Marketing Management

MARKETING MANAGEMENT
Dr. DIVYA VIJAY

CONTENTS
UNIT I Page No. 1 - 42
Fundamentals of Marketing- Introduction-------------------------------------------------- 1
Evolution of Marketing----------------------------------------------------------------------- 2
Approaches to the Study of Marketing----------------------------------------------------- 3
Definitions of Marketing --------------------------------------------------------------------- 6
Core Concepts of Marketing----------------------------------------------------------------- 7
Market- Marketing and Marketer------------------------------------------------------------ 10
Importance of Marketing--------------------------------------------------------------------- 11
Nature of Marketing -------------------------------------------------------------------------- 12
Marketing Management---------------------------------------------------------------------- 14
Concepts of Marketing------------------------------------------------------------------------ 14
Functions of Marketing----------------------------------------------------------------------- 20
Marketing Environment---------------------------------------------------------------------- 25
Marketing Interface with other Functional Areas----------------------------------------- 31
Marketing Mix --------------------------------------------------------------------------------- 35
UNIT II Page No. 43- 87
Segmentation --------------------------------------------------------------------------------- 43
Requirements for Markets Segmentation ------------------------------------------------- 44
Benefits of Segmentation ------------------------------------------------------------------- 45
Aggregation and Segmentation------------------------------------------------------------- 45
Basis for Segmenting Markets ------------------------------------------------------------- 46
Markets on the basis of Segmentation----------------------------------------------------- 50
Target Marketing ---------------------------------------------------------------------------- 51
Evaluating the Market Segments --------------------------------------------------------- 53
Selecting the Market Segments------------------------------------------------------------ 55
Positioning------------------------------------------------------------------------------------ 56
Consumer Behaviour ----------------------------------------------------------------------- 58
Factors Influencing Consumer Behaviour ----------------------------------------------- 59
Buying Decision Process ------------------------------------------------------------------- 73
Buying Roles--------------------------------------------------------------------------------- 76
Types of Decision Processes--------------------------------------------------------------- 77
Industrial Buyer Behaviour---------------------------------------------------------------- 79
Types of Organizational Markets--------------------------------------------------------- 79
Participants in the Industrial Buying Process------------------------------------------- 82
Industrial Buying Situations -------------------------------------------------------------- 84
Industrial Buyer Decision Making Process --------------------------------------------- 85
UNIT III Page No. 88 - 135
Product -------------------------------------------------------------------------------------- 88
Product Classification ---------------------------------------------------------------------- 89

Product Hierarchy -------------------------------------------------------------------------- 94
Product Levels ---------------------------------------------------------------------------- 95
Product Mix ------------------------------------------------------------------------------- 96
New Product Development -------------------------------------------------------------- 101
Need for New Product Development--------------------------------------------------- 102
New Product Development Process----------------------------------------------------- 102
Product Modification Decision---------------------------------------------------------- 112
Product Elimination Decisions ---------------------------------------------------------- 113
Product Failure ---------------------------------------------------------------------------- 113
Types of Product Failure ----------------------------------------------------------------- 114
Product Life Cycle ------------------------------------------------------------------------ 115
Branding ------------------------------------------------------------------------------------ 119
Brand Elements ---------------------------------------------------------------------------- 120
Branding Decision ------------------------------------------------------------------------- 120
Types of Brands --------------------------------------------------------------------------- 121
Selection of Brand Name ---------------------------------------------------------------- 122
Brand Sponsor Decision ----------------------------------------------------------------- 123
Brand Name Strategies ------------------------------------------------------------------- 123
Brand Image ------------------------------------------------------------------------------- 125
Brand Identify ----------------------------------------------------------------------------- 126
Brand Personality ------------------------------------------------------------------------- 126
Brand Positioning ------------------------------------------------------------------------- 127
Brand Equity ------------------------------------------------------------------------------ 128
Multi-Brand Decision -------------------------------------------------------------------- 128
Packaging ---------------------------------------------------------------------------------- 129
Labeling ------------------------------------------------------------------------------------ 133
UNIT IV Page No. 136 - 204
Pricing -------------------------------------------------------------------------------------- 136
Pricing Objectives ------------------------------------------------------------------------ 139
Pricing Methods -------------------------------------------------------------------------- 142
Quantity Discounts ---------------------------------------------------------------------- 146
Channels of Distribution ---------------------------------------------------------------- 148
Channel Functions ----------------------------------------------------------------------- 149
Major Channels of Distributions ------------------------------------------------------- 151
Middlemen -------------------------------------------------------------------------------- 152
Retailer ------------------------------------------------------------------------------------ 153
Channel Choice --------------------------------------------------------------------------- 154
Channel Design Decisions -------------------------------------------------------------- 157
Channel Management Decisions ------------------------------------------------------- 159
Physical Distribution and Inventory Management ----------------------------------- 160
Major Logistics Functions --------------------------------------------------------------- 163
Integrated Logistics Management ------------------------------------------------------ 165
Sales Forecasting -------------------------------------------------------------------------- 165

Forecasting Techniques ------------------------------------------------------------------ 168
Sales Promotion -------------------------------------------------------------------------- 171
Need for Sales Promotion --------------------------------------------------------------- 171
Methods of Sales Promotion ----------------------------------------------------------- 172
Evaluation of Sales Promotion --------------------------------------------------------- 178
Personal Selling -------------------------------------------------------------------------- 179
Personal Selling Process ---------------------------------------------------------------- 181
Qualities of an Effective Salesperson ------------------------------------------------- 186
Designing Sales Force Strategy and Structure ---------------------------------------- 188
Recruitment and Selection -------------------------------------------------------------- 190
Training ------------------------------------------------------------------------------------ 196
Compensation ---------------------------------------------------------------------------- 198
Evaluation of Performance of Sales Force -------------------------------------------- 200
UNIT V Page No. 205 - 249
Advertising ------------------------------------------------------------------------------- 205
Benefits of Advertising ----------------------------------------------------------------- 206
Advertising Classification -------------------------------------------------------------- 209
Publicity ---------------------------------------------------------------------------------- 214
Public Relations ------------------------------------------------------------------------- 214
Effectiveness of Public Relation ------------------------------------------------------- 216
Sale of Goods Act ----------------------------------------------------------------------- 216
Consumer Protection Act -------------------------------------------------------------- 226
Recent Trends in Marketing ----------------------------------------------------------- 237
Consumerism ----------------------------------------------------------------------------- 237
Green Marketing ------------------------------------------------------------------------ 239
De-marketing ----------------------------------------------------------------------------- 244
Viral Marketing -------------------------------------------------------------------------- 246
Guerrilla Marketing --------------------------------------------------------------------- 247
Marketing aimed at mobile phones --------------------------------------------------- 248

UNIT I
FUNDAMENTALS OF MARKETING
INTRODUCTION
Marketing is indeed an ancient art; it has been practiced in one form or the other.
Today, it has become the most vital function in the world of business. Marketing is the
business function that identifies unfulfilled needs and wants, define and measures their
magnitude, determines which target market the organization can best serve, decides on
appropriate products, services and programmes to serve these markets, and calls upon
everyone in the organization to think and serve the customer. Marketing is the force that
harnesses a nation's industrial capacity to meet the society's material wants. It uplifts the
standard of living of people in society.
Marketing must not be seen narrowly as the task of finding clever ways to sell the
company's products. Many people confuse marketing with some of its sub functions, such as
advertising and selling. Authentic marketing is not the art of selling what you make but
knowing what to make. It is the art of identifying and understanding customer needs and
creating solutions that deliver satisfaction to the customers, profit to the producers, and
benefits for the stakeholders. Market leadership is gained by creating customer satisfaction
through product innovation, product quality, and customer service. If these are absent, no
amount of advertising, sales promotion, or salesmanship can compensate.
EVOLUTION OF MARKETING
In a lot of ways, Marketing is as old as civilization itself. From Ancient Greece to our
modern days, culture has based its trading and selling upon communication in order to move
products faster than the man next to him. Mass production coupled with advancements in
transportation and technology meant that businessmen needed a better strategy when it came
to the movement of goods. There have been major stages in the history of marketing, which
are:
1. The Trade Era: Production consisted in handmade goods that were limited and
generally traded through exploration.
2. The Production Orientation Era: Enter the industrial age. Since goods were scarce,
businesses focused mainly in manufacturing. As long as someone was producing,
someone else would want to buy it. This orientation rose to popularity due to

shortages in the market, and it creating the foundation of “Supply creates its own
demand."
3. The Sales Orientation Era: After the Industrial Revolution, competition grew and
focus turned to selling. Marketing, branding and sales became an important pillar as
outputs surpassed demand, and companies competed for customers.
4. The Marketing Orientation Era: From the second half of the 20th century onward,
the saturation of markets led companies to give marketers the opportunity to perform
on a more strategic level. Through a profound knowledge on the customer, company
would produce its distribution channels and pricing strategy.
5. The Relationship Marketing Era: The focus of companies shifts towards building
customer loyalty and developing relationships with clients.
6. The Social Marketing Era: Concentrates on social interaction and a real-time
connection with clients. Businesses are connected to current and potential customers
24/7 and engagement is a critical success factor.
APPROACHES TO THE STUDY OF MARKETING
There are different approaches to the study of marketing. These approaches have
immensely contributed to the evolution of the modern approach and the concept of
marketing. To facilitate the study, these approaches may be broadly classified as follows:
i. Commodity approach
ii. Functional approach
iii. Institutional approach
iv. Managerial approach
v. Systems approach
i. Commodity Approach
The first approach is the commodity approach under which a specific commodity is
selected and then its marketing methods and environments are studied in the course of its
movement from producer to consumer. In this approach, the specific commodity selected for
the study and includes the sources and conditions of supply, nature and extent of demand, the
distribution channels used, promotional methods adopted etc.
ii. Functional Approach
The second approach is the functional approach under which the study concentrates
on the specialized functions or services performed by the marketers and the problems faced
by them in performing those functions. Such marketing functions include buying, selling,

