Marketing

Management

PRESENTED BY-
YATIN SHARMA
What Is Marketing

“Meeting Needs Profitability”

Marketing is an organizational
function
and set of processes for
creating, communicating & delivering
value to customers and
for managing customer relationships
in ways that
benefit the organization & its
stakeholders
What is Marketing Management

The art and Science of

choosing target markets
and getting, keeping and
growing customers
through creating,
delivering and
communicating superior
customer value
Marketing Concept

Production Concept
Service Concept
Selling Concept
Product Concept
Marketing Concept
Holistic Concept
 Internal Marketing
 Integrated Marketing
 Relationship Marketing
 Performance Marketing
Modern Marketing

Every Employee is a
Marketer
Internal Communication
Experience Concept
Green Marketing
Factors Influencing Marketing Concept

Growth of Population
Changing Concept of Family
More Disposable Income
More Discretionary Income
Technology Advancement
Media
Credit Facility
 Nature Of Marketing
It is a legal process by which ownership is transferred
It is a system of interacting business activities
It is a managerial function of organizing and directing
business activities that facilitates the movement of goods
from producers to consumers
It is a Philosophy based on consumer orientation and
satisfaction
It has dual objectives- Profit Making and Consumer
Satisfaction
Scope Of Marketing
Marketers are involved with
marketing ten types of entities :
Services
Events
Experiences
Persons
Places
Properties
Organizations
Information
Ideas
Physical Goods
Scope Of Marketing
Who Markets
Marketers and Prospects
 Eight Demand states are possible
 Negative Demand

 Nonexistent Demand

 Latent Demand

 Declining Demand

 Irregular Demand

 Full Demand

 Overfull Demand

 Unwholesome Demand
Scope Of Marketing
Study of Consumer wants and needs
Study of Buyer Behavior
Product Planning and development
Pricing Policies
Distribution
Promotion
Consumer Satisfaction
Marketing Control
What is a Market

Markets includes both place

and region in which buyers
and sellers are in free
competition with each other
Classification of Markets

On the basis of Area

On the basis of Time
On the basis of Transaction
On the basis of Regulation
On the basis of volume of
Business
On the basis of Nature of
Goods
 Difference Between Marketing and Selling

Marketing Selling
Focuses on Customer Needs Focuses On Sellers Needs
Begins before Production Begins after Production
Continues After Sales Comes To an End after sale of Product
Philosophy of Business Routine Process
Profits through customer satisfaction Profits through Sales Volume
Long Term Perspective Short Term Perspective
Customer First Product First
Marketing Management Tasks

Developing Marketing
Strategies and Plan
Capturing Marketing Insights
Connecting with Customers
Building Strong Brands
Shaping the Market offerings
Delivering Value
Communicating Value
Creating Long Term Growth
Marketing Environment
 Factors which affect Marketing
Environment:-
 Social Forces
 Sociological Factors
 Psychological Factors
 Anthropological Factors
 Economic Factors
Consumer
 Competition

 Price

 Political Forces
 Ethical Forces
 Physical Forces
 Technological Forces
Marketing Environment contd…..
Macro Environment
Demographic Factors
Economic Factors
Competition
Social and Cultural Forces
Political and Legal Forces
Technology
Micro Environment
Market
Suppliers
Marketing Intermediaries
Environmental Scanning

What is the Goal behind

Environmental Scanning
Technological Environment
Political Environment
Economic Environment
Cultural Environment
Demographic Environment
Methods used for Environmental Scanning

SWOT Analysis
Scenario Building
Cross Impact Analysis
Delphi Method
SWOT ANALYSIS
A SWOT (Strengths, Weaknesses, Opportunities, and Threats) is a tool
used to provide a general or detailed snapshot of a company's health.
Think of your SWOT as a tune-up that every business needs periodically to
diagnose and fix what’s a problem, what’s on the verge of breaking
down, or what’s already broken and needs replacement--so that you can
keep the business humming—even better than it has in the past.
SWOT offers professional managers an effective evaluative technique to
aid the decision making process.
It can not find the solution for you, but it will ensure that issues are:
identified, classified and prioritized clearly, showing the problem in terms
of key underlying issues. Decision makers can then see the answer.
It's a four-part approach to analyzing a company's overall strategy or the
strategy of its business units. All four aspects must be considered to
implement a long-range plan of action.
SWOT ANALYSIS
Another example is Dell Computer Corp., which is a great
example of how an IT company can use a SWOT analysis to
carve out a strong business strategy, according to Glazer.
 Dell recognized that its strength was selling directly to
consumers and keeping its costs lower than those of other
hardware vendors.
 As for weaknesses, the company acknowledged that it
lacked solid dealer relationships. Identifying opportunities
was an easier task.
 Dell looked at the marketplace and saw that customers
increasingly valued convenience and one-stop shopping
and that they knew what they wanted to purchase.
SWOT ANALYSIS
Dell also saw the Internet as a powerful
marketing tool.
On the threats side, Dell realized that
competitors like IBM and Compaq Computer
Corp. had stronger brand names, which put
Dell in a weaker position with dealers.
Dell put together a business strategy that
included mass customization and just-in-time
manufacturing (letting customers design their
own computers and custom-building
systems).
 Dell also stuck with its direct sales plan and
offered sales on the Internet.
 Analyzing the Macroenvironment
 Successful companies recognize and respond profitably to unmet needs
and trends. Companies could make a fortune if they could solve any of
these problems: a cure for cancer; chemical cures for mental diseases;
desalinization of seawater; nonfattening, tasty nutritious food; practical
electric cars; and affordable housing.
 Needs and Trends
 A trend is a direction or sequence of events that has some momentum
and durability. Trends are more predictable and durable than fads. A
trend reveals the shape of the future and provides many opportunities.
 A fad is "unpredictable, short-lived, and without social, economic, and
political significance." A company can cash in on a fad, but this is more
a matter of luck and good timing than anything else.
 Megatrends have been described as "large social, economic, political
and technological changes [that] are slow to form, and once in place,
they influence us for some time— between seven and ten years, or
longer."
Identifying the Major Forces
 Companies and their suppliers, marketing intermediaries,
customers, competitors, and publics all operate in a
macroenvironment of forces and trends that shape opportunities
and pose threats. These forces represent "noncontrollables,"
which the company must monitor and to which it must respond.
In the economic arena, companies and consumers are
increasingly affected by global forces
 the steep decline of the stock market, its effect on living of
people

 Within the rapidly changing global picture, the firm must monitor
six major forces: demographic, economic, social-cultural, natural,
technological, and political-legal.
The Demographic Environment
Worldwide Population
Growth
Population Age Mix
Ethnic and Other
Markets
Educational Groups
Household Patterns
Geographical Shifts in
Population
 Other Major Macroenvironments
 Social-Cultural Environment
 Views of themselves
 Views of others
 Views of organizations.
 Views of society
 Views of nature.
 Views of the universe.
 HIGH PERSISENCE OF CORE CULTURAL VALUES
 EXISTENCE OF SUBCULTURES
 SHIFTS OF SECONDARY CULTURAL VALUES THROUGH TIME
 Economic Environment
 Income Distribution
 SAVINGS, DEBT, AND CREDIT AVAILABILITY
 OUTSOURCING AND FREE TRADE
Political-Legal Environment
 INCREASE IN BUSINESS LEGISLATION
 GROWTH OF SPECIAL-INTEREST GROUPS
Technological Environment
 Accelerating pace of change
 INCREASED REGULATION OF TECHNOLOGICAL CHANGE
 VARYING R&D BUDGETS
 UNLIMITED OPPORTUNITIES FOR INNOVATION
Natural Environment
 Shortage Of Materials
 Increased Energy Costs
 ANTI-POLLUTION PRESSURES
 Changing Role of Government
 Introduction
General approach
Conditions for effective segmenting
Basis of segmentation
Introduction
Markets consists of buyers & buyers differ
in one or more respects.
Wants
Purchasing power
Geographical location
Buying attitudes
CONDITIONS For Effective Marketing

Measurable.

Accessibility.

Optimum size.

Differentiable

Actionable
PATTERNS of Market Segmentation:

A) HOMOGENEOUS PREFERENCES :

-A market where all the consumers have
roughly the same preferences.

-Market shows no natural segments

-We would predict that existing brands

would be similar & cluster in the centre
Contd…
B) DIFFUSED PREFERENCES :
- At the other extreme consumer
preferences may be scattered through
out the space.
- that shows consumers vary greatly in
their preferences.
The first brand to enter the market is likely to
position in the centre to appeal to most of the
people.
Contd…
The second competitor could locate next to the first
brand & fight for market share

OR

It could locate in a corner to attract a customer group

that was not satisfied with the centre brand.
Contd…

C) CLUSTERED PREFERENCES :

- the market might reveal distinct
preference clusters called
Natural Market Segments.
Contd…
 The first firm in this market has three options:

a) It might position itself in the centre hoping to appeal to

all the groups. (Undifferentiated marketing).

b) It might position itself in the largest market segment

(Concentrated marketing).

c) It might develop several brands, each positioned in a

different segment.
( Differentiated marketing )
RATIONALE OF MARKET SEGMENTATION

Facilitates proper choice of target market.

Facilitates tapping of the target market
Adapting the offer to the target market.
Makes the marketing effort more efficient &
economic
Helps identify less satisfied segments &
concentrate on them
Benefits the customers as well.
 BASIS OF SEGMENTATION
A. Consumer Characteristic Approach

GEOGRAPHIC :
Region : pacific, mountain.
City or Metro size: under 5000,above 40000.
Density: urban, suburban, rural
climate :Northern , southern
DEMOGRAPHIC:

Age
Gender
Family size
Family life cycle
Income
Occupation
Education
Religion
Race
Nationality
PSYCHOGRAPHIC

Social class: upper-upper, lower uppers,

upper middles, middle class,
working class, upper lowers,
lower lowers.

