Download Marketing management UNIT III Marketing mix decisions Product

Marketing management
UNIT III
Marketing mix decisions
Product planning and development – product life cycle – new product development and management –
market segmentation – targeting and positioning – channel management – advertising and sales
promotions – pricing objectives, policies and methods.
Table of contents
3.1 Meaning of a product ....................................................................................................................................... 3
3.1.1 Definition of product ............................................................................................................................... 3
Product levels ........................................................................................................................................................ 3
Five levels of the product ....................................................................................................................................... 3
3.1.2 Product differentiation ........................................................................................................................... 4
Product classification on the basis of customer shopping habits :............................................................................ 5
Product mix ........................................................................................................................................................... 6
Dimensions of product mix .................................................................................................................................... 6
Product line ........................................................................................................................................................... 6
3.2 Product planning & development ..................................................................................................................... 6
Concept of product planning .................................................................................................................................. 7
Product planning definition .................................................................................................................................... 7
Product planning cycle .......................................................................................................................................... 7
Product development definition ............................................................................................................................. 7
Needs of product development ............................................................................................................................... 8
3.2.1 The product life cycle .............................................................................................................................. 8
Example: new flavor of pepsi .............................................................................................................................. 10
New product strategies ........................................................................................................................................ 11
3.3 The new product development ....................................................................................................................... 11
Stage 1: Idea generation ....................................................................................................................................... 12
Stage 2: Idea screening ........................................................................................................................................ 12
Stage 3: Concept development and testing ........................................................................................................... 13
Stage 4: Marketing strategy and development ...................................................................................................... 13
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Stage 5: Business analysis ................................................................................................................................... 13
Stage 8: Commercialisation ................................................................................................................................. 14
Conclusion .......................................................................................................................................................... 14
3.3.1 Reasons for new products ..................................................................................................................... 14
Factors of new product development:................................................................................................................... 14
3.4 Market segmentation...................................................................................................................................... 14
Concept and definition ......................................................................................................................................... 14
The need for market segmentation ....................................................................................................................... 15
Requirements of market segments........................................................................................................................ 15
3.5 Positioning .................................................................................................................................................... 17
Positioning .......................................................................................................................................................... 18
Example .............................................................................................................................................................. 19
3.5.1 Steps to product positioning................................................................................................................. 19
3.6 Targeting ....................................................................................................................................................... 20
Example .............................................................................................................................................................. 21
Basis of target marketing ..................................................................................................................................... 21
How to select the target market ? ......................................................................................................................... 21
Example: ............................................................................................................................................................. 22
Why do people use soaps ? .................................................................................................................................. 22
3.7 What is a marketing channel?......................................................................................................................... 23
Names for marketing intermediaries .................................................................................................................... 23
3.8 Pricing strategy .............................................................................................................................................. 23
3.9 Pricing objectives .......................................................................................................................................... 24
3.10 Pricing methods ........................................................................................................................................... 25
3.11 Price discounts ............................................................................................................................................. 26
3.12 Functions of marketing channels .................................................................................................................. 26
3.12.1 Types and levels of distribution channel / the channels of distribution are broadly divided into
four types:- ..................................................................................................................................................... 27
3.13 What is promotional mix? ............................................................................................................................ 28
3.14 Advertising: ................................................................................................................................................. 28
3.14.1 Definition of advertisisng .................................................................................................................... 29
From the above definitions: ................................................................................................................................. 29
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3.14.2 Advertising objectives ....................................................................................................................... 30
3.15 Concept of sales promotion .......................................................................................................................... 31
3.15.1 Consumer oriented sales promotion ................................................................................................... 32
3.15.2 Purpose of sales promotion ................................................................................................................. 33
3.15.4 Sales promotion opportunities and limitations .................................................................................... 33
3.1 Meaning of a product
A good, idea, method, information, object or service created as a result of a process and serves a
need or satisfies a want. It has a combination of tangible and intangible attributes (benefits, features,
functions, uses) that a seller offers a buyer for purchase. For example a seller of a toothbrush not only
offers the physical product but also the idea that the consumer will be improving the health of their teeth.
A product is anything that can be offered to a market that might satisfy a want or need. In retailing,
products are called merchandise.
3.1.1 Definition of product
Its a bundle of physical, chemical or intangible attributes that have the potential that satisfy
present and potential customers wants. It means goods and services which combination of company
offers to the target market .
Products are almost always combinations of the tangible and intangible. The entire package is
sometimes referred to as the augmented product.
The mix of tangibles and intangibles in the augmented product varies from one product or service
to another.
Product is a key element in the market offering. Marketing mix planning begins with formulating
an offering to meet target customers‘ needs or wants.
The customer will judge the offering by three basic elements : product features and quality,
services mix and quality, and price appropriateness.
Product levels
 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 hierarchy.
Five levels of the product
(1) Core product
(2) Basic product
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(3) Expected product
(4) Augmented product
(5) Potential product
(1) core product / core benefit : the fundamental service or benefit that the customer is really
buying.
(2) basic product : at the same level, the marketer has to turn the core benefit into a basic product.
(3) expected product : a set of attributes and conditions buyers normally expect when they purchase
this product.
(4) augmented product : the marketer prepares an augmented product that exceeds customer
expectations.
Today‘s competition essentially takes place at the product-augmentation level.( in less developed
countries, competition takes place mostly at the expected product level
According to levitt : the new competition is not between what companies produce in their factories, but
between what they add to their factory output in the form of packaging, services,advertising, customer
advice, financing,delivery arrangements, warehousing, and other things that people value.
Some things should be noted about product -augmentation strategy :



First, each augmentation adds cost. The marketer has to ask whether customers will pay enough to
cover the extra cost.
Second, augmented benefits soon become expected benefits. For gaining competitive advantage
one will have to search for still other features and benefits.product-augmentation strategy )
Third, as companies raise the price of their augmented product, some competitors can offer a ―
stripped-down‖ version at a much lower price. Thus alongside the growth of fine products we see
the emergence of lower-cost products for the clients who simply want the basic product.
(5) potential product : encompasses all the possible augmentations and transformations the product
might undergo in the future.companies search for new ways to satisfy customers and distinguish their
offer
3.1.2 Product differentiation
The challenge before the product marketers is to create relevant and distinctive product differentiation.
The product differentiation may be based on :

