, and thus are of vital
importance to small businesses seeking an international market share.
RAILROADS—LONG DISTANCE SHIPPING Railroads continue to present an
efficient mode for the movement of bulky commodities over long distances. These
commodities include coal, chemicals, grain, non-metallic minerals, and lumber and
wood products.
PIPELINES—SPECIALIZED TRANSPORTERS Pipelines are utilized to efficiently
transport natural gas and oil products from mining sites to refineries and other
destinations. In addition, so-called slurry pipelines transport products such as coal,
which is ground to a powder, mixed with water, and moved as a suspension
through the pipes.
INTERMODAL SERVICES Small business owners often take advantage of multimode deals offered by shipping companies. Under these arrangements, business
owners can utilize a given transportation mode in the section of the trip in which it
is most cost efficient, and use other modes for other segments of the transport.
Overall costs are often significantly lower under this arrangement than with singlemode transport.
Of vital importance to small businesses are transporters specializing in small
shipments. These include bus freight services, United Parcel Service, Federal
Express, DHL International, the United States Postal Service, and others. Since
small businesses can be virtually paralyzed by transportation strikes or other
disruptions in small shipment service, many owners choose to diversify to include
numerous shippers, thus maintaining an established relationship with an alternate
shipper should disruptions occur. Additionally, small businesses often rely on freight
forwarders who act as transportation intermediaries: these firms consolidate
shipments from numerous customers to provide lower rates than are available
without consolidation. Freight forwarding not only provides cost savings to small
businesses, it provides entrepreneurial opportunities for start-up businesses as
well.
WAREHOUSING
Small business owners who require warehousing facilities must decide
whether to maintain their own strategically located depot(s), or resort to holding
their goods in public warehouses. And those entrepreneurs who go with non-public
warehousing must further decide between storage or distribution facilities. A
storage warehouse holds products for moderate to long-term periods in an attempt
to balance supply and demand for producers and purchasers. They are most often
used by small businesses whose products' supply and demand are seasonal. On the
other hand, a distribution warehouse assembles and redistributes products quickly,
keeping them on the move as much as possible. Many distribution warehouses
physically store goods for fewer than 24 hours before shipping them on to
customers.
In contrast to the older, multi-story structures that dot cities around the
country, modern warehouses are long, one-story buildings located in suburban and
semi-rural settings where land costs are substantially less. These facilities are often
located so that their users have easy access to major highways or other
transportation options. Single-story construction eliminates the need for installing
and maintaining freight elevators, and for accommodating floor load limits.
Furthermore, the internal flow of stock runs a straight course rather than up and
down multiple levels. The efficient movement of goods involves entry on one side of
the building, central storage, and departure out the other end.
Computer technology for automating warehouses is dropping in price, and
thus is increasingly available for small business applications. Sophisticated software
translates orders into bar codes and determines the most efficient inventory picking
sequence. Order information is keyboarded only once, while labels, bills, and
shipping documents are generated automatically. Information reaches hand-held
scanners, which warehouse staff members use to fill orders. The advantages of
automation include low inventory error rates and high processing speeds.
INVENTORY CONTROL
Inventory control can be a major component of a small business physical
distribution system. Costs include funds invested in inventory, depreciation, and
possible obsolescence of the goods. Experts agree that small business inventory
costs have dropped dramatically due to deregulation of the transportation industry.
Inventory control analysts have developed a number of techniques which can
help small businesses control inventory effectively. The most basic is the Economic
Order Quantity (EOQ)
model. This involves
a trade-off between the
two
fundamental components of an inventory control cost: inventory-carrying cost
(which increases with the addition of more inventory), and order-processing cost
(which decreases as the quantity ordered increases). These two cost items are
traded off in determining the optimal warehouse inventory quantity to maintain for
each product. The EOQ point is the one at which total cost is minimized. By
maintaining product inventories as close to the EOQ point as possible, small
business owners can minimize their inventory costs.
ORDER PROCESSING
The small business owner is concerned with order processing—another
physical distribution function—because it directly affects the ability to meet the
customer service standards defined by the owner. If the order processing system is
efficient, the owner can avoid the costs of premium transportation or high inventory
levels. Order processing varies by industry, but often consists of four major
activities: a credit check; recording of the sale, such as crediting a sales
representative's commission account; making the appropriate accounting entries;
and locating the item, shipping, and adjusting inventory records.
Technological innovations, such as increased use of the Universal Product
Code, are contributing to greater efficiency in order processing. Bar code systems
give small businesses the ability to route customer orders efficiently and reduce the
need for manual handling. The coded information includes all the data necessary to
generate customer invoices, thus eliminating the need for repeated keypunching.
Another technological innovation affecting order processing is Electronic Data
Interchange. EDI allows computers at two different locations to exchange business
documents
in
machine-readable
format,
employing
strictly-defined
industry
standards. Purchase orders, invoices, remittance slips, and the like are exchanged
electronically, thereby eliminating duplication of data entry, dramatic reductions in
data entry errors, and increased speed in procurement cycles.
PROTECTIVE PACKAGING AND MATERIALS HANDLING
Another important component of a small business physical distribution
system is material handling. This comprises all of the activities associated with
moving products within a production facility, warehouse, and transportation
terminals. One important innovation is known as unitizing—combining as many
packages as possible into one load, preferably on a pallet. Unitizing is accomplished
with steel bands or shrink wrapping to hold the unit in place. Advantages of this
material handling methodology include reduced labor, rapid movement, and
minimized damage and pilferage.
A second innovation is containerization—the combining of several unitized
loads into one box. Containers that are presented in this manner are often unloaded
in fewer than 24 hours, whereas the task could otherwise take days or weeks. This
speed allows small export businesses adequate delivery schedules in competitive
international markets. In-transit damage is also reduced because individual
packages are not handled en route to the purchaser.
MARKETING RISKS:
Marketing is the part of your business that transforms production activities
into financial returns. However, many unanticipated forces, such as weather,
market trends and government actions, can lead to uncertainty of costs, prices and
demand in the market and, therefore, cause marketing risks. Marketing risk largely
concerns price risk and market availability. Price risk is related to the volatility of
product or input prices. Market availability risk is related to loss of market access
due to competition or loss of a major customer, and loss of marketing power due to
the small size of sellers relative to buyers.
