Globalizatione.g. Computer: software in U.S, body in China, assembly in Taiwan, sold worldovere.g. Trade Unions: EU – 15 countries, common currency, common standards ®ulationse.g. Retail: Wal-Mart – affordability with convenience, made retail organisede.g. ICT: videoconferencing, downloads, social media, online bankinge.g. Global Warming: packaging standards, recycle waste, energy conservation,green building
ResultIncreased Disposable Income & Consumptione.g. rise in per capita income, GDP/GNP, higher diminishing marginal utilityImproved Standard of Livinge.g. access, reach, declined mortality rate, gadgets, literacyGrowth in Niche Markets (and products)e.g. facetone powder, deo without gas, 3-D cinema, fair & handsome, pinknewspaper, CNG, Thai foodVarying Consumer Groups (differentiation)e.g. ice cream flavours, grunge music genre, nanotechnology, kollywood
Summarizing What are the major forces driving the New Economy?How are business and marketing practices changing as a result of the New Economy?
WHAT IS MARKETING? DefinitionMarketing is a social & managerial process by which individuals & groups obtainwhat they need & want through creating, offering and exchanging products ofvalue with others. ***Marketing is the process of planning and executing the conception, pricing,promotion, and distribution of ideas, goods, and services to create exchange thatsatisfy individual and organisational goals.
Components of DefinitionNeeds, Wants & DemandNeed: can’t be created; it pre-exists (human biology)Want: influenced desire (social status)Demand: desire backed by money and willingness to spend (Audi 6 is a greatsocial status but Toyota Corolla will do) MARKETERS DO NOT CREATE NEEDS; NEED PRE-EXIST MARKETERS.Marketers do not create need for Social Status but influence demand by making the product appropriate, attractive, available to target segment.
Components of definitionA product can be : Idea, Good and ServiceIdea: take-away mealsGoods: food in the restaurantService: 30 minutes delivery or free, seating SELLERS WHO CONCENTRATE THEIR THINKING ON PHYSICAL PRODUCT INSTEAD OF CUSTOMER’S NEED ARE SAID TO BE SUFFERING FROM MARKETING MYOPIA. Product is a ‘solution to a need’ for e.g. car for transportation, television for entertainment and phone for communication.
Components of definitionMarketing Myopia defines product versus market orientation e.g.:
Components of definitionHow do consumers choose products to satisfy needs?Based on Value, Cost & SatisfactionValue is consumer’s estimate of the product’s overall capacity to satisfy a givenneed.e.g. travel by public bus, auto rickshaw, bi-cycle, car, bike etc. based on lowestpossible cost of acquisition, ownership and use.
Components of definitionExchangeIs a ‘value creating’ process.Barter or monetary transaction.Marketing is the study of transactions (transaction behaviour). It seeks to elicit abehavioural response from consumers/distributors. MARKETING CONSISTS OF THE ACTIONS UNDERTAKEN TO ELICIT DESIRED RESPONSES FROM A TARGET AUDIENCE.
Components of definitionMarketing does not end with transaction of product (Exchange stage), it goesfurther towards augmenting marketing network through:Relationship (Marketing)A practice of building long term satisfying relationship with networks –customers, suppliers, distributors – for business.Competition is not between companies but rather whole networks, with the prize going to the company that has built the better network.
Components of definitionMarketA meeting place of buyers and sellers to transact.Potential customers sharing a particular need and willing to engage in exchangeto satisfy their need. MARKETING MEANS WORKING WITH MARKETS TO ACTUALISE EXCHNAGES FOR THE PURPOSE OF SATISFYING HUMAN NEEDS.
Components of definitionMarketers & ProspectMarketer seeks prospects for exchange. A prospect is someone who is willing andable to engage in this exchange for value.A marketer can be both – a seller and a buyer.e.g. In case of buying a house, several buyers will try to market themselves to thesellers.e.g. In seeking admission to college/job, several applicants define why theircandidature should be considered against the job/college seat. These two are examples of ‘Reciprocal Marketing’
Marketing managementMarketing Management is the process of formulating ideal marketing-mix whose goal is to produce satisfaction for the parties involved. Marketing-mix is combination of Product, Price Promotion and Placement (called as 4Ps). It’s task is to influence (and not create) the level, timing and composition of demand for the company’s products in a way that will help the organisation achieve its objective.