Physical differences ( eg., features,performance, conformance, durability,reliability, design, style,
packaging )
 Availability differences ( eg., availablefrom stores or orderable by phone, mail,fax, internet )
 Service differences ( eg., delivery,installation, training, consulting,maintenance, repair )
 Price differences ( eg., very high price,medium price, low price, very low price )
 Image differences ( eg., symbols,atmosphere, events, media )
3.1.3 Product classification
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On the basis of productcharacteristics : durability, tangibility and use (consumer or industrial )
(1) non-durable
(2) durable
(3) services
(1)non-durables
These are tangible goods normally consumed in one or few uses. Becausethese goods are consumed
quickly and purchased frequently, the appropriatestrategy is to make them available atmany locations,
charge only a smallmark up and advertise heavily to inducetrial and build preference.
(2) durables
These are tangible goods that normallysurvive many uses. Normally requiremore personal selling and
service,command a higher margin, and requiremore seller guarantees.
(3) servicesthese are intangible,in seperable,variable andperishable products.normally require more
quality control,superior credibility, and adaptability.
Product classification on the basis of customer shopping habits :
(1) convenience goods
(2) shopping goods
(3) speciality goods
(4) unsought goods
1) Convenience goods are goods that the customer usually purchases frequently, immediately, and with a minimum of
efforts.
(a) staples: consumers purchase on a regular basis.
(b) impulse goods: are purchased without any planning or search efforts.
(c) emergency goods: are purchased when a need is urgent.
(2) Shopping goods are goods that the customer , in the process of selection and purchase, characteristically compares
on such basis as suitability, quality, price and style.
(a) Homogeneous shopping goods: are similar in quality but different enough in price to justify
shopping comparisons.
(b) Heterogeneous shopping goods: differ in product features and services that may be more important
than price.
(3) Speciality goods are goods with unique characteristics or brand identification for which buyer is
willing to make a special purchasing effort.
(4) Unsought goods are goods the consumer does not know about or does not normally think of buying.
These goods require advertising and personal selling support.
3.1.4 Product strategy
Calls for coordinated decisions on :
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(1) product mix
(2) product line
(3) individual product
(4) service product
Product mix
A product mix (also called product assortment) is the set of all products and items that a particular
seller offers for sale.
A total group of products that an organization markets.
A company‘s product mix has a certain width, length, depth and consistency.
Dimensions of product mix
The width of company‘s (say hll‘s) product mix refers to how many different product lines the
company carries, such as bathing soap, detergents, shampoos, toothpaste, food products.
The length of a company‘s product mix refers to the total number of items in its product mix. Thus in
each of the product line hll has a number of product items. Eg., in the product line of bathing soaps, hll
has several product items like lux, liril, lifebuoy, pears.
The depth of a company‘s product mix refers to how many variants are offered of each product in the
line. Thus if closeup toothpaste comes in three formulations and in three sizes, close up has a depth of
nine (3x3). The average depth of hll product mix can be calculated by averaging the number of variants
within the brand groups.
The consistency of the product mix refers to how closely related the various product lines are in end-use,
production requirements, distribution channels, or some other way. Hll‘s product lines are consistent
insofar as they are consumer goods that go through the same distribution channels.
These four dimensions of the product mix provide the handles for defining the company‘s product
strategy. The company can expand its business in four ways.
1. The co. Can add new product lines, thus widening its product mix.
2. The co. Can lengthen each product line.
3. The co. Can add more product variants to each product and deepen its product mix.
4. The co. Can pursue more product-line consistency or less, depending upon whether it wants to acquire
a strong reputation in a single field or participate in several fields.
Product line
 A product line is a group of products that are closely related, because they performa similar function,
are sold to the same customer groups, are marketed through the same channels or fall within the
given price ranges.
 The product mix may be composed of several product lines.
3.2 Product planning & development
Product planning and development are essential components in how a business creates products
and refines them before offering them for sale. Planning and development are two distinct phases of the
product creation process. Planning requires information gathering from multiple business departments
including consumer input and competition information. Development is a partnership between the
marketing and engineering departments, which work together to create a final product that meets
consumer needs in the most effective way possible.
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product planning and development involves the creation of a product proposal, a proof-of-concept
report and a test market study. When an idea is generated, a product proposal should be created that
discusses how it will be profitable to the company and identifies any associated risks. If the product is
found to be within the company's scope of interest and budget, it is reviewed further, based on marketing,
production and competitive considerations. Once it passes the further review, plans for its design,
production and special circumstances are finalized and assigned to someone chosen to head the project. A
prototype is then made and test marketed to gauge customer reactions, concerns or satisfaction.
Product proposals are the first step in product planning and development. When an idea merits
consideration by a company, a proposal provides management with the reasons why this product will be a
positive contribution to its current offerings. Not only does the proposal discuss specifics about the
product idea, but it also outlines associated risks and financial estimates. It should touch upon marketing,
production and competitive areas to discuss what will be needed and if additional resources or equipment
will be required. Once the proposal is approved, management will assign the project to someone who will
be responsible for it through the product planning and development stage.
Concept of product planning
The marketing activities of many firms are organized along product lines. Some multiple-product
producers, for example, maintain separate sales forces for each of the company's product lines.
Manufactures, wholesalers, and retailers frequently have salesman and buyers who specialise in one or
two products and operate as through they were running their own small business.
Product planning definition

Product planning in a broad sense is how a company generates the ideas for its products based on
a number of factors. These include input from multiple business departments, such as marketing,
technical support, sales teams and engineering. A business also includes analysis of competitor products
and consumer needs into its product planning. This helps a business understand what products the
competition is offering, how those products are meeting consumer needs and how the business can
innovate new products to better meet those needs.
Product planning cycle

The product planning cycle for a business encompasses all steps from the initial input phase of
product planning to the initiation of development. Once input on a product is received from all
departments, the planning phase moves to product proposals. These proposals may come from multiple
departments, including engineering and marketing. Executives may also have product proposals to
submit. These proposals are then sanded down to a couple of product proposals that show the most
promise. The marketing department then takes these final proposals and gauges which product can best
meet customer needs as well as which product is the most marketable. Marketing may also include other
figures in making a final product determination, such as cost of production and expected sales numbers
based on the current need in the market.
Product development definition

Product development is the process by which a business builds initial prototypes of a given
product, determines a product's functional specifications and which materials create the strongest product
for the most economical price. The engineering department and marketing department should work
closely during this phase of product development to ensure the product the engineering department
creates is the same product the marketing department is planning to unveil to the public. This also helps
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ensure the design of the product is in line with the determinations of the product planning phase. The
final product must meet consumer needs in the way the product planning phase envisioned it.
Needs of product development

