=$$===MARKETING CONCEPTS=====$$

[bonddonraj]

FRIENDS THIS TREAD IS DEDICATED TO MARKETING CONCEPTS == QUESTIONS AND ANSWERS == NEW CONCEPTS --- SO KEEP IT COMING FROM ALL SIDES---:SugarwareZ-229:

[bonddonraj]

What are the tasks of marketing?
■ What are the major concepts and tools of marketing?
■ What orientations do companies exhibit in the marketplace?
■ How are companies and marketers responding to the new challenges?
Change is occurring at an accelerating rate; today is not like yesterday, and tomorrow
will be different from today. Continuing today’s strategy is risky; so is turning
to a new strategy. Therefore, tomorrow’s successful companies will have to heed three
certainties:
➤ Global forces will continue to affect everyone’s business and personal life.
➤ Technology will continue to advance and amaze us.
➤ There will be a continuing push toward deregulation of the economic sector.
These three developments—globalization, technological advances, and deregulation—
spell endless opportunities. But what is marketing and what does it have to do
with these issues?
Marketing deals with identifying and meeting human and social needs. One of
the shortest definitions of marketing is “meeting needs profitably.” Whether the marketer
is Procter & Gamble, which notices that people feel overweight and want tasty
but less fatty food and invents Olestra; or CarMax, which notes that people want more
certainty when they buy a used automobile and invents a new system for selling used
cars; or IKEA, which notices that people want good furniture at a substantially lower
price and creates knock-down furniture—all illustrate a drive to turn a private or social
need into a profitable business opportunity through marketing.

[bonddonraj]

In fact, we can distinguish three stages through which marketing practice might
pass:
1. Entrepreneurial marketing: Most companies are started by individuals who visualize an
opportunity and knock on every door to gain attention. Jim Koch, founder of Boston
Beer Company, whose Samuel Adams beer has become a top-selling “craft” beer,
started out in 1984 carrying bottles of Samuel Adams from bar to bar to persuade bartenders
to carry it. For 10 years, he sold his beer through direct selling and grassroots
public relations. Today his business pulls in nearly $200 million, making it the leader
in the U.S. craft beer market.2
2. Formulated marketing: As small companies achieve success, they inevitably move toward
more formulated marketing. Boston Beer recently began a $15 million television
advertising campaign. The company now employs more that 175 salespeople and has
a marketing department that carries on market research, adopting some of the tools
used in professionally run marketing companies.
3. Intrepreneurial marketing: Many large companies get stuck in formulated marketing,
poring over the latest ratings, scanning research reports, trying to fine-tune dealer
relations and advertising messages. These companies lack the creativity and passion
of the guerrilla marketers in the entrepreneurial stage.3 Their brand and product
managers need to start living with their customers and visualizing new ways to add
value to their customers’ lives.
The bottom line is that effective marketing can take many forms. Although it is
easier to learn the formulated side (which will we will also see how creativity and passion can be used by today’s and tomorrow’s
marketing managers.
The Scope of Marketing
Marketing people are involved in marketing 10 types of entities: goods, services, experiences,
events, persons, places, properties, organizations, information, and ideas.
Goods. Physical goods constitute the bulk of most countries’ production and
marketing effort. The United States produces and markets billions of physical
goods, from eggs to steel to hair dryers. In developing nations, goods—
particularly food, commodities, clothing, and housing—are the mainstay of the
economy.
Services. As economies advance, a growing proportion of their activities are
focused on the production of services. The U.S. economy today consists of a
70–30 services-to-goods mix. Services include airlines, hotels, and maintenance
and repair people, as well as professionals such as accountants, lawyers,
engineers, and doctors. Many market offerings consist of a variable mix of
goods and services.
Experiences. By orchestrating several services and goods, one can create, stage,
and market experiences. Walt Disney World’s Magic Kingdom is an experience;
so is the Hard Rock Cafe.
Events. Marketers promote time-based events, such as the Olympics, trade
shows, sports events, and artistic performances.
Persons. Celebrity marketing has become a major business. Artists, musicians,
CEOs, physicians, high-profile lawyers and financiers, and other professionals
draw help from celebrity marketers.4
Places. Cities, states, regions, and nations compete to attract tourists, factories,
company headquarters, and new residents.5 Place marketers include economic
development specialists, real estate agents, commercial banks, local business
associations, and advertising and public relations agencies.
Properties. Properties are intangible rights of ownership of either real property
(real estate) or financial property (stocks and bonds). Properties are bought
and sold, and this occasions a marketing effort by real estate agents (for real
estate) and investment companies and banks (for securities).
Organizations. Organizations actively work to build a strong, favorable image in
the mind of their publics. Philips, the Dutch electronics company, advertises
with the tag line, “Let’s Make Things Better.” The Body Shop and Ben & Jerry’s
also gain attention by promoting social causes. Universities, museums, and
performing arts organizations boost their public images to compete more
successfully for audiences and funds.
Information. The production, packaging, and distribution of information is one
of society’s major industries.6 Among the marketers of information are schools
and universities; publishers of encyclopedias, nonfiction books, and specialized
magazines; makers of CDs; and Internet Web sites.
Ideas. Every market offering has a basic idea at its core. In essence, products and
services are platforms for delivering some idea or benefit to satisfy a core need.
A Broadened View of Marketing Tasks
Marketers are skilled in stimulating demand for their products. However, this is too
limited a view of the tasks that marketers perform. Just as production and logistics professionals
are responsible for supply management, marketers are responsible for
demand management. They may have to manage negative demand (avoidance of a
product), no demand (lack of awareness or interest in a product), latent demand (a
strong need that cannot be satisfied by existing products), declining demand (lower
demand), irregular demand (demand varying by season, day, or hour), full demand (a
satisfying level of demand), overfull demand (more demand than can be handled), or
unwholesome demand (demand for unhealthy or dangerous products). To meet the
organization’s objectives, marketing managers seek to influence the level, timing, and
composition of these various demand states.
The Decisions That Marketers Make
Marketing managers face a host of decisions in handling marketing tasks. These range
from major decisions such as what product features to design into a new product, how
many salespeople to hire, or how much to spend on advertising, to minor decisions
such as the wording or color for new packaging.
Among the questions that marketers ask (and will be addressed in this text) are:
How can we spot and choose the right market segment(s)? How can we differentiate our
offering? How should we respond to customers who press for a lower price? How can we
compete against lower-cost, lower-price rivals? How far can we go in customizing our
offering for each customer? How can we grow our business? How can we build stronger
brands? How can we reduce the cost of customer acquisition and keep customers loyal?
How can we tell which customers are more important? How can we measure the payback

[bonddonraj]

Defining Marketing
We can distinguish between a social and a managerial definition for marketing.
According to a social definition, marketing is a societal process by which individuals
and groups obtain what they need and want through creating, offering, and exchanging
products and services of value freely with others.
As a managerial definition, marketing has often been described as “the art of
selling products.” But Peter Drucker, a leading management theorist, says that “the
aim of marketing is to make selling superfluous. The aim of marketing is to know and
understand the customer so well that the product or service fits him and sells itself.
Ideally, marketing should result in a customer who is ready to buy.”7
The American Marketing Association offers this managerial definition:
Marketing (management) is the process of planning and executing the conception,
pricing, promotion, and distribution of ideas, goods, and services to create exchanges
that satisfy individual and organizational goals.8
Coping with exchange processes—part of this definition—calls for a considerable
amount of work and skill. We see marketing management as the art and science
of applying core marketing concepts to choose target markets and get, keep, and grow
customers through creating, delivering, and communicating superior customer value.

[bonddonraj]

Target Markets and Segmentation
A marketer can rarely satisfy everyone in a market. Not everyone likes the same soft
drink, automobile, college, and movie. Therefore, marketers start with market segmentation.
They identify and profile distinct groups of buyers who might prefer or require
varying products and marketing mixes. Market segments can be identified by examining
demographic, psychographic, and behavioral differences among buyers. The firm
then decides which segments present the greatest opportunity—those whose needs
the firm can meet in a superior fashion.
For each chosen target market, the firm develops a market offering. The offering
is positioned in the minds of the target buyers as delivering some central benefit(s).
For example, Volvo develops its cars for the target market of buyers for whom automobile
safety is a major concern. Volvo, therefore, positions its car as the safest a customer
can buy.

[pra_ajm]

good stuff keep it up................................................

[sskadir]

Its a fantastic article....like to seee more on this topic

[bonddonraj]

A global industry is one in which the strategic positions of competitors in major
geographic or national markets are fundamentally affected by their overall global positions.
Global firms—both large and small—plan, operate, and coordinate their activities
and exchanges on a worldwide basis.
Today we can distinguish between a marketplace and a marketspace. The marketplace
is physical, as when one goes shopping in a store; marketspace is digital, as when
one goes shopping on the Internet. E-commerce—business transactions conducted
on-line—has many advantages for both consumers and businesses, including convenience,
savings, selection, personalization, and information. For example, on-line
shopping is so convenient that 30 percent of the orders generated by the Web site of
REI, a recreational equipment retailer, is logged from 10 P.M. to 7 A.M., sparing REI the
expense of keeping its stores open late or hiring customer service representatives.
However, the e-commerce marketspace is also bringing pressure from consumers for
lower prices and is threatening intermediaries such as travel agents, stockbrokers,
insurance agents, and traditional retailers. To succeed in the on-line marketspace,
marketers will need to reorganize and redefine themselves.
The metamarket, a concept proposed by Mohan Sawhney, describes a cluster of
complementary products and services that are closely related in the minds of consumers
but are spread across a diverse set of industries. The automobile metamarket
consists of automobile manufacturers, new and used car dealers, financing companies,
insurance companies, mechanics, spare parts dealers, service shops, auto magazines,
classified auto ads in newspapers, and auto sites on the Internet. Car buyers can get
involved in many parts of this metamarket. This has created an opportunity for metamediaries
to assist buyers to move seamlessly through these groups. One example is
Edmund’s (www.edmunds.com), a Web site where buyers can find prices for different
cars and click to other sites to search for dealers, financing, and accessories.
Metamediaries can serve various metamarkets, such as the home ownership market,
the parenting and baby care market, and the wedding market.9
Marketers and Prospects
Another core concept is the distinction between marketers and prospects. A marketer
is someone who is seeking a response (attention, a purchase, a vote, a donation) from
another party, called the prospect. If two parties are seeking to sell something to each
other, both are marketers.Needs, Wants, and Demands
The successful marketer will try to understand the target market’s needs, wants, and
demands. Needs describe basic human requirements such as food, air, water, clothing,
and shelter. People also have strong needs for recreation, education, and entertainment.
These needs become wants when they are directed to specific objects that might
satisfy the need. An American needs food but wants a hamburger, French fries, and a
soft drink. A person in Mauritius needs food but wants a mango, rice, lentils, and beans.
Clearly, wants are shaped by one’s society.
Demands are wants for specific products backed by an ability to pay. Many people
want a Mercedes; only a few are able and willing to buy one. Companies must measure
not only how many people want their product, but also how many would actually be
willing and able to buy it.
However, marketers do not create needs: Needs preexist marketers. Marketers,
along with other societal influences, influence wants. Marketers might promote the
idea that a Mercedes would satisfy a person’s need for social status. They do not, however,
create the need for social status.
Product or Offering
People satisfy their needs and wants with products. A product is any offering that can
satisfy a need or want, such as one of the 10 basic offerings of goods, services, experiences,
events, persons, places, properties, organizations, information, and ideas.
A brand is an offering from a known source. A brand name such as McDonald’s
carries many associations in the minds of people: hamburgers, fun, children, fast food,
golden arches. These associations make up the brand image. All companies strive to
build a strong, favorable brand image.
Value and Satisfaction
In terms of marketing, the product or offering will be successful if it delivers value and
satisfaction to the target buyer. The buyer chooses between different offerings on the
basis of which is perceived to deliver the most value. We define value as a ratio between
what the customer gets and what he gives. The customer gets benefits and assumes costs,
as shown in this equation:
Value

Benefits


Functional benefits  emotional benefits
Costs Monetary costs  time costs  energy costs  psychic costs
Based on this equation, the marketer can increase the value of the customer offering by
(1) raising benefits, (2) reducing costs, (3) raising benefits and reducing costs, (4) raising
benefits by more than the raise in costs, or (5) lowering benefits by less than the
reduction in costs. A customer choosing between two value offerings, V1 and V2, will
examine the ratio V1/V2. She will favor V1 if the ratio is larger than one; she will favor V2
if the ratio is smaller than one; and she will be indifferent if the ratio equals one.
Exchange and Transactions
Exchange, the core of marketing, involves obtaining a desired product from someone
by offering something in return. For exchange potential to exist, five conditions must
be satisfied:
1. There are at least two parties.
2. Each party has something that might be of value to the other party.
3. Each party is capable of communication and delivery.4. Each party is free to accept or reject the exchange offer.
5. Each party believes it is appropriate or desirable to deal with the other party.
Whether exchange actually takes place depends upon whether the two parties can
agree on terms that will leave them both better off (or at least not worse off) than
before. Exchange is a value-creating process because it normally leaves both parties
better off.
Note that exchange is a process rather than an event. Two parties are engaged in
exchange if they are negotiating—trying to arrive at mutually agreeable terms. When an
agreement is reached, we say that a transaction takes place. A transaction involves at least
two things of value, agreed-upon conditions, a time of agreement, and a place of agreement.
Usually a legal system exists to support and enforce compliance among transactors.
However, transactions do not require money as one of the traded values. A barter
transaction, for example, involves trading goods or services for other goods or services.
Note also that a transaction differs from a transfer. In a transfer, A gives a gift, a
subsidy, or a charitable contribution to B but receives nothing tangible in return.
Transfer behavior can also be understood through the concept of exchange. Typically,
the transferer expects something in exchange for his or her gift—for example, gratitude
or seeing changed behavior in the recipient. Professional fund-raisers provide
benefits to donors, such as thank-you notes. Contemporary marketers have broadened
the concept of marketing to include the study of transfer behavior as well as transaction
behavior.
Marketing consists of actions undertaken to elicit desired responses from a target
audience. To effect successful exchanges, marketers analyze what each party
expects from the transaction. Suppose Caterpillar, the world’s largest manufacturer of
earth-moving equipment, researches the benefits that a typical construction company
wants when it buys such equipment. The items shown on the prospect’s want list in
Figure 1-2 are not equally important and may vary from buyer to buyer. One of
Caterpillar’s marketing tasks is to discover the relative importance of these different
wants to the buyer.
As the marketer, Caterpillar also has a want list. If there is a sufficient match or
overlap in the want lists, a basis for a transaction exists. Caterpillar’s task is to formulate
an offer that motivates the construction company to buy Caterpillar equipment.
The construction company might, in turn, make a counteroffer. This process of negotiation
leads to mutually acceptable terms or a decision not to transact.
Relationships and Networks
Transaction marketing is part of a larger idea called relationship marketing.
Relationship marketing aims to build long-term mutually satisfying relations with key parties—
customers, suppliers, distributors—in order to earn and retain their long-term
preference and business.10 Effective marketers accomplish this by promising and delivering
high-quality products and services at fair prices to the other parties over time.
Relationship marketing builds strong economic, technical, and social ties among the
parties. It cuts down on transaction costs and time. In the most successful cases, transactions
move from being negotiated each time to being a matter of routine.
The ultimate outcome of relationship marketing is the building of a unique company
asset called a marketing network. A marketing network consists of the company and
its supporting stakeholders (customers, employees, suppliers, distributors, university scientists,
and others) with whom it has built mutually profitable business relationships.
Increasingly, competition is not between companies but rather between marketing
networks, with the profits going to the company that has the better network.11Marketing Channels
To reach a target market, the marketer uses three kinds of marketing channels.
Communication channels deliver messages to and receive messages from target buyers.
They include newspapers, magazines, radio, television, mail, telephone, billboards,
posters, fliers, CDs, audiotapes, and the Internet. Beyond these, communications are
conveyed by facial expressions and clothing, the look of retail stores, and many other
media. Marketers are increasingly adding dialogue channels (e-mail and toll-free numbers)
to counterbalance the more normal monologue channels (such as ads).
The marketer uses distribution channels to display or deliver the physical product
or service(s) to the buyer or user. There are physical distribution channels and service
distribution channels, which include warehouses, transportation vehicles, and various
trade channels such as distributors, wholesalers, and retailers. The marketer also uses
selling channels to effect transactions with potential buyers. Selling channels include
not only the distributors and retailers but also the banks and insurance companies
that facilitate transactions. Marketers clearly face a design problem in choosing the
best mix of communication, distribution, and selling channels for their offerings.
Supply Chain
Whereas marketing channels connect the marketer to the target buyers, the supply chain
describes a longer channel stretching from raw materials to components to final products
that are carried to final buyers. For example, the supply chain for women’s purses
starts with hides, tanning operations, cutting operations, manufacturing, and the marketing
channels that bring products to customers. This supply chain represents a value
delivery system. Each company captures only a certain percentage of the total value generated
by the supply chain. When a company acquires competitors or moves upstream
or downstream, its aim is to capture a higher percentage of supply chain value.