Summary Marketers do not create needs.; need pre-exist marketers. Marketers influence demand by making the product appropriate, attractive, affordable & easily available to target consumers. Marketers job is to sell the benefits or services built into a physical product rather the product itself (or else they suffer ‘marketing myopia’). Marketing emerges when people decide to satisfy needs and wants through an exchange. A marketer seeks prospects for exchange; and a prospect is someone who is willing and able to engage in exchange. A market consists of all the potential customers sharing a particular need or want who might be willing and able to satisfy that need or want. In nutshell, marketing stimulates demand for company’s products.
Marketing philosophiesThere are 5 concepts under which organisations can choose to conduct their marketing activities:The Production Concept:Concentrate on high production efficiency (low price) and wide distribution (availability) D > S like in most developing countries Product’s high cost is decreased to expand the market.
Marketing PhilosophiesThe Product Concept Focus on quality, performance & innovative features. Improves them over the time. Often design products with little or no customer input. It rejects the idea of bringing marketing at the beginning of product development. It asks “how can public know what kind of car they want until they see what is available”! It leads to the kind of ‘marketing myopia’.
Marketing philosophiesThe Sales Concept Calls for aggressive selling and promotion effort for unsought goods – like encyclopedia, insurance, water purifier, fire extinguisher. Aim is to sell what they make rather than make what the market wants. But Marketing is different from Selling/Sales. THE AIM OF MARKETNG IS TO KNOW AND UNDERSTAND THE CUSTOMER SO WELL THAT THE PRODUCT FITS HIM WELL AND SELLS ITSELF.
MARKETING PHILOSOPHIESThe Marketing Concept: Integrating activities toward determining & satisfying the needs and wants of target market better than competitors. It rest on 4 pillars: target market, customer needs, integrated marketing & profitability Target market: e.g. ‘Nothing sucks like an Electrolux’ (Vacuum cleaner) Types of needs: stated, real (stapler or tape), unstated, delight (complimentary map with travel guide), secret (Facebook) Responsive Vs. Creative Marketing:Responsive marketer finds a stated need and fills it; creative marketer discovers and produces solutions that customer did not ask for but to which they enthusiastically respond. Integrated Marketing: e.g. Airlines: better food, cleaner cabins, better trained cabin crew – combining all can deliver customer satisfaction.
Marketing PhilosophiesSelling Vs. Marketing: Selling focuses on the needs of the seller; marketing on needs of buyers. Selling is preoccupied with seller’s need to convert product into cash; marketing with the idea of satisfying the needs.
Marketing philosophiesThe Societal Marketing Concept: Calls upon marketers to build social and ethical considerations into their marketing practices. Preserve or enhance consumer’s satisfaction and society’s well-being. Environment deterioration (like Global Warming) – ecological or green marketing E.g. Aquafina claims to save water through recycling; Aircel’s Save the Tiger campaign;. Hunger, Poverty, Malnutrition, Illiteracy – humanistic marketing E.g. P&Gs ‘Shikha’ model – a portion from the sale of each P&G product goes into education for deprived, NACO on AIDS awareness.
SummarizingCan you identify a company that has over the time shifted from one marketing concept to other? *** Can you name a category of products for which your negative feelings have softened? What precipitated this change?
Steps in marketing process Concept Development Selling Analysis of Market OpportunityImplementation Market Strategy Design Market Testing
Marketing Process Concept DevelopmentRequires environment scanning:- Economic conditions: e.g. demand for high-utility low-cost products shoots up during economic meltdown- Competition: e.g. real-estate developers- Technology: symbian or android- Social-cultural factors: car with brand name ‘nova’ means ‘doesn’t go’ in Spanish- Political-legal factors: excise duty increased from 10 to 12%- Demographic factors: rice consumption is higher in coastal/hilly areas than in plains; literacy, employment, income etc. (size and growth rate of population)- Ecological factors: e.g. mining – Vedanta; energy – Suzlon
Marketing process Analysis of Marketing OpportunityRequires understanding of:- marketing environment: e.g. market for bi-cycle will exist or not (researching needs & trends, competition)- consumer behaviour: e.g. what sort of people will buy bi-cycle? (buying behaviour and buying decision process)- segmentation: e.g. mountain bikes- targeting: e.g. customers who love hiking on cycle trails in mountainsFirefox company is one example who markets mountain bikes (cycles) to hikers. The company analyzed and found a (niche) market with hikers.