Life style : freaky, trendy, ethnic

Personality : Dominance, Authoritarian,

ambitious
B. Consumer Response Approach

. Benefit response – T aspects of efficiency, prestige,

durability, economy or resale value.
. Usage Response- Heavy, Medium, light and non-user.
. Loyalty response- Most loyal, moderately loyal, and
fickle-minded.
Conti…
Occasion response- regular occasion, special
occasion.
 User status - non user, ex user, potential user, first
time user, regular user
Target Marketing
Target market is one which the marketing efforts are
directed towards.
The factors that play significant role in the process of
targeting are:
1. Segment’s attractiveness
2. Keeping competitors at distance
3. The company objectives and resources
Alternative Market Targeting Strategies

Undifferentiated Marketing: Entire market serve with

one product. Example : American car manufacturers
Differentiated Marketing: Local market with variety
of products.
Concentrated Marketing : focuses on only one or a
few segments.
Strategic Planning In Marketing
 Strategic planning is the formal
consideration of an organization's future
course. All strategic planning deals with at
least one of three key questions:
 "What do we do?"
 "For whom do we do it?"
 "How do we excel?“
 Corporate and Division Strategic Planning
 Defining the corporate mission

 Establishing strategic business units

 Assigning resources to each SBU

 Assessing growth opportunities

Defining Corporate Mission: To define its mission, a company should
address Peter Drucker's classic questions:21 What is our business?
Who is the customer? What is of value to the customer? What will
our business be? What should our business be? These simple-
sounding questions are among the most difficult a company will ever
have to answer.
Good mission statements have three major characteristics. First,
they focus on a limited number of goals.
Second, mission statements stress the company's major policies and
values. They narrow the range of individual discretion so that
employees act consistently on important issues.
 Third, they define the major competitive spheres within which the
company will operate:
Establishing strategic business units: Companies often define their
businesses in terms of products: They are in the "auto business" or
the "clothing business." But Levitt argues that market definitions of a
business are superior to product definitions.
Large companies normally manage quite different businesses, each
requiring its own strategy. General Electric classified its businesses
into 49 strategic business units (SBUs). An SBU has three
characteristics:
 It is a single business or collection of related businesses that can be
planned separately from the rest of the company.
 It has its own set of competitors.
 It has a manager who is responsible for strategic planning and profit
performance and who controls most of the factors affecting profit.
Assigning Resources to each SBU: Once the organization defines
its SBU’s then they must decide how to allocate resources to each SBU.
 GE/McKinsey classifies each SBU’s according to the extend of
competitive advantage and attractiveness of the industry
 Another model the BCG’s Growth Share Matrix uses relative share and
annual rate of market growth as a criteria to make investment
decisions

Assessing growth opportunities: Assessing growth opportunities

involves planning new businesses, downsizing, or terminating older
businesses. The company's plans for existing businesses allow it to project
total sales and profits. If there is a gap between future desired sales and
projected sales, corporate management will have to develop or acquire
new businesses to fill it.
Business Unit Strategic Planning

Marketing Opportunity Analysis (MOA)

Can the benefits be articulated to a target
market?
Can the target market be reached with
cost-effective media and trade channels?
Does the company have the critical
capabilities to deliver the customer
benefits?
Can the company deliver these benefits
better than any actual or potential
competitors?
Will the rate of return meet the required
threshold of investment?
Opportunity and Threat Matrices

4-49
Business Unit Strategic Planning

Internal Environmental Analysis

(Strength/Weakness Analysis)
Goal Formation
Strategic
Formulation
Strategy
Business Unit Strategic Planning
Porter’s Generic Strategies
Overall cost leadership
Differentiation
Focus
Travelocity’s Web site helps the consumer plan the whole vacation –
flights, lodging, and car rental.com
Business Unit Strategic Planning
Operational Effectiveness and Strategy
Strategic group
Strategic alliances

4-53
Business Unit Strategic Planning
Marketing Alliances
Product or service alliances
Promotional alliances
Logistical alliances
Pricing collaborations
Partner Relationship
Management, PRM
Program Formulation and Implementation

4-54
Business Unit Strategic Planning
Feedback and Control

4-55
The Marketing Process
Steps in the Planning Process
The marketing process
Analyzing Market Opportunities
Developing Marketing Strategies
Planning Marketing Programs
Managing the Marketing Effort
Annual-plan control
Profitability control
Strategic control

4-56
Figure 4-10: Factors
Influencing Company
Marketing Strategy
Product Planning: The Nature and Contents of a Marketing Plan

Contents of the Marketing Plan

Executive Summary
Current Marketing Situation
Opportunity and issue analysis
Objectives
Marketing strategy
Action programs
Financial projections
Implementation controls
Product Planning: The Nature and Contents of a Marketing Plan

Sample Marketing Plan: Sonic Personal Digital

Assistant
Current Marketing Situation
Opportunity and Issue Analysis
Objectives
Action Programs
Financial Projections

4-59
Product Planning: The Nature and Contents of a Marketing Plan

Implementation Controls
Marketing Strategy
 Positioning
 Product Management

 Pricing

 Distribution

 Marketing Communications

 Marketing Research

4-60
INTENSIVE GROWTH Corporate management's first
course of action should be a review of opportunities for
improving existing businesses. Ansoff proposed a useful
framework for detecting new intensive growth
opportunities called a "product-market expansion grid.
The company first considers whether it could gain more
market share with its current products in their current
markets (market-penetration strategy). Next it considers
whether it can find or develop new markets for its
current products (market-development strategy). Then it
considers whether it can develop new products of
potential interest to its current markets (product-
development strategy). Later it will also review
opportunities to develop new products for new markets
(diversification strategy.
INTEGRATIVE GROWTH backward, forward, or horizontal
integration within its industry. For example, drug company giant
Merck has gone beyond just developing and selling ethical
pharmaceuticals. It purchased Medco, a mail-order pharmaceutical
distributor in 1993, formed a joint venture with DuPont to establish
more basic research, and another joint venture with Johnson &
Johnson to bring some of its ethical products into the over-the-
counter market.
Media companies have long reaped the benefits of integrative
growth. Here is how one business writer explains the potential that
NBC could reap from its merger with Vivendi Universal
Entertainment to become NBC Universal. Admittedly a far-fetched
example, it gets across the possibilities inherent in this growth
strategy
DIVERSIFICATION GROWTH: Diversification growth
makes sense when good opportunities can be found
outside the present businesses. A good opportunity is one
in which the industry is highly attractive and the company
has the right mix of business strengths to be successful.
For example, from its origins as an animated film
producer, Walt Disney Company has moved into licensing
characters for merchandised goods, entering the
broadcast industry with its own Disney Channel as well as
ABC and ESPN acquisitions, and developed theme parks
and vacation and resort properties
DOWNSIZING AND DIVESTING OLDER BUSINESSES
Companies must not only develop new businesses; they
must also carefully prune, harvest, or divest tired old
businesses in order to release needed resources and
reduce costs. Weak businesses require a disproportionate
amount of managerial attention. Managers should focus
on growth opportunities, and not fritter away energy and
resources trying to salvage hemorrhaging businesses.
Heinz sold its 9-Lives and Kibbles 'n Bits pet food, StarKist
tuna, College Inn broth, and All-in-One baby formulas to
Del Monte in 2002 after years of stagnant sales, to allow
it to focus on its core brands in ketchup, sauces, and
frozen foods
Market Targeting

 Once the firm has identified its market-

segment opportunities, it has to decide
how many and which ones to target.
Marketers are increasingly combining
several variables in an effort to identify
smaller, better-defined target groups.
Thus, a bank may not only identify a
group of wealthy retired adults, but
within that group distinguish several
segments depending on current income,
assets, savings, and risk preferences.
This has led some market researchers to
advocate a needs-based market
segmentation approach.
 Effective Segmentation Criteria
 Not all segmentation schemes are useful. For example, table salt buyers
could be divided into blond and brunette customers, but hair color is
undoubtedly irrelevant to the purchase of salt.
 To be useful, market segments must rate favorably on five key criteria:
 Measurable. The size, purchasing power, and characteristics of the
segments can be measured.
 Substantial. The segments are large and profitable enough to serve.
A segment should be the largest possible homogeneous group worth
going after with a tailored marketing program. It would not pay, for
example, for an automobile manufacturer to develop cars for people
who are under four feet tall.
 Accessible. The segments can be effectively reached and served.
 Differentiable. The segments are conceptually distinguishable and
respond differently to different marketing-mix elements and
programs. If married and unmarried women respond similarly to a
sale on perfume, they do not constitute separate segments.
 Actionable. Effective programs can be formulated for attracting and
serving the segments
Evaluating and Selecting the Market Segments
In evaluating different market segments, the firm must
look at two factors: the segment's overall attractiveness
and the company's objectives and resources.
After evaluating different segments, the company can
consider five patterns of target market selection:
Single-Segment Concentration
Selective Specialization
Product Specialization
MARKET SPECIALIZATION
Full market Coverage
MANAGING MULTIPLE SEGMENTS
Differentiated marketing Cost
 Single-segment Selective Product
concentration specialization specialization
M1 M2 M3 M1 M2 M3
M1 M2 M3
P1 P1
P1
P2 P2
P2
P3 P3
P3

Market Full market

specialization coverage
M1 M2 M3 M1 M2 M3
P1 P1
P = Product
M = Market P2 P2
P3 P3
 Segment by Segment Invasion Plan
A company would be wise to enter one segment at a time.
Competitors must not know to what segment (s) the firm will
move next. Segment-by-segment invasion plans. Three firms,
A, B, and C, have specialized in adapting computer systems to
the needs of airlines, railroads, and trucking companies.
Company A meets all the computer needs of airlines. Company
B sells large computer systems to all three transportation
sectors. Company C sells personal computers to trucking
companies
 Customer Groups
Airlines Railroads Truckers
Product Varieties