[bonddonraj]

Competition
Competition, a critical factor in marketing management, includes all of the actual and
potential rival offerings and substitutes that a buyer might consider. Suppose an automobile
company is planning to buy steel for its cars. The car manufacturer can buy
from U.S. Steel or other U.S. or foreign integrated steel mills; can go to a minimill such
Figure 1-2 Two-Party Exchange Map Showing Want Lists of Both Partiesas Nucor to buy steel at a cost savings; can buy aluminum for certain parts of the car to
lighten the car’s weight; or can buy some engineered plastics parts instead of steel.
Clearly U.S. Steel would be thinking too narrowly of competition if it thought
only of other integrated steel companies. In fact, U.S. Steel is more likely to be hurt in
the long run by substitute products than by its immediate steel company rivals. U.S.
Steel also must consider whether to make substitute materials or stick only to those
applications in which steel offers superior performance.
We can broaden the picture by distinguishing four levels of competition, based
on degree of product substitutability:
1. Brand competition: A company sees its competitors as other companies that offer similar
products and services to the same customers at similar prices. Volkswagen might
see its major competitors as Toyota, Honda, and other manufacturers of mediumprice
automobiles, rather than Mercedes or Hyundai.
2. Industry competition: A company sees its competitors as all companies that make the
same product or class of products. Thus, Volkswagen would be competing against all
other car manufacturers.
3. Form competition: A company sees its competitors as all companies that manufacture
products that supply the same service. Volkswagen would see itself competing against
manufacturers of all vehicles, such as motorcycles, bicycles, and trucks.
4. Generic competition: A company sees its competitors as all companies that compete for
the same consumer dollars. Volkswagen would see itself competing with companies
that sell major consumer durables, foreign vacations, and new homes.
Marketing Environment
Competition represents only one force in the environment in which all marketers
operate. The overall marketing environment consists of the task environment and the
broad environment.
The task environment includes the immediate actors involved in producing, distributing,
and promoting the offering, including the company, suppliers, distributors,
dealers, and the target customers. Material suppliers and service suppliers such as marketing
research agencies, advertising agencies, Web site designers, banking and insurance
companies, and transportation and telecommunications companies are included
in the supplier group. Agents, brokers, manufacturer representatives, and others who
facilitate finding and selling to customers are included with distributors and dealers.
The broad environment consists of six components: demographic environment, economic
environment, natural environment, technological environment, political-legal environment,
and social-cultural environment. These environments contain forces that can have
a major impact on the actors in the task environment, which is why smart marketers
track environmental trends and changes closely.
Marketing Mix
Marketers use numerous tools to elicit the desired responses from their target markets.
These tools constitute a marketing mix:12 Marketing mix is the set of marketing tools
that the firm uses to pursue its marketing objectives in the target market. As shown in
Figure 1-3, McCarthy classified these tools into four broad groups that he called the four
Ps of marketing: product, price, place, and promotion.13
Marketing-mix decisions must be made to influence the trade channels as well as
the final consumers. Typically, the firm can change its price, sales-force size, and advertising
expenditures in the short run. However, it can develop new products and modify
its distribution channels only in the long run. Thus, the firm typically makes fewerperiod-to-period marketing-mix changes in the short run than the number of marketing-
mix decision variables might suggest.
Robert Lauterborn suggested that the sellers’ four Ps correspond to the customers’
four Cs.14
Four Ps Four Cs
Product Customer solution
Price Customer cost
Place Convenience
Promotion Communication
Winning companies are those that meet customer needs economically and conveniently
and with effective communication.
COMPANY ORIENTATIONS TOWARD THE MARKETPLACE
Marketing management is the conscious effort to achieve desired exchange outcomes
with target markets. But what philosophy should guide a company’s marketing efforts?
What relative weights should be given to the often conflicting interests of the organization,
customers, and society?
For example, one of Dexter Corporation’s most popular products was a profitable
grade of paper used in tea bags. Unfortunately, the materials in this paper
accounted for 98 percent of Dexter’s hazardous wastes. So while Dexter’s product was
popular with customers, it was also detrimental to the environment. Dexter assigned
an employee task force to tackle this problem. The task force succeeded, and the company
increased its market share while virtually eliminating hazardous waste.15
Figure 1-3 The Four P Components of the Marketing MixClearly, marketing activities should be carried out under a well-thought-out philosophy
of efficient, effective, and socially responsible marketing. In fact, 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 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 bad-mouth 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
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.
Target Market
Companies do best when they choose their target market(s) carefully and prepare tailored
marketing programs. For example, when cosmetics giant Estee Lauder recognized
the increased buying power of minority groups, its Prescriptives subsidiary launched an
“All Skins” line offering 115 foundation shades for different skin tones. Prescriptives
credits All Skins for a 45 percent sales increase since this product line was launched.
Customer Needs
A company can carefully define its target market yet fail to correctly understand the
customers’ needs. Clearly, understanding customer needs and wants is not always simple.
Some customers have needs of which they are not fully conscious; some cannot
articulate these needs or use words that require some interpretation. We can distinguish
among five types of needs: (1) stated needs, (2) real needs, (3) unstated needs,
(4) delight needs, and (5) secret needs.
Responding only to the stated need may shortchange the customer. For example,
if a customer enters a hardware store and asks for a sealant to seal glass window
panes, she is stating a solution, not a need. If the salesperson suggests that tape would
provide a better solution, the customer may appreciate that the salesperson met her
need and not her stated solution.
A distinction needs to be drawn between responsive marketing, anticipative marketing,
and creative marketing. A responsive marketer finds a stated need and fills it, while an
anticipative marketer looks ahead to the needs that customers may have in the near
future. In contrast, a creative marketer discovers and produces solutions that customers
did not ask for, but to which they enthusiastically respond. Sony exemplifies a creative
marketer because it has introduced many successful new products that customers never
asked for or even thought were possible: Walkmans, VCRs, and so on. Sony goes beyond
customer-led marketing: It is a market-driving firm, not just a market-driven firm. Akio
Morita, its founder, proclaimed that he doesn’t serve markets; he creates markets.20Why is it supremely important to satisfy the needs of target customers? Because a
company’s sales come from two groups: new customers and repeat customers. One
estimate is that attracting a new customer can cost five times as much as pleasing an
existing one.21 And it might cost 16 times as much to bring the new customer to the
same level of profitability as that of the lost customer. Customer retention is thus more
important than customer attraction.

[bonddonraj]

Integrated Marketing
When all of the company’s departments work together to serve the customers’ interests,
the result is integrated marketing. Integrated marketing takes place on two levels.
First, the various marketing functions—sales force, advertising, customer service,
product management, marketing research—must work together. All of these functions
must be coordinated from the customer’s point of view.
Second, marketing must be embraced by the other departments. According to
David Packard of Hewlett-Packard: “Marketing is far too important to be left only to
the marketing department!” Marketing is not a department so much as a companywide
orientation. Xerox, for example, goes so far as to include in every job description
an explanation of how each job affects the customer. Xerox factory managers know
that visits to the factory can help sell a potential customer if the factory is clean and
efficient. Xerox accountants know that customer attitudes are affected by Xerox’s
billing accuracy.
To foster teamwork among all departments, the company must carry out internal
marketing as well as external marketing. External marketing is marketing directed at
people outside the company. Internal marketing is the task of hiring, training, and motivating
able employees who want to serve customers well. In fact, internal marketing
must precede external marketing. It makes no sense to promise excellent service
before the company’s staff is ready to provide it.
Managers who believe the customer is the company’s only true “profit center”
consider the traditional organization chart—a pyramid with the CEO at the top, management
in the middle, and front-line people and customers at the bottom—obsolete.
Master marketing companies invert the chart, putting customers at the top. Next in
importance are the front-line people who meet, serve, and satisfy the customers;
under them are the middle managers, who support the front-line people so they can
serve the customers; and at the base is top management, whose job is to hire and support
good middle managers.
Profitability
The ultimate purpose of the marketing concept is to help organizations achieve their
objectives. In the case of private firms, the major objective is profit; in the case of nonprofit
and public organizations, it is surviving and attracting enough funds to perform
useful work. Private firms should aim to achieve profits as a consequence of creating
superior customer value, by satisfying customer needs better than competitors. For
example, Perdue Farms has achieved above-average margins marketing chicken—a
commodity if there ever was one! The company has always aimed to control breeding
and other factors in order to produce tender-tasting chickens for which discriminating
customers will pay more.22
How many companies actually practice the marketing concept? Unfortunately,
too few. Only a handful of companies stand out as master marketers: Procter &
Gamble, Disney, Nordstrom, Wal-Mart, Milliken & Company, McDonald’s, Marriott
Hotels, American Airlines, and several Japanese (Sony, Toyota, Canon) and European
companies (IKEA, Club Med, Nokia, ABB, Marks & Spencer). These companies focus
on the customer and are organized to respond effectively to changing customerneeds. They all have well-staffed marketing departments, and all of their other departments—
manufacturing, finance, research and development, personnel, purchasing—
accept the customer as king.
Most companies do not embrace the marketing concept until driven to it by circumstances.
Various developments prod them to take the marketing concept to heart,
including sales declines, slow growth, changing buying patterns, more competition,
and higher expenses. Despite the benefits, firms face three hurdles in converting to a
marketing orientation: organized resistance, slow learning, and fast forgetting.
Some company departments (often manufacturing, finance, and research and
development) believe a stronger marketing function threatens their power in the organization.
Resistance is especially strong in industries in which marketing is being introduced
for the first time—for instance, in law offices, colleges, deregulated industries, and government
agencies. In spite of the resistance, many companies manage to introduce some
marketing thinking into their organization. Over time, marketing emerges as the major
function. Ultimately, the customer becomes the controlling function, and with that view,
marketing can emerge as the integrative function within the organization.
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 causerelated
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.
HOW BUSINESS AND MARKETING ARE CHANGING
We can say with some confidence that “the marketplace isn’t what it used to be.” It is
changing radically as a result of major forces such as technological advances, globalization,
and deregulation. These forces have created new behaviors and challenges:Customers increasingly expect higher quality and service and some customization.
They perceive fewer real product differences and show less brand loyalty. They can
obtain extensive product information from the Internet and other sources, permitting
them to shop more intelligently. They are showing greater price sensitivity in their
search for value.
Brand manufacturers are facing intense competition from domestic and foreign
brands, which is resulting in rising promotion costs and shrinking profit margins.
They are being further buffeted by powerful retailers who command limited shelf
space and are putting out their own store brands in competition with national brands.
Store-based retailers are suffering from an oversaturation of retailing. Small retailers
are succumbing to the growing power of giant retailers and “category killers.”
Store-based retailers are facing growing competition from direct-mail firms; newspaper,
magazine, and TV direct-to-customer ads; home shopping TV; and the Internet.
As a result, they are experiencing shrinking margins. In response, entrepreneurial
retailers are building entertainment into stores with coffee bars, lectures, demonstrations,
and performances, marketing an “experience” rather than a product
assortment.
Company Responses and Adjustments
Given these changes, companies are doing a lot of soul-searching, and many highly
respected firms are adjusting in a number of ways. Here are some current trends:
➤ Reengineering: From focusing on functional departments to reorganizing by key
processes, each managed by multidiscipline teams.
➤ Outsourcing: From making everything inside the company to buying more products
from outside if they can be obtained cheaper and better. Virtual companies outsource
everything, so they own very few assets and, therefore, earn extraordinary rates of
return.
➤ E-commerce: From attracting customers to stores and having salespeople call on
offices to making virtually all products available on the Internet. Business-tobusiness
purchasing is growing fast on the Internet, and personal selling can
increasingly be conducted electronically.
➤ Benchmarking: From relying on self-improvement to studying world-class performers
and adopting best practices.
➤ Alliances: From trying to win alone to forming networks of partner firms.24
➤ Partner–suppliers: From using many suppliers to using fewer but more reliable
suppliers who work closely in a “partnership” relationship with the company.
➤ Market-centered: From organizing by products to organizing by market segment.
➤ Global and local: From being local to being both global and local.
➤ Decentralized: From being managed from the top to encouraging more initiative and
“intrepreneurship” at the local level.
Marketer Responses and Adjustments
As the environment changes and companies adjust, marketers also are rethinking
their philosophies, concepts, and tools. Here are the major marketing themes at the
start of the new millennium:
➤ Relationship marketing: From focusing on transactions to building long-term,
profitable customer relationships. Companies focus on their most profitable
customers, products, and channels.Customers increasingly expect higher quality and service and some customization.
They perceive fewer real product differences and show less brand loyalty. They can
obtain extensive product information from the Internet and other sources, permitting
them to shop more intelligently. They are showing greater price sensitivity in their
search for value.
Brand manufacturers are facing intense competition from domestic and foreign
brands, which is resulting in rising promotion costs and shrinking profit margins.
They are being further buffeted by powerful retailers who command limited shelf
space and are putting out their own store brands in competition with national brands.
Store-based retailers are suffering from an oversaturation of retailing. Small retailers
are succumbing to the growing power of giant retailers and “category killers.”
Store-based retailers are facing growing competition from direct-mail firms; newspaper,
magazine, and TV direct-to-customer ads; home shopping TV; and the Internet.
As a result, they are experiencing shrinking margins. In response, entrepreneurial
retailers are building entertainment into stores with coffee bars, lectures, demonstrations,
and performances, marketing an “experience” rather than a product
assortment.
Company Responses and Adjustments
Given these changes, companies are doing a lot of soul-searching, and many highly
respected firms are adjusting in a number of ways. Here are some current trends:
➤ Reengineering: From focusing on functional departments to reorganizing by key
processes, each managed by multidiscipline teams.
➤ Outsourcing: From making everything inside the company to buying more products
from outside if they can be obtained cheaper and better. Virtual companies outsource
everything, so they own very few assets and, therefore, earn extraordinary rates of
return.
➤ E-commerce: From attracting customers to stores and having salespeople call on
offices to making virtually all products available on the Internet. Business-tobusiness
purchasing is growing fast on the Internet, and personal selling can
increasingly be conducted electronically.
➤ Benchmarking: From relying on self-improvement to studying world-class performers
and adopting best practices.
➤ Alliances: From trying to win alone to forming networks of partner firms.24
➤ Partner–suppliers: From using many suppliers to using fewer but more reliable
suppliers who work closely in a “partnership” relationship with the company.
➤ Market-centered: From organizing by products to organizing by market segment.
➤ Global and local: From being local to being both global and local.
➤ Decentralized: From being managed from the top to encouraging more initiative and
“intrepreneurship” at the local level.
Marketer Responses and Adjustments
As the environment changes and companies adjust, marketers also are rethinking
their philosophies, concepts, and tools. Here are the major marketing themes at the
start of the new millennium:
➤ Relationship marketing: From focusing on transactions to building long-term,
profitable customer relationships. Companies focus on their most profitable
customers, products, and channels.Customers increasingly expect higher quality and service and some customization.
They perceive fewer real product differences and show less brand loyalty. They can
obtain extensive product information from the Internet and other sources, permitting
them to shop more intelligently. They are showing greater price sensitivity in their
search for value.
Brand manufacturers are facing intense competition from domestic and foreign
brands, which is resulting in rising promotion costs and shrinking profit margins.
They are being further buffeted by powerful retailers who command limited shelf
space and are putting out their own store brands in competition with national brands.
Store-based retailers are suffering from an oversaturation of retailing. Small retailers
are succumbing to the growing power of giant retailers and “category killers.”
Store-based retailers are facing growing competition from direct-mail firms; newspaper,
magazine, and TV direct-to-customer ads; home shopping TV; and the Internet.
As a result, they are experiencing shrinking margins. In response, entrepreneurial
retailers are building entertainment into stores with coffee bars, lectures, demonstrations,
and performances, marketing an “experience” rather than a product
assortment.
Company Responses and Adjustments
Given these changes, companies are doing a lot of soul-searching, and many highly
respected firms are adjusting in a number of ways. Here are some current trends:
➤ Reengineering: From focusing on functional departments to reorganizing by key
processes, each managed by multidiscipline teams.
➤ Outsourcing: From making everything inside the company to buying more products
from outside if they can be obtained cheaper and better. Virtual companies outsource
everything, so they own very few assets and, therefore, earn extraordinary rates of
return.
➤ E-commerce: From attracting customers to stores and having salespeople call on
offices to making virtually all products available on the Internet. Business-tobusiness
purchasing is growing fast on the Internet, and personal selling can
increasingly be conducted electronically.
➤ Benchmarking: From relying on self-improvement to studying world-class performers
and adopting best practices.
➤ Alliances: From trying to win alone to forming networks of partner firms.24
➤ Partner–suppliers: From using many suppliers to using fewer but more reliable
suppliers who work closely in a “partnership” relationship with the company.
➤ Market-centered: From organizing by products to organizing by market segment.
➤ Global and local: From being local to being both global and local.
➤ Decentralized: From being managed from the top to encouraging more initiative and
“intrepreneurship” at the local level.
Marketer Responses and Adjustments
As the environment changes and companies adjust, marketers also are rethinking
their philosophies, concepts, and tools. Here are the major marketing themes at the
start of the new millennium:
➤ Relationship marketing: From focusing on transactions to building long-term,
profitable customer relationships. Companies focus on their most profitable
customers, products, and channels.➤ Customer lifetime value: From making a profit on each sale to making profits by
managing customer lifetime value. Some companies offer to deliver a constantly
needed product on a regular basis at a lower price per unit because they will enjoy
the customer’s business for a longer period.
➤ Customer share: From a focus on gaining market share to a focus on building customer
share. Companies build customer share by offering a larger variety of goods to their
existing customers and by training employees in cross-selling and up-selling.
➤ Target marketing: From selling to everyone to trying to be the best firm serving welldefined
target markets. Target marketing is being facilitated by the proliferation of
special-interest magazines, TV channels, and Internet newsgroups.
➤ Individualization: From selling the same offer in the same way to everyone in the
target market to individualizing and customizing messages and offerings.
➤ Customer database: From collecting sales data to building a data warehouse of
information about individual customers’ purchases, preferences, demographics,
and profitability. Companies can “data-mine” their proprietary databases to detect
different customer need clusters and make differentiated offerings to each cluster.
➤ Integrated marketing communications: From reliance on one communication tool such
as advertising to blending several tools to deliver a consistent brand image to
customers at every brand contact.
➤ Channels as partners: From thinking of intermediaries as customers to treating them
as partners in delivering value to final customers.
➤ Every employee a marketer: From thinking that marketing is done only by marketing,
sales, and customer support personnel to recognizing that every employee must be
customer-focused.
➤ Model-based decision making: From making decisions on intuition or slim data to
basing decisions on models and facts on how the marketplace works.
These major themes will be examined throughout this book to help marketers and companies
sail safely through the rough, but promising, waters ahead. Successful companies
will change their marketing as fast as their marketplaces and marketspaces change, so
they can build customer satisfaction, value, and retention

[bonddonraj]

EXECUTIVE SUMMARY
All marketers need to be aware of the effect of globalization, technology, and deregulation.
Rather than try to satisfy everyone, marketers start with market segmentation
and develop a market offering that is positioned in the minds of the target market.
To satisfy the target market’s needs, wants, and demands, marketers create a
product, one of the 10 types of entities (goods, services, experiences, events, persons,
places, properties, organizations, information, and ideas). Marketers must
search hard for the core need they are trying to satisfy, remembering that their products
will be successful only if they deliver value (the ratio of benefits and costs) to
customers.
Every marketing exchange requires at least two parties—both with something
valued by the other party, both capable of communication and delivery, both free to
accept or reject the offer, and both finding it appropriate or desirable to deal with the
other. One agreement to exchange constitutes a transaction, part of the larger idea of
relationship marketing. Through relationship marketing, organizations aim to build
enduring, mutually satisfying bonds with customers and other key parties to earn and
retain their long-term business. Reaching out to a target market entails communicationchannels, distribution channels, and selling channels. The supply chain, which
stretches from raw materials to the final products for final buyers, represents a value
delivery system. Marketers can capture more of the supply chain value by acquiring
competitors or expanding upstream or downstream.
In the marketing environment, marketers face brand, industry, form, and
generic competition. The marketing environment can be divided into the task environment
(the immediate actors in producing, distributing, and promoting the product
offering) and the broad environment (forces in the demographic, economic, natural,
technological, political-legal, and social-cultural environment). To succeed,
marketers must pay close attention to the trends and developments in these environments
and make timely adjustments to their marketing strategies. Within these environments,
marketers apply the marketing mix—the set of marketing tools used to pursue
marketing objectives in the target market. The marketing mix consists of the four
Ps: product, price, place, and promotion.
Companies can adopt one of five orientations toward the marketplace. The production
concept assumes that consumers want widely available, affordable products;
the product concept assumes that consumers want products with the most quality, performance,
or innovative features; the selling concept assumes that customers will not
buy enough products without an aggressive selling and promotion effort; the marketing
concept assumes the firm must be better than competitors in creating, delivering,
and communicating customer value to its chosen target markets; and the societal marketing
concept assumes that the firm must satisfy customers more effectively and effi-
ciently than competitors while still preserving the consumer’s and the society’s wellbeing.
Keeping this concept in mind, smart companies will add “higher order” image
attributes to supplement both rational and emotional benefits.
The combination of technology, globalization, and deregulation is influencing
customers, brand manufacturers, and store-based retailers in a variety of ways.
Responding to the changes and new demands brought on by these forces has caused
many companies to make adjustments. In turn, savvy marketers must also alter their
marketing activities, tools, and approaches to keep pace with the changes they will face
today and tomorrow.