ANALYZE MARKETING RISKS:
As agriculture moves towards a more global market, marketing forces
increasingly arise from world factors – consider how currency exchange rates affect
international trades, and the impact of international supply on U.S. markets. These
forces are often difficult to predict and impossible for individual growers to control.
To effectively managing marketing risks, growers need to adopt strategies that are
in accordance with their own risk attitudes, preferences, and business and family
financial conditions. A better understanding of how risk tolerant you are, your
financial situation, what risk factors you can control, and the possible consequences
of your decisions will remove some of the uncertainty from making marketing
decisions. To be systematic about analyzing marketing risks, you should:
Identify the nature and importance of various sources in the market that
might cause you to earn lower profits.
♦ Evaluate the impacts of different sources of marketing risks on the efficiency and
profitability of your business.
♦ Focus on factors your can control and select risk management strategies to
minimize
those marketing risks.
♦ Evaluate various alternatives for managing marketing risks, potential costs and
returns,
and their impacts on risk reduction and the overall business.
RESPOND TO MARKETING RISKS:
The development of year-round supplies and increased competition between
global mega-merchandisers and regional/local retailers has expanded the range of
mainstream and specialty agriculture products. Agriculture producers have
responded to this diversified market in a number of ways to control marketing
risks: establishing production in multiple regions, forming strategic alliances with
other producers or marketers, developing new products, and forcing early or late
production. In addition, marketing contracts are becoming increasingly important to
larger producers, as is spreading sales to reduce dependence on a small number of
buyers or market segments. Smaller-scale producers are seeking specialty and
value-added niches, and are utilizing additional marketing channels such as a
variety of direct marketing outlets and marketing cooperatives to buffer market
access and price risks in the wholesale market. These new market developments
have created opportunities as well as problems for producers and marketers of
agriculture products.
The new products often have special production, handling and marketing
requirements, and the new markets often demand transformation of operation
logistics. To make an informed and balanced decision to manage marketing risks,
managers of agriculture businesses should begin with developing a strategic
marketing plan and also take into consideration other aspects of risks in the
operation including production, financial, legal, and human resource. Some
producers have also formed marketing clubs to improve their knowledge of
marketing concepts and gain greater success in the marketplace. A marketing club
is a grower-learning group, in which all participants contribute their knowledge and
share tasks to increase their marketing know-how.
It provides members with an opportunity to explore specific marketingrelated topics that interest them, at the pace and level of depth they need.
Extension educators and other resource people can play supportive roles, but it is
the members who determine what they want to learn and how they will learn it.
Another risk management tool that is often overlooked, especially by specialty crop
producers, is insurance. Insurance is not an investment tool. Nonetheless, in the
event of a serious mistake by you or your employee, an accident, or a natural or
man-made disaster, your insurance coverage is likely the only thing that will stand
between you and a major loss.
Both the type(s) of insurance you carry and the level of coverage provided
through each type of insurance are important.
Types of insurance to consider include liability insurance, hazard insurance
on business property, business continuation insurance, insurance for employees,
and crop insurance. Crop insurance relates to the marketing plan by helping to
insure that in the event of a crop or market failure, you will be able to continue
operating existing resources and serving your markets that you have worked hard
to develop. Government provides cost-sharing incentives for growers to purchase
crop insurance policies, especially in the underserved Northeast States.
Successful marketers are continually updating their abilities by learning new
skills. Learning about the full range of marketing tools will allow you to become a
better marketer and risk manager. Finally, marketing decisions should not be made
independently of other business decisions; they should be integrated with other
aspects of the overall business.
UNIT 4
1MARKS
1.
2.
3.
4.
5.
What do you mean by price?
Write the factors of pricing
Who is a buyer?
Who is s seller?
Write the @ factors that affecting pricing decision
5MARKS
1.
2.
3.
4.
Write the competitors action towards the price changes
Explain about multi product pricing
Explain about physical distribution
What do you mean by marketing risk
8MARKS
1. Explain the pricing policies and its types
2. Explain the factors influencing pricing decision
3. Explain about physical distribution and marketing risk
UNIT – V
BRANDING DECISIONS: BRAND-BRAND IMAGE, BRAND IDENTITY-BRAND
PERSONALITY –POSITIONING AND LEVERAGING THE BRANDS -BRANDS
EQUITY.
BRAND:
A brand is the identity of a specific product, service, or business.
A brand can take many forms, including a name, sign, symbol, color
combination or slogan. The word branding began simply as a way to tell one
person's cattle from another by means of a hot iron stamp. A legally protected
brand name is called a trademark. The word brand has continued to evolve to
encompass identity - it affects the personality of a product, company or service.
A concept brand is a brand that is associated with an abstract concept, like
breast cancer awareness or environmentalism, rather than a specific product,
service, or business. A commodity brand is a brand associated with a commodity.
Got milk? is an example of a commodity brand.
People engaged in branding seek to develop or align the expectations behind
the brand experience, creating the impression that a brand associated with a
product or service has certain qualities or characteristics that make it special or
unique. A brand is therefore one of the most valuable elements in an advertising
theme, as it demonstrates what the brand owner is able to offer in the marketplace.
The art of creating and maintaining a brand is called brand management.
Orientation of the whole organization towards its brand is called brand orientation.
One of the most significant product policy decisions an orgnisation faces is how to
identify its products. In general, branding is a way for an organization to identify its
offerings and distinguish them from those of competitors.
Branding may be accomplished by the use of:
A brand is a name, term symbol, or design, or a combination of them which
is intended to identify the goods or services of one seller or group of sellers and to
differentiate them from those of the computers.
A brand name, consists of words, marks, symbols or some combinations of
these that can be communicated orally.
A trade mark, is a brand that has legal protection, because, it is capable of
exclusive appropriation (i.e., only the owner can use it)
A brand mark is the part of the brand which appears in the form of a symbol,
or design or distinctive coloring, or lettering. It is recognized by sight but is not
expressed when a person pronounces the brand.
Brand names should not be confused with the trade names, wohere brand
refers to product, trade name refers to company. The name of the firm is its trade
name. The brand name can come from its trade name.
The continued use of brands to present times in business has been largely
due to: (i) growth in competition, (ii) growth of national and local advertising, (iii)
growth of packaging and (iv) the development of consumer brand consciousness.
The organizations brands its production for three particular reasons: physical
identification, legal protection and as a basis for promotional efforts.
