PGDBM- Marketing Management SEM 02 UNIT II.pdf

Class: Sem-02
Subject: Marketing Management
Unit: II
By Prof. Aﬁya Arif. Malek

Introduction:
◉ STP is an acronym for Segmentation, Targeting, and Positioning – a three-step model that examines
your products or services as well as the way you communicate their beneﬁts to speciﬁc customer
segments.
◉ In a nutshell, the STP marketing model means you segment your market, target select customer
segments with marketing campaigns tailored to their preferences, and adjust your positioning
according to their desires and expectations.
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Segmentation:
◉ The ﬁrst step of the STP marketing model is the segmentation stage
◉ The main goal here is to create various customer segments based on speciﬁc criteria and traits that
you choose.
◉ The four main types of audience segmentation include:
◉ Geographic segmentation: Diving your audience based on country, region, state, province, etc.
◉ Demographic segmentation: Dividing your audience based on age, gender, education level,
occupation, etc.
◉ Behavioral segmentation: Dividing your audience based on how they interact with your
business: What they buy, how often they buy, what they browse, etc.
◉ Psychographic segmentation: Dividing your audience based on “who” your potential customer
is: Lifestyle, hobbies, activities, opinions, etc.
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Targeting:
◉ Step two of the STP marketing model is targeting
◉ Your main goal here is to look at the segments you have created before and determine which of
those segments are most likely to generate desired results for your business
◉ Your ideal segment is one that is actively growing, has high profitability, and has a low cost of
acquisition:
○ Size: Consider how large your segment is as well as its future growth potential.
○ Profitability: Consider which of your segments are willing to spend the most money on your
product or service. Determine the lifetime value of customers in each segment and compare.
○ Reachability: Consider how easy or difficult it will be for you to reach each segment with your
marketing efforts
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Positioning:
◉ The final step in this framework is positioning, which allows you to set your product or services apart
from the competition in the minds of your target audience
◉ There are a lot of businesses that do something similar to you, so you need to find what it is that
makes you stand out
◉ All the different factors that you considered in the first two steps should have made it easy for you to
identify your niche
◉ There are three positioning factors that can help you gain a competitive edge:
○ Symbolic positioning: Enhance the self-image, belongingness, or even ego of your customers
○ Functional positioning: Solve your customer’s problem and provide them with genuine
benefits
○ Experiential positioning: Focus on the emotional connection that your customers have with
your product, service, or brand.
The most successful product positioning is a combination of all three factors.
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The STP Formula
◉ Segmentation + Targeting = Positioning
◉ This formula clearly illustrates that each segment requires tailored positioning and marketing mix to
ensure its success
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Beneﬁts of STP
◉ Your brand messaging becomes more personal and empathetic because you have your customer
personas and know exactly whom you’re talking to
◉ Your marketing mix becomes more clear and yields higher return on investment because you’re no
longer wasting budget on channels that your audience simply ignores
◉ Your market research and product innovation become more effective because you know exactly
whom to ask for advice and feedback in the development phase
◉ Your marketing becomes More personalized
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Developing product strategy
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What is a product?
- A product is the item offered for sale.
- Product is anything that can be offered to someone to satisfy a need or a want.
◉ A product can be a service or an item.
◉ It can be physical or in virtual or cyber form.
◉ Every product is made at a cost and each is sold at a price. The price that can be charged
depends on the market, the quality, the marketing and the segment that is targeted.
◉ Each product has a useful life after which it needs replacement, and a life cycle after which it
has to be re-invented.
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What are the characteristics of a product?
◉ Product is one of the elements of marketing mix or programme.
◉ Different people perceive it differently. Management, society, and consumers have different
expectations.
◉ Product includes both good and service.
◉ Marketer can actualize its goals by producing, selling, improving, and modifying the product.
◉ Product is a base for entire marketing programme.
◉ In marketing terminology, product means a complete product that can be sold to consumers. That
means branding, labeling, colour, services, etc., constitute the product.
◉ Product includes total offers, including main qualities, features, and services.
◉ It includes tangible and intangible features or beneﬁts.
◉ It is a vehicle or medium to offer beneﬁts and satisfaction to consumers.
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Product Classiﬁcation
Based on Durability & Tangibility:
◉ Non-durable (Eg:Fruits, vegetables, flowers, cheese, milk, etc.)
◉ Durable (Eg: refrigerator, fans, electric irons, vehicles, etc.)
◉ Services (Eg: barber, cobbler, doctor, mechanic)
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Consumer products classification:
◉ Shopping Products (Gold and jewelleries, footwear, clothes etc.)
◉ Specialty Goods (Apple Iphone, etc)
◉ Convenience Products (Example, soaps, biscuits, toothpaste, etc.)
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Consumer products classification:
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Industrial Products
◉ Machines and components
◉ Raw-materials and supplies
◉ Services and consultancies
◉ Electricity and Fuels, etc.