Large
computers

Mid-size
computers

Personal
computers

Company A Company B Company C

 Where should company C move next? Arrows have been added to the chart
to show the planned sequence of segment invasions. Company C will next
offer midsize computers to trucking companies. Then, to allay company B's
concern about losing some large computer business with trucking
companies, C's next move will be to sell personal computers to railroads.
Later, C will offer midsize computers to railroads. Finally, it may launch a
full-scale attack on company B's large computer position in trucking
companies. Of course, C's hidden planned moves are provisional in that
much depends on competitors' segment moves and responses.
 Unfortunately,, too many companies fail to develop a long-term,
invasion, plan. PepsiCo is an exception. It first attacked Coca-Cola in the
grocery market, then in the vending-machine market, then in the fast-
food market, and so on.
 A company's invasion plans can be thwarted when it confronts blocked
markets. The problem of entering blocked markets calls for a
megamarketing approach. Megamarketing is the strategic coordination of
economic, psychological, political, and public relations skills, to gain the
cooperation of a number of parties in order to enter or operate in a given
market. Pepsi used megamarketing to enter the Indian market.
Consumer behavior is the study
of how individuals, groups, and
organizations select, buy, use,
and dispose of goods, services,
ideas, or experiences to satisfy
their needs and wants.
 Studying consumers provides
clues for improving or
introducing products or services,
setting prices, devising channels,
crafting messages, and
developing other marketing
activities.
How And Why Consumers Buy

Model of Customer Buyer Behavior

Factors Affecting Consumer Behavior: Culture
Culture is the Most Basic Cause of a Person's Wants
and Behavior.

The fundamental determinant of Subculture

a person’s wants and behaviors • Groups of people with shared
acquired through socialization value systems based on
processes with family and other common life experiences.
key institutions. • Hispanic Consumers
• African American Consumers
• Asian American Consumers
• Mature Consumers
Factors Affecting Consumer Behavior: Culture

Social Class
• Society’s relatively permanent & ordered
divisions whose members share similar values,
interests, and behavior.
• Measured by a Combination of: Occupation,
Income, Education, Wealth and Other
Variables.
Subcultures

Nationalities: Indian
Religions: Hindu, Sikh, Muslim,
Geographic regions: East, West, North,
South
Special interests: Business, Service, Army
 Groups
Membership, Reference,
or Aspirational
Family Most
Important Consumer Buying Organization

Roles and Status

Characteristics of Social Classes

Within a class, people tend to behave alike.

Social class conveys perceptions of inferior or
superior position.
Class may be indicated by a cluster of variables
(occupation, income, wealth).
Class designation is mobile over time.
Upper uppers, Lower uppers, Upper middles, Middle
class, Upper lowers, Lower lowers, Working class
Social Factors

Reference
Family
groups

Social
Statuses
roles
Family
Family of Orientation
Religion
Politics
Economics
Family of Procreation
Everyday buying behavior
Reference Groups

Membership: groups having direct influence on person

Primary: with whom interaction is fairly continuously &
informally e.g. family, friend
Secondary: with whom interaction is formal & requires
less continuous interaction
Aspirational: the group which person hopes to join
Dissociative: the group which person rejects
Consumer Buying
Process
Problem Recognition (awareness of need)--
The buying process starts when the buyer recognizes a
problem or need. The need can be triggered by internal or
external stimuli. With an internal stimulus, one of the
person's normal needs—hunger, thirst, sex—rises to a
threshold level and becomes a drive; or a need can be
aroused by an external stimulus difference between the
desired state and the actual condition. Deficit in assortment
of products. Hunger--Food. Hunger stimulates your need to
eat.
Can be stimulated by the marketer through product
information--did not know you were deficient? I.E., see a
commercial for a new pair of shoes, stimulates your
recognition that you need a new pair of shoes.
Information search--
 An aroused consumer will be inclined to search for more information.
We can distinguish between two levels of arousal. The milder search
state is called heightened attention. At this level a person simply
becomes more receptive to information about a product
 Internal search, memory.
 External search if you need more information. Friends and relatives
(word of mouth). Marketer dominated sources; comparison shopping;
public sources etc.
A successful information search leaves a buyer with possible
alternatives, the evoked set.
 Hungry, want to go out and eat, evoked set is
 chinese food
 indian food
 KFC, Pizza Hut etc
Evaluation of Alternatives—
 How does the consumer process competitive brand information and
make a final value judgment? No single process is used by all
consumers or by one consumer in all buying situations. There are
several processes, the most current models of which see the process as
cognitively oriented. That is, they see the consumer as forming
judgments largely on a conscious and rational basis.
 Need to establish criteria for evaluation, features the buyer wants or
does not want. Rank/weight alternatives or resume search. May decide
that you want to eat something spicy, Indian gets highest rank etc.
 If not satisfied with your choice then return to the search phase. Can
you think of another restaurant? Look in the yellow pages etc.
Information from different sources may be treated differently.
Marketers try to influence by "framing" alternatives.
Purchase decision--Choose buying alternative, includes
product, package, store, method of purchase etc.
Post-Purchase Evaluation—
 After the purchase, the consumer might experience dissonance that
stems from noticing certain disquieting features or hearing favorable
things about other brands, and will be alert to information that
supports his or her decision. Marketing communications should supply
beliefs and evaluations that reinforce the consumer's choice and help
him or her feel good about the brand.
Outcome: Satisfaction or Dissatisfaction.
 Cognitive Dissonance, have you made the right decision. This can be
reduced by warranties, after sales communication etc.
After eating an indian meal, may think that really you wanted a chinese
meal instead.
Product Mix
The product mix is the set of all
products offered for sale by a
company.
Bajaj Electricals a household name
in India, has almost ninety products
in its portfolio ranging from low
value items like bulbs to high priced
consumer durables like mixers and
luminaries and lighting projects .The
number of products carried by a
firm at a given point of time is called
its product mix.
 Constituents of A Product Mix
Product Line: A set of related products sold by a single
company.
Depth : measures the number of products that are
offered within each product line. Satisfies several
consumer segments for the same product, maximizes
shelf space, discourages competitors, covers a range of
prices and sustains dealer support. High cost in
inventory etc.
Width : measures the number of product lines a
company offers. Enables a firm to diversify products,
appeals to different consumer needs and encourages one
stop shopping.
Length :It refers to the total number of Items Produced
by a company in all the product lines.
 Product Line Decision
Factors on which the decision to change a
product depends are:
Changes in Market Demands: Population growth,
Increase in purchasing power.
Competition: Firm may need to counter Competition by
adding a new product
Marketing Influences: Product may be added to Increase
sales (New Market or expanding present ones) second, to
better use of resources i.e. salesmen, warehouse or
branch office.
Product influence: Increase Capacity will lead to
reduction in NET PRODUCTION COST.
Financial Influences: May Add or Drop a product
because of Financial Condition of a company.
 Product Line Strategies
Expansion Of Product Mix: Increasing the number of
lines or adding depth to a existing line can help
expansion of product mix.
Contracting or Dropping a product: Dropping a
product is difficult, even if pruning of the product the
product fails the a company may drop a product.
Alteration of Existing products: Alteration in design,
shape, color, flavor, texture or packaging may infuse a
life in the product. e.g. SX4 Diesel.
Development of New Uses of Existing Products: e.g.
AMWAY products used for different purposes.
 Product Positioning
Components Of Product Positioning
Perceptual Mapping
Product Benefits
Segmentation
Product Categories
Perceptual Mapping (Product Positioning)
 This is Marketing research
technique in which
consumer's views about a
product are traced or plotted
(mapped) on a chart.
Respondents are asked
questions about their
experience with the product
in terms of its performance,
packaging, price, size, etc.
Theses qualitative answers
are transferred to a chart
(called a perceptual map)
using a suitable scale (such
as the Likert scale), and the
results are employed in
improving the product or in
developing a new one
 Product Benefit (Product Positioning)

Benefits of a product facilitate consumers

in decision making and reduce the
uncertainty in their minds. They
encapsulate its identity, origin, specificity
and guarantee.
Product Benefit can be converted to brand
benefits to gain the following strategic
relevance in marketing:
Brand aims to segment the market
 Brand helps in brand building
Brand helps in innovations
 Segmentation (Product Positioning)
An Understanding of market dimensions to
the marketing manager is an important factor
in product management. In market
segmentation, consumers are grouped in
terms of the market dimensions and then the
firm attempts to match the needs of different
consumer group through compatible market
inputs encompassing PRODUCT PRICE PLACE
AND PROMOTION
 Product Categories (Product Positioning)
The nature of a product is found to have considerable impact
on the method of product positioning.
 Consumer Goods: Products that are purchased for consumption
by the average consumer. Alternatively called final goods,
consumer goods are the end result of production and
manufacturing and are what a consumer will see on the store
shelf. Clothing, food, automobiles and jewelry are all examples
of consumer goods. Basic materials such as copper are not
considered consumer goods because they must be transformed
into usable products.
 Industrial goods: products or services purchased for use in the
production of other goods or services, in the operation of a
business, or for resale to other consumers. Industrial products
include heavy machinery, raw materials, typewriters, tools, and
cash registers
 Product Market Mix Strategy