Marketing process Market Strategy DesignStrategies related to 4 Ps or Marketing-Mix that is based on:d) Differentiation & b) Positioning- Differentiation: is the act of designing a set of meaningful differences to distinguish the company’s offering from competitors’ offerings.- Volume Industry: few but large competitive advantages – like construction.- Stalemated Industry: small and few competitive advantages – like steel industry. Hard to differentiate the product or decrease manufacturing costs.- Fragmented Industry: many opportunities to differentiate but each opportunity is small – like Restaurant.- Specialized Industry: many opportunities and each gives high payoff.
Marketing process Differentiation variables Product Services Personnel Channel Image features ordering ease competence coverage symbolperformance delivery courtesy expertise media durability installation credibility performance events reliability customer reliability trainingrepairability maintenance responsiveness style communication design
Marketing process PositioningBrand can sometimes successfully differentiate on attributes that appear to createa meaningful product difference but are actually irrelevant to creating thatbenefit.Positioning is the act of designing the company’s offering and image so that theyoccupy a meaningful and distinct competitive position in the target customer’sminds.The end result of positioning is the successful creation of a market focused valueproposition (30 minute pizza delivery), a simple clear statement of why the targetmarket should buy the product (taste, low price, hot and fresh, quality pizza).
Marketing process PositioningA company selects the way in which it will distinguish itself from competitors based on the following criteria: Important: product delivers highly valued benefit (e.g. Aquaguard: cleanse the impurities of water and cuts down on your health expenses). Distinctive: not being offered by other like Aquguard claims 3 ways process - UV rays cleanse the impurities, reverse osmosis and a candle filter. Superior: in comparison to other – Aquaguard – a TATA product. Communicable Preemptive: difference is unique that it cannot be easily copied. Affordable: for TG Profitable: to company
Marketing process Marketing Mix: is set of marketing tool that a firm uses to pursue its marketing objectives in a target market. McCarthy popularized a 4 factor classification of these tools called as 4Ps. 4Ps represent the sellers’ view of the marketing tools available for influencing buyers. It means each marketing tool is designed to deliver a customer benefit.Product – variety, quality, design, features, brand name, packaging, sizes, services,warranties, returnsPrice – list price, discount, allowances, payment period, credit termsPromotion – sales promotion, advertising, direct marketing, PRPlacement – channels, coverage, assortments, locations, inventory, transport
Marketing process Marketing mixRobert Lauterborn suggested that sellers’ 4Ps correspond to the customers 4Cs. 4 Ps 4 Cs product customer needs & wants price cost to the customer placement convenience promotion communication
Marketing processMarket Testing: ascertain if the proposed market is favorable to firm’s product usually done through pilot tests/ sampling using market research methods like forecasting, trend projection etc. Market testing uncovers the gaps between firm’s understanding of target market and behaviour of the market towards firm’s product.Implementation: putting plan to action or execution after feedback from market testing.Selling: product sales to generate revenue for the firm. Give further inputs in product development – better, faster, cheaper.
Marketing Process SummaryMarketing Process consists of analyzing marketing opportunities, developing marketing strategies, planning marketing programs, and managing the marketing effort.It involves:- ascertaining the generic needs- developing and offering a product to fulfill those needs- devising strategies to support the product being offered- focus on public interest (primary) and profits (secondary)
Marketing segmentation WHY?A firm can’t serve all customers in the market because:4) customers are too numerous and diverse in their buying requirements &5) resources are limited.Therefore, firm needs to identify the market segment that it can serve most effectively.