Product hierarchy Meaning:
A product hierarchy is a modeling of the hierarchical
relationships between products in a tree structure.
A product hierarchy enables the grouping of products and
deﬁnes the relationship between products and groups at
different hierarchy levels
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Product Levels By Kotler:
◉ Core Beneﬁt or Product (Hotel: Sleep & Rest)
◉ Basic or Generic Product (Hotel: bed, towels, a bathroom)
◉ Expected Level (Hotel: sheets, some clean towels)
◉ Augmented Product (Hotel: concierge service or a free map)
◉ Potential Product (Hotel: chocolates on one occasion, and some luxury water on another)
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Product Systems, mixes, line
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Product Systems:
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● A product system is a group of diverse but related items that
function in a compatible manner.
● A product system is the combination of end products and the
enabling products for those end products.

Product Mixes:
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● A product mix is an assortment of all products and items a
particular seller offers.
● It consists of various product lines.
● A company’s product mix has certain width, length & depth

Product Lines:
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● A product line is a group of
related products all marketed
under a single brand name that
is sold by the same company.
Example:

Product Line Length:
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● A company’s objective inﬂuences line length.
● The objectives can be:
○ Induce up-selling
○ Create cross selling
○ Protect brand against economic ups & downs
○ Seek high market share

A company lengthens its line in two ways
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1. Line stretching: Line stretching is an expanding strategy by a company where the new
products are launched in the same product line but beyond the current product range
with some additional or different features.
The company can lengthen its product line in 3 ways:
a. Down market stretch: Going lower than positioned
b. Up market stretch: Going upwards than positioned
c. Two way stretch: Having products in high end market, middle & low end market

A company lengthens its line in two ways
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2. Line filling: The concept of Line Filling can be defined as the business strategy where the
firm plans to increase the number of products in the existing product line.
The main idea and intention behind the same are to reduce the level of competition in the
market and take advantage of the gap in the market.

What Is a Product Life Cycle?
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● The term product life cycle refers to the length of time a product is introduced to
consumers into the market until it's removed from the shelves
● The life cycle of a product is broken into four stages—introduction, growth, maturity,
and decline
● This concept is used by management and by marketing professionals as a factor in
deciding when it is appropriate to increase advertising, reduce prices, expand to new
markets, or redesign packaging
● The process of strategizing ways to continuously support and maintain a product is
called product life cycle management.

How Product Life Cycles Work?
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● Products, like people, have life cycles
● A product begins with an idea, and within the conﬁnes of modern business, it isn't
likely to go further until it undergoes research and development (R&D) and is found to
be feasible and potentially proﬁtable only at that point, the product is produced,
marketed, and rolled out.
● As mentioned, there are four stages in the life cycle of a product—introduction,
growth, maturity, and decline

Stages of product life cycle
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● Introduction: This phase generally includes a substantial investment in advertising and
a marketing campaign focused on making consumers aware of the product and its
beneﬁts
● Growth: If the product is successful, it then moves to the growth stage. This is
characterized by growing demand, an increase in production, and expansion in its
availability
● Maturity: This is the most proﬁtable stage, while the costs of producing and marketing
decline
● Decline: A product takes on increased competition as other companies emulate its
success—sometimes with enhancements or lower prices. The product may lose
market share and begin its decline

