Pages marking are from Ramaswpany
Answers from Kotler
Discuss the Boston Consultancy Group approach to business portfolio analysis for each type of SBU.
2009
How does the B.C.G. matrix help in developing separate strategies and assign appropriate funding?
2008
How does B.C.G. matrix help in developing separate marketing strategies.
2010
SN: BCG Matrix
2007
SN: BCG Matrix
2004
SN: BCG Matrix
2003
Discuss: BCG Matrix
2002
Page 119 Author Ramaswamy
Boston Consulting Group (BCG) Matrix is a four celled matrix (a 2 * 2 matrix) developed by BCG, USA. It
is the most renowned corporate portfolio analysis tool. It provides a graphic representation for an
organization to examine different businesses in it’s portfolio on the basis of their related market share
and industry growth rates. It is a two dimensional analysis on management of SBU’s (Strategic Business
Units). In other words, it is a comparative analysis of business potential and the evaluation of
environment.
According to this matrix, business could be classified as high or low according to their industry growth
rate and relative market share.
Relative Market Share = SBU Sales this year leading competitors sales this year.
Market Growth Rate = Industry sales this year - Industry Sales last year.
The analysis requires that both measures be calculated for each SBU. The dimension of business
strength, relative market share, will measure comparative advantage indicated by market dominance.
The key theory underlying this is existence of an experience curve and that market share is achieved due
to overall cost leadership.
BCG matrix has four cells, with the horizontal axis representing relative market share and the vertical
axis denoting market growth rate. The mid-point of relative market share is set at 1.0. if all the SBU’s are
in same industry, the average growth rate of the industry is used. While, if all the SBU’s are located in
different industries, then the mid-point is set at the growth rate for the economy.
Resources are allocated to the business units according to their situation on the grid. The four cells of
this matrix have been called as stars, cash cows, question marks and dogs. Each of these cells represents
a particular type of business.
BCG Matrix
10 x
1x
0.1 x
Figure: BCG Matrix
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1. Stars- Stars represent business units having large market share in a fast growing industry. They may
generate cash but because of fast growing market, stars require huge investments to maintain their
lead. Net cash flow is usually modest. SBU’s located in this cell are attractive as they are located in a
robust industry and these business units are highly competitive in the industry. If successful, a star will
become a cash cow when the industry matures.
2. Cash Cows- Cash Cows represents business units having a large market share in a mature, slow
growing industry. Cash cows require little investment and generate cash that can be utilized for
investment in other business units. These SBU’s are the corporation’s key source of cash, and are
specifically the core business. They are the base of an organization. These businesses usually follow
stability strategies. When cash cows loose their appeal and move towards deterioration, then a
retrenchment policy may be pursued.
3. Question Marks- Question marks represent business units having low relative market share and
located in a high growth industry. They require huge amount of cash to maintain or gain market share.
They require attention to determine if the venture can be viable. Question marks are generally new
goods and services which have a good commercial prospective. There is no specific strategy which can
be adopted. If the firm thinks it has dominant market share, then it can adopt expansion strategy, else
retrenchment strategy can be adopted. Most businesses start as question marks as the company tries to
enter a high growth market in which there is already a market-share. If ignored, then question marks
may become dogs, while if huge investment is made, then they have potential of becoming stars.
4. Dogs- Dogs represent businesses having weak market shares in low-growth markets. They neither
generate cash nor require huge amount of cash. Due to low market share, these business units face cost
disadvantages. Generally retrenchment strategies are adopted because these firms can gain market
share only at the expense of competitor’s/rival firms. These business firms have weak market share
because of high costs, poor quality, ineffective marketing, etc. Unless a dog has some other strategic
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aim, it should be liquidated if there is fewer prospects for it to gain market share. Number of dogs
should be avoided and minimized in an organization.
Limitations of BCG Matrix
The BCG Matrix produces a framework for allocating resources among different business units and
makes it possible to compare many business units at a glance. But BCG Matrix is not free from
limitations, such as1. BCG matrix classifies businesses as low and high, but generally businesses can be medium also.
Thus, the true nature of business may not be reflected.
2. Market is not clearly defined in this model.
3. High market share does not always leads to high profits. There are high costs also involved with high
market share.
4. Growth rate and relative market share are not the only indicators of profitability. This model ignores
and overlooks other indicators of profitability.
5. At times, dogs may help other businesses in gaining competitive advantage. They can earn even
more than cash cows sometimes.
6. This four-celled approach is considered as to be too simplistic.
Appply segmentation targeting and positioning to the following company's products.(Take any product
2009
What do you understand by product positioning in marketing?
2010
SN: Repositioning
2009
Repositioning – Page 230 Author Ramaswamy
In marketing, positioning has come to mean the process by which marketers try to create an image or
identity in the minds of their target market for its product, brand, or organization.
Re-positioning involves changing the identity of a product, relative to the identity of competing
products, in the collective minds of the target market.
De-positioning involves attempting to change the identity of competing products, relative to the identity
of your own product, in the collective minds of the target market.
The original work on Positioning was consumer marketing oriented, and was not as much focused on the
question relative to competitive products as much as it was focused on cutting through the ambient
"noise" and establishing a moment of real contact with the intended recipient. In the classic example of
Avis claiming "No.2, We Try Harder", the point was to say something so shocking (it was by the
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standards of the day) that it cleared space in your brain and made you forget all about who was #1, and
not to make some philosophical point about being "hungry" for business.
The growth of high-tech marketing may have had much to do with the shift in definition towards
competitive positioning. An important component of hi-tech marketing in the age of the world wide web
is positioning in major search engines such as Google, Yahoo and Bing, which can be accomplished
through Search Engine Optimization , also known as SEO. This is an especially important component
when attempting to improve competitive positioning among a younger demographic, which tends to be
web oriented in their shopping and purchasing habits as a result of being highly connected and involved
in social media in general.
Definitions
Although there are different definitions of Brand Positioning, probably the most common is: identifying
a market niche for a brand, product or service utilizing traditional marketing placement strategies (i.e.
price, promotion, distribution, packaging, and competition).
Positioning is also defined as the way by which the marketers create an impression in the customers
mind.
Positioning is a concept in marketing which was first introduced by Jack Trout ( "Industrial Marketing"
Magazine- June/1969) and then popularized by Al Ries and Jack Trout in their bestseller book
"Positioning - The Battle for Your Mind." (McGraw-Hill 1981)
This differs slightly from the context in which the term was first published in 1969 by Jack Trout in the
paper "Positioning" is a game people play in today’s me-too market place" in the publication Industrial
Marketing, in which the case is made that the typical consumer is overwhelmed with unwanted
advertising, and has a natural tendency to discard all information that does not immediately find a
comfortable (and empty) slot in the consumers mind. It was then expanded into their ground-breaking
first book, "Positioning: The Battle for Your Mind," in which they define Positioning as "an organized
system for finding a window in the mind. It is based on the concept that communication can only take
place at the right time and under the right circumstances" (p. 19 of 2001 paperback edition).
What most will agree on is that Positioning is something (perception) that happens in the minds of the
target market. It is the aggregate perception the market has of a particular company, product or service
in relation to their perceptions of the competitors in the same category. It will happen whether or not a
company's management is proactive, reactive or passive about the on-going process of evolving a
position. But a company can positively influence the perceptions through enlightened strategic actions.
A company, a brand or a brand must have positioning concept in order to survive in the competitive
marketplace. If you don't position your business, you competitor will which is likely not what you desire.
(According to the book "Marketing Concepts that Win! Copyright 2011 by Martha Guidry, Live Oak Book
Company) Many individuals confuse a core idea concept with a positioning concept. A Core Idea
Concept simply describes the product or service. Its purpose is merely to determine whether the idea
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has any interest to the end buyer. In contrast, a Positioning Concept attempts to sell the benefits of the
product or service to a potential buyer. The positioning concepts focus on the rational or emotional
benefits that buyer will receive or feel by using the product/service. A successful positioning concept
must be developed and qualified before a "positioning statement" can be created. The positioning
concept is shared with the target audience for feedback and optimization; the Positioning Statement (as
defined below) is a business person's articulation of the target audience qualified idea that would be
used to develop a creative brief for an agency to develop advertising or a communications strategy.
Positioning Statement (As written in the highly revered book Crossing the Chasm. Copyright 1991, by
Geoffrey Moore, HarperCollins Publishers) For (target customer) Who (statement of the need or
opportunity) The (product name) is a (product category) That (statement of key benefit – that is,
compelling reason to buy) Unlike (primary competitive alternative) Our product (statement of primary
differentiation)
Differentiation in the context of business is what a company can hang its hat on that no other business
can. For example, for some companies this is being the least expensive. Other companies credit
themselves with being the first or the fastest. Whatever it is a business can use to stand out from the
rest is called differentiation. Differentiation in today’s over-crowded marketplace is a business
imperative, not only in terms of a company’s success, but also for its continuing survival.*
Brand positioning process
Effective Brand Positioning is contingent upon identifying and communicating a brand's uniqueness,
differentiation and verifiable value. It is important to note that "me too" brand positioning contradicts
the notion of differentiation and should be avoided at all costs. This type of copycat brand positioning
only works if the business offers its solutions at a significant discount over the other competitor(s).
Generally, the brand positioning process involves:
1. Identifying the business's direct competition (could include players that offer your product/service
amongst a larger portfolio of solutions)
2. Understanding how each competitor is positioning their business today (e.g. claiming to be the
fastest, cheapest, largest, the #1 provider, etc.)
3. Documenting the provider's own positioning as it exists today (may not exist if startup business)
4. Comparing the company's positioning to its competitors' to identify viable areas for differentiation
5. Developing a distinctive, differentiating and value-based positioning concept
6. Creating a positioning statement with key messages and customer value propositions to be used for
communications development across the variety of target audience touch points (advertising, media,
PR, website, etc.)
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Product positioning process
Generally, the product positioning process involves:
1. Defining the market in which the product or brand will compete (who the relevant buyers are)
2. Identifying the attributes (also called dimensions) that define the product 'space'
3. Collecting information from a sample of customers about their perceptions of each product on the
relevant attributes
4. Determine each product's share of mind
5. Determine each product's current location in the product space
6. Determine the target market's preferred combination of attributes (referred to as an ideal vector)
7. Examine the fit between:
o The position of your product
o The position of the ideal vector
Positioning concepts
More generally, there are three types of positioning concepts:
1. Functional positions
o Solve problems
o Provide benefits to customers
o Get favorable perception by investors (stock profile) and lenders
2. Symbolic positions
o Self-image enhancement
o Ego identification
o Belongingness and social meaningfulness
o Affective fulfillment
3. Experiential positions
o Provide sensory stimulation
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o Provide cognitive stimulation
Measuring the positioning
Positioning is facilitated by a graphical technique called perceptual mapping, various survey techniques,
and statistical techniques like multi dimensional scaling, factor analysis, conjoint analysis, and logit
analysis.
Repositioning a company
In volatile markets, it can be necessary - even urgent - to reposition an entire company, rather than just
a product line or brand. When Goldman Sachs and Morgan Stanley suddenly shifted from investment to
commercial banks, for example, the expectations of investors, employees, clients and regulators all
needed to shift, and each company needed to influence how these perceptions changed. Doing so
involves repositioning the entire firm.
This is especially true of small and medium-sized firms, many of which often lack strong brands for
individual product lines. In a prolonged recession, business approaches that were effective during
healthy economies often become ineffective and it becomes necessary to change a firm's positioning.
Upscale restaurants, for example, which previously flourished on expense account dinners and
corporate events, may for the first time need to stress value as a sale tool.
Repositioning a company involves more than a marketing challenge. It involves making hard decisions
about how a market is shifting and how a firm's competitors will react. Often these decisions must be
made without the benefit of sufficient information, simply because the definition of "volatility" is that
change becomes difficult or impossible to predict.
Positioning is however difficult to measure, in the sense that customer perception on a product may not
tested on quantitative measures.
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Why would a company want to segment a market? What factors should considered for effective market
2009
What is segmentation? What are the factors which influence segmentation. Give a detailed study for
2010
What are the various levels of market segmentation and bases for segmenting consumer market?
2008
SN: Segmentation and Targeting
2007
What is market segmentation? Ehat are the requirements for effective segmentation?
2006
Discuss the basis for segmentation consumer and industrial markets
2006
Explain the different segementation variables which can be used for segmentation of industrial
2005
What is market? Explain the elasticity's that expand or contract a market. Explain the strategy of
2004
What is marketing? What and how are markets segmented and what are the pre-requisites?
2003
What is market segmentation? What are its pre-requisite and benefits? Describe the base of market
2002
What is market segmentation? What are the essentials for implementing this strategy? Elaborate on
2001
What is market segmentation? Ehat are the requirements for effective segmentation?
2000
Market segmentation aims to increase a company’s precision marketing. A market segment consists of a
large identifiable group within a market, with similar wants, purchasing power, geographical location,
buying attitudes, or buying habits. For example, an automaker may identify four broad segments in the
car market: buyers who are primarily seeking (1) basic transportation, (2) high performance, (3) luxury,
or (4) safety. Because the needs, preferences, and behavior of segment members are similar but not
identical, Anderson and Narus urge marketers to present flexible market offerings instead of one
standard offering to all members of a segment.2 A flexible market offering consists of the product and
service elements that all segment members value, plus options (for an additional charge) that some
segment members value. For example, Delta Airlines offers all economy passengers a seat, food, and
soft drinks, but it charges extra for alcoholic beverages and earphones. Segment marketing allows a firm
to create a more fine-tuned product or service offering and price it appropriately for the target
audience. The choice of distribution channels and communications channels becomes much easier, and
the firm may find it faces fewer competitors in certain segments.
Patterns of Market Segmentation
Market segments can be built up in many ways. One common method is to identify preference
segments. Suppose ice cream buyers are asked how much they value sweetness and creaminess as two
product attributes. Three different patterns can emerge:
➤ Homogeneous preferences: Figure 3-6 shows a market in which all of the consumers have roughly
the same preference, so there are no natural segments. We predict that existing brands would be similar
and cluster around the middle of the scale in both sweetness and creaminess.
➤ Diffused preferences: At the other extreme, consumer preferences may be scattered throughout the
space (Figure 3-6), indicating great variance in consumer preferences. One brand might position in the
center to appeal to the most people; if several brands are in the market, they are likely to position
throughout the space and show real differences to reflect consumer-preference differences.
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➤ Clustered preferences: The market might reveal distinct preference clusters, called natural market
segments (Figure 3-6). The first firm in this market might position in the center to appeal to all groups,
choose the largest market segment (concentrated marketing), or develop several brands for different
segments. If the first firm has only one brand, competitors would enter and introduce brands in the
other segments.
Smart marketers examine such segmentation patterns carefully to better understand the various
positions they might take in a market—and the competitive implications.
Market-Segmentation Procedure
Marketers use a three-step procedure for identifying market segments:
1. Survey stage. The researcher conducts exploratory interviews and focus groups to gain insight into
customer motivations, attitudes, and behavior. Then the researcher prepares a questionnaire and
collects data on attributes and their importance ratings, brand awareness and brand ratings, productusage patterns, attitudes toward the product category, and respondents’ demographics, geographics,
psychographics, and mediagraphics.
2. Analysis stage. The researcher applies factor analysis to the data to remove highly correlated
variables, then applies cluster analysis to create a specified number of maximally different segments.
3. Profiling stage. Each cluster is profiled in terms of its distinguishing attitudes, behavior, demographics,
psychographics, and media patterns, then each segment is given a name based on its dominant
characteristic. In a study of the leisure market, Andreasen and Belk found six segments:10 passive
homebody, active sports enthusiast, inner-directed self-sufficient, culture patron, active homebody, and
socially active.
They found that performing arts organizations could sell the most tickets by targeting culture patrons as
well as socially active people.
Market segmentation is the identification of portions of the market that are different from one another.
Segmentation allows the firm to better satisfy the needs of its potential customers.
The Need for Market Segmentation
The marketing concept calls for understanding customers and satisfying their needs better than the
competition. But different customers have different needs, and it rarely is possible to satisfy all
customers by treating them alike.
Mass marketing refers to treatment of the market as a homogenous group and offering the same
marketing mix to all customers. Mass marketing allows economies of scale to be realized through mass
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production, mass distribution, and mass communication. The drawback of mass marketing is that
customer needs and preferences differ and the same offering is unlikely to be viewed as optimal by all
customers. If firms ignored the differing customer needs, another firm likely would enter the market
with a product that serves a specific group, and the incumbant firms would lose those customers.
Target marketing on the other hand recognizes the diversity of customers and does not try to please all
of them with the same offering. The first step in target marketing is to identify different market
segments and their needs.
Requirements of Market Segments
In addition to having different needs, for segments to be practical they should be evaluated against the
following criteria:
• Identifiable: the differentiating attributes of the segments must be measurable so that they can be
identified.
• Accessible: the segments must be reachable through communication and distribution channels.
• Substantial: the segments should be sufficiently large to justify the resources required to target them.
• Unique needs: to justify separate offerings, the segments must respond differently to the different
marketing mixes.
• Durable: the segments should be relatively stable to minimize the cost of frequent changes.
A good market segmentation will result in segment members that are internally homogenous and
externally heterogeneous; that is, as similar as possible within the segment, and as different as possible
between segments.
Bases for Segmentation in Consumer Markets
Consumer markets can be segmented on the following customer characteristics.
• Geographic
• Demographic
• Psychographic
• Behavioralistic
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Geographic Segmentation
The following are some examples of geographic variables often used in segmentation.
• Region: by continent, country, state, or even neighborhood
• Size of metropolitan area: segmented according to size of population
• Population density: often classified as urban, suburban, or rural
• Climate: according to weather patterns common to certain geographic regions
Demographic Segmentation
Some demographic segmentation variables include:
• Age
• Gender
• Family size
• Family lifecycle
• Generation: baby-boomers, Generation X, etc.
• Income
• Occupation
• Education
• Ethnicity
• Nationality
• Religion
• Social class
Many of these variables have standard categories for their values. For example, family lifecycle often is
expressed as bachelor, married with no children (DINKS: Double Income, No Kids), full-nest, empty-nest,
or solitary survivor. Some of these categories have several stages, for example, full-nest I, II, or III
depending on the age of the children.