storage, standardizing, transport, finance, risk-bearing, market information etc. This approach
certainly enables one to gain detailed knowledge on various functions of marketing.
iii. Institutional Approach
The third approach is the institutional approach under which the main interest centres
around the institutions or agencies that perform marketing functions. Such agencies include
wholesalers, retailers, mercantile agents and facilitating institutions like transport
undertakings, banks, insurance companies etc. This approach helps one to find out the
operating methods adopted by these institutions and the various problems faced by them and
to know how they work together in fulfilling their objectives.
iv. Managerial Approach
In the managerial approach, the focus of marketing study is on the decision-making
process involved in the performance of marketing functions at the level of a firm. The study
encompasses the different underlying concepts, decision influencing factors; alternative
strategies – their relative importance, strengths and weaknesses, ad techniques and methods
of problem-solving. This approach entails the study of marketing at the micro-level of a
business firm – of the managerial functions of analysis, planning, implementation,
coordination and control in relation to the marketing functions or creating, stimulating,
facilitating and valuing transactions.
v. Systems Approach
Modern marketing is complex, vast and sophisticated and it influences the entire
economy and standard of living of people. Hence marketing experts have developed one
more approach namely ‘System approach’. Under this approach, marketing itself is
considered as a sub-system of economic, legal and competitive marketing system. The
marketing system operates in an environment of both controllable and uncontrollable forces
of the organisation. The controllable forces include all aspects of products, price, physical
distribution and promotion. The uncontrollable forces include economic, sociological,
psychological and political forces. The organisation has to develop a suitable marketing
programme by taking into consideration both these controllable and uncontrollable forces to
meet the changing demands of the society. The systems approach, in fact, examines this
aspect and also integrates commodity, functional institutional and managerial approaches.
Further, this approach emphasise the importance of the use of ‘market information’ in
marketing programmes.

DEFINITIONS OF MARKETING
There are varying perceptions and viewpoints on the meaning and content of
marketing. Some important definitions are:
 Marketing is the process that seeks to influence voluntary exchange transactions
between a customer and a marketer. William G. Zikmund and Michael d.Amico
 Marketing is the process of discovering and translating consumer needs and wants
into products and services, creating demand for these products and services and then
in turn expanding this demand. H.L. Hansen.
 Marketing is the business process by which products are matched with markets and
through which transfer of ownership are affected. Edward W. Cundiff
 Marketing consists of the performance of business activities that direct the flow of
goods and services from producers or suppliers to consumers or end-users.
American Marketing Association
 Marketing is a societal process by which individuals and groups obtain what they
need and want through creating, offering and freely exchanging products and services
of value with others. Philip Kotler
 Marketing is the performance of activities that seek to accomplish an organization’s
objectives by anticipating customer or client needs and directing the flow of need
satisfying goods and services from producer to customer or client.
William D. Perreault and E. Jerome McCarthy
CORE CONCEPTS OF MARKETING
Marketing can be further understood by defining several of its core concepts.
Need , Want
& Demand
Product or
offering
Value &
Satisfaction
Exchange &
Transaction
Marketing &
Marketing
Management

NEEDS, WANTS AND DEMANDS
A human need is a state of felt deprivation of some basic satisfaction. People require
foods, clothing, shelter, safety, belonging, esteem etc. these needs exist in the very nature of
human beings.
Human wants are desires for specific satisfiers of these needs. For example, cloth is a
needs but Raymonds suiting may be want. While people’s needs are few, their wants are
many.
Demands are wants for specific products that are backed up by an ability and
willingness to buy them. Wants become demands when backed up by purchasing power.
PRODUCTS
People satisfy their needs and wants with products. A product is any offering that can
satisfy a need or want. The word product brings to mind a physical object, such as T.V., Car,
and Camera etc.
VALUE AND SATISFACTION
Value is the consumer’s estimate of the product’s overall capacity to satisfy his or her
needs. Consumers choose among the products, a particular product that give them maximum
value and satisfaction. Value is the consumer’s estimate of the product’s capacity to satisfy
their requirements. Value is what customer gets and what he gives. Customer gets benefits
and assumes costs. Benefits include functional and emotional benefits. Costs include
monetary costs, time costs, energy costs and psychic cost.
Benefits (functional and emotional benefits)
Value = ---------------------------------------------
Costs (include monetary costs, time costs,
energy costs and psychic cost)
Value of customer offering can be increased by:
 Raise benefits
 Reduce costs
 Raise benefits AND reduce costs
 Raise benefits by MORE THAN the raise in costs
 Lower benefits by LESS THAN the decrease in costs

EXCHANGE AND TRANSACTIONS
Exchange is the act of obtaining a desired product from someone by offering
something in return. For exchange potential to exist five conditions must be satisfied:
 At least two parties
 Each party has something that might be of some value to the other party.
 Each party is capable of communication and delivery
 Each party is free to accept or reject offer
 Each party believes that it is appropriate or desirable to deal with the other party.
Exchange is value-creating process as it leaves both the parties normally better off.
Exchange is a process rather than an event.
A transaction is a trade of values between two or more parties.
Monetary transaction: Paying money in exchange of goods. Barter transaction: Goods or
services for other goods or services.
Dimensions of a transaction: At least two things of value, agreed upon conditions, a time of
agreement, place of agreement. Transaction differs from transfer. In a transfer A gives goods
to B but does not receive anything tangible in return. Example: Gifts, charities, subsidies etc.
MARKET
The term market originates from the Latin word Marcatus which means “a place where
business is conducted”. A market consist of all the existing and potential consumers sharing a
particular need or want who might be willing and able to engage in exchange to satisfy that
need or want. According to Perreault and McCarthy, market is defined as a group of potential
customers with similar needs or wants who are willing to exchange something of value with
sellers offering various goods and/or services to satisfy those needs or wants. The term
market stood for the place where buyers and sellers gathered to exchange their goods.
Economists use the term market to refer to a collection of buyers and sellers who transact
over a particular product or product class.
MARKETING AND MARKETER
The concept of markets brings the full circle to the concept of marketing. Marketing
means human activities taking place in relation to markets. Marketing means working with
markets to actualize potential exchanges for the purpose of satisfying human needs and wants. If
one party is more actively seeking an exchange than the other party, the first party a marketer and

the second party a prospect. A marketer is someone seeking a resource from someone else and
willing to offer something of value in exchange. The marketer is seeking a response from the
other party, either to sell something or to buy something. Marketer can be a seller or a buyer.
Marketing is a societal process by which individuals and groups obtain what they
need and want through creating, offering and freely exchanging products and services
of value with others.
IMPORTANCE OF MARKETING
1. Marketing process brings goods and services to satisfy the needs and wants of the
people.
2. It helps to bring new varieties and quality goods to consumers.
3. By making goods available at al places, it brings equipment distribution.
4. Marketing converts latent demand into effective demand.
5. It gives wide employment opportunities.
6. It creates time, place and possession utilities to the products.
7. Efficient marketing results in lower cost of marketing and ultimately lower prices to
consumers.
8. It is vital link between production and consumption and primarily responsible to
keep the wheel of production and consumption constantly moving.
9. It creates to keep the standard of living of the society.
NATURE OF MARKETING
Buyer and seller affect the demand for products in aggregate areas, market
includes both the place and region which buyers and sellers are in a free inter course with
another.
 Marketing is a customer focus: Market intense to satisfy and delight the customer,
the activities of marketing must be directed and focused at the customer marketers can
remain in customers mind. As they are provided value for what they spend.
 Marketing must deliver value: Marketer has to track customer needs and deliver the
product as per their requirement. The co operate storage must be aimed at delivering
greater customer value than competitors.
 Marketing is business: When a customer is the focus of all activities the marketer
has not to search customer to see response to his product. Customer group is decided
from whom the product is prepared and presented.