Stages of product life cycle
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What is new product
development?
New product development is an eight-stage process that aims to transform an
idea into a workable, quality product.
New Product Development is the process of bringing a new idea to life that
focuses on solving the problems of the target audience.
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Types Of New Products
◉ New-to-the-world products: These are essentially the new products that didn’t exist in the world
before. For example, the launch of Uber app was a new-to-the-world product
◉ New-to-the-firm Products (new product lines): These are new products that didn’t exist in the firm’s
portfolio before. These are not new to the world but are just new to the firm and add a new product
line to the existing portfolio. For example, P&G’s first shampoo was a new-to-the-firm product
◉ Additions to existing product lines: These products are supplements to the company’s established
product lines. For example, a new flavour for Colgate would be a product line extension
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Types Of New Products
◉ Improvements and revisions of existing products: These are the upgrades that replace current
products and provide improved performance and/or higher perceived value
◉ Repositionings: Repositioning is changing the existing image of the product in front of the existing
target market (and relaunching it) or taking this product to a new market with a new image. For
example, McDonald’s was launched in Japan as Makudonarudo
◉ Cost reductions: These are the new products that provide performance similar to the existing
products but at a lower cost to the company
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Examples:
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4. New-to-the-world product 5. Additions to existing product lines
1. Repositionings
6. Improvements and revisions of existing products
2. Cost reductions 3. New-to-the-ﬁrm Product

New Product Development Process
A new product isn’t always about developing a new-to-the-world product
In fact, according to Kotler, only 10% of all new products are truly innovative and unique to the world
Upgrading existing products and relaunching them as new products, adding new products to the existing
product mix, etc. are all essential practices for the company as they operate in a dynamic business
environment where customer’s needs and tastes, technologies, and product life cycles are always
changing
But no matter what type of new product the company develops, its process can be easily be broken down
into eight stages
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1. Idea generation: Is the idea worth Considering (Yes or No)
Yes- Continue
No- Drop
2. Idea screening: Is the product idea compatible with company objectives, strategies, and resources?
3. Concept development and testing: Can we find a good concept consumers say they would try?
4. Marketing strategy development: Can we find a cost-effective, affordable marketing strategy?
5. Business analysis: Will this product meet our profit goal?
6. Product development: Have we got a technically and commercially sound product?
7. Market testing: Have product sales met expectations? YES Or NO
If NO send the idea back to product development.
8. Commercialization: Are product sales meeting expectations? YES or NO
Yes- make future plans
No- Drop
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Products that were dropped by brands
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Colgate frozen meals, 1982 Cheetos lipbalm, 2005 Satisfries, Buger king, 2014