Product development requires development resources to successfully create a functioning
prototype of a product and continue to make revisions as market requirements come into focus. To
accomplish this, a business must prioritize its development projects by those that show the most promise
and those which may require more design time. Allocating resources effectively is paramount to a
business shortening its development time and moving finished products to market at a more rapid pace.
This allows a business to meet customer demands at peak need before another company can swoop in and
take advantage.
3.2.1 The product life cycle
A product's life cycle (plc) can be divided into several stages characterized by the revenue generated by
the product. If a curve is drawn showing product revenue over time, it may take one of many different
shapes, an example of which is shown below:
The life cycle concept may apply to a brand or to a category of product. Its duration may be as
short as a few months for a fad item or a century or more for product categories such as the gasolinepowered automobile.
Product development is the incubation stage of the product life cycle. There are no sales and the firm
prepares to introduce the product. As the product progresses through its life cycle, changes in the
marketing mix usually are required in order to adjust to the evolving challenges and opportunities.
Introduction stage
When the product is introduced, sales will be low until customers become aware of the product and its
benefits. Some firms may announce their product before it is introduced, but such announcements also
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alert competitors and remove the element of surprise. Advertising costs typically are high during this
stage in order to rapidly increase customer awareness of the product and to target the early adopters.
The following are some of the marketing mix implications of the introduction stage:


Product - one or few products, relatively undifferentiated
Price - generally high, assuming a skim pricing strategy for a high profit margin as the early
adopters buy the product and the firm seeks to recoup development costs quickly. In some cases a
penetration pricing strategy is used and introductory prices are set low to gain market share rapidly.

Distribution - distribution is selective and scattered as the firm commences implementation of
the distribution plan.

Promotion - promotion is aimed at building brand awareness. Samples or trial incentives may be
directed toward early adopters. The introductory promotion also is intended to convince potential
resellers to carry the product.
Growth stage

Rapid growth in sales and profits

More product awareness

Competitors see the opportunity and enter the market.

Some competitors will copy the product or may try to make it better or more appealing to other
target markets.

The new entries result in more product variety.
During the growth stage, the goal is to gain consumer preference and increase sales. The marketing mix
may be modified as follows:



Product - new product features and packaging options; improvement of product quality.
Price - maintained at a high level if demand is high, or reduced to capture additional customers.
Distribution - distribution becomes more intensive. Trade discounts are minimal if resellers show
a strong interest in the product.

Promotion - increased advertising to build brand preference.
Maturity stage

Most common stage in the cycle.

Sales begin to level off.

The competition gets tougher as more competitors have entered the market.

Increased competition creates a downward movement in prices.

Industry profits are largest, but it is also when industry profits begin to decline.

Promotion is targeted to create brand differentiation.
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During the maturity stage, the primary goal is to maintain market share and extend the product life cycle.
Marketing mix decisions may include:

Product - modifications are made and features are added in order to differentiate the product
from competing products that may have been introduced.

Price - possible price reductions in response to competition while avoiding a price war.

Distribution - new distribution channels and incentives to resellers in order to avoid losing shelf
space.

Promotion - emphasis on differentiation and building of brand loyalty. Incentives to get
competitors' customers to switch.
Decline stage

Sales continue to decline.

Shrinking market

New products replace the old.

Firms will often try to use extension strategies.

Companies may be able to keep some sales by appealing to their most loyal customers.
During the decline phase, the firm generally has three options:

Maintain the product in hopes that competitors will exit. Reduce costs and find new uses for the
product.

Harvest it, reducing marketing support and coasting along until no more profit can be made.

Discontinue the product when no more profit can be made or there is a successor product.
The marketing mix may be modified as follows:

Product - the number of products in the product line may be reduced. Rejuvenate surviving
products to make them look new again.

Price - prices may be lowered to liquidate inventory of discontinued products. Prices may be
maintained for continued products serving a niche market.

Distribution - distribution becomes more selective. Channels that no longer are profitable are
phased out.

Promotion - expenditures are lower and aimed at reinforcing the brand image for continued
products.
Example: new flavor of pepsi
Stage 1: Market introduction

Pepsi bottles the new flavored product and places it on the market for consumers.

Pepsi also spends a lot of money advertising the new flavor creating awareness.
Stage 2: Market growth
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
Customers like the flavor and begin to make routine purchases.

Coke introduces their competing flavor.
Stage 3: Market maturity

More competitors enter the market taking some of pepsi‘s profits.
Stage 4: Sales decline

Customers have moved on to the next new flavor.

Some loyal fans stay behind.
New product strategies
 Developed by h. Igor ansoff in the form of growth vectors
 Market penetration – growth direction through increase in market share for present markets
 Product development – creating new products to replace existing ones
 Market development – finding new customers for existing products
 Diversification – developing new products and cultivating new markets
 Policy-making criteria on new products should specify
 Working definition of profit concept acceptable to top management
 Minimum level or floor of profits
 Availability and cost of capital to develop a new product
 Specified time period for recuperating operating costs and contributing to profits

3.3 The new product development
Improving and updating product lines is crucial for the success for any organisation. Failure
for an organisation to change could result in a decline in sales and with competitors racing ahead. The
process of npd is crucial within an organisation. Products go through the stages of their lifecycle and will
eventually have to be replaced. New product development has eight stages.. These stages will be
discussed briefly below:
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Stage 1: Idea generation
The new product development process starts with the search for ideas. Consumer‘s problems are
the most fertile ground for the generation of new product ideas. New product ideas come from interacting
with various groups & from using creativity generation techniques like brainstorming, synectics etc.
Brainstorming is a process, where a small group of people are encouraged to came up with their ideas on
a specified problem. Whereas in synectics, the real problem is kept away initially from the group & only
a broader framework of the problem is given to them. The group is encouraged to think in all possible
dimensions and slowly the problem will be made clear to them, & their ideas would get refined.new
product ideas have to come from somewhere. But where do organizations get their ideas for npd? Sources
include:
Marketresearch
employees
consultants
competitors
customers
distributors and suppliers
Stage 2: Idea screening
This process involves shifting through the ideas generated above and selecting ones which are
feasible and workable to develop. Pursing non feasible ideas can clearly be costly for the company. The
purpose of screening stage is to drop poor ideas as early as possible. Thus an idea committee is formed to
classify the proposed ideas into 3 categories, such as: promising, marginal & rejects. Every promising
idea is kept together for rigorous screening by product evaluation committee. In screening ideas, the
companies normally face 2 serious errors & they must try to avoid these mistakes as far as possible, those
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2 serious errors are: drop error & go error. Let‘s clarify: drop error: error which occurs when the
company rejects one really good idea having potential. Go error: error which occurs, when the company
permits & facilitates a poor idea to move onto further development stages & commercialization
Stage 3: Concept development and testing
The organisation may have come across what they believe to be a feasible idea, however, the idea
needs to be taken to the target audience. What do they think about the idea? Will it be practical and
feasible? Will it offer the benefit that the organisation hopes it will? Or have they overlooked certain
issues? Note the idea taken to the target audience is not a working prototype at this stage, it is just a
concept. A concept is an elaborated version of a product idea expressed in meaningful consumer terms.
Example: a leading soft drink company, if wants to add a new product, i.e. Fruit juice to its product lines,
then the following concepts can came across:
Concept 1: fruit juice for young & grown ups as a funny thirst quenching item.
Concept 2: fruit juice for children as a health supplements.
Concept 3: for adults as a nutritional energy supplements.
From the above 3 concepts, the 1st one looks to be attractive & promising. After the product concept has
been developed, the stage is now set for testing them. It is here the prospective consumer understand the
product idea. Here whether they are receptive towards the idea & their willingness to try out such product
is tested.
Stage 4: Marketing strategy and development
How will the product/service idea be launched within the market? A proposed marketing strategy
will be written laying out the marketing mix strategy of the product, the segmentation, targeting and
positioning strategy sales and profits that are expected.
Stage 5: Business analysis
The company has a great idea, the marketing strategy seems feasible, but will the product be
financially worth while in the long run? The business analysis stage looks more deeply into the cashflow
the product could generate, what the cost will be, how much market shares the product may achieve and
the expected life of the product . This stage will decide whether from financial as well as marketing point
of view, the project is beneficial or not. The projects overall impact on the corporation‘s financial
position with & without the new product are estimated & compared. Here management needs to prepare
sales as well as cost & profit projections to determine whether they satisfy company objectives.
Stage 6: Product development
At this stage the prototype is produced. The prototype will clearly run through all the desired
tests, and presented to a selection of people made up of the the target market segment to see if changes
need to be made.
Stage 7: Test marketing
Test marketing means testing the product within a specific area. The product will be launched
within a particular region so the marketing mix strategy can be monitored and if needed modified before
national launch. The product here is actually tested in the selected market segments. Based on the
outcomes of the test marketing, the marketer lunches large scale manufacture of the new product. It is a
controlled marketing experiment to decide the soundness & feasibility of fully fledged marketing of the
product
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Stage 8: Commercialisation
If the test marketing stage has been successful the product will go for national launch. There are
certain factors that need to be taken into account before a product is launched nationally. These include:





