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MODULE 1: INTRODUCTION TO MARKETING CHAPTER 1 : MARKETING “Good companies will meet needs; Great companies will create markets” – Philip Kotler Introduction Today, the market is open for several organizations and thus the competition is cutthroat. It is very important for any organization to influence the consumers. Consumers are most important aspect of any business. Gandhiji in one of the speech in South Africa in the year 1890, said: “A customer is the most important visitor on our premises. He is not dependent on us. We are dependent on him. He is not an interruption of our work. He is the purpose of it. He is not an outsider of our business. He is part of it. We are not doing him a favour by serving him. He is doing us a favour by giving us the opportunity to do so.” A business organization with satisfied consumers will be able to sustain in long term. Marketing is the business function which takes care of the same. Marketing helps in market research, identifying target consumers, analyzing the requirements of the consumers, after sale services, promotions, creating and maintaining brand image, creating brand loyalty etc. Let’s look at the marketing strategy of one of the most famous Indian brand – Amul Amul is the most popular and loved brand in India. It comprises of butter, cheese, ghee, ice-creams, chocolates, paneer and various other products. Prior to 1946, a company named Polson Dairy in a place called Anand, Gujarat producing dairy products was in existence. Polson Dairy exploited farmers by procuring milk at very low prices. Amul was started as a cooperative movement in 1946 against this company and to stop exploitation. Instantly Amul gained attention of the public and also respect. Dr. Verghese Kurien wanted to establish Amul as the brand of India. The name “AMUL” (Anand Milk Union Federation Limited) means “Amulya” or priceless. Amul initially started its ad campaigns with the song ‘Amul doodh peeta hai India’. This further promoted Amul as the brand of India. Amul has not only replaced other butter brands but butter itself. We don’t ask for butter anymore, it’s always ‘Amul dena’. Amul expanded its market by competing not only against butter brands but also ghee. Its ad campaign promoting ‘butter pav bhaji, butter dosa, butter chole puri, butter paratha’ has helped Amul in replacing ghee and home-made butter. The tag line for Amul is “Amul butter, Asli butter”. As a new marketing strategy, Amul now publishes its views on various events occurring in country by way of hoardings or in newspapers. E.g. When BJP won elections in 2014, Amul came up with following comment: “Accha din-ner aaya hai! Amul in all cabinets !” DEFINITIONS OF MARKETING 1. Philip Kotler – The science and art of exploring, creating and delivering value to satisfy the needs of a target market at a profit. Marketing identifies unfulfilled needs and desires. It defines, measures and quantifies the size of the identified market and the profit potential. It pinpoints which segments the company is capable of serving best and it designs and promotes the appropriate products and services.” 2. American Marketing Association – “Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.” Q1.What are the features of Marketing? Or Explain the Nature of Marketing Ans: American Marketing Association has defined marketing as “Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.” Following are the features of marketing: SMART CODE: [SIDBI COFI] 1. Social Concept Marketing aims at identifying the needs and wants of its consumers. Its main aim is to satisfy the needs of consumers. Besides, the business organization is dependent on society and hence has certain responsibilities towards society. Hence, it is important to strike a balance between consumer needs, organizational objectives and public interest. E.g. Navneet uses recycled and eco-friendly paper for note-books. Many stores have started giving recyclable carry bags instead of normal plastic ones. 2. Inter-linked Management Function Marketing function is inter-linked with other management functions like planning, financing, production etc. For instance, in order to launch a new product in the market, it is essential to conduct a market research, identify size of market, identify the competitors, potential customers, funds required for advertising etc and plan accordingly. 3. Dynamic Function Marketing is mainly dependent on needs and wants of customers. The wants of consumers are constantly changing. Therefore, marketing must constantly change to meet those needs and wants. Besides, marketing is also influenced by competition, technological advancement, political changes, innovations etc. All these factors keep on changing. Hence, marketing is said to be dynamic function. 