Psychographic Segmentation
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Psychographic segmentation groups customers according to their lifestyle. Activities, interests, and
opinions (AIO) surveys are one tool for measuring lifestyle. Some psychographic variables include:
• Activities
• Interests
• Opinions
• Attitudes
• Values
Behavioralistic Segmentation
Behavioral segmentation is based on actual customer behavior toward products. Some behavioralistic
variables include:
• Benefits sought
• Usage rate
• Brand loyalty
• User status: potential, first-time, regular, etc.
• Readiness to buy
• Occasions: holidays and events that stimulate purchases
Behavioral segmentation has the advantage of using variables that are closely related to the product
itself. It is a fairly direct starting point for market segmentation.
Bases for Segmentation in Industrial Markets
In contrast to consumers, industrial customers tend to be fewer in number and purchase larger
quantities. They evaluate offerings in more detail, and the decision process usually involves more than
one person. These characteristics apply to organizations such as manufacturers and service providers, as
well as resellers, governments, and institutions.
Many of the consumer market segmentation variables can be applied to industrial markets. Industrial
markets might be segmented on characteristics such as:
• Location
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• Company type
• Behavioral characteristics
Location
In industrial markets, customer location may be important in some cases. Shipping costs may be a
purchase factor for vendor selection for products having a high bulk to value ratio, so distance from the
vendor may be critical. In some industries firms tend to cluster together geographically and therefore
may have similar needs within a region.
Company Type
Business customers can be classified according to type as follows:
• Company size
• Industry
• Decision making unit
• Purchase Criteria
Behavioral Characteristics
In industrial markets, patterns of purchase behavior can be a basis for segmentation. Such behavioral
characteristics may include:
• Usage rate
• Buying status: potential, first-time, regular, etc.
• Purchase procedure: sealed bids, negotiations, etc.
Definition:
Target Marketing involves breaking a market into segments and then concentrating your marketing
efforts on one or a few key segments.
Target marketing can be the key to a small business’s success.
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The beauty of target marketing is that it makes the promotion, pricing and distribution of your products
and/or services easier and more cost-effective. Target marketing provides a focus to all of your
marketing activities.
So if, for instance, I open a catering business offering catering services in the client’s home, instead of
advertising with a newspaper insert that goes out to everyone, I could target my market with a direct
mail campaign that went only to particular residents.
While market segmentation can be done in many ways, depending on how you want to slice up the pie,
three of the most common types are:
• Geographic segmentation – based on location such as home addresses;
• Demographic segmentation – based on measurable statistics, such as age or income;
• Psychographic segmentation – based on lifestyle preferences, such as being urban dwellers or pet
lovers.
Targeting
After the process of segmentation the next step is for the organization to decide how it is going to target
these particular group(s). There are three targeting options an organization can adopt.
Option 1
Undifferentiated marketing - Sometimes referred to as mass marketing the firm may decide to aim its
resources at the entire market with one particular product. Coca Colas original marketing strategy was
based on this form. One product aimed at the mass market in the hope that a sufficient amount of
buyers would be attracted., although there are now changes in their product line to cater for growing
dietary and caffeine free needs of consumers.
Figure
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Option 2
Differentiated marketing strategy - Where the firm decides to target several segments and develops
distinct products/services with separate marketing mix strategies aimed at the varying groups. An
example of this would be airline companies offering first, business (segment 1) or economy class tickets
(segment 2) , with separate marketing programmes to attract the different groups.
Figure
Option 3
Concentrated Marketing: Where the organisation concentrates its marketing effort on one particular
segment. The firm will develop a product that caters for the needs of that particular group. For example
Rolls Royce cars aim its vehicles at the premium segment, same as Harrods within the UK.
Figure
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Explain the five M's of advertising in detail
2009
Explain concept of five M's in advertising.
2010
State the various attributes of the 5 M's of advertising.
2008
Explain 5 M's of advertising and state various sales promotion gimmicks companies adopt to boost the
2007
Five Ms of Advertising
An advertiser has to take decisions on the following aspects:
1. Mission : This refers to the purpose/objective behind advertising. The objectives behind advertising
are varied in character. They include sales promotion, information and guidance to consumers,
developing brand loyalty, market goodwill, facing market competition effectively, making the products
popular/successful and introduction of a new product. Decision in regard to mission is a basic one as
other decisions are to be adjusted as per the mission or objective or purpose of advertising decided. For
consumer products like chocolate, tooth paste, soap, the mission/objective include facing market
competition, sales promotion and making the product popular in the market.
2. Money : This refers to the finance provided for advertising purpose (advertising budget). It means
the budget allocation made by the company for advertising. Money provided is a limiting factor as
effectiveness of advertising, media used, coverage of advertising, etc. are related to the funds provided
for advertising purpose. Advertising is costly and companies have to spend crores of rupees for this
purpose. Advertising should be always within the limits of funds provided. Naturally, decisions on
advertising package should be adjusted as per the budget allocation for advertising.
It may be noted that consumer products like tooth paste or chocolate are highly competitive with
many substitutes easily available in the market. Naturally, extensive advertising on TV, newspapers,
radio, etc. is required. These media are costly. Naturally, the manufacturing/marketing company will
have to provide huge money for advertising purpose.
3. Message : Message is provided through the text of advertisement. The message is given through
written words, pictures, slogans and so on. The message is for the information, guidance and motivation
of prospective buyers. Attractive and meaningful messages give positive results and the advertising
becomes result-oriented. The services of creative writers, artists, etc. are used for giving attractive
message to the consumers. Here, the advertiser has to decide the message to be given, the media to be
used for communicating the message, the extent of creativity, the specific customer group selected for
giving the message and so on. The message is also related to the decisions taken as regards mission and
money provided for advertising.
For advertising consumer product like chocolate, the message is important. The buyers are mainly
children and others of lower age groups or for the benefit (pleasure and satisfaction) of younger
generation. The advertising message should be simple and easily understandable with the help of
picture or slogan. It should be also attractive and agreeable to younger generation. The pictures or
slogans used should be short and impressive.
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4. Media : Media of advertising are already noted previously. The advertiser has to take decision about
the media to be used for advertising purpose. Media differ as regards cost, coverage, effectiveness and
so on. The selection of media depends on the budget provided, products to be advertised, and features
of prospective buyers and so on. Wrong decision on media may make advertising ineffective and money
spent will be wasted. This suggests that media should be selected properly and decision in this regard is
important and critical.
For advertising popular and extensively used consumer items like chocolate, the media should be
selected properly. TV advertising particularly a cartoon channel, advertising in children books or
newspaper supplements for children, advertising on radio programmes for children, etc.
5. Measure : Measure relates to the effectiveness of advertising. An advertiser will like to make
evaluation of advertisement in order to judge its effectiveness. If an advertisement is not effective
/purposeful, it will be modified or withdrawn. This is necessary for avoiding expenditure on the
advertisement which is not effective or is not likely to give positive results. An advertiser has to measure
the effectiveness of his advertisement programme/ campaign and take suitable decisions. This decisionmaking as regards effectiveness of advertising is equally important and essential. Such testing facilitates
introduction of suitable remedial measures, if required.
For measuring effectiveness of chocolate advertising, the post advertising sale is one major
consideration. Demand creation in new market segments or in new age groups is another consideration
for the measurement of advertising effectiveness. Even success of sales promotion programme is useful
for measuring advertising effectiveness.
In brief, like other areas of marketing management, decision-making is necessary in advertising. This
relates to Five Ms - mission, money, message, media and measurement.
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Take a detailed note of enviornmental aspects in marketing in India
2009
What are the steps involved in strategic marketing planning. Explain the importance of good mission
2009
Enlist various factors which are focused while analyzing the marketing environment
2007
Explain the marketing philosophy adopted by organizations
2006
Page 109 and 458 Author Ramaswamy
Analyzing the Environment
If marketing is indeed about understanding and responding to customers, then solid analysis of the
environment is where great Web marketing plans begin. It is in the environment that we see the
changes which indicate emerging segments. For Web marketing, this process is constant. So much is
changing so fast that you just can't sit back, so this activity becomes an ongoing part of the solid Web
marketing plan.
Environmental Analysis:
Demographic ~ Competitive ~ Social-Cultural
Technological ~ Political-Legal ~ Economic
Consumer Behaviour
Environmental Analysis
When we speak of the marketing environment, we are referring to all of the things happening in our
world that may have an impact on business. Always keep in mind that the environment is an external
concept -- that is, it is outside the firm's control. Environmental analysis always refers to an industry as a
whole, not to a specific firm. Think of an entrepreneur about to start a business -- she would look for the
most promising opportunity and pick the best area to develop her Web marketing plan.
Web sites are unlike products. They can and do change frequently, with many major sites getting a
substantial overhaul every six months. Web activity is “right here, right now” and people can react
quickly. For instance, a well-publicized case of credit card fraud online would almost instantly affect
buyer behaviour. The site that had a problem can fix that problem in an hour in many cases. This isn't
like a lousy car that continues to be offered for years.
Environmental analysis is largely descriptive, but it is appropriate to note emerging trends or to
speculate on what competitors might do. Always label speculation as such: “From our experience, we
believe Giant Corp. will enter this market.”
Demographics
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To some, demographics determines everything. On the Web, though, it does not have the same
importance as in conventional marketing. That's because visitors to a site are defined clearly by their
interests (e.g. NFL football) moreso than their demographics.
Having said that, there are many sites which define themselves largely by age. Teens move towards sites
for their favoured bands, while there are many sites geared to retired people.
Who is on from what country is another issue. Women behave differently from men online and Europe
is forecast to grow mightily online.
Another issue is the number of people that will ultimately be regulars on the Web. So far, higher levels
of income and education are strong indicators of Web participation. How far down can we go in income
and education levels before we see a drop? With well under half of U.S. households online, growth is
waning.
Consider how changing demographic trends, such as ageing Baby Boomers or a larger teenage cohort
would affect the industry. Also, if there is a clear demographic profile for those who might visit sites in
this industry, that will be helpful in reaching them.
Competitive
The Web has transformed the nature of competitive analysis. Web sites reveal much of the strategy and
activity of firms on the Web, and they make it easy to assess strategies. Keep in mind that your
competitors will be among the visitors to your Web site! However, withholding information for this
reason is counterproductive.
Never forget that competition should always be broadly defined (movies and bars compete for
entertainment spending), so don't overlook the traditional businesses or catalogue operators.
The Web even has third parties that search out the lowest price for a given item, using robots to search
sites. If they could take away some of your business, they're competitors!
This section can have some overlap with the Current Situation section, but it needs to be covered
somewhere. Take particular heed of concepts or firms that have only given some indication they might
enter the fray. Remember, the point is to recognize what might happen in the future, not give a history
lesson.
Social-Cultural
For anyone considering retail sales on the Web, this area is crucial. Many consumers enjoy the
experience of shopping in malls and will never go for online buying. How large is the segment that is
desperate to do it all online?
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How will consumers react to bad experiences in the online world? Will they continue to visit auction
sites riddled with bogus bidders? If the order never comes, or is late, will they give up on Web
purchases? Some Web sites are using the weak strategy of free shipping as a lure for business. What will
happen when they tire of red ink and start covering their costs? Will consumers make that next click at
someone else's site?
Consider social changes or trends that may work for or against growth in the category. For instance, if
pet lovers are anxious to buy special presents for their animals, a site offering custom pet clothing might
do well.
This section is particularly useful for identifying segments for consumer categories. It can also be useful
in business marketing, especially with the entrepreneurial trend.
Technological
One helpful piece of advice here is to plan the strategy, then find or wait for the technology that will
execute it. The torrid pace of innovation in this area means that the unthinkable becomes the plausible
very rapidly. You really want to stay on top in this area!
Web technologies that allow faster file transfers, videoconferencing, interactive Web pages and more
are all progressing rapidly. If they could have an impact on the market under consideration, they must
be tracked.
Technology also makes it possible to create Web sites that track visitor behaviour and permit ongoing
refinements so people stay longer, or whatever the goal may be. Those using such technologies can be
more responsive to user trends. Database management is increasingly a part of most Web marketing
plans.
Adoption of technologies also enhances some businesses. For instance, the adoption of XML (eXtensible
Markup Language) will open new opportunities for supply chain management and effective
administration. Technologies also imply a threat for those on the outside.
Think broadly, and look realistically at what is happening out there in technology.
Political-Legal
With its open, free culture, the Web may seem an area that would bear little fruit for political-legal
matters. However, think of the impact taxation would have on the Web. Consider the possibility of
government regulation of Web activity or commerce. Imagine no more Microsoft trying to establish selfserving proprietary standards, as may happen if it gets broken up.
Into this area could fall certification of sites by some external authority.
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Many are striving to “control” the Web for their own interests. It would be prudent to be part of any
groups looking to set standards for an industry to make sure you can live with the solutions.
Economic
For years, the idea of perfect competition, which requires perfect information, lived only in economic
textbooks. Now, buyers can get huge amounts of information to make their decisions. The laws of
supply and demand apply on the Web as they do anywhere else.
Consider how supply and demand works for the industry you are analyzing. Don't jump to any
conclusions about prices being driven down by the Web. Remember there is a supply side to things.
What would happen to prices if manufacturers said they would only make the amount wanted at a
certain price?
Consider too how a recession would affect the Web. We don't know yet! In a recession, firms often shift
to other activities to keep busy and the Web opens new opportunities to do so.
In your analysis, consider these issues to see if economics could impact the industry and your plans.
Consumer Behaviour
In either the current situation section or this one, you should sum up the consumer behaviour (or buyer
behaviour for business) to show what the key segments look like and what motivates them in their
purchases -- their ideal marketing mix. By considering this from the perspective of consumers, we can
understand what each segment is all about before we try to match one to our firm.
It is very helpful to prepare a table showing the key segments and their ideal marketing mix -- the
products/services they would like to see, the places they would expect to find them, the level of pricing
they would be prepared to pay and the message that would work for them.
For example, we might find segments like these for online books (only three are shown to illustrate):
Table 1
P opular
Fiction
Specific
Best sellers authors
Price
Price
sensitive
insensitive
General
bookstores,
General sites fan sites
Popular
books at low Author info,
prices
new books
Special Interest
Books dealing with selected
areas
Price secondary to product
Specialty sites, some deep
general bookstores
We have books for your special
interest
Table 1
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This simple example shows how there are different levels of price sensitivity, difference preferences for
the kind of site and different products sought. By looking at the market as objectively as we can, we
come to understand the consumers who should be the focus of our marketing. The same technique
works in business -- some value speed, others want reliability or relationships or some other
differentiating factor. Typical business segmentation can get you into brand-conscious segments (the
item has to work well), price-conscious buyers (think all offerings are the same) and the value-in-use
purchaser, who works out all of the costs of ownership and is more likely to pay more initially for a
longer product life.
Bring out the various Core Concepts of marketing?
2008
Briefly describe the evolution of the modern marketing concept.
2002
Define marketing and state various core concepts / marketing philosophies
2007
Describe and explain the marketing concept. How has adoption and implementation of marketing
2001
There are five competing concepts under which organizations conduct marketing activities: production
concept, product concept, selling concept, marketing concept, and societal marketing concept.
The Production Concept
The production concept, one of the oldest in business, holds that consumers prefer products that are
widely available and inexpensive. Managers of production-oriented businesses concentrate on achieving
high production efficiency, low costs, and mass distribution. This orientation makes sense in developing
countries, where consumers are more interested in obtaining the product than in its features. It is also
used when a company wants to expand the market. Texas Instruments is a leading exponent of this
concept. It concentrates on building production volume and upgrading technology in order to bring
costs down, leading to lower prices and expansion of the market. This orientation has also been a key
strategy of many Japanese companies.
The Product Concept
Other businesses are guided by the product concept, which holds that consumers favor those products
that offer the most quality, performance, or innovative features. Managers in these organizations focus
on making superior products and improving them over time, assuming that buyers can appraise quality
and performance. Product-oriented companies often design their products with little or no customer
input, trusting that their engineers can design exceptional products. A General Motors executive said
years ago: “How can the public know what kind of car they want until they see what is available?” GM
today asks customers what they value in a car and includes marketing people in the very beginning
stages of design. However, the product concept can lead to marketing myopia.16 Railroad management
thought that travelers wanted trains rather than transportation and overlooked the growing
competition from airlines, buses, trucks, and automobiles. Colleges, department stores, and the post
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office all assume that they are offering the public the right product and wonder why their sales slip.
These organizations too often are looking into a mirror when they should be looking out of the window.
The Selling Concept
The selling concept, another common business orientation, holds that consumers and businesses, if left
alone, will ordinarily not buy enough of the organization’s products. The organization must, therefore,
undertake an aggressive selling and promotion effort. This concept assumes that consumers must be
coaxed into buying, so the company has a battery of selling and promotion tools to stimulate buying.
The selling concept is practiced most aggressively with unsought goods—goods that buyers normally do
not think of buying, such as insurance and funeral plots. The selling concept is also practiced in the
nonprofit area by fund-raisers, college admissions offices, and political parties.
Most firms practice the selling concept when they have overcapacity. Their aim is to sell what they make
rather than make what the market wants. In modern industrial economies, productive capacity has been
built up to a point where most markets are buyer markets (the buyers are dominant) and sellers have to
scramble for customers.
Prospects are bombarded with sales messages. As a result, the public often identifies marketing with
hard selling and advertising. But marketing based on hard selling carries high risks. It assumes that
customers who are coaxed into buying a product will like it; and if they don’t, that they won’t badmouth it or complain to consumer organizations and will forget their disappointment and buy it again.
These are indefensible assumptions.
In fact, one study showed that dissatisfied customers may bad-mouth the product to 10 or more
acquaintances; bad news travels fast, something marketers that use hard selling should bear in mind.17
The Marketing Concept
The marketing concept, based on central tenets crystallized in the mid-1950s, challenges the three
business orientations we just discussed.18 The marketing concept holds that the key to achieving
organizational goals consists of the company being more effective than its competitors in creating,
delivering, and communicating customer value to its chosen target markets.