The Physical identification of individual product lines are important in
shipping, sorting, grading, labeling and managing the inventory of various products.
There are three recognized degrees of brand identification:
(a) Brand insistence, where consumers insist on a brand when they perceive
it as having few close substitutes, Brand insistence is he ultimate goal of production
differentiation and market segmentation.
(b) Brand preferences, may stem form habit or experience. Preferences exit
among groups of consumers for almost all well-known brands.
(c) Brand recognition results when consumers remember having seen or
heard of a brand but make no special attempt to purchase it because they are
satisfied with their present brand.
Legal protection is vested in the trade mark/ the brand over which the
organization has an exclusive right.
BRAND IMAGE:
Brand image is the current view of the customers about a brand. It can be
defined as a unique bundle of associations within the minds of target customers. It
signifies what the brand presently stands for. It is a set of beliefs held about a
specific brand. In short, it is nothing but the consumers’ perception about the
product. It is the manner in which a specific brand is positioned in the market.
Brand image conveys emotional value and not just a mental image. Brand image is
nothing but an organization’s character. It is an accumulation of contact and
observation by people external to an organization. It should highlight an
organization’s mission and vision to all. The main elements of positive brand image
are- unique logo reflecting organization’s image, slogan describing organization’s
business in brief and brand identifier supporting the key values.
Brand image is the overall impression in consumers’ mind that is formed
from all sources. Consumers develop various associations with the brand. Based on
these associations, they form brand image. An image is formed about the brand on
the basis of subjective perceptions of associations bundle that the consumers have
about the brand. Volvo is associated with safety. Toyota is associated with
reliability.
The idea behind brand image is that the consumer is not purchasing just the
product/service but also the image associated with that product/service. Brand
images should be positive, unique and instant. Brand images can be strengthened
using brand communications like advertising, packaging, word of mouth publicity,
other promotional tools, etc.
Brand image develops and conveys the product’s character in a unique
manner different from its competitor’s image. The brand image consists of various
associations in consumers’ mind - attributes, benefits and attributes. Brand
attributes are the functional and mental connections with the brand that the
customers have. They can be specific or conceptual. Benefits are the rationale for
the purchase decision.
Benefits of Brand Image:
There are three types of benefits: Functional benefits - what do you do
better (than others ),emotional benefits - how do you make me feel better (than
others), and rational benefits/support - why do I believe you(more than others).
Brand attributes are consumers overall assessment of a brand.
Brand image has not to be created, but is automatically formed. The brand
image includes products' appeal, ease of use, functionality, fame, and overall value.
Brand image is actually brand content. When the consumers purchase the product,
they are also purchasing it’s image. Brand image is the objective and mental
feedback of the consumers when they purchase a product. Positive brand image is
exceeding the customers expectations. Positive brand image enhances the goodwill
and brand value of an organization.
STEPS IN BUILDING A BRAND NAME PRODUCT OR SERVICES:
At times, organizations are often inspired by a variety of ideas to create
products and services which can be offered locally or globally. Generally, such
products or services require the establishment of a brand or company name. Often
these brands include both logo and lettering and can do a long way in advertising
such products or services. Therefore, one of the most important steps in building a
Brand is decide upon a brand name for the product or service one wishes to sell.
Branding is a process that allows an individual or a group of individuals the
ability to provide a brand image and lettering to an idea. Upon doing so, one has a
better chance of selling such items to a broader audience whether that be on a local
or global level. Therefore, while the old adage “nothing happens until somebody
sells something,” still stands true to some extent, at times almost seems as if the
process of advertising and branding has overtaken the desire to sell.
Although branding generally identifies the company and philosophies behind
same, it can also be representative of those working for such a company. This is a
good thing as it generates the right type of audience to the product or service being
sold based on personal relationships with those running the company. Therefore,
benefiting both the organizations selling the branded product or service and the
dealers buying same.
One of the most important steps in selling any product or service is the belief
one holds in relation to the item. Therefore, only those who strongly believe in the
products and services offered by the company are going to be good at selling same.
Otherwise, one may want to work from an advertising or graphic artist perspective
in relation to advertising rather than sales when it comes to time to market same.
Another step is to build a brand that maintains loyalty with its customer base
and has a strong customer service department. For, having such a department in
today's world where one is both experienced and knowledgeable when it comes to
helping others can be a rare find. So, companies who represent oneself has having
a strong customer base and even stronger customer service department are often
more successful than those who do not.
A very important step in marketing a brand is to identify the target audience
before creating the logo and lettering in relation to marketing. This is because
different age groups react differently to a variety of logo and lettering especially as
so much is misrepresented by a variety of gangs and others using such material
inappropriately. Therefore, if one can define the brand name, logo and lettering and
present same to a marketing research review panel or the like, one may be able to
gain a better understanding of which audience one needs to direct their product or
service to in order to create the most sales.
Still, if one can communicate the use of their product or service clearly,
establish trust within the community, be that locally or globally, aim marketing at
the right audience, build a base of buyers and customer loyalty and offer great
customer service, then one is on their way to not only creating and advertising an
excellent brand but selling one as well.
Therefore, when looking for steps in building a brand, there are many steps
which one can complete to help make the creation of such brand an easier task.
These include, knowing your audience, building your brand, finding a great logo and
lettering to represent same, targeting the appropriate audience and placing a
number of ads in as many online and offline advertising venues one can find. For,
after doing so, one may just find that they are selling even more products and
services than one had ever dreamed possible.
BRAND IDENTITY:
Brand identity stems from an organization, i.e., an organization is
responsible for creating a distinguished product with unique characteristics. It is
how an organization seeks to identify itself. It represents how an organization
wants to be perceived in the market. An organization communicates its identity to
the consumers through its branding and marketing strategies. A brand is unique
due to its identity. Brand identity includes following elements - Brand vision, brand
culture, positioning, personality, relationships, and presentations.
Brand identity is a bundle of mental and functional associations with the
brand. Associations are not “reasons-to-buy” but provide familiarity and
differentiation that’s not replicable getting it.
Examples:
These associations can include signature tune(for example - Britannia “tingting-ta-ding”), trademark colours (for example - Blue colour with Pepsi), logo (for
example - Nike), tagline (for example - Apple’s tagline is “Think different”),etc.