 Marketing is surrounded by customer need: Marketing starts with identification of
customer needs and requirements’. These are termed into probable features that might
satisfy the basic needs
 Marketing is a part of total environment: Total environment mainly defined as the
combination of all resources and institutions which are directly related to the
production, distribution of goods, services, ideas, places and persons for satisfaction
of human needs.
 Marketing systems effect companies strategies: Marketing has its own sub-systems
which interact with each other to turn complete marketing system that is responsible
to company’s marketing strategy.
 Marketing has a discipline: The sub of marketing has emerged out of business
which has derived its existence from economic. These are different disciplines of
marketing such as consumer behaviour, legal aspects marketing research, advertising
media, pricing, promotion method etc.
 Marketing creates mutual beneficial relationship: As the customer is the focus of
all marketing activities. The strategies of marketing have been shifting to different
ways. Marketing is there for everything that results in mutual benefit of the customer.
 Universal function: Marketing has a universal function in the sense that it can be
applied to both profit motive and non-profit motive organization.
MARKETING MANAGEMENT
Marketing Management is defined as “the analysis, planning, implementation and
control of programmes designed to create build and purpose of achieving organizational
objectives”.
Marketing manages have to carry marketing research, marketing planning, marketing
implementation and marketing control. Within marketing planning, marketer must make
decisions on target markets, market post phoning product development, pricing, channels of
distribution, physical distribution, communication and promotion. Thus, the marketing
managers must acquire several skills to be effective in market place.
The American Marketing Association offers the following definition:
Marketing Management is the process of planning and executing the conception, pricing,
promotion, and distribution of ideas, goods, services to create exchanges that satisfy
individual and organizational goals.

CONCEPTS OF MARKETING
There are five distinct concepts under which business organisation can conduct their
marketing activity.
 Production Concept
 Product Concept
 Selling Concept
 Marketing Concept
 Societal Marketing Concept
 PRODUCTION CONCEPT
It is one of the oldest concepts guiding sellers. The production concept holds that
customers will favour those products that are widely available and low in cost. Managers of
production-oriented organisations concentrate on achieving high production efficiency and wide
distribution coverage.
The assumption that consumers are primarily interested in product availability and low
price holds in at least two types of situations. The first is where the demand for a product exceeds
supply. Here consumers are more interested in obtaining the product than in its fine points. The
suppliers will concentrate on finding ways to increase production. The second situation is where
the product’s cost is high and has to be brought down through increased productivity to expand
the market.
 PRODUCT CONCEPT
The product concept holds that consumer’s will favour those products that offer the
most quality, performance and features. Management in these product-oriented organizations
focus their energy on making good products and improving them over time. In many cases,
these organizations fail in the market. They do not bother to study the market and the
consumer in-depth. They get totally engrossed with the product and almost forget the
consumer for whom the product is actually meant; they fail to find what the consumers
actually need and what they would accept. The product concept leads to “marketing myopia”,
an undue concentration on the product rather than the need.
Marketing Myopia
 At this stage, it would be appropriate to explain the phenomenon of ‘marketing
myopia’. The term ‘marketing myopia’ is to be credited to Professor Theodore Levitt.
In one of his classic articles bearing the same title, in the Harvard Business Review,
Professor Levitt has explained ‘marketing myopia’ as a coloured or crooked

perception of marketing and a short-sightedness about business. Excessive attention to
production or product or selling aspects at the cost of the customer and his actual
needs, creates this myopia. It leads to a wrong or inadequate understanding of the
market and hence failure in the market place. The myopia even leads to a wrong or
inadequate understanding of the very nature of the business in which a given
organisation is engaged and thereby affects the future of the business.
 SELLING CONCEPT
The sales concept maintains that a company cannot expect its products to get picked
up automatically by the customers. The company has to consciously push its products.
Aggressive advertising, high-power personal selling, large scale sales promotion, heavy price
discounts and strong publicity and public relations are the normal tools used by organisation
that rely on this concept. In actual practice, these organizations too do not enjoy the best of
customer patronage.
The selling concept is thus undertaken most aggressively with ‘unsought goods’, i.e.
those goods that buyers normally do not think of buying, such as insurance, encyclopaedias.
These industries have perfected various techniques to locate prospects and with great
difficulty sell them as the benefits of their products.
Difference between Selling and Marketing
The marketing and selling are considered synonymously. But there is great of
difference between the two. Selling focuses on the needs of the seller; marketing on the
needs of the buyer. Selling is preoccupied with the seller’s need to convert his product into
cash; marketing with the idea of satisfying the needs of the customer by mean of the product
and the whole cluster of thing associated with creating delivering and finally consuming it.
Marketing vs. Selling
Focuses on Customer’s needs. Focuses on seller’s needs.
Customer enjoys supreme importance. Product enjoys supreme importance.
Converting customer’s needs into product. Converting product into cash.
Profits through customer satisfaction. Profits through sales volume.
Emphasis is given on product planning and
development to match products with the
market.
Emphasis is placed on sale of products
already produced.
Integrated approach to marketing is Fragmented approach to selling is practiced.

practiced.
The principle of caveat vendor (let the seller
beware) is followed.
The principle of caveat emptor (let the
buyer beware) is followed.
 MARKETING CONCEPT
The Marketing concept was born out of the awareness that marketing starts with the
determination of consumer wants and ends with the satisfaction of those wants. The concept
puts the consumer both at the beginning and at the end of the business cycle. The business
firms recognize that “there is only one valid definition of business purpose: to create a
customer”. It proclaims that “the entire business has to be seen from the point of view of the
customer”. In a company practicing this concept, all departments will recognize that their
actions have a profound impact on the company’s to create and retain a customer. Every
department and every worker and manager will ‘think customer’ and ‘act customer’.
The marketing concept holds that the key to achieving organizational goals consists in
determining the needs and wants of the target markets and delivering the desired satisfactions
efficiently, than competitors. In other words, marketing concept is a integrated marketing
effort aimed at generating customer satisfaction as the key to satisfying organizational goals.
 SOCIETAL MARKETING CONCEPT
Now the question is whether the marketing concept is an appropriate organizational
goal in an age of environmental deterioration, resource shortages, explosive population
growth etc. and whether the firm is necessarily acting in the best long run interests of
consumers and society. For example, many modern disposable packing materials create
problem of environmental degradation Situations like this, call for a new concept, which is
called ‘Social Marketing Concept’.
The societal marketing concept holds that the organization’s task is to determine the
needs, wants and interests of target markets and to deliver the desired satisfaction more
effectively and efficiently than competitors in a way that preserves or enhances the
consumer’s and the society’s well being. The societal marketing concept calls upon marketers
to balance three considerations in setting their marketing policies namely firm’s profits,
consumer want satisfaction and society interest.

FUNCTIONS OF MARKETING
The scope of marketing can be understood by the terms of functions that the
marketing department performs in most of the business enterprise. Marketing department is a
setup under supervision of the marketing manager. The major purpose of their department is
to generate revenue for business by selling goods and services to the customer. A number of
functions have to be performing in every marketing process. The functions of marketing can
be classified as under:
I. Functions exchange include:
i. Buying: Buying involves planning of purchase search for the sellers selecting of goods
to be purchased enabling of goods to suit the requirement of the buyer.
ii. Selling: Selling function involves location of the buyer negotiation of the term of sale,
price, quality, quantity etc..
iii. Pricing: Price is the most important element determine the market share and profitably
of the company. The firm has to decide the price of commodity by considering many
factors of a price policy of a product such as determining demand, estimating the cost,
analyzing competitor’s price and selecting price method.
iv. Advertising: In the aim of advertising is a creation of awareness, interest and finally of
purchase of goods and services.
MARKETING
FUNCTIONS OF EXCHANGE
 BUYING
 SELLING
 PRICING
 ADVERTISING
 SALES PROMOTION
FUNCTIONS OF PHYSICAL SUPPLY
 TRANSPORTATION
 STORAGE
 WARE HOUSING
FACILITATING FUNCTIONS
 FINANCING
 RISK TAKING
 MARKET
INFORMATION
 MARKET
RESEARCH
 STANDARDIZATION
 GRADING
 PACKING
 BRANDING
MARKETING

v. Sales Promotion: Sales Promotion stimulates greater purchase after particular product
or service by a consumer. Consumer sales promotion activities include samples, cash
refund offers, price off, premium, price discount etc.
I. Functions on the basis of Physical supply
i. Transportation: Transportation creates place utility. It’s transverse the goods from the
place of production of the place of consumption. There are various modes of
transportation:-
a. Land Transport: It is further divided into road transport and rail transport.
 Road Transport: It is the cheapest form of transport compared to the other forms on
account of less maintenance expenses of the ‘way’. It can reach the place of loading
and unloading. Door – to door service is one of the most attractive features of road
transport.
 Rail Transport: Railways play a crucial role in the promotion of trade and industry. It
is most suitable for carrying heavy and bulk commodities. It is suitable for long
distance travel and transport. Railways are often referred to as the common man’s
transport because of its cheap rate.
b. Water Transport: In the early days, this was the only means of transport available
for moving bulky goods of cheap value. World trade and industry was developed
through the medium of waterways. It is the heaviest carries of goods.
c. Air Transport: The contribution of air transport in commercial field is very
significant. It creates “time utility” even in international market. Speed is the most
important feature of air transport. It help to transmit perishable commodities to other
counties.
ii. Storage: Storage is an important function of marketing. Storage means holding and
protecting goods in stores. It is the process of holding and preserving goods from the
time they are produced until they are needed for consumption. Storage protects goods
or commodities from deterioration.
iii. Ware housing: The place where goods are stored is called warehouse. Warehouse is a
building or room for storing goods. The function of storage is performed through
warehousing. Storage is the physical distribution function of marketing and
warehousing is the tool with which this function is performed.
II. Facilitating Functions :