4. Brand Building Marketing is the link between the organization and consumers. The consumers usually get influenced by the promotional techniques used by organization. The promotional technique of the organization will influence the perception of the consumers. Marketing helps in identifying the needs of consumers and satisfy their wants. They help in building relations with the consumers. If the needs of consumers are effectively satisfied, it creates brand loyalty. E.g. ICICI bank promotes itself as a customer friendly bank. The tag line of ICICI is “Hum Hai Na.” 5. Identification of Target Market and consumers Market has widened and so has the scope of marketing. It is impossible to satisfy the needs and wants of everyone. Thus a target market and consumers are identified. The needs and wants of such consumers are identified accordingly. This narrows down the requirements and helps to satisfy more specific needs of consumers. Marketing strategy is also designed as per the target market. E.g. Cold drink companies like Pepsico target youth. Thus Ranbir Kapoor, Virat Kohli and Anushka Sharma are a part of their ad campaigns. Book-my-show website identified a need of online movie ticketing services. To fulfill that need they developed the website and helped in satisfying want of consumers. 6. Consumer Centric Marketing starts and ends at consumers. The companies truly believe in the phrase “Consumer is the king.” The organizations now concentrate on identifying wants/needs of consumers and satisfying such wants. Infact, companies have started providing additional services which help in attracting more consumers. Consumers will opt for a brand that understands their needs and gives them priority. E.g. ICICI has introduced a tab banking system. Instead of a consumer visiting ICICI branch to open account, ICICI sends its representatives at consumer’s place. This feature was propagated by an advertisement featuring Mr. Amitabh Bachhan. It helped ICICI in opening half million accounts in just eight months. Following is the link of that advertisement or scan the QR code: https://www.youtube.com/watch?v=Cmw8BFs0tqc 7. Organizational Goals Every organization has its set goals and objectives. Marketing helps in attaining goals like profit maximization, creating goodwill, brand loyalty, growth and expansion, providing stability, increasing market share etc. For instance, to promote loyalty stores like shoppers stop, lifestyle etc have started points system. Every time a consumer makes a purchase, certain points get deposited in his account. These points can then be utilized for availing higher discounts. This marketing campaign has helped in promoting brand loyalty. 8. Facing competition The market is open for all organizations and this has increased competition. Marketing comprises of market research. Research helps in understanding the needs of the consumers. The consumers will be attracted to the brand that caters to their specific needs. If the organization can establish itself as a brand for the consumers, it will gain a competitive edge. E.g. Parle-G is a brand which gives quality biscuits and very low prices, starting at Rs. 2 only. Thus it is affordable for everyone. This has ensured that brands like Tiger biscuits have not affected the market share of Parle-G. 9. Includes services and ideas Marketing is no longer restricted to promotion of goods alone. It is also used for promotion of ideas and services. Growing market for services and ideas has led to an increasing need for marketing. E.g. Promotion of goods like Coca-Cola, Pepsi, electronics etc. Promotion of services by banks (Axis, SBI), insurance company etc. Promotion of ideas like Cleanliness (“Swachh Bharat Abhiyaan”), Polio drive etc. Q2. What is the importance of Marketing? Ans. American Marketing Association has defined marketing as “Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.” Following is the importance of marketing: 1. Consumer Value The market today is consumer oriented. It revolves around satisfying the wants of consumers. Marketing helps to indentify the wants of consumers. Marketing not only helps in satisfying these wants but also helps in increasing satisfaction by providing additional services. Customer value can be increased by providing additional services specific to their requirements. E.g. ICICI bank has started providing Debit and Credit cards with the option of customizing the card with an image of the card owner’s choice. Following is the link of that advertisement or scan the QR code: https://www.youtube.com/watch?v=L96PX2KbPs8 2. Competition There is cut-throat competition in the market on account of large number of organizations. The substitute products are now easily available (E.g. Pepsi and Thums-up). Effective marketing strategy helps in gaining an edge over the competitors. E.g. There are various online shopping websites like flipkart, snapdeal, ebay, amazon etc. Effective marketing strategy will help these companies in pulling the prospective customers. Flipkart had organized “Big Billion Day Sale” on 31st January, 2015 which attracted millions of consumers. 