Market segmentation• Identify and profile distinct groups of buyers who might require separate products or marketing-mix.• Because buyers differ in their wants, purchasing power, geographical locations, buying attitudes and buying habits.• A market segment consists of a large identifiable group within a market.
Level of Market segmentation 5 LEVELS of MARKET SEGEMENTATION• Mass Marketing – seller engages in the mass production, mass distribution, and mass promotion of one product for all buyers.• Segment Marketing – recognizes that buyers differ in their wants, purchasing power, locations, buying habits. For e.g. car buyers seeking luxury (Rolls Royce); some seeking safety, (BMW) some just the basic transport (Alto), some seeking high performance (Audi) and some seeking tough looks (Fortuner).• Niche Marketing – represent a more narrowly defined group, a small group whose needs are not being well-served. It is one of sub-segments of a segment. It is characterized by distinctive set of traits who may seek a
Level of Market segmentation 5 LEVELS of MARKET SEGEMENTATION4) Local Marketing – refers to marketing programs being tailored to theneeds and wants of local customer groups (Regional-basis).5) Individual Marketing – means customized marketing or one-to-onemarketing i.e. individually designed products to meet each customer’srequirements.
Patterns of segmentation 3 PATTERNS of SEGMENTATION• Homogeneous – all consumers have roughly the same preference. One brand. E.g. Ice Cream with high sweet-high cream.• Diffused – consumers vary greatly in their preferences. Several brands. E.g. Ice Cream with less sweet-less cream; high sweet-less cream; less sweet-high cream; and high sweet-high cream is already there.• Clustered – cluster of several brands competing for market share.
Bases for Segmentation 5 BASES for SEGMENTATION• Geographic Segmentation: dividing the market into different geographical units such as nations, states, regions, cities, density, climate, topology etc. E.g. coffee – sold nationally but flavoured regionally or for e.g. coffee in more popular in South India while North Indians prefer tea.• Demographic Segmentation: age, life cycle stage (infant, adult, old), gender, income, social class (status).• Psychographic Segmentation: 2 different groups – i) Lifestyle: cosmetics, beverages, furniture etc. ii) Personality: independent, impulsive, masculine etc.
Bases for Segmentation4. Behavioural Segmentation: the variables are:i) Occasions: marriage, injury, illness, retirement, death (e.g. McDonald’s Breakfast,Valentines’ Day)ii) Benefits (e.g. toothpaste’s benefit – medicinal, taste, cosmetic, economical)iii) User Status (non-users, extra-users, first time users, habitual/regular users)iv) Usage Rate (light, medium, heavy users)v) Loyalty (hardcore loyals, split loyals, shifting loyals, switchers)vi) Buyer-readiness stage (aware, unaware, informed, interested, desiring, intending tobuy).
Bases for segmentation5. Multi-attribute Segmentation (Geo-clustering)The inhabitants in a cluster tend to lead similar lives, drive similar cars, havesimilar jobs, read similar magazines.Normally based on Education and affluence, Family lifecycle, urbanization, raceand ethnicity, mobility.E.g. emerging, upscale, ethnic, big city mosaic, buy imported cars, read Hellomagazine, eat high-end cornflakes, play tennis, wear designer clothes, annualincome 1 Cr.
Market segmentation Requirements for Effective SegmentationTo be useful market segment must be:4) Measurable – the size, purchasing power and characteristics of the segments can be measured.5) Substantial – the segments are large & profitable enough to serve. A segment should be the largest possible homogeneous group.6) Accessible – the segments can be effectively reached & served.7) Differentiable – the segments are distinguishable & respond differently to different marketing-mix.8) Actionable – effective programs can be formulated for attracting & serving the segments.
targeting Targeting involves 2 steps:1) Evaluating The Market Segments – The firm must look at 2 factors:• Overall attractiveness of the segment (such as size, growth, profitability, share) and,• Company’s objectives & resources (i.e. whether investing in the segment makes sense given the firm’s objectives & resources.)
targeting2) Selecting The Market Segment – Which one out of the 5 segments?• Single-Segment Concentration: company selects a single segment. For e.g. small size car segment.Its features are: firm gains a strong knowledge of the segment’s needs & achieves a strong market position in the segment. Firm enjoys ‘scale of economics’ & achieve specialization in production, distribution and promotion. But risk is high.