i. Financing: Financing is the life blood of every business. The service of providing fund
needed to meet the cost of getting merchandising into the hands of consumer is
commonly referred to as the finance function in market. It is very difficult to carry on
smooth functioning of marketing without the availability of good finance.
ii. Risk taking: It is the primary function of a marketing activity and profit is the reward.
Risk means an element of uncertainty or possibility of loss. Marketing risk is defined
as the possibility of loss from unforeseeable circumstances in future.
iii. Marketing Information: Marketing information is an essential function as it gives
information about the product, demand, supply, price, competition etc.
iv. Market Research: It is a systematic gathering, recording and analysing of data about
problems relating to marketing goods and services. It is a generation of primary data
analyzing of information, recommendation and implementation of findings.
v. Standardization: It is process of setting standard norms criteria for the goods and
services. It involves the determination of basic measures to which goods must
conform and include the process of conforming to such standard. It determines the
basics of colour, weight, quality, and other special features.
vi. Grading: It is “the process of sorting individual specimen of a given product to the
standard grades or classes to which they belong”. Grading involves dividing the goods
into lots which are similar in characteristics. The word grade and standard are used
interchangeably. Grading begins with where standardization ends.
vii. Packaging: Packing means wrapping, compressing, filling or creating of goods for the
purpose of protection and convenient handling. Packing is essential for placing
various kinds of goods in appropriate packages. Package means a case, container
wrapper or other receptacle for packing goods. Packaging is designing and producing
of a container or wrapper for a product in order to prepare the goods for transport, sale
and usage.
viii. Branding: Branding is done on a product or package of the product. It is the process of
stamping a product with some identifying mark or name or a combination of both. It
is the name, mark, symbol, design or distinctive number of letters given to a product
for distinguishing it from others.

MARKETING ENVIRONMENT
A company's marketing environment consists of the factors and forces that affect the
company's ability to develop and maintain successful transactions and relationships with its
target customers. Every business enterprise is confronted with a set of internal factors and a
set of external factor. A variety of environmental forces influence a company’s marketing
system. Some of them are controllable while some others are uncontrollable. It is the
responsibility of the marketing manager to change the company’s policies along with the
changing environment.
According to Philip Kotler, “A company’s marketing environment consists of the
internal factors & forces, which affect the company’s ability to develop & maintain
successful transactions & relationships with the company’s target customers”.
The Environmental Factors may be classified as:
1. Internal Factor
2. External Factor
The internal factors are generally regarded as controllable factors because the company
has a fair amount of control over these factors, it can alter or modify such factors as its
personnel, physical facilities, marketing-mix etc. to suit the environment. The external factors
are by and large, beyond the control of a company.

INTERNAL ENVIRONMENTAL FACTORS
A Company’s marketing system is influenced by its capabilities regarding production,
financial & other factors. Hence, the marketing management/manager must take into
consideration these departments before finalizing marketing decisions. The Research &
Development Department, the Personnel Department, the Accounting Department also have
an impact on the Marketing Department. It is the responsibility of a manager to company-
ordinate all department by setting up unified objectives.
EXTERNAL ENVIRONMENTAL FACTORS
As the environmental factors are beyond the control of a firm, its success will depend
to a very large extent on its adaptability to the environment, i.e. its ability to properly design
and adjust internal variables to take advantages of the opportunities and to combat the threats
in the environment.
External Factors may be further classified into:
1. Micro Environment
2. Macro Environment
THE MICRO ENVIRONMENT
The micro environment consists of the actors in the company's immediate
environment that affects the ability of the marketers to serve their customers. These include
the suppliers, marketing intermediaries, competitors, customers and publics.

i. Suppliers: Suppliers are those who supply the inputs like raw materials and
components etc. to the company. Uncertainty regarding the supply or other supply
constraints often compels companies to maintain high inventories causing cost
increases. It is very risky to depend on a single supplier because a strike, lock out or
any other production problem with that supplier may seriously affect the company.
Hence, multiple sources of supply often help reduce such risks.
ii. Customers: The major task of a business is to create and sustain customers. A
business exists only because of its customers and hence monitoring the customer
sensitivity is a prerequisite for the business to succeed. A company may have different
categories of consumers like individuals, households, industries, commercial
establishments, governmental and other institutions etc. Depending on a single
customer is often too risky because it may place the company in a poor bargaining
position. Thus, the choice of the customer segments should be made by considering a
number of factors like relative profitability, dependability, growth prospects, demand
stability, degree of competition etc.
iii. Competitors: A firm's competitors include not only the other firms which market the
same or similar products but also all those who compete for the discretionary income
of the consumers.
iv. Marketing Intermediaries: The immediate environment of a company may consist
of a number of marketing intermediaries which are "firms that aid the company in
promoting, selling and distributing its goods to final buyers”. The marketing
intermediaries include middlemen such as agents and merchants, who help the
company find customers or close sales with them; physical distribution firms which
assist the company in stocking and moving goods from their origin to their destination
such as warehouses and transportation firms; marketing service agencies which assist
the company in targeting and promoting its products to the right markets such as
advertising agencies; consulting firms, and finally financial intermediaries which
finance marketing activities and insure business risks. Marketing intermediaries are
vital link between the company and final consumers. A dislocation or disturbance of
this link, or a wrong choice of the link, may cost the company very heavily.
v. Public: A company may encounter certain publics in its environment. "A public is
any group that has actual or potential interest in or impact on an organisation's ability
to achieve its interests". Media, citizens, action publics and local publics are some

examples. Similarly, fruitful symbiotic cooperation between a company and the local
publics may be established for the benefit of the company and the local community.
MACRO ENVIRONMENT
A company and the forces in its micro environment operate in larger macro
environment of forces that shape opportunities and pose threats to the company. The macro
forces are, generally, more uncontrollable than the micro forces. The macro environmental
forces are given below:
i. Economic Environment: Economic conditions, economic policies and the economic
system are the important external factors that constitute the economic environment of
a business. The economic conditions of a country e.g., the nature of the economy, the
stage of development of the economy, economic resources, the level of income, the
distribution of income and assets etc. are among the very important determinants of
business strategies.
ii. Political and Government Environment: Political and government environment
has a close relationship with the economic system and economic policy. In most
countries, there are a number of laws that regulate the conduct of the business. These
laws cover such matters as standards of product, packaging, promotion etc.
iii. Socio-cultural Environment: The socio-cultural environment includes the customs,
traditions, taboos, tastes, preferences etc. of the members of the society which cannot
be ignored at any cost by any business unit. For a business to be successful, its
strategy should be the one that is appropriate in the socio-cultural environment.
iv. Demographic Environment: Demographic factors like the size, growth rate, age
composition, sex composition, family size, economic stratification of the population,
educational levels, language, caste, religion etc. are all factors relevant to business.
All these demographic variables affect the demand for goods and services.
v. Natural Environment: Geographical and ecological factors such as natural
resources endowments, weather and climate conditions, topographical factors,
location aspects in the global context, port facilities etc. are all relevant to business.
vi. Physical facilities and Technological Environment: Business prospects depend on
the availability of certain physical facilities. The application of modern technology in
industry leads to rapid economic growth and deteriorates physical environment
around us.
vii. International Environment: The international environment is very important from
the point of view of certain categories of business. It is particularly important for

industries directly depending on exports or imports. Similarly, international bodies
like WTO, IMF, WHO, ILO etc have had a major impact on influencing the policies
and trade of many countries, especially India.
These environments contain forces that can have a major impact on the actors in the task
environment. Market actors must pay close attention to the trends and developments in these
environments and make timely adjustments to their marketing strategies.
MARKETING INTERFACE WITH OTHER FUNCTIONAL AREAS
The interface between marketing and the various management functions take two
major avenues. First, in developing a business plan, it is essential to coordinate the marketing
component with other functions. Second, it is essential to incorporate marketing input in the
other corporate plans as well as overall short term and long term plans of the firm
RESEARCH AND DEVELOPMENT:
Research and Development focus to challenge technical problems without concerning
payoffs, supervision and accountability. Marketers are more interested in sales than product’s
technical features. Marketing Management focus with business-oriented, people prides
themselves on sales promotion and feel about pay. R & D people only consider maximising
technical qualities rather than designing for customer requirements.
Marketers Vs. Research & Development: R & D and marketing share responsibility for
successful market oriented innovation. R & D take responsibility for innovation and
successful product launch. Marketers must take responsibility for new sales features and
identifying customer needs and preferences.
PURCHASING:
Purchasing Management refers to “the process of efficient, effective and economical
purchasing of materials to be utilized by the organization in relation to its manufacturing
activities”. Purchase Management focus on obtaining materials and components in right
quantities and qualities at cheap cost. Marketers request purchasing small quantities of many
items rather than large quantities of few items.