- Ansoff drew up a growth vector matrix, describing a combination of a

firm’s activities in current and new market, with existing and new products.
The product-market mix strategy is illustrated in diagram below:
Current products and current market: market penetration
Market penetration: the firm seeks to:
 Maintain or increase its share of the current market with current
products.
 Secure dominance of growth markets.
 Restructure a mature market by driving out competitors.
 Increase usage by existing customer.
Present products and new markets: market development
New geographical areas and export markets
Different package sizes for food and other domestic items so that
those who buy in bulk and small quantities are catered for.
New distribution channels to attract new customers (e.g. organic
foods sold in supermarkets not just specialist shops)
Differential pricing policies to attract different types of customer and
create new market segments.
 New products to present markets: product development
 Advantage – Product development forces competition to innovate, new
comers to the market might be discouraged.
The drawbacks include the expense and the risk.
 New products and new markets: diversification
occurs when a company decides to make new products for new markets. It
has to have a clear idea of what it hopes to gain from diversification. There
are two types of diversification, related and unrelated diversification.
Growth - new products and new markets should be selected which offer
prospects for growth, which the existing product market mix does not.
Investing surplus – funds not required for other expansion needs: but the funds
could be returned to shareholders.
The firms strengths matches the opportunity if – outstanding new products
have been developed by the company’s research and development department.
The profit opportunities from diversification are high.
 Related diversification
Horizontal integration refers to ‘development into activities which are
competitive with or directly complementary to a company’s present
activities.’ Sony with its play station started to compete in computer
games.
 Vertical integration occurs when a company becomes its own;
a. supplier of raw materials, components or services (backward
vertical integration)
b. Distributor or sales agent (forward vertical integration), for example:
where a manufacturer of synthetic yarn begins to produce shirts from the
yarn instead of selling it to other shirt manufacturers.
 Advantage of vertical integration
 a. To secure supply of components or raw materials with more control. Supplier
bargaining power is reduced.
b. Strengthen the relationships and contacts of the manufacturer with the final
consumer of the product.
c. Win a share of the higher profits.
d. Pursue a differentiation strategy more effectively.
e. Raise barriers to entry.
Disadvantages of vertical integration
 a. Over-concentration - A company places too many bets on ‘a same
end-market product’
b. The firm fails to benefit from any economies of scale or technical
advances in the industry to which it has diversified. This is why in the
publishing industry most printing is subcontracted to the specialist
printing firms, who can work machinery to capacity by doing work
for many firms.
Unrelated diversification - conglomerate diversification
Unrelated diversification or conglomerate diversification is
very unfashionable now – but it has been a key strategy for
many companies in Asia.
 Advantages of conglomerate diversification
 a. Risk spreading – entering new products into new markets offers
protection against failure of current products and markets.
b. High profit opportunities – Ability to move into high growth profitable
industries especially important if current industry is in decline.
c. Escape – from the present business if competition is too hot!
d. Better access to capital markets.
e. No other way to grow – expansion in the existing industry might lead to
monopoly and government investigation
f. Use surplus cash
g. Exploit under-utilized resources
h. Obtain cash or other financial advantages
i. Use a company’s image reputation in one market to build products and
services in another market.
Disadvantages of conglomerate diversification
 a. The dilution of shareholders earnings if diversification is into growth
industries with high P/E ratios.
b. Lack of a common identity and purpose in a conglomerate
organization. A conglomerate will be successful only if it has high
quality of management and financial ability at head office where
diverse operations are brought together.
c. Failure in one business will drag down the rest.
d. Lack of management experience
e. No good for shareholders – shareholders can spread risk by buying
shares in companies in different industries.
MARKETING MIX

Product
Price
Place
Promotion
Marketing Mix Determination
PRODUCT

 WHAT SIZE SHAPE AND THE

FEATURE’s SHOULD THE
PRODUCT HAVE.

 HOW SHOULD IT BE PACKAGED

 WHAT ASPECT OF SERVICE IS

MOST IMPORTANT TO
CONSUMERS

 HOW IT IS TO BE DESIGNED
Marketing Mix Determination
PRICE

 PRICE SENSITIVITY OF CONSUMERS

 PRICE AWARENESS

 NEW PRODUCT LAUNCH

 LIST PRICE

 DISCOUNTS,ALLOWANCES AND
PAYMENT METHODS
Marketing Mix Determination
PLACE
DISTRIBUTION
PROCESS RELATED ISSUES
 CONSUMER’S LOYALTY.
 WHAT TYPE OF RETAIL OUTLET
SHOULD SELL.
 LOCATION AND IN WHAT NUMBERS
Marketing Mix Determination
PROMOTION

ADVERTISING
PERSONAL SELLING
PUBLICITY
DIRECT MARKETING
Marketing Mix Determination
PROMOTION
IDENTIFY TARGET MARKET
REGION SPECIFIC
CONSUMER ATTENTION
COLOUR AND CONTRAST
SIZE
MEDIUM
EXPENDITURE
 Packaging ,Labeling,
Warranties &
Guarantees
Packaging is defined as all the activities of designing and
producing the container for a product

Primary Package Factors Contributing to

growing use of packaging:
Secondary
SELF SERVICE
Package
Shipping Package CONSUMER AFFLUENCE
COMPANY & BRAND IMAGE
INNOVATION OPPURTUNITY
labeling
Label identifies the product
or brand
Grade the Product
Promote- Through
attractive graphics
Describe the product
Warranties and Guarantees
Warranties are formal statements of
expected product performance by the
manufacturer
Extended warranties
Guarantee: A promise or an
assurance, especially one given in
writing, that attests to the quality or
durability of a product or service
A pledge that something will be
performed in a specified manner
The meaning of a product

A product is a set of tangible and intangible attributes,

which may include packaging, color, price, quality and
brand, plus the seller’s reputation and services.
Consumers are buying want-satisfaction in the form of the
benefits they expect to receive from the product.

121
Contd…

Anything that can be offered to a market for attention,

acquisition, use or consumption and which creates utility
Physical objects, services, events, persons, places,
organizations, ideas or mixes of all these entities
Ex. A car, a DVD player, a vacation, Coffee, investment
services etc.

122
Attributes comprising a product

Quality
Physical
Services
Traits

Company’s
Price
reputation

Product

Color Brand

Warranty Packaging

Design

123
LEVELS OF PRODUCT
Core benefit:
What consumer really wants to buy
expectations of the customer
 Actual benefit:
the core benefit turned into product.
features, design, packaging, quality level, brand
name…(all are carefully combined to deliver the core
benefit)

124
Augmented product:
Delivery and credit, Installation, Warranty, After-sale
service offering additional consumer services and
benefits.
consumers see product as complex bundles of
benefits that satisfy their needs. When developing
products, marketers first must identify the core
consumer needs the product will satisfy. They must
then design the actual product and find ways to
augment it in order to create the bundle of benefits
that will provide the most satisfying customer
experience…

125
CLASSIFICATION OF PRODUCT

Industrial Products
Consumer Products
Raw Materials
Convenience
Fabricating materials
goods and parts
Shopping goods Installations
Specialty goods Accessory equipment
Unsought goods Operating supplies

126
Consumer products:
Bought by the final consumer for personal
consumption.
Industrial product:
Bought by the individuals or organizations for the
further processing or for use in conducting a
business.
…a desk purchased by a person for personal use is a
consumer product, the same bought by an
entrepreneur for his industry is an industrial product,
….
127
Consumer products
Convenience products
Frequently purchased products. Low customer
involvement. Low price more outlets. Mass promotion from
producer
Ex. detergent, toothpaste, magazines etc.
b) Shopping products
Less frequently purchased . Much planning and shopping
effort, comparison of brands on price quality and style.
Higher price fewer outlets. Advertising and personnel
selling by both producer and reseller.
Ex. Television, fridge etc.

128
c ) Specialty products
Strong brand preference and loyalty , special purchase
effort, little comparison. Low price sensitive. High price, one
or a few outlets in a locality only. Carefully targeted
promotion by both producer and reseller.
ex. Luxury goods like Rolex watches, BMW cars etc
d) Unsought products
Little product awareness, (if aware, negative
interest or little) Price and distribution varies. Aggressive
advertising and personal selling by producer and reseller.
ex. Life insurance etc.

129
Industrial Products
Materials and parts:
Raw materials (farm and natural): wheat, cotton,, fish
petroleum etc.
Manufactured parts & materials: iron, yarn, wires, cement,
tires, castings etc.
b) Capital items:
Industrial items that aid in buyers productions or
operations. Major purchases such as buildings & fixed
equipment (generators, super computers). Accessories like
hand tools, fax machines, desks, computers etc.

130
a) Supplies and services:
Operating supplies: lubricants, coal, paper, pencil
Repair and maintenance items: paint, nail, brooms.
Supplies are the convenience products of industrial
field.
b) Services:
Maintenance and repair services: window cleaning,
computer repair etc
Advisory services: Legal, Management consulting,,
advertising.
Services are supplied under contract

131
New Product Development Process
Role
 Product Mix Matches the
changing environmental
conditions.
 Compare New and
Developing Segments of the
Market
 Filling excess capacity
 Achieving Long term growth
and profit.
New Product Development Process
Idea Generation
Sales Personnel
Marketing Personnel
R & D Team
Top Management
executives
Production department
Employee Suggestions
Idea Screening
The object is to eliminate unsound
concepts prior to devoting resources to
them.
The screeners should ask several
questions:
Will the customer in the target market
benefit from the product?
What is the size and growth forecasts of
the market segment/target market?
What are the industry sales and market
trends (idea is based on)?
Is it technically feasible to manufacture
the product?
Will the product be profitable when
manufactured and delivered to the
customer at the target price?
 Concept Development and Testing
Develop the marketing and engineering details
Investigate intellectual property issues and search patent
data bases
Who is the target market and who is the decision maker in
the purchasing process?
What product features must the product incorporate?
What benefits will the product provide?
How will consumers react to the product?
How will the product be produced most cost effectively?
Prove feasibility through virtual computer aided rendering,
and rapid prototyping
What will it cost to produce it?
Testing the Concept by asking a sample of prospective
customers what they think of the idea.
Business Analysis
Estimate likely selling price based upon competition
and customer feedback