[bonddonraj]

Winning Markets
Through Strategic
Planning,
Implementation,
and Control



ow do companies compete in a global marketplace? One part of the answer is a
commitment to creating and retaining satisfied customers. We can now add a second
part: Successful companies know how to adapt to a continuously changing marketplace
through strategic planning and careful management of the marketing
process.
In most large companies, corporate headquarters is responsible for designing a
corporate strategic plan to guide the whole enterprise and deciding about resource
allocations as well as starting and eliminating particular businesses. Guided by the corporate
strategic plan, each division establishes a division plan for each business unit
within the division; in turn, each business unit develops a business unit strategic plan.
Finally, the managers of each product line and brand within a business unit develop a
marketing plan for achieving their objectives.
However, the development of a marketing plan is not the end of the marketing
process. High-performance firms must hone their expertise in organizing, implementing,
and controlling marketing activities as they follow marketing results closely,
diagnose problems, and take corrective action when necessary. In today’s fast-paced
business world, the ability to effectively manage the marketing process—beginning to
end—has become an extremely important competitive advantage.
CORPORATE AND DIVISION STRATEGIC PLANNING
Marketing plays a critical role in corporate strategic planning within successful companies.
Market-oriented strategic planning is the managerial process of developing
and maintaining a viable fit among the organization’s objectives, skills, and resources
and its changing market opportunities. The aim of strategic planning is to shape the
company’s businesses and products so that they yield target profits and growth and
keep the company healthy despite any unexpected threats that may arise.
Strategic planning calls for action in three key areas. The first area is managing a
company’s businesses as an investment portfolio. The second area involves assessing
each business’s strength by considering the market’s growth rate and the company’s
position and fit in that market. And the third area is the development of strategy, a
game plan for achieving long-term objectives. The complete strategic planning, implementation,
and control cycle is shown in Figure 1-4.
Corporate headquarters starts the strategic planning process by preparing statements
of mission, policy, strategy, and goals, establishing the framework within which the
divisions and business units will prepare their plans. Some corporations allow their business
units a great deal of freedom in setting sales and profit goals and strategies. Others
set goals for their business units but let them develop their own strategies. Still others set
the goals and get involved heavily in the individual business unit strategies.1 Regardless
of the degree of involvement, all strategic plans are based on the corporate mission.
Defining the Corporate Mission
An organization exists to accomplish something: to make cars, lend money, provide a
night’s lodging, and so on. Its specific mission or purpose is usually clear when the business
starts. Over time, however, the mission may lose its relevance because of changed market
conditions or may become unclear as the corporation adds new products and markets.
When management senses that the organization is drifting from its mission, it
must renew its search for purpose. According to Peter Drucker, it is time to ask some
fundamental questions.2 What is our business? Who is the customer? What is of value to the
customer? What will our business be? What should our business be? Successful companies
continuously raise these questions and answer them thoughtfully and thoroughly.
A well-worked-out mission statement provides employees with a shared sense of
purpose, direction, and opportunity. It also guides geographically dispersed employees
to work independently and yet collectively toward realizing the organization’s
goals. The mission statement of Motorola, for example, is “to honorably serve the
needs of the community by providing products and services of superior quality at a fair
price to our customers; to do this so as to earn an adequate profit which is required for
the total enterprise to grow; and by so doing provide the opportunity for our employees
and shareholders to achieve their reasonable personal objectives.”
Good mission statements focus on a limited number of goals, stress the company’s
major policies and values, and define the company’s major competitive scopes.
These include:
➤ Industry scope: The industry or range of industries in which a company will operate.
For example, DuPont operates in the industrial market; Dow operates in the
industrial and consumer markets; and 3M will go into almost any industry where it
can make money.
➤ Products and applications scope: The range of products and applications that a
company will supply. St. Jude Medical aims to “serve physicians worldwide with highquality
products for cardiovascular care.”
➤ Competence scope: The range of technological and other core competencies that a
company will master and leverage. Japan’s NEC has built its core competencies in
computing, communications, and components to support production of laptop
computers, televisions, and other electronics items.
➤ Market-segment scope: The type of market or customers a company will serve. For
example, Porsche makes only expensive cars for the upscale market and licenses its
name for high-quality accessories.
➤ Vertical scope: The number of channel levels from raw material to final product and
distribution in which a company will participate. At one extreme are companies
with a large vertical scope; at the other extreme are firms with low or no vertical
integration that may outsource design, manufacture, marketing, and physical
distribution.3
➤ Geographical scope: The range of regions or countries in which a company will
operate. At one extreme are companies that operate in a specific city or state. At the
other extreme are multinationals such as Unilever and Caterpillar, which operate in
almost every one of the world’s countries.
A company must redefine its mission if that mission has lost credibility or no
longer defines an optimal course for the company.4 Kodak redefined itself from a film
company to an image company so that it could add digital imaging;5 Sara Lee rede-
fined itself by outsourcing manufacturing and becoming a marketer of brands. The
corporate mission provides direction for the firm’s various business units.

[bonddonraj]

Establishing Strategic Business Units
A business can be defined in terms of three dimensions: customer groups, customer needs,
and technology.6 For example, a company that defines its business as designing incandescent
lighting systems for television studios would have television studios as its customer
group; lighting as its customer need; and incandescent lighting as its technology.
In line with Levitt’s argument that market definitions of a business are superior
to product definitions,7 these three dimensions describe the business in terms of a
customer-satisfying process, not a goods-producing process. Thus, Xerox’s product
definition would be “We make copying equipment,” while its market definition
would be “We help improve office productivity.” Similarly, Missouri-Pacific Railroad’s
product definition would be “We run a railroad,” while its market definition would
be “We are a people-and-goods mover.”
Large companies normally manage quite different businesses, each requiring
its own strategy; General Electric, as one example, has established 49 strategic business
units (SBUs). An SBU has three characteristics: (1) It is a single business or collection
of related businesses that can be planned separately from the rest of the
company; (2) it has its own set of competitors; and (3) it has a manager responsible
for strategic planning and profit performance who controls most of the factors
affecting profit.
Assigning Resources to SBUs
The purpose of identifying the company’s strategic business units is to develop separate
strategies and assign appropriate funding to the entire business portfolio. Senior
managers generally apply analytical tools to classify all of their SBUs according to
profit potential. Two of the best-known business portfolio evaluation models are the
Boston Consulting Group model and the General Electric model.8
The Boston Consulting Group Approach
The Boston Consulting Group (BCG), a leading management consulting firm, developed
and popularized the growth-share matrix shown in Figure 1-5. The eight circles
represent the current sizes and positions of eight business units in a hypothetical company.
The dollar-volume size of each business is proportional to the circle’s area. Thus,
the two largest businesses are 5 and 6. The location of each business unit indicates its
market growth rate and relative market share.
The market growth rate on the vertical axis indicates the annual growth rate of the
market in which the business operates. Relative market share, which is measured on the
horizontal axis, refers to the SBU’s market share relative to that of its largest competitor
in the segment. It serves as a measure of the company’s strength in the relevant
market segment. The growth-share matrix is divided into four cells, each indicating a
different type of business:
➤ Question marks are businesses that operate in high-growth markets but have low
relative market shares. Most businesses start off as question marks as the company
tries to enter a high-growth market in which there is already a market leader. A
question mark requires a lot of cash because the company is spending money on
plant, equipment, and personnel. The term question mark is appropriate because the
company has to think hard about whether to keep pouring money into this business.
➤ Stars are market leaders in a high-growth market. A star was once a question mark,
but it does not necessarily produce positive cash flow; the company must still spend
to keep up with the high market growth and fight off competition.
➤ Cash cows are former stars with the largest relative market share in a slow-growth
market. A cash cow produces a lot of cash for the company (due to economies of
scale and higher profit margins), paying the company’s bills and supporting its
other businesses.
➤ Dogs are businesses with weak market shares in low-growth markets; typically, these
generate low profits or even losses.
After plotting its various businesses in the growth-share matrix, a company must
determine whether the portfolio is healthy. An unbalanced portfolio would have too many
dogs or question marks or too few stars and cash cows. The next task is to determine what
objective, strategy, and budget to assign to each SBU. Four strategies can be pursued:
1. Build: The objective here is to increase market share, even forgoing short-term earnings
to achieve this objective if necessary. Building is appropriate for question marks
whose market shares must grow if they are to become stars.
2. Hold: The objective in a hold strategy is to preserve market share, an appropriate strategy
for strong cash cows if they are to continue yielding a large positive cash flow.
3. Harvest: The objective here is to increase short-term cash flow regardless of long-term
effect. Harvesting involves a decision to withdraw from a business by implementing a
program of continuous cost retrenchment. The hope is to reduce costs faster than
any potential drop in sales, thus boosting cash flow. This strategy is appropriate for
weak cash cows whose future is dim and from which more cash flow is needed.
Harvesting can also be used with question marks and dogs.
4. Divest: The objective is to sell or liquidate the business because the resources can be
better used elsewhere. This is appropriate for dogs and question marks that are dragging
down company profits.
Successful SBUs move through a life cycle, starting as question marks and becoming
stars, then cash cows, and finally dogs. Given this life-cycle movement, companies
should be aware not only of their SBUs’ current positions in the growth-share matrix
(as in a snapshot), but also of their moving positions (as in a motion picture). If an
SBU’s expected future trajectory is not satisfactory, the corporation will need to work
out a new strategy to improve the likely trajectory.
The General Electric Model
An SBU’s appropriate objective cannot be determined solely by its position in the
growth-share matrix. If additional factors are considered, the growth-share matrix can
be seen as a special case of a multifactor portfolio matrix that General Electric (GE)
pioneered. In this model, each business is rated in terms of two major dimensions—
market attractiveness and business strength. These two factors make excellent marketing
sense for rating a business. Companies are successful to the extent that they enter
attractive markets and possess the required business strengths to succeed in those markets.
If one of these factors is missing, the business will not produce outstanding
results. Neither a strong company operating in an unattractive market nor a weak
company operating in an attractive market will do well.
Using these two dimensions, the GE matrix is divided into nine cells, as shown in
Figure 1-6. The three cells in the upper-left corner indicate strong SBUs suitable for
investment or growth. The diagonal cells stretching from the lower left to the upper
right indicate SBUs of medium attractiveness; these should be pursued selectively and
managed for earnings. The three cells in the lower-right corner indicate SBUs low in
overall attractiveness, which the company may want to harvest or divest.9
In addition to identifying each SBU’s current position on the matrix, management
should also forecast its expected position over the next 3 to 5 years. Making this
determination involves analyzing product life cycle, expected competitor strategies,
new technologies, economic events, and so on. Again, the purpose is to see where
SBUs are as well as where they appear to be headed.

[bonddonraj]

Critique of Portfolio Models
Both the BCG and GE portfolio models have a number of benefits. They can help
managers think more strategically, better understand the economics of their SBUs,
improve the quality of their plans, improve communication between SBU and corporate
management, identify important issues, eliminate weaker SBUs, and strengthen
their investment in more promising SBUs.
However, portfolio models must be used cautiously. They may lead a firm to
overemphasize market-share growth and entry into high-growth businesses or to
neglect its current businesses. Also, the models’ results are sensitive to ratings and
weights and can be manipulated to produce a desired location in the matrix. Finally,
the models fail to delineate the synergies between two or more businesses, which
means that making decisions for one business at a time might be risky. There is a danger
of terminating a losing SBU that actually provides an essential core competence
needed by several other business units. Overall, though, portfolio models have
improved managers’ analytical and strategic capabilities and allowed them to make
better decisions than they could with mere impressions.10
Planning New Businesses, Downsizing Older Businesses
Corporate management often desires higher sales and profits than indicated by the
projections for the SBU portfolio. The question then becomes how to grow much
faster than the current businesses will permit. One option is to identify opportunities
to achieve further growth within the company’s current businesses (intensive growth
opportunities). A second option is to identify opportunities to build or acquire businesses
that are related to the company’s current businesses (integrative growth opportunities).
A third option is to identify opportunities to add attractive businesses that are
unrelated to the company’s current businesses (diversification growth opportunities).
➤ Intensive growth. Ansoff has proposed the product–market expansion grid as a framework
for detecting new intensive growth opportunities.11 In this grid, the company first
considers whether it could gain more market share with its current products in
current markets (market-penetration strategy) by encouraging current customers to buy
more, attracting competitors’ customers, or convincing nonusers to start buying its
products. Next it considers whether it can find or develop new markets for its current
products (market-development strategy). Then it considers whether it can develop new
products for its current markets (product-development strategy). Later it will also review
opportunities to develop new products for new markets (diversification strategy).
➤ Integrative growth. Often a business’s sales and profits can be increased through
backward integration (acquiring a supplier), forward integration (acquiring a
distributor), or horizontal integration (acquiring a competitor).
➤ Diversification growth. This makes sense when good opportunities exist outside the
present businesses. Three types of diversification are possible. The company could
seek new products that have technological or marketing synergies with existing
product lines, even though the new products themselves may appeal to a different
group of customers (concentric diversification strategy). Second, the company might
search for new products that appeal to its current customers but are technologically
unrelated to the current product line (horizontal diversification strategy). Finally, the
company might seek new businesses that have no relationship to the company’s
current technology, products, or markets (conglomerate diversification strategy).
Of course, companies must not only develop new businesses, but also prune, harvest,
or divest tired, old businesses in order to release needed resources and reduce
costs. Weak businesses require a disproportionate amount of managerial attention;
managers should therefore focus on growth opportunities rather than wasting energy
and resources trying to save hemorrhaging businesses.
BUSINESS STRATEGIC PLANNING
Below the corporate level, the strategic-planning process for each business or SBU
consists of the eight steps shown in Figure 1-7. We examine each step in the sections
that follow.
Business Mission
Each business unit needs to define its specific mission within the broader company
mission. Thus, a television studio-lighting-equipment company might define its mission
as “The company aims to target major television studios and become their vendor
of choice for lighting technologies that represent the most advanced and reliable studio
lighting arrangements.”
SWOT Analysis
The overall evaluation of a business’s strengths, weaknesses, opportunities, and threats
is called SWOT analysis. SWOT analysis consists of an analysis of the external and
internal environments.
External Environment Analysis
In general, a business unit has to monitor key macroenvironment forces (demographiceconomic,
technological, political-legal, and social-cultural) and microenvironment
actors (customers, competitors, distributors, and suppliers) that affect its ability to earn
profits (see Chapter 4 for more detail). Then, for each trend or development, management
needs to identify the associated marketing opportunities and threats.
A marketing opportunity is an area of buyer need in which a company can perform
profitably. Opportunities can be classified according to their attractiveness and
their success probability. The company’s success probability depends on whether its busi-
ness strengths not only match the key success requirements for operating in the target
market, but also exceed those of its competitors. Mere competence does not constitute
a competitive advantage. The best-performing company will be the one that can
generate the greatest customer value and sustain it over time.
An environmental threat is a challenge posed by an unfavorable external trend
or development that would lead, in the absence of defensive marketing action, to deterioration
in sales or profit. Threats should be classified according to seriousness and
probability of occurrence. Minor threats can be ignored; somewhat more serious threats
must be carefully monitored; and major threats require the development of contingency
plans that spell out changes the company can make if necessary.
Internal Environment Analysis
It is one thing to discern attractive opportunities and another to have the competencies
to succeed in these opportunities. Thus, each business needs to periodically evaluate its
internal strengths and weaknesses in marketing, financial, manufacturing, and organizational
competencies. Clearly, the business does not have to correct all of its weaknesses,
nor should it gloat about all of its strengths. The big question is whether the
business should limit itself to those opportunities in which it possesses the required
strengths or consider better opportunities to acquire or develop certain strengths.
Sometimes a business does poorly because its departments do not work together
well as a team. It is therefore critically important to assess interdepartmental working
relationships as part of the internal environmental audit. Honeywell, for example, asks
each department to annually rate its own strengths and weaknesses and those of the
other departments with which it interacts. The notion is that each department is a “supplier”
to some departments and a “customer” of other departments. If one department
has weaknesses that hurt its “internal customers,” Honeywell wants to correct them.
Goal Formulation
Once the company has performed a SWOT analysis of the internal and external environments,
it can proceed to develop specific goals for the planning period in a process
called goal formulation. Managers use the term goals to describe objectives that are specific
with respect to magnitude and time. Turning objectives into measurable goals
facilitates management planning, implementation, and control.
To be effective, goals must (1) be arranged hierarchically to guide the businesses in
moving from broad to specific objectives for departments and individuals; (2) be stated
quantitatively whenever possible; (3) be realistic; and (4) be consistent. Other important
trade-offs in setting goals include: balancing short-term profit versus long-term growth;
balancing deep penetration of existing markets with development of new markets; balancing
profit goals versus nonprofit goals; and balancing high growth versus low risk.
Each choice in this set of goal trade-offs calls for a different marketing strategy.
Strategy Formulation
Goals indicate what a business unit wants to achieve; strategy describes the game plan
for achieving those goals. Every business strategy consists of a marketing strategy plus
a compatible technology strategy and sourcing strategy. Although many types of marketing
strategies are available, Michael Porter has condensed them into three generic
types that provide a good starting point for strategic thinking: overall cost leadership,
differentiation, or focus.12
➤ Overall cost leadership: Here the business works to achieve the lowest production and
distribution costs so that it can price lower than competitors and win more market
share. Firms pursuing this strategy must be good at engineering, purchasing,
manufacturing, and physical distribution; they need less skill in marketing. Texas
Instruments uses this strategy. The problem is that rivals may emerge with still lower
costs, hurting a firm that has rested its whole future on cost leadership.
➤ Differentiation: Here the business concentrates on achieving superior performance in
an important customer benefit area, such as being the leader in service, quality,
style, or technology—but not leading in all of these things. Intel, for instance,
differentiates itself through leadership in technology, coming out with new
microprocessors at breakneck speed.
➤ Focus: Here the business focuses on one or more narrow market segments, getting
to know these segments intimately and pursuing either cost leadership or
differentiation within the target segment. Airwalk shoes, for instance, came to fame
by focusing on the very narrow extreme-sports segment.
Firms that do not pursue a clear strategy—“middle-of-the-roaders”—do the
worst. International Harvester fell upon hard times because it did not stand out as lowest
in cost, highest in perceived value, or best in serving some market segment.
Middle-of-the-roaders try to be good on all strategic dimensions, but because strategic
dimensions require different and often inconsistent ways of organizing the firm, these
firms end up being not particularly excellent at anything.
Strategy formulation in the age of the Internet is particularly challenging. The
chemical company Solutia, a Monsanto spinoff, copes by creating four different, possible
short-term scenarios for each strategy. This allows the firm to act quickly when it sees
a scenario unfolding. Sun Microsystems holds a weekly meeting with the firm’s top decision
makers to brainstorm strategies for handling new threats. By revisiting strategic
plans frequently, both companies are able to stay ahead of environmental changes.