Theodore Levitt of Harvard drew a perceptive contrast between the selling and marketing concepts:
“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 means of the product and the whole cluster of things associated with creating,
delivering and finally consuming it.”19
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The marketing concept rests on four pillars: target market, customer needs, integrated marketing, and
profitability. The selling concept takes an inside-out perspective. It starts with the factory, focuses on
existing products, and calls for heavy selling and promoting to produce profitable sales. The marketing
concept takes an outside-in perspective.
It starts with a well-defined market, focuses on customer needs, coordinates activities that affect
customers, and produces profits by satisfying customers.
The Societal Marketing Concept
Some have questioned whether the marketing concept is an appropriate philosophy in an age of
environmental deterioration, resource shortages, explosive population growth, world hunger and
poverty, and neglected social services. Are companies that successfully satisfy consumer wants
necessarily acting in the best, long-run interests of consumers and society? The marketing concept
sidesteps the potential conflicts among consumer wants, consumer interests, and long-run societal
welfare.
Yet some firms and industries are criticized for satisfying consumer wants at society’s expense. Such
situations call for a new term that enlarges the marketing concept. We propose calling it the societal
marketing concept, which holds that the organization’s task is to determine the needs, wants, and
interests of target markets and to deliver the desired satisfactions 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 build social and ethical considerations into their
marketing practices. They must balance and juggle the often conflicting criteria of company profits,
consumer want satisfaction, and public interest.
Yet a number of companies have achieved notable sales and profit gains by adopting and practicing the
societal marketing concept.
Some companies practice a form of the societal marketing concept called cause related marketing.
Pringle and Thompson define this as “activity by which a company with an image, product, or service to
market builds a relationship or partnership with a ‘cause,’ or a number of ‘causes,’ for mutual
benefit.”23 They see it as affording an opportunity for companies to enhance their corporate
reputation, raise brand awareness, increase customer loyalty, build sales, and increase press coverage.
They believe that customers will increasingly look for demonstrations of good corporate citizenship.
Smart companies will respond by adding “higher order” image attributes than simply rational and
emotional benefits. Critics, however, complain that cause-related marketing might make consumers feel
they have fulfilled their philanthropic duties by buying products instead of donating to causes directly.
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SN: Branding
2009
SN: Branding
2004
Explain the significance of product branding as compared to umbrella branding?
2009
SN: Branding
2003
SN: Branding policies
2002
SN: Branding and its implications
2007
Page 231 Author Ramaswamy
The American Marketing Association (AMA) defines a brand as a "name, term, sign, symbol or design, or
a combination of them intended to identify the goods and services of one seller or group of sellers and
to differentiate them from those of other sellers.
Therefore it makes sense to understand that branding is not about getting your target market to choose
you over the competition, but it is about getting your prospects to see you as the only one that provides
a solution to their problem.
The objectives that a good brand will achieve include:
• Delivers the message clearly
• Confirms your credibility
• Connects your target prospects emotionally
• Motivates the buyer
• Concretes User Loyalty
To succeed in branding you must understand the needs and wants of your customers and prospects. You
do this by integrating your brand strategies through your company at every point of public contact.
Your brand resides within the hearts and minds of customers, clients, and prospects. It is the sum total
of their experiences and perceptions, some of which you can influence, and some that you cannot.
A strong brand is invaluable as the battle for customers intensifies day by day. It's important to spend
time investing in researching, defining, and building your brand. After all your brand is the source of a
promise to your consumer. It's a foundational piece in your marketing communication and one you do
not want to be without.
Introduction
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Almost every business has a trading name, from the smallest market trader to the largest multi-national
corporation. Only a minority of those businesses however, have what could be classed as a ‘brand’ or a
‘brand name’.
Branding is a word commonly referred to by advertisers and marketing people, but what does it actually
mean, how can you get it, and most importantly; how will it benefit your business?
What is Branding?
There are many different definitions of a brand, the most effective description however, is that a brand
is a name or symbol that is commonly known to identify a company or it’s products and separate them
from the competition.
A well-known brand is generally regarded as one that people will recognise, often even if they do not
know about the company or its products/services. These are usually the businesse s name or the name
of a product, although it can also include the name of a feature or style of a product.
The overall ‘branding’ of a company or product can also stretch to a logo, symbol, or even design
features (e.g. Regularly used colours or layouts, such as red and white for Coca Cola.) that identify the
company or its products/services.
For example:
The Nike brand name is known throughout the world, people can identify the name and logo even if
they have never bought any of their products.
However, not only is the company name a brand, but the logo (The ‘tick’ symbol) is also a strong piece of
branding in its own right. The majority of people that are aware of the company can also identify it (or
its products) from this symbol alone.
The clothing and running shoe company Adidas is well known for using three stripes on its range of
products. This design feature branding allows people to identify their products, even if the Adidas brand
name and logo is not present.
How Can Branding Benefit My Business?
Recognition and Loyalty
The main benefit of branding is that customers are much more likely to remember your business. A
strong brand name and logo/ image helps to keep your company image in the mind of your potential
customers.
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If your business sells products that are often bought on impulse, a customer recognising your brand
could mean the difference between no-sale and a sale. Even if the customer was not aware that you sell
a particular product, if they trust your brand, they are likely to trust you with unfamiliar products. If a
customer is happy with your products or services, a brand helps to build customer loyalty across your
business.
Image of Size
A strong brand will project an image of a large and established business to your potential customers.
People usually associate branding with larger businesses that have the money to spend on advertising
and promotion. If you can create effective branding, then it can make your business appear to be much
bigger than it really is.
An image of size and establishment can be especially important when a customer wants reassurance
that you will still be around in a few years time.
Image of Quality
A strong brand projects an image of quality in your business, many people see the brand as a part of a
product or service that helps to show its quality and value.
It is commonly said that if you show a person two identical products, only one of which is branded; they
will almost always believe the branded item is higher quality.
If you can create effective branding, then over time the image of quality in your business will usually go
up. Of course, branding cannot replace good quality, and bad publicity will damage a brand (and your
businesses image), especially if it continues over a long period of time.
For example:
The Sunny Delight drinks brand was one of the biggest in the UK just a year after its launch. However,
constant bad publicity about the quality of the product has severely damaged the image of the brand,
and sales have dropped for each of the past several years.
Image of Experience and Reliability
A strong brand creates an image of an established business that has been around for long enough to
become well known. A branded business is more likely to be seen as experienced in their products or
services, and will generally be seen as more reliable and trustworthy than an unbranded business.
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Most people will believe that a business would be hesitant to put their brand name on something that
was of poor quality.
Multiple Products
If your business has a strong brand, it allows you to link together several different products or ranges.
You can put your brand name on every product or service you sell, meaning that customers for one
product will be more likely to buy another product from you.
For Example:
Sony sells televisions, music equipment, consoles, camcorders, DVD players, video players, and etc all
under the Sony brand name.
You can also create separate brand names for your product ranges, allowing people to see your brand
name, and then use the range brand name to work out what they wish to buy.
For Example:
Cadbury’s makes a range of confectionary under many different sub-brand names such as Dairy Milk,
Boost, Flake, and Time Out. All of these are sold under the product brand, but all feature the Cadbury’s
brand name on the packaging.
BRANDING POLICIES:
What do you understand by the term brand?
Firstly we need to understand about the term brand and branding what exactly they mean so Brand
represent the Image of the products and services by which customers defined those products and
services through name, term, sign, symbol, Logo, Design and any other features. Through these factors
one seller create difference their products and services from others products and services in the market.
In legal term we usually known brand as Trademark. In the phase of Branding policy communication tool
and consistent in execution method of products and services is the most important part.
There are certain key features which need to be measured from the term branding that is it creates
awareness the relevance of the branding. There are certain steps in the policies of branding which helps
in providing the structure which needs to be assessed and developed properly by its relevance and
awareness.
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Communication tool should be easy and well defined so customer gets full information about the
products and services in terms of benefits, Pros and cons of the products and services , this information
help to create perception in the mind of the customers, this phase called Brand awareness. Next step
defined the Brand Promise where marketers describe about what the brand must be and do for the
customer. At the company represent them as Global brand where company represent their products
and services as a global brand and perceived to reflect same set of value around the world like: puma,
Nike, Coca-cola, Apple, HP, Sony .
To elaborate a bit more in terms of legal: Branding policy is the combination of rules & regulations,
Producers and guidelines defined by the ministry of government, company Law and other laws defined
by the government that how a company define their products and services in terms of brand means
name, term, sign, symbol, Logo, Design and any other features should not be copy of other defined
brand which already represent the one Products or services of the seller or company. The core message
is that a company should use always different name, term, sign, symbol, Logo, Design and any other
features to represent the its products and services in the market in terms of brand. If a company use a
registered trademark this represent the violation of Intellectual property right.
Violation of IPR (Intellectual Property Right) is illegal and there is defined strict punishment and rules
and regulation regarding it. Of course Branding define by name, term, sign, symbol, Logo, Design and
any other features of products and services but positioning plays very important role in the branding
process. Punch lines, Tag lines, Phrases which describe the products and services in one sentences
comes under copyright law.
There are certain parameters in branding policies which is to be determined properly like the use of logo
which needs to be trusted and not copied from any other brand or a company. The uses of color,
electronic items such as posters, leaflets, power point presentation of a company, company
presentation, website of the company, other stationary items needs to be trusted, reports,
advertisements, newsletters and different policies like the pictorial as well as photographic material
needs to be properly designed which should be trusted.
There should be a unique and trusted logo of the company which will determine about the description
of the logo, which will help the branding in understanding the unique strategy of branding. As I have
described earlier in the above sentences that branding requires design and any other features which
should not be copied of other defined brand which already represent the one Products or services of the
seller or company which should define the uniqueness of the brand and should express about its worth
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and trust. The core message of the branding policies is that a company should use always different
name, term, sign, symbol, Logo, Design and any other features to represent the its products and services
in the market in terms of brand as compare to any brand which will describe about the company’s
uniqueness and if a company use a registered trademark this represent the violation of Intellectual
property right then it will always be safe and secure from any point of view. It will not have to suffer
from any other activities in future point of view.
SN: Promotion
2009
Select any brand you are familiar with and study the promotional mix. Also comment on the
2010
SN: Role of sales promotion
2004
Discuss the objectives and tools of consumer promotion
2006
SN: Why is there an increase in Sales Promotion
2008
Explain various sales promotion techniques adopted by companies to increase sales.
2010
What is sales promotion? Why is it used? Describe various types of sales promotions with relevant
2003
Page 423 and 425 Author Ramaswamy
It is not enough for a business to have good products sold at attractive prices. To generate sales and
profits, the benefits of products have to be communicated to customers. In marketing, this is commonly
known as "promotion".
Promotion is all about companies communicating with customers.
A business' total marketing communications programme is called the "promotional mix" and consists of
a blend of advertising, personal selling, sales promotion and public relations tools. In this revision note,
we describe the four key elements of the promotional mix in more detail.
It is helpful to define the four main elements of the promotional mix before considering their strengths
and limitations.
(1) Advertising
Any paid form of non-personal communication of ideas or products in the "prime media": i.e. television,
newspapers, magazines, billboard posters, radio, cinema etc. Advertising is intended to persuade and to
inform. The two basic aspects of advertising are the message (what you want your communication to
say) and the medium (how you get your message across)
(2) Personal Selling
Oral communication with potential buyers of a product with the intention of making a sale. The personal
selling may focus initially on developing a relationship with the potential buyer, but will always
ultimately end with an attempt to "close the sale".
(3) Sales Promotion
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Providing incentives to customers or to the distribution channel to stimulate demand for a product.
(4) Publicity
The communication of a product, brand or business by placing information about it in the media without
paying for the time or media space directly. otherwise known as "public relations" or PR.
Advantages and Disadvantages of Each Element of the Promotional Mix
What is Promotional Mix?
Integration of all the elements of promotion mix is necessary to meet the information requirements of
all target customers. This simply means that the promotion mix is not designed to satisfy only the
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prospective buyer or only the regular buyer. Some elements of the mix may be aimed at the target
customer who is unaware of the product, while others may be aimed at potential customers who are
fully aware of the product and are likely to purchase it. Suppose you are interested in buying a personal
computer. Because of your interest in the product, you started paying attention to computer
advertisements in newspapers and magazines. You may even read the media reports on personal
computers by experts. You also may participate in training programmes or demonstrations. You may
also contact the sales persons of different computers and find out the features and relative merits.
Based on all this information you may then purchase a specific brand.
Which aspect of the promotional mix brought you to the decision to buy the brand you finally selected?
You may say that the expertise of the salespersons was a major influence, but the fact is that all the
elements of the mix played their roles in bringing about the sale. Therefore, to get better response from
the target customers, you have to adopt all the different components of the promotion mix. However,
you should note that the elements of the promotion mix must be coordinated and integrated so that
they reinforce and complement each other to create a blend that helps in achieving the promotional
objectives of the organization.
Components of Promotion Mix
There are seven main elements in a promotional mix. They are:
1. Advertising - Any paid form of non-personal communication through mass media about a service or
product or an idea by a sponsor is called advertising. It is done through non personal channels or
media. Print advertisements, advertisements in Television, Radio, Billboard, Brouchers and Cataloges,
Direct mails, In-store display, motion pictures, emails, banner ads, web pages, posters are some of the
examples of advertising. Paid promotion and presentation of goods, services, ideas by a sponsor comes
under the advertisement.
2. Personal Selling - This is a process by which a person persuade the buyer to accept a product or a
point of view or convince the buyer to take specific course of action through face to face contact. It is
an act of helping and persuading through the use of oral presentation of products or services. Target
audience may very from product to product and situation to situation. In other words personal selling is
a person to person process by which the seller learns about the prospective buyer's wants and seeks to
satisfy them by making a sale. Examples: Sales Meetings, sales presentations, sales training and
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incentive programs for intermediary sales people, samples and telemarketing etc. It can be of face-toface or through telephone contact.
3. Publicity: Non-personal stimulation of demand for a product, service or business unit by generating
commercially significant news about it in published media or obtaining favourable presentation of it on
radio, television or stage. Unlike advertising, this form of promotion is not paid for by the sponsor.
Thus, publicity is news carried in the mass media about an organization, its products, policies, actions,
personnel etc. It can originate with the media or the marketer, and is published or broadcast at no
charge for media space and time. Examples: Magazine and Newspaper articles/reports, radio and
televison presentations, charitable contributions, speeches, issue advertising, and seminars. Publicity
can be favourable (positive) or unfavourable (Negative). The message is in the hands of media and not
controlled by the organization/firm.
4. Sales promotion - is any activity that offers an incentive for a limited period to obtain a desired
response from the target audience or intermediaries which includes wholesalers and retailers. It
stimulate consumer demand, market demand and improve product availability. Examples: Contests,
product samples, Coupons, sweepstakes, rebates, tie-ins, self-liquidating premiums, trade shows, tradeins, and exhibitions.
5 Corporate image - It is important to create a good image in the sight of general public as the Image of
an organization is a crucial point in marketing. If the reputation of a company is bad, consumers are less
willing to buy a product from this company as they would have been, if the company had a good image.
6 Exhibitions: Exhibitions provide a chance to try the product by the customers. It is an avenue for the
producers to get an instant response from the potential consumers of the products.
7 Direct Marketing is reaching the customer without using the traditional channels of advertising such
as radio, newspaper, television etc. This type of marketing reach the targeted consumers with
techniques such as promotional letters, street advertising, catalogue distribution, fliers etc.
These promotional efforts are of two general types involving:
1. Direct face to face communication
2. Indirect communication through some mass medium, such as television, newspapers, radio, etc.
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Sometimes a mixture of personal/direct and non personal/indirect promotion is used as we use in the
sales promotion. Industrial buyer will not decide to purchase equipments on the basis of
advertisements or direct mail. Personal selling is preferred in this case. On the other hand a customer
buying toothpaste or hair oil will have less contact with the company sales person and will be
influenced more by advertisements.
Sales Promotion:
Definition:
Materials that act as a direct inducement, offering added value, or incentive for the product, to resellers,
sales persons or consumers.
Designed for immediate (short term) increase in product sales.
Cirrus...Sweepstakes, cocktail parties, test drives
Selecting Promotional Tools
A marketer must do the following while planning and sending communications to a target audience:
1. Identify the Audience
Individuals, groups, special publics or the general public.
Intermediaries vs Consumer
2. Identify the Stage of Product Life Cycle
o Introductory Inform Publicity/Advertising/Sales force (interm.)/Sales promotion (free samples)
o Growth Persuade Differentiate from competitors offering
o Maturity Remind Reminder advertising, Sales promotion (coupons)
o Decline Cut budget
3. Product Characteristics
o Complexity How much information must be communicated. The more complex the message, the
greater the need to use personal selling.
o Risk Greater risk, greater need for personal selling
4. Stages of Buying Decision
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In many cases the final response sought is purchase, but purchase is the result of a long process of
consumer decision making. Need to know where the target audience now stands (in the process), and
what state they need to be moved to.
Adoption Process
o Not Aware--Advertising/Publicity
o Aware--no knowledge Advertising/Publicity
o Interest--how do they feel? Personal Selling/SalesPromotion/Advertising
o Evaluation--should they try? sales promotion/personal selling
o Trial--test drive/sales promotion
o Adoption--do they purchase? Reminder/reinforce--advertising
Communication programs goal must lead consumers to take the final step.
5. Channel Strategies
-Push Vs Pull Policy
o Push-promotes product only to the next institutions down the marketing channel. Stresses personal
selling, can use sales promotions and advertising used in conjunction.
o Pull-promotes directly to consumers, intention is to create a strong consumer demand, primarily
advertising and sales promotion. Since consumers are persuaded to seek products in retail stores,
retailers will in turn go to wholesalers etc (use channels overhead)
Nature of Sales Promotion
Encompasses all promotional activities and materials other than personal selling, advertising and
publicity. Grown dramatically in the last ten years due to short term focus on profits. Funds are usually
earmarked for advertising are transferred to sales promotion.
Often used in conjunction with other promotional efforts.
Scope and importance of sales promotion:
o 323 billion coupons were distributed 1993 nationally annually (3,200/household), only 2.3% are
redeemed.
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o 9000 trade shows containing 10 exhibits or more/year. New York auto show attracts more than a
million people per year.
o $15-20 billion/year spent on point of purchase material in stores.
Why??
o companies are looking to get a competitive edge
o quick returns are possible for short term profits
o more consumers are looking for promotions before purchase
o channel members putting pressure on mf. for promotions
o advances in tech. make SP easier (ie coupon redemption)
Sales Promotion Opportunities and Limitations
o Increase in sales by providing extra incentive to purchase. May focus on resellers (push), consumers
(pull) or both.
o Objectives must be consistent with promotional objectives and overall company objectives.
o Balance between short term sales increase and long term need for desired reputation and brand
image.
o Attract customer traffic and maintain brand/company loyalty.
o Reminder functions-calendars, T Shirts, match books etc.
o Impulse purchases increased by displays
o Contests generate excitement esp. with high payoffs.
Limitations
o Consumers may just wait for the incentives
o May diminish image of the firm, represent decline in the product quality.
o Reduces profit margins, customers may stock up during the promotion.
o Shift focus away from the product itself to secondary factors, therefore no product differential
advantage.
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Sales Promotion Methods
Consumer Sales Promotion Techniques
-encourage/stimulate customers to patronize a specific retail store or to try a specific product.
o Coupons:
Usually reduce the purchase price or offered as cash. Need to state the offer clearly and make it easy to
recognize.
Handout...Awash in Coupons...
Looks at the volume of coupons (323 bn) and the poor redemption rate (less than 3%). Looks at more
innovative media to deliver coupons (currently over 80% are delivered via the Sunday paper)....in store
by the products, as customers exit the store based on purchases...discussed delivering coupons to
customers as they enter the store, using a card that swipes to indicate past purchases. Past buying
behavior is the best predictor of future buying patterns!! Also discussed that they may be delivered via
TV, in conjunction with an advertisement.
Users only redeem coupons they would ordinarily purchase. 75% of the coupons are redeemed by
consumers who would buy the brand already.
Stores/marketers are honoring competitors coupons etc.
Stores often don't have enough of the couponed item in stock.
o Demonstrations:
Excellent attention getters. Labor costs are usually high.
o Frequent User Incentives:
Major airlines, helps foster customer loyalty to a specific company. Credit card companies. Trading
stamps-Co-ops back in England, foster retail loyalty.
Blockbuster's new credit card offers company products based on card usage. Cindy Crawford "Why wait
for whats coming to you" Co-Branded with immediate rewards...this is what is very appealing about this
card...immediate reward, as opposed to having to build up points for an air flight etc.
Airlines have had to raise the threshold of their award programs 35,000 from 20,000, 2 free round trip
tickets due to $3+trillion liabilities
Long Distance telephone also offer free air miles, >$25/mo = airmiles
Frequent User cards are used to collect information for companies enabling them to better target their
customers.
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o Point of Purchase Display:
Outside signs, window displays, counter pieces, display racks. 90% of retailers believe that point of
purchase materials sell products.
Essential for product introductions. Also with 2/3 of purchasing decisions made in the store, they are
important.
o Free Samples:
Stimulate trial of product. Increase sales volume at the early stage of the product life cycle and obtain
desirable distribution.
Most expensive sales promotion technique.
Not appropriate for mature products and slow turnover products.
Handout...With Sampling there is too a free lunch
Discusses the pros and cons of free sampling.
o Money Refunds/Rebates:
Submit proof of purchase and mail specific refund, usually need multiple purchase for refund. Helps
promote trial use, due to the complexity of the refund, it has little impact.
Customers have a poor perception of rebate offered products.
Used extensively in the Auto and Computer industry.
o Premium Items:
Offered free or at minimum cost as a bonus. Used to attract competitors customers, different sizes of
established products.
Gas stations give free glasses--basics buy!! McDonalds premium items are considered collectors items by
some!
Flintstones program last year with McDonalds.
Burger King with the Lion King movie
Last summer the following tie-in premium programs.
th Pepsi, Pizza Hut, Choice Hotels
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o Cents-off Offer:
Strong incentive for trying a product-very similar to coupons, but are a part of the package.
o Consumer Contests and Sweepstakes:
Consumers compete based on their analytical or creative skills. Must be accurate or you will anger
customers/retailers.
Sweepstakes are prohibited in some states.
SN: Pricing
2009
What are the various pricing methods? Elaborate with practical examples. Give a detail pricing
2010
How would you appraise the sales price?
2004
Explain the methods of pricing and pricing startegies.
2008
Name the various pricing methods. Describe any one of them.
2005
What are the objective of pricing? Describe the steps in the pricing process. Describe mark-up, target
2004
Illustrate with examples the various objectives; determinants and methods of pricing.
2003
Explain the various methods and objectives of pricing
2002
What are the possible pricing objectives? Explain the various pricing methods.
2001
Page 337 Author Ramaswamy
Pricing is the process of determining what a company will receive in exchange for its products. Pricing
factors are manufacturing cost, market place, competition, market condition, and quality of product.
Pricing is also a key variable in microeconomic price allocation theory. Pricing is a fundamental aspect of
financial modeling and is one of the four Ps of the marketing mix. The other three aspects are product,
promotion, and place. Price is the only revenue generating element amongst the four Ps, the rest being
cost centers.
Pricing is the manual or automatic process of applying prices to purchase and sales orders, based on
factors such as: a fixed amount, quantity break, promotion or sales campaign, specific vendor quote,
price prevailing on entry, shipment or invoice date, combination of multiple orders or lines, and many
others. Automated systems require more setup and maintenance but may prevent pricing errors. The
needs of the consumer can be converted into demand only if the consumer has the willingness and
capacity to buy the product. Thus pricing is very important in marketing.
Pricing Methods
Four models for calculating your pricing
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As we said earlier, there is no "one right way" to calculate your pricing. Once you've considered the
various factors involved and determined your objectives for your pricing strategy, now you need some
way to crunch the actual numbers. Here are four ways to calculate prices:
• Cost-plus pricing - Set the price at your production cost, including both cost of goods and fixed costs at
your current volume, plus a certain profit margin. For example, your widgets cost $20 in raw materials
and production costs, and at current sales volume (or anticipated initial sales volume), your fixed costs
come to $30 per unit. Your total cost is $50 per unit. You decide that you want to operate at a 20%
markup, so you add $10 (20% x $50) to the cost and come up with a price of $60 per unit. So long as you
have your costs calculated correctly and have accurately predicted your sales volume, you will always be
operating at a profit.
• Target return pricing - Set your price to achieve a target return-on-investment (ROI). For example, let's
use the same situation as above, and assume that you have $10,000 invested in the company. Your
expected sales volume is 1,000 units in the first year. You want to recoup all your investment in the first
year, so you need to make $10,000 profit on 1,000 units, or $10 profit per unit, giving you again a price
of $60 per unit.
• Value-based pricing - Price your product based on the value it creates for the customer. This is usually
the most profitable form of pricing, if you can achieve it. The most extreme variation on this is "pay for
performance" pricing for services, in which you charge on a variable scale according to the results you
achieve. Let's say that your widget above saves the typical customer $1,000 a year in, say, energy costs.
In that case, $60 seems like a bargain - maybe even too cheap. If your product reliably produced that
kind of cost savings, you could easily charge $200, $300 or more for it, and customers would gladly pay
it, since they would get their money back in a matter of months. However, there is one more major
factor that must be considered.
• Psychological pricing - Ultimately, you must take into consideration the consumer's perception of your
price, figuring things like:
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o Positioning - If you want to be the "low-cost leader", you must be priced lower than your competition.
If you want to signal high quality, you should probably be priced higher than most of your competition.
o Popular price points - There are certain "price points" (specific prices) at which people become much
more willing to buy a certain type of product. For example, "under $100" is a popular price point.
"Enough under $20 to be under $20 with sales tax" is another popular price point, because it's "one bill"
that people commonly carry. Meals under $5 are still a popular price point, as are entree or snack items
under $1 (notice how many fast-food places have a $0.99 "value menu"). Dropping your price to a
popular price point might mean a lower margin, but more than enough increase in sales to offset it.
o Fair pricing - Sometimes it simply doesn't matter what the value of the product is, even if you don't
have any direct competition. There is simply a limit to what consumers perceive as "fair". If it's obvious
that your product only cost $20 to manufacture, even if it delivered $10,000 in value, you'd have a hard
time charging two or three thousand dollars for it -- people would just feel like they were being gouged.
A little market testing will help you determine the maximum price consumers will perceive as fair.
Now, how do you combine all of these calculations to come up with a price? Here are some basic
guidelines:
• Your price must be enough higher than costs to cover reasonable variations in sales volume. If your
sales forecast is inaccurate, how far off can you be and still be profitable? Ideally, you want to be able to
be off by a factor of two or more (your sales are half of your forecast) and still be profitable.
• You have to make a living. Have you figured salary for yourself in your costs? If not, your profit has to
be enough for you to live on and still have money to reinvest in the company.
• Your price should almost never be lower than your costs or higher than what most consumers consider
"fair". This may seem obvious, but many entrepreneurs seem to miss this simple concept, either by
miscalculating costs or by inadequate market research to determine fair pricing. Simply put, if people
won't readily pay enough more than your cost to make you a fair profit, you need to reconsider your
business model entirely. How can you cut your costs substantially? Or change your product positioning
to justify higher pricing?
Pricing is a tricky business. You're certainly entitled to make a fair profit on your product, and even a
substantial one if you create value for your customers. But remember, something is ultimately worth
only what someone is willing to pay for it.
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Pricing strategies
Pricing strategies for products or services encompass three main ways to improve profits. These are that
the business owner can cut costs or sell more, or find more profit with a better pricing strategy. In the
downturn of 2008-11, and since, when costs are likely already at their lowest and sales are hard to find,
adopting a better pricing strategy is a key option to stay viable.
Merely raising prices is not always the answer, especially in a poor economy. Too many businesses have
been lost because they priced themselves out of the marketplace. On the other hand, too many
business and sales staff leave "money on the table". One strategy does not fit all, so adopting a pricing
strategy is a learning curve when studying the needs and behaviors of customers and clients.[1]
Models of pricing
Cost-plus pricing
Cost-plus pricing is the simplest pricing method. The firm calculates the cost of producing the product
and adds on a percentage (profit) to that price to give the selling price. This method although simple has
two flaws; it takes no account of demand and there is no way of determining if potential customers will
purchase the product at the calculated price.
This appears in two forms, Full cost pricing which takes into consideration both variable and fixed costs
and adds a % markup. The other is Direct cost pricing which is variable costs plus a % markup, the latter
is only used in periods of high competition as this method usually leads to a loss in the long run.
Creaming or skimming
In market skimming, goods are sold at higher prices so that fewer sales are needed to break even.
Selling a product at a high price, sacrificing high sales to gain a high profit is therefore "skimming" the
market. Skimming is usually employed to reimburse the cost of investment of the original research into
the product: commonly used in electronic markets when a new range, such as DVD players, are firstly
dispatched into the market at a high price. This strategy is often used to target "early adopters" of a
product or service. These early adopters are relatively less price-sensitive because either their need for
the product is more than the need to economise, they understand the value of the product better than
others or simply because they are too rich to be affected by the high prices.
This strategy is employed only for a limited duration to recover most of investment made to build the
product. To gain further market share, a seller must use other pricing tactics such as economy or
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penetration. This method can have some setbacks as it could leave the product at a high price against
the competition.[2]
Limit pricing
A limit price is the price set by a monopolist to discourage economic entry into a market, and is illegal in
many countries. The limit price is the price that the entrant would face upon entering as long as the
incumbent firm did not decrease output. The limit price is often lower than the average cost of
production or just low enough to make entering not profitable. The quantity produced by the incumbent
firm to act as a deterrent to entry is usually larger than would be optimal for a monopolist, but might
still produce higher economic profits than would be earned under perfect competition.
The problem with limit pricing as a strategy is that once the entrant has entered the market, the
quantity used as a threat to deter entry is no longer the incumbent firm's best response. This means that
for limit pricing to be an effective deterrent to entry, the threat must in some way be made credible. A
way to achieve this is for the incumbent firm to constrain itself to produce a certain quantity whether
entry occurs or not. An example of this would be if the firm signed a union contract to employ a certain
(high) level of labor for a long period of time.
Loss leader
A loss leader or leader is a product sold at a low price (ie at cost or below cost) to stimulate other
profitable sales.
Market-oriented pricing
Setting a price based upon analysis and research compiled from the target market. This means that
marketers will set prices depending on the results from the research. For instance if the competitors are
pricing their products at a lower price, then it's up to them to either price their goods at an above price
or below, depending on what the company wants to achieve .
Penetration pricing
Setting the price low in order to attract customers and gain market share. The price will be raised later
once this market share is gained.[3]
Price discrimination
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Setting a different price for the same product in different segments to the market. For example, this can
be for different ages, such as classes, or for different opening times, .
Premium pricing
Premium pricing is the practice of keeping the price of a product or service artificially high in order to
encourage favorable perceptions among buyers, based solely on the price. The practice is intended to
exploit the (not necessarily justifiable) tendency for buyers to assume that expensive items enjoy an
exceptional reputation, are more reliable or desirable, or represent exceptional quality and distinction.
Predatory pricing
Aggressive pricing (also known as "undercutting") intended to drive out competitors from a market. It is
illegal in some countries.
Contribution margin-based pricing
Contribution margin-based pricing maximizes the profit derived from an individual product, based on
the difference between the product's price and variable costs (the product's contribution margin per
unit), and on one’s assumptions regarding the relationship between the product’s price and the number
of units that can be sold at that price. The product's contribution to total firm profit (i.e. to operating
income) is maximized when a price is chosen that maximizes the following: (contribution margin per
unit) X (number of units sold)..
Psychological pricing
Pricing designed to have a positive psychological impact. For example, selling a product at $3.95 or
$3.99, rather than $4.00.
Dynamic pricing
A flexible pricing mechanism made possible by advances in information technology, and employed
mostly by Internet based companies. By responding to market fluctuations or large amounts of data
gathered from customers - ranging from where they live to what they buy to how much they have spent
on past purchases - dynamic pricing allows online companies to adjust the prices of identical goods to
correspond to a customer’s willingness to pay. The airline industry is often cited as a dynamic pricing
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success story. In fact, it employs the technique so artfully that most of the passengers on any given
airplane have paid different ticket prices for the same flight. [4]
Price leadership
An observation made of oligopolistic business behavior in which one company, usually the dominant
competitor among several, leads the way in determining prices, the others soon following. The context
is a state of limited competition, in which a market is shared by a small number of producers or sellers.
Target pricing
Pricing method whereby the selling price of a product is calculated to produce a particular rate of return
on investment for a specific volume of production. The target pricing method is used most often by
public utilities, like electric and gas companies, and companies whose capital investment is high, like
automobile manufacturers.
Target pricing is not useful for companies whose capital investment is low because, according to this
formula, the selling price will be understated. Also the target pricing method is not keyed to the demand
for the product, and if the entire volume is not sold, a company might sustain an overall budgetary loss
on the product.
Absorption pricing
Method of pricing in which all costs are recovered. The price of the product includes the variable cost of
each item plus a proportionate amount of the fixed costs and is a form of cost-plus pricing
High-low pricing
Method of pricing for an organization where the goods or services offered by the organization are
regularly priced higher than competitors, but through promotions, advertisements, and or coupons,
lower prices are offered on key items. The lower promotional prices are designed to bring customers to
the organization where the customer is offered the promotional product as well as the regular higher
priced products.[5]
Premium decoy pricing
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Method of pricing where an organization artificially sets one product price high, in order to boost sales
of a lower priced product.
Marginal-cost pricing
In business, the practice of setting the price of a product to equal the extra cost of producing an extra
unit of output. By this policy, a producer charges, for each product unit sold, only the addition to total
cost resulting from materials and direct labor. Businesses often set prices close to marginal cost during
periods of poor sales. If, for example, an item has a marginal cost of $1.00 and a normal selling price is
$2.00, the firm selling the item might wish to lower the price to $1.10 if demand has waned. The
business would choose this approach because the incremental profit of 10 cents from the transaction is
better than no sale at all.
Value-based pricing
Pricing a product based on the perceived value and not on any other factor. Pricing based on the
demand for a specific product would have a likely change in the market place.
Pay what you want
Pay what you want is a pricing system where buyers pay any desired amount for a given commodity,
sometimes including zero. In some cases, a minimum (floor) price may be set, and/or a suggested price
may be indicated as guidance for the buyer. The buyer can also select an amount higher than the
standard price for the commodity.
Giving buyers the freedom to pay what they want may seem to not make much sense for a seller, but in
some situations it can be very successful. While most uses of pay what you want have been at the
margins of the economy, or for special promotions, there are emerging efforts to expand its utility to
broader and more regular use.
Freemium
Freemium is a business model that works by offering a product or service free of charge (typically digital
offerings such as software, content, games, web services or other) while charging a premium for
advanced features, functionality, or related products and services. The word "freemium" is a
portmanteau combining the two aspects of the business model: "free" and "premium". It has become a
highly popular model, with notable success.
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Odd pricing
In this type of pricing, the seller tends to fix a price whose lastmost digits are odd numbers. This is done
so as to give the buyers/consumers no gap for bargaining as the prices seem to be less and yet in an
actual sense are too high. A good example of this can be noticed in telephone promotions of some
countries like Uganda where instead of writing the price as sh. 40000, they write it as sh. 39999. This
pricing policy is common in economies using the free market policy.
Pricing Objectives
The firm's pricing objectives must be identified in order to determine the optimal pricing. Common
objectives include the following:
• Current profit maximization - seeks to maximize current profit, taking into account revenue and costs.
Current profit maximization may not be the best objective if it results in lower long-term profits.
• Current revenue maximization - seeks to maximize current revenue with no regard to profit margins.
The underlying objective often is to maximize long-term profits by increasing market share and lowering
costs.