#1 Idea Generation
Ideas form the spine of the new product development.
They stem from market opportunities and can be innumerable.
This stage involves creating a large pool of ideas from both internal and external sources using numerous
techniques.
New Product Ideas From Internal Sources
Research and Development: R&D department is a formal department of the business that includes experts
with the sole responsibility to conduct market research and analysis and generate new ideas.
Employees: Employees are the ones who work closely with the product and the customers. According to
research, almost 45% of all new product ideas come from the employees.
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#1 Idea Generation
New Product Ideas From External Sources
Customers: Customers are the most important sources to get new product development ideas. Their
needs, wants, and desires form the base of the market opportunity, and most of the time they know what
they want. Surveys, customer forums are excellent sources of new product development ideas
Channels Of Distribution: Since distributors work closely with the customers, they understand better what
the customer actually demands. They often give ideas for new product possibilities and can also help the
company with market information like new concepts, techniques, technology, and materials
Competitors: Competitor analysis is a great way to analyse how the market rate the existing players and
what’s missing in the market. This information is further used to develop new products
Others: Other idea generation sources include consultants, communities, government agencies, market
research ﬁrms, commercial laboratories, etc.
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#2 Idea Screening
While the purpose of idea generation is to create a large pool of ideas, this stage involves evaluating the
pool and drop as many ideas as possible from consideration.
This is done by determining and evaluating the ideas’ –
Compatibility: Compatibility of the idea(s) with the overall business objectives.
Relevance: Relevance of the ideas based on the current and predicted business environment and the
organisation’s goals.
Assumptions: Validity of the assumptions the idea is based on.
Constraints: Internal and external constraints that hinder the growth of the idea into reality.
Feasibility: Feasibility of the idea according to the resources available.
Value: The idea’s predicted return on investment.
Risks: Internal or external risks that may hinder the idea’s progress.
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#2 Idea Screening
There’s a likelihood of two types of errors in the new product development process.
The idea screening phase acts as a ﬁlter to prevent the business from them.
The errors are –
Drop error – Dismissing of a good idea.
Go error – Moving forward with a bad idea.
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#3 Concept Development And Testing
An idea is different from a concept.
While an idea is just a mental construct of a business possibility or opportunity, a concept is an idea that
has gone through the process of fine-tuning and is less inconsistent.
The concept is a presentable version of the product idea which takes into consideration –
◉ Potential target audience
◉ Product usage
◉ Potential value propositions
For example, a product idea could be a fitness centre. But a product concept would be a fitness centre that focuses on
providing Zumba classes to working women offline in the morning and online in the evening.
This step involves developing single or multiple concepts based on the product ideas and testing them for their viability.
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Concept development:
Let’s take the example of an electric car as a product idea.
Possible product concepts for this electric car could be –
- Concept 1: An affordable electric car focused on working individuals who commute daily. This car
can be charged at home but isn’t viable for long-distance travel
- Concept 2: A mid-priced electric car for environment-ocused millennials. The car has sporty looks,
and there are recharging points available
- Concept 3: A high-priced electric SUV for high earning individuals who care about the environment..
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Concept Testing:
Once the concept is developed, it is tested using several methods and processes like –
Concept-test surveys: The planned target audience is asked to answer some product-related questions.
These answers are further analysed to test the viability of the concept
Prototype: A prototype is developed to understand the viability of the product better.
Testing different concepts gives a clear picture to the management on which concept to take forward and
which to drop.
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#4 Marketing Strategy Development
Once a promising concept is finalised, the next step involves developing a marketing strategy for the new
product.
The marketing strategy is divided into three parts:
- The detailed description of the target market’s size structure and behaviours, the planned value
proposition, the product positioning strategy, and sales size, market share and profit goals for the
first few years.
- An outline of the pricing strategy, distribution strategy, and the required marketing budget for the
first year.
- The marketing mix strategy and the planned long-term sales and profit goals.
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#5 Business Analysis
Once the product and its marketing strategy is finalised, the next step involves the evaluation of business
attractiveness of this proposed product.
This step of the new product development process involves a review and analysis of the sales, costs, and
profit projections for the new product.
In simple terms, this step evaluates the product as a business by reviewing –
- Costs involved in producing, marketing, and selling.
- Projected sales
- Projected profits
- The analysis is done either by conducting market surveys, consulting experts, or by analysing
the history of similar products. Once done, this analysis is then compared with the company’s
objectives, and the product goes into the production stage only if these factors satisfy the
objectives.
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#6 Product Development
Up to this point, the product only existed as a word description, a drawing, or a prototype.