[bonddonraj]

Program Formulation
Once the business unit has developed its principal strategies, it must work out detailed
supporting programs. Thus, if the business has decided to attain technological leadership,
it must plan programs to strengthen its R&D department, gather technological
intelligence, develop leading-edge products, train the technical sales force, and
develop ads to communicate its technological leadership.
After these marketing programs have been tentatively formulated, the marketing
people must estimate their costs. Questions arise: Is participating in a particular trade
show worth it? Will a specific sales contest pay for itself? Will hiring another salesperson
contribute to the bottom line? Activity-based cost (ABC) accounting should be
applied to each marketing program to determine whether it is likely to produce suffi-
cient results to justify the cost.14
Implementation
A clear strategy and well-thought-out supporting programs may be useless if the firm
fails to implement them carefully. Indeed, strategy is only one of seven elements,
according to McKinsey & Company, that the best-managed companies exhibit.15 In
the McKinsey 7-S framework for business success, strategy, structure, and systems are
considered the “hardware” of success, and style (how employees think and behave),
skills (to carry out the strategy), staff (able people who are properly trained and
assigned), and shared values (values that guide employees’ actions) are the “software.”
When these software elements are present, companies are usually more successful at
strategy implementation.16 Implementation is vital to effective management of the
marketing process
Feedback and Control
As it implements its strategy, the firm needs to track the results and monitor new developments
in the internal and external environments. Some environments are fairly stable
from year to year. Other environments evolve slowly in a fairly predictable way. Still
other environments change rapidly in significant and unpredictable ways.
Nonetheless, the company can count on one thing: The marketplace will change. And
when it does, the company will need to review and revise its implementation, programs,
strategies, or even objectives.
A company’s strategic fit with the environment will inevitably erode because the
market environment changes faster than the company’s 7-Ss. Thus a company might
remain efficient while it loses effectiveness. Peter Drucker pointed out that it is more
important to “do the right thing” (effectiveness) than “to do things right” (efficiency).
The most successful companies excel at both.
Once an organization fails to respond to a changed environment, it has difficulty
recapturing its lost position. This happened to the once-unassailable Motorola when it
was slow to respond to the new digital technology used by Nokia and others, and kept
rolling out analog phones.17 Similarly, Barnes & Noble did not immediately recognize
the threat posed by Amazon.com’s Internet-based book retailing model; then, as a
latecomer to e-commerce, it had more of a struggle establishing itself. Clearly, the key
to organizational health is the firm’s willingness to examine the changing environment
and to adopt appropriate new goals and behaviors. High-performance organizations
continuously monitor the environment and use flexible strategic planning to
maintain a viable fit with the evolving environment.
THE MARKETING PROCESS
Planning at the corporate, division, and business levels is an integral part of planning
for the marketing process. To understand that process fully, we must first look at how
a company defines its business.
The task of any business is to deliver value to the market at a profit. There are at
least two views of the value-delivery process.18 The traditional view is that the firm makes
something and then sells it (Figure 1-8). In this view, marketing takes place in the second
half of the value-delivery process. The traditional view assumes that the company
knows what to make and that the market will buy enough units to produce profits for
the company.
Companies that subscribe to this traditional view have the best chance of succeeding
in economies marked by goods shortages in which consumers are not fussy
about quality, features, or style. But the traditional view of the business process will not
work in more competitive economies in which people face abundant choices. The
“mass market” is actually splintering into numerous micromarkets, each with its own
wants, perceptions, preferences, and buying criteria. The smart competitor therefore
must design the offer for well-defined target markets.
The Value-Delivery Sequence
This belief is at the core of the new view of business processes, which places marketing
at the beginning of the planning process. Instead of emphasizing making and selling,
companies see themselves involved in a three-phase value creation and delivery
sequence (Figure 1-8).
The first phase, choosing the value, represents the strategic “homework” that
marketing must do before any product exists. The marketing staff must segment the
market, select the appropriate market target, and develop the offer’s value position
specifications
and services, set a target price, then make and distribute the product.
Developing specific product features, prices, and distribution occurs at this stage and
is part of tactical marketing. The task in the third phase is communicating the value.
Here, further tactical marketing occurs in utilizing the sales force, sales promotion,
advertising, and other promotional tools to inform the market about the product.
Thus, as Figure 1-8 shows, the marketing process actually begins before there is a product
and continues while it is being developed and after it becomes available.
Steps in the Marketing Process
The marketing process consists of analyzing market opportunities, researching and
selecting target markets, designing marketing strategies, planning marketing programs,
and organizing, implementing, and controlling the marketing effort. The four
steps in the marketing process are:
1. Analyzing market opportunities. The marketer’s initial task is to identify potential longrun
opportunities given the company’s market experience and core competencies.
To evaluate its various opportunities, assess buyer wants and needs, and gauge market
size, the firm needs a marketing research and information system. Next, the firm studies
consumer markets or business markets to find out about buying behavior, perceptions,
wants, and needs. Smart firms also pay close attention to competitors and look
for major segments within each market that they can profitably serve.
2. Developing marketing strategies. In this step, the marketer prepares a positioning strategy
for each new and existing product’s progress through the life cycle, makes decisions
about product lines and branding, and designs and markets its services.
3. Planning marketing programs. To transform marketing strategy into marketing programs,
marketing managers must make basic decisions on marketing expenditures,
marketing mix, and marketing allocation. The first decision is about the level of marketing
expenditures needed to achieve the firm’s marketing objectives. The second
Design
product
Advertise/
promote Procure Make Price Sell Distribute Service
Make the Product Sell the Product
Customer
segmentation
(b) Value creation and delivery sequence
Strategic marketing Tactical marketing
(a) Traditional physical process sequence
Value
positioning
Market
selection/
focus
Product
development
Service
development
Sales
promotion Pricing
Making Servicing
Sourcing Distributing
Sales force Advertising
Choose the Value Provide the Value Communicate the Value
Two Views of the Value-Delivery Process
decision is how to divide the total marketing budget among the various tools in the
marketing mix: product, price, place, and promotion.19 And the third decision is how to
allocate the marketing budget to the various products, channels, promotion media,
and sales areas.
4. Managing the marketing effort. In this step (discussed later in this chapter), marketers
organize the firm’s marketing resources to implement and control the marketing
plan. Because of surprises and disappointments as marketing plans are implemented,
the company also needs feedback and control.
Figure 1-9 presents a grand summary of the marketing process and the factors
that shape the company’s marketing strategy.
The Nature and Contents of a Marketing Plan
The marketing plan created for each product line or brand is one of the most important
outputs of planning for the marketing process. A typical marketing plan has eight sections:
➤ Executive summary and table of contents: This brief summary outlines the plan’s main
goals and recommendations; it is followed by a table of contents.
➤ Current marketing situation: This section presents relevant background data on sales,
costs, profits, the market, competitors, distribution, and the macroenvironment,
drawn from a fact book maintained by the product manager.
➤ Opportunity and issue analysis: This section identifies the major opportunities and
threats, strengths and weaknesses, and issues facing the product line or brand.
➤ Objectives: This section spells out the financial and marketing objectives to be achieved.
Target
customers
Product
Marketing
Intermediaries
Competitors
Suppliers Publics
Promotion
Price Place
Demographic/
economic
environment
Political/
legal
environment
Technological/
physical
environment
Social/
cultural
environment
Marketing
information
system
system
Marketing
planning
Marketing
organization
Marketing
control
system
and
implementation
system

[bonddonraj]

Product- or Brand-Management Organization
Companies that produce a variety of products and brands often establish a product-
(or brand-) management organization as another layer of management within the
marketing function. A product manager supervises product category managers, who
in turn supervise specific product and brand managers. A product-management organization
makes sense if the firm’s products are quite different, or if the sheer number
of products is beyond the ability of a functional marketing organization to handle.
In both consumer and industrial markets, product and brand managers are
responsible for product planning and strategy; preparing annual marketing plans and
sales forecasts; working with advertising and merchandising agencies to create programs
and campaigns; stimulating support among sales reps and distributors; ongoing
research into product performance, customer and dealer attitudes, opportunities and
threats; and initiating product improvements to meet changing market needs.
The product-management organization allows the product manager to concentrate
on developing a cost-effective marketing mix for each product, to react more
quickly to marketplace changes, and to watch over smaller brands. On the other hand,
it can lead to conflict and frustration when product managers are not given enough
authority to carry out their responsibilities effectively. In addition, product managers
become experts in their product but rarely achieve functional expertise. And appointing
product managers and associate product managers for even minor products can
bloat payroll costs. Finally, brand managers normally move up in a few years to another
brand or transfer to another company, leading to short-term thinking that plays havoc
with long-term brand building.
To counter these disadvantages, some companies have switched from product
managers to product teams. For example, Hallmark uses a triangular marketing team
consisting of a market manager (the leader), a marketing manager, and a distribution
manager; 3M uses a horizontal product team consisting of a team leader and representatives
from sales, marketing, laboratory, engineering, accounting, and marketing
research.
Another alternative is to introduce category management, in which a company focuses
on product categories to manage its brands. Kraft has changed from a classic brand-management
structure, in which each brand competed for resources and market share, to a
category-based structure in which category business directors (or “product integrators”)
lead cross-functional teams of representatives from marketing, R&D, consumer promotion,
and finance. These category teams work with process teams dedicated to each product
category and with customer teams dedicated to each major customer.20 Still, category
54 CHAPTER3 WINNING MARKETS THROUGH STRATEGIC PLANNING, IMPLEMENTATION, AND CONTROL
management is essentially product-driven, which is why Colgate recently moved from
brand management (Colgate toothpaste) to category management (toothpaste category)
to a new stage called “customer-need management” (mouth care). This last step finally
focuses the organization on a basic customer need.21
Market-Management Organization
Many companies sell their products to a diverse set of markets; Canon, for instance,
sells fax machines to consumer, business, and government markets. When customers
fall into different user groups with distinct buying preferences and practices, a market
management organization is desirable. A markets manager supervises several market
managers (also called market-development managers, market specialists, or industry
specialists). The market managers draw upon functional services as needed or may
even have functional specialists reporting to them.
Market managers are staff (not line) people, with duties similar to those of product
managers. This system has many of the same advantages and disadvantages of product
management systems. Its strongest advantage is that the marketing activity is organized
to meet the needs of distinct customer groups. This is why Xerox converted from
geographic selling to selling by industry, as did IBM, which recently reorganized its
employees into 14 customer-focused divisions. In fact, several studies have confirmed
the value of market-centered organization: Slater and Narver found a substantial positive
effect of market orientation on both commodity and noncommodity businesses.22
Product-Management/Market-Management Organization
Companies that produce many products that flow into many markets tend to adopt a
matrix organization. Consider DuPont, a pioneer in developing the matrix structure. Its
textile fibers department consists of separate product managers for rayon and other
fibers plus separate market managers for menswear and other markets. The product
managers plan the sales and profits for their respective fibers, each seeking to expand
the use of his or her fiber; the market managers seek to meet their market’s needs
rather than push a particular fiber. Ultimately, the sales forecasts from the market
managers and the product managers should add to the same grand total.
A matrix organization would seem desirable in a multiproduct, multimarket
company. However, this system is costly and often creates conflicts as well as questions
about authority and responsibility. By the early 1980s, a number of companies had
abandoned matrix management. But matrix management has resurfaced and is again
flourishing in the form of “business teams” staffed with full-time specialists reporting
to one team boss. The major difference is that companies today provide the right context
in which a matrix can thrive—an emphasis on flat, lean team organizations
focused around business processes that cut horizontally across functions.23
Corporate-Divisional Organization
As multiproduct-multimarket companies grow, they often convert their larger product
or market groups into separate divisions with their own departments and services. This
raises the question of what marketing services and activities should be retained at corporate
headquarters. Some corporations leave marketing to each division; some have
a small corporate marketing staff; and some prefer to maintain a strong corporate
marketing staff.
The potential contribution of a corporate marketing staff varies in different
stages of the company’s evolution. Most companies begin with weak marketing in their
divisions and often establish a corporate staff to bring stronger marketing into the divisions
through training and other services. Some members of corporate marketing
Managing The Marketing Process 55
might be transferred to head divisional marketing departments. As divisions become
strong in their marketing, corporate marketing has less to offer them. Some companies
then decide corporate marketing has done its job and proceed to eliminate the
department.24
Global Organization
Companies that market internationally can organize in three ways. Those just going
global may start by establishing an export department with a sales manager and a few assistants
(and limited marketing services). As they go after global business more aggressively,
they can create an international division with functional specialists (including marketing)
and operating units structured geographically, according to product, or as
international subsidiaries. Finally, companies that become truly global organizations have
top corporate management and staff plan worldwide operations, marketing policies,
financial flows, and logistical systems. In these organizations, the global operating units
report directly to top management, not to the head of an international division.
Building a Companywide Marketing Orientation
Many companies are beginning to realize that their organizations are not really marketand
customer-driven—they are product or sales driven. Companies such as Baxter,
General Motors, and Shell are working hard to reorganize themselves into true marketdriven
companies. The task is not easy: it requires changes in job and department defi-
nitions, responsibilities, incentives, and relationships.
To create a market- and customer-focused company, the CEO must: convince
senior managers of the need to be more customer-focused; appoint a senior marketing
officer and marketing task force; get outside help and guidance; change reward
measurement and system to encourage actions that build long-term customer satisfaction;
hire strong marketing talent; develop strong in-house marketing training programs;
install a modern marketing planning system; establish an annual marketing
excellence recognition program; consider restructuring as a market-centered organization;
and shift from a department focus to a process-outcome focus.
DuPont successfully made the transition from an inward-looking to an outwardlooking
orientation when it began building a “marketing community” by reorganizing
divisions along market lines and holding marketing management training seminars
for thousands of managers and employees. The company also established a marketing
excellence recognition program and honored employees from around the world who
had developed innovative marketing strategies and service improvements.25 It takes a
great deal of planning and patience to get managers to accept customers as the foundation
and future of the business—but it can be done, as the DuPont example shows.
Marketing Implementation
Organization is one factor contributing to effective marketing implementation, the
process that turns marketing plans into action assignments and ensures that such
assignments are executed in a manner that accomplishes the plan’s stated objectives.26
This part of the marketing process is critical, because a brilliant strategic marketing
plan counts for little if it is not implemented properly. Whereas strategy addresses the
what and why of marketing activities, implementation addresses the who, where, when,
and how. Strategy and implementation are closely related in that one layer of strategy
implies certain tactical implementation assignments at a lower level. For example, top
management’s strategic decision to “harvest” a product must be translated into specific
actions and assignments.
56 CHAPTER3 WINNING MARKETS THROUGH STRATEGIC PLANNING, IMPLEMENTATION, AND CONTROL
Bonoma identified four sets of skills for implementing marketing programs:
(1) diagnostic skills (the ability to determine what went wrong); (2) identification of
company level (the ability to discern whether problems occurred in the marketing
function, the marketing program, or the marketing policy); (3) implementation skills
(the ability to budget resources, organize effectively, motivate others); and (4) evaluation
skills (the ability to evaluate results).27 These skills are as vital for nonprofits as
they are for businesses, as the Alvin Ailey Dance Theater has discovered.
Like many nonprofit cultural organizations, the company founded by Alvin
Ailey in 1958 always seemed to be operating in the red—despite its ability to attract
full houses—because of the high costs of mounting a production. But Judith
Jameson, the principal dancer who succeeded Ailey as director after his death, has
been able to keep the company in the black, thanks largely to her skill at motivating
others to carry out marketing efforts. The nonprofit implements its marketing plan
through a high-powered board of directors and a group of businesses that want to
associate with the Ailey company for their own marketing purposes. For example,
Healthsouth Corporation provides free physical therapy to the dancers and benefits
from the association when marketing its sports medicine clinics. With an audience
that is almost half African American and 43 percent of which is between the ages of
19 and 39, Ailey provides access to an important market for its corporate partners,
earning their enthusiastic support.28
Evaluating and Controlling the Marketing Process
To deal with the many surprises that occur during the implementation of marketing
plans, the marketing department has to monitor and control marketing activities continuously.
Table 1.1 lists four types of marketing control needed by companies: annualplan
control, profitability control, efficiency control, and strategic control.
Annual-Plan Control
The purpose of annual-plan control is to ensure that the company achieves the sales,
profits, and other goals established in its annual plan. The heart of annual-plan control
is the four-step management by objectives process in which management (1) sets
monthly or quarterly goals; (2) monitors the company’s marketplace performance;
(3) determines the causes of serious performance deviations; and (4) takes corrective
action to close the gaps between goals and performance.
This control model applies to all levels of the organization. Top management
sets sales and profit goals for the year that are elaborated into specific goals for each
lower level. In turn, each product manager commits to attaining specified levels of
sales and costs; each regional district and sales manager and each sales representative
also commits to specific goals. Each period, top management reviews and interprets
performance results at all levels, using these five tools:
➤ Sales analysis. Sales analysis consists of measuring and evaluating actual sales in
relation to goals, using two specific tools. Sales-variance analysis measures the relative
contribution of different factors to a gap in sales performance. Microsales analysis
looks at specific products, territories, and other elements that failed to produce
expected sales. The point of these analyses is to determine what factors (pricing,
lower volume, specific territories, etc.) contributed to a failure to meet sales goals.
➤ Market-share analysis. Company sales do not reveal how well the company is
performing relative to competitors. To do this, management needs to track its
market share. Overall market share is the company’s sales expressed as a percentage
Managing The Marketing Process 57
of total market sales. Served market share is its sales expressed as a percentage of
the total sales to its served market—all of the buyers who are able and willing to buy
the product. Relative market share can be expressed as market share in relation to
the largest competitor; a rise in relative market share means a company is gaining
on its leading competitor. A useful way to analyze market-share movements is in
terms of customer penetration, customer loyalty, customer selectivity, and price
selectivity.
➤ Marketing expense-to-sales analysis. This is a key ratio because it allows management to
be sure that the company is not overspending to achieve sales goals. Minor
fluctuations in the expense-to-sales ratio can be ignored, but major fluctuations are
cause for concern.
Type of Prime Purpose of
Control Responsibility Control Approaches
I. Annual-plan control
II. Profitability control
III. Efficiency control
IV. Strategic control
Top management
Middle management
Marketing
controller
Line and staff
management
Marketing
controller
Top management
Marketing auditor
To examine whether
the planned results
are being achieved
To examine where the
company is making
and losing money
To evaluate and
improve the spending
efficiency and impact
of marketing
expenditures
To examine whether
the company is
pursuing its best
opportunities in
markets, products, and
channels
■ Sales analysis
■ Market-share
analysis
■ Marketing expenseto-
sales analysis
■ Financial analysis
■ Market-based
scorecard analysis
Profitability by:
■ product
■ territory
■ customer
■ segment
■ trade channel
■ order size
Efficiency of:
■ sales force
■ advertising
■ sales promotion
■ distribution
■ Marketiingeffectiveness
review
■ Marketing audit
■ Marketing
excellence review
■ Company ethical
and social
responsibility review
Table 1.1 Types of Marketing Control
58 CHAPTER3 WINNING MARKETS THROUGH STRATEGIC PLANNING, IMPLEMENTATION, AND CONTROL
➤ Financial analysis. Management uses financial analysis to identify the factors that
affect the company’s rate of return on net worth.29 The main factors are shown in
Figure 1-10, along with illustrative numbers for a large chain-store retailer. To
improve its return on net worth, the company must increase its ratio of net profits
to its assets or increase the ratio of its assets to its net worth. The company should
analyze the composition of its assets (i.e., cash, accounts receivable, inventory, and
plant and equipment) and see if it can improve its asset management.30
➤ Market-based scorecard analysis. Companies should also prepare two market-based
scorecards that reflect performance and provide possible early warning signals of
problems. A customer-performance scorecard records how well the company is doing on
such customer-based measures as new customers, dissatisfied customers, lost customers,
target market awareness, target market preference, relative product quality, and
relative service quality. A stakeholder-performance scorecard tracks the satisfaction of
constituencies who have a critical interest in and impact on the company’s
performance: employees, suppliers, banks, distributors, retailers, and stockholders.31
Profitability Control
Successful companies also measure the profitability of their products, territories, customer
groups, segments, trade channels, and order sizes. This information helps management
determine whether any products or marketing activities should be expanded,
reduced, or eliminated. The first step in marketing-profitability analysis is to identify
the functional expenses (such as advertising and delivery) incurred for each activity.
Next, the firm measures how much functional expense was associated with selling
through each type of channel. Third, the company prepares a profit-and-loss statement
for each type of channel.
In general, marketing-profitability analysis indicates the relative profitability of
different channels, products, territories, or other marketing entities. However, it does
not prove that the best course of action is to drop the unprofitable marketing entities,
1.5%
3.2
Asset turnover
Profit margin
Net profits
–––––––
Net sales
4.8% =
Return on assets
Net profits
–––––––
Total assets
2.6 x
Financial
leverage
Total assets
–––––––
Net worth
12.5% =
Rate of return
on net worth
Net profits
–––––––
Net worth
Net sales
–––––––
Total assets
Figure 1-10 Financial Model of Return on Net Worth
Managing The Marketing Process 59
nor does it capture the likely profit improvement if these marginal marketing entities
are dropped. Therefore, the company must examine its alternatives closely before taking
corrective action.
Efficiency Control
Suppose a profitability analysis reveals poor profits for certain products, territories, or
markets. This is when management must ask whether there are more efficient ways to
manage the sales force, advertising, sales promotion, and distribution in connection
with these marketing entities. Some companies have established a marketing controller
position to work on such issues and improve marketing efficiency.
Marketing controllers work out of the controller’s office but specialize in the
marketing side of the business. At companies such as General Foods, DuPont, and
Johnson & Johnson, they perform a sophisticated financial analysis of marketing
expenditures and results, analyzing adherence to profit plans, helping prepare brand
managers’ budgets, measuring the efficiency of promotions, analyzing media production
costs, evaluating customer and geographic profitability, and educating marketing
personnel on the financial implications of marketing decisions.32
Strategic Control
From time to time, companies need to undertake a critical review of overall marketing
goals and effectiveness. Each company should periodically reassess its strategic approach
to the marketplace with marketing-effectiveness reviews and marketing audits.
➤ The marketing-effectiveness review. Marketing effectiveness is reflected in the degree to
which a company or division exhibits the five major attributes of a marketing
orientation: customer philosophy (serving customers’ needs and wants), integrated
marketing organization (integrating marketing with other key departments), adequate
marketing information (conducting timely, appropriate marketing research), strategic
orientation (developing formal marketing plans and strategies), and operational efficiency
(using marketing resources effectively and flexibly). Unfortunately, most companies
and divisions score in the fair-to-good range on measures of marketing effectiveness.33
➤ The marketing audit. Companies that discover marketing weaknesses should
undertake a marketing audit, a comprehensive, systematic, independent, and
periodic examination of a company’s (or SBU’s) marketing environment, objectives,
strategies, and activities to identify problem areas and opportunities and
recommend a plan of action for improving the company’s marketing
performance.34 The marketing audit examines six major marketing components:
(1) the macroenvironment and task environment, (2) marketing strategy,
(3) marketing organization, (4) marketing systems, (5) marketing productivity, and
(6) marketing function (the 4 Ps).
Highly successful companies also perform marketing excellence reviews and ethicalsocial
responsibility reviews to gain an outside-in perspective on their marketing activities.
➤ The marketing excellence review. This best-practices excellence review rates a firm’s
performance in relation to the best marketing and business practices of highperforming
businesses. The resulting profile exposes weaknesses and strengths and
highlights where the company might change to become a truly outstanding player
in the marketplace.
➤ The ethical and social responsibility review. In addition, companies need to evaluate
whether they are truly practicing ethical and socially responsible marketing.
Business success and continually satisfying customers and other stakeholders are
60 CHAPTER3 WINNING MARKETS THROUGH STRATEGIC PLANNING, IMPLEMENTATION, AND CONTROL
intimately tied to adoption and implementation of high standards of business and
marketing conduct. The most admired companies abide by a code of serving
people’s interests, not only their own. Thus, the ethical and social responsibility
review allows management to determine how the firm is grappling with ethical
issues and exhibiting a “social conscience” in its business dealings.
Effective control of the marketing process ultimately depends on accurate,
timely, and complete information about markets, demand, and the marketing environment—