• Maximize quantity - seeks to maximize the number of units sold or the number of customers served in
order to decrease long-term costs as predicted by the experience curve.
• Maximize profit margin - attempts to maximize the unit profit margin, recognizing that quantities will
be low.
• Quality leadership - use price to signal high quality in an attempt to position the product as the quality
leader.
• Partial cost recovery - an organization that has other revenue sources may seek only partial cost
recovery.
• Survival - in situations such as market decline and overcapacity, the goal may be to select a price that
will cover costs and permit the firm to remain in the market. In this case, survival may take a priority
over profits, so this objective is considered temporary.
• Status quo - the firm may seek price stabilization in order to avoid price wars and maintain a moderate
but stable level of profit.
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SN: Micro Enviornment
2008
Analyze the needs and trends in the Macro Environment
2008
What do you understand by macro environment? Explain macro enviornment forces faced by a firm?
2006
List down the various factors which are present in the macro and micro environment and can
2005
MARKETING ENVIRONMENT
In order to correctly identify opportunities and monitor threats, the company must begin with
athorough understanding of the marketing environment in which the firm operates. The marketing
environment consists of all the actors and forces outside marketing that affect the marketing
management’s ability to develop and maintain successful relationships with its target customers.Though
these factors and forces may vary depending on the specific company and industrial group, they can
generally be divided into broad micro environmental and macro environmental components. For most
companies, the micro environmental components are: the company,suppliers, marketing channel firms
(intermediaries), customer markets, competitors, and publics which combine to make up the company’s
value delivery system. The macro environmental components are thought to be: demographic,
economic, natural, technological, political, and cultural forces. The wise marketing manager knows that
he or she cannot always affect environmental forces. However, smart managers can take a proactive,
rather than reactive,approach to the marketing environment. As marketing management collects and
processes data on these environments, they must be ever vigilant in their efforts to apply what they
learn to developing opportunities and dealing with threats. Studies have shown that excellent
companies not only have a keen sense of customer but an appreciation of the environmental forces
swirling around them. By constantly looking at the dynamic changes that are occurring in the
aforementioned environments, companies are better prepared to adapt to change, prepare long-range
strategy, meet the needs of today’s and tomorrow’s customers, and compete with the intense
competition present in the global marketplace. All firms are encouraged to adopt an environmental
management perspective in the new millennium. A company’s marketing environment consists of the
actors and forces outside marketing that affect marketing management’s ability to develop and
maintain successful relationships with its target customers.1). Being successful means being able to
adapt the marketing mix to trends and changes thisenvironment.2). Changes in the marketing
environment are often quick and unpredictable.3). The marketing environment offers both
opportunities and threats.4). The company must use its marketing research and marketing intelligence
systems to monitor the changing environment.5). Systematic environmental scanning helps marketers
to revise and adapt marketing strategies to meet new challenges and opportunities in the marketplace.
The marketing environment is made up of a:
1. Micro environmental
2. Macro-environment
1. Micro Environmental
The microenvironment consists of five components. The first is the organization’s internal
environment—its several departments and management levels—as it affects marketing management's
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decision making. The second component includes the marketing channel firms that cooperate to create
value: the suppliers and marketing intermediaries (middlemen, physical distribution firms, marketingservice agencies, financial intermediaries). The third component consists of the five types of markets in
which the organization can sell: the consumer, producer,reseller, government, and international
markets. The fourth component consists of thecompetitors facing the organization. The fifth component
consists of all the publics that have anactual or potential interest in or impact on the organization’s
ability to achieve its objectives:financial, media, government, citizen action, and local, general, and
internal publics. So themicroenvironment consists of six forces close to the company that affect its
ability to serve itscustomers:a. The company itself (including departments). b. Suppliers.c. Marketing
channel firms (intermediaries).d. Customer markets.e. Competitors.f. Publics.
1. The Company’s Microenvironment
As discussed earlier the company’s microenvironment consists of six forces that affect its abilityto serve
its customers. Lets discuss these forces in detail:
a. The Company
The first force is the company itself and the role it plays in the microenvironment. This could bedeemed
the internal environment.1). Top management is responsible for setting the company’s mission,
objectives, broadstrategies, and policies.2). Marketing managers must make decisions within the
parameters established by topmanagement.3). Marketing managers must also work closely with other
company departments. Areas such asfinance, R & D, purchasing, manufacturing, and accounting all
produce better results whenaligned by common objectives and goals.4). All departments must “think
consumer” if the firm is to be successful. The goal is to providesuperior customer value and satisfaction.
b. Suppliers
Suppliers are firms and individuals that provide the resources needed by the company and
itscompetitors to produce goods and services. They are an important link in the company’s
overallcustomer “value delivery system.”1). One consideration is to watch supply availability (such as
supply shortages).2). Another point of concern is the monitoring of price trends of key inputs. Rising
supply costsmust be carefully monitored.
c. Marketing Intermediaries
Marketing intermediaries are firms that help the company to promote, sell, and distribute itsgoods to
final buyers.1).
Resellers are distribution channel firms that help the company find customers or make salesto them.2).
These include wholesalers and retailers who buy and resell merchandise.3). Resellers often perform
important functions more cheaply than the company can performitself. However, seeking and working
with resellers is not easy because of the power that somedemand and use.
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Physical distribution firms help the company to stock and move goods from their points of origin to their
destinations. Examples would be warehouses (that store and protect goods beforethey move to the next
destination).
Marketing service agencies (such as marketing research firms, advertising agencies, mediafirms, etc.)
help the company target and promote its products.
Financial intermediaries (such as banks, credit companies, insurance companies, etc.) helpfinance
transactions and insure against risks.
d. Customers
The company must study its customer markets closely since each market has its own
specialcharacteristics. These markets normally include:1).
Consumer markets (individuals and households that buy goods and services for
personalconsumption).2).
Business markets (buy goods and services for further processing or for use in their production
process).3).
Reseller markets (buy goods and services in order to resell them at a profit).4).
Government markets (agencies that buy goods and services in order to produce public services or
transfer them to those that need them).5).
International markets (buyers of all types in foreign countries).
e. Competitors
Every company faces a wide range of competitors. A company must secure a strategic advantageover
competitors by positioning their offerings to be successful in the marketplace. No singlecompetitive
strategy is best for all companies.
f. Publics
A Public is any group that has an actual or potential interest in or impact on an organization’sability to
achieve its objectives. A company should prepare a marketing plan for all of their major publics as well
as their customer markets. Generally, publics can be identified as being:1). Financial publics--influence
the company’s ability to obtain funds.2). Media publics--carry news, features, and editorial opinion.3).
Government publics--take developments into account.4). Citizen-action publics--a company’s decisions
are often questioned by consumer organizations.5). Local publics--includes neighborhood residents and
community organizations.6). General publics--a company must be concerned about the general public’s
attitude toward its products and services.7). Internal publics--workers, managers, volunteers, and the
board of directors.
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2. MACRO ENVIRONMENT
The Company’s Macro environment
The company and all of the other actors operate in a larger macro environment of forces thatshape
opportunities and pose threats to the company. There are six major forces (outlined below)in the
company’s macro environment. There are six major forces (outlined below) in thecompany’s macro
environment.a. Demographic. b. Economic.c. Natural.d. Technological.e. Political.f. Cultural.
a. Demographic Environment
Demography is the study of human populations in terms of size, density, location, age, sex,
race,occupation, and other statistics. It is of major interest to marketers because it involves people and
people make up markets. Demographic trends are constantly changing. Some more interestingones
are.1). The world’s population (though not all countries) rate is growing at an explosive rate that
willsoon exceed food supply and ability to adequately service the population. The greatest danger isin
the poorest countries where poverty contributes to the difficulties. Emerging markets such asChina are
receiving increased attention from global marketers.2). The most important trend is the changing age
structure of the population. The population isaging because of a slowdown in the birth rate (in this
country) and life expectancy is increasing.The baby boomers following World War II have produced a
huge “bulge” in our population’sage distribution. The new prime market is the middle age group (in the
future it will be the senior citizen group). There are many subdivisions of this group.a). Generation X-this group lies in the shadow of the boomers and lack obvious distinguishingcharacteristics. They are a
very cynical group because of all the difficulties that have surroundedand impacted their group. b).
Echo boomers (baby boomlets) are the large growing kid and teen market. This group is usedto
affluence on the part of their parents (as different from the Gen Xers). One distinguishingcharacteristic
is their utter fluency and comfort with computer, digital, and Internet technology(sometimes called NetGens).c). Generational marketing is possible, however, caution must be used to avoid
generationalalienation. Many in the modern family now “telecommute”--work at home or in a remote
officeand conduct their business using fax, cell phones, modem, or the Internet In general, the
population is becoming better educated. The work force is be-coming more white-collar.Products such
as books and education services appeal to groups following this trend. Technicalskills (such as in
computers) will be a must in the future. The final demographic trend is theincreasing ethnic and racial
diversity of the population. Diversity is a force that must berecognized in the next decade. However,
companies must recognize that diversity goes beyond ethnic heritage. One the important markets of the
future are that disabled people (a market larger any of our ethnic minority groups).
b. Economic Environment
The economic environment includes those factors that affect consumer purchasing power andspending
patterns. Major economic trends in the United States include:1). Personal consumption (along with
personal debt) has gone up (1980s) and the early 1990s brought recession that has caused adjustments
both personally and corporately in this country.Today, consumers are more careful shoppers.2).
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Value marketing (trying to offer the consumer greater value for their dollar) is a very seriousstrategy in
the 1990s. Real income is on the rise again but is being carefully guarded by a value-conscious
consumer.3).
Income distribution is still very skewed in the U. S. and all classes have not shared in prosperity. In
addition, spending patterns show that food, housing, and transportation stillaccount for the majority of
consumer dollars. It is also of note that distribution of income hascreated a “two-tiered market” where
there are those that are affluent and less affluent. Marketersmust carefully monitor economic changes
so they will be able to prosper with the trend, notsuffer from it.
c. Natural Environment
The natural environment involves natural resources that are needed as inputs by marketers or that are
affected by marketing activities. During the past two decades environmental concernshave steadily
grown. Some trend analysts labeled the specific areas of concern were:
1).Shortages of raw materials.
Staples such as air, water, and wood products have been seriously damaged and non-renewablesuch as
oil, coal, and various minerals have been seriously depleted during industrial expansion.
2).Increased pollution
is a worldwide problem. Industrial damage to the environment is very serious. Far-sightedcompanies are
becoming “environmentally friendly” and are producing environmentally safe andrecyclable or
biodegradable goods. The public response to these companies is encouraging.However, lack of adequate
funding, especially in third world countries, is a major barrier.
3).Government intervention
in natural resource management has caused environmental concerns to be more practical andnecessary
in business and industry. Leadership, not punishment, seems to be the best policy for long-term results.
Instead of opposing regulation, marketers should help develop solutions to thematerial and energy
problems facing the world.
4).Environmentally sustainable strategies.
The so-called green movement has encouraged or even demanded that firms produce strategiesthat are
not only environmentally friendly but are also environmentally proactive. Firms are beginning to
recognize the link between a healthy economy and a healthy environment.
d. Technological Environment
The technological environment includes forces that create new technologies, creating new product and
market opportunities.1). Technology is perhaps the most dramatic force shaping our destiny.2). New
technologies create new markets and opportunities.3). The following trends are worth watching:a).
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Faster pace of technological change. Products are being technologically outdated at a rapid pace. b).
There seems to be almost unlimited opportunities being developed daily. Consider theexpanding fields
of health care, the space shuttle, robotics, and biogenetic industries.c). The challenge is not only
technical but also commercial--to make practical, affordableversions of products.d). Increased
regulation. Marketers should be aware of the regulations concerning product safety,individual privacy,
and other areas that affect technological changes. They must also be alert toany possible negative
aspects of an innovation that might harm users or arouse opposition.
e. Political Environment
The political environment includes laws, government agencies, and pressure groups thatinfluence and
limit various organizations and individuals in a given society. Various forms of legislation regulate
business.1). Governments develop public policy to guide commerce--sets of laws and regulations
limiting business for the good of society as a whole.2). Almost every marketing activity is subject to a
wide range of laws and regulations. Sometrends in the political environment include:
1). Increasing legislation to:a).Protect companies from each other.b).Protecting consumers
from unfair business practices.c).Protecting interests of society against unrestrained business behavior.
2). Changing government agency enforcement. New laws and their enforcement will continue or
increase.3). Increased emphasis on ethics and socially responsible actions. Socially responsible
firmsactively seek out ways to protect the long-run interests of their consumers and the environment.a).
Enlightened companies encourage their managers to look beyond regulation and “do the rightthing.” b).
Recent scandals have increased concern about ethics and social responsibility.c). The boom in ecommerce and Internet marketing has created a new set of social and ethicalissues. Concerns are
Privacy, Security, Access by vulnerable or unauthorized groups
f. Cultural Environment
The cultural environment is made up of institutions and other forces that affect society’s basicvalues,
perceptions, preferences, and behaviors. Certain cultural characteristics can affectmarketing decisionmaking. Among the most dynamic cultural characteristics are:1). Persistence of cultural values. People’s
core beliefs and values have a high degree of persistence.
Core beliefs and values are passed on from parents to children and are reinforced byschools, churches,
business, and government.
Secondary beliefs and values are more open tochange.2). Shifts in secondary cultural values. Since
secondary cultural values and beliefs are open tochange, marketers want to spot them and be able to
capitalize on the change potential. Society’smajor cultural views are expressed in:a).
People’s views of themselves.
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People vary in their emphasis on serving themselves versus serving others. In the 1980s, personal
ambition and materialism increased dramatically, with significant implications for marketing. The leisure
industry was a chief beneficiary. b).
People’s views of others.
Observers have noted a shift from a “me-society” to a “we-society.” Consumers are spending more on
products and services that will improve their lives rather than their image.c).
People’s views of organizations.
People are willing to work for large organizations butexpect them to become increasingly socially
responsible. Many companies are linking themselves to worthwhile causes. Honesty in appeals is a
must.d).
People’s views of society.
This orientation influences consumption patterns. “Buy American”versus buying abroad is an issue that
will continue into the next decade.e).
People’s view of nature.
There is a growing trend toward people’s feeling of mastery over nature through technology and the
belief that nature is bountiful. However, nature is finite. Loveof nature and sports associated with
nature are expected to be significant trends in the nextseveral years.f).
People’s views of the universe.
Studies of the origin of man, religion, and thought-provokingad campaigns are on the rise. Currently,
Americans are on a spiritual journey. This will probablytake the form of “spiritual individualism.”
Reference:Principles of Marketing, Philip Kotler, 12th Edition
SN: Packaging
2008
SN: Packaging
2007
Explain the functions of packaging
2006
What is the significance of packaging & Labeling in modern day marketing?
2010
SN: Functions of packaging
2004
What role does packaging play in the marketing mix?
2003
SN: Functions of packaging
2002
Page 235 Author Ramaswamy
Introduction
Packaging is now generally regarded as an essential component of our modern life style and the way
business is organized. Packaging is the enclosing of a physical object, typically a product that will be
offered for sale. It is the process of preparing items of equipment for transportation and storage and
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which embraces preservation, identification and packaging of products. Packing is recognized as an
integral part of modern marketing operation, which embraces all phases of activities involved in the
transfer of goods and services from the manufacturer to the consumer. Packaging is an important part
of the branding process as it plays a role in communicating the image and identity of a company.
How can we define Packaging?
Kotler defines packaging as "all the activities of designing and producing the container for a product."
Packaging can be defined as the wrapping material around a consumer item that serves to contain,
identify, describe, protect, display, promote, and otherwise make the product marketable and keep it
clean. Packaging is the outer wrapping of a product. It is the intended purpose of the packaging to make
a product readily sellable as well as to protect it against damage and prevent it from deterioration while
storing. Furthermore the packaging is often the most relevant element of a trademark and conduces to
advertising or communication.
Functional Requirements
1. Protection and preservation
A basic function of package is to protect and preserve the contents during transit from the manufacturer
to the ultimate consumer. It is the protection during transport and distribution; From climatic effects
(heat and cold, moisture, vapour, drying atmospheres); from hazardous substances and contaminants;
and from infestation. Protection is required against transportation hazards spillage, dirt, ingress and
egress of moisture, insect infection, contamination by foreign material, tampering pilferage etc. A
package should preserve the contents in 'Factory Fresh' condition during the period of storage and
transportation, ensuring protection from bacteriological attacks, chemical reaction etc.
2. Containment
Most products must be contained before they can be moved from one place to another. To function
successfully, the package must contain the product. This containment function of packaging makes a
huge contribution to protecting the environment. A better packaging help to maintain the quality of the
product and reachability of the product in the consumer's hand without spillages It gives better image to
the organisation.
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3. Communication
A major function of packaging is the communication of the product. A package must communicate what
it sells. When international trade is involved and different languages are spoken, the use of
unambiguous, readily understood symbols on the distribution package is essential. It is the interest
further that to get appropriate communication to the consumer about the product, how to use it and
other utility informations. Packaging protects the interests of consumers. Information includes: quantity;
price; inventory levels; lot number; distribution routes; size; elapsed time since packaging; colour; and
merchandising and premium data.
Types of packaging
An important distinction is to be made here between two types of packaging
o Transport packing: The product entering in to the trade need to be packed well enough to protect
against loss damage during handling, transport and storage. Eg: fiberboard, wooden crate etc.
o Consumer Packing: This packaging holds the required volume of the product for ultimate consumption
and is more relevant in marketing. Eg: beverages, tobacco etc.
Hazards of Transport
There are four main hazards of transport
* Drops and impacts
* Compression forces
* Vibration
* Climatic variations
Various Mechanical Tests
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o Drop Test: This test help to measure the ability of the container and inside packing materials to
provide protection to its contents and to measure the ability of the container to withstand rough
handling.
o Vibration Test: This test is to determine the ability of the container to withstand vibration and the
protection offered by materials used for interior packing.
o Compression Test: This test is carried out, generally, on empty containers, to measure the ability of
the container to resists external compressive loads applied to faces or applied to diagonally opposite
edges or corners.
o Inclined Impact Test: This test help to study the extend of damage in a way of crushing, breaking,
cracking, distortion, and shifting during handling storage and transport which occurs to the container
and its content.
o Rolling Test: This test helps to evaluate the overall strength of the container and the cushioning
material provided inside and any failure of the content.
o Drum test: This test help to evaluate loaded shipping containers with respect to general overall
durability and for the protection afforded to the contents against certain hazards of handling and
shipment.