But once the business analysis clears the product, the work is handed over to the research and
development department for actual product development.
It may take days, weeks, or months to develop the final product as the product goes through a series of
testing phases (alpha testing and beta testing) to validate all the assumptions and incorporate everything
that was promised during the previous stages.
◉ Alpha testing is testing the product within the firm to make sure it fits the standards set.
◉ Beta testing involves launching a test version in the market to validate the product-market fit.
However, it doesn’t involve testing the final product or marketing strategy.
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#7 Test Marketing Or Market Testing
Once the product development is completed, the product is then dressed up with a brand identity and
released in a selected market segment as a pilot for testing.
This step involves the company to test both the ﬁnal product and its entire marketing and branding
strategy, including
- Positioning strategy,
- Pricing strategy,
- Communication strategy,
- Promotion strategy, and
- Distribution strategy.
The product is developed in full scale only after test marketing shows positive results.
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#7 Test Marketing Or Market Testing
There are three types of test markets –
- Standard test markets: These are small representative markets (for example, a single city instead of
the full state) where the firm conducts a full marketing campaign and uses store audits, customer
surveys, distributor surveys, and other methods to analyse performance. The results are used to
predict full-scale campaign’s performance, discover unsolved problems, tap untapped
opportunities, and fine-tune the marketing program. The biggest disadvantage of standard test
markets is that the competitors get to know about the new product and its marketing strategies
before the actual launch.
- Control test markets: These are artificial testing venues like panels of stores that have agreed to carry
new products for a fee. These artificial testing venues are less expensive than the standard test
market and provide a faster analysis (of both the product and its competitors). Still, there’s a risk of
competition gaining access to the new product.
- Simulated test markets: These are events where the firm creates a shopping environment and
analyse customer behaviour with respect to the new product and its competitors. This test market
also lets the researchers interview customers.
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#8 Commercialisation
- Test marketing provides the management with the information needed to make the final decision
about the product launch.
- Once the final decision is made and the product is decided to be launched in the market, the new
product goes into the final stage -commercialisation or introduction, and is finally produced in the
needed quantity.
- This stage involves the highest costs as
- Manufacturing units are leased or purchased
- Advertising and communication campaigns are executed
- Sales promotion and other marketing efforts are executed to develop an initial demand
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#8 Commercialisation
Several important decisions are taken during the commercialisation stage like –
Introduction timing: The best time to launch the product
Introduction place: The decision about the place. Should it be launched in a single market or should it be
launched simultaneously in multiple markets?
Future strategies: What should be the strategies once the product is launched in the market.
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Meaning
Philip Kotler deﬁnes Consumer behaviour as
“The study of how individual, groups and organisation select, buy, use and dispose of goods and services,
ideas or experiences to satisfy their needs and wants.”
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Meaning
American Marketing Association deﬁnes Consumer behaviour as
“The dynamic interaction of affect and cognition, behaviour and environmental events by which human
being conduct the exchange aspect of their lives.”
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Factors influencing Consumer Behaviour
Consumer behavior is influenced by many different factors
A marketer should try to understand the factors that influence consumer behavior
Here are 5 major factors that influence consumer behavior:
◉ Psychological Factors
◉ Social Factors
◉ Cultural Factors
◉ Personal Factors
◉ Economic Factors
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Psychological Factors
◉ Human psychology is a major determinant of consumer behavior. These factors are difﬁcult to
measure but are powerful enough to inﬂuence a buying decision.
◉ Some of the important psychological factors are:
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Social Factors:
◉ Humans are social beings and they live around many people who inﬂuence their buying behavior.
Humans try to imitate other humans and also wish to be socially accepted in the society. Hence their
buying behavior is inﬂuenced by other people around them. These factors are considered as social
factors.
◉ Some of the social factors are:
i. Family
ii. Reference Groups
iii. Roles and status
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Cultural Factors:
◉ A group of people is associated with a set of values and ideologies that belong to a particular
community. When a person comes from a particular community, his/her behavior is highly
inﬂuenced by the culture relating to that particular community.
i. Culture
ii. Subculture
iii. Social Class <occupation, family background, education and residence location>
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Personal Factors:
◉ Factors that are personal to the consumers inﬂuence their buying behavior. These personal factors
differ from person to person, thereby producing different perceptions and consumer behavior.
i. Age
ii. Income
iii. Occupation
iv. Lifestyle
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Economic Factors
◉ The consumer buying habits and decisions greatly depend on the economic situation of a country or
a market
◉ When a nation is prosperous, the economy is strong, which leads to the greater money supply in the
market and higher purchasing power for consumers. When consumers experience a positive