targetingii) Selective Specialization: multi-segment coverage to diversify the risk of onesegment. Even if one segment becomes unattractive, the firm can continue to earn moneyin other segments. M1 M2 M3 P1 P2 P3
Targetingiii) Product Specialization: single (same) product being sold to severalsegments. For e.g. a microscope seller that sells microscope to university labs,govt. labs, and commercial labs. Risk here is the obsoletion of the technologywith superior one. M1 M2 M3 P1 P2 P3
targetingiv) Market Specialization: the firm concentrates on serving many needs of aparticular customer group. For e.g. the same microscope seller, selling burners,chemical flasks, funnels to the university labs. M1 M2 M3 P1 P2 P3
Targetingv) Full market coverage: the firm attempts to serve all customer groups with allthe products that they might need. Only a large firm can undertake a full marketcoverage strategy. E.g. Coca Cola (soft drink market); General Motors (Allvehicle market), IBM (servers). M1 M2 M3 P1 P2 P3
Consumer behaviourStudies how individuals, groups & organisations select buy, use & dispose goods, services, ideas or experiences to satisfy their needs & wants.7 O’s Framework to identify consumer behaviour: Occupants: who constitutes the market? Objects: what does the market buy? Objectives: why does the market buy? Organisations: who participates in the buying? Operations: how does the market buy? Occasions: when does the market buy? Outlets: where does the market buy?
Consumer behaviour Model of Consumer BehaviourMarketing Marketing Buyer’s Buyer’s Buyer’s Decision Stimuli Environment Characteristics Decision Process Product choiceProduct Economic Cultural Problem recognition Brand choicePrice Technological Social Information search Dealer choicePromotion Political Personal Evaluation Purchase timingPlacement Cultural Psychological Decision Purchase amount Post purchase behaviour
Consumer behaviour Factors Influencing Consumer Behaviour• Cultural Factors: includes a) Culture (set of values, perceptions), b) Sub- culture (culture within culture), c) Social class (caste system wherein members of different caste share similar values, interests and behaviour, reflects in income, occupation, education, area of residence).• Social Factors: includes a) Reference groups (groups that directly or indirectly influence the person’s attitudes or behaviours), b) Family and c) Roles & Statuses.
Consumer behaviour3. Personal Factors: a) Age & lifecycle stage (infant stage, old age), b) Occupation, c)Economic circumstances – disposable income, savings, assets, debts, borrowingpower, attitude toward spending & savings, d) Lifestyle – people coming fromsame subculture, social class, and occupation may lead quite different lifestylesreflected in their activities, interests, opinions & e) Personality & Self image –personality is person’s distinguishing psychological characteristics or traits likeself confidence, defensive, adaptable, social, independent etc. Self image is how aperson sees himself, different from others.
Consumer behaviour4. Psychological Factors: needs that arise from psychological states of tensions are called psychogenic needs.• Motivation – presses to drive the person to act. 3 theories: Freud’s theory – real psychological forces shaping people’s behaviour are largely unconscious. Thus, it would require in-depth interviews. E.g. adopting vegetarianism due sense of guilt for animal killing or due to health benefits. Maslow’s theory – moving from psychological need to self actualization needs thus moving from lower need to higher need. Herzberg’s two-factor theory – which distinguishes between dissatisfiers and satisfiers. E.g. computer without warranty is not likely to be purchased (it would be a dissatisfier) yet its not the warranty for which computer is being purchased. It for the satisfiers the computer is being purchased like ease of use, enhance office productivity etc.
Consumer behaviourb) Perception – is the process by which we interpret information to createmeaningful picture.Types of Perception:Selective Attention – people are likely to remember stimuli that relate to a currentneed (thirsty person will notice water bottle) , or that are large enough incomparison to be noticed (accident).Selective Distortion – people’s tendency to twist information into personal meaningsand interpret information in a way that will support their preconceptions. (youdiscount the negatives about a brand if you like it for e.g. IBM ThinkPad).Selective Retention – you only tend to remember what good points you have heard.