Various Climatic Tests
o Rain Test: This test is conducted in a simulated rain condition to assess its impact on the test area for
two hours.
o Sand and Dust Test: This test is to evaluate the resistance of a package to the penetration of sand and
dust.
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o Salt Spray Test: This test is to evaluate the resistance of a package to corrosion by salt spray and to
serve as a general standard for corrosion.
o Fungus Resistance Test: This test is to evaluate all the materials used in the fabrication of shipping
containers for fungus resistance.
Importance of Cushion Materials
Cushioning is that part of packaging, which protects the article from damage due to shock and vibration.
The main functions of cushioning materials can be detailed as follows:
o Shock protection against vibration
o Protection against abrasion
o Protection of grease proof and water proof barriers at ponut of contact with solid blocks
o Protection of moisture vapour barriers at points of contact with sharp edges of the article itself.
o Protection of small projections
o Filling of void space in the container
o Other secondary purposes
Packaging Cost
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The most important aspect when we look into packaging is the packaging cost. Packaging cost include
the following:
* Material cost: It means the cost of the pack and quality control cost.
* Storage and handling cost of empty packages: This include the handling cost of bulky packages, heavy
materials of construction, drums etc.
* Packaging operation costs: This includes the cost involved in operations like, cleaning the package
product filling – closing, labeling – unitizing, stenciling, handling cylindrical slums etc.
* Storage of filled packages: This includes the cost incurred to shift the goods from one form of
packaging to another.
* Transportation cost of filled packages: This involves the transportation cost by sea, air etc. (freight by
volume)
* Loss and Damage cost: It is related to the loss and damage during operation, transportation delivery
etc.
* Insurance cost: It varies depending on the vulnerability of package
* Effect of packages on sales: The package that influence on sales.
* Obsolescence Cost: This cost involves when changes in the packaging materials, packages and labels
happen.
* Package developmental cost: This include the evaluation cost, pilot test cost, field testing cost,
consumer research cost, feed back cost, final trial cost etc.
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Importance of packaging: An Overview
Some of the major significance of packaging can be detailed as follows:
* Can make a product more convenient to use or store, easier to identify or promote or to send out a
message.
* Can make the important difference to a marketing strategy by meeting customers' needs better.
* Packaging plays a key role in brand promotion and management. Packaging is of great importance in
the final choice the consumer will make, because it directly involves convenience, appeal, information
and branding.
* The paramount concern of packaging is the reachability of the product without any damage. No
matter where and how the products are transported or shipped, they arrive at the customer's door in
working condition without need of repair or adjustment.
* Packaging is especially important in certain industry where future sales may be based largely on the
quality, integrity and performance of a company's previous delivery.
Functions of packaging
The various functions of packaging are divided into primary, secondary and tertiary functions. In
contrast with the primary functions, which primarily concern the technical nature of the packaging,
secondary functions relate to communications. Primary, secondary and tertiary functions are divided
into the following sub-functions:
Primary functions
Protective function
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Storage function
Loading and transport function
Secondary functions
Sales function
Promotional function
Service function
Guarantee function
Tertiary functions
Additional function
Protective function
The protective function of packaging essentially involves protecting the contents from the environment
and vice versa. The inward protective function is intended to ensure full retention of the utility value of
the packaged goods. The packaging is thus intended to protect the goods from loss, damage and theft.
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In addition, packaging must also reliably be able to withstand the many different static and dynamic
forces to which it is subjected during transport, handling and storage operations. The goods frequently
also require protection from climatic conditions, such as temperature, humidity, precipitation and solar
radiation, which may require "inward packaging measures" in addition to any "outward packaging
measures".
The outward protection provided by the packaging must prevent any environmental degradation by the
goods. This requirement is of particular significance in the transport of hazardous materials, with
protection of humans being of primary importance. The packaging must furthermore as far as possible
prevent any contamination, damage or other negative impact upon the environment and other goods.
The inward and outward protective function primarily places demands upon the strength, resistance and
leakproof properties of transport packaging.
Storage function
The packaging materials and packaging containers required for producing packages must be stored in
many different locations both before packaging of the goods and once the package contents have been
used. Packaging must thus also fulfill a storage function.
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Loading and transport function
Convenient goods handling entails designing transport packaging in such a manner that it may be held,
lifted, moved, set down and stowed easily, efficiently and safely. Packaging thus has a crucial impact on
the efficiency of transport, handling and storage of goods. Packaging should therefore be designed to be
easily handled and to permit space-saving storage and stowage. The shape and strength of packages
should be such that they may not only be stowed side by side leaving virtually no voids but may also be
stowed safely one above the other.
The most efficient method of handling general cargo is to make up cargo units. Packaging should thus
always facilitate the formation of cargo units; package dimensions and the masses to be accommodated
should where possible be tailored to the dimensions and load-carrying capacity of standard pallets and
containers.
Where handling is to be entirely or partially manual, packages must be easy to pick up and must be of a
suitably low mass. Heavy goods must be accommodated in packages which are well suited to
mechanical handling. Such items of cargo must be forkliftable and be provided with convenient loadbearing lifting points for the lifting gear, with the points being specially marked where necessary
(handling marks).
The loading and transport function places requirements upon the external shape of the package, upon
the mass of the goods accommodated inside and upon the convenient use of packaging aids. The
strength of the package required for stowing goods on top of each other demonstrates the close
relationship between the loading and transport function and the protective function.
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Sales function
The purpose of the sales function of a package is to enable or promote the sales process and to make it
more efficient.
Promotional function
Promotional material placed on the packaging is intended to attract the potential purchaser's attention
and to have a positive impact upon the purchasing decision. Promotional material on packaging plays a
particularly important role on sales packaging as it is directly addressed to the consumer. This function is
of subordinate significance in transport packaging. While product awareness is indeed generated along
the transport chain, excessive promotion also increases the risk of theft.
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Service function
The various items of information printed on packaging provide the consumer with details about the
contents and use of the particular product. Examples are the nutritional details on yogurt pots or dosage
information on medicines.
The package may also perform a further function once the contents have been used (e.g. storage
container, toy).
Guarantee function
By supplying an undamaged and unblemished package, the manufacturer guarantees that the details on
the packaging correspond to the contents. The packaging is therefore the basis for branded goods,
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consumer protection and product liability. There are legislative requirements which demand that goods
be clearly marked with details indicating their nature, composition, weight, quantity and storage life.
Additional function
The additional function in particular relates to the extent to which the packaging materials or packaging
containers may be reused once the package contents have been used. The most significant example is
the recycling of paper, paperboard and cardboard packaging as waste paper.
SN: Challenges faced in New Product Development
2008
What do you understand by the term 'Product'. Explain in detail Product classification and benefits of
2008
Explain the stages involved in the development of new product
2007
What is new product? Why do new products fail?
2006
Describe the process for New Product Development?
2006
Describe with suitable examples the stpes involved in the typical product process followed for new
2005
What are the steps involved in a New Product Development Process?
2010
Describe the new product planning process
2004
Describe the new product planning process
2003
What is product? What are its core and surround values? Explain the new product planning process?
2002
Describe the stpes in new product planning process.
2001
Describe the new product planning process
2000
Explain the process of New product Development with illustartions
2009
Page 252 Author Ramaswamy
In business and engineering, new product development (NPD) is the term used to describe the complete
process of bringing a new product to market. A product is a set of benefits offered for exchange and can
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be tangible (that is, something physical you can touch) or intangible (like a service, experience, or
belief). There are two parallel paths involved in the NPD process: one involves the idea generation,
product design and detail engineering; the other involves market research and marketing analysis.
Companies typically see new product development as the first stage in generating and commercializing
new products within the overall strategic process of product life cycle management used to maintain or
grow their market share.
The process
1. Idea Generation is often called the "fuzzy front end" of the NPD process
o Ideas for new products can be obtained from basic research using a SWOT analysis (Strengths,
Weaknesses, Opportunities & Threats), Market and consumer trends, company's R&D department,
competitors, focus groups, employees, salespeople, corporate spies, trade shows, or Ethnographic
discovery methods (searching for user patterns and habits) may also be used to get an insight into new
product lines or product features.
o Lots of ideas are being generated about the new product. Out of these ideas many ideas are being
implemented. The ideas use to generate in many forms and their generating places are also various.
Many reasons are responsible for generation of an idea.
o Idea Generation or Brainstorming of new product, service, or store concepts - idea generation
techniques can begin when you have done your OPPORTUNITY ANALYSIS to support your ideas in the
Idea Screening Phase (shown in the next development step).
2. Idea Screening
o The object is to eliminate unsound concepts prior to devoting resources to them.
o The screeners should ask several questions:
What is the current or expected competitive pressure for the product idea?
tured and delivered to the customer at the target price?
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3. Concept Development and Testing
o Develop the marketing and engineering details
decision maker in the purchasing process?
ity through virtual computer aided rendering, and rapid prototyping
o Testing the Concept by asking a sample of prospective customers what they think of the idea. Usually
via Choice Modelling.
4. Business Analysis
o Estimate likely selling price based upon competition and customer feedback
o Estimate sales volume based upon size of market and such tools as the Fourt-Woodlock equation
o Estimate profitability and break-even point
5. Beta Testing and Market Testing
o Produce a physical prototype or mock-up
o Test the product (and its packaging) in typical usage situations
o Conduct focus group customer interviews or introduce at trade show
o Make adjustments where necessary
o Produce an initial run of the product and sell it in a test market area to determine customer
acceptance
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6. Technical Implementation
o New program initiation
o Finalize Quality management system
o Resource estimation
o Requirement publication
o Publish technical communications such as data sheets
o Engineering operations planning
o Department scheduling
o Supplier collaboration
o Logistics plan
o Resource plan publication
o Program review and monitoring
o Contingencies - what-if planning
7. Commercialization (often considered post-NPD)
o Launch the product
o Produce and place advertisements and other promotions
o Fill the distribution pipeline with product
o Critical path analysis is most useful at this stage
8. New Product Pricing
o Impact of new product on the entire product portfolio
o Value Analysis (internal & external)
o Competition and alternative competitive technologies
o Differing value segments (price, value, and need)
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o Product Costs (fixed & variable)
o Forecast of unit volumes, revenue, and profit
New Product Planning and development
New products are a vital part of a firm’s competitive growth strategy. Leaders of successful firms know
that it is not enough to develop new products on sporadic basis. What counts is a climate of a products
development that leads to one triumph after another. It is commonplace fro major companies to have
50percent or more of their current sales in products introduced within the last 10 years.
Some Additional facts about new products are:
• Many new products are failures. Estimates of new product failures range from 33%-90%, depending on
industry.
• New product sales grow far more rapidly than sales of current products, potentially providing a
surprisingly large boost to a company’s growth rate;
• Companies vary widely in the effectiveness of their new products programs;
• A major obstacle to effectively predicting new product demand is limited vision;
• Common elements appear in the management practices that generally distinguish the relative degree
of efficiency and success between companies.
In one recent year, almost 22 000 products were introduced in supermarkets, drugstores, mass
merchandisers and health food stores.
Idea Generation
Every product starts as an idea. But all new product aides do not equal merit or potential for economic
or commercial success. Some estimates indicate that as many as 60-70 ideas are necessary to yield one
successful product. To develop a new product the following step must be realized:
1. Idea generation;
2. Idea screening;
3. Project planning;
4. Product development;
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5. Test marketing;
6. Commercialization.
Idea screening
The primary function of the idea screening process is two fold: first, to eliminate ideas for new products
that could not be profitably marketed by the firm, and second, to expand viable ideas into full product
concepts. New product ideas may be eliminated either because they are outside the fields of the firm’s
interest or because the firm does not have the necessary resources or technology to produce the
product at a profit. The organization has to consider three categories of risk in the idea screening phase
prior to reaching a decision. These three risk categories are:
1. Strategic risk – strategic risk involves the risk of not matching the role or purpose of a new product
with a specific strategic need or issue of the organization;
2. Market risk – market risk is the risk that a new product won’t meet a market need; As products are
being developed, customer requirements change and new technologies evolve;
3. Internal risk – internal risk is the risk that a new product won’t be developed within the desired time
and budget;
Project planning
This stage of the process involves several steps. It is here that the new product proposal is evaluated
further and responsibility for the project is assigned to a project team. The proposal is analyzed in terms
of production, marketing, financial and competitive factors. A development budget is established and
some preliminary marketing and technical research is undertaken. Alternative product features and
component specifications are outlined. Finally, a project plan is written up, which includes estimates of
future development, production and marketing costs along with capital requirements and manpower
needs. Project proposal is given to top management for a go or no-go decision.
Various alternatives exist for creating and managing the project team. A key component contributing to
the success of many companies’ product development efforts relates to the emphasis placed on creating
cross-functional teams early in the development process. Frequently, marketing and sales personnel are
called in to lead the teams.
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Product development
At this juncture, the product idea has been evaluated from the standpoint of engineering,
manufacturing, finance and marketing. If it has met all expectation, it is considered a candidate for
further research and testing. A development report to management is prepared that spells out in fine
detail: 1. results of the studies; 2. required plan design; 3. production facilities design; 4. tooling
requirements; 5. marketing test plan; 6. financial program survey and 7. estimated release data.
Test Marketing
Up until mow the product has been a company secret. Now management goes outside the company and
submits the product candidate for customers approval. Test marketing is a controlled experiment in a
limited geographic area to test the new product or in some cases certain aspects of the marketing
strategy, such as packaging or advertising.
The main goal of a test market is to evaluate and adjust the general marketing strategy to be used and
the appropriate marketing mix. Throughout the test market process, findings are being analyzed and
forecasts of volume developed. Upon completion of a successful test market phase, the marketing plan
can be finalized and the product prepared for launch.
Commercialization
This is the launching step in which the firm commits to introducing the product into the marketplace.
During this stage, heavy emphasis is placed on the organization structure and management talent
needed to implement the marketing strategy. Emphasis is also given to following up on such things as
bugs in the design, production costs, quality control, and inventory requirements.
Importance of time
Over the course of the last five years, companies have placed an increasing emphasis on shortening their
products’ time to market. Time to market can be defined as the elapsed time between product
definition and product availability. It has been well documented that companies that are first in bringing
their products to market enjoy a competitive advantage both in terms of profits and market share.
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Quality level
Consumers consider that the level of product quality when making purchase decisions are both new and
existing products. At minimum, buyers want product that will perform the functions they are supposed
to and do so reasonably well. Some customers are willing to accept lower quality if product use is not
demanding and the price is lower.
In designing new products, marketers must consider what criteria potential customer use to determine
their perceptions of quality. Eight general criteria are given below:
1. Performance – How well does the product do what it is supposed to do?
2. Features – Does the product have any unique feature that are desirable?
3. Reliability – Is the product likely to function well and not break down over a reasonable time period?
4. Conformance – Does the product conform to established standards for such things as safety?
5. Durability – How long will the product last before it will be worn out and have to be replaced?
6. Serviceability – How quickly and easily can any problems be corrected?
7. Aesthetics – How appealing is the product to the appropriate senses of sight, taste, smell, feel and/or
sound?
8. Overall evaluation – Considering everything about the product, including its physical characteristics,
manufacturer, brand image, packaging and price, how good is this product?
Product design
Many well-designed products are easy to use as intended and pleasing to the senses. Designing new
products with both ease of use and aesthetic appeal can be difficult, but it can clearly differentiate a
new product from competitors. Good design can add great value to a new product.
Product safety
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Clearly, new products must have a reasonable level of safety. Safety is both an ethical and practical
issue. Ethically, customers should not be harmed by using a product as intended. The practical issue is
that when users get harmed by a product, they may stop buying, tell others about their experience, or
sue the company.
Cause of New Product Failure
Many new products with satisfactory potential have failed to make the grade. Here is a brief list of some
of the more important causes of new product failures after the products have been carefully screened,
developed and marketed:
1. No competitive point of difference, unexpected reactions from competitors;
2. Poor positioning;
3. Poor quality of product;
4. Non-delivery of promised benefits of product;
5. Too little marketing support;
6. Poor perceived price/quality value;
7. Faulty estimates of market potential and other marketing research mistake;
8. faulty estimates of production and marketing costs;
9. Improper channels of distribution and marketing costs;
10. Rapid change in the market after the product was introduced.
Need for research
The keystone activity of any new product planning system is research – nut just marketing research, but
technical research as well. This need will be more clearly understood if some of the specific questions
commonly raised in evaluating product ideas are examined:
1. What is the anticipated market demand over time? Are the potential applications for the product
restricted?
2. Can the item be patented? Are there any antitrust problems?
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3. Can the product be sold through present channels and sales force?
4. At different volume levels, what will be the unit of manufacturing costs?
5. What is the most appropriate package to use in terms of color, material, design and so forth?
6. What is the estimated return on investment?
7. What is the appropriate pricing strategy?
SN: PLC (Product Life Cycle)
2007
Explain with suitable examples the concept of product life cycle (PLC). Also give the typical
2005
Explain the product life cycle
2004
Explain the product life cycle
2003
Discuss: Product life cycle
2002
Explain the product life cycle
2001
Explain the product life cycle
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Page 253 Author Ramaswamy
Product life-cycle management
Product life-cycle management (or PLCM) is the succession of strategies used by business management
as a product goes through its life-cycle. The conditions in which a product is sold (advertising, saturation)
changes over time and must be managed as it moves through its succession of stages.
Product life-cycle (PLC) Like human beings, products also have an arc. From birth to death, human
beings pass through various stages e.g. birth, growth, maturity, decline and death. A similar life-cycle is
seen in the case of products. The product life cycle goes through multiple phases, involves many
professional disciplines, and requires many skills, tools and processes. Product life cycle (PLC) has to do
with the life of a product in the market with respect to business/commercial costs and sales measures.
