Peter Drucker: The aim of marketing is to
know & understand the customer so well
that the product or service fits him & sells
itself. All that should be needed is to make
the product or the services available.
WHAT IS MARKETED?
COMPANY ORIENTATION TOWARDS THE
The production concept
The product concept
The selling concept
The marketing concept(customer
orientation, satisfaction, integrated
mgt., realization all organizational goals).
Social marketing concept.
The holistic marketing concept(every thing
HOW BUSINESS AND MARKETING ARE
CHANGING THE WORLD?
The collection of non-marketing influences that
have an impact on a marketing manager's success
in forming and keeping favorable relationships with
desirable customers. The overall market
environment for a business is made up of the
macro environment that consists of broader societal
influences and the microenvironment which
includes company related influences.
of marketing environment
Trends in the environment
Right fit between business and envt
The micro environment refers to the forces that are
close to the company and affect its ability to serve
its customers. It includes the company itself, its
suppliers, marketing intermediaries, customer
markets and publics.
Marketing managers must watch supply availability
and other trends dealing with suppliers to ensure
that product will be delivered to customers in the
time frame required in order to maintain a strong
Marketing intermediaries refers to
resellers, physical distribution firms, marketing
services agencies, and financial intermediaries .
These are the people that help the company
promote, sell, and distribute its products to final
Resellers are those that hold and sell the
Physical distribution firms are places such as
warehouses that store and transport the company’s
product from its origin to its destination.
Marketing services agencies are companies that
offer services such as conducting marketing
research, advertising, and consulting.
Financial intermediaries are institutions such as
banks, credit companies and insurance companies.
Another aspect of microenvironment is the
customers. There are different types of customer
markets including consumer markets, business
markets, government markets, international
markets, and reseller markets.
Competitors are also a factor in the
microenvironment and include companies with
similar offerings for goods and services
The final aspect of the microenvironment is
publics, which is any group that has an interest in or
impact on the organization’s ability to meet its goals.
THE MARKETING ENVT., CONSISTS OF THE
The macro environment refers to all forces that are
part of the larger society and affect the
microenvironment. It includes concepts such as
demography, economy, natural forces, technology,
politics, and culture.
Factors affecting organization in Macro environment
are known as PESTEL, that is: Political, Economical,
Social, Technological, Environmental and Legal.
The Demographic Environment
:Demography refers to studying human populations
in terms of
size, density, location, age, gender, race, and
This is a very important factor to study for
marketers and helps to divide the population
into market segments and target markets.
Ex. classifying groups of people according to the
year they were born.
World wide population growth
Population age mix
Literacy level of population
Economic Environment: This refers to
the purchasing power of potential customers and
the ways in which people spend their money.
General economic condition
Disposable income and purchasing power
Rate of growth of economy
Credit availability and interest rate
Foreign exchange reserve
Behaviour of capital market
Social – Cultural environment: consists basic values and
beliefs of a group of people
Culture: is the combined result of factors like
religion, language, education and upbringing.
Social class: is determined by income, occupation, location of
Each class has its own standards with respect to lifestyle
behaviors etc., they are known as class values or class
Natural environment: This includes the natural resources
that a company uses as inputs that affects their marketing
Natural resources: raw material is one major part these
resources and firm are concerned with its availability, they
need to know whether there will be a shortage in any of the
critical raw materials, they also need to know the trends
governing their cost.
Ecology: issues like environmental pollution, protection of wild
life are the factors concerned with ecology.
Climate: this is the concern of firms whose product demand
depends on climate factors.
Technological environment: is perhaps one of the
fastest changing factors in the macroenvironment.
it affects final product processes operation ….
A firm has to assess the relative merits and cost
effectiveness of alternate technology.
govt’s approach in respect of technology: regulation of
government restricts the operation of a firm.
Technology selection: firms have to scan the technology
environment and select technologies that will be
appropriate for the firm.
Accelerating pace of change:
Unlimited opportunities for innovation
Varying R&D budgets
Increased regulation of technological chance
Political- legal Environment: includes
all laws, government agenicies, and groups that
influence or limit other organizations and individuals
within a society.
legal environment depends on:
Protection of society
Regulation on products, prices and distribution
Control on trade practices
Protect national firms against fore
Increase in business legislation
Growth of special interest group
BUYERS BEHAVIOUR & MARKETING SEGMENTATION
marketers must fully understand both the theory
& reality of consumer behaviour. A consumer’s
buying behaviour is influenced by cultural, social
& personal factors & they are a part of the buyer
as an individual.