Timing of the launch,
How the product will be launched,
Where the product will be launched,
Will there be a national roll out or
Will it be region by region?
Conclusion
The eight stages of product development may seem like a long process but they are designed to
save wasted time and resources. New product development ideas and prototypes are tested to ensure that
the new product will meet target market needs and wants. There is a test launch during the test marketing
stage as a full market launch is expensive. Finally the commercialization stage involves careful planning
to maximize product success, a poor launch will affect product sales and could even affect the reputation
and image of the new product.
3.3.1 Reasons for new products
There are at least 3 reasons for which new products should be developed.



New products become necessary for meeting the changes in consumer needs.
New products become necessary for making new profits.
New products become necessary for combating environmental threats.
Factors of new product development:
New product development is a continuous function of marketing management in the present day
highly competitive environment. In the process of new product development, a company should keep in
mind the following considerations:

Adequate market demand.

The product should fit into company‘s present market structure.

The idea should fit into the company‘s present production structure.

The product should fit as per the financial resources available.

Adequate distribution in depth & breadth.
3.4 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.
Concept and definition
The concept of market segment is based on the fact that the market of commodities are not
homogeneous but they are heterogeneous. Market represent a group of customer having common
characteristics but two customer are never common in their nature, habits, hobbies income and
purchasing techniques
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•
According to philip kotler , ― Market segmentation is sub-dividing a market into distinct and
homogeneous subgroups of customers, where any group can conceivably be selected as a target market to
be met with distinct marketing mix.‖
•
Market segmentation is a method of ―Dividing a market (large) into smaller groupings of
consumers or organisations in which each segment has a common characteristic such as needs or
behaviour.‖
Delta airlines offers all economy passengers a seat and soft drinks. It charges economy passengers extra
for alcoholic beverages.
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:

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.


Geographic
Demographic
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

Psychographic
Behavioralistic
Geographic segmentation
The following are some examples of geographic variables often used in segmentation.




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
Demographic segmentation
Some demographic segmentation variables include:












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.
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:





Activities
Interests
Opinions
Attitudes
Values
Behavioralistic segmentation
Behavioral segmentation is based on actual customer behavior toward products. Some behavioralistic
variables include:
16






Benefits sought
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:



Location
Company type
Behavioral characteristics
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.
Company type
Business customers can be classified according to type as follows:




Company size
Industry
Decision making unit
Purchase criteria
Behavioral characteristics
In industrial markets, patterns of purchase behavior can be a basis for segmentation. Such
behavioral characteristics may include:



Usage rate
Buying status: potential, first-time, regular, etc.
Purchase procedure: sealed bids, negotiations, etc.
3.5 Positioning
The place a product occupies in consumers‘ minds relative to competing products.
17
Locating a brand in consumers‘ minds over and against competitors in terms of attributes and benefits
that the brand does and does not offer
–
Attribute or benefit
–
Quality and price
–
Use or user
–
Competition
Definition: The perception of a product or organisation in the consumer‘s mind relative to their
perception of other offerings in the same category.
A couple of definitions

Creating distinct and valued physical and perceptual differences between one‘s product and its
competitors, as perceived by the target customer.

The act of designing the firm‘s market offering so that it occupies a distinct and valued place in
the minds of its target customers.
Positioning
Positioning is the last stage in the segmentation targeting positioning cycle.
Once the organization decides on its target market, it strives hard to create an image of its product
in the minds of the consumers. The marketers create a first impression of the product in the minds of
consumers through positioning.
Positioning helps organizations to create a perception of the products in the minds of target
audience.
Ray ban and police sunglasses cater to the premium segment while vintage or fastrack sunglasses
target the middle income group. Ray ban sunglasses have no takers amongst the lower income group.
Garnier offers wide range of merchandise for both men and women.
Each of their brands has been targeted well amongst the specific market segments. (men, women,
teenagers as well as older generation)
Men-sunscreen lotions, deodorant
women - daily skin care products, hair care products
teenagers - hair colour products, garnier light (fairness cream)
older generation - cream to fight signs of ageing, wrinkles
A female would never purchase a sunscreen lotion meant for men and vice a versa. That‘s brand
positioning.
The key words are perception in the mind of consumer’s which include attributes, benefits & brand.
18
•
Product’s position - the way the product is defined by consumers on important attributes the place the product occupies in consumers’ minds relative to competing products.
The process of creating an image of a product in the minds of the consumers is called as
positioning. Positioning helps to create first impression of brands in the minds of target audience. In
simpler words positioning helps in creating a perception of a product or service amongst the consumers.
Example
The brand ―bisleri‖ stands for purity.
The brand ―ceat tyre‖ stands for better grip.
3.5.1 Steps to product positioning
Marketers with the positioning process try to create a unique identity of a product amongst the
customers.
1.
Know your target audience well
It is essential for the marketers to first identify the target audience and then understand their needs and
preferences. Every individual has varied interests, needs and preferences. No two individuals can think
on the same lines.
Know what your customers expect out of you.
The products must fulfill the demands of the individuals.
2.
Identify the product features
The marketers themselves must be well aware of the features and benefits of the products. It is rightly
said you can‘t sell something unless and until you yourself are convinced of it.
A marketer selling nokia phones should himself also use a nokia handset for the customers to believe
him.
3.
Unique selling propositions
Every product should have usps; at least some features which are unique. The organizations must create
usps of their brands and effectively communicate the same to the target audience.
The marketers must themselves know what best their product can do.
Find out how the products can be useful to the end-users ?
Why do people use ―anti dandruff shampoo?‖
Anti dandruff shampoos are meant to get rid of dandruff. This is how the product is positioned in the
minds of the individuals.
19
Individuals purchase ―dabur chyawanprash ―to strengthen their body‘s internal defense mechanism and
fight against germs, infections and stress. That‘s the image of dabur chyawanprash in the minds of
consumers.
Usp of a nokia handset - better battery backup.
Usp of horlicks foodles - healthy snack
Communicate the usps to the target audience through effective ways of advertising. Use banners, slogans,
inserts and hoardings.
Let individuals know what your brand offers for them to decide what is best for them.
4.
Know your competitors