To say that a product has a life cycle is to assert three things:
• Products have a limited life,
• Product sales pass through distinct stages, each posing different challenges, opportunities, and
problems to the seller,
• Products require different marketing, financing, manufacturing, purchasing, and human resource
strategies in each life cycle stage.
The four main stages of a product's life cycle and the accompanying characteristics are:
Figures tab
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The Product Life Cycle
A new product progresses through a sequence of stages from introduction to growth, maturity, and
decline. This sequence is known as the product life cycle and is associated with changes in the marketing
situation, thus impacting the marketing strategy and the marketing mix.
The product revenue and profits can be plotted as a function of the life-cycle stages as shown in the
graph below:
Product Life Cycle Diagram
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Introduction Stage
In the introduction stage, the firm seeks to build product awareness and develop a market for the
product. The impact on the marketing mix is as follows:
• Product branding and quality level is established, and intellectual property protection such as patents
and trademarks are obtained.
• Pricing may be low penetration pricing to build market share rapidly, or high skim pricing to recover
development costs.
• Distribution is selective until consumers show acceptance of the product.
• Promotion is aimed at innovators and early adopters. Marketing communications seeks to build
product awareness and to educate potential consumers about the product.
Growth Stage
In the growth stage, the firm seeks to build brand preference and increase market share.
• Product quality is maintained and additional features and support services may be added.
• Pricing is maintained as the firm enjoys increasing demand with little competition.
• Distribution channels are added as demand increases and customers accept the product.
• Promotion is aimed at a broader audience.
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Maturity Stage
At maturity, the strong growth in sales diminishes. Competition may appear with similar products. The
primary objective at this point is to defend market share while maximizing profit.
• Product features may be enhanced to differentiate the product from that of competitors.
• Pricing may be lower because of the new competition.
• Distribution becomes more intensive and incentives may be offered to encourage preference over
competing products.
• Promotion emphasizes product differentiation.
Decline Stage
As sales decline, the firm has several options:
• Maintain the product, possibly rejuvenating it by adding new features and finding new uses.
• Harvest the product - reduce costs and continue to offer it, possibly to a loyal niche segment.
• Discontinue the product, liquidating remaining inventory or selling it to another firm that is willing to
continue the product.
The marketing mix decisions in the decline phase will depend on the selected strategy. For example, the
product may be changed if it is being rejuvenated, or left unchanged if it is being harvested or
liquidated. The price may be maintained if the product is harvested, or reduced drastically if liquidated.
SN: Business product buying process
2007
What are the factors that influence consumer buyer behaviour? How business buying behaviour is
2010
Explain a firm's business buying process
2006
Explain the various stages in a typical buying process
2005
Page 190 Author Ramaswamy
Consumer Decision Making Processes/ Buying process
Traditionally, consumer researchers have approached decision making process from a rational
perspective. This dominant school of thought views consumers as being cognitive (i.e., problem-solving)
and, to some but a lesser degree, emotional. Such a view is reflected in the stage model of a typical
buying process (often called the consumer information processing model) depicted in Figure 1.
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In this model, the consumer passes through five stages: problem recognition, information search,
evaluation and selection of alternatives, decision implementation, and post-purchase evaluation.
Problem Recognition
In this information processing model, the consumer buying process begins when the buyer recognizes a
problem or need. For example, Doug may realize that his best suit doesn’t look contemporary any
more. Or, Kathleen may recognize that her personal computer is not performing as well as she thought
it should. These are the kinds of problem that we as consumers encounter all the time. When we found
out a difference between the actual state and a desired state, a problem is recognized. When we find a
problem, we usually try to solve the problem. We, in other words, recognize the need to solve the
problem. But how?
Information Search
When a consumer discovers a problem, he/she is likely to search for more information. Kathleen may
simply pay more attention to product information of a personal computer. She becomes more attentive
to computer ads, computers purchased by her friends, and peer conversations about computers. Or,
she may more actively seek information by visiting stores, talking to friends, or reading computer
magazines, among others. Through gathering information, the consumer learns more about some
brands that compete in the market and their features and characteristics. Theoretically, there is a total
set of brands available to Kathleen, but she will become aware of only a subset of the brands
(awareness set) in the market. Some of these brands may satisfy her initial buying criteria, such as price
and processing speed (consideration set). As Kathleen proceeds to more information search, only a few
will remain as strong candidates (choice set).
Evaluation and Selection of Alternatives
How does the consumer process competitive brand information and evaluate the value of the brands?
Unfortunately there is no single, simple evaluation process applied by all consumers or by one consumer
in all buying situations.
One dominant view, however, is to see the evaluation process as being cognitively driven and rational.
Under this view, a consumer is trying to solve the problem and ultimately satisfying his/her need. In
other words, he/she will look for problem-solving benefits from the product. The consumer, then, looks
for products with a certain set of attributes that deliver the benefits. Thus, the consumer sees each
product as a bundle of attributes with different levels of ability of delivering the problem solving
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benefits to satisfy his/her need. The distinctions among the need, benefits, and attributes are very
important.
As the underlying need is often personal, consumers differ as to their beliefs about what product
benefits and attributes are more (or less) important and relevant in satisfying their needs. Based on
their personal judgment on importance of benefits and attributes, consumers develop a set of attitudes
(or preferences) toward the various brands. One may express his/her preferences of the brands in
terms of ranking, probability of choice, and so forth
Decision Implementation
To actually implement the purchase decision, however, a consumer needs to select both specific items
(brands) and specific outlets (where to buy) to resolve the problems. There are, in fact, three ways
these decisions can be made: 1) simultaneously; 2) item first, outlet second; or 3) outlet first, item
second. In many situations, consumers engage in a simultaneous selection process of stores and
brands. For example, in our Kathleen’s personal computer case, she may select a set of brands based on
both the product’s technical features (attributes) and availability of brands in the computer stores and
mail-order catalogs she knows well. It is also possible, that she decides where to buy (e.g., CompUSA in
her neighborhood) and then chooses one or two brands the store carries. Once the brand and outlet
have been decided, the consumer moves on to the transaction (“buying”).
Post-purchase Evaluation
Post-purchase evaluation processes are directly influenced by the type of preceding decision-making
process. Directly relevant here is the level of purchase involvement of the consumer. Purchase
involvement is often referred to as “the level of concern for or interest in the purchase” situation, and
it determines how extensively the consumer searches information in making a purchase decision.
Although purchase involvement is viewed as a continuum (from low to high), it is useful to consider two
extreme cases here. Suppose one buys a certain brand of product (e.g., Diet Pepsi) as a matter of habit
(habitual purchase). For him/her, buying a cola drink is a very low purchase involvement situation, and
he/she is not likely to search and evaluate product information extensively. In such a case, the
consumer would simply purchase, consume and/or dispose of the product with very limited postpurchase evaluation, and generally maintain a high level of repeat purchase motivation (Figure 3).
However, if the purchase involvement is high and the consumer is involved in extensive purchase
decision making (e.g., personal computer), he/she is more likely to be involved in more elaborate postpurchase evaluation – often by questioning the rightness of the decision: “Did I make the right choice?
Should I have gone with other brand?” This is a common reaction after making a difficult, complex,
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relatively permanent decision. This type of doubt and anxiety is referred to as post-purchase cognitive
dissonance (Figure 4).
Post-purchase
Dissonance
Purchase
Product Use
Dissatisfaction
Disposition
Elaborate
Evaluation
Repeat Purchase
Motivation
According to the research, the likelihood of experiencing this kind of dissonance and the magnitude of it
is a function of:
• The degree of commitment or irrevocability of the decision,
• The importance of the decision to the consumer,
• The difficulty of choosing among the alternatives, and
• The individual’s tendency to experience anxiety.
Because dissonance is uncomfortable, the consumer may use one or more of the following approaches
to reduce it:
• Increase the desirability of the brand purchased.
• Decrease the desirability of rejected alternatives.
• Decrease the importance of the purchase decision.
• Reject the negative data on the brand purchased.
If the dissonance about the purchase is not reduced, the anxiety may transform into a dissatisfaction
(general or specific). Certainly, this negative experience leads to a new problem recognition (Figure 1),
and the consumer will engage in another problem solving process. The difference, however, is that in
the next round of process, memory of the previous negative experience and dissatisfaction will be used
as part of information. Therefore, the probability for the unsatisfactory brand to be re-selected and
repurchased will be significantly lower than before.
Consumer behavior refers to the selection, purchase and consumption of goods and services for the
satisfaction of their wants. There are different processes involved in the consumer behavior. Initially the
consumer tries to find what commodities he would like to consume, then he selects only those
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commodities that promise greater utility. After selecting the commodities, the consumer makes an
estimate of the available money which he can spend. Lastly, the consumer analyzes the prevailing prices
of commodities and takes the decision about the commodities he should consume. Meanwhile, there
are various other factors influencing the purchases of consumer such as social, cultural, personal and
psychological. The explanation of these factors is given below.
1. Cultural Factors
Consumer behavior is deeply influenced by cultural factors such as: buyer culture, subculture, and social
class.
Culture
Basically, culture is the part of every society and is the important cause of person wants and behavior.
The influence of culture on buying behavior varies from country to country therefore marketers have to
be very careful in analyzing the culture of different groups, regions or even countries.
Subculture
Each culture contains different subcultures such as religions, nationalities, geographic regions, racial
groups etc. Marketers can use these groups by segmenting the market into various small portions. For
example marketers can design products according to the needs of a particular geographic group.
Social Class
Every society possesses some form of social class which is important to the marketers because the
buying behavior of people in a given social class is similar. In this way marketing activities could be
tailored according to different social classes. Here we should note that social class is not only
determined by income but there are various other factors as well such as: wealth, education, occupation
etc.
2. Social Factors
Social factors also impact the buying behavior of consumers. The important social factors are: reference
groups, family, role and status.
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Reference Groups
Reference groups have potential in forming a person attitude or behavior. The impact of reference
groups varies across products and brands. For example if the product is visible such as dress, shoes, car
etc then the influence of reference groups will be high. Reference groups also include opinion leader (a
person who influences other because of his special skill, knowledge or other characteristics).
Family
Buyer behavior is strongly influenced by the member of a family. Therefore marketers are trying to find
the roles and influence of the husband, wife and children. If the buying decision of a particular product is
influenced by wife then the marketers will try to target the women in their advertisement. Here we
should note that buying roles change with change in consumer lifestyles.
Roles and Status
Each person possesses different roles and status in the society depending upon the groups, clubs,
family, organization etc. to which he belongs. For example a woman is working in an organization as
finance manager. Now she is playing two roles, one of finance manager and other of mother. Therefore
her buying decisions will be influenced by her role and status.
3. Personal Factors
Personal factors can also affect the consumer behavior. Some of the important personal factors that
influence the buying behavior are: lifestyle, economic situation, occupation, age, personality and self
concept.
Age
Age and life-cycle have potential impact on the consumer buying behavior. It is obvious that the
consumers change the purchase of goods and services with the passage of time. Family life-cycle
consists of different stages such young singles, married couples, unmarried couples etc which help
marketers to develop appropriate products for each stage.
Occupation
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The occupation of a person has significant impact on his buying behavior. For example a marketing
manager of an organization will try to purchase business suits, whereas a low level worker in the same
organization will purchase rugged work clothes.
Economic Situation
Consumer economic situation has great influence on his buying behavior. If the income and savings of a
customer is high then he will purchase more expensive products. On the other hand, a person with low
income and savings will purchase inexpensive products.
Lifestyle
Lifestyle of customers is another import factor affecting the consumer buying behavior. Lifestyle refers
to the way a person lives in a society and is expressed by the things in his/her surroundings. It is
determined by customer interests, opinions, activities etc and shapes his whole pattern of acting and
interacting in the world.
Personality
Personality changes from person to person, time to time and place to place. Therefore it can greatly
influence the buying behavior of customers. Actually, Personality is not what one wears; rather it is the
totality of behavior of a man in different circumstances. It has different characteristics such as:
dominance, aggressiveness, self-confidence etc which can be useful to determine the consumer
behavior for particular product or service.
4. Psychological Factors
There are four important psychological factors affecting the consumer buying behavior. These are:
perception, motivation, learning, beliefs and attitudes.
Motivation
The level of motivation also affects the buying behavior of customers. Every person has different needs
such as physiological needs, biological needs, social needs etc. The nature of the needs is that, some of
them are most pressing while others are least pressing. Therefore a need becomes a motive when it is
more pressing to direct the person to seek satisfaction.
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Perception
Selecting, organizing and interpreting information in a way to produce a meaningful experience of the
world is called perception. There are three different perceptual processes which are selective attention,
selective distortion and selective retention. In case of selective attention, marketers try to attract the
customer attention. Whereas, in case of selective distortion, customers try to interpret the information
in a way that will support what the customers already believe. Similarly, in case of selective retention,
marketers try to retain information that supports their beliefs.
Beliefs and Attitudes
Customer possesses specific belief and attitude towards various products. Since such beliefs and
attitudes make up brand image and affect consumer buying behavior therefore marketers are interested
in them. Marketers can change the beliefs and attitudes of customers by launching special campaigns in
this regard.
Explain the steps in the market research process
2006
Explain the research approaches conducted by companies to collect data
2006
Explain the marketing research process with any specific examples
2010
Explain the various types of questions in Marketing research.
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Discuss the steps involved in a marketing research study
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Page 476 Author Ramaswamy
Marketing research process is a set of six steps which defines the tasks to be accomplished in conducting
a marketing research study. These include problem definition, developing an approach to problem,
research design formulation, field work, data preparation and analysis, and report generation and
presentation. [1]
Stages of marketing research process
Step 1: Problem Definition
The first step in any marketing research project is to define the problem. In defining the problem, the
researcher should take into account the purpose of the study, the relevant background information,
what information is needed, and how it will be used in decision making. Problem definition involves
discussion with the decision makers, interviews with industry experts, analysis of secondary data, and,
perhaps, some qualitative research, such as focus groups. Once the problem has been precisely defined,
the research can be designed and conducted properly.[2]
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Step 2: Development of an Approach to the Problem
Development of an approach to the problem includes formulating an objective or theoretical
framework, analytical models, research questions, hypotheses, and identifying characteristics or factors
that can influence the research design. This process is guided by discussions with management and
industry experts, case studies and simulations, analysis of secondary data, qualitative research and
pragmatic considerations. [2]
'Step 3: Research Design Formulation'
A research design is a framework or blueprint for conducting the marketing research project. It details
the procedures necessary for obtaining the required information, and its purpose is to design a study
that will test the hypotheses of interest, determine possible answers to the research questions, and
provide the information needed for decision making. Conducting exploratory research, precisely
defining the variables, and designing appropriate scales to measure them are also a part of the research
design. The issue of how the data should be obtained from the respondents (for example, by conducting
a survey or an experiment) must be addressed. It is also necessary to design a questionnaire and a
sampling plan to select respondents for the study.
More formally, formulating the research design involves the following steps [1]:
1. Secondary data analysis
2. Qualitative research
3. Methods of collecting quantitative data (survey, observation, and experimentation)
4. Definition of the information needed
5. Measurement and scaling procedures
6. Questionnaire design
7. Sampling process and sample size
8. Plan of data analysis
Step 4: Field Work or Data Collection
Data collection involves a field force or staff that operates either in the field, as in the case of personal
interviewing (in-home, mall intercept, or computer-assisted personal interviewing), from an office by
telephone (telephone or computer-assisted telephone interviewing), or through mail (traditional mail
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and mail panel surveys with prerecruited households). Proper selection, training, supervision, and
evaluation of the field force helps minimize data-collection errors.
Step 5: Data Preparation and Analysis
Data preparation includes the editing, coding, transcription, and verification of data. Each questionnaire
or observation form is inspected, or edited, and, if necessary, corrected. Number or letter codes are
assigned to represent each response to each question in the questionnaire. The data from the
questionnaires are transcribed or key-punched on to magnetic tape, or disks or input directly into the
computer. Verification ensures that the data from the original questionnaires have been accurately
transcribed, while data analysis, guided by the plan of data analysis, gives meaning to the data that have
been collected. Univariate techniques are used for analyzing data when there is a single measurement
of each element or unit in the sample, or, if there are several measurements of each element, each RCH
variable is analyzed in isolation. On the other hand, multivariate techniques are used for analyzing data
when there are two or more measurements on each element and the variables are analyzed
simultaneously. [2]
Step 6: Report Preparation and Presentation
The entire project should be documented in a written report which addresses the specific research
questions identified, describes the approach, the research design, data collection, and data analysis
procedures adopted, and presents the results and the major findings. The findings should be presented
in a comprehensible format so that they can be readily used in the decision making process. In addition,
an oral presentation should be made to management using tables, figures, and graphs to enhance clarity
and impact. [2]
For these reasons, interviews with experts are more useful in conducting marketing research for
industrial firms and for products of a technical nature, where it is relatively easy to identify and
approach the experts. This method is also helpful in situations where little information is available from
other sources, as in the case of radically new products.
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SN: Role of advertising
2006
SN: Defining target audience for advertising
2006
List down the steps required for planning and advertising campaign
2005
What are the stages in developing an advertising campaign? What are the elements that make an
2003
SN: Advertising budgets
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SN: Advertising budgets
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SN: Developing an advertising budget
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SN: Advertising Evaluation
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SN: Developing an advertising message
2006
Discuss the various ways an advertising message is developed . Give examples.
2004
SN: Advertising media in India
2006
Discuss the advantages and limitations of the various advertising media in india
2002
Discuss media in India. What factors influence the choice of media
2004
Page 395 Author Ramaswamy
Advertising consists of four different roles:
The marketing role
The communication role
The economic role
The societal role
A marketing role within advertising will focus on satisfying general consumers and seeing to their
requirements through services and goods. It will not be directed at all the public but only at certain
customers that are termed a ‘target market’.
A communication role in advertising will refer to a mass communication intention that advertising will
be capable of fulfilling. This is an impressive way in which to inform customers and let them know about
the services and goods they wish to buy.