Estimate sales volume based upon size of market and

such tools as the Fourt-Woodlock equation

Estimate profitability and break-even point

Beta Testing and Market Testing
Produce a physical prototype or mock-
up
Test the product (and its packaging) in
typical usage situations
Conduct focus group customer
interviews or introduce at trade show
Make adjustments where necessary
Produce an initial run of the product
and sell it in a test market area to
determine customer acceptance
Technical Implementation
New program initiation
Finalize Quality management system
Resource estimation
Requirement publication
Publish technical communications such as
data sheets
Engineering operations planning
Department scheduling
Supplier collaboration
Logistics plan
Resource plan publication
Program review and monitoring
Contingencies - what-if planning
Commercialization
Launch the product
Produce and place
advertisements and other
promotions
Fill the distribution
pipeline with product
Critical path analysis is
most useful at this stage
Reasons For Adding A New Product
Excess Capacity As a reason
Profit as a criterion of
Optimum Product-Line
Diversification as response
to change
Company’s Strong point
Forward-Backward
integration
 Adoption Process

Five Stages
 Awareness -The consumer becomes aware of the innovation but lacks
information about it.
 Interest-The consumer is stimulated to seek information about the
innovation.
 Evaluation -The consumer considers whether to try the innovation.
 Trial-The consumer tries the innovation to improve his or her estimate of
its value.
 Adoption -The consumer decides to make full and regular use of the
innovation.
 Product Life Cycle
Product life cycle management (or PLCM) is
the succession of strategies used by
business management as a product goes
through its life cycle. The conditions in
which a product is sold (advertising,
saturation) changes over time and must be
managed as it moves through its succession
of stages.
 Market introduction
stage costs are very high
slow sales volumes to
start
little or no competition
demand has to be created
customers have to be
prompted to try the
product
makes no money at this
stage
Growth stage costs reduced due
to economies of scale
sales volume increases
significantly
profitability begins to rise
public awareness increases
competition begins to increase
with a few new players in
establishing market
increased competition leads to
price decreases
Maturity stage costs are lowered
as a result of production volumes
increasing and experience curve
effects
•sales volume peaks and market
saturation is reached
•increase in competitors entering
the market
•prices tend to drop due to the
proliferation of competing
products
•brand differentiation and feature
diversification is emphasized to
maintain or increase market share
Industrial profits go down
Saturation and decline
stage costs become
counter-optimal
sales volume decline
or stabilize
prices, profitability
diminish
profit becomes more
a challenge of
Branding
What is a Brand
“A name, term, sign, symbol, or
design or a combination of these,
intended to identify the
goods & services of one seller or
group of
sellers & to differentiate them from
those of
the competitors.”

Gives a visual identification in the

minds of customers.
A brand can deliver up to
four levels of meaning:
Attributes. A brand first brings to mind
certain product attributes. e.g. Mercedes
Benefits. Customers do not buy attributes,
they buy benefits.
Values. A brand also says something about
the buyers' values. Thus Mercedes buyers
value high performance, safety and prestige.
Personality. A brand also projects a
personality. Motivation researchers
sometimes ask, 'If this brand were a person,
what kind of person would it be?
Brand Equity
Brands vary in the amount of power and
value they have in the marketplace
Some brands command a high degree of
brand loyalty.
The world's top brands include such
superpowers as McDonald's, Coca-Cola,
Disney, Kodak, Sony and Mercedes-Benz
Brand equity refers to the marketing effects
and outcomes that accrue to a product with
its brand name compared with those that
would accrue if the same product did not
have the brand name
This suggests that marketing strategy should
focus on extending loyal customer lifetime
-value, with brand management serving as
an essential marketing tool.
 Brand Element Choice Criteria
 Memorability:

 Meaningfulness:

 Likability:

 Transferability: Amazon, Exxon

 Adaptability: logos and characters can be given a new look

or a new design to make them appear more modern and
relevant
 Branding Decision
Four general strategies are often used
Individual Names : Procter & Gamble (INDIA) has several
individual brands in different product categories, Vicks, Ariel
and tide, Head & Shoulders and Pampers. Kingfisher Airlines,
after acquiring Air Deccan, a low – cost airline, modified the
brand name to Simplifly Deccan, and retained it as a separate
brand, partly to protect the equity of kingfisher.
Blanket Family names : This policy is followed by Tata. The
blanket family salt, tea, coffee, automobiles, and steel.
Development cost are lower with blanket names because
there’s no need to run “name” research or spend heavily on
advertising to create recognition. Sales of the new product
are likely to be strong if the manufacturer’s name is good.
Corporate – Image.
 Branding Decision
Four general strategies are often used
Separate family names for the product : The Aditya Birla Group in
India follows this policy to a great extent. It uses separate family
names for its various products. Hindalco for aluminum. Ultra Tech for
cement, Grasim for suitings.

Corporate names combined with individual product names: Kellogg

combines corporate and individual names in Kellogg’s Rice Krispies,
Kellogg’s Raisin Bran, and Kellogg’s Corn Flakes, as do Honda, Sony
and Hewlett – Packard for their products. The company name
legitimizes, and the individual name individualizes, the new product.
 Promotion Mix
The specific mix of advertising, personal selling, sales promotion and
public relations that a company uses to pursue its advertising and
marketing objectives
 Promotion Mix
Advertising: Any paid form of non-personal presentation and
promotion of ideas, goods or services by an identified sponsor
Personal selling. Oral presentation in a conversation with one or
more prospective purchasers for the purpose of making sales and
building customer relationships.
Sales promotion. Short-term incentives to encourage the purchase or
sale of a product or service.
Public relations. Building good relations by doing favorable
publicity, building up a good corporate image, and handling or
heading off unfavorable rumors, stories and events.
Advantages and Disadvantages of Each Element
of the Promotional Mix
Advantages Disadvantages
Mix Element
•Good for building awareness
•Impersonal - cannot answer all a
•Wide reach
customer's questions
Advertising •Repetition of main brand and
•Not good at getting customers to
product positioning helps build
make a final purchasing decision
customer trust

•Highly interactive •Costly - employing a sales

•Excellent for communicating force has many hidden costs in
Personal Selling complex / detailed product addition to wages
information and features •Not suitable if there are
•Relationships can be built up thousands of important buyers

•Can stimulate quick increases in •If used over the long-term,

customers may get used to the
sales by targeting promotional
Sales Promotion incentives on particular products
effect
•Too much promotion may damage
•Good short term tactical tool the brand image
•Often seen as more "credible" -
since the message seems to be •Risk of losing control - cannot
coming from a third party (e.g.
Public Relations magazine, newspaper)
always control what other
•Cheap way of reaching many people write or say about your
customers
Developing Price Strategies
and Programs
Kotler on Marketing
Sell value, not price.
Nine Price-Quality Strategies
Price Should Align with Value
Setting the Price

Step 1: Selecting the pricing objective

 Survival

 Maximize current profits

 Maximize their market share

Market-penetration pricing
 Best when:

 Market is highly price-sensitive, and a low price

stimulates market growth,

 Production and distribution costs fall within

accumulated production experience, and

 Low price discourages actual and potential

competition
Setting the Price

Step 2: Determining Demand

Price sensitivity
Total Cost of Ownership (TCO)
Setting the Price
Tom Nagle offers this list of factors associated
with lower price sensitivity
 The product is more distinctive
 Buyers are less aware of substitutes
 Buyers cannot easily compare the quality of substitutes
 The expenditure is a smaller part of the buyer’s total income
 The expenditure is small compared to the total cost of the
end product
 Part of the cost is borne by another party
 The product is used in conjunction with assets previously
bought
 The product is assumed to have more quality, prestige, or
exclusiveness
 Buyers cannot store the product
Setting the Price

Estimating Demand Curves

Price Elasticity of Demand
Inelastic

Elastic

Price indifference band

16-163
Setting the Price

Step 3: Estimating Cost

Types of Cost and Levels of Production
Fixedcosts (overhead)
Variable cost

Total cost

Average cost

Accumulated Production
Experience curve (Learning curve)
Setting the Price

Differentiated Marketing Offers

Activity-based cost (ABC)
accounting
Target costing
Step 4: Analyzing Competitors’
Cost, Prices, and Offers

16-165
Setting the Price

Step 5: Selecting a Pricing Method

Markup Pricing
Unit Cost =
variable cost + (fixed cost/unit sales)

Markup price
Markup price=
unit cost/ (1 – desired return on sales)

Target-Return Pricing
Target-return price =
unit cost + (desired return X investment capital)/unit sales
Setting the Price

Break-even volume
Break-even volume = fixed cost / (price – variable cost)
Perceived-Value Pricing
 Perceived value Break-Even Chart for Determining Target-
Return Price and Break-Even Volume
 Price buyers

 Value buyers

 Loyal buyers

 Value-in-use price
Setting the Price
Value Pricing
Everyday low pricing (EDLP)
High-low pricing
Going-Rate Pricing
Auction-Type Pricing
English auctions (ascending bids)
Dutch auctions (descending bids)
Sealed-bid auctions
Group Pricing
Setting the Price
Step 6: Selecting the Final Price
Psychological Pricing
 Reference price
Gain-and-Risk-Sharing Pricing
Influence of the Other Marketing Elements
 Brands with average relative quality but high relative
advertising budgets charged premium prices
 Brands with high relative quality and high relative
advertising budgets obtained the highest prices
 The positive relationship between high advertising budgets
and high prices held most strongly in the later stages of the
product life cycle for market leaders
Setting the Price

 Brands with average relative quality but high relative

advertising budgets charged premium prices
 Brands with high relative quality and high relative
advertising budgets obtained the highest prices
 The positive relationship between high advertising
budgets and high prices held most strongly in the later
stages of the product life cycle for market leaders
Company Pricing Policies
Impact of Price on Other Parties
Adapting the Price
Geographical Pricing (Cash, Countertrade, Barter)
Countertrade

Barter

Compensation deal
Buyback arrangement

Offset

Price Discounts and Allowances

 Price Discounts and Allowances
Cash Discount: A price reduction to buyers who pay bills
promptly. A typical example is “2/10, net 30,”
which means that payment is due within 30
days and that the buyer can deduct 2 percent
by paying the bill within 10 days.