[bonddonraj]

EXECUTIVE SUMMARY
Market-oriented strategic planning is the managerial process of developing and maintaining
a viable fit among the organization’s objectives, skills, and resources and its
changing market opportunities. The aim of strategic planning is to shape the company’s
businesses and products to yield the targeted profits and growth. Strategic planning
takes place at four levels: corporate, division, business unit, and product.
The corporate strategy establishes the framework within which the divisions and
business units prepare their strategic plans. Setting a corporate strategy entails defining
the corporate mission; establishing strategic business units (SBUs), assigning
resources to each SBU based on its market attractiveness and business strength, and
planning new businesses and downsizing older businesses. Strategic planning for SBUs
entails defining the business mission, analyzing external opportunities and threats,
analyzing internal strengths and weaknesses, formulating goals, formulating strategy,
formulating programs, implementing the programs, and gathering feedback and
exercising control.
The marketing process consists of four steps: analyzing market opportunities,
developing marketing strategies, planning marketing programs, and managing marketing
effort. Each product level within a business unit must develop a marketing plan
for achieving its goals. The marketing plan is one of the most important outputs of the
marketing process. It should contain an executive summary and table of contents, an
overview of the marketing situation, an analysis of opportunities and threats, a summary
of financial and marketing objectives, an overview of marketing strategy, a
description of action programs, a projected profit-and-loss statement, and a summary
of the controls for monitoring the plan’s progress.
In managing the marketing process, companies can organize the marketing
department according to function, geographic area, products, or customer markets.
Companies that market in other countries can create an export department, an international
division, or a global organization. Marketing implementation is the process
that turns marketing plans into action assignments and ensures that such assignments
are executed in a manner that accomplishes the plan’s stated objectives. To manage
the marketing process, companies can apply four types of control: annual-plan control,
profitability control, efficiency control, and strategic control.

[bonddonraj]

The marketing environment is changing at an accelerating rate. Given the following
changes, the need for real-time market information is greater than at any time in the
past:
From local to national to global marketing: As companies expand their geographical market
coverage, their managers need more information more quickly.
From buyer needs to buyer wants: As incomes improve, buyers become more selective in
their choice of goods. To predict buyers’ responses to different features, styles, and
other attributes, sellers must turn to marketing research.
From price to nonprice competition: As sellers increase their use of branding, product differentiation,
advertising, and sales promotion, they require information on these marketing
tools’ effectiveness.
Fortunately, the exploding information requirements have given rise to impressive new
information technologies: computers, microfilm, cable television, copy machines, fax machines,
tape recorders, video recorders, videodisc players, CD-ROM drives, the Internet.1
Some firms have developed marketing information systems that provide company management
with rapid and incredible detail about buyer wants, preferences, and behavior.
For example, the Coca-Cola Company knows that we put 3.2 ice cubes in a glass, see 69
of its commercials every year, and prefer cans to pop out of vending machines at a temperature
of 35 degrees. Kimberly-Clark, which makes Kleenex, has calculated that the average
person blows his or her nose 256 times a year. Hoover learned that we spend about
35 minutes each week vacuuming, sucking up about 8 pounds of dust each year and using
6 bags to do so.2 Marketers also have extensive information about consumption patterns
in other countries. On a per capita basis within Western Europe, for example, the
Swiss consume the most chocolate, the Greeks eat the most cheese, the Irish drink the
most tea, and the Austrians smoke the most cigarettes.3
Nevertheless, many business firms lack information sophistication. Many lack a marketing
research department. Others have departments that limit work to routine forecasting,
sales analysis, and occasional surveys. In addition, many managers complain about not
knowing where critical information is located in the company; getting too much information
that they can’t use and too little that they really need; getting important information
too late; and doubting the information’s accuracy. In today’s information-based society,
companies with superior information enjoy a competitive advantage. The company can
choose its markets better, develop better offerings, and execute better marketing planning.
H E C O M P O N E N T S O F A M O D E R N M A R K E T I N G
I N F O R M A T I O N S Y S T E M
Every firm must organize a rich flow of information to its marketing managers. Competitive
companies study their managers’ information needs and design marketing information
systems (MIS) to meet these needs.
■ A marketing information system (MIS) consists of people, equipment,
and procedures to gather, sort, analyze, evaluate, and distribute needed,
timely, and accurate information to marketing decision makers.
To carry out their analysis, planning, implementation, and control responsibilities,
marketing managers need information about developments in the marketing environment.
The role of the MIS is to assess the manager’s information needs, develop
the needed information, and distribute that information in a timely fashion. The in-
Analyzing
Marketing
Opportunities 100

[bonddonraj]

How do companies compete in a global marketplace? One part of the answer is a
commitment to creating and retaining satisfied customers. We can now add a second
part: Successful companies know how to adapt to a continuously changing marketplace
through strategic planning and careful management of the marketing
process.
In most large companies, corporate headquarters is responsible for designing a
corporate strategic plan to guide the whole enterprise and deciding about resource
allocations as well as starting and eliminating particular businesses. Guided by the corporate
strategic plan, each division establishes a division plan for each business unit
within the division; in turn, each business unit develops a business unit strategic plan.
Finally, the managers of each product line and brand within a business unit develop a
marketing plan for achieving their objectives.
However, the development of a marketing plan is not the end of the marketing
process. High-performance firms must hone their expertise in organizing, implementing,
and controlling marketing activities as they follow marketing results closely,
diagnose problems, and take corrective action when necessary. In today’s fast-paced
business world, the ability to effectively manage the marketing process—beginning to
end—has become an extremely important competitive advantageCORPORATE AND DIVISION STRATEGIC PLANNING
Marketing plays a critical role in corporate strategic planning within successful companies.
Market-oriented strategic planning is the managerial process of developing
and maintaining a viable fit among the organization’s objectives, skills, and resources
and its changing market opportunities. The aim of strategic planning is to shape the
company’s businesses and products so that they yield target profits and growth and
keep the company healthy despite any unexpected threats that may arise.
Strategic planning calls for action in three key areas. The first area is managing a
company’s businesses as an investment portfolio. The second area involves assessing
each business’s strength by considering the market’s growth rate and the company’s
position and fit in that market. And the third area is the development of strategy, a
game plan for achieving long-term objectives. The complete strategic planning, implementation,
and control cycle is shown in Figure 1-4.
Corporate headquarters starts the strategic planning process by preparing statements
of mission, policy, strategy, and goals, establishing the framework within which the
divisions and business units will prepare their plans. Some corporations allow their business
units a great deal of freedom in setting sales and profit goals and strategies. Others
set goals for their business units but let them develop their own strategies. Still others set
the goals and get involved heavily in the individual business unit strategies.1 Regardless
of the degree of involvement, all strategic plans are based on the corporate mission.
Defining the Corporate Mission
An organization exists to accomplish something: to make cars, lend money, provide a
night’s lodging, and so on. Its specific mission or purpose is usually clear when the business
starts. Over time, however, the mission may lose its relevance because of changed market
conditions or may become unclear as the corporation adds new products and markets.
When management senses that the organization is drifting from its mission, it
must renew its search for purpose. According to Peter Drucker, it is time to ask some
fundamental questions.2 What is our business? Who is the customer? What is of value to the
customer? What will our business be? What should our business be? Successful companies
continuously raise these questions and answer them thoughtfully and thoroughly.A well-worked-out mission statement provides employees with a shared sense of
purpose, direction, and opportunity. It also guides geographically dispersed employees
to work independently and yet collectively toward realizing the organization’s
goals. The mission statement of Motorola, for example, is “to honorably serve the
needs of the community by providing products and services of superior quality at a fair
price to our customers; to do this so as to earn an adequate profit which is required for
the total enterprise to grow; and by so doing provide the opportunity for our employees
and shareholders to achieve their reasonable personal objectives.”
Good mission statements focus on a limited number of goals, stress the company’s
major policies and values, and define the company’s major competitive scopes.
These include:
➤ Industry scope: The industry or range of industries in which a company will operate.
For example, DuPont operates in the industrial market; Dow operates in the
industrial and consumer markets; and 3M will go into almost any industry where it
can make money.
➤ Products and applications scope: The range of products and applications that a
company will supply. St. Jude Medical aims to “serve physicians worldwide with highquality
products for cardiovascular care.”
➤ Competence scope: The range of technological and other core competencies that a
company will master and leverage. Japan’s NEC has built its core competencies in
computing, communications, and components to support production of laptop
computers, televisions, and other electronics items.
➤ Market-segment scope: The type of market or customers a company will serve. For
example, Porsche makes only expensive cars for the upscale market and licenses its
name for high-quality accessories.
➤ Vertical scope: The number of channel levels from raw material to final product and
distribution in which a company will participate. At one extreme are companies
with a large vertical scope; at the other extreme are firms with low or no vertical
integration that may outsource design, manufacture, marketing, and physical
distribution.3
➤ Geographical scope: The range of regions or countries in which a company will
operate. At one extreme are companies that operate in a specific city or state. At the
other extreme are multinationals such as Unilever and Caterpillar, which operate in
almost every one of the world’s countries.
A company must redefine its mission if that mission has lost credibility or no
longer defines an optimal course for the company.4 Kodak redefined itself from a film
company to an image company so that it could add digital imaging;5 Sara Lee rede-
fined itself by outsourcing manufacturing and becoming a marketer of brands. The
corporate mission provides direction for the firm’s various business units.

[bonddonraj]

Lesson – 1
PRINCIPLES OF MARKETING
Understanding Marketing:
Marketing: It is the process of creating consumer value in the form of goods, services, or ideas
that can improve the consumer’s life.
Marketing is the organizational function charged with defining customer targets and the best way
to satisfy needs and wants competitively and profitably. Since consumers and business buyers face
an abundance of suppliers seeking to satisfy their everyday need, companies and nonprofit
organizations cannot survive today by simply doing a good job. They must do an excellent job if
they are to remain in the increasingly competitive global marketplace. This is what we say that
survival of the fittest. Many studies have demonstrated that the key to profitable performance is to
know and satisfy target customers with competitively superior offers. This process takes place
today in an increasingly global, technical, and competitive environment.
MGT - 301
Principles of Marketing – MGT301 VU
What is Marketing?
Marketing is not only restricted to
selling and advertising as is
perceived but is More than it
advertising it identifies and
satisfies customers needs. it
functions revolve around wide
variety and range of tasks and
activities mostly termed as functions
related to 4ps i.e. Product, price,
place and promotion. Marketing is:
a. Creating customer value and
satisfaction are at the very
heart of modern marketing
thinking and practice.
b. A very simple definition of
marketing is that it is the delivery of customer satisfaction at a profit.
c. Sound marketing is critical to the success of every organization.
Marketing can also be defined as process of planning and executing the conception, pricing,
promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual
and organizational objectives.”
Simple Marketing System
The concept of Marketing System
brings one full circle to the concept of
marketing.
Simple marketing system comprises of
different actors and factors like
producer/seller, product/service
something valuable to exchange in
return of product/service (money),
consumer/customer, communication
process to have two way
communication like to provide
information about product or service
to customer or consumer and to have
feedback in same regard from the customer. Fig presents an example of a very simple marketing
system. Marketing system has following basic activities:
1) Sellers must search for buyers, identify their needs, design good products and services, set
prices for them, promote them, and store and deliver them.
2) A modern marketing system includes all of the elements necessary to bring buyers and
sellers together. This might include such activities as product development, research,
communication, distribution, pricing, and service..
3) Each of the major actors in a marketing system adds value for the next level of the system.
There is often critical interdependency among network members.
To learn more about marketing fist we should learn about some basics that are some time termed
as 4ps(Product, price, place, promotion) and some times even 6 or 7ps (Product, price, place
promotion, position, personal relations, people and profit) lets have some definitions in this regard:
Simple Marketing Simple Marketing
System System
What is What is
Marketing, Marketing,
anyway? anyway?
Advertising
Sales
Promotions
Public
relations
Sponsorships
Pricing
Retailing
Direct mail
Catalogues
Billboard
s
E-commerce
Shopping
chan
nels
Packaging
Delivery
Service
Research
Coupons
• Price—what is your pricing strategy?
• Place or distribution—how are you
distributing your product to get it into the
marketplace?
• Promotion—how are you telling
consumers in your target group about your
product?
• Positioning—what place do you want your
product to hold in the consumer’s mind?
• Personal relationships—how are you building relationships with your target consumers?
• People: public who can have impact on organization or can be affected by organization.
• Profits: the basic objective of organization that to have something valuable in return of
product or service mostly it is in form of money.
Marketing assumes that it will proceed in accordance with ethical actives. It Identifies the 4
marketing variables i.e. product, price, promotion, and distribution it also states that the public, the
customer, and the client determine the marketing program. Marketing mainly emphasizes on
creating and maintaining relationships and applies for both non-profit organizations and profitoriented
businesses. Major activities that are performed in marketing process include:
Personal selling Advertising, Making products available in stores and Maintaining inventories. Any
thing like goods, services, experiences, events, persons, places, organizations, information and
ideas can be marketed to the customers in return of something of value.
How Does an Organization Create a Customer?
Organizations (producer/ seller) can create the customers by Identifying customer needs,
designing goods and services that meet those needs than communicating information about those
goods and services to prospective buyers Making the goods or services available at times and
places that meet customers’ needs Pricing goods and services to reflect costs, competition, and
customers’ ability to buy and finally providing for the necessary service and follow-up to ensure
customer satisfaction after the purchase
How is Marketing Done?
According to Peter F. Drucker If we want to
know what a business is, we have to start
with its purpose. And its purpose must lie
outside the business itself. In fact, it must lie
in society since a business enterprise is an
organ of society. There is one valid
definition of business purpose: to create a
customer.
Reasons for Studying Marketing:
Marketing is part of all of our lives and
touches us in some way every day. To be
successful each company that deals with
customers on a daily basis must not only be customer-driven, but customer-obsessed. The best
way to achieve this objective is to develop a sound marketing function within the organization.
Major reason to study marketing is:
• Marketing plays an important role in society
Product Price
Place Promotion
Customers
Costs
About 50% of total
product costs are
marketing costs
Contributions to
Individual Organizations
Critical to the success
of a firm
Careers
About 25 to 33% of
the work force hold
marketing positions.
Contributions to Society
Marketing decisions affect
the lives of individual
consumers and society as
a whole
Why Study
Marketing ?
• It is Vital to business
• Marketing offers outstanding career opportunities
• Marketing effects your life every day
What do Marketers think about?
To have clearer concept in this regard lets consider an example of Opening a Book Shop on
campus. To do so we have to answer different questions like:
1. Is there a need? (Of having book shop)
2. What is my target market? (Who will be buying products from your book shop)
3. What is my product?(Basic items to be sold)
4. How can I produce and deliver a “product” better than my competitors?
5. How shall I promote my product?
6. How can I insure customer loyalty?
Mostly before starting any activity of above-mentioned type marketer performs an analysis termed
as SWOT (Strength, Weakness, Opportunity and Threat). Marketing is a process of getting the
right products to the right people at the right price and at the right place and time with the right
promotion. But this requires solution to certain simple question: like
Simple Questions, Hard Answers
1. Who are our customers? (Target Market)
2. What important & unique benefits do we provide? (Product/service)
3. Are these benefits sustainable? (Long-term competitive advantage)
These questions are apparently very simple but are very difficult to be answered theses questions
like it is really difficult to define basic characteristics to be produced in product and services as per
demands and requirements pf the customers; and then to precisely define your target market and
to have long-term competitive advantage through customer satisfaction.