Brand
identity is the total proposal/promise that an organization
makes to consumers. The brand can be perceived as a product, a personality, a set
of values, and a position it occupies in consumer’s minds. Brand identity is all that
an organization wants the brand to be considered as. It is a feature linked with a
specific company, product, service or individual. It is a way of externally expressing
a brand to the world.
Brand identity is the noticeable elements of a brand (for instance - Trademark
colour, logo, name, symbol) that identify and differentiates a brand in target
audience mind. It is a crucial means to grow your company’s brand.
Brand identity is the aggregation of what all you (i.e. an
organization) do. It is an organizations mission, personality, promise to
the consumers and competitive advantages. It includes the thinking, feelings
and expectations of the target market/consumers. It is a means of identifying and
distinguishing an organization from another. An organization having unique brand
identity have improved brand awareness, motivated team of employees who feel
proud working in a well branded organization, active buyers, and corporate style.
Brand identity leads to brand loyalty, brand preference, high credibility, good prices
and good financial returns. It helps the organization to express to the customers
and the target market the kind of organization it is. It assures the customers again
that you are who you say you are. It establishes an immediate connection between
the organization and consumers. Brand identity should be sustainable. It is crucial
so that the consumers instantly correlate with your product/service.
Brand identity should be futuristic, i.e, it should reveal the associations
aspired for the brand. It should reflect the durable qualities of a brand. Brand
identity is a basic means of consumer recognition and represents the brand’s
distinction from it’s competitors.
The outward expression of a brand, including its name, trademark,
communications, and visual appearance. Because the identity is assembled by the
brand owner, it reflects how the owner wants the consumer to perceive the brand and by extension the branded company, organization, product or service. This is in
contrast to the brand image, which is a customer's mental picture of a brand. The
brand owner will seek to bridge the gap between the brand image and the brand
identity.
Effective brand names build a connection between the brand personality as it
is perceived by the target audience and the actual product/service. The brand name
should be conceptually on target with the product/service (what the company
stands for). Furthermore, the brand name should be on target with the brand
demographic. Typically, sustainable brand names are easy to remember, transcend
trends and have positive connotations. Brand identity is fundamental to consumer
recognition and symbolizes the brand's differentiation from competitors.
Brand identity is what the owner wants to communicate to its potential
consumers. However, over time, a product's brand identity may acquire (evolve),
gaining new attributes from consumer perspective but not necessarily from the
marketing communications an owner percolates to targeted consumers. Therefore,
brand associations become handy to check the consumer's perception of the brand.
Brand identity needs to focus on authentic qualities - real characteristics of
the value and brand promise being provided and sustained by organizational and/or
production characteristics.
SOURCES OF BRAND IDENTITY:
1. SYMBOLS:
Symbols help customers memorize organization’s products and services.
They help us correlate positive attributes that bring us closer and make it
convenient for us to purchase those products and services. Symbols emphasize our
brand expectations and shape corporate images. Symbols become a key component
of brand equity and help in differentiating the brand characteristics. Symbols are
easier to memorize than the brand names as they are visual images. These can
include logos, people, geometric shapes, cartoon images, anything. For instance,
Marlboro has its famous cowboy, Pillsbury has its Poppin’ Fresh doughboy, Duracell
has its bunny rabbit, Mc Donald has Ronald, Fed Ex has an arrow, and Nike’s
swoosh. All these symbols help us remember the brands associated with them.
Brand symbols are strong means to attract attention and enhance brand
personalities by making customers like them. It is feasible to learn the relationship
between symbol and brand if the symbol is reflective/representative of the brand.
For instance, the symbol of LG symbolize the world, future, youth, humanity, and
technology. Also, it represents LG’s efforts to keep close relationships with their
customers.
2. LOGOS:
A logo is a unique graphic or symbol that represents a company, product,
service, or other entity. It represents an organization very well and make the
customers well-acquainted with the company. It is due to logo that customers form
an image for the product/service in mind. Adidas’s “Three Stripes” is a famous
brand identified by it’s corporate logo.
Features of a good logo are :
a.
b.
c.
d.
e.
f.
g.
h.
i.
j.
It should be simple.
It should be distinguished/unique. It should differentiate itself.
It should be functional so that it can be used widely.
It should be effective, i.e., it must have an impact on the intended
audience.
It should be memorable.
It should be easily identifiable in full colours, limited colour palettes, or
in black and white.
It should be a perfect reflection/representation of the organization.
It should be easy to correlate by the customers and should develop
customers trust in the organization.
It should not loose it’s integrity when transferred on fabric or any
other material.
It should portray company’s values, mission and objectives.
The elements of a logo are:
i.
ii.
iii.
Logotype - It can be a simple or expanded name. Examples of logotypes
including only the name are Kellogg’s, Hyatt, etc.
Icon - It is a name or visual symbol that communicates a market position.
For example-LIC ’hands’, UTI ’kalash’.
Slogan - It is best way of conveying company’s message to the consumers.
For instance- Nike’s slogan “Just Do It”.
3. TRADEMARKS:
Trademark is a unique symbol, design, or any form of identification that
helps people recognize a brand. A renowned brand has a popular trademark and
that helps consumers purchase quality products. The goodwill of the dealer/maker
of the product also enhances by use of trademark. Trademark totally indicates the
commercial source of product/service. Trademark contribute in brand equity
formation of a brand. Trademark name should be original. A trademark is chosen by
the following symbols:
™ (denotes unregistered trademark, that is, a mark used to promote or
brand
goods);
SM
(denotes
unregistered
service
mark)
® (denotes registered trademark).
Registration of trademark is essential in some countries to give exclusive
rights to it. Without adequate trademark protection, brand names can become
legally declared generic. Generic names are never protectable as was the case with
Vaseline, escalator and thermos.
Some guidelines for trademark protection are as follows:
a.
b.
c.
d.
Go for formal trademark registration.
Never use trademark as a noun or verb. Always use it as an adjective.
Use correct trademark spelling.
Challenge each misuse of trademark, specifically by competitors in
market.
e. Capitalize first letter of trademark. If a trademark appears in point,
ensure that it stands out from surrounding text.
Brand Identity
Brand Image
1
Brand identity develops from the
source or the company.
Brand image is perceived by the
receiver or the consumer.
2
Brand message is tied together in
terms of brand identity.
Brand message is untied by the
consumer in the form of brand
image.