Marketers Vs Purchasing: Purchasing management collect all the data relating to suppliers.
They required knowledge of supply chain, business and tax laws, invoice and inventory
procedures and transportation and logistics issues.
PRODUCTION OR MANUFACTURING:
Production/Manufacturing responsible for producing right products in right quantities at right
time for right cost.
Marketing Vs. Manufacturing: Production planning influence the performance of
production. Marketing influenced by scheduling the production plan when plan and
scheduling is problematic. Production and marketing need to cooperate to resolve problems
and need to adjust continually.
OPERATIONS:
Operations used for creating and providing goods and services.
Marketers vs. Operations: Operations concern with production of goods and services with
little resource and effective meeting of customer requirements. i.e., managing the process of
converting the input into output.
FINANCE :
Finance department focuses on evaluating profit on different business actions.
Marketing people do not spend time relating expenditures to results. They are not able to
prove how much revenue these expenditures will produce. They are too quick to sales prices
to win orders instead price to make profit. They “know they value of everything and the cost
of nothing”. Marketing focus on budgets for advertising, sales promotions and sales force.
Marketing Vs Finance: The financial management should avoid the mistake of looking
marketing expenses only from the point of view of cost control. Working capital management
should be taken into consideration not only by the financial managers but also by the
marketing executives.
ACCOUNTING:
Accounts Department prepare the sales report and gives effective marketing
information system. They enter into the special deals of sales with customers and require
special accounting procedures. Marketers requires to prepare special reports on sales and

profitability by segments, important customers, individual products, channels, territories,
order size etc.. They allocate fixed-cost burdens to different product in the line
HUMAN RESOURCE MANAGEMENT:
An integrative management that involves identifying organization's demands for
human resources with particular skills and abilities. Marketing Department has the
responsibility to inform about the development of new product or service, need of marketing
experts, commercialization of the product etc. The characteristics of Human resources (skill,
quality, moral, commitment, attitude etc) could contribute the strength and weakness of a
marketing organization.
Marketing Management Vs HR Management.: The involvement and initiative of people
at different levels may vary from organization to organization, and it is essentially required to
manage personnel issues by the Human Resource Management and to achieve the marketing
objectives.
INFORMATION SYSTEM:
Information system focuses on exploring the interface between management, information
science and computer science.
Marketing Vs. Information System:
Information System provides input to marketing decisions including product improvements,
price and packaging changes, copywriting, media buying, distribution etc. It is a part of an
ongoing data gathering process involving initial data collection as well as routine and
systematic data collection procedures.

MARKETING MIX
Marketing mix is one of the major concepts in modern marketing. It is the
combination of various elements which constitutes the company’s marketing system. It is set
of controllable marketing variables that the firm blends to produce the response it wants in
the target market. Though there are many basic marketing variables, it is McCarthy, who
popularized a four-factor classification called the four P’s: Product, Price, Place and
Promotion. Each P consists of a list of particular marketing variables.
According to Philip Kotler “Marketing Mix is the set of controllable variables that the firm
can use to influence the buyer’s response”. The controllable variables in this context refer to the 4
‘P’s (product, price, place and promotion). Each firm strives to build up such a composition of
4‘P’s, which can create highest level of consumer satisfaction and at the same time meet its
organisational objectives. Thus, this mix is assembled keeping in mind the needs of target
customers, and it varies from one organisation to another depending upon its availableresources and
marketingobjectives.
FEATURES OF MARKETING MIX:
1. Combination of four controllable variables: Marketing mix is the combination of
four variables inputs namely product, price, and promotion that constitute the core of
organizations marketing system.
2. Inter relation of variables: The four P’s of marketing mix are interrelated and
independent as the decision of one area automatically depends upon the other.

3. Managerial activity: Marketing mix is a managerial activity ie. it is the
responsibility of the marketing manager to combine the four ingredients in the right
proportion as to achieve optimum results.
4. Dynamic concept: Marketing mix is a dynamic concept as the need of constant as per
the changes taking place in the marketing environment.
5. Consumer orientation: All marketing activities are directed towards consumer
satisfaction therefore marketing mix variables need to be flexible to adopt the needs
expectation, purchasing power and buying behaviour of the consumer.
6. Target oriented: It is one of the important components of marketing mix centres
around the consumer and his welfare.
7. Universal approach: Marketing is a universal concept. It is applicable to not only
business organizational but also to non-business and non-profit organizations.
8. Creative activity:- Determination of right marketing mix is a creative process. The
imagination, intelligence and creativity to prepare a perfect blend of four variables to
provide maximum satisfaction to the consumers and returns to the organization.
Marketing involves a number of activities. To begin with, an organisation may decide
on its target group of customers to be served. Once the target group is decided, the product is
to be placed in the market by providing the appropriate product, price, distribution and
promotional efforts. These are to be combined or mixed in an appropriate proportion so as to
achieve the marketing goal. Such mix of product, price, place and promotional efforts is
known as ‘Marketing Mix’.
Product: Product refers to the goods and services offered by the organisation. product can be
described as a bundle of benefits which a marketer offers to the consumer for a price. Product
can also take the form of a service like an air travel, telecommunication, etc. Thus, the term
product refers to goods and services offered by the organisation for sale. The product mix has
the following dimensions:
a. Product innovation and invention.
b. Product features ie, shape, size, weight, design, colour, quality, standard etc..
c. Product planning and development.
d. Product range and mix
e. Packing and labelling of product.
f. Brand name and trade mark.

g. After sales service and warranty.
Price: Price is the amount charged for a product or service. It is the second most important
element in the marketing mix. Fixing the price of the product is a tricky job. Many factors
like demand for a product, cost involved, consumer’s ability to pay, prices charged by
competitors for similar products, government restrictions etc. have to be kept in mind while
fixing the price. In fact, pricing is a very crucial decision area as it has its effect on demand
for the product and also on the profitability of the firm. The product mix has the following
dimension:
a. Pricing policies
b. Cost of production and profit margin
c. Determination of per unit price.
d. Discount, rebates and level of margins.
e. Credit policy
f. Term delivery and payment
g. Instalment and Higher Purchase.
Place: Goods are produced to be sold to the consumers. They must be made available to the
consumers at a place where they can conveniently make purchase. This involves a chain of
individuals and institutions like distributors, wholesalers and retailers who constitute firm’s
distribution network (also called a channel of distribution). The organisation has to decide
whether to sell directly to the retailer or through the distributors/wholesaler etc. It can even
plan to sell it directly to consumers. The place mix has the following dimensions:
a. Type of intermediaries.
b. Different marketing channels
c. Physical distribution system
d. Inventory control
e. Areas to be covered
f. Channel remuneration and incentives
g. Dealer relations.
Promotion: If the product is manufactured keeping the consumer needs in mind, is rightly
priced and made available at outlets convenient to them but the consumer is not made aware
about its price, features, availability etc, its marketing effort may not be successful. Therefore

promotion is an important ingredient of marketing mix as it refers to a process of informing,
persuading and influencing a consumer to make choice of the product to be bought.
Promotion is done through means of personal selling, advertising, publicity and sales
promotion. It is done mainly with a view to provide information to prospective consumers
about the availability, characteristics and uses of a product. It arouses potential consumer’s
interest in the product, compare it with competitors’ product and make his choice. The
proliferation of print and electronic media has immensely helped the process of promotion.
Various dimensions of promotion mix are:-
a. Advertising and publicity
b. Personal selling techniques
c. Sales promotion measures
d. Public relation techniques
e. Display of goods for sales promotion
f. Trade fare and exhibitions
g. After sales services
For successful marketing, the marketing manager has to develop a best marketing mix for
his product.

Questions
1. Define Marketing?
2. What is meant by marketing? Explain the nature of marketing
3. Explain the functions or scope and classification of marketing.
4. What are the concepts of marketing?
5. Define marketing and discuss in brief the various concepts of marketing.
6. Define marketing. Bring out its importance
7. Briefly discuss the various concept of marketing.
8. What are differences between selling concept and marketing concept?
9. “Marketing begins before production and ends after production” Comment.
10. What is marketing Environment?
11. Explain socio- cultural environment.
12. What is macro and micro environment?
13. Explain the different kinds of marketing environment.
14. Explain the macro environmental factors that affect the marketing system of an
organization.
15. Explain the impact of environmental forces on marketing.
16. Discuss the various elements of marketing system.
17. What is meant by marketing mix? Explain its features.
18. Explain the various functions of marketing.
19. Write about the principles of marketing mix.
20. Define marketing mix. Briefly explain different elements of marketing mix.

UNIT II
MARKET SEGMENTATION, TARGETING AND POSITIONING
A market consists of people or organizations with wants, money to spend, and the
willingness to spend it. However, most markets the buyers' needs are not identical. Therefore,
a single marketing program for the entire market is unlikely to be successful. A sound
marketing program starts with identifying the differences that exist within a market, a process
called, market segmentation, and deciding which segments will be treated as target markets.
Market segmentation is customer oriented and consistent with the marketing concept. It
enables a company to make more efficient use of its marketing resources. After evaluating
the size and potential of each of the identified segments, it targets them with a unique
marketing mix. The marketer must somehow persuade the members of each segment that its
product will satisfy their needs better than competitive products. To do so, marketers attempt
to develop a special image for their products in the consumer's mind relative to competitive
products: that is, it positions its product as filling a special niche in the market place.
SEGMENTATION
According to William Stanton, “Market segmentation is the process of dividing the
total heterogeneous market for a product into several sub-markets or segments each of which
tend to be homogeneous in all significant aspects”.
Market segmentation is basically a strategy of ‘divide and rule’. The strategy involves
the development of two or more different marketing programmes for a given product or
service, with each marketing programme aiming at each segment. A strategy of market
segmentation requires that the marketer first clearly define the number and nature of the
customer groupings to which he intends to offer his product or service. This is a necessary
condition for optimizing efficiency of marketing effort.
REQUIREMENTS FOR MARKETS SEGMENTATION
For market segmentation to become effective and result oriented, the following principles are
to be observed:
 It must be measurable, or definable. In other words, there must be some way of
identifying the members of the segment and knowing how many of them there are.
 It must be accessible. This means it must be possible to communicate with the
segment as a group, and to get the product to them as a group.
 It must be substantial, i.e. big enough to be worth aiming for.