[bonddonraj]

Lesson – 2
Lesson overview and learning objectives:
In last Lesson we tried to understand the term of marketing its need and its impact on the
organization. The focus in this discussion is to have concept of about different core concepts of
the marketing and the increasingly important role of the marketing process in the ever-changing
domestic and global business environment Today we will be covering following topics:
A. ROAD MAP
B. UNDERSTANDING MARKETING AND MARKETING PROCESS
C. CORE MARKETING CONCEPTS
Now we will discuss these topics one by one:
A. Road Map
We will cover following topics in our coming Lessons:
• Introduction-an overview of marketing.
• Understanding Marketing and Marketing Process
• Marketing Functions and Customer Relationship Management
• Marketing in Historical perspective and Evolution of Marketing
• Marketing Challenges in the 21st century
• Marketing Management Process
• Strategic Planning and Marketing Process
• The Marketing process
• Marketing Environment (Micro)
• Marketing Environment (Macro)
• Analyzing Marketing opportunities and developing strategies-MIS
• Marketing Research
• Consumer Market-understanding the consumer
• Consumer Markets and consumer buying behavior
• Buying Behaviors for New Products and services
• Business Buying Behavior
• Market segmentation
• Developing the Marketing Mix--- 4 P’s
• Product Planning
• Service Strategy
• Pricing
• Pricing Strategies
• Price Adjustment and Price Changes
• Distribution Channels
• Logistics Management
• Retailing and wholesaling
• Promotion Planning
• Advertising
• Public Relations
• Personal Selling
• Sales Promotion
• Sales Force Management
• Integrating and analyzing the marketing plan
• Global Marketing
• Technological developments and Marketing
• Web base Marketing
• Social Marketing
• Social, Ethical and Consumer issues
• Review
• Marketing in a Glance
B. Understanding Marketing and Marketing Process
Process by which individuals and groups obtain what they need and want through creating and
exchanging products and value with others is termed as marketing process. The marketing process
consists of four steps: analyzing market opportunities; developing marketing strategies; planning
marketing programs, which entails choosing the marketing mix (the four Ps of product, price,
place, and promotion); and organizing, implementing, and controlling the marketing effort.
Marketing is the organizational function charged with defining customer targets and the best way
to satisfy needs and wants competitively and profitably. Since consumers and business buyers face
an abundance of suppliers seeking to satisfy their every need, companies and nonprofit
organizations cannot survive today by simply doing a good job. They must do an excellent job if
they are to remain in the increasingly competitive global marketplace. Many studies have
demonstrated that the key to profitable performance is to know and satisfy target customers with
competitively superior offers. This process takes place today in an increasingly global, technical,
and competitive environment.
The concept of markets brings one full circle to the concept of marketing.
1). Sellers must search for buyers,
identify their needs, design good products and
services, set prices for them, promote them,
and store and deliver them.
2). A modern marketing system
includes all of the elements necessary to bring
buyers and sellers together. This might
include such activities as product
development, research, communication,
distribution, pricing, and service.
3). Each of the major actors in a
marketing system adds value for the next level
of the system. There is often critical
interdependency among network members.
There are certain factors that can influence the marketing process directly or indirectly termed as,
“actors and forces in marketing system”. Let’s have brief explanation of these actors and forces:
Company or Marketing Organization -marketing plans must accommodate the needs of other
functional areas of the firm to coordinate product/service delivery effectively.
Suppliers - are the firms and persons that provide the resources needed by the company and
competitors to produce goods and services.
Actors and Forces in a
Modern Marketing System
Actors and Forces in a
Modern Marketing System
Environment
Suppliers
Company
(marketer)
Marketing
intermediaries
End-user
market
Product Price
Place Promotion
Customers
Marketing Intermediaries - include various middlemen and distribution firms as well as
marketing service agencies and financial institutions.
Customers -usually consist of consumer, industrial, reseller, government, and international
markets.
Competitors - are usually considered those companies also serving a target market with similar
products and services, although broader definitions may apply.
Publics - may consist of any group that perceives itself having an interest in the actions of the
firm. Publics can have positive as well as negative influences on the company's objectives.
Other than factors above there are certain macro environmental factors that can have impact or
that can affect the marketing process. These forces and environmental factors will be discussed in
more detail in coming Lessons. As described in a fig: important connections with customers,
connections with marketing partners, and connections with the World around us are to be made in
order to perform the marketing process. The main connections required in this regard are
connecting with marketing partners: (These connections occur by (a) connecting with other
marketing departments, (b) connecting with suppliers and distributors, and (c) connecting through
strategic alliances). Marketing companies do not operate in a vacuum. They have to be interacting
with intermediaries that have information to share, ideas to explore, and experiences that are
invaluable. New technologies can bring this information to the decision maker in new rapid ways.
Finally companies need to have information about the competitors and other environmental
factors and are need to have updated knowledge because for success, change adoption with change
occurrence is required otherwise company will not able to stay in this completive era.
What image comes to mind when you hear the word “marketing”? Some people think of
advertisements or brochures, while others think of public relations (for instance, arranging for
clients to appear on TV talk shows). The truth is, all of these—and many more things—make up
the field of marketing because as we have discussed in our last Lesson that marketing is more than
just advertisement or promotion. The Knowledge Exchange Business Encyclopedia defines marketing as
“planning and executing the strategy involved in moving a good or service from producer to
consumer.”
With this definition in mind, it’s apparent that marketing and many other business activities are
related in some ways. In simplified terms, marketers and others help move goods and services
through the creation and production process; at that point, marketers help move the goods and
services to consumers. But the connection goes even further: Marketing can have a significant
impact on all areas of the business and vice versa. Lets have discussion on some basics of
marketing: (already mentioned in first Lesson:
(first the four P’s, and then the six P’s)
• Product—What are you selling? (It might
be a product or a service.)
• Price—What is your pricing strategy?
• Place or distribution—How are you
distributing your product to get it into
the marketplace?
• Promotion—How are you telling
consumers in your target group about
your product?
• Positioning—What place do you want your product to hold in the consumer’s mind?
• Personal relationships—How are you building relationships with your target consumers? So
based upon all this discussion marketing process can be defined as a social and managerial
process by which individuals and groups obtain what they need and want through creating,
offering and exchanging products of value with others
The sum of the above is called the marketing mix. It is important to have as varied a mix as
possible in marketing efforts, since each piece plays a vital role and boosts the overall impact.
Let’s take a closer look at the basic P’s of marketing and particularly at how they might affect what
you do in business.
�� Product
Marketers identify a consumer need and then provide the product or service to fill that need. The
marketer’s job is to pinpoint and understand existing needs, expand upon them, and identify new
ones. For example, because there are more singles and small families these days than in years past,
marketers might see a need for products to be sold in smaller quantities and offered in smaller
packages.
How can this impact other professionals in the business/marketing process? Let’s say your
company has developed a new product that generates enormous consumer demand. Your
marketing department may ask you to find a way to speed up the workflow in order to crank out
more products faster. A year after the product is introduced, however, the market might be
flooded with cheap imitations. Since one marketing strategy is to keep products price-competitive,
a marketer may then ask you to find a way to make the product less expensively.
This relationship works both ways. There may be production and industrial engineers who may see
a way to change the work process that would create additional options for consumers. Those
engineers will also be instrumental in design and development of products for which human
factors and ergonomics are important considerations. Maybe there’s room to add another product
line. For instance, that product X is still blue but new product Y is red. You can suggest this to
your marketing department; it, in turn, would do research to gauge potential consumer demand for
the new line.
�� Price
Ideally, a marketer wants to be proactive in setting price rather than simply react to the
marketplace. To that end, the marketer researches the market and competition and plots possible
price points, looking for gaps that indicate opportunities. When introducing a new product, the
marketer needs to be sure that the price is competitive with that of similar products or, if the price
is higher, that the consumers perceive they’re getting more value for their money.
Various other technical professionals can have an important impact on marketers’ pricing
decisions. Again, you may be asked to determine if productivity can be enhanced so that the
product can be manufactured and then sold—for a lower price.
�� Place or distribution
What good is a product if you can’t get it to people who want to purchase it? When marketers
tackle this issue, they try to figure out what the optimum distribution channels would be. For
example, should the company sell the product to distributors who then wholesale it to retailers or
should the company have its own direct sales force?
Marketers also look at where the product is placed geographically. Is it sold regionally, nationally,
and internationally? Will the product be sold only in high-end stores or strictly to discounters? The
answers to all of these questions also help shape how a product can be distributed in the best way.
Such distribution questions are potentially of great significance to many professionals, including
industrial and other types of engineers in a company. For instance, whether a product will be
marketed regionally or internationally can have enormous implications for package design as well
as obvious areas of the supply chain: logistics, transportation, distribution, and warehousing.
�� Promotion
Promotion encompasses the various ways marketers get the word out about a product—most
notably through sales promotions, advertising, and public relations.
Sales promotions are special offers designed to entice people to purchase a product. These can
include coupons, rebate offers, two-for-one deals, free samples, and contests.
Advertising encompasses paid messages that are intended to get people to notice a product. This
can include magazine ads, billboards, TV and radio commercials, Web site ads, and so forth.
Perhaps the most important factor in advertising success is repetition. We’re all bombarded with
an enormous number of media messages every day, so the first few times a prospective customer
sees an ad, it usually barely makes a dent. Seeing the ad over and over is what burns the message
into people’s minds. That’s why it’s good to run ads as frequently as possible.
Public relations refer to any non-paid communication designed to plant a positive image of a
company or product in consumers’ minds. One way to accomplish this is by getting the company
or product name in the news. This is known as media relations, and it’s an important aspect of
public relations.
As with price, changes in demand created by promotions can have a direct impact on the work of
many other professionals.
�� Positioning
By employing market research techniques and competitive analysis, the marketer identifies how the
product should be positioned in the consumer’s mind. As a luxury, high-end item? A bargain item
that clearly provides value? A fun product? Is there a strong brand name that supports how the
image is fixed in the consumer’s mind? Once the marketer answers these kinds of questions, he or
she develops, through a host of vehicles, the right image to establish the desired position.
This, too, can affect the work you do. If an upscale image is wanted, the materials used in the
product and packaging are likely to be different from those used in a bargain product—a fact that
could make the workflow significantly more complex. On the other hand, with your engineering
knowledge, you may be able to suggest alternative materials that would preserve the desired image
but be easier or less expensive to use.
�� Personal Relationships
In recent years, personal relationships have come to the forefront of marketing programs. Now
even the largest companies want their customers to feel that they have a personal relationship with
the company. Companies do this in two ways: They tailor their products as much as possible to
individual specifications, and they measure customer satisfaction.
The firm’s contribution can significantly impact the area of personal relationships. If the work
processes the firm creates cannot meet the customer time frames, the relationship will be damaged.
If the firm develops manufacturing lines that cannot be tailored to fit individual customer needs, it
will be difficult for the company to give consumers the perception of personal commitment. If
salespeople promise delivery by a certain date, but the product cannot be produced on schedule,
consumers will not be happy.
Marketing, engineering, and many other professional activities are interrelated and interdependent
disciplines. By understanding the role that marketers play in moving a good or service to
consumers, others can operate more effectively, for the present and the future.
C. Core Marketing Concepts
To have more clear view about the marketing and to understand the marketing process first we
should discuss the some basic concepts, which we will be discussing in the coming Lessons and
what is the main essence of the marketing process and we can say that the marketing revolves
around theses concepts.
a. Needs, wants, and
demandsNeeds Human
needs are the most basic concept
underlying marketing. A human need
is a state of felt deprivation.
1). Humans have many complex
needs.
a). Basic, physical needs for
food, clothing, warmth, and
safety.
b). Social needs for belonging
and affection.
c). Individual needs for
knowledge and selfexpression.
2). These needs are part of the basic human makeup.
Wants A human want is the form that a human need takes as shaped by culture and individual
personality.
Demands are human wants that are backed by buying power.
1). Consumers view products as bundles of benefits and choose products that give them
the best bundle for their money.
2). People demand products with the benefits that add up to the most satisfaction.
Outstanding marketing companies go to great lengths to learn about and understand their
customer’s needs, wants, and demands. The outstanding company strives to stay close to the
customer.
b. Products and Services
A product is anything that can be offered to a market to satisfy a need or want.
A service is an activity or benefit offered for sale that is essentially intangible and does not result
in the ownership of anything.
1). The concept of product is not limited to physical objects and can include experiences,
persons, places, organizations, information, and ideas.
2). Be careful of paying attention to the product and not the benefit being satisfied.
3). “Marketing myopia” is caused by shortsightedness or losing sight of
underlying customer needs by only focusing on existing wants.
Products
and
Services
Value,
satisfaction,
and quality
Needs, w
ants,
and dem
ands
Exchange,
transactions,
and relationships
Markets
Core
Marketing
Concepts
Core
Marketing
Concepts
c. Value, satisfaction, and quality
Customer value is the difference between the values that the customer gains from owning and
using a product and the costs of obtaining the product. Customers do not often judge product
values and costs accurately or objectively--they act on perceived value.
Customer satisfaction depends on a product’s perceived performance in
Delivering value relative to a buyer’s expectations. If performance exceeds expectations, the buyer
is delighted (certainly a worthy goal of the marketing company).
1). Smart companies aim to delight customers by promising only what they can deliver, then
delivering more than they promise.
2). The aim of successful companies today is total customer satisfaction.
3). Customer delight creates an emotional affinity for a product or service, not just a
rational preference, and this creates high customer loyalty.
4). Quality has a direct impact on product or service performance. Quality is defined in
terms of customer satisfaction.
The term total quality management (TQM) is an approach in which all the
company’s people are involved in constantly improving the quality of products,
services, and marketing processes.
1). In the narrowest sense, quality can be defined as “freedom from defects.”
2). Quality has a direct impact on product or service performance. Quality is
defined in terms of customer satisfaction.
3). The fundamental aim of today’s total quality movement has become total
customer satisfaction.
d. Exchange, transactions, And relationships
Marketing occurs when people decide to satisfy needs and wants through exchange.
Exchange is the act of obtaining a desired object from someone by offering something in return.
Exchange is only one of many ways to obtain a desired object. Exchange is the core concept of
marketing. Conditions of exchange include:
1. At least two parties must participate.
2. Each must have something of value to the other.
3. Each must want to deal with the other party.
Each must be free to accept or reject the other's offer
Whereas exchange is a core concept of marketing, a transaction (a trade of values between two
parties) is marketing’s unit of measurement. Most involve money, a response, and action.
Transaction marketing is part of a larger idea of relationship marketing. Beyond creating shortterm
transactions, marketers need to build long- term relationships with valued customers,
distributors, dealers, and suppliers. Ultimately, a company wants to build a unique company asset
called a marketing network (the company and all its supporting stakeholders). The goal of
relationship marketing is to deliver long-term value to the customer and thereby secure
customer satisfaction and retention of patronage.
1). Competition is increasingly between networks.
2). Build a good network of relationships with key stakeholders and profits will follow.
e. Markets
The concepts of exchange and relationships lead to the concept of a market. A market is
the set of actual and potential buyers of a product.
Principles of Marketing – MGT301 VU
Originally a market was a place where buyers and sellers gathered to exchange goods
(such as a village square).
2). Economists use the term to designate a collection of buyers and sellers who transact in a
particular product class (as in the housing market).
3). Marketers see buyers as constituting a market and sellers constituting an industry.
4). Modern economies operate on the principle of division of labor, where each person
specializes in producing something, receives payment, and buys needed things with this money.
Thus, modern economies abound in markets.
5). Marketers are keenly interested in markets.