Quantity Discount: A price reduction to those who buy large

volumes. A typical example is “$10 per unit for
less than 100 units; $9 per unit for 100 or more
units.” Quantity discounts must be offered
equally to all customers and must not exceed
the cost savings to the seller. They can be
offered on each order placed or on the number
of units ordered over a given period.
Adapting the Price

Promotional Pricing
Loss-leader pricing
Special-event pricing
Cash rebates
Low-interest financing
Longer payment terms
Warranties and service contracts
Psychological discounting
Adapting the Price

Discriminatory Pricing
Customer segment pricing
Product-form pricing
Image pricing
Channel pricing
Location pricing
Time pricing
Yield pricing
Adapting the Price

Product-mix pricing
Product-Line Pricing
Optional-Feature Pricing
Captive-Product Pricing
Captiveproducts
Two-Part Pricing
By-Product Pricing
Product-Bundling Pricing
Pure bundling
Mixed bundling
 Managing Integrated
Marketing Communications
Kotler on Marketing

Integrated marketing
communications is a way
of looking at the whole
marketing process from
the viewpoint of the
customer.
Marketing Communications Mix

Advertising
Sales Promotion
Public Relations and Publicity
Personal Selling
Direct and Interactive Marketing

19-178
The Communication Process

Common Communication Platforms

Advertising Sales Public Personal Direct

Promotion Relations Selling Marketing
Print and Contests, Press kits Sales Catalogs
broadcast ads games, presentation
sweepstakes,
lotteries
Packaging- Premiums and Speeches Sales Mailings
outer gifts meetings

Packaging Sampling Seminars Incentive Telemarketing

inserts programs

Motion Fairs and Annual reports Samples Electronic

pictures trade shows shopping
Elements in the Communication Process
The Communication Process

Target audience may not receive the

intended message for any of three reasons:
Selective attention
Selective distortion
Selective retention
The Communication Process
Fiske and Hartley have outlined factors
that influence communication:
The greater the influence of the
communication source, the greater the
effect on the recipient
Communication effects are greatest
when they are in line with existing
opinions, beliefs, and dispositions
The Communication Process

Communication can produce the most effective shifts

on unfamiliar, lightly felt, peripheral issues that do not
lie at the core of the recipient’s value system.
Communication is more likely to be effective if the
source is believed to have expertise, high status,
objectivity, or likeability, but particularly if the source
has power and can be identified with.
The social context, group, or reflective group will
mediate the communication and influence whether or
not the communication is accepted.
 Steps in Developing
Effective Communication
Developing Effective Communications

Identify the Target Audience

Image analysis
 Familiarity scale
Never Heard of Know a Know a Fair Know Very
Heard of Only Little Bit Amount Well

 Favorability scale
Very Somewhat Indifferent Somewhat Very
Unfavorable Unfavorable Favorable favorable
Deciding on the Marketing Communications Mix

The Promotional tools

Advertising
 General Qualities:
 Public presentation

 Pervasiveness

 Amplified expressiveness

 Impersonality

Sales Promotion
 Benefits:
 Communication

 Incentive

 Invitation
Deciding on the Marketing Communications Mix
Public Relations and Publicity
Distinctive qualities:
High credibility

Ability to catch buyers off guard

Dramatization

Personal Selling
Distinctive qualities:

Personal confrontation

Cultivation

Response
Deciding on the Marketing Communications Mix

Direct Marketing
Distinctivequalities:
Nonpublic

Customized

Up-to-date

Interactive
Deciding on the Marketing Communications Mix

Factors in setting the Marketing Communications

Mix
Type of Product Market
Advertising’s role in business markets:

Advertising can provide an introduction to the

company and its products

If the product embodies new features,

advertising can explain them

Reminder advertising is more economical than

sales calls
Deciding on the Marketing Communications Mix

Advertisements offering brochures and carrying

the company’s phone number are an effective
way to generate leads for sales representatives.
Sales representatives can use tear sheets of the

company’s ads to legitimize their company and

products.
Advertising can remind customers of how to use

the product and reassure them about their

purchase.
Deciding on the Marketing Communications Mix

Levitt found that:

Corporate advertising that can build up the
company’s reputation will help the sales
representatives
Sales representatives from well-known firms
have an edge, but a highly effective
presentation from a lesser known company’s
rep can overcome that edge
Company reputation helps most when the
product is complex
Deciding on the Marketing Communications Mix
Gary Lilien found that:
 The average industrial company sets its marketing
budget at 7 percent of sales
 Industrial companies spent a higher-than-average
amount on advertising if their products had higher
quality, uniqueness, or purchase frequency, or if
there was customer growth
 Industrial companies set a higher-than-average
marketing budget when their customers were more
dispersed or the customer growth rate was higher
Deciding on the Marketing Communications Mix

Effectively trained consumer sales force can

make four important contributions:
Increased stock position

Enthusiasm building

Missionary selling

Key account management

Buyer-Readiness Stage
Cost-Effectiveness of Different Promotional Tools
Managing the Sales Force
The original and oldest form of direct
marketing is the field sales call.
U.S. firms spend over a trillion dollars
annually on sales forces and sales force
materials— more than they spend on
any other promotional method.
companies are trying to increase the
productivity of the sales force through
better selection, training, supervision,
motivation, and compensation.
The term sales representative covers a broad range of positions.
Six can be distinguished:

1. Deliverer-A salesperson whose major task is the delivery of a

product (water, fuel, oil).
2. Order taker -A salesperson who acts predominantly as an
inside order taker or outside order taker.
3. Missionary-A salesperson who is not expected or permitted
to take an order but whose major task is to build goodwill or to
educate the actual or potential user.
4. Technician - A salesperson with a high level of technical
knowledge.
5. Demand creator -A salesperson who relies on creative
methods for selling tangible products (vacuum cleaners,
cleaning brushes, household products) or intangibles
(insurance, advertising services, or education).
6. Solution vendor - A salesperson whose expertise is in the solving of a
customer's problem, often with a system of the company's products and
services (for example, computer and communications systems).
Sales Force Objectives and Strategy
Specific Tasks Performed by Sales Force
 Prospecting. Searching for prospects, or leads.
 Targeting. Deciding how to allocate their time
among prospects and customers.
 Communicating. Communicating information
about the company's products and services.
 Selling. Approaching, presenting, answering
questions, overcoming objections, and closing
sales.
 Servicing. Providing various services to the
customers—consulting on problems,
rendering technical assistance, arranging
financing, expediting delivery.
 Information gathering. Conducting market
research and doing intelligence work.
 Allocating. Deciding which customers will get
scarce products during product shortages.
Recruiting and Selecting Representatives
One survey revealed that the top 27
percent of the sales force brought in
over 52 percent of the sales.
The average annual turnover rate for
all industries is almost 20 percent.
Sales force turnover leads to lost
sales, costs of finding and training
replacements, and often a strain on
existing salespeople to pick up the
slack
What is the Challenge?
Right Person for the Right Job!!!!
Test is taken interview is taken,
personality tests are done, past
history is checked
Sales Rep Productivity
 How many calls should a company make on a particular
account each year?
 Some research has suggested that today's sales reps are
spending too much time selling to smaller, less profitable
accounts when they should be focusing more of their
efforts on selling to larger, more profitable accounts.
 NORMS FOR PROSPECT CALLS
 25 percent of their time prospecting and to stop
calling on a prospect after three unsuccessful calls
 Using Sales Time Efficiently
 To cut costs, reduce time demands on their outside
sales force, and take advantage of computer and
telecommunications innovations, many companies
have increased the size and responsibilities of their
inside sales force
 Inside salespeople are of three types
 Technical support people
 Sales assistants
 Telemarketers
Motivating Sales Representatives
 Sales managers must be able to convince
salespeople that they can sell more by
working harder or by being trained to work
smarter.

 Sales managers must be able to convince

salespeople that the rewards for better
performance are worth the extra effort.

 marketers reinforce intrinsic and extrinsic

rewards of all types

 One research study that measured the

importance of different rewards found that
the reward with the highest value was pay,
followed by promotion, personal growth, and
sense of accomplishment

 The least-valued rewards were liking and

respect, security, and recognition.
Evaluating Sales Representatives
 SOURCES OF INFORMATION
 Sales reports
 Personal observation
 Salesperson self-reports
 Customer letters and complaints
 Customer surveys, and conversations with other sales
representatives.
 These reports provide raw data from which sales
managers can extract key indicators of sales
performance: (1) average number of sales calls per
salesperson per day, (2) average sales call time per
contact, (3) average revenue per sales call, (4) average
cost per sales call, (5) entertainment cost per sales call,
(6) percentage of orders per hundred sales calls, (7)
number of new customers per period, (8) number of
lost customers per period, and (9) sales force cost as a
percentage of total sales.
Territory: Midland Sales
Representative: John Smith 2006 2007 2008 2009