With regards to an economical role in advertising, this will directly deal with the objectives of the
advertiser. Normally, the objectives of an advertiser are to be able to generate sales from an
advertisement. It will also help a consumer to appraise both the value as well as the benefits of any of
the products which are advertised against their prices that the products are being offered at so as to
make the most economic and efficient choice.
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Finally, a societal role within advertising is quite a fascinating role. On the one hand, an advertisement
will help to generate the trends within a certain society. In contrast, it is the cause of breaking a norm
that has been a part of society for a while so as to generate a truly unique impact. It tends to have a
somewhat tentative nature, which some people will like while some will resent it.
The theory of any advertising is
•
Awareness
•
Knowledge
•
Liking
•
Preference
•
Conviction
•
Purpose
Just about any medium could be utilized for advertising. Commercial advertising can include billboards,
wall paintings, web banners, television adverts, subway trains and platforms amongst others. There is
also digital advertising as in television, radio and online advertising. Physical advertising could include
mobile billboard, in-store, street and press advertising.
Defining your target audience will help you to maximize your advertising budget. This is simply put
however, it may oblivious to the business owner who just wants traffic coming into the business or to
the website. For instance, if you have a retail business selling athletic wear it may be difficult to tell who
your target audience may be.
First, you have to determine who is the person who purchases most items in the household. Most of the
time it is the female in the family who does the most shopping.
Next, you have to be specific to the type of athletic wear to be purchased to fine tune your target
audience. If the items to be purchased are children’s shoes , then you have the right audience. Most
women are the purchasers of children’s goods in the average household.
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Once you define your target audience and then fine tune your target, you can then design your
advertisements to attract this power purchaser to help your business grow.
Steps to Launch an Advertising Campaign
An advertising campaign is simply the time which makes use of a particular type of advertising.
Let’s look at the steps needed to launch an ad campaign:
1. Defining advertising goals
We must first determine the objectives of our advertising campaign, that is, we should point out what
we want to achieve through it, for example, our marketing objectives can be:
* Publicize a new product.
* Report on the characteristics of a product.
* Highlight the key benefits or attributes of a product.
* Positioning a slogan.
* Persuade, encourage, stimulate or motivate the purchase or use of a product or service.
* To remember the existence of a product or service.
2. Identify target audience or market
Once established our marketing objectives, we must identify our audience or target market, i.e. the
specific groups will be directed to our advertising campaign.
And, once determined our target audience, observe and analyze their characteristics, so that, on this
basis, we design our media messages and advertising strategies.
The reason for a particular target segment is that not all audiences have access to the same channels as
advertising, or react the same way to the same type of message.
Even if we sell the same product type, we may need different media messages and advertising strategies
for each audience.
3. Define media or advertising channels
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Once we have determined and analyzed our target, we define the means or channels that will be used
to send the advertisement to the public, i.e., we define the media or advertising channels we use to
advertise our products or services to our target audience.
The media and advertising channels may be formed, for example, television, radio, newspapers,
magazines, Internet, traditional and electronic mail, trade shows, campaigns, events, posters, posters,
brochures, flyers, etc..
4. Write your marketing message
After defining the advertising media we use, we turn to write the message sent through the media, to
our target audience.
In the message must identify the main features of our product, we highlight the characteristics they
have a greater benefit to the public, allowing the product associated with that message and that capture
consumers who seek only those characteristics, for example, we can create a message that emphasizes
the quality or status that would give the possession of our product.
The advertising message must consist of a clear, fluid and easy to understand. Should capture the
attention of consumers, and a message must be truthful, we must offer something that our products do
not have or something we cannot meet, as it happened, we would give a very bad image.
5. Launch advertising campaign
And finally, once defined our advertising goals, identified and analyzed our target, given the means or
channels that use it, and will send written advertisement, now is the time to redeem our advertising
campaign.
It is notoriously difficult to measure the effect of advertising on a business’ sales. Advertising is just one
of the variables that might affect sales in a particular period. These include:
• Consumer and business confidence
• Levels of disposable income
• Availability of product (e.g. does the retailer actually have stock to sell?)
• Availability of competing products
• The weather (often blamed by retailers for poor sales!)
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How can a business know whether a specific advertising campaign was effective?
As a percentage of sales, advertising expenditure varies enormously from business to business, from
market to market. For example, the leading pharmaceutical companies spend around 20% of sales on
advertising, whilst business such as Ford and Toyota spend less than 1%. An average for fast-moving
consumer goods markets (“FMCG”) is around 8-10% of sales.
In practice, the following approaches are used for setting the advertising budget:
Approaches to setting the advertising budget
Method (1) Fixed percentage of sales
In markets with a stable, predictable sales pattern, some companies set their advertising spend
consistently at a fixed percentage of sales. This policy has the advantage of avoiding an “advertising
war” which could be bad news for profits.
However, there are some disadvantages with this approach. This approach assumes that sales are
directly related to advertising. Clearly this will not entirely be the case, since other elements of the
promotional mix will also affect sales. If the rule is applied when sales are declining, the result will be a
reduction in advertising just when greater sales promotion is required!
Method (2) Same level as competitors
This approach has widespread use when products are well-established with predictable sales patterns. It
is based on the assumption that there is an “industry average” spend that works well for all major
players in a market.
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A major problem with this approach (in addition to the disadvantages set out for the example above) is
that it encourages businesses to ignore the effectiveness of their advertising spend – it makes them
“lazy”. It could also prevent a business with competitive advantages from increasing market share by
spending more than average.
Method (3) Task
The task approach involves setting marketing objectives based on the “tasks” that the advertising has to
complete.
These tasks could be financial in nature (e.g. achieve a certain increase in sales, profits) or related to the
marketing activity that is generated by the campaigns. For example:
• Numbers of enquiries received quoting the source code on the advertisement
• Increase in customer recognition / awareness of the product or brand (which can be measured)
• Number of viewers, listeners or readers reached by the campaign
Method (4) Residual
The residual approach, which is perhaps the worst of all, is to base the advertising budget on what the
business can afford – after all other expenditure. There is no attempt to associate marketing objectives
with levels of advertising. In a good year large amounts of money could be wasted; in a bad year, the
low advertising budget could guarantee a further low year for sales.
How would you go about determining the size of your sales force?
2002
SN: Motivating sales force
2006
SN: Motivating sales force
2003
SN: Motivating sales force
2001
Explain the methods companies use to motivate salesman
2005
Page 439 Author Ramaswamy
Motivating Sales Representatives
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Some ambitious sales representatives are self-starters who will put forth their best effort without any
special coaching. The majority of reps, however, require more encouragement and special incentives.
This is especially true of field selling, which can be frustrating because reps usually work alone, keep
irregular hours, are often away from home, frequently lack the authority to do what is necessary to win
an account, and sometimes lose large orders they have worked hard to obtain. Most people, moreover,
require incentives, such as financial gain or social recognition, to operate at full capacity.
Studying sales rep motivation, Churchill, Ford, and Walker developed a model indicating that the higher
the salesperson’s motivation, the greater his or her effort.22
Greater effort will lead to greater performance, greater performance will lead to greater rewards,
greater rewards will lead to greater satisfaction, and greater satisfaction will reinforce motivation. The
model thus implies that sales managers must be able to convince salespeople that (1) They can sell more
by working harder or by being trained to work smarter, and (2) the rewards for better performance are
worth the extra effort.
According to this research, the most-valued reward was pay, followed by promotion, personal growth,
and sense of accomplishment. The least-valued rewards were liking and respect, security, and
recognition. Thus, salespeople seem highly motivated by pay and the chance to get ahead and satisfy
their intrinsic needs, and less motivated by compliments and security. The researchers also found that
the importance of motivators varied with demographic characteristics. Financial rewards were mostly
valued by older, longer-tenured people and those who had large families, while higher-order rewards
such as recognition were more valued by young salespeople who were unmarried or had small families
and usually more formal education. However, motivators can vary across countries. Whereas money is
the number-one motivator of 37 percent of U.S. salespeople, only 20 percent of salespeople in Canada
feel the same way.
Salespeople in Australia and New Zealand were the least motivated by a fat paycheck.23
How to Motivate the Sales Force
There are three critical elements to motivate a successful and high performance professional sales force.
These elements are Appreciation, Recognition, and Compensation. It is necessary to provide all three
ingredients with integrity.
Appreciation
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Giving Recognition and Compensation is not the same as demonstrating Appreciation. Recognition
implies personal performance. Appreciation requires a mutual understanding of the value of the
personal performance as a contribution to the greater good of the organization. The sales professional is
just one important participant. All of the employees and roles in the organization contribute to the
success of the organization. To effectively demonstrate appreciation, it is necessary to understand and
communicate how the roles of the various departments and functions work together, and the impact of
each on another.
Once appreciation is measured in terms of benefit to the organization, then it becomes easy to identify
how to express appreciation. Quite often, this expression of appreciation is bestowed in the form of
training and development. The training is intended to help the sales associate sustain and expand on
successful performance by providing a platform to learn more about the product, process, integration,
or techniques. Appreciation may be presented in the form of tools that enable and empower the sales
associate with hardware, software, or knowledge. Appreciation acknowledges contribution to the
organization and empowers continued success.
The contributions of a sales associate may be worthy of demonstrating appreciation, even when
personal attainment has not achieved the necessary levels for recognition or compensation.
Recognition
Give recognition for the attainment of personal goals. Recognition may be shared in the form of awards,
certificates, or personal accolades. It may also be provided in the form of written communication. It is
important to give team or group recognition when appropriate, just as it is important to provide
individual recognition when appropriate. Recognition should be fair, balanced, and earned. When it is
earned, it should not be forgotten.
Verbal recognition is a nice gesture, but not a lasting one. If the contributions of the sales associate have
had a significant benefit to the organization, and if the associate has achieved personal commitments,
give lasting recognition in the form of a certificate or award. An award is a lasting reminder to the
recipient, and to those individuals who may also want to receive one, that the organization recognizes
and appreciates personal achievement.
Compensation
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The professional sales associate is measured by compensation to the organization in the form of
revenue. Is it a surprise that the sales associate measures the performance of the organization to the
sales associate in the same manner? Commission and bonus plans should be clear and easily
understood. Commission, as pay for performance, should be realistic, even when it is treated as a
'stretch goal'.
Some sales cycles and customers take longer to close. Does the company strategy or compensation plan
change more frequently than the product offering? How significant are these changes, and how well are
they understood? Are compensation plans based on history, opportunity, the sales pipeline, or an
unattainable pipe dream? Does the plan reward the team as a percentage of individual effort, thereby
encouraging reciprocal support? Commission plans should be based on an allocation, as opposed to a
budget. Commission should be an appropriated investment as incentive for team building and individual
compensation.
What motivates people to buy? Descrive a model of consumer behavior.
2004
Describe the various types of buyer behavior for different types of products. Give suitable examples for
2005
SN: Buying motives
2002
Page 186,181, Author Ramaswamy
Discuss: The consumer Innovation Adoption Process
2002
Explain innovation diffusion theory and the characteristics that affect the rate of adoption of an
2003
SN: The consumer Innovation Adoption Process
2001
Describe consumer adoption process
2006
Describe the types of consumer products
2006
Adoption is an individual’s decision to become a regular user of a product.
Sequence of events beginning with consumer awareness of a new product leading to trial usage and
culminating in full and regular use of the new product. Over time the adoption process resembles a bell
curve formed by innovators, early adopters, the majority of consumers, late adopters, and laggards.
An innovation is any good, service, or idea that is perceived by someone as new. The idea may have a
long history, but it is an innovation to the person who sees it as new. Innovations take time to spread
through the social system. Rogers defines the innovation diffusion process as “the spread of a new idea
from its source of invention or creation to its ultimate users or adopters.”
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The consumer-adoption process focuses on the mental process through which an individual passes from
first hearing about an innovation to final adoption. Adopters of new products have been observed to
move through five stages:
1. Awareness -The consumer becomes aware of the innovation but lacks information about it.
2. Interest-The consumer is stimulated to seek information about the innovation.
3. Evaluation -The consumer considers whether to try the innovation.
4. Trial-The consumer tries the innovation to improve his or her estimate of its value.
5. Adoption -The consumer decides to make full and regular use of the innovation.
The new-product marketer should facilitate movement through these stages. A portable
electricdishwasher manufacturer might discover that many consumers are stuck in the interest
stage;they do not buy because of their uncertainty and the large investment cost. But these same
consumers would be willing to use an electric dishwasher on a trial basis for a small monthly fee.The
manufacturer should consider offering a trial-use plan with option to buy.
The five adopter groups differ in their value orientations and their motives for adopting or resisting the
new product.
Innovators are technology enthusiasts; they are venturesome and enjoy tinkering with new product and
mastering their intricacies. In return for low process, they are happy to conduct alpha and beta testing
and report on early weakness.
Early adopters are opinion leaders who carefully search for new technologies that might give them a
dramatic competitive advantage. They are lesser price sensitive and willing to adopt the product if given
personalized solutions and good service support.
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Early majority are deliberate pragmatists who adopt the new technology when its benefits are proven
and a lot of adoption has already taken place. They make up the mainstream market.
Late majority are skeptical conservatives who are risk adverse, technology shy, and price sensitive.
Laggards are tradition bound and resist the innovation until they find that the status quo is no longer
defensible.
Intermediaries are parasites in the distribution chain' - If yes why, if no, why not.
2003
What are the factors that influence the choice of distribution channels?
2001
How would you justify the role of middlemen in the distribution chain?
2002
Briefly explain the activities involved in physical distribution
2003
Elaborate on the various logistical aspects of physical distribution
2002
Discuss the functions of Distribution Channels
2006
What are the determinant choice of a distributor's channel
2004
"Channels of distribution used are different for different products" - Discuss
2010
How distribution strategy plays critical role in success of any product/brand
2010
Page 295 Author Ramaswamy
Distribution (or "Place") is the fourth traditional element of the marketing mix. The other three are
Product, Price and Promotion.
The Nature of Distribution Channels
Most businesses use third parties or intermediaries to bring their products to market. They try to forge a
"distribution channel" which can be defined as
"all the organisations through which a product must pass between its point of production and
consumption"
Why does a business give the job of selling its products to intermediaries? After all, using intermediaries
means giving up some control over how products are sold and who they are sold to.
The answer lies in efficiency of distribution costs. Intermediaries are specialists in selling. They have the
contacts, experience and scale of operation which means that greater sales can be achieved than if the
producing business tried run a sales operation itself.
Functions of a Distribution Channel
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The main function of a distribution channel is to provide a link between production and consumption.
Organisations that form any particular distribution channel perform many key functions:
Figures tab
Information
Promotion
Contact
Matching
Negotiation
Physical
distribution
Financing
Risk taking
Gathering and distributing market research and intelligence - important for
marketing planning
Developing and spreading communications about offers
Finding and communicating with prospective buyers
Adjusting the offer to fit a buyer's needs, including grading, assembling and
packaging
Reaching agreement on price and other terms of the offer
Transporting and storing goods
Acquiring and using funds to cover the costs of the distribution channel
Assuming some commercial risks by operating the channel (e.g. holding stock)
All of the above functions need to be undertaken in any market. The question is - who performs them
and how many levels there need to be in the distribution channel in order to make it cost effective.
Numbers of Distribution Channel Levels
Each layer of marketing intermediaries that performs some work in bringing the product to its final
buyer is a "channel level". The figure below shows some examples of channel levels for consumer
marketing channels:
In the figure above, Channel 1 is called a "direct-marketing" channel, since it has no intermediary levels.
In this case the manufacturer sells directly to customers. An example of a direct marketing channel
would be a factory outlet store. Many holiday companies also market direct to consumers, bypassing a
traditional retail intermediary - the travel agent.
The remaining channels are "indirect-marketing channels".
Channel 2 contains one intermediary. In consumer markets, this is typically a retailer. The consumer
electrical goods market in the UK is typical of this arrangement whereby producers such as Sony,
Panasonic, Canon etc. sell their goods directly to large retailers such as Comet, Dixons and Currys which
then sell the goods to the final consumers.
Channel 3 contains two intermediary levels - a wholesaler and a retailer. A wholesaler typically buys and
stores large quantities of several producers goods and then breaks into the bulk deliveries to supply
retailers with smaller quantities. For small retailers with limited order quantities, the use of wholesalers
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makes economic sense. This arrangement tends to work best where the retail channel is fragmented i.e. not dominated by a small number of large, powerful retailers who have an incentive to cut out the
wholesaler. A good example of this channel arrangement in the UK is the distribution of drugs.
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Other Questions:
SN: Competitive advantage & core competence
2009
Question for drawing marekting plan, using strategies and using 4P's of marketing
2007
Case study
2007
SN: Categories of business customers
2006
Describe: Name the characteristics that differentiate services marketing from that physical products
2005
List the various methods that can be used for forecasting demand for any product/service.
2005
How would you determine the number of salesman an FMCG company would need for a macro city
2004
Explain the concept the customer value hierarchy
2004
Briefly explain the various activities involved in outbound logistics
2004
What are the characteristics of services? How do they differ from products? Explain 'Gap Analysis'.
2004
SN: Marketing Audience
2004
SN: Break Even Analysis
2004
What is your conceptual understanding of (i)Break even analysis (ii)Demand elasticities
2002
Describe the salient features of the Indian business enviornment relevant for marketing decisions.
2003
SN: The communication process
2003
SN: Marketing Audit
2003
Briefly explain the key factors in the Indian business environment that impact on decisions of
2002
Discuss: The customer value hierarchy
2002
"Below the line promotions erode brand equity" - comment
2002
SN: Marketing cost analysis
2002
Describe various steps involved in (i) Strategic management process (ii) Strategic marketing process
2001
Explain the concept: Business portfolio and product portfolio. How do you go about developing a balanced 2001
Identify the strategic decisions a marketing manager must make in the area of advertising
2001
Describe the type of media that must be most suitable for promoting (i)Greeting cards (ii)A burger
2001
SN: Bayesian approach to decision making
2001
SN: Niche marketing
2001
SN: Creating consumer orientation in 3 company
2001
SN: Role of personal selling in consumer products
2001
SN: Inventory carrying costs
2001
SN: Warehousing
2001
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