5.
A marketer must be aware of the competitor‘s offerings. Let the individuals know how your
product is better than the competitors?
Never underestimate your competitors.
Let the target audience know how your product is better than others.
The marketers must always strive hard to have an edge over their competitors.
Ways to promote brands




6.
Choose the right theme for the advertisement.
Use catchy taglines.
The advertisement must not confuse people.
The marketer must highlight the benefits of the products.
Maintain the position of the brand





For an effective positioning it is essential for the marketers to continue to live up to the
expectations of the end - users.
Never compromise on quality.
Don‘t drastically reduce the price of your products.
A mercedes car would not be the same if its price is reduced below a certain level.
A rado watch would lose its charm if its price is equal to a sonata or a maxima watch.
3.6 Targeting
the process of evaluating segments and focusing marketing efforts on a country, region, or
group of people that has significant potential to respond
Once the marketer creates different segments within the market, he then devises various
marketing strategies and promotional schemes according to the tastes of the individuals of
particular segment. This process is called targeting. Once market segments are created, organization
then targets them.
Targeting is the second stage and is done once the markets have been segmented.
20
Organizations with the help of various marketing plans and schemes target their products amongst
the various segments.
Example
Nokia offers handsets for almost all the segments. They understand their target audience well and
each of their handsets fulfils the needs and expectations of the target market.
Tata motors launched tata nano especially for the lower income group.
It is not possible for a marketer to have similar strategies for product promotion amongst all individuals.
Kids do not get attracted towards products meant for adults and vice a versa. Every segment has a
different need, interest and perception. No two segments can have the same ideologies or require a
similar product.
Target marketing refers to a concept in marketing which helps the marketers to divide the
market into small units comprising of like minded people. Such segmentation helps the marketers to
design specific strategies and techniques to promote a product amongst its target market. A target market
refers to a group of individuals who are inclined towards similar products and respond to similar
marketing techniques and promotional schemes.
Kellogg’s k special mainly targets individuals who want to cut down on their calorie intake. The
target market in such a case would be individuals who are obese. The strategies designed to promote k
special would not be the same in case of any other brand say complan or boost which majorly cater to
teenagers and kids to help them in their overall development. The target market for kellogg‘s k special
would absolutely be different from boost or complan.
Selecting a target market
•
Before a marketing mix strategy can be implemented, the marketer must identify, evaluate, and
select a target market.
•
Market: people or institutions with sufficient purchasing power, authority, and willingness to buy
•
Target market: specific segment of consumers most likely to purchase a particular product
Basis of target marketing

Age

Gender

Interests

Geographic location

Need

Occupation
How to select the target market ?
 It is essential for the organizations or marketers to identify the set of people whom they want to
target ?. Marketers must understand the needs and expectations of the individuals to create its
target market.

The target audience must have similar needs, interests and expectations.

Similar products and brands should entice the individuals comprising the target market.
21

Same taglines and advertisements attract the attention of the target audience and prompt them to
buy.
To select a target market, it is essential for the organizations to study the following factors:









Understand the lifestyle of the consumers
Age group of the individuals
Income of the consumers
Spending capacity of the consumers
Education and profession of the people
Gender
Mentality and thought process of the consumers
Social status
Kind of environment individuals are exposed to
Example:
Why do people use soaps ?
Some would use it against body odour
some would use it to fight germs and infections
some for a fair and spotless skin
In the above case the product is same but the needs of the individuals are different. Consumers have
different reasons as to why they use soaps.
Target audience 1
Against body odour - soaps with a strong and lasting fragrance.




Marketing professionals
Sales representatives
People exposed to sun for a longer duration
Individuals travelling by public transport
Target audience 2
To fight germs and infections - soaps with medicinal properties


Individuals working in hospitals, nursing homes and research centres
Individuals working in unhygienic conditions
Target audience 3
For a whiter skin - soaps which improve the skin tone of individuals.


Teenagers
College students
Target audience 4
For a younger looking skin - soaps which help get rid of wrinkles and fine lines of ageing
22

Individuals between age group 30 – 50 years or above
Individuals with identical requirements form the target audience. A 20 year old girl can‘t be targeted
along with someone who is 50 years old.
Online matrimony sites target young individuals aspiring to get married. The organizations strive hard to
fulfil their expectations by providing suitable matches.
Other important factors like climatic conditions and geographical locations also play an important role in
deciding the target market.
Deodorants and perfumes sell like hot cakes in humid and warm places.
Target market for beverages
Bournvita, complan, maltova, boost - growing kids
soft drinks (pepsi, coke) - teenagers
fruit juice (real, tropicana) - health conscious individuals
energy drinks(red bull) - professionals, office goers
3.7 What is a marketing channel?
a set of interdependent organizations that ease the transfer of ownership as products move
from producer to business user or consumer.
the administration of existing channels to secure the cooperation of channel members in
achieving the firm‘s distribution objectives
a set of interdependent organizations that ease the transfer of ownership as products move
from producer to business user or consumer.
Names for marketing intermediaries
Retailer - a channel intermediary that sells mainly to customers.
Wholesaler - an institution that buys goods from manufacturers, takes title to goods, stores them, and
resells and ships them.
Agents and brokers - wholesaling intermediaries who facilitate the sale of a product by representing
channel member.
Retailers - take title to goods
Merchant wholesalers- take title to goods
Agents and brokers - do not take title to goods
3.8 Pricing strategy
One of the four major elements of the marketing mix is price. Pricing is an important strategic
issue because it is related to product positioning. Furthermore, pricing affects other marketing mix
elements such as product features, channel decisions, and promotion.
23
While there is no single recipe to determine pricing, the following is a general sequence of steps that
might be followed for developing the pricing of a new product:
1.
Develop marketing strategy - perform marketing analysis, segmentation, targeting, and
positioning.
2.
Make marketing mix decisions - define the product, distribution, and promotional tactics.
3.
Estimate the demand curve - understand how quantity demanded varies with price.
4.
Calculate cost - include fixed and variable costs associated with the product.
5.
Understand environmental factors - evaluate likely competitor actions, understand legal
constraints, etc.
6.
Set pricing objectives - for example, profit maximization, revenue maximization, or price
stabilization (status quo).
7.
Determine pricing - using information collected in the above steps, select a pricing method,
develop the pricing structure, and define discounts.
These steps are interrelated and are not necessarily performed in the above order. Nonetheless, the above
list serves to present a starting framework.
3.9 Pricing objectives
The firm's pricing objectives must be identified in order to determine the optimal pricing.
Common objectives include the following:

Current profit maximization - seeks to maximize current profit, taking into account revenue and
costs. Current profit maximization may not be the best objective if it results in lower long-term profits.

Current revenue maximization - seeks to maximize current revenue with no regard to profit
margins. The underlying objective often is to maximize long-term profits by increasing market share and
lowering costs.

Maximize quantity - seeks to maximize the number of units sold or the number of customers
served in order to decrease long-term costs as predicted by the experience curve.

Maximize profit margin - attempts to maximize the unit profit margin, recognizing that
quantities will be low.

Quality leadership - use price to signal high quality in an attempt to position the product as the
quality leader.

Partial cost recovery - an organization that has other revenue sources may seek only partial cost
recovery.

Survival - in situations such as market decline and overcapacity, the goal may be to select a price
that will cover costs and permit the firm to remain in the market. In this case, survival may take a priority
over profits, so this objective is considered temporary.

Status quo - the firm may seek price stabilization in order to avoid price wars and maintain a
moderate but stable level of profit.
For new products, the pricing objective often is either to maximize profit margin or to maximize quantity
(market share). To meet these objectives, skim pricing and penetration pricing strategies often are
employed. Joel dean discussed these pricing policies in his classic hbr article entitled, pricing policies for
new products.
24
Skim pricing attempts to "skim the cream" off the top of the market by setting a high price and selling to
those customers who are less price sensitive. Skimming is a strategy used to pursue the objective of profit
margin maximization.
Skimming is most appropriate when:


Demand is expected to be relatively inelastic; that is, the customers are not highly price sensitive.
Large cost savings are not expected at high volumes, or it is difficult to predict the cost savings
that would be achieved at high volume.

The company does not have the resources to finance the large capital expenditures necessary for
high volume production with initially low profit margins.
Penetration pricing pursues the objective of quantity maximization by means of a low price. It is most
appropriate when:

Demand is expected to be highly elastic; that is, customers are price sensitive and the quantity
demanded will increase significantly as price declines.

Large decreases in cost are expected as cumulative volume increases.

The product is of the nature of something that can gain mass appeal fairly quickly.

There is a threat of impending competition.
As the product lifecycle progresses, there likely will be changes in the demand curve and costs. As such,
the pricing policy should be reevaluated over time.
The pricing objective depends on many factors including production cost, existence of economies of
scale, barriers to entry, product differentiation, rate of product diffusion, the firm's resources, and the
product's anticipated price elasticity of demand.
3.10 Pricing methods
To set the specific price level that achieves their pricing objectives, managers may make use of
several pricing methods. These methods include:



Cost-plus pricing - set the price at the production cost plus a certain profit margin.
Target return pricing - set the price to achieve a target return-on-investment.
Value-based pricing - base the price on the effective value to the customer relative to alternative
products.

Psychological pricing - base the price on factors such as signals of product quality, popular price
points, and what the consumer perceives to be fair.
In addition to setting the price level, managers have the opportunity to design innovative pricing models
that better meet the needs of both the firm and its customers. For example, software traditionally was
purchased as a product in which customers made a one-time payment and then owned a perpetual license
to the software. Many software suppliers have changed their pricing to a subscription model in which the
customer subscribes for a set period of time, such as one year. Afterwards, the subscription must be
renewed or the software no longer will function. This model offers stability to both the supplier and the
customer since it reduces the large swings in software investment cycles.
25
3.11 Price discounts
The normally quoted price to end users is known as the list price. This price usually is discounted for
distribution channel members and some end users. There are several types of discounts, as outlined
below.


Quantity discount - offered to customers who purchase in large quantities.
Cumulative quantity discount - a discount that increases as the cumulative quantity increases.
Cumulative discounts may be offered to resellers who purchase large quantities over time but who do not
wish to place large individual orders.

Seasonal discount - based on the time that the purchase is made and designed to reduce seasonal
variation in sales. For example, the travel industry offers much lower off-season rates. Such discounts do
not have to be based on time of the year; they also can be based on day of the week or time of the day,
such as pricing offered by long distance and wireless service providers.

Cash discount - extended to customers who pay their bill before a specified date.

Trade discount - a functional discount offered to channel members for performing their roles.
For example, a trade discount may be offered to a small retailer who may not purchase in quantity but
nonetheless performs the important retail function.

Promotional discount - a short-term discounted price offered to stimulate sales.
3.12 Functions of marketing channels
Information

A distribution channel collects and analyzes market intelligence on current and potential
customers, competitors, suppliers, regulators and on the general political and business
environment. For example, a multinational company's chinese distributor can potentially tap into
his government sources and provide timely information about impending regulatory changes that
could prove valuable in adjusting strategies ahead of the competition.
Promotion

A channel develops marketing strategies, including preparing the marketing budget, designing the
promotional and advertising material, recruiting and training sales representatives and organizing
trade shows and other networking events. The channels can adjust their marketing efforts faster
than the head office because they are closer to their customers.
Contact

Distribution channels find and establish contact with prospective buyers. For example, a computer
wholesaler's job would be to find computer retailers, while a retailer's job would be to find
customers. This can be done through promotions that pull in customers--including attracting them
directly to the company's online store--and also through old-fashioned telephone calls and door
knocking that push products to customers.
26
Matching

Once contact is made, the channel partner's job changes to a matching role, which involves
tailoring the product to fit customer needs. For example, if a retailer only wants to sell laptops
with word-processing software included, the distributor needs to contact her company's nearest
manufacturing facility to ensure the laptops are properly configured prior to shipment.
Negotiation

Closing the sale is part of a channel's negotiation function. For a computer wholesaler, it could
mean negotiating price and minimum quantity levels with the retailer. For a master franchise
operator (an experienced franchisee with exclusive rights in a region), it could mean negotiating
the franchise agreement with a new franchisee and providing training and mentoring services.
Transportation