3. Objective Oriented Every organization has its set goals and objectives. Marketing is a systematic, goal oriented process. It helps in attaining goals like profit maximization, creating goodwill, brand loyalty, growth and expansion, providing stability, increasing market share etc. 4. Company Reputation Marketing is the link between consumers and organization. Efficient marketing strategy can help build a good company reputation. It helps in improving consumer loyalty. E.g. Amul Butter has a very good brand image. Infact, in restaurant menu cards, we find items like “Amul Pav Bhaji.” Similarly, many of us still ask for “Xerox” instead of photocopy. Xerox is a company which manufactures photocopy machines. 5. Expansion and Growth Effective marketing techniques attract more consumers. This helps the business to expand. Various marketing strategies are used for expansion of business. It helps in increasing profitability, market share etc and thus helps a company to grow. E.g. Good-knight has launched various products like Good Knight mosquito coils, Good Knight Silver mats, Good Knight Advanced Activ Plus, Good Knight Mosquito Spray etc. 6. Cost Effective In order to succeed it is important for the organization to create an impact on its market. This is done by way of marketing. Although marketing is an expensive function, it is actually an investment. Market research, advertising, promotion and other functions of marketing helps in attracting consumers. Marketing by way of hoardings, radio advertisements, using social media etc are inexpensive. 7. Reduced Risks Marketing effectively reduces business risks. This is because the organization has complete knowledge of the requirements of consumers, market structure, competition, target consumers, income groups, demand and supply etc due to market research. Hence, an organization is aware of the challenges it may face. 8. Employment Generation Marketing helps in generating direct as well as indirect employment. Marketing function provides job opportunities directly for the marketing team of an organization. There is an indirect generation of employment in those organizations that provide marketing services. 9. Higher Efficiency Good marketing research helps the organization in gathering information related to needs of consumers, competition, pricing strategy etc. This information helps the organization in taking informed decisions, generating demand, increase sales and thereby profits of the company. The profits earned can further be reinvested to improve the marketing strategies, conduct research and development etc. 10. Gaining Popularity / Creating Brand Awareness These days it is very important to gain popularity. Consumers get attracted towards the popular products. E.g. Cadbury has such efficient marketing history that the term “chocolate” is often replaced by “Cadbury” (Bhaiya ek Cadbury dena). When Cadbury Silk was launched in the market, the advertisements covered the entire country with hoardings, advertisements etc. Q3. What are the functions of marketing? Ans. American Marketing Association has defined marketing as “Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.” Following are the functions of marketing: SMART CODE: [MBA & CS Develop Perfect PPT] 1. Marketing research Marketing research is a systematic process of gathering data for analysis and solving the marketing problems. Marketing research helps in gathering information related to size of market, competitors, consumer preference, their requirement etc. Marketing research may include research about the products, consumers, competitors, requirement etc. The data gathered may help in solving various marketing problems, designing effective marketing strategies, identifying needs of consumers, taking important decisions etc. 2. Branding, Packaging and Labeling Branding – Branding means establishing a unique identity of the brand. This can be achieved by developing a brand name, a symbol or even a tag line. Branding helps in creating an image in the market. E.g. Coca-cola has started a series of ad campaigns with a tag line “Open Happiness”. Following is the link of that advertisement or scan the QR code: https://www.youtube.com/watch?v=aQ3uhnByS1k Packaging and labeling – Packaging and labeling is also called as “silent salesmen”. Packaging is important for protection of the product and the purpose of labeling is to provide instructions to consumers. However, attractive packaging and innovative labeling techniques attract consumers. E.g. Kinderjoy has established itself as a brand for children. It’s packaging and labeling is attractive for kids specially because of the unique egg shaped package and the free toys inside. 3. Advertisement Strategy Advertising is the marketing revolution. It is that aspect of marketing which has the potential of maximum market coverage and creating brand awareness. Advertising is a non-personal form of marketing. Apart from creating awareness, advertising helps in enhancing brand image and customer loyalty, influencing the market, developing an edge over the competitors, creating awareness etc. E.g. Fevikwik launched its advertisement with a tag-line of “Todo nahin, jodo” during India-Pakistan world cup match. The advertisement presented a humorous way of presenting the message of human bonding. Following is the link of that advertisement or scan the QR code: https://www.youtube.com/watch?v=A4WZF74dAg4 4. Customer Care Services Customer care or after sale services are the services offered by organizations after the sale of product. The aim is to resolve customer grievances. It helps to establish customer loyalty, build a good brand image and develop healthy relationship with customers. The customers find it easier to rely on brands that provide services even after sale. E.g. Nokia Care centers are set up at various places that provide repair services for Nokia mobile phones. All the electronic companies provide services even after they have sold the goods. 