Net sales product A $251,300 $253,200 $270,000 $263,100

Net sales product B 423,200 439,200 553,900 561,900

Net sales total 674,500 692,400 823,900 825,000

Percent of quota product A 95.6 92 88 84.7

Percent of quota product B 120.4 122.3 134.9 130.8

Gross profits product A $50,260 $50,640 $54,000 $52,620

Gross profits product B 42,320 43,920 55,390 56,190

Gross profits total 92,580 94,560 109,390 108,810

Sales expense $10,200 $11,100 $11,600 $13,200

Sales expense to total sales (%) 1.5 1.6 1.4 1.6

Number of calls 1,675 1,700 1,680 1,660

Cost per call $6.09 $6.53 $6.90 $7.95

Average number of customers 320 24 328 334

Number of new customers 13 14 15 20

Number of lost customers 8 10 11 14

Average sales per customer $2,108 $2,137 $2,512 $2,470

Average gross profit per customer $289 $292 $334 $326

Viral Marketing
Marketing phenomenon that facilitates
and encourages people to pass along a
marketing message.
Viral marketing describes any strategy
that encourages individuals to pass on
a marketing message to others,
creating the potential for exponential
growth in the message's exposure and
influence
It can be delivered by word of mouth or
enhanced by the network effects of the
internet. Viral promotions may take the
form of video clips, interactive flash
games, brandable Software, images, or
text messages
 History
There is debate on the origination and the
popularization of the term viral marketing, though some
of the earliest uses of the current term are attributed to
the Harvard Business School graduate Tim Draper and
faculty member Jeffry Rayport.
Among the first to write about viral marketing on the
Internet was the Media critic Douglas Rushkoff. The
assumption is that if such an advertisement reaches a
"susceptible" user, that user becomes "infected" (i.e.,
accepts the idea) and shares the idea with others
"infecting them," in the viral analogy's terms
 Notable Examples
Popularized in the 1960s and '70s is essentially a form of viral
marketing in which representatives gain income through marketing
products through their circle of influence and give their friends a
chance to market products similarly
The Classic Hotmail.com Example
 The classic example of viral marketing is Hotmail.com, one of the first free
Web-based e-mail services. The strategy is simple:
 Give away free e-mail addresses and services,
 Attach a simple tag at the bottom of every free message sent out: "Get
your private, free email at http://www.hotmail.com" and,
 Then stand back while people e-mail to their own network of friends and
associates,
 Who see the message,
 Sign up for their own free e-mail service, and then
 Propel the message still wider to their own ever-increasing circles of
friends and associates.
 Like tiny waves spreading ever farther from a single pebble dropped into
a pond, a carefully designed viral marketing strategy ripples outward
extremely rapidly.
 Types of Viral Marketing
 Pass-along: A message which encourages the user to send the message to
others. The crudest form of this is chain letters where a message at the
bottom of the e-mail prompts the reader to forward the message
 Incentivized viral: A reward is offered for either passing a message along
or providing someone else's address. This can dramatically increase
referrals. However, this is most effective when the offer requires another
person to take action.
 Undercover: A viral message presented as a cool or unusual page,
activity, or piece of news, without obvious incitements to link or pass
along. In Undercover Marketing, it is not immediately apparent that
anything is being marketed.
 "Edgy Gossip/Buzz marketing" ads or messages that create controversy
by challenging the borders of taste or appropriateness. Discussion of the
resulting controversy can be considered to generate buzz and word of
mouth advertising. Prior to releasing a movie, some Hollywood movie
stars get married, get divorced, or get arrested, or become involved in
some controversy that directs conversational attention to them.
 User-managed database: Users create and manage their own lists of
contacts using a database provided by an online service provider. By
inviting other members to participate in their community, users create a
viral, self-propagating chain of contacts that naturally grows and
encourages others to sign up as well.
 Network Marketing
The simplest explanation of
network marketing is that it
is a method of marketing
that utilizes independent
representatives to reach
potential customers that a
company otherwise would
not reach with traditional
online or offline marketing
methods.
 How did network marketing start?
Network marketing has been around for nearly
fifty years. It started in the US, and the first
major modern network marketing business was
formed in 1959. This company was created by
business partners Rich DeVos and Jay VanAndel,
originally with just one single product and a
new and unique business vision. They regarded
conventional sales jobs as unfair - being paid
only once for the work that they did even when
the company continued to make a profit from
their labors for many years afterwards.
So DeVos and VanAndel broke away
and formed their own company,
returning a few years later with
enough money to buy out their original
employers and incorporate the vitamin
business into their growing
corporation. Their company is now a
multi-billion dollar business operating
in virtually every developed country in
the world. Within a few short years,
many more companies followed in
their footsteps and now network
marketing is responsible for a turnover
of tens of billions of dollars in the US
alone.
 Word-of-mouth communication
Most influential for consumer decision making
 Comes from an independent source
Often based on experience
Can be negative and positive
But, how can marketers act on it?
Until now, it was difficult to ascertain who is talking to who?
 One could not easily reach “opinion leaders”.
 One could act on w.o.m. only on the aggregate using broad
proxies to identify opinion leaders
 Psychographics
Demographics
Etc.
 What has changed?
We have refined data on consumer communities.
Social network data: people designate friends (e.g.
MySpace.com)
Telecom data: people talk to friends, people designate
preferred contacts (e.g. Skype)
We have new technology to analyze the data
Hardware
Software
We can act on the data (viral marketing)
Send messages to key people in the network
Avoid marketing “noise” (blanket SMS promotion)
 What network marketers do?
Find communities in complex networks (Skype,
Myspace, Telecom traffic data)
to target with brands/content
to discriminate w.r.t. price/advertising
 Find “key people” who (i) connect communities, (ii)
hold communities together
to initiate new product/service diffusion
 to ensure best return on direct (viral) marketing
to refine CRM techniques
 SELECTED
ENTIRE GROUPS
FROM THE
NETWORK NETWORK
Members classified in terms of their role
(value) in the communities.
 Advantages

100% data availability

One-time setup cost, low marginal cost
Variety of uses:
Promotion
CRM
Advertising
CASE : East European social network
site

• Problem: How existing members influence

new ones joining the site?
• What was done: Described people’s
adoption behavior as a function of
their personal networks and demographics
• Key insight: Fast adopters are people with
dense networks (not large
networks
 CASE : Middle-Eastern telecom company
(10 million customers)

• Problem: Identify highly Connected/

influential customers to be targeted
by direct marketing for cross-selling
another service
• What was done: Identified the top
10,000 targets
• Insights: Top targets may not be the
ones who have most connections
 Event Marketing
The activity of designing or
developing a themed activity,
occasion, display, or exhibit (such as a
sporting event, music festival, fair, or
concert) to promote a product, cause,
or organization. Also called event
creation.
Event Marketing Planning

Advertising
Advertising
Plan
Plan Event
EventPlanning
Planning and
andPRPR
Concept
Concept Strategy
Strategy
Objectives
Objectives
Strategies
Strategies
Execution
Execution

Evaluation
Evaluationand
and
Measurement
Measurement
 Event Concept

Event
EventConcept
Concept Theme
Theme
and
andDesign
Design Venue
Venue
$$Resources
Resources
Timing
Timing
Rooms&
Rooms &Layout
Layout
Number of and extent of Technical&
Technical &A/V
A/V
decisions depends on size Suppliers
Suppliers
and scope of the event. Accomodations
Accomodations
 Event Objectives
Objectives are essential in order to justify investment.
Some possible objectives include:
• Size of audience reached
• Ability to reach target
• Sponsor recognition levels
• Potential sales
• Economic Impact
Objectives are included in an event proposal along
with organizational details and a timeline.
Event Marketing Strategies
An event is much like a product so the marketing
strategies are similar.
• Define the product (the event)
• Establish price
• Distribution (of tickets)
• Marketing Communications
Marketing Communications

Branding Name, logo, color, and image.

Branding
Event needs a consistent look.

Advertising Message and media strategy to

Advertising
Strategy create interest and reach target
Strategy
effectively.

PR Press releases and conferences in

PRStrategy
Strategy
pre-event stage.
Event Marketing Execution
Delineating all of the details associated with the event.
• Site Selection
• Staging
• Catering and Accommodations
• Staffing
• Operations and Logistics
• Safety and Security
 Following them can ensure a cost effective
implementation of the event marketing.
 If the event is meant to market a certain product, then it is necessary to
ensure that the purchase decision-maker attends the event.

 Make sure you get participant contact information before the event as
well as after. Other value-added benefits that can be expected from the
show organizer include

 Before the event is undertaken, the cost effectiveness of promoting the

product through the event should be questioned by asking yourself
event qualifying questions around the “who" instead of the “how many”

 The giveaways at the event should be relevant to the business being

promoted through the event. And make sure you don't give something
away for free just for the heck of it.

 The location chosen for the event is perhaps the most important aspect.
Make sure you don't purchase a cheap booth at a popular exhibition
because there are strong chances that no one will be visiting you, since
your booth will be tucked away hidden from all eyes
Direct Marketing
Direct marketing is the use of
consumer-direct (CD) channels to
reach and deliver goods and
services to customers without
using marketing middlemen.
These channels include direct
mail, catalogs, telemarketing,
interactive TV, kiosks, Web sites,
and mobile devices.
 Objectives of direct marketing

Direct ordering.
Providing information.
Visit generation.
Trial generation.
The Range of Direct Marketing
Techniques
Direct mail - material distributed via the postal service
to a recipient’s home or business to promote a
product/service.
Direct response advertising - standard broadcast and
print media designed to generate a direct response,
e.g an order or personal visit.
Telemarketing - a direct personal, verbal approach via
some kind of written or visual method.
Mail order - the purchase of products featured in
advertising or selected from a catalogue.
Teleshopping - home based shopping.
Direct-mail marketing has passed through a number of stages:
E "Carpet bombing." Direct mailers gather or buy as many names
as possible and send out a mass mailing. Usually the response rate
is very low.
Database marketing. Direct marketers mine the database to
identify prospects who would have the most interest in an offer.
a Interactive marketing. Direct marketers include a telephone
number and Web address, and offer to print coupons from the
Web site. Recipients can contact the company with questions.
The company uses the interaction as an opportunity to up-sell,
cross-sell, and deepen the relationship.
B Real-time personalized marketing. Direct marketers know
enough about each customer to customize and personalize the
offer and message.
 Applications of telemarketing
Generate leads.
Screen leads before follow up.
Arrange opportunities for representatives.
Direct sales.
Encourage cross / up selling.
Dealer support.
Account servicing.
Market research.
Test marketing.
 Use of Telemarketing

New business and lead generation 28%

Customer care 26%
Customer service 26%
Brand loyalty 14%
Crisis management 6%
Traditional strengths of mail order
 Weaknesses of traditional mail order catalogues

Lack of speed.
Downmarket image.
Lack of targeting.
Agency system
 Catalog Marketing

In catalog marketing, companies may send

full-line merchandise catalogs, specialty
consumer catalogs, and business catalogs,
usually in print form but also sometimes as
CDs, videos, or online.