A distributor often transports products from the manufacturer to retailers and customers. For
example, a potato chip distributor may have one or more delivery vans departing every day to
different retailers (chains and convenience stores) to drop off their merchandise.
Financing

A distribution channel partner finances his costs, including buying and storing inventory. For
example, a car dealership may arrange financing through the car manufacturer or the local banks
or a combination.
Risk

A distribution channel shares in some of the business risks. For example, if a new product launch
does not go well, the distributor may get stuck with excess inventory. There also is the risk of
unpaid bills and damaged inventory. Foreign distributors also bear the risk of political and
economic uncertainty in their respective countries.
3.12.1 Types and levels of distribution channel / the channels of distribution are broadly divided
into four types:Zero level channel Producer —- consumer
One level
Producer —- retailer —- consumer
Two level
Producer —– wholesaler — retailer — consumer
Three level
Producer —- distributor — wholesaler — retailer — consumer
Four level
Producer — agent —- distributor — wholesaler— retailer —–consumer
27




Producer-customer:- this is the simplest and shortest channel in which no middlemen is involved
and producers directly sell their products to the consumers. It is fast and economical channel of
distribution. Under it, the producer or entrepreneur performs all the marketing activities himself
and has full control over distribution. A producer may sell directly to consumers through door-todoor salesmen, direct mail or through his own retail stores. Big firms adopt this channel to cut
distribution costs and to sell industrial products of high value. Small producers and producers of
perishable commodities also sell directly to local consumers.
Producer-retailer-customer:- this channel of distribution involves only one middlemen called
'retailer'. Under it, the producer sells his product to big retailers (or retailers who buy goods in
large quantities) who in turn sell to the ultimate consumers.this channel relieves the manufacturer
from burden of selling the goods himself and at the same time gives him control over the process
of distribution. This is often suited for distribution of consumer durables and products of high
value.
Producer-wholesaler-retailer-customer:- this is the most common and traditional channel of
distribution. Under it, two middlemen i.e. Wholesalers and retailers are involved. Here, the
producer sells his product to wholesalers, who in turn sell it to retailers. And retailers finally sell
the product to the ultimate consumers. This channel is suitable for the producers having limited
finance, narrow product line and who needed expert services and promotional support of
wholesalers. This is mostly used for the products with widely scattered market.
Producer-agent-wholesaler-retailer-customer:- this is the longest channel of distribution in
which three middlemen are involved. This is used when the producer wants to be fully relieved of
the problem of distribution and thus hands over his entire output to the selling agents. The agents
distribute the product among a few wholesalers. Each wholesaler distribute the product among a
number of retailers who finally sell it to the ultimate consumers. This channel is suitable for wider
distribution of various industrial products.
3.13 What is promotional mix?
Promotion is dissemination of information about the product, product line, brand or company
.promotion mix is the process of making channels of information and persuasion to sell a product, service
or an idea. We can also say that promotion mix is basically the tool that helps organization in getting its
communication objectives.
Following are the items of promotion mix:
1. Advertising
2. Direct marketing (not traditional part but important part of imc)
3. Internet marketing
4. Sales promotion
5. Publicity
6. Personal selling
3.14 Advertising:
Advertising is basically paid form of non personal communication about the product,organization,
service or idea. Always remember that the nature of advertisement differsfrom one industry to another.
28
Non personal communication means that getting the immediate feedback from theaudience is not
possible.
Adverting is only one element of the promotion mix, but it often considered prominent in
the overall marketing mix design. Its high visibility and pervasiveness made it as an important social and
encomia topic in indian society. Promotion may be defined as ―the co-ordination of all seller initiated
efforts to set up channels of information and persuasion to facilitate the scale of a good or service.‖
Promotion is most often intended to be a supporting component in a marketing mix. Promotion decision
must be integrated and co-ordinated with the rest of the marketing mix, particularly product/brand
decisions, so that it may effectively support an entire marketing mix strategy. The promotion mix consists
of four basic elements. They are:- 1. Advertising 2. Personal selling 3. Sales promotion, and 4. Publicity
1. Advertising is the dissemination of information by non-personal means through paid media where the
source is the sponsoring organization. 2. Personal selling is the dissemination of information by nonpersonal methods, like face-to-face, contacts between audience and employees of the sponsoring
organization.
Advertising may be defined as the process of buying sponsor-identified media space or time in order to
promote a product or an idea. The american marketing association, chicago, has defined advertising as
―any form of non-personal presentation or promotion of ideas, goods or services, by an identified
sponsor.‖ What advertisement is? Advertisement is a mass communicating of information intended to
persuade buyers to by products with a view to maximizing a company‘s profits.
The elements of advertising are:
1. It is a mass communication reaching a large group of consumers.
2. It makes mass production possible.
3. it is non-personal communication, for it is not delivered by an actual person, nor is it addressed to
a specific person.
4. It is a commercial communication because it is used to help assure the advertiser of a long
business life with profitable sales.
5. Advertising can be economical, for it reaches large groups of people. This keeps the cost per
message low.
6. The communication is speedy, permitting an advertiser to speak to millions of buyers in a matter
of a few hours.
7. advertising is identified communication.
3.14.1 Definition of advertisisng
The american marketing association, chicago, has defined advertising as "any form of nonpersonal presentation or promotion of ideas, goods or services, by an identified sponsor."
From the above definitions:

Advertisement is a message to large groups.

It is in the form of non_personal communication.

It persuade the general publics to purchase the goods or services, advertised.

It is paid for by advertiser to publisher.

Advertising messages are identified with the advertiser.
29
Advertising includes the following forms of messages:
The messages carried in


Newspapers and magazines;
On radio and television broadcasts;
Circular of all kinds, (whether distributed by mail, by person, thorough tradesmen, or by inserts in
packages);

Dealer help materials,

Window display and counter – display materials and efforts;

Store signs, motion pictures used for advertising,

Novelties bearing advertising messages and signature of the advertiser.
3.14.2 Advertising objectives
Each advertisement is a specific communication that must be effective, not just for one customer,
but for many target buyers. This means that specific objectives should be set for each particular
advertisement campaign. Advertising is a form of promotion and like a promotion; the objectives of
advertising should be specific. This requires that the target consumers should be specifically identified
and that the effect which advertising is intended to have upon the consumer should be clearly indicated.
The objectives of advertising were traditionally stated in terms of direct sales. Now, it is to view
advertising as having communication objectives that seek to inform persuade and remind potential
customers of the worth of the product. Advertising seeks to condition the consumer so that he/she may
have a favorable reaction to the promotional message. Advertising objectives serve as guidelines for the
planning and implementation of the entire advertising programme.
3.14.3 Advantages of advertising

Advertising is considered multi dimensional.