5. Sales Promotion Schemes Sales promotion is an important tool of marketing. It effectively attracts consumers with various incentives and schemes. These incentives include Buy1get1 Free, Free Sampling, Discounts etc. E.g. GOSF or “Great Online Shopping Festival” organized by Google in partnership with websites like Jabong.com and Myntra, attracted a lot of customers. It encouraged customers to shop online. 6. Developing the Design of the Product Designing decisions comprise of decisions regarding the appearance aspect of the product. The consumers tend to get attracted to appealing products. The package design adds uniqueness to the product and also gives it an edge over its competitors. E.g. Apple has introduced its new phone Iphone 6 which is one of the slimmest phones in the market. Alongwith features, the design of the cell phone is extremely appealing. 7. Pricing Decisions Price is one the most important factors that affect the success of any organization. Price is the amount a consumer is willing to pay for the goods or services offered by the organization. Similarly, it is also an amount which an organization expects for the goods or services offered to consumer. The price should be set such that all the costs of production, distribution, marketing etc are covered. An organization should also be able to earn sufficient profits. However, prices should be set keeping in mind the income levels in the market, the quality of the product and also the competitive prices of other products. 8. Personal Selling Personal selling is a tool of marketing that is used by organizations who want to maintain a personal touch with its consumers. This technique is used usually for new products or for technical / electronic products. Also for services like insurance, it is important to explain the terms and conditions to the consumers and so personal selling is important. 9. Physical Distribution Physical distribution is the process of actual distribution of goods. It comprises of warehousing, inventory management, decisions regarding selection of the appropriate distribution channel etc. 10. Test Marketing Test marketing, as the name suggests, is the process wherein the organizations launch the product but in small segments only. After studying the market response, decision is made whether the product should be launched on a large scale or whether it requires to be further developed. E.g. Pepsico recently launched an ad campaign for Slice called “Slice Aamsutra” wherein 4 new flavors were launched but on a small scale. The consumers were asked to vote for their choice of flavor. Q4. Explain the Evolution of the Marketing Concept. 1. The Exchange Concept (Seller’s market) When a product is sold or service is offered for a certain value, exchange takes place. Exchange can be in the form of barter or for money. This concept revolves around the exchange process only. It is a narrow concept of marketing. The motive is profit maximization only. The sellers do not consider the requirements of the consumers. They believe that as long as there are commodities in the market, the consumer will buy them. This is a traditional concept. It is in practice only in certain third world countries. 2. The Production Concept (Seller’s market) The production concept revolves around the production process. It is based on the concept that buyers will buy the product if it is available at a cheaper price. This concept works on the idea that if the production is efficiently increased then per unit cost of production will reduce. The motive is profit maximization only. This concept is applicable only in a sellers’ market as it ignores quality of product, consumer needs, customer relations, market research, competition etc. It can be applicable for products whose features are not an important deciding factor for purchase. 3. The Product Concept (Seller’s market) The product concept was more advanced as compared to the initial concepts of marketing. This concept is product centric. The idea is to improve the product quality to increase the demand. Although the quality is improved, it does not consider the requirements of the consumers. The motive is profit maximisation. 