 It must be congruent, that is to say the members must have a close agreement on their
needs.
 It must be stable. The nature and membership of the segment must be reasonably
constant.
BENEFITS OF SEGMENTATION
1. The manufacturer is in a better position to find out and compare the marketing
potentialities of his products. He is able to judge product acceptance or to assess the
resistance to his product.
2. The result obtained from market segmentation is an indicator to adjust the production,
using man, materials and other resources in the most profitable manner. In other
words, the organization can allocate and appropriate its efforts in a most useful
manner.
3. Change required may be studied and implemented without losing markets. As such, as
product line could be diversified or even discontinued.
4. It helps in determining the kinds of promotional devices that are more effective and
also their results.
5. Appropriate timing for the introduction of new products, advertising etc., could be
easily determined.
AGGREGATION AND SEGMENTATION
Market aggregation is just the opposite of segmentation. Aggregation implies the
policy of lumping together into one mass all the markets for the products. Production oriented
firms usually adopt the method of aggregation instead of segmentation. Under this concept,
management having only one product considers the entire buyers as one group. Market
aggregation enables an organization to maximize its economies of scale of production,
pricing, physical distribution and promotion.
BASIS FOR SEGMENTING MARKETS
As explained above, market segmentation consists in identifying a sufficient number
of common buyer characteristics to permit sub division of the total demand for a product into
economically viable segments. These segments fall between two extremes of total
homogeneity and total heterogeneity. The various segments that are in vogue are as follows:
1. Geographic Segmentation: Chronologically this kind of segmentation appeared
first, for planning and administrative purposes. The marketer often find it convenient

to sub-divide the country into areas in a systematic way. The great advantages of
adopting this scheme are that standard regions are widely used by Government and it
facilitates collection of statistics. Most of the national manufacturers split up their
sales areas into sales territories either state-wise or district-wise.
2. Demographic Segmentation: Under this method, the consumers are grouped into
homogeneous groups in terms of demographic similarities such as Age, Gender,
Education, Income Level, Life Style etc. This is considered to be more purposeful
since the emphasis ultimately rests on customers. The variables are easy to recognize
and measure than in the case of the first type, as persons of the same group may
exhibit more or less similar characteristics.
a. Age Groups: Usually age groups are considered by manufacturers of certain special
products. For example, toys. Even in the purchases made by parents, children exert a
profound influence. The market segmented on the basis of the age groups is as
follows: (I) children, (ii) teenagers, (iii) adults, (IV) grown-ups.
b. Family Life-Cycle: This is yet another method falling under demographic
segmentation. The concept of a family life cycle refers to the important stages in the
life of an ordinary family. These stages are called ‘decision-making units’. A widely
accepted system distinguishes the following eight stages: (i) Young, single, (ii)
Young, married, no children, (iii) Young, married, youngest child under six, (iv)
Young, married, youngest child over six, (v) Older, married with children, (vi) Older,
married, no children under eighteen, (vii) Older single, (viii) Others. Although the
distinction between the young and the old is not explicit the concept provides a useful
basis for breaking down the total population into sub-group for a more detailed
analysis.
c. Gender: Gender influences buying motives in consumer market, e.g. in the case of
many products women demand special styles. Bicycle is an example. This kind of
segmentation is useful in many respects. The recent studies, however, show that
traditional differences are being fast broken down and this kind of segmentation
doesn’t hold much water. One reason for this is that women are going in for jobs. This
is a blessing in disguise as a number of new products are now being demanded, e.g.
frozen food, household appliances, etc. Successful attempts to remove barriers of
discrimination against women have generated many market opportunities.
Interestingly enough, however, it has not been so easy to get males to accept products

traditionally considered feminine. These changes have tremendous marketing
implications.
3. Socio-Economic Segmentation: The segmentation here is done on the basis of social
class, viz., working class, middle income groups, etc. Since marketing potentially is
intimately connected with the "ability to buy", this segmentation is meaningful in
deciding buying patterns of a particular class.
4. Product Segmentation: When the segmentation of markets is done on the basis of
product characteristics that are capable of satisfying certain special needs of
customers, such a method is known as product segmentation. The products, on this
basis, are classified into:
i. Prestige Products, e.g. Automobiles, Clothing.
ii. Maturity Products, e.g. Cigarettes, Blades.
iii. Status Products, e.g. Most Luxuries Products
iv. Anxiety Products, e.g. Medicines, Soaps.
v. Functional Products, e.g. Fruits, Vegetables.
The argument in favour of this type of product segmentation is that it is directed
towards differences among the products which comprise markets. Where the products
involved show great differences, this method is called a rational approach.
5. Benefit Segmentation: Russell Hally introduced the concept of benefit
segmentation. Under this method, segmentation of the market can be done on the
basis of benefit sought by the buyer out of a particular product. Here consumers are
interviewed to learn the importance of different benefits they may be expecting from
a product. These benefits or utilities may be classified into generic or primary utilities
and secondary or evolved utilities.
6. Volume Segmentation: Another way of segmenting the market is on the basis of volume
of purchases. Under this method the buyers may be classified as bulk purchasers,
medium purchasers and single unit purchasers on the basis of the quantity goods they
buy. This analysis is also capable of showing the buying behaviour of different groups.
7. Marketing-Factor Segmentation: The responsiveness of buyers to different marketing
activities is the basis for these types of segmentation. The price, quality, advertising,
promotional devices, etc., are some of the activities involved under this method.

MARKETS ON THE BASIS OF SEGMENTATION
It is now certain that any market could be segmented to a considerable extent because
buyers' characteristics are never similar. This, however, does not mean that manufacturers
may always try to segment their market. On the basis of the intensity of segmentation,
marketing strategies to be adopted may be classified into:
1. Undifferentiated Marketing: When the economies of organization do not permit the
division of market into segments, they conceive of the total market concept. In the
case of fully standardized products and where substitutes are not available,
differentiation need not be undertaken. Under such circumstances firms may adopt
mass advertising and mass methods in marketing.
2. Differentiated Marketing: A firm may decide to operate in several or all segments
of the market and devise separate product-marketing programmes. This also helps in
developing intimacy between the producer and the consumer. In recent years most
firms have preferred a strategy of differentiated marketing, mainly because consumer
demand is quite diversified.
3. Concentrated Marketing: Both the concepts explained above imply the approach of
total market either with segmentation or without it. Another option is to have
concentrated efforts in a few markets capable of affording opportunities. Put in
another way, 'instead of spreading itself thin in many parts of the market, it
concentrates its forces to gain a good market position in a few areas. Then new
products are introduced and test marketing is conducted, and this method is adopted.
The principle involved here is 'specialization' in markets which have real potential.
Another important feature of this method is the advantage of one segment is never
offset by the other.
TARGET MARKETING
Target marketing refers to selection of one or more of many market segments and
developing products and marketing mixes suited to each segments.
Having divided the market into segments, managers must decide which segment will
be the best to target, given the firm’s overall objectives. Normally managers would choose
the most profitable segment, but equally a firm may decide to aim for a particular segment of
the market that is currently neglected, on the grounds that competitors are less likely to enter
the market. The process of selecting a segment to aim for is called targeting. There are three
basic strategic options open to marketers.

i. Concentrated marketing (single segment). This is also known as Niche Marketing.
The niche marketer concentrates on being the very best within a single tiny segment.
ii. Differentiated Marketing (Multi- Segmented) means concentrating on two or more
segments, offering a differentiated marketing mix for each.
iii. Undifferentiated Marketing is about using a ‘scattergun’ approach. The producers
who do this are usually offering a basic product that would be used by almost all age
groups and lifestyles. It would be difficult to imagine any real adaptation to the
product that would meet people’s needs sufficiently well to merit a premium price.
The decision regarding which strategy to adopt will rest on the following three
factors:
 the company’s resources,
 the product’s features and benefits, and
 the characteristics of the segment(s).
EVALUATING THE MARKET SEGMENTS
In evaluation different market segments, the firm must look at three factors, namely
segment size and growth, segment structural attractiveness and company objectives and
resources.
a) Segment size and growth: The first question that a company should ask is whether a
potential segment has the right size and growth characteristics. Large companies
prefer segments with large sales volumes and overlook small segments. Small
companies in turn avoid large segments because they would require too many
resources. Segment growth is a desirable characteristic since companies generally
want growing sales and profits.
b) Segment structural attractiveness: A segment might have desirable size and growth
and still not be attractive from a profitability point of view. The five threats that a
company might face are:
i. Threat from industry competitors: A segment is unattractive if it already contains
numerous and aggressive competitors. This condition may lead to frequent price wars.
ii. Threats from potential entrants: i.e. from new competitors who, if enter the segment at
a later stage, bring in new capacity, substantial resources and would soon steal a part
of the market share.

iii. Threat of substitute products: A segment is unattractive if there exists too many
substitutive products because it would result in brand switching, price wars, low
profits etc.
iv. Threat of growing bargaining power of buyers: A segment is unattractive if the buyers
possess strong bargaining power. Buyers will try to force price down, demand more
quality or services, all at the expense of the seller's profitability.
v. Threat of growing bargaining power of suppliers: A segment is unattractive if the
company's suppliers of raw materials, equipment, finance etc., are able to raise prices
or reduce the quality or quantity of ordered goods.
c) Company objectives and resources: Even if a segment has positive size and growth
and is structurally attractive, the company needs to consider its own objectives and
resources in relation to that segment. Some attractive segments could be dismissed
because they do not match with the company's long-run objectives. Even if the
segment fits the company's objectives, the company has to consider whether it
possesses the requisite skills and resources to succeed in that segment. The segment
should be dismissed if the company lacks one or more necessary competences needed
to develop superior competitive advantages.
SELECTING THE MARKET SEGMENTS
As a result of evaluating different segments, the company hopes to find one or more
market segments worth entering. The company must decide which and how many segments
to serve. This is the problem of target market selection. A target market consists of a set of
buyers sharing common needs or characteristics that the company decides to serve. The
company can consider five patterns of target market selection.
1. Single segment concentration: In the simplest case, the company selects a single
segment. This company may have limited funds and may want to operate only in one
segment, it might be a segment with no competitor, and it might be a segment that is a
logical launching pad for further segment expansion.
2. Selective specialization: Here a firm selects a number of segments, each of which is
attractive and matches the firm's objectives and resources. This strategy of 'multi-
segment coverage' has the advantage over 'single-segment coverage' in terms of
diversifying the firm’s risk i.e. even if one segment becomes unattractive, the firm can
continue to earn money in other segments.

3. Product specialization: Here the firm concentrates on marketing a certain product
that it sells to several segments. Through this strategy, the firm builds a strong
reputation in the specific product area.
4. Market specialization: Here the firm concentrates on serving many needs of a
particular customer group. The firm gains a strong reputation for specializing in
serving this customer group and becomes a channel agent for all new products that
this customer group could feasibly use.
5. Full market coverage: Here the firm attempts to serve all customer groups with all
the products that they might need. Only large firms can undertake a full market
coverage strategy. Large firms going in for whole market can do so in two broad
ways— through undifferentiated marketing or differentiated marketing.
POSITIONING
Suppose a company has researched and selected its target market. If it is the only
company serving the target market, it will have no problem in selling the product at a price
that will yield reasonable profit. However, if several firms pursue this target market and their
products are undifferentiated, most buyers will buy from the lowest priced brand. Either, all
the firms will have to lower their price or the only alternative is to differentiate its product or
service from that of the competitors, thereby securing a competitive advantage and better
price and profit. The company must carefully select the ways in which it will distinguish
itself from competitors.
"Differentiation is the act of designing a set of meaningful differences to distinguish
the company's offer from competitors' offers.
Positioning is the act of designing the company's offer so that is occupies a distinct
and valued place in the target customer's minds. Positioning calls for the company to decide
how many differences and which differences to promote to the target customers.
How many differences to promote: Many marketers advocate aggressively promoting only
one benefit to the target market. Each brand should pick an attribute and claim itself to be
"number one" on it.
The major ones are "best quality", "best service", "best value", “most advanced
technology” etc. If a company hammers at any one of these positioning points and delivers it
properly, it will probably be best known and recalled for this strength. Besides single benefit
positioning, the company can try for double benefit positioning.
What differences to promote: A company should promote its major strengths provided that
the target market values these strengths. The company should also recognize that

differentiation is a continuous process. It would seem that the company should go after cost
or service to improve its market appeal relative to competitors.
Communicating the Company's positioning: The Company must not only develop a clear
positioning strategy, it must also communicate it effectively. Suppose a company chooses the
"best in quality" positioning strategy. It must then make sure that it can communicate this
claim convincingly. Quality is communicated by choosing those physical signs and cuts that
people normally use to judge quality.
Quality is often communicated through other marketing elements. A high price
usually signals a premium-quality product to buyers. The product's quality image is also
affected by the packaging, distribution, advertising and promotion. The manufacturer’s
reputation also contributes to the perception of quality. To make a quality claim credible, the
surest way is to offer "satisfaction or your money back". Smart companies try to
communicate their quality to buyers and guarantee that this quality will be delivered or their
money will be refunded.

CONSUMER BEHAVIOUR
The aim of marketing is to satisfy target customers needs and wants. The field
consumer behaviour studies how individual, groups, and organizations select, buy ,use and
dispose of goods , services, ideas or experience to satisfy their needs and wants. To achieve
consumer satisfactions, the marketer should know, understand consumer behaviour – their
characteristics, needs, attitudes and so on. But, the study of consumer’s behaviour is not an
easy task as to involve complex system of interaction of various factors namely sociological,
cultural, economical and psychological.
The study of consumer behaviour is the study of how individuals make decisions to
spend their available resources on consumption related items.
Consumer Behaviour means “Actions of consumers in the market place and
underlying motives for those actions”.
FACTORS INFLUENCING CONSUMER BEHAVIOUR
The starting point for understanding consumer behaviour is the stimulus – response
model. Marketing and environmental stimuli enter the buyer’s consciousness. The buyer’s
characteristics and decision processes lead to certain purchase decision. The marketer’s task
is to understand what happen in the buyer’s consciousness between the arrival of outside
stimuli and purchase decision.
Consumer’s buying behaviour is influenced by cultural, social, personal, and
psychological factors. Cultural factors exert the broadest and deepest influence.
Cultural Factors
Culture, subculture, and social class are particularly important in buying behaviour.
Culture
Culture is the most fundamental determinant of a person’s wants and behaviour. The
growing child acquires a set of values, perceptions, preferences, and behaviour through his or
her family and other key institutions. Eg: A child growing up in the United States is exposed
to the following values: achievement and success, activity, efficiency and practicality,
progress, material comfort, individualism, freedom, external comfort, humanitarianism, and
youthfulness.

Subculture
Each culture consists of smaller subcultures that provide more specific identification
and socialization for their members. Subcultures include nationalities, religions, racial
groups, and geographic regions. Many subcultures make up important market segments, and
marketers often design products and marketing programs tailored to their needs.
Social Class
Virtually all human societies exhibit social stratification. Stratification sometimes
takes the form of a caste system where the members of different castes are reared for certain
roles and cannot change their caste membership. More frequently, stratification takes the
form of social classes.
Social classes are relatively homogeneous and enduring divisions in a society, which
are hierarchically ordered and whose members share similar values, interests, and
behaviour.
Social classes do not reflect income alone, but also other indicators such as
occupation, education, and area of residence. Social classes differ in dress, speech patterns,
recreational preferences, and many other characteristics.
Social classes have several characteristics. First, those within each social class tend to
behave more alike than persons from two different social classes. Second, persons are
perceived as occupying inferior or superior positions according to social class. Third, social
class is indicated by a cluster of variables rather than by any single variable. Fourth,
individuals can move from one social class to another up or down during their lifetime. The
extent of this mobility varies according to the rigidity of social stratification in a given
society.
SOCIAL FACTORS
In addition to cultural factors, a consumer’s behaviour is influenced by such social
factors as reference group, family, and social roles and statuses.
Reference Groups
A person’s reference groups consist of the entire group that have a direct (face-to-
face) or indirect influence on the person’s attitudes or behaviour. Groups having a direct
influence on a person are called membership groups.

Some membership groups are primary groups, such as family, friends, neighbours,
and co-workers, with whom the person interact continuously and informally.
People also belong to secondary groups, such religious, professional, and trade union
groups, which tend to be more formal and require less continuous interaction. People are
significantly influenced by their reference groups in at least three ways. Reference groups
expose an individual to new behaviours and lifestyles. They influence attitudes and self
concept. And they create pressures for conformity that may affect actual product and brand
choices.
People are also influenced by groups to which they do not belong. Aspirational
Groups are those the person hopes to join; Dissociative Groups are those whose values or
behaviour an individual rejects.
Manufacturers of products and brand where group influence is strong must determine
how to reach and influence the opinion leaders in the reference groups. An opinion leader is
the person in informal product-related communications who offers advice or information
about a specific product or product category, such as which of several brand is best or how a
particular product or product category, such as which of several brands is best or how a
particular product may be used. Opinion leaders are found in all strata of society, and person
can be an opinion leader in certain product areas and an opinion follower in other areas.
Marketers try to reach opinion leaders by identifying demographic and psychographic
characteristics associated with opinion leadership, identifying the media read by opinion
leaders, and directing messages at the opinion leaders.
Family
The family is the most important consumer-buying organization in society, and it has
been researched extensively. Family members constitute the most influential primary
reference group. We can distinguish between two families in the buyer’s life. The family of
orientation consists of one’s parents and siblings. From parents a person acquires an
orientation toward religion, politics, and economics and sense of personal ambition, self-
worth, and love. Even if the buyer no longer interacts very much with his or her parents, their
influence on the buyer’s behaviour can be significant. In countries where parents live with
their grown children, their influence can be substantial. A more direct influence on everyday
buying behaviour is one’s family of procreation. namely, one’s spouse and children.
Roles and Statuses
A person participates in many groups’ family, clubs, and organizations. The person’s
position in each group can be defined in terms of role and status. A role consists of the