(1) Cultural Factors :Each culture consist of various
subcultures that provide more specific
identification. It includes
nationalities, religions, social groups &
Social Factors :Consumer’s behaviour is
influenced by social factors such as reference
groups, family, social roles & status.
Reference Groups : A person’s reference groups
consist of all the groups that have a direct or
indirect influence on his attitude. They can be family
friends, neighbours, coworker, religious, professional & trade union
groups.Reference groups expose an individual to
new behaviours & lifestyles & influence attitude &
Family :From parents a person acquires an
orientation toward religion politics & a sense of
personal ambition, self-worth & love.
Role & Status : The person’s position in each
group can be defined in terms of role & status.
Personal Factors : The personal factors
include the buyer’s age & stage in the life
cycle, occupation & economic
position, personality & self concept lifestyle &
BUYING DECISION PROCESS.
The consumer passes through 5 stages : problem
recognition information search, evaluation of
alternatives; purchase decision, & post purchase
(1) Problem Recognition : this is when a customer feels
he need something.
Information Search : Through gathering
information, the consumer learns about competing
brands & other features.
(3) Evaluation of Alternatives : first the consumer is
trying to satisfy a need, second the consumer is
looking for certain benefits & third the consumer views
each product as a bundle of attributes to satisfy this
(4) Purchasing decission:
Purchasing decision: only if the buyer is convinced
about the correctness of purchasing decision, then
5. Post Purchase Behavior : The purchase leads to a
specific post purchase behavior, usually it
creates some restlessness in the mind of the
individual. The marketer should monitor the
Post purchase satisfaction
Post purchase action
Post purchase uses
To compete more effectively, many companies go for target
marketing which can establish & communicate the distinctive
benefits of the company’s market offering. This process is
called as market segmentation.
the aggregate of consumers of a given product and
consumers vary in their characteristics buying behaviour. It is
feasible to disaggregate the consumers into segments in such a
manner that in needs characteristics & buying behaviour, the
members vary significantly among segments.
Market segmentation is a marketing strategy that involves
dividing a broad target market into subsets of consumers who
have common needs, and then designing and implementing
strategies to target their needs and desires using media
channels and other ways that best allow to reach them.
CRITERIA FOR SEGMENTING
An ideal market segment meets all of the following
It is possible to measure.
It must be large enough to earn profit.
It must be stable enough that it does not vanish after
It is possible to reach potential customers via the
organization's promotion and distribution channel.
It is internally homogeneous (potential customers in
the same segment prefer the same product qualities).
It is externally heterogeneous, that is, potential
customers from different segments have different
It responds consistently to a given market stimulus.
It can be reached by market intervention in a costeffective manner.
BENEFITS OF SEGMENTATION
Facilitates Proper Choice of Target Market :
marketer can not target all areas, this will enable
him to know his specific market.
Facilitates controlling of the Market: marketer
will know the need of consumer in a better way
because the market is segmented to small parts.
Makes the Marketing Effort More Efficient &
Economic: the resources of any firm are
limited & no firm can normally afford to attack &
tap the entire market.
Benefits the customer as well: products will be
available as per their choices.
BENEFITS OF SEGMENTATION
Helps spots (consider) the less satisfied
segments & succeed by satisfying such
Helps achieve the specialization required in
product, distribution, promotion & pricing for
matching the customer group & develop
DISADVANTAGES OF MARKET SEGMENTATION
Puts all eggs in one basket.
Small shift in the population or consumer tastes can
greatly effect the firm.
May have trouble expanding into new markets
Up-market: Appealing to or designed for high-income
BASIS FOR MARKET SEGMENTATION
Geographic Segmentation: dividing the market into
different geographical units such as
nations, regions, countries, cites or neighborhood.
Demographic Segmentation: In demographic
segmentation, the market is divided into groups on the
basis of variables such as age, family size, family life
cycle, gender, income occupation, education
religion, race generation, nationality & social class.
Age & Life Cycle Stage: Consumer wants & abilities change
Gender: Men & women have different behavioral
Income: low priced product middle income group.
Generation: Each generation is deeply influenced by the
time in which it grows- the music movies, politics.
Social Class : has a strong influence of preferences on
products like car….
BASIS FOR MARKET SEGMENTATION
Psychographic Segmentation: The strict norms,
that consumers follow with respect to good
habits or dress codes are representative.
Behavioural Segmentation: different customer
groups expect different benefits from the same
product & accordingly they will be different in their
motives in owning it. Degree of use can be
another base, they can be segmented on the
basis of whether they are light, medium or heavy
users of the product or whether they are
enthusiastic or indifferent or negative towards the
LEVELS OF MARKET SEGMENTATION
Segment Marketing: A market segment consist of
a group of customers who share a similar set of
needs & wants.