It helps number of marketing activities.

It is a technique of sales promotion.

Sales volume is increased by advertising.

It helps and supports the salesman in selling the products.

Consumer knowledge about the product is increase by advertising.

It helps the consumer to save their time in purchases.

It helps the manufacturer sell their products.

It helps quick selling is possible which leads to more production at less cast.

The relation between wholesalers and retailers is improved through advertising.

Advertising introduces new products, stimulates markets regarding the existing product and
repeated sales
Benefits to manufacturers:
1it increase sales volume. On the one hand, it reduces the cost of production and,on the other increases
profits.
1.
2.
3.
It helps easy introduction of products into the markets.
It helps to create an image and reputation not only of the product but also of the advertiser.
Retail price maintance is possible.
30
4.
It helps to establish a direct contact between manufacturers and consumers.
Benefits to wholesalers retailers :
1.
Easy sale of the products is possible since consumers are aware of rhe product and its quality.
1.
2.
3.
4.
It increases the rate of the turnover of stock.
It supplements the selling activities.
The reputation credited is shared by the wholesalers and retailers and alike.
It enables them to have product information.
Benefits to consumers
1.
Advertising stresses quality and very often prices. This forms an indirect guarantee to the
consumers. Further more, large scale production assured by advertising enables the seller to sell the
product at a lower cast.
2.
It provides an opportunity to the customers to compare the merits and demerits of various
substitute products.
3.
This is perhaps the only medium through which consumers could know the varied and new uses
of a product.
4.
Modern advertisements are highly informative.
Benefits to salesmen
1.
Introducing the product is made easy.
2.
Advertising prepares necessary ground for a salesman to begin his work. Hence sales efforts are
reduced.
3.
The contact established with the customer by a salesman is made permanent through advertising.
4.
The salesman can weigh the effectiveness of advertising when he makes a direct contact with the
customer.
Benefits to community
1.
Advertising in general is educative in nature. In the words of the late president roosevelt of the
usa, ‗advertising brings to the greatest number of people actual knowledge concerning useful things; it is
essentially a form of education and the progress of civilization depends on education'.
2.
Advertising leads to large scale production creating more employment opportunities.
3.
Advertising has made more popular and universal the uses of such inventions as the auto mobiles,
radios, various household appliances. "advertising nourishes the consuming power of man. Its creates
wants for a better standing of living.. It spurs individual exertion and greater production".
3.15 Concept of sales promotion
Sales promotion consists of diverse collection of incentive tools, mostly short-term designed to
stimulate quicker and / or greater purchase of a particular product by consumers or the trade.. Sales
promotion includes tools for consumer promotion (for example samples, coupons, prizes, cash refund,
warranties, demonstrations, contest); trade promotion (for example buying allowances, free goods,
merchandise allowances, co-operative advertising, advertising and display allowances, dealer sales
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contests); and sales-force promotion (for example bonuses, contests, sales rallies).sales promotion efforts
are directed at final consumers and designed to motivate, persuade and remind them of the goods and
receives that are offered. Sales persons adopt several techniques for sales promotion.
Definitions Of Sales Promotion
W.j. Stanton defines sales promotion as all those activities other than advertising, personal selling, public
relations and publicity that are intended to stimulate customer demand and improve the marketing
performance of sellers.
3.15.1 Consumer oriented sales promotion
Kind of sales Objectives
promotion
Advantages
Disadvantages
Encourage retailer support
Consumers delay purchase
Coupons
Stimulate demand
Deals
Increase trail; retaliate Reduce consumer risk
against
competitor's
actions
Premiums
Build goodwill
Contests
Increase
consumer Encourage
consumer Require
creative
purchases;
build involvement with product
analytical thinking
business inventory
Sweepstakes
Encourage
present Get customer to use product Sales
drop
customers to buy more; and store more often.
sweepstakes
minimize
brand
switching
Samples
Encourage new product Low risk for consumer
trial
Encourage
Continuity
purchases
programs
(frequent user
promos)
Consumers like free
reduced-price merchandise
repeat Help create loyalty
Consumers
delay
purchases;
reduce
perceived product value
or Consumers
buy
for
premium, not product
or
after
High cost for company
High cost for company
Point-ofpurchase
displays
Increase product trial; Provide good product
provide in-store support
for other promotions
Rebates
Encourage customer to Effective at stimulating demand Easily copied; steal sales
purchase; stop sales
from
future;
reduce
decline
perceived product value
Product
placement
Introduce new products; Positive message in a non- Little
control
over
demonstrate product use commercial setting
presentation of product.
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Hard to get retailer to
allocate high-traffic space.
3.15.2 Purpose of sales promotion
Sales promotion tools vary in their specific objectives. A free sample stimulates consumer trial,
while a free management advisory service comments along-term relationship with a retailer. From the
marketer's perspective, sales promotion serves three essential rolesit informs, persuades and reminds
prospective and current customers and otherselected audiences about a company and its products.
Because distribution channels are often long, a product may pass through many lands between a producer
and consumers. Therefore, a producer must inform middlemen as well as the ultimate consumers or
business users about the product. Wholesalers, in turn must inform retailers and retailers must inform
consumers. As the number of potential customers grows and the geographic dimensions of a market
expand, the problems and costs of informing the market increase.
3.15.3 Objectives of sales promotion
The basic objectives of sales promotion are:
I) To Introduce new products
To induce buyers to purchase a new product, free samples may be distributed or money and merchandise
allowance may be offered to business to stock and sell the product.
Ii) To attract new customers
New customers may be attracted through issue of free samples, premiums, contests and similar devices.
Iii) To induce present customers to buy more
Present customers may be induced to buy more by knowing more about a product, its ingredients and
uses.
Iv) To help firm remain competitive
Sales promotions may be undertaken to meet competition from a firm.
V) to increase sales in off season
Buyers may be encouraged to use the product in off seasons by showing them the variety of uses of the
product.
Vi) to increase the inventories of business buyers
Retailers may be induced to keep in stock more units of a product so that more sales can be effected.
3.15.4 Sales promotion opportunities and limitations
o
Increase in sales by providing extra incentive to purchase. May focus on resellers (push), consumers
(pull) or both.
o
Objectives must be consistent with promotional objectives and overall company objectives.
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o
Balance between short term sales increase and long term need for desired reputation and brand
image.
o
Attract customer traffic and maintain brand/company loyalty.
o
Reminder functions-calendars, t shirts, match books etc.
o
Impulse purchases increased by displays
o
Contests generate excitement esp. With high payoffs.
Limitations
o
o
o
o
Consumers may just wait for the incentives
May diminish image of the firm, represent decline in the product quality.
Reduces profit margins, customers may stock up during the promotion.
Shift focus away from the product itself to secondary factors, therefore no product differential
advantage.
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