[bonddonraj]

Lesson – 3
In last Lesson we had a detailed view of Marketing process and core marketing concepts. For
today the focus of discussion is on the increasingly powerful role of customers in the marketing
process and the need for marketers to provide value that exceeds customer expectations. Along
with the concept of relationship marketing major functions performed by the marketing are also
presented so today we will be discussing the following topics:
A. MARKETING FUNCTIONS
B. CUSTOMER RELATIONSHIP MANAGEMENT
Marketing Functions
There are eight Universal functions that are performed in marketing these are as shown in fig these
are Buying, selling, transporting, storing, standardizing and grading, financing and finally risk taking
now lets discuss these one by one:
• Buying: (Raw material to
produce goods and services and
to purchase finished goods or
services as retailer or whole seller
to sell them again for final
customers and consumers). It is a
function that ensures that
product offerings are available in
sufficient quantities to meet
customer demands
• Selling: The function to be
performed to sell the
products/services/idea to satisfy customer needs or wants. Using advertising, personal
selling, and sales promotion to match goods and services to customer needs
• Transporting: Function related to create the availability of product or services. It is used
for moving products from their points of production to location convenient for purchases
• Storing: Warehouses are used to store the products for further distribution.
• Standardizing and grading: To provide more quality products and services without
variation in the quality. Ensuring that product offerings meet established and grading
quality and quantity control standards of size, weight, and other product variables
• Financing: Providing the financial resources to carry out different function e.g. promotion
of product and providing credit for channel members (wholesalers retailers) or consumers
• Risk taking: Marketer takes a risk specifically when any new product is introduced in a
market because there are equal chances of success and failure. Dealing with uncertainty
about consumer purchases resulting from creation and marketing of goods and services
that consumers may purchase in the future
• Securing Marketing Information: Collecting information about consumers, competitors,
information and channel members (wholesalers, and retailers) for use in making marketing
decisions Almost all marketing functions are based on information acquired from external
Universal
Marketing
Functions
Information Buying
Risk Taking Selling
Financing Transporting
Standardizing
and Grading Storing
Marketing
Functions
environment and information distributed out of organization. Marketer seeks information
to find out customer needs and wants which are to be satisfied than after producing goods
and services awareness about the availability is required so that consumer can purchase the
available goods and services.
Marketing Management:
Marketing management is “the art and science of choosing target markets and building profitable
relationships with them.” Creating, delivering and communicating superior customer value is key.
Marketing management is the conscious effort to achieve desired exchange outcomes with target
markets. The marketer’s basic skill lies in influencing the level, timing, and composition of demand
for a product, service, organization, place, person, idea, or some form of information.
Marketing Management is defined as the analysis, planning, implementation, and control of
programs designed to create, build, and maintain beneficial exchanges with target buyers for the
purpose of achieving organisational objectives. Which are:
Demand Management - marketing management is concerned with increasing demand, as well as
changing or even reducing demand. Marketing management is concerned not only with finding and
increasing demand, but also with changing or even reducing it.
1). Demarketing: Marketing to reduce demand temporarily or permanently; the aim is not to
destroy demand but only to reduce or shift it. Demarketing’s aim is to reduce demand temporarily
or permanently (move traffic away from a popular tourist attraction during peak demand times).
2). In reality, marketing management is really demand management.
Building Profitable Customer Relationships - Beyond designing strategies to attract new
customers, marketing organizations also go all out to retain current customers and build lasting
customer relationships. (This is our second topic to be discussed today).
Customer Relationship Management
Before going in the detail of customer relationship marketing first we should know that what is
relationship marketing? It is basically Establishing a long-term continuous relationship with the
customer, initiated and managed by the firm. This relationship must provide value to both parties.
If a customer is lost, not only is that particular transaction lost, but perhaps all future transactions
throughout the life of that customer.
As discussed earlier that marketing is the
organizational function charged with defining
customer targets and the best way to satisfy needs
and wants competitively and profitably. Since
consumers and business buyers face an abundance
of suppliers seeking to satisfy their every need,
companies and nonprofit organizations cannot
survive today by simply doing a good job. They
must do an excellent job if they are to remain in
the increasingly competitive global marketplace.
Many studies have demonstrated that the key to
profitable performance is to know and satisfy
target customers with competitively superior
offers. This process takes place today in an
increasingly global, technical, and competitive
environment. When marketing helps everyone in a
Customer Relationship
Management
firm really meet the needs of a customer both before and after a purchase, the firm doesn’t just get
a single sale. Rather, it has a sale and an ongoing relationship with the customer. That’s why we
emphasize that marketing concerns a flow of need-satisfying goods and services to the customer.
Often, that flow is not just for a single transaction but rather is part of building a long-lasting
relationship that is beneficial to both the firm and the customer.
1. CRM Customer relationship management
“CRM is the overall process of building and maintaining profitable customer relationships by
delivering superior customer value and satisfaction.” CRM Customer relationship management can
be defined: as strategies focused on increasing customer satisfaction, loyalty, and profitability by
leveraging superior customer knowledge acquired, stored, and acted upon with the aid of
information technology.
2. The basic goals of the CRM are:
Customer relationship marketing provides the key to retaining customers and involves providing
financial and social benefits as well as structural ties to the customers. Companies must decide how
much relationship marketing to invest in different market segments and individual customers, from
such levels as basic, reactive, accountable, proactive, and full partnership. Much depends on
estimating customer lifetime value against the cost stream required to attract and retain these
customers.
Total quality marketing is seen today as a major approach to providing customer satisfaction and
company profitability. Companies must understand how their customers perceive quality and how
much quality they expect. Companies must then strive to offer relatively higher quality than their
competitors. This involves total management and employee commitment as well as measurement
and reward systems. Marketers play an especially critical role in their company’s drive toward
higher quality. The basic goals of CRM are:
• The idea of CRM is that it helps businesses use technology to gain insight into the behavior
of customers and the value of those customers. If it works as hoped, a business can:
• Provide better customer service
• Make call centers more efficient
• Help sales staff close deals faster
• Simplify marketing and sales processes
• Discover new customers Enable companies to provide excellent real-time customer service
by developing a relationship with each valued customer through the effective use of
individual account information
• Based on customer attributes, companies can customize market offerings, services,
programs, messages, and media
• Reduces the rate of customer defection
• Increases the longevity of the customer relationship
• Enhances the growth potential of each customer through “share of wallet,” cross-selling,
and up-selling
• Makes low-profit customers more profitable or terminates them
• Focuses disproportionate effort on high value customers
CRM is mainly based upon the customer loyalty that is of great importance for the marketer
because firms have realized the value of customer retention. Winning a new customer is usually 5-
10 times more costly than retaining an existing customer Customers are usually more profitable the
longer you keep them. The value of loyalty goes beyond single customer for the reason that loyal
customers provide more and more credible referrals but the angry gossip of disloyal customers can
devastate a firm.
3. Building Profitable Customer Relationships
Managing demand means managing customers because:
1. A demand comes from new customers and repeat customers.
2. Today, besides making efforts to attract new customers, marketers are going all out to
retain and build relationships with existing customers. It costs five times as much to attract
a new customer as it does to keep a current customer satisfied.
3. Because of changing demographics, a slow-growth economy, more sophisticated
competitors, and overcapacity in many industries, many markets and market shares are
shrinking. The key to successful customer retention is superior customer value and
satisfaction.

[bonddonraj]

Lesson – 4
Lesson overview and learning objectives:
In last Lesson the focus of discussion was core concepts of the marketing and the increasingly
important role of the marketing process in the ever-changing domestic and global business
environment Today we will be covering following topics:
A. MARKETING IN HISTORICAL PERSPECTIVE AND
EVOLUTION OF MARKETING
The marketing concept is a matter of increased marketing activity, but it also implies better
marketing programs and implementation efforts. In addition, the internal market in every
company (marketing your company and products to and with the employees of the company) has
become as challenging as the external marketplace due to diversity and many other social/cultural
issues.
What image comes to mind when you hear the word “marketing”? Some people think of
advertisements or brochures, while others think of public relations (for instance, arranging for
clients to appear on TV talk shows). The truth is, all of these—and many more things—make up
the field of marketing. Marketing as “planning and executing the strategy involved in moving a
good or service from producer to consumer.”
With this definition in mind, it’s apparent that marketing and many other business activities are
related in some ways. In simplified terms, marketers and others help move goods and services
through the creation and production process; at that point, marketers help move the goods and
services to consumers. But the connection goes even further: Marketing can have a significant
impact on all areas of the business and vice versa. Lets discuss some Marketing Basics In
introductory marketing you learned some basics—first the four P’s, and then the six P’s:
• Product—What are you selling? (It might be a product or a service.)
• Price—What is your pricing strategy?
• Place or distribution—How are you distributing your product to get it into the
marketplace?
• Promotion—How are you telling consumers in your target group about your
product?
• Positioning—What place do you want your product to hold in the consumer’s
mind?
Personal relationships—How are you building relationships with your target consumers?
Marketing management is the conscious effort to achieve desired exchange outcomes with target
markets. The marketer's basic skill lies in influencing the level, timing, and composition of demand
for a product, service, organization, place, person, idea or some form of information.
There are several factors that participated role to evolution of marketing like:
1. Changes in Consumer Behavior
There have been many major marketing shifts during the last few decades that have shaped
marketing in the 21st century. There is a view among professional marketers that there is no longer
the substantial product loyalty that existed over the last few decades. Product and brand loyalty,
many argue, has been replaced by something more akin to a consumer decision that is based on the
absence of a better product or service. In addition, there are major changes in the way customers
look at market offerings. During the 1980s customers were optimistic, and in the early 1990s they
were pessimistic. Later in the 1990s, consumers appeared rather optimistic, but still cautious at
times. The following chart demonstrates some of the major shifts that have occurred to the
present:
Increasingly it is clear that while the 4 Ps (product, price, promotion, and place) have value for the
consumer, the marketing strategies of the 21st century will use the four “4 Cs” as added critical
marketing variables:
1. Care: It has replaced service in importance. Marketers must really care about the
way they treat customers, meaning that customers are really everything.
2. Choice: Marketers need to reassess the diversity and breadth of their offerings into
a manageable good-better-best selection.
3. Community: Even national marketers must be affiliated, attached to neighborhoods
wherever they operate stores.
4. Challenge: The task of dealing with the ongoing reality of demographic change.
2. End of the Mass Market
During the late 1990s, we witnessed the death of the concept of mass market. Regardless, some
marketers continue to argue that database marketing will never replace mass marketing for most
products. The view is that communicating with users by e-mail, Web site, mail, telephone, or fax
will never become cost-efficient enough to justify the return. However, the success of the Internet
provides considerable evidence that one-to-one marketing is and will be appropriate for many
packaged goods and other high- and low-involvement products that in the past sold almost
exclusively with brand advertising.
Through the 1970s, only high-end retailers and personal-service firms could afford to practice oneto-
one marketing. For the most part, they did it the old-fashioned way with personal selling and
index-card files.
During the 1990s, bookstore chains, supermarkets, warehouse clubs, and even restaurants began to
track individual purchase transactions to build their “share of the customer.” Many of these
programs now run on Personal Computers platforms or workstation environments much more
powerful than the most capable mainframes of the 1970s. It is possible today to track 5 or 6
million customers for the same real cost as tracking a single customer in 1950. With Internet-based
databases and remote access, this capability literally has exploded in the last few years.
The situation will become even more interesting as one-to-one marketing becomes even
increasingly pervasive. With an increasingly powerful array of much more efficient, individually
interactive vehicles, the options are virtually unlimited, including on-site interactivity, Web site
connections, fax-response, e-mail, and interactive television.
Most households today either have direct Internet access, or with TV sets that also provide realtime
interactivity through the Internet. We are closing rapidly on the time where individuals will
interact with their television and/or computer simply by speaking to it. Via various Web sites,
computers work for us to enable us to remember transactions and preferences and find just the
right entertainment, information, products, and services. Likewise, online capabilities enable
providers to anticipate what a consumer might want today or in the future. Unfortunately, the
system has been slower to protect consumers from commercial intrusions that they may not find
relevant or interesting.
The increasing level of market definition and refinement (and resulting opportunities for
marketers) is possible through the massive social, economic, and technological changes of the past
three decades. Some of the important demographic shifts have been:
• Increasing diversity of the population. The United States has always been an immigrant
nation. However, large numbers of immigrants from Latin America and Asia have
increased the proportion of minorities in the country to one in three, up from one
in five in 1980. This diversity is even more noticeable in the younger market.
• Changing family and living patterns. There has been a substantial rise in the divorce rate,
cohabitation, non-marital births, and increased female participation in the labor
force. In addition, married couples with one earner make up only 15 percent of all
households. Dual-earner households have become much more common—the
additional income is often necessary for the family to pay their bills. Thus, older
have replaced the stereotypical family of the 1950s, working parents with much less
time available.
• Emergence of a new children’s market. Minorities are over-represented in the younger
age brackets due to the higher fertility and the younger population structure of
many recent immigrants. The result is that one in three children in the United
States is black, Hispanic, or Asian. In addition, nearly all of today’s children grow
up in a world of divorce and working mothers. Many are doing the family shopping
and have tremendous influence over household purchases. In addition, they may
simply know more than their elders about products involving new technology such
as computers.
• Income and education increases are two other important demographic factors impacting
the marketing management arena. Generally, income increases with age, as people
are promoted and reach their peak earning years, and the level of education
generally has increased over the last few decades. Family units today often have
higher incomes because they may have two earners. Accordingly, there is an
increased need for products and services because they likely have children and are
homeowners.
In sum, the need for market analysis and marketing decision-making, and managers to perform
those tasks has never been greater. But, as the course will demonstrate, the complexities of, and
analytical tools required for, these activities have never been greater. Be prepared for a challenging
experience.
3. Marketing Management Philosophies:
There are several alternative philosophies that can guide organizations in their efforts to carry out
their marketing goal(s). Marketing efforts should
be guided by a marketing philosophy. Decisions
about the weight, given the interests of the
organization, customers, and society need to be
made by marketing managers. There are five
alternative concepts under which organizations
conduct their marketing activities.
a. The Production Concept
The production concept holds that consumers will
favor products that are available ad highly
affordable and that management should,
therefore, focus on improving production and
distribution efficiency. This is one of the oldest
philosophies that guide sellers. The production
concept is useful when:
1). Demand for a product exceeds the supply.
2). The product’s cost is too high and improved productivity is needed to bring it down.
The risk with this concept is in focusing too narrowly company operations. The production
concept holds that consumers will favor products that are affordable and available, and therefore
management’s major task is to improve production and distribution efficiency and bring down
prices.
SOCIETAL
MARKETING
CONCEPT
PRODUCTION
CONCEPT
PRODUCT
CONCEPT
MARKETING
CONCEPT
MARKETING
CONCEPT
KEY
MARKETING
PHILOSOPHIES
SELLING
CONCEPT
b. The Product Concept
The product concept holds that consumers favor quality products that are reasonably priced, and
therefore little promotional effort is required. The selling concept holds that consumers will not
buy enough of the company’s products unless they are stimulated through a substantial selling and
promotion effort. The product concept states that consumers will favor products that offer the most
quality, performance, and features, and that the organization should, therefore, devote its energy to
making continuous product improvements. The product concept can also lead to “marketing
myopia,” the failure to see the challenges being presented by other products.
c. The Selling Concept
Many organizations follow the selling concept. The selling concept is the idea that consumers will not
buy enough of the organization’s products unless the organization undertakes a large-scale selling
and promotion effort.
1). This concept is typically practiced with unsought goods (those that buyers do not normally
think of buying e.g. insurance policies).
2). To be successful with this concept, the organization must be good at tracking down the
interested buyer and selling them on product benefits.
3). Industries that use this concept usually have overcapacity. Their aim is to sell what they
make rather than make what will sell in the market.
4). There are not only high risks with this approach but low satisfaction by customers.
d. The Marketing Concept
The marketing concept holds that achieving organizational goals depends on determining the needs
and wants of target markets and delivering the desired satisfactions more effectively and efficiently
than competitors do. The marketing and selling concepts are often confused. The primary
differences are:
1). The selling concept takes an “inside-out” perspective (focuses on existing products and
uses heavy promotion and selling efforts).
2). The marketing concept takes an “outside-in” perspective (focuses on needs, values, and
satisfactions). Many companies claim to adopt the marketing concept but really do not unless they
commit to market-focused and customer-driven philosophies:
• Customer-driven companies research current customers to learn about their desires, gather
new product and service ideas, and test proposed product improvements.
• Such customer-driven marketing usually works well when there exists a clear need and
when customers know what they want.
• When customers do not know what they want, marketers can try customer driving
marketing--understanding customer needs even better than customers themselves do, and
creating products and services that will meet existing and latent needs now and in the
future.
e. The Societal Marketing Concept
The societal marketing concept holds that the organization should determine the needs, wants, and
interests of target markets. It should then deliver the desired satisfactions more effectively and
efficiently than competitors in a way that maintains or improves the consumer’s and the society’s
well being.
1). The societal marketing concept is the newest of the marketing philosophies.
2). It questions whether the pure marketing concept is adequate given the wide variety of
societal problems and ills.
3). According to the societal marketing concept, the pure marketing concept overlooks
possible conflicts between short-run consumer wants and long- run consumer welfare.
c. Marketing as the
major function
d. The customer as the
controlling factor
Marketing
Finance
Human
resources
Production
Customer
Human
resources
Finance
Production
Marketing
4). The societal concept calls upon marketers to balance three considerations in setting their
marketing policies:
a). Company profits.
b). Customer wants.
c). Society’s interests.
5). It has become good business to consider and think of society’s interests when the
organization makes marketing decisions.
4. Evolving Views of Marketing’s Role:
As expressed in figures initially the Marketing was considered
to play equal function as other departments of the
organization. But with the passage of times and growing
importance of the customers marketing department attained
more importance and
attained the central
part in the
organization.
Afterwards the customer is now the main actor that is
controlling almost all functions and efforts of the
marketing department, because the success of any
organization in today’s competitive era depends upon the
level of
satisfaction
provided by
the company. Nowadays the marketing department is
acting, as integration department to provide
integration among the functions performed by the
company and customer is acting as controlling factor
in the organization e. The customer as the controlling
function and marketing as the
integrative function
Customer
Marketing
Production
Human
re
sources
Fin
a
n
ce
a. Marketing as an
equal function
b. Marketing as a more
important function
Finance Production
Marketing Human
resources
Finance
Human
resources
Marketing
Production

[bonddonraj]