Niche Marketing : A niche is a narrowly defined
customer group seeking a distinctive mix of
benefits. Marketers usually identify niches by
dividing a segment into sub segments.
Local Marketing : Target marketing is leading to
marketing programs tailored to the needs & wants
of local customers groups.
Customization : The ultimate level of
segmentations leads to one to one marketing.
MANAGING THE PRODUCT
Product Life Cycle( PLC):A product passes
through distinct stages during its life & is called
product life cycle.
Because most companies understand the different product life
cycle stages, and that the products they sell all have a limited
lifespan, the majority of them will invest heavily in new
product development in order to make sure that their
businesses continue to grow.
(a) Introduction Stage: The product is in
introductory stage. At this stage, there may not be
a ready market for the product. Sales are low. On
the other hand, the cost of things like research and
development, consumer testing, and the marketing
needed to launch the product can be very
high, especially if it’s a competitive sector.
One of the crucial decisions to be taken in this
stage is the pricing strategy to be adopted
either market skimming(high price) or market
Growth Stage : During the market growth stage,
demand for the product increases & size of
market grows. The sales & profits also go up.
New competitors may enter the market. The
marketer has to stay ahead of his competitor &
has to reconsider his pricing strategy. He follows
competition oriented pricing, because the total
market is being shared among many firms.
Marketing & distribution efficiency becomes
decisive factor at this state.
Maturity Stage: : In the maturity stage, the
demand tends to reach a saturation point &
there is enough supply from competitive sources.
Price competition becomes intense & exploits the
Long term & short term marketing plans are
implemented to profitably prolong the maturity
Deals & make special offers to new market
segments so that his sales volume do not
Decline Stage : In the decline stage, sales begin
due to new & functionally advanced products,
becoming available in the market demand
Because of less sales profit decreases.
But some firms at this stage may try to link up the
sales of these products with some other
premium products they have developed & thus try
to stretch the life of the decline product.
BENEFITS OF PLC
PLC concept helps & is used as a tool in
formulating& implementing marketing strategy.
• It facilitates pre planning the product launch.
• Facilitates prolonging the profitable phase.
• Facilitates investment decisions on products.
• Facilitates choice of appropriate entry strategy.
• Facilitates choice of the right time to exit.
• Provides useful clues(tips) for managing
SUMMERY CHART OF PLC
Rapidly rising sale
High cost per
Average cost per
Low cost per
Low cost per
Create product Maximize market
awareness and share
Reduce to take
Sales promotion heavy
NEW PRODUCT DEVELOPMENT(NPD)
The various stages in NPD are :(1) Generating New Product Ideas : New
product ideas may come from
customers, dealers, in company sources including
the market research group & external research
new product development (NPD) is the complete
process of bringing a new product to market.
To create the next product in a company’s product
line a design team goes through product development
(2) Idea Screening: In this stage, various new
products ideas are put under severe screening by
(3) Concept Testing: What is tested at this stage
is the product concept itself, whether the
prospective customers understand the product ideas,
whether they are receptive forwards the ideas;
whether they actually need a product.
(4) Business / Market Analysis: whether from the
financial & marketing point of view, the project is
worth proceeding with. . Investment analysis &
profitability analysis of the project under different
assumptions are made at this stage.
(5) Estimating the Demand for New Product:
(a) Substitution method (b) End use method.
In substitution method, the demand for the existing
product is forecasted using standard forecasting
method. Based on that, an idea of the demand for
the new product is gained.
In, end use method, products that have an
altogether new end use do come to the marketer
once in a while.
(6) Actual Development of the Product: in this
stage the actual product is developed, as it may be in
(7) Market Test: Now, the new product has to be tried
out in selected market segments. Market test is
essentially a risk control tool. It is experimental
marketing at minimum cost & risk.
(8) Test Marketing : In test marketing, the new
product, with the support of the chosen marketing mix
is actually launched & marketed in few selected
cities / towns / territories.
(9) Commercialization : At this stage, the company
takes the decision to go in for large scale
manufacturing & marketing of the product. At this
stage the company fully commits itself to
commercialize the new product with the required
investment in manufacturing & marketing.
Processes (such as cleaning, drying, preserving)
and materials (such as glass, metal, paper or
paperboard, plastic) employed to contain, handle,
protect, and/or transport an article. Role of
packaging is broadening and may include functions
such as to attract attention, assist in promotion,
provide machine identification (barcodes, etc.),
impart essential or additional information, and help
Packaging contains, protects, preserves,
transports, informs, and sells.
MAIN DECISION AREAS IN PACKAGING
(a) Package Materials : Changing trends - from
wood to paper & plastics
(b) Package Aesthetics(beauty) : For enhancing
the sales appeal of the package, more & more
attention is now being given to package.
(c) Package Size & Convenience :
1. The cold drink cans
2. Reusable containers
3. Refill packs.
• Function of Label could be:
1. Identify product. 2.Describe product. 3.Grade product.
• Current consumer law requires label to convey:
Grade (if applicable).
Percentage label (% of important ingredients).
“The label may be a simple tag attached to the
product or an elaborately designed graphic”.
The silver foil in dairy milk chocolate is the Package, while the
written material cover is the Labeling.
• Labeling is a subset of packaging.
• Labels are mandatory for package products.
• Labels could range from a single tag attached to a product, to
an elaborately designed graphic that is part of packaging.
APPRAISAL OF PRODUCT LINE
A growing business has to undertake a constant
appraisal of its existing product lines. No product
runs for all time to come and no product line is
perfect eternally. Changes in the business
environment, in customer tastes and
preferences, as also the extent of competition
building up, all exercise some pressure on the
product policy of a firm.
Product line appraisal is a dynamic task.
What is product-mix ?• Set of all product offered
for sale by a company.• It consist of various product
line.• Any company’s product mix has four
dimension : 1. Width 2. Length 3. Depth 4.
Length: Total number of items in the
product mix of the company
width or breadth the number of product
lines that a company offers.
Depth: the different varieties of product in
the product line or Assortment of size, color
and models offered in each item of a product
Consistency: relationship of various
product line either in their end use, production
requirement, distribution channel or other way.
Down-market stretch—introduce a lower-priced
Up-market stretch—enter the high end of the
Two-way stretch—product lines in both
stretching—occurs when a firm
lengthens its product line beyond the
LINE MODERNIZATION, FEATURING, AND
rapidly changing product
markets.(improvements to encourage
customer migration to higher valued, higher
Featuring—used to boost demand for
Pruning(cutting)—identifying weak items
through sales and cost analysis. opposite of
PRODUCT MIX AND PRODUCT LINES
Definitions: the commercial value that derives from consumer
perception of the brand name of a particular product or service,
rather than from the product or service itself.
“The tangible and intangible value that a brand provides
positively or negatively to an organization, its products, its
services, and its bottom-line derived from consumer knowledge,
perceptions, and experiences with the brand.” Susan Gunelius
This definition hits the three main points that define brand equity:
Tangible and intangible value: This can be tangible value
such as revenues and price premiums or intangible value such
as awareness and goodwill.
Positive or negative effects: The organization, products,
services, and bottom line can benefit or suffer from brand
Consumer catalysts: Brands are built by consumers, not
companies. Therefore, brand equity is built by consumers too.
Means brand power in market place
the unique set of brand assets & liabilities that
is linked to a brand.
Some brands enjoy a high degree of brands
preference i.e. they are selected over others.
Few brands command brand loyalty i.e. if the
brand is not available at one store they would go to
another store for it, without buying a substitute
Products can be differentiated on the basis of a number
of different product or service dimensions such as
product features, performance, conformance
durability, reliability, style & design.
There are two conditions for differentiation to exceed :(i) differentiation should be perceptible
(ii) Should be rooted in competitive advantage
Definition: Development or incorporation of aspects (such
as benefits, price, quality, styling, service, etc.) that A
product's intended customers perceive to be different and
desirable. Advertising and promotion of a product is based
on its differentiating characteristics.
These products have a distinct identity
The manufacturer has some control over the price
It need not sell for the same price as the
Keys to success are product characteristics
Entry very difficult
To carry out the responsibilities, marketing
managers follow a marketing process & the
product managers come up with a marketing
plan for individual product lines, brands, channels
or customer groups. Each product level must
develop a marketing plan for achieving its goals.
A marketing plan is a written document that
summarizes what the marketer has learned about
the market place & indicates how the firm plans to
reach its marketing objectives.
CONTENTS OF MARKETING PLANS
(b) Situation Analysis : is relevant background data on
sales, costs the market, competitors & various forces
in the macro environment. All this information is used to
carry out SWOT Analysis.
(a) Executive Summary & Table of Contents : The
marketing plan should open with a brief summary of the
main goals & recommendations. A table of contents
outlines the rest of the plan & all the supporting &
(c) Marketing Strategy : Here, the product manager
defines the mission & marketing & financial objectives.
The manager also defines those groups & needs that the
market offerings are intended to satisfy.
(e) Implementation Control: outlines the controls
for monitoring & adjusting implementation of the plan.
(d) Financial Projections: include a sales
forecast, an expense forecast & a break even
analysis on the revenue side, the projections
show the forecasted sales volume by month &
product category. On the expense side, the
projections show the expected costs of marketing.
CHAPTER NO. 5
Pricing is the process of determining what a
company will receive in exchange for its product.
Traditionally, price has been the major determinant
of a buyer’s choice & is the only element in the
marketing mix that generates revenue.
mistakes in pricing seriously affects the firm, its
profits, growth & future.
FACTORS INFLUENCING PRICING
There are internal as well as external factors that affect
pricing : Internal factors:
(i) Corporate & marketing objectives of the firm.
(iii) The characteristic of the product
(iv) Price elasticity of demand of the product.
(v) Stage of product in its life cycle.
(ii) The image sought by the firm through pricing
(vi) Use pattern & turnaround rate of the product.
(vii) Cost of manufacturing & marketing
(viii) Extent of differentiation practiced
(ix) Other elements of the marketing mix & their interaction with
(x) Composition of the product line of the firm.
EXTERNAL FACTORS :
(i) Market characteristics (relative to
demand, customer & competition)
(ii) Buyer behavior in respect of the product
(iii) Bargaining power of major customers
(iv) Bargaining power of major suppliers
(v) Competitor’s pricing policy
(vi) Government controls / regulation on pricing
(vii) Other relevant legal aspects
(viii) Societal consideration.
(i) Profit maximization in the short term.
(ii) Profit optimization in the long term.
(iii) A minimum return on investment
(iv) A minimum return on sales turnover.
(v) Achieving a particular sales volume.
(vi) Achieving a particular market share.
(vii) Deeper penetration of the market.
(viii) Entering new markets.
(ix) Target project on the entire product line.
(x) Keeping competition out, or keeping it under check.
(xi) Keeping similarity with competition.
(xii) Fast turn around & early cash recovery.
(xiii) Stabilizing price & margins in the market.
(xiv) Providing the commodities at prices affordable by weaker
(xv) Providing the commodities at prices that will stimulate
METHODS OF PRICING OR PRICING STRATEGIES
Cost Based Pricing :
• Mark Up Pricing: cost plus margin
• Absorption Cost Pricing: rests on the estimated
unit cost of the product. Each indirect cost will be
treated separately and allocated accordingly.
• Target Rate of Return Pricing: a specific
percentage is targeted in advance like 5% or is a
rational approach to arrive at the mark up
• Marginal Cost Pricing: setting the price of a product
to equal the extra cost of producing an extra unit of
output. It aims at maximizing the contribution
towards fixed costs.
(2) Demand Based Pricing :
• What the Traffic can Bear’ Pricing: the maximum
price that the customers are willing to pay
• Skimming Pricing: high price & high profits in the
early stage of marketing the product.
• Penetration Pricing: seeks to achieve greater
market penetration through relatively low price.
(3) Competition Oriented Pricing:
• Premium Pricing: above the level adopted by
• Discount Pricing : lower than competitors
• Parity Pricing: equal with competitors
(4) Value Pricing: Value pricing rests on the idea
that the purpose of pricing is not to recover costs,
but to capture the value of the product perceived
by the customer.
the following situation are possible with the cost
value price chain.
• Value > Price > Costs
• Price > Value > Costs
• Price > Costs > Value
• Price = Value > Costs
(5) Product Line Pricing: When a firm markets
a variety of products grouped into suitable
product lines, a special possibility in pricing
arises. As the product in a given product line
are related to each other, sales of one
influence that of the others. They also have
interrelated costs of manufacturing & distribution.
It can fix the prices of the different product in such
a manner that the product line as a whole is
priced optimally, resulting in optimal sales of all
the products put together & optimal total profits
from the line.
(6) Tender Pricing: Business firms are often
required to fix the prices of their products on a tender
basis.( small ads on newspaper)
(7) Affordability Based Pricing: Idea here is to set
prices in such a way that all sections of the population
are in a position to buy & consume the products to
the required extent.
(8) Differentiated pricing: different prices for the
same product in different zones/ areas of the
STEPS INVOLVED IN PRICING PROCEDURE
(i) Identify the target customer segments & draw up the
(ii) Decide the market position & price image that the firm
desires for the brand.
(iii) Determine the extent of price elasticity of demand of
the product & the extent of price sensitivity of target customer
(iv) Take into account the life cycle stage of the product.
Analyze competitions prices.
(v) Analyze, other environmental factors.
(vi) Choose the pricing methods to be adopted taking all the
above factors into account.
(vii) Select the final price.
(viii) Periodically review the pricing method as well as