economic environment, they are more confident to spend on buying products
◉ Whereas, a weak economy reflects a struggling market that is impacted by unemployment and
lower purchasing power
◉ Economic factors bear a significant influence on the buying decision of a consumer
i. Personal income
ii. Family Income
iii. Consumer credit
iv. Liquid assets
V. Savings
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Philip Kotler 5 stages of CB Model
◉ Consumers go through a set of sequential steps while buying a product
◉ A buying process is the sequence of steps that a consumer takes while making a
purchasing decision
◉ A normal consumer purchase includes the recognition of needs and wants
◉ Next comes the information search, followed by an evaluation of all the choices
◉ Finally, the purchase happens, and post-purchase evaluation follows a purchase
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Recognition of need
◉ This is the first stage of the buying process. A consumer will not initiate a purchase without the
recognition of the needs or wants. When a consumer feels the need to buy a particular product, he
will go for a purchase decision
◉ There is an unmet need or there is a problem that can be solved by buying a particular product
◉ Needs arise as there is a problem. For example, you broke the table that you were using for your
business. And due to this problem, you now have to buy a new table
◉ Wants arise either because you have need a product or just because you are influenced by external
factors. For example, you see your friends using a laptop for their project work. You might also have
seen numerous advertisements about how a laptop can help you in your project work. Due to this
influence, you feel you want to upgrade to a laptop though you may already have a desktop
◉ In this stage, the marketer should identify the needs of the consumers and offer the products based
on the desire
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Information Search:
◉ At this stage, the consumer is aware of his need or want. He also knows that he wants to buy a
product that can relieve his problem. Therefore, he wants to know more about the product that can
relieve his problem. This leads to the information search stage
◉ The consumer will try to ﬁnd out the options available and the best solution for his problem. The
buyer will look for information in internal and external business environments. A consumer may look
into advertisements, print, videos, online and even might ask his friends and family
◉ When consumers want to buy a laptop, they look for a laptop, its features, price, discounts,
warranty, after-sales service, insurance, and a lot of other important features
◉ Here, a marketer must offer a lot of information about the product in the form of informative videos,
demos, blogs, how-to-do videos, and celebrity interviews
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Evaluation of Alternatives:
◉ By now the consumer has done enough research about the kind of product that can solve his
problem. The next step is to evaluate alternative products that can solve his problem. Various points
of information gathered from different sources are used in evaluating alternatives
◉ Generally, consumers evaluate the alternatives based on a number of attributes of the product
◉ Looks, durability, quality, price, service, popularity, brand, social media reviews are some of the
factors that consumers consider
◉ The market offers many products that can solve the problem of a consumer. Hence the consumer
has to make a choice after evaluating the various alternatives available
◉ At the end of this stage, the consumer will rank his choices and pick a product that best matches his
needs and wants.
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Purchase decisions:
◉ At this point, customers have already explored multiple options. They are aware of the pricing and payment options
available. Here, consumers are deciding whether to buy that product or not. Yes, even at this stage they can still drop
the purchase and walk away.
◉ Philip Kotler (2009) says the final purchase decision may be ‘interrupted’ by two factors. Customers may get negative
feedback from friends or other customers who bought it. For example, a customer shortlisted a laptop, but his friend
gave negative feedback. This will make him to change his decision. Furthermore, the decision might also change.
Sudden changes in business plans, financial crunch, unexpected higher prices, etc. might lead the consumer to drop
the idea of buying the laptop.
◉ The Consumer chooses the product that he wants to buy, but many times, he may not actually buy it for various
reasons. At this stage, a marketer should find out the various reasons why the consumer is hesitating to buy. The
reasons could be price, value, and change in the needs of the consumer.
◉ A marketer needs to step up the game. Start by reminding the customers of the reason behind their decision to buy
the product. Furthermore, give as much information regarding your brand reiterating that you are the best provider of
the product that can fulfill his needs.
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Post Purchase Evaluation:
◉ This is the last stage and is most often ignored by marketers
◉ After buying the product, customers compare products with their expectations. There can be two outcomes: Either
satisfaction or dissatisfaction. Consumers will be happy after buying the product if it has satisfied their needs. But in
case the product was not up to his expectations, the consumer will be dissatisfied. A consumer can be lost even at
this stage
◉ A dissatisfied customer might feel as though he took an incorrect decision. This will result in returns! Offering an
exchange will be a straightforward action. However, even when a customer is satisfied, there is no guarantee that the
customer might be a repeat customer
◉ Customers, either satisfied or dissatisfied, can take action to distribute their experience in the form of customer
reviews. This may be done through reviews on customer forums, websites, social media conversations, or word of
mouth
◉ A marketer has to make sure that the consumer will be satisfied with the product so that his experience will lead to
repeat customers
◉ Brands need to be careful to create a positive post-purchase experience.
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