4. The Selling Concept (Buyer’s market) The selling concept initiated the emphasis on the selling aspect of marketing. The main idea of this concept is to use more aggressive promotional techniques. This will help in pushing the product in the market and attract consumers. Publicity, sales promotion and other selling techniques are put to use. However this concept revolves around the seller and not the consumer. The motive here is profit maximization only. 5. The Marketing Concept (Buyer’s market) In this concept, the attention finally shifted to consumers. This concept is consumer centric. The purpose is to identify wants of consumers and satisfying them as efficiently as possible. The organizations realized that it is important to earn consumer loyalty in order to survive in the market. Although profit maximization is a motive, other aspects are also taken into consideration. These include customer satisfaction, market research, consumer relationship, target market etc. According to this concept, consumer welfare and satisfaction is the key to success. 6. The Societal Concept (Buyer’s market) This concept was developed when the organizations realized the importance of social welfare. The focus is on three factors. Along with profit motive and consumer welfare it is equally important to consider the aspect of societal welfare. This concept encouraged the use of eco-friendly methods of production. Also, it gave birth to various research and development projects in order to make goods which are eco-friendly along with being consumer friendly. 7. The Relationship Marketing Concept (Buyer’s market) The relationship marketing concept basically concentrates on building healthy and long lasting relationships with all the stakeholders. The stakeholders include employees, dealers, suppliers, distributors, financers, shareholders, society and also consumers. The stakeholders of an organization are the main strength of the organization. Without support of the stakeholders, the organization will collapse. For the success and prosperity of an organization it is necessary to build strong relations with all the stakeholders. 8. The Holistic Concept (Buyer’s market) The Holistic Concept Integrated Marketing Relationship Marketing Internal Marketing Performance Marketing The Holistic Concept is a wider concept of marketing. Holistic means allencompassing. It comprises of four main factors: 1. Integrated Marketing – Integrated marketing means inter-linked marketing. Marketing function is inter-linked with other functions like planning, financing, production etc. For instance, in order to launch a new product in the market, it is essential to conduct market research, identify the competitors and understand the consumers. E.g. Depending on the results of the research, the quantity to be produced needs to be decided. This will affect production function. In order to produce particular quantity, raw material will have to be purchased. This will result in additional cash outflow and hence will affect finance function. 2. Relationship Marketing – Stakeholders include consumers, dealers, suppliers, employees etc. They are the essence of an organization. Without support of the stakeholders, the organization will collapse. For the success and prosperity of an organization it is necessary to build strong relations with all the stakeholders. E.g. If the employees are unhappy, they may not be able to work with same efficiency and productivity. If the suppliers are unhappy, they may not extend credit period or supply good quality product. 3. Internal Marketing – Employees are the most important pillars of any organization. If the employees are satisfied, they will give excellent results. It is important to have a well-trained and self-motivated workforce to increase efficiency. Optimum utilization of human resource is possible only if the employees understand the objectives of their organization. 4. Performance Marketing – Performance Marketing comprises of improving the performance. Performance can be achieved by reducing costs, increasing sales, improving brand loyalty, quality of product, enhancing customer satisfaction etc. SMART RECAP CONCEPT Exchange concept Production concept Product concept Selling concept Marketing concept Societal concept Relationship marketing concept Holistic concept MEANING FOCUS As long as there are commodities in the market, the consumer will buy them Improved production will reduce the production cost. Thus the prices of goods will reduce. The quality of product is improved. This should attract more consumers. Aggressive promotional techniques are used to push the product in the market. Consumer oriented concept aimed at satisfying the wants/needs of consumers. Welfare of society is taken into consideration while making business decisions Building healthy relationships with the stakeholders of business. It comprises of integrated marketing, relationship marketing, internal marketing and performance marketing. Profit maximization by making products available in the market for exchange. Profit maximization by increasing production. TYPE OF MARKET Seller’s market Seller’s market Profit maximization by improving the quality of the products. Profit maximization by using promotional and other selling techniques. Consumer satisfaction by focusing on the needs and wants of consumers. Societal welfare by using environment friendly techniques. Healthy stakeholder relationship. Seller’s market All round development of the organization. Buyer’s market Seller’s market Buyer’s market Buyer’s market Buyer’s market