activities that a person is expected to perform. Each role carries a status. Marketers are aware
of the status symbol potential of products and brands.
PERSONAL FACTORS
A buyer’s decisions are also influenced by personal characteristics. These include the
buyer’s age and stage in the life cycle, occupation, economic circumstances, lifestyle, and
personality and self-concept.
Age and Stage in the Family Life Cycle
People buy different goods and service over a lifetime. They eat baby food in the
early years, most foods in the growing and mature years, and special diets in the later years.
Taste in clothes, furniture, and recreation is also age related.
Consumption is shaped by the family life cycle. Marketers often choose life-cycle
groups as their target market. Yet target households are not always family based: There are
also single households, gay households, and cohabitor households.
Stage in Family Life Cycle Buying or Behavioural Pattern
Family Life Cycle Stage Buying or Behavioural Pattern
Bachelor Stage; young, single, not living at
home.
Few financial burdens. Fashion leaders.
Recreation oriented. Buy: basic home
equipment, furniture, cars, equipment for the
mating game; vacations.
Newly married couples: young, no children. Highest purchase rate and highest average
purchase of durables: cars, appliances,
furniture, vacations.
Full nest I: youngest child under six Home purchasing at peak. Liquid assets low.
Interested in new products, advertised
products. Buy: washers, dryers, TV, baby
food, medicines, and dolls.
Full nest II: youngest child six or over. Financial position better. Less influenced by
advertising. Buy larger-size packages,
multiple-unit deals. Buy: many foods,
cleaning materials, bicycles.
Full nest III: older married couples
with dependent children
Financial position still better. Some children
get jobs. Hard to influence with advertising.

High average purchase of durables: new,
more tasteful furniture, auto travel,
magazines.
Empty nest I: older married couples,
no children living with them, of house-hold
in labour force.
Home ownership at peak. Most satisfied with
head financial position and money saved.
Interested in travel, recreation.
Buy : vacations, luxuries, home
improvements.
Empty nest II: older married No children
living at home, head of household retired
Drastic cut in income. Keep home. Buy:
medical appliances medical-care products.
Solitary survivor, in labour force. Income still good but likely to sell home.
Solitary survivor, retired. Same medical and product needs as other
retired group; drastic cut in income. Special
need for attention, affection, and security.
Occupation and Economic Circumstances
Occupation also influences a person’s consumption pattern. Marketers try to identify
the occupational groups that have above-average interest in their product and services.
Product choice is greatly affected by economic circumstances: spendable income (level,
stability, and time pattern), savings and assets (including the percentage that is liquid), debts,
borrowing power, and attitude toward spending versus saving. Marketers of income-sensitive
goods pay constant attention to trends in personal income savings, and interest rates. If
economic indicators point to a recession, marketers can take steps to redesign, reposition, and
re-price their products so they continue to offer value to target customers.
Lifestyle
People from the same subculture, social class, and occupation may lead quite different
lifestyles.
A lifestyle is the person’s pattern of living in the world as expressed in activities,
interests, and opinions. Lifestyle portrays the whole person interacting with his or her
environment.
Marketers search for relationships between their products and lifestyle groups.
Personality and Self-Concept

Each person has a distinct personality that influences behaviour.
Personality means distinguishing psychological characteristics that lead to relatively
consistent and enduring responses to environment.
Personality is usually described in terms of such traits as self-confidence, dominance,
autonomy, defensiveness, and adaptability. Personality can be a useful variable in analyzing
consumer behaviour, provided that personality types can be classified accurately and that
strong correlations exist between certain personality types and product or brand choices.
Related to personality is self-concept (or self-image). Marketers try to develop brand
images that match the target market’s self-image. It is possible that a person’s actual self-
concept (how she views herself) differs from her ideal self-concept (how she would like to
view herself) differs from her other-self-concept (how she thinks others see her).
PSYCHOLOGICAL FACTORS
A person’s buying choices are influenced by four major psychological factors:
motivation, perception, learning, and beliefs and attitudes.
Motivation
A person has many needs at any given time. Some needs are biogenic; they arise from
physiological states of tension such as hunger, thirst, discomfort. Other needs are
psychogenic; they arise from psychological states of tension such as the need for recognition,
esteem, or belonging. A need becomes a motive when it is aroused to a sufficient level of
intensity. A motive is a need that is sufficiently pressing to drive the person to act.
Each person has distinct motives for purchases, and these change by situation and
over time. Consumers often combine economic (price, durability) and emotional (social
acceptance, self-esteem) motives when making purchases.
Psychologists have developed theories of human motivation. Three of the best known
- the theories of Sigmund Freud, Abraham Maslow, and Frederik Herzberg carry quite
different implications for consumer analysis and marketing strategy.
Freud’s Theory
Sigmund Freud assumed that the psychological forces shaping people are largely
unconscious, and that a person cannot fully understand his or her own motivations. A
technique called laddering can be used to trace a person’s motivations from the stated
instrumental ones to the more terminal ones. Then the marketer can decide at what level to
develop the message and appeal. When a person examines specific brands, he or she will
react not only to their stated capabilities but also to other, less conscious cues. Shape, size,
weight, material, colour, and brand name can all trigger certain associations and emotions.

Maslow’s Theory
Abraham Maslow sought to explain why people are driven by particular needs at
particular times. Why does one person spend considerable time and energy on personal safety
and another on pursuing the high opinion of others? Maslow’s answer is that human needs
are arranged in a hierarchy, from the most pressing to the least pressing. In their order of
importance, they are physiological needs (food, water, shelter), safety needs (security,
protection), social needs (sense of belonging, love), esteem needs (self-esteem, recognition,
status), and self-actualization needs (self-development and realization). People will try to
satisfy their most important needs first. When a person succeeds in satisfying an important
need, that need will cease being a current motivator, and the person will try to satisfy the
next-most-important need.
Maslow’s Hierarchy of Needs
Herzberg’s Theory
Frederick Herzberg developed a two-factor theory that distinguishes dissatisfier’s
(factors that cause dissatisfaction) and satisfiers (factors that cause satisfaction). The absence
of dissatisfier’s is not enough; satisfiers must be actively present to motivate a purchase.
Herzberg’s theory has two implications. First, sellers should do their best to avoid
dissatisfier’s (for example, a poor training manual or a poor service policy). Although these
things will not sell a product, they might easily un-sell it. Second, the manufacturer should

identify the major satisfiers or motivators of purchase in the market and then supply them.
These satisfiers will make the major difference as to which brand the customer buys.
Perception
A motivated person is ready to act. How the motivated person actually acts is
influenced by his or her perception of the situation.
Perception is the process by which an individual selects, organizes and interprets
information inputs to create a meaningful picture of the world.
Perception depends not only on the physical stimuli but also on the stimuli’s relation
to the surrounding field and on conditions within the individual.
Learning
Learning involves changes in an individual’s behaviour arising from experience.
Most human behaviour is learned. Learning theorists believe that learning is produced
through the interplay of drives, stimuli, cues, responses, and reinforcement. A drive is a
strong internal stimulus impelling action. Cues are minor stimuli that determine when, where,
and how a person responds.
Beliefs and Attitude
A belief is descriptive thought that a person holds about something.
Beliefs may be based on knowledge, opinion, or faith. They may or may not carry an
emotional charge. Of course, manufacturers are very interested in the beliefs people carry in
their heads about their products and services. These beliefs make up product and brand
images, and people act on their images. If some beliefs are wrong and inhibit purchase, the
manufacturer will want to launch a campaign to correct these beliefs.
An attitude is a person’s enduring favorable or unfavorable evaluations, emotional
feelings, and action tendencies toward some object or idea.
People have attitudes toward almost everything: religion, politics, clothes, music, and
food. Attitudes put them into a frame of mind of liking or disliking an object, moving toward
or away from it. Attitudes lead people to behave in a fairly consistent way toward similar
object. People do not have to interpret and react to every object in a fresh way. Because
attitudes economize on energy and thought, they are very difficult to change. A person’s
attitudes settle into a consistent pattern: To change a single attitude may require major
adjustments in other attitudes.
BUYING DECISION PROCESS
Marketers have to go beyond the various influences on buyers and develop an
understanding of how consumers actually make their buying decisions. Specifically,

marketers must identify who makes the buying decision, the types of buying decisions, and
the steps in the buying process.
STAGES OF THE BUYING DECISION PROCESS
The consumer passes through five stages: problem recognition, information search,
evaluation of alternatives, purchase decision, and post purchase behaviour. Clearly the buying
process starts long before the actual purchase and has consequences long afterward.
1. Problem recognition; It is the stage when the individual recognizes a need or
problem to be satisfied or solved. The need can be triggered by either an internal
stimulus (hunger, thirst), or external stimulus (bread, car, or ad)
2. Information research; Of key interest to the marketer are the major information
sources:
 Personal source- family neighbours, acquaintances
 Commercial sources- sales persons, dealers , packaging displays
 Public sources- mass media, consumer-rating organizations
 Experiential sources- handling, examining, or using the product
Problem Recognition
Information Search
Evaluation of Alternatives
Purchase Decision
Post Purchase Behaviour

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