Catalogs are a huge business—about 71

percent of Americans shop from home using
catalogs by phone, mail, and Internet.
 Other Media for Direct-Response Marketing

TELEVISION : is used by direct marketers in several ways:

Direct-response advertising -Some companies prepare 30-

and 60-minute infomercials that attempt to combine the
sell of commercials with the draw of educational
information and entertainment. Infomercials can be seen as
a cross between a sales call and a television ad and cost
roughly $250,000 to $500,000 to make.

At-home shopping channels - Some television channels are

dedicated to selling goods and services.

Videotext and interactive TV- The consumer's TV set is

linked with a seller's catalog by cable or telephone lines.
Consumers can place orders via a special keyboard device
connected to the system.
 KIOSK MARKETING
A kiosk is a small building or structure that might
house a selling or information unit. The name
describes newsstands, refreshment stands, and
free-standing carts whose vendors sell watches,
costume jewelry, and other items. The carts
appear in bus and rail stations and along aisles in
a mall. The term also covers computer-linked
vending machines and "customer-order-placing
machines" in stores, airports, and other locations.
 Interactive Marketing
Interactive Marketing refers to the evolving trend in
marketing whereby marketing has moved from a
transaction-based effort to a conversation.
The Internet provides marketers and consumers with
opportunities for much greater interaction and
individualization. Companies in the past would send
standard media—magazines, newsletters, ads—to
everyone. Today these companies can send individualized
content and consumers themselves can further
individualize the content. Today companies can interact
and dialogue with much larger groups than ever in the
past
 The Benefits of Interactive Marketing
It is highly accountable and its effects can be easily
traced.

The Web offers the advantage of "contextual

placements." Marketers can buy ads from sites that
are related to their offerings, as well as place
advertising based on contextual keywords from
online search outfits like Google.

Web can reach people when they have actually

started the buying process
 Designing an Attractive Web Site
A key challenge is designing a site that is attractive on first viewing
and interesting enough to encourage repeat visits.
Rayport and Jaworski have proposed that effective Web sites
feature seven design elements that they call the 7Cs
 Context. Layout and design.
 Content. Text, pictures, sound, and video the site contains.
 Community. How the site enables user-to-user communication.
 Customization. Site's ability to tailor itself to different users or to
allow users to personalize the site.
 E Communication. How the site enables site-to-user, user-to-site, or
two-way communication.
 Connection. Degree that the site is linked to other sites.
 Commerce. Site's capabilities to enable commercial transactions.
 Green Marketing
According to the American
Marketing Association “green
marketing is the marketing of
products that are presumed to be
environmentally safe”.
Thus green marketing incorporates a
broad range of activities, including
product modification, changes to the
production process, packaging
changes, as well as modifying
advertising
 Evolution of Green Marketing
The green marketing has evolved over a period of time.
According to Peattie (2001), the evolution of green marketing
has three phases.

•First phase as Ecologic : and during this period all marketing

activities were concerned to help
environment problems and provide remedies for environmental
problems.
•Second phase was "Environmental" green marketing and the
focus shifted on clean technology that involved designing of
innovative new products, which take care of pollution and
waste issues.
•Third phase was "Sustainable" green marketing. It came into
prominence in the late 1990s and early 2000.
 Why Green Marketing?

As resources are limited and human wants are unlimited, it

is important for the marketers to utilize the resources
efficiently without waste as well as to achieve the
organization's objective. So green marketing is inevitable.

There is growing interest among the consumers all over the

world regarding protection of environment. Worldwide
evidence indicates people are concerned about the
environment and are changing their behavior. As a result of
this, green marketing has emerged
 Benefits of Green Marketing

Companies that develop new and improved products

and services with environment inputs in mind give
themselves access to new markets, increase their profit
sustainability, and enjoy a competitive advantage over
the companies which are not concerned for the
environment.
 Green Marketing Mix
The 4 P's of green marketing are that of a conventional marketing but the
challenge before marketers is to use 4 P's in an innovative manner.
Product
The ecological objectives in planning products are to reduce resource consumption and
pollution and to increase conservation of scarce resources (Keller man, 1978).
Price
Price is a critical and important factor of green marketing mix. Most consumers will only
be prepared to pay additional value if there is a perception of extra product value. This
value may be improved performance, function, design, visual appeal, or taste. Green
marketing should take all these facts into consideration while charging a premium price.
Promotion
There are three types of green advertising: -
Ads that address a relationship between a product/service and the biophysical
environment
Those that promote a green lifestyle by highlighting a product or service
Ads that present a corporate image of environmental responsibility
Place
The choice of where and when to make a product available will have significant impact
on the customers. Very few customers will go out of their way to buy green products.
Channel Management
The Role of Marketing Channels in Marketing Strategy

Channels provide the means by which the firm

moves the goods and services it produces to ultimate
users
Facilitate the exchange process by cutting the
number of contacts necessary
Adjust for discrepancies in the market’s
assortment of goods and services via sorting
Standardize exchange transactions
Facilitate searches by both buyers and sellers
Types of Marketing Channel
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 Channel Strategy Decisions
Selection of a Marketing Channel
Factors which impact the selection of a
marketing channel include:
 Market factors
 Customer Preference
 Geography
 Competitors
 Product factors
 Life cycle
 Product Complexity
 Product Size and Weight
 Producer/Manufacturer factor
 Company Objective
 Company Resources
 Desire Of control
 Determining Distribution Intensity
Intensive distribution:
distribution channel policy in which
a manufacturer of a convenience product
attempts to saturate the market
Selective distribution:
distribution channel policy in which
a firm chooses only a limited number of retailers
to handle its product line
Exclusive distribution:
distribution channel policy in which
a firm grants exclusive rights to a single
wholesaler or retailer to sell its products in a
particular geographic area
 CONFLICT
Causes Of Channel Conflict

 Goal Incompatibility
 Unclear Roles and Rights
 Differences In perception
 Intermediaries dependency on manufacturer

Types Of Conflict

 Vertical Channel Conflict e.g. General Motors vs. Dealers

 Horizontal Channel Conflict e.g. Pizza Inn franchisee
complaint on sub standard products used.
 Multichannel conflict ( same product sold by different
channels )

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 Achieving Channel Cooperation
Channel Cooperation, achieved
via effective cooperation among
channel members, is the desired
antidote to channel conflict
It is Best achieved when all
channel members regard
themselves as components of the
same organization
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 Vertical Marketing Systems
Vertical marketing system (VMS): planned channel system
designed to improve distribution efficiency and cost
effectiveness by integrating various functions throughout the
distribution chain
Administered marketing system:system VMS that achieves
channel coordination when a dominant channel member
exercises its power e.g. Kodak, Gillette
Corporate marketing system:
system a VMS in which a single
owner operates at each stage in its marketing channel
Contractual marketing system:
system VMS that coordinates
channel activities through formal agreements among
channel members like:
 Wholesaler-Sponsored Voluntary Chains
 Retail Cooperatives ( Grocery Store, Hardware)
 Franchises
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 Making Channel Management Decisions

Channel management decisions can greatly affect the

success or failure of a business, because the partners that
you decide to work with and the effort you put into
managing them will determine how your business comes
across to the public. There are certain trade offs when
you choose to utilize channel sales to market and
distribute your product. Of course, channel sales are
usually cost-effective, which is why businesses rely on
sales partners to sell their product. The loss of complete
control over how your product is marketed is the
drawback, but with a good partner management
program you can make sure your company is represented
the way you want it to be.
 Training and Motivating Channel Members

Coercive Power

Reward Power

Legitimate power

Expert power

Referent power
 Marketing Logistics
 Planning, implementing, and controlling the physical
flows of materials and final goods from points of origin to
points of use.
•Nature of Market Logistics
• Supply chain - manage activities - sales forecasting
• Planning
• Inventory management
• Packaging
• Warehousing
• Shipping
• Transportation
• Warehousing
Costs of Market Logistics
• Major - 30-40% of total costs
• Breakout - transportation 37%
• Inventory 22%
• Warehousing 21%
• Other 20%
Market Logistics Objective
 Right good at right place at right time for least cost
M =T + FW + VW + S
where M= total market logistics cost
T= total freight cost
FW= total fixed warehouse cost
VW= total variable warehouse cost
S= total costs of lost sales
 Market Logistics Decisions
• Order processing
•order to remittance cycle - elapsed time between an
order placement and payment
• Warehousing
•Storage
•distribution
• automated
• Inventory
• service increases - inventory costs increases
• re-order point
• how much: order processing costs vs. inventory carrying
costs
just in time production methods
•Transportation
• Medium
• Speed
• Frequency
• Dependability
• Capability
• Availability
• Traceability
• Cost
 Selecting the Pricing Objective
Step:1 Selecting the Pricing Objectives
•Survival
•Maximum Current Profit
•Maximum Market Share
•Maximum Market Skimming
•Product Quality Leadership

Step 2: Determining Demand

•Price Sensitivity
•Estimating Demand Curves
• Surveys
• Price Experiments
• Statistical Analysis
•Price Elasticity of Demand
Step 3- Estimating costs
Types of Costs
Variable Costs and Fixed Costs
Accumulated Production
Target Costing
Step 4- Analyzing Competitor's Cost’s, Prices and Offers
Step5- Selecting a Pricing Method
Markup Pricing MP=Unit Cost/(1-desired return on Sales)
Target Return Pricing TRP=Unit Cost+ {Desired Return x Invested Capital/Unit Sales}
Perceived Value Pricing
Value Pricing
Going Rate Pricing
Auction Type Pricing
Step-6 Selecting the Final Pricing

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