Consumer behaviourc) Learning: involves change in a an individual’s behaviour arising fromexperience.d) Beliefs & Attitudes: Through learning, people acquire beliefs and attitudes.Belief is a descriptive thought that a person holds about something. For e.g.Made in China is considered inferior. Japan, contrary, is known for high-techinnovations. France is fashion-market of the world; German cars are best in theworld, Corruption in India has grown multifold etc.Attitude is person’s favourable or unfavourable evaluations, emotional feelings,and action tendencies toward some idea or object. E.g. God is great, IBM makesbest servers, Sachin is world’s best batsman…People have attitudes towardalmost everything – religion, politics, clothes, sports, music, food…
Demand forecasting Company needs to measure and forecast the size, growth, and profit potential of marketing opportunity. Marketing prepares ‘Sales Forecasts’ – based on demand estimates. Demand can be measured for different product levels (industry sales, company sales, product-line sales, product item sales), different space levels (World, Country, State, City) and different time levels (short term, medium, and long). Market Demand: for a product is the total volume that would be brought by a defined customer group in a defined geographical area in a defined time period in a defined marketing environment under a defined marketing program. Company Demand: is the company’s estimated share of market demand based on its marketing efforts.
Demand forecasting• Market forecast shows expected market demand (not the maximum demand).• Market Potential is the limit approached by market demand.• For e.g. market potential for automobiles in a period of recession versus a period of prosperity.• Estimating Current Demand is based on 3 things:• TOTAL MARKET POTENTIAL• AREA MARKET POTENTIAL – 2 types: Market Buildup & Multiple-factor Index• INDUSTRY SALES & MARKET SHARES
Demand forecastingTotal Market Potential: (e.g. Samsung laptops market potential in Delhi) Q = nqp where, Q = total market potential n = number of buyers (1,00,000,00 buyers) q = quantity purchased by an average buyer (1 laptop per yr) p = price of an average unit (Rs. 30,000) Q = 1,00,000,00 x 1 x 30,000 = 3000, 00000000 (3000 Cr.)
Demand forecasting Area Market Potential: estimate market potential based on geography. Two methods are available: Market Buildup Method & Multiple Factor Index Method. Market Buildup Method: used primarily by business marketers. It calls for identifying all the potential buyers in each market and estimating their potential purchases. For e.g. a raw aluminum supplier might identify aluminum based manufacturing companies, and compiles a directory of such companies. Then, it identifies amount of raw aluminum each company might purchase based on number of headcounts (say per 1000 employees in that industry) or based on percentage of the amount spent (say per Rs. 1 million of Sales in that industry).
Demand forecastingMultiple-factor Index Method: used primarily by consumer marketers to estimatearea market potential.E.g. a drug manufacturer wants to find out area potential for its new drug in NewDelhi.He can create a multiple factor index made up of total population in Delhi, disposableincome, retail sales. Each factor is assigned some weight based on its perceivedimportance to the company. For e.g. disposable income is most important thereforecould be assigned 5% (or 0.5) as weight. Similarly, 0.3 to retail sales in India and 0.2 topopulation.Now, suppose Delhi has 2% of India’s disposable personal income, 1.96% of India’sretail sales and 2.28% of India’s population – then the buying power index of Delhiwould be: 0.5 (2) + 0.3 (1.96) + (0.2) (2.28) = 2.04
Demand forecastingIndustry Sales & Market Shares:Deals with identifying its competitors and estimating their sales by collecting datafrom trade associations like TRAI for Telecom, ASSOCHAM (chambers ofcommerce), FICCI (industry reports), RBI for Banks etc. IMRB, A.C Neilsonetc. independent marker agencies also conduct specialized surveys to report salesand market shares.Marketers can compare industry growth with respect to its own. For e.g. industryis growing at 10% while company’s growth has declined for this respective periodwhere overall market attractiveness and growth was high would mean company islosing its strength.
END OF UNIT I Contents are copyright work of authors and hence protected. The contents inthis presentation have been used from Philip Kotlers Marketing Management : Planning, Analysis, Implementation & Control. These notes are my personal and based on my understanding and interpretation of the book. These notes are purely for non-commercial use.