3
The general meaning of brand
identity is “who you really are?”
The general meaning of brand image
is “How market perceives you?”
4
It’s nature is that it is substance
oriented or strategic.
It’s nature is that it is appearance
oriented or tactical.
5
Brand identity symbolizes firms’
reality.
Brand image symbolizes perception of
consumers
6
Brand identity represents “your
desire”.
Brand image represents “others view”
7
It is enduring.
It is superficial.
8
Identity is looking ahead.
Image is looking back.
9
Identity is active.
Image is passive.
10
It signifies “where you want to
be”.
It signifies “what you have got”.
11
It is total promise that a company
makes to consumers.
It is total consumers’ perception
about the brand.
BRAND PERSONALITY:
Based on the premise that brands can have personalities in much the same
way as humans, Brand Personality describes brands in terms of human
characteristics. Brand personality is seen as a valuable factor in increasing brand
engagement and brand attachment, in much the same way as people relate and
bind to other people. Much of the work in the area of brand personality is based on
translated theories of human personality and using similar measures of personality
attributes and factors.
CREATING A BRAND PERSONALITY:
At the turn of the century, corporate communication professionals
experienced their finest hour: in the world of branding the concept of ‘identity’ was
the centre of attention. For many years corporate communication had been
regarded as the department in charge of ‘very important things’ - but without direct
relevance to profit & loss results. The strategic reputation based long-term focus of
the corporate communication professional entered the core of modern marketingtheories. The concept of identity connected the ‘inside-out’ way of thinking of
corporate communication to the ‘outside-in’ of marketing for years the predominant
principle in business.
The strategic shift towards identity was not surprising. The traditional
marketing approach had lost its effect. Marketing professionals had become a bit
too much mechanical, executing the accepted rules and processes of brand
building, marketing communication and product innovation.
Marketing itself became a mass produced product, a commodity lacking spirit and
authenticity.
And the consumers at the receiving end grew tired of the traditional
approach of push marketing. They literally didn’t buy it anymore. We all know the
effects: declining brand loyalty, declining market share for well-known brands,
more room for out-of-the-box ideas, no-brand products. This gave rise to new
techniques like guerrilla marketing, pull marketing, experience marketing, niche
marketing.
Identity prism:
Thought provoking was the Identity Prism of academic Jean-Nol Kapferer in
his bestselling book STRATEGIC BRAND MANAGEMENT (1995). His theory had a
profound impact on how companies viewed the very nature of brand building. Of
course the French professor didnt create the shift to identity single-handedly, but
he can be seen as one of the visionaries who ignited the process. Companies soon
acknowledged that identity was one of the essential keys for building successful
brands. The focus in companies shifted away from the stereotype marketing
mantra: doing and communicating whatever the consumer wants according to
research. Business and marketing professionals started to pay attention to their
own, inner values as a company, as a brand.
You can observe this shift in thinking from a historical perspective. Over the past
fifty years the mentality/approach of companies has progressively evolved in
several stages:
 product based
 sales based
 market based
 marketing based
 (brand)identity based
 Brand personality
Just like people, all brands have a personality. Whether it is shallow and
instrumental
or
deep,
emotionally
charged
and
carefully
managed.
This personality is crucial. Why? To put it boldly: personality is a key issue in our
society. Look at politics: the popularity of politicians and government leaders is
personality based. It is not about their identity, it is not about their views, which
are elements of the overall concept that matter most: their personality. Was Tony
Blair so successful because of his identity, his views, or his overall personality?
In my view, the situation for brands is no different. It is all about personality.
Personality is the concept to give life to a brand, to manage ‘identity and image’, to
create likeability.
IDENTITY <-> PERSONALITY
So what is the main difference between identity and personality? Lets set the
record straight: of course they are not complete opposites, like Mars and Venus. It
has to do with a fundamentally different approach. Identity as a term refers to
background and facts in most languages. Your identity is about characteristics you
share with others, like the country and culture you come from, your race, your
religion, and facts, like the place where you live.
In communication it mostly refers to your true inner self - as a company or a
brand. To quote Kapferer: “Having an identity means being who you are, following
your own, determined, but individual path”. Be who you are. This is the paradigm
of identity.
The concept of brand personality combines inside-out and outside-in; identity and
image. A personality has it’s roots in the identity but is strongly externally focused.
It is not ‘be who your are’. Personality is: Become who you should be.
In the words of Carl Jung: “Personality is the supreme realisation of the
innate idiosyncrasy of a living being. It is an act of courage flung in the face of life,
the absolute affirmation of all that constitutes the individual, the most successful
adaptation to the universal conditions of existence, coupled with the greatest
possible
freedom
of
self-determination.”
[C.G. Jung, 1875-1961]
In psychology, three elements are defined as a part of personality:
-private
personality
(thoughts,
feelings,
fantasies,
ambitions,
talents)
-public
personality
(how
you
want
others
to
see
you)
-attributed personality (how others see you)
The private personality overlaps identity; the public and attributed
personalities indicate the external aim and nature of personality.
IDENTITY -> PERSONALITY:
In historic perspective, the shift from identity to personality was organic and
logical. Identity-based thinking was a logical reaction to marketing-based thinking.
Forgive me for dropping names, but in many dynamic processes, I use the theory
of dialectic development of the German philosopher Georg Hegels to explain the
developments that took place: thesis -> antithesis -> synthesis. It also applies in
this matter: the thesis is marketing (outside-in), the antithesis is identity (insideout), the synthesis is personality.
This is an ongoing process that, fortunately, never stops. I am curious to see what
will come next.
THE USE OF BRAND PERSONALITY:
OK, now we have established the logic behind the concept of brand
personality: what should we do with it? We use brand personality to bring brand
strategy to life. Don’t forget, consumers demand a brand of flesh and blood. The
consumer will treat your brand like you treat the consumer. If your brand has no
personality and no warmth, the consumer will treat it likewise: zero loyalty, high
price sensitivity.
The fact of the matter is that brand-strategy models are extremely important
to modern business. But they are an intellectual piece of work, not necessarily a
practical one. They are vital in telling what a brand should be all about and why;
but less useful in helping professionals finding out how they should manage to
achieve, follow and contribute to this strategy in the day-to-day business
environment.
The brand personality should be clearly defined; like you would describe the
personality of a real person. Obviously this does not apply to every brand. You can
choose other verbal concepts to express the brand personality. It is most important
to define a brand personality without using any professional lingo.
Use peoples language, simple words, create a lively picture of a personality
that is absolutely clear to anyone. It will be a big contribution to what I call the
internal governance of your brand. It brings you beyond the strategic words that
are too abstract to manage a brand in daily business and beyond the strict
guidelines that are too inflexible.
THE POWER OF PARADOX:
One essential thing I would like to add to this outline about personality is the
power of paradox. The point is that organisations are not one-dimensional, markets
are not one-dimensional, people and personalities are not one-dimensional. So.....:
why should a brand strategy be worded in one-dimensional keywords? Why is it
that three or four keywords should stand for the eternal truth about the brand? Life
isn’t as simple as that. And you limit yourself from a commercial perspective.
Unless, maybe, you are talking about a very simple fast-moving consumer product.
Any brand with more richness and complexity (and therefore: power) in its
personality can achieve more by crossing the line of one-dimensional key words.
Right now I am involved in the strategic development of a European brand.
One of the keywords of the brand strategy is ‘innovative’. This word is meaningful
and meaningless at the same time. After reading and talking about the project we
defined the paradox ‘innovative - mainstream’ to replace the single minded
‘innovative’. And then you feel energy: a brand that should be innovative and
mainstream. That is much more like real life, much more exiting, much more
strength and power. And: much easier to conduct creative reviews in developing
the brand and to organise internal governance once the brand is on the market. I
can tell you from experience.
If you determine and define precisely the two or three fields of paradox that
are crucial to your brand; you will have a unique and strong compass to build and
conduct it.
Note
to
all
readers:
Apart from your opinion, I am interested in interesting examples of what I am
writing about articles or remote literature that I should know of (please be specific,
up to the page)
POSITIONING AND LEVERAGING THE BRANDS:
Brand positioning refers to “target consumer’s” reason to buy your brand in
preference to others. It is ensures that all brand activity has a common aim; is
guided, directed and delivered by the brand’s benefits/reasons to buy; and it
focuses at all points of contact with the consumer.
Brand positioning must make sure that:
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Is it unique/distinctive vs. competitors ?
Is it significant and encouraging to the niche market ?
Is it appropriate to all major geographic markets and businesses ?
Is the proposition validated with unique, appropriate and original products ?
Is it sustainable - can it be delivered constantly across all points of contact
with the consumer ?
Is it helpful for organization to achieve its financial goals ?
Is it able to support and boost up the organization ?
In order to create a distinctive place in the market, a niche market has to be
carefully chosen and a differential advantage must be created in their mind. Brand
positioning is a medium through which an organization can portray it’s customers
what it wants to achieve for them and what it wants to mean to them. Brand
positioning forms customer’s views and opinions.
Brand Positioning can be defined as an activity of creating a brand offer in such a
manner that it occupies a distinctive place and value in the target customer’s mind.
For instance-Kotak Mahindra positions itself in the customer’s mind as one entity“Kotak ”- which can provide customized and one-stop solution for all their financial
services needs. It has an unaided top of mind recall. It intends to stay with the
proposition of “Think Investments, Think Kotak”. The positioning you choose for
your brand will be influenced by the competitive stance you want to adopt.
Brand Positioning involves identifying and determining points of similarity and
difference to ascertain the right brand identity and to create a proper brand image.
Brand Positioning is the key of marketing strategy. A strong brand positioning
directs marketing strategy by explaining the brand details, the uniqueness of brand
and it’s similarity with the competitive brands, as well as the reasons for buying
and using that specific brand. Positioning is the base for developing and increasing
the required knowledge and perceptions of the customers. It is the single feature
that sets your service apart from your competitors. For instance- Kingfisher stands
for youth and excitement. It represents brand in full flight.
There are various positioning errors, such as1. Under positioning- This is a scenario in which the customer’s have a
blurred and unclear idea of the brand.
2. Over positioning- This is a scenario in which the customers have too
limited a awareness of the brand.
3. Confused positioning- This is a scenario in which the customers have a
confused opinion of the brand.
4. Double Positioning- This is a scenario in which customers do not accept the
claims of a brand.
Positioning can be defined as follows:
Positioning is how a product appears in relation to other products in the
market
Brands can be positioned against competing brands on a perceptual map.
A perceptual map defines the market in terms of the way buyers perceive
key characteristics of competing products.
The basic perceptual map that buyers use maps products in terms of their
price and quality, as illustrated below:
BRAND POSITIONING STRATEGIES :
A product can be positioned based on 2 main platforms: The Consumer and
The Competitor. When the positioning is on the basis of consumer, the
campaigns and messages are always targeted to the consumer himself (the user of
the product)
The other kind of positioning is on basis of competition. These campaigns
are targeted towards competing with other players in the market.
Dettol television commercials always concentrate on advertisements, which
show that this product would give you more protection, then the others.
A number of positioning strategies might be employed in developing a
promotional program. The 7 such strategies are discussed below:
1. POSITIONING BY PRODUCT ATTRIBUTES AND BENEFITS:
Associating a product with an attribute, a product feature or a consumer
feature. Sometimes a product can be positioned in terms of two or more attributes
simultaneously. The price/ quality attribute dimension is commonly used for
positioning the products.
A common approach is setting the brand apart from competitors on the basis of
the specific characteristics or benefits offered. Sometimes a product may be
positioned on more than one product benefit. Marketers attempt to identify salient
attributes (those that are important to consumers and are the basis for making a
purchase decision)
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Consider the example of Ariel that offers a specific benefit of cleaning even
the dirtiest of clothes because of the micro cleaning system in the product.
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Colgate offers benefits of preventing cavity and fresh breath.
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Promise, Balsara’s toothpaste, could break Colgate’s stronghold by being the
first to claim that it contained clove, which differentiated it from the leader.
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Nirma offered the benefit of low price over Hindustan Lever’s Surf to become
a success.
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Maruti Suzuki offers benefits of maximum fuel efficiency and safety over its
competitors. This strategy helped it to get 60% of the Indian automobile
market.
2. POSITIONING BY PRICE/ QUALITY:
Marketers often use price/ quality characteristics to position their brands.
One way they do it is with ads that reflect the image of a high-quality brand where
cost, while not irrelevant, is considered secondary to the quality benefits derived
from using the brand. Premium brands positioned at the high end of the market use
this approach to positioning.
Another way to use price/ quality characteristics for positioning is to focus
on the quality or value offered by the brand at a very competitive price. Although
price is an important consideration, the product quality must be comparable to, or
even better than, competing brands for the positioning strategy to be effective.
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Parle Bisleri – “Bada Bisleri, same price” ad campaign.
3. POSITIONING BY USE OR APPLICATION:
Another way is to communicate a specific image or position for a brand is to
associate it with a specific use or application.
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Surf Excel is positioned as stain remover ‘ Surf Excel hena!’
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Also, Clinic All Clear – “Dare to wear Black”.
4. POSITIONING BY PRODUCT CLASS:
Often the competition for a particular product comes from outside the product
class. For example, airlines know that while they compete with other airlines, trains
and buses are also viable alternatives. Manufacturers of music CDs must compete
with the cassettes industry. The product is positioned against others that, while not
exactly the same, provide the same class of benefits.
5. POSITIONING BY PRODUCT USER:
Positioning a product by associating it with a particular user or group of users
is yet another approach. Motography Motorola Mobile Ad.n this ad the persona of
the user of the product is been positioned.
6. POSITIONING BY COMPETITOR:
Competitors may be as important to positioning strategy as a firm’s own
product or services. In today’s market, an effective positioning strategy for a
product or brand may focus on specific competitors. This approach is similar to
positioning by product class, although in this case the competition is within the
same
product
category.
Onida was positioned against the giants in the television industry through this
strategy, ONIDA colour TV was launched with the message that all others were
clones and only Onida was the leader. “neighbour’s Envy, Owners Pride”.
7. POSITIONING BY CULTURAL SYMBOLS:
An additional positioning strategy where in the cultural symbols are used to
differentiate the brands. Examples would be Humara Bajaj, Tata Tea, Ronald
McDonald. Each of these symbols has successfully differentiated the product it
represents from competitors.
BRANDS EQUITY:
A brand is a name or symbol used to identify the source of a product. When
developing a new product, branding is an important decision. The brand can add
significant value when it is well recognized and has positive associations in the mind
of the consumer. This concept is referred to as brand equity.
Brand Equity is the value and strength of the Brand that decides its worth. It can
also be defined as the differential impact of brand knowledge on consumers
response to the Brand Marketing. Brand Equity exists as a function of consumer
choice in the market place. The concept of Brand Equity comes into existence when
consumer makes a choice of a product or a service. It occurs when the consumer is
familiar with the brand and holds some favourable positive strong and distinctive
brand associations in the memory.
 Brand Equity can be determined by measuring:
 Returns to the Share-Holders.
 Evaluating the Brand Image for various parameters that are considered
significant.
 Evaluating the Brand’s earning potential in long run
 By evaluating the increased volume of sales created by the brand compared
to other brands in the same class.
 The price premium charged by the brand over non-branded products
 From the prices of the shares that an organization commands in the market
(specifically if the brand name is identical to the corporate name or the
consumers can easily co-relate the performance of all the individual brands
of the organization with the organizational financial performance.
 OR, An amalgamation of all the above methods
What is Brand Equity?
Brand equity is an intangible asset that depends on associations made by the
consumer. There are at least three perspectives from which to view brand equity:
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Financial:
One way to measure brand equity is to determine the price premium that a
brand commands over a generic product. For example, if consumers are willing to
pay $100 more for a branded television over the same unbranded television, this
premium provides important information about the value of the brand. However,
expenses such as promotional costs must be taken into account when using this
method to measure brand equity.
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Brand extensions:
A successful brand can be used as a platform to launch related products. The
benefits of brand extensions are the leveraging of existing brand awareness thus
reducing advertising expenditures, and a lower risk from the perspective of the
consumer. Furthermore, appropriate brand extensions can enhance the core brand.
However, the value of brand extensions is more difficult to quantify than are direct
financial measures of brand equity.
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Consumer-based:
A strong brand increases the consumer's attitude strength toward the product
associated with the brand. Attitude strength is built by experience with a product.
This importance of actual experience by the customer implies that trial samples are
more effective than advertising in the early stages of building a strong brand. The
consumer's awareness and associations lead to perceived quality, inferred
attributes, and eventually, brand loyalty.
Strong brand equity provides the following benefits:
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Facilitates a more predictable income stream.
Increases cash flow by increasing market share, reducing promotional costs,
and allowing premium pricing.
Brand equity is an asset that can be sold or leased.
However, brand equity is not always positive in value. Some brands acquire a
bad reputation that results in negative brand equity. Negative brand equity can be
measured by surveys in which consumers indicate that a discount is needed to
purchase the brand over a generic product.
PROTECTING BRAND EQUITY:
The marketing mix should focus on building and protecting brand equity. For
example, if the brand is positioned as a premium product, the product quality
should be consistent with what consumers expect of the brand, low sale prices
should not be used compete, the distribution channels should be consistent with
what is expected of a premium brand, and the promotional campaign should build
consistent associations.
Finally, potentially dilutive extensions that are inconsistent with the
consumer's perception of the brand should be avoided. Extensions also should be
avoided if the core brand is not yet sufficiently strong.
FACTORS CONTRIBUTING TO BRAND EQUITY:
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5.
Brand Awareness
Brand Associations
Brand Loyalty
Perceived Quality
Other Proprietary Brand Assets
1. Brand Awareness :
Brand awareness is the probability that consumers are familiar about the life
and availability of the product. It is the degree to which consumers precisely
associate the brand with the specific product. It is measured as ratio of niche
market that has former knowledge of brand. Brand awareness includes both brand
recognition as well as brand recall. Brand recognition is the ability of consumer to
recognize prior knowledge of brand when they are asked questions about that
brand or when they are shown that specific brand, i.e., the consumers can clearly
differentiate the brand as having being earlier noticed or heard. While brand recall
is the potential of customer to recover a brand from his memory when given the
product class/category, needs satisfied by that category or buying scenario as a
signal. In other words, it refers that consumers should correctly recover brand from
the memory when given a clue or he can recall the specific brand when the product
category is mentioned. It is generally easier to recognize a brand rather than recall
it from the memory.
Brand awareness is improved to the extent to which brand names are selected
that is simple and easy to pronounce or spell; known and expressive; and unique as
well as distinct. For instance - Coca Cola has come to be known as Coke.
There are two types of brand awareness:
1. Aided awareness- This means that on mentioning the product category, the
customers recognize your brand from the lists of brands shown.
2. Top of mind awareness (Immediate brand recall)- This means that on
mentioning the product category, the first brand that customer recalls from
his mind is your brand.
The relative importance of brand recall and recognition will rely on the degree to
which consumers make product-related decisions with the brand present or not. For
instance - In a store, brand recognition is more crucial as the brand will be
physically present. In a scenario where brands are not physically present, brand
recall is more significant (as in case of services and online brands).
Building brand awareness is essential for building brand equity:
It includes use of various renowned channels of promotion such as
advertising, word of mouth publicity, social media like blogs, sponsorships,
launching events, etc. To create brand awareness, it is important to create reliable
brand image, slogans and taglines. The brand message to be communicated should
also be consistent. Strong brand awareness leads to high sales and high market
share. Brand awareness can be regarded as a means through which consumers
become acquainted and familiar with a brand and recognize that brand.
2. Brand Associations:
Brand Associations are not benefits, but are images and symbols associated
with a brand or a brand benefit. For example- The Nike Swoosh, Nokia sound, Film
Stars as with “Lux”, signature tune Ting-ting-ta-ding with Britannia, Blue colour
with Pepsi, etc. Associations are not “reasons-to-buy” but provide acquaintance and
differentiation that’s not replicable. It is relating perceived qualities of a brand to a
known entity. For instance- Hyatt Hotel is associated with luxury and comfort; BMW
is associated with sophistication, fun driving, and superior engineering. Most
popular brand associations are with the owners of brand, such as - Bill Gates and
Microsoft, Reliance and Dhirubhai Ambani.
Brand association is anything which is deep seated in customer’s
mind about the brand. Brand should be associated with something positive so
that the customers relate your brand to being positive. Brand associations are the
attributes of brand which come into consumers mind when the brand is talked
about. It is related with the implicit and explicit meanings which a consumer
relates/associates with a specific brand name. Brand association can also be
defined as the degree to which a specific product/service is recognized within it’s
product/service class/category. While choosing a brand name, it is essential that
the name chosen should reinforce an important attribute or benefit association that
forms it’s product positioning. For instance - Power book.
Brand associations are formed on the following basis:
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Customers contact with the organization and it’s employees;
Advertisements;
Word of mouth publicity;
Price at which the brand is sold;
Celebrity/big entity association;
Quality of the product;
Products and schemes offered by competitors;
Product class/category to which the brand belongs;
POP ( Point of purchase) displays; etc
Positive brand associations are developed if the product which the brand depicts is
durable, marketable and desirable. The customers must be persuaded that the
brand possess the features and attributes satisfying their needs. This will lead to
customers having a positive impression about the product. Positive brand
association helps an organization to gain goodwill, and obstructs the competitor’s
entry into the market.
3. Brand Loyalty :
Brand Loyalty is a scenario where the consumer fears purchasing and consuming
product from another brand which he does not trust. It is measured through
methods like word of mouth publicity, repetitive buying, price sensitivity,
commitment, brand trust, customer satisfaction, etc. Brand loyalty is the extent to
which a consumer constantly buys the same brand within a product category. The
consumers remain loyal to a specific brand as long as it is available. They do not
buy from other suppliers within the product category. Brand loyalty exists when the
consumer feels that the brand consists of right product characteristics and quality
at right price. Even if the other brands are available at cheaper price or superior
quality, the brand loyal consumer will stick to his brand.
Brand loyal consumers are the foundation of an organization. Greater
loyalty levels lead to less marketing expenditure because the brand loyal customers
promote the brand positively. Also, it acts as a means of launching and introducing
more products that are targeted at same customers at less expenditure. It also
restrains new competitors in the market. Brand loyalty is a key component of brand
equity.
Brand loyalty can be developed through various measures such as quick service,
ensuring quality products, continuous improvement, wide distribution network, etc.
When consumers are brand loyal they love “you” for being “you”, and they will
minutely consider any other alternative brand as a replacement. Examples of brand
loyalty can be seen in US where true Apple customers have the brand's logo
tattooed onto their bodies. Similarly in Finland, Nokia customers remained loyal to
Nokia because they admired the design of the handsets or because of user- friendly
menu system used by Nokia phones.
Brand loyalty can be defined as relative possibility of customer shifting
to another brand in case there is a change in product’s features, price or
quality. As brand loyalty increases, customers will respond less to competitive
moves and actions. Brand loyal customers remain committed to the brand, are
willing to pay higher price for that brand, and will promote their brand always. A
company having brand loyal customers will have greater sales, less marketing and
advertising costs, and best pricing. This is because the brand loyal customers are
less reluctant to shift to other brands, respond less to price changes and selfpromote the brand as they perceive that their brand have unique value which is not
provided by other competitive brands.
Brand loyalty is always developed post purchase. To develop brand loyalty, an
organization should know their niche market, target them, support their product,
ensure easy access of their product, provide customer satisfaction, bring constant
innovation in their product and offer schemes on their product so as to ensure that
customers repeatedly purchase the product.
4. Perceived Quality:
Refers to the customer’s perception about the total quality of the brand. While
evaluating quality the customer takes into account the brands performance on
factors that are significant to him and makes a relative analysis about the brand’s
quality by evaluating the competitors brands also. Thus quality is a perceptual
factor and the consumer analysis about quality varies. Higher perceived quality
might be used for brand positioning. Perceived quality affect the pricing decisions of
the organizations. Superior quality products can be charged a price premium.
Perceived quality gives the customers a reason to buy the product. It also captures
the channel member’s interest. For instance - American Express.
5. Other Proprietary Brand Assets:
Patents, Trademarks and Channel Inter-relations are proprietary assets. These
assets prevent competitors attack on the organization. They also help in
maintaining customer loyalty as well as organization’s competitive advantage.
UNIT 5
1MARKS
1. What do you mean by brand?
2. What do you mean by brand image?
3. How will you identify the brand?
5MARKS
1. Explain about brand and brand image
2. Explain positioning and leveraging the brand
3. Explain the Factors contributing to brand loyalty
8MARKS
1. Explain the brand positioning strategy
2. Explain the concept and brand positioning in diagram
3. Explain the sources of brand identity