Lesson – 5
Lesson overview and learning objectives:
In last Lesson the focus of discussion was core concepts of the marketing and the increasingly
important role of the marketing process in the ever-changing domestic and global business
environment Today we will be covering following topics:
A. MARKETING CHALLENGES IN THE 21st CENTURY.
The marketing concept has changed dramatically over the last several decades, and recently the
focus has increasingly moved to customers (versus products and selling) marketing globally and the
various technology issues that impact the market. In addition, there is renewed emphasis in
marketing on creating and innovating with new and better products and services rather than just
competing against other firms and following the marketing patterns established by competitors.
A. Porter’s 5 Forces Model of Competition:
Marketing is facing different challenges in the 21st century to meet these Before entering the
business Porter model can be used to analyze the environment both for new and existing business
and can be used to overcome and meet the challenges.
• Threat of New Entrants
Ratio of new entrants in the
industry greater the ratio greater
will be intensity of competition
• Bargaining Power of
Buyers: When
competition is intense and
number of manufacturer is greater
the buyer have more options for
product switching over this will
increase the buying power of
buyer
• Threat of Substitute: As
obvious from the term greater the threat of new entrants will result in greater higher
completion that in tern will result in increase in the number of substitutes
• Bargaining Power of Suppliers: Greater number of the supplier will provide the stronger
buying power to the manufacturer/customer and vice versa
• Rivalry Among Competing Firms in Industry: Larger number of the manufacturers and
greater number of product variety increases the rivalry among the competitors, which
demands for more quality and customer satisfy9ng products in order to meet the
competition.
A. The information technology revolution
The information age, particularly the advent of the Internet is having a major impact on the
direction of marketing science and practice.
Digitalization and Connectivity: The flow of digital information requires connectivity Intranets,
Extranets, and the Internet are key drivers of the “new economy
Technologies for Connecting
b. The major force behind the new connectedness is technology.
Threat o f
New
Entrants
Threat o f
Substitu te
Products
Threat o f
New
Entrants
Bargaining
Power o f
Buyers
Bargaining
Power o f
Supplie rs
Rivalry Among Competing
Firms in Industry
*
c. The boom in computer, telecommunications, and information technology, as well as the
merging of these technologies, has had a major impact on the way businesses bring value to their
customers.
1). Using today’s powerful computers, marketers create detailed databases and use them to
target individual customers with offers designed to meet their specific needs and buying patterns.
2). Cell phones; fax machines, and CD-ROM to interactive TV are just a few of the tools
being used to make connections.
a). Electronic commerce allows consumers to shop and buy without ever leaving home.
b). Virtual reality displays, virtual shopping, and virtual salespeople are just a few of the
changes that consumers seem to be embracing. The Information Superhighway (and its backbone--
the Internet) will link customers to companies in ways that were unimagined only a few years ago.
The Internet is a vast and burgeoning global web of computer networks, with no central
management or ownership. The user-friendly World Wide Web has changed us all.
1). The Internet has been hailed as the technology behind a new model for doing business.
2). New applications include:
a). Internet--connecting with customers.
b). Intranets--connecting with others in the company.
c). Extranets--connecting with strategic partners, suppliers, and dealers.
3). Marketplaces have now become market spaces.
2). However, new opportunities abound.
• Connections with Customers
Today, most marketers are realizing that they don’t want to connect with just any customers.
Instead, most are targeting fewer, potentially more profitable customers.
1). Greater diversity and new consumer connections have meant greater market
fragmentation.
a). Marketers have responded by moving to more segmented marketing where they
target carefully chosen sub markets or even individual buyers.
2). At the same time, companies are analyzing the value of the customer to the firm. What
value does the customer bring to the organization? Are they worth pursuing?
a). Connect with those that will be bring in profits.
h. Connect for a customer’s lifetime.
1). Rather than always looking for new customers, the focus has now shifted to keeping
current customers and building lasting relationships based on superior satisfaction and value.
2). Long-term profits have superseded short-term gain.
3). Companies are spending more time considering “share of customer” and less time
worrying about “share of market.”
a). Employees are being trained in cross-selling.
b). Up-selling is now a common practice.
Today, beyond connecting more deeply, many companies are also taking advantage of new
technologies that let them connect more directly with their customers.
1). Products are now available via telephone, mail-order catalogs, kiosks, and electronic
commerce.
2). Business-to-business purchasing over the Internet has increased even faster than online
consumer buying.
3). Some firms sell only via direct channels (Example: Dell Computer,
Amazon.com).
4). Other firms use a combination of traditional selling and direct selling methods.
Direct marketing is redefining the buyer’s role in connecting with sellers.
1). Buyers are now active participants in shaping the marketing offer and process.
2). Some companies allow buyers to design their own products online.
3). Some marketers have hailed direct marketing as the “marketing model of the next
millennium.”
• Connections with Marketing’s Partners
Connecting inside the company--traditionally, marketers have played the role of intermediary,
charged with understanding customer needs and representing the customer to different company
departments, which then acted upon these needs.
1). Marketing no longer has sole ownership of customer interactions.
a). Now, every employee must be customer-focused.
b). Companies are reorganizing their operations to align them better with customer
needs.
c). Teams coordinate efforts toward the customer.
Connecting with outside partners--most companies today are networked companies, relying heavily
on partnerships with other firms.
1). Supply chain management--the supply chain describes a longer channel, stretching from
raw materials to components to final products that are carried to final buyers. Each member of
the supply chain creates and captures only a portion of the total value generated by the supply
chain.
2). Supply chain management allows all partners to strengthen relationships for mode of
payment and delivery.
3). Strategic alliances--companies need strategic partners.
a). Many strategic alliances take the form of marketing alliances--can be product or
service oriented in which one company licenses another to produce its product, or two companies
jointly market their complementary products.
b). Alliances could be promotional, logistical, or even pricing in nature.
c). Companies must be careful when choosing partners so as to complement strengths
and offset weaknesses.
• Connections with the World Around Us
Marketers are taking a fresh look at how they connect with the broader world around them.
1). Global connections--geographical and cultural differences and distances have shrunk
dramatically in the last decade.
2). Today, almost every company, large or small, is touched in some way by global
competition.
a). Firms are challenged by international competitors in their once safe domestic
market.
b). Companies are not only exporting, but buying more components and supplies from
abroad.
c). Domestically purchased goods and services are hybrids (with components coming
from many international sources).
d). The secret for business success in the next century will be to build good global
networks.
The New Connected World of Marketing
Smart marketers of all kinds are taking advantage of new opportunities for connecting with their
customers, marketing partners, and the world around them.
1). The old marketing thinking saw marketing as little more than selling or advertising. It
emphasized:
a). Customer acquisition.
b). Short-term profit.

c). Goal--sell products.
connections is a corporate goal.
a). Target profitable customers.
b). Find innovative ways to capture and keep these customers.
c). Form direct connections and build lasting customer relationships.
• Use targeted media.
• Integrate communications.
• Use technologies to provide connections.
• View suppliers and distributors as partners, not adversaries.
• Deliver superior value.
B. Rapid Globalisation
Technological and economic developments continue to shrink the distances between countries.
World is becoming global village due to advancement in the connecting technologies. The world is
shrinking rapidly with the advent of faster communication, and transportation, and financial flows.
In the Twenty-First century, firms can no longer afford to pay attention only to their domestic
market, no matter how large it is. Many industries are global industries, and those firms that
operate globally achieve lower costs and higher brand awareness. At the same time, global
marketing is risky because of variable exchange rates, unstable governments, protectionist tariffs
and trade barriers, and other prohibitive factors
Global Marketing into the Twenty-First Century:
a. The world is shrinking rapidly with advent of faster communication, transportation, and
financial flows.
c. Domestic companies never thought about foreign competitors until they suddenly found
them in their backyard. The firm that stays at home to play it safe might not only lose its chance to
enter other markets but also risks losing its home market.
d. Although some companies would like to stem the tide of foreign imports through
protectionism, this response would be only a temporary solution and, in the long run, would raise
the cost of living and protect inefficient firms.
e. The longer that companies delay taking steps toward internationalizing; the more they risk
being shut out of growing global markets.
h. A global firm, is a firm that, by operating in more than one country, gains marketing,
production, R&D, and financial advantages in its costs and reputation that are not available to
purely domestic competitors.
C. The Changing World Economy
Even as new markets open to rising affluence in such countries as the "new industrialised" pacific
rim, poverty in many areas and slowed economies in previously industrial nations has already
changed the world economy. The New Economy presents many new challenges and opportunities
for the marketer. The most important point is that the New Economy assuredly places the
customer more firmly in the driver’s seat for decisions on her/his product and service choices
(customization and customerization). In addition, there have been and will be many changes in
business and marketing practices as both consumers and businesses have virtual and real-time
access to literally millions of products, offers, options, prices, people, competitors, and sources of
information that did not exist until recent years. As a result, the marketing mix will change as
marketers and firms identify new uses for intangible assets and effective customer relationship
management that is more than a marketing term. We can assume that this increasingly rapid
growth and rate of change will continue, and despite the dot-com bust, recession, and other major
social, political, and economic adjustments, the Internet and the New Economy have changed
marketers and marketing for the long-term future.
D. The Call for More Ethics and Social Responsibility
The greed of the 1980's and the problems caused by pollution in Eastern Europe and elsewhere
has spurred a new interest in ethical conduct in business. Social and ethical issues in marketing:
Connections with our values and social responsibilities--as the worldwide consumerism and
environmentalism movements mature, today’s marketers are being called upon to take greater
responsibility for the social and environmental impact of their actions. The social responsibility and
environmental movements will place even stricter demands on companies in the future. Those
that resist will be forced into compliance by legislation or consumer outcries.
1. High Prices High Costs of Distribution can be misleading. Among other reasons, consumers
want to know about products, it is expensive to advertise and promote, brands provide
psychological benefits and quality standards, and distribution costs include delivering the product
not just promoting it. High Advertising and Promotion Costs are determined in a competitive
marketplace where consumers often have real choices. Excessive Markups are the exception rather
than the rule and are more likely in uncompetitive industries. Ethics can influence strategic
decisions on such pricing decisions as market penetration versus market skimming
2. High costs of distribution. It is often argued that middlemen are greedy and mark up
prices beyond the value of their services. A comprehensive implementation of marketing ethics
should include policies and guidelines for defining the company's relationship with distributors
3. High advertising and promotion costs. Modern marketing is also accused of pushing
prices up to cover the costs of heavy advertising and sales promotion. When considered in light of
increasing activism among consumer groups to regulate advertising, marketers have a unique
opportunity to proactively address the needs for strong advertising ethical standards. While
protecting free speech, marketers could adopt a statement on ethics in advertising that promotes
accurate information exchange, encourages creative and innovative message generation.
4. Excessive middlemen gross profit margins. Critics say that middlemens gross margins
are excessive.
5. Deceptive Practices Deceptive pricing includes practices such as falsely advertising "factory"
or "wholesale" prices or a large price reduction from a phoney high list price. Deceptive promotion
includes practices such as overstating the product's features or performance, luring the customer to
the store for a bargain that is out of stock, or running rigged contests. Deceptive packaging includes
exaggerating package contents through subtle design, not filling the package to the top, using
misleading labeling, or describing size in misleading terms.
6. High-Pressure Selling People are free to not respond to selling tactics. Moreover, most
states have "cooling off" periods that allow buyers to return products or back out of a
purchase for large ticket items.
7. Unsafe Products Dangerous products are most often illegal.
Corporate marketing policies can provide broad guidelines that everyone in the organization must
follow
8. Product Development. Product development may be influenced by ethical codes seeking
more desirable products or changes is salutary product concepts to make them more desirable.
E. The New Marketing Landscape
The new marketing landscape is a dynamic, fast-paced and evolving function of all these changes
and opportunities. More than ever there is no static formula for success. Customer is known as the
king in the marketing and all efforts of the organization rate directed towards the customer
satisfaction this provides new landscape to the marketing and development of the connecting
technologies are playing primary role in this concern.

[bonddonraj]

Lesson – 6
In last Lesson the focus of discussion was marketing challenges in the 21st century. Today we will
discuss strategic planning, describe marketing management and planning process, identify sections
of a marketing plan and specify the contents of each section. So today we will be covering
following topics:
STRATEGIC PLANNING AND MARKETING PROCESS
1. Strategic planning
The process of developing and maintaining a strategic fit between the organization’s goals and
capabilities and its changing marketing opportunities is called Strategic planning. Planning is
basically concerned with what are we going to do and how are we going to do it? Organizations,
which are not able to perform the effective planning, are actually planning for failures. To meet
changing conditions in their industries, companies need to be farsighted and visionary, and must
develop long-term strategies. Strategic planning involves developing a strategy to meet competition
and ensure long-term survival and growth. The marketing function plays an important role in this
process in that it provides information and other inputs to help in the preparation of the
organization’s strategic plan. Planning is performed to:
• Address changing environment and consumers
• Develop shared goals within organization
• Address competitive threat
• To anticipate the future
• Determine actions that are needed to achieve objectives
Strategic planning is mainly of three types:
(1) Strategic Planning: Major activities in strategic planning process include
developing the company's goals and
plans. Typically strategic planning
focus on long-term issues and
emphasize the survival, growth, and
overall effectiveness of the
organization.
(2) Tactical Planning: Tactical planning is
concerned with translating the general goals and
plans developed by strategic managers into
objectives that are more specific and activities.
These decisions, or tactics, involve both a shorter
time horizon and the coordination of
resources.
(3) Operational Planning: Operational
planning is used to supervise the
operations of the organization. It is
directly involved with non-management
employees, implementing the specific
plans developed with tactical managers.
This role is critical in the organization,
because operational managers are the link
between management and nonmanagement
personnel. Your first
Strategic Planning
��Conducted by
Board, CEO,
Division VPs
��Sets Objectives
��Fundamental
Strategies
Operational Planning
��District Sales
Managers, Staff
Marketing Supervisors
��Daily and Weekly
Plans
��Departmental Rules &
Procedures
management position probably will fit into this category.
2. Characteristics of a Strategic Plan
Strategic planning consists of developing a company mission (to give it direction), objectives and
goals (to give it means and methods for accomplishing its mission), business portfolio (to allow
management to utilize all facets of the organization), and functional plans (plans to carry out daily
operations from the different functional disciplines). Since most companies are interested in
growth, this chapter explores several growth alternatives within the context of strategic planning
and portfolio analysis. The product/market expansion grid shows four avenues for growth: market
penetration, market development, product development, and diversification. Many companies
operate without formal plans. However, formal planning can provide many benefits:
1). It encourages management to think ahead systematically.
2). It forces managers to clarify objectives and policies.
3). It leads to better coordination of company efforts.
4). It provides clearer performance standards for control.
5). It is useful for a fast-changing environment since sound planning helps the company
anticipate and respond quickly to environmental changes and sudden developments.
3. Strategic planning Process:
It is defined as the process of developing and maintaining a strategic fit between the organization’s
goals and capabilities and its changing marketing opportunities.
1). Strategic planning sets the stage for the rest of the planning in the firm.
2). There are four steps to the strategic planning process:
a). stating a clear company mission.
b). Setting supporting
company objectives.
c). Designing a sound
business portfolio.
d). Planning and
coordinating marketing and other
functional strategies.
a. Defining the Company’s Business and Mission
An organization exists to accomplish something. When management senses that the organization is
drifting, it is time to renew its search for purpose by asking:
1). What is our business?
2). Who is our customer?
3). What do customers value?
4). What should our business be?
The first step in the strategic planning process is defining the company mission.
Defining
the
Company
Mission
Setting
Company
Objectives
and Goals
Designing
the Business
Portfolio
Planning,
marketing,
and other
functional
Strategies
Corporate Level
Business unit,
product,
and market
level
1). A mission statement is a statement of the organization’s purpose—what it wants to
accomplish in the larger environment.
2). A clear mission statement acts as an “invisible hand” that guides people in the organization.
3). Market definitions of a business are
better than product or technological
definitions. Products and technologies can
become outdated, but basic market needs
may last forever.
4). A market-oriented mission statement
defines the business in terms of satisfying
basic customer needs.
The mission statement must avoid being
too narrow or too broad. Mission
statements must:
1). Be realistic.
2). Be specific.
3). Fit the market environment.
4). Indicate distinctive competencies.
5). Be motivating.
b. Setting Company Objectives and Goals
The company’s mission needs to be turned into detailed supporting objectives for each level of
management. This second step in the strategic planning process requires the manager to set
company goals and objectives and be responsible for achieving them.
1). The mission leads to a hierarchy of objectives including business and marketing
objectives.
2). Objectives should be as specific as possible.
c. Designing the Business Portfolio
The third step in the strategic planning process is designing the business portfolio.
1). The business portfolio is a collection of businesses and products that make up the
company.
2). The best business
portfolio is the one that best
fits the company’s strengths
and weaknesses to
opportunities in the
environment.
b. In order to design the
business portfolio, the
business must:
1). Analyze its current
business portfolio and decide
which business should receive
more, less, or no investment.
Market Oriented Market Oriented
Realistic Realistic
Fit Market Environment Fit Market Environment
Distinctive Competencies Distinctive Competencies
Motivating Motivating
Specific
Characteristics
of a Good
Mission
Statement:
A Mission Statement is a Statement of the
Organization’s Purpose.
3 ?
10x 4x 2x 1.5x 1x 10x 4x 2x 1.5x 1x
20% 20%-
18% 18%-
16% 16%-
14% 14%-
12% 12%-
10% 10%-
8% 8%-
6% 6%-
4% 4%-
2% 2%-
0
Market growth rate
Relative market share
Stars
Cash cow
Question marks
Dogs
?
?
?
5
4
2
1
6
8
7
2). Develop growth strategies for adding new products or businesses to the
portfolio.
Analyzing the Current Business Portfolio
In order to analyze the current business portfolio, the company must conduct portfolio analysis (a
tool by which management identifies and evaluates the various businesses that make up the
company). Two steps are important in this analysis:
1). The first step is to identify the key businesses (SBUs). The strategic business unit
(SBU) is a unit of the company that has a separate mission and objectives and which can be
planned independently from other company businesses.
2). The SBU can be a company division, a product line within a division, or even a single
product or brand.
3). The second step is to assess the attractiveness of its various SBUs and decide how much
support each deserves. The best-known portfolio planning method is the Boston Consulting
Group (BCG) matrix:
1). Using the BCG approach, where a company classifies all its SBUs according to the
growth-share matrix.
a). The vertical axis, market growth rate, provides a measure of market attractiveness.
b). The horizontal axis, relative market share, serves as a measure of company strength
in the market.
2). Using the matrix, four types of SBUs can be identified:
a. Stars
b. Cash Cows
c. Question Marks
d. Dogs
a). Stars are high-growth, high-share businesses or products (they need heavy
investment to finance their rapid growth potential).
b). Cash Cows are low-growth, high-share businesses or products (they are established,
successful, and need less investment to hold share).
c). Question Marks are low-share business units in high-growth markets (they require
a lot of cash to hold their share).
d). Dogs are low-growth, low-share businesses and products (they may generate enough
cash to maintain themselves, but do not have much future). Once it has classified its SBUs, a
company must determine what role each will play in the future. The four strategies that can be
pursued for each SBU are:
1). The company can invest more in the business unit in order to build its share.
2). The company can invest enough just to hold at the current level.
3). The company can harvest the SBU.
4). The company can divest the SBU.
As time passes, SBUs change their positions in the growth-share matrix. Each has its own life
cycle. The growth-share matrix has done much to help strategic planning study; however, there are
problems and limitations with the method.
1). They can be difficult, time-consuming, and costly to implement.
2). Management may find it difficult to define SBUs and measure market share and growth.
3). They focus on classifying current businesses but provide little advice for future planning.
4). They can lead the company to placing too much emphasis on market-share growth or
growth through entry into attractive new markets. This can cause unwise expansion into hot, new,
risky ventures or giving up on established units too quickly. In spite of the drawbacks, most firms
are still committed to strategic planning.

[bonddonraj]

Lesson – 7
Lesson overview and learning objectives:
All companies must look ahead and develop long-term strategies to meet the changing
conditions in their industries. Each company must find the game plan that makes the most sense
given its specific situation, opportunities, objectives, and resources. Keeping in view this fact the
last Lesson was dedicated for the discussion to explore several growth alternatives within the
context of strategic planning and portfolio analysis. The product/market expansion grid shows
four avenues for growth: market penetration, market development, product development, and
diversification.
PORTFOLIO ANALYSIS
A. MARKETING PROCESS
Analyzing the Current Business Portfolio
We have discussed in last Lesson that in order to analyze the current business portfolio, the
company must conduct portfolio analysis (a tool by which management identifies and evaluates
the various businesses that make up the company). Two steps are important in this analysis:
1). The first step is to identify the key businesses (SBUs). The strategic business unit
(SBU) is a unit of the company that has a separate mission and objectives and which can be
planned independently from other company businesses.
2). The SBU can be a company division, a product line within a division, or even a single
product or brand.
3). The second step is to assess the attractiveness of its various SBUs and decide how much
support each deserves.
d. The best-known portfolio planning method is the Boston Consulting Group (BCG) matrix:
1). Using the BCG approach, where a company classifies all its SBUs according to the
growth-share matrix.
a). The vertical axis, market growth rate, provides a measure of market attractiveness.
b). The horizontal axis, relative market share, serves as a measure of company strength
in the market.
2). Using the matrix, four types of SBUs can be identified (Discussed in detail in last
Lesson)
a). Stars
b). Cash Cows
c). Question Marks
d). Dogs
Once it has classified its SBUs, a company must determine what role each will play in the future.
The four strategies that can be pursued for each SBU are:
1). The company can invest more in the business unit in order to build its share.
2). The company can invest enough just to hold at the current level.
3). The company can harvest the SBU.
4). The company can divest the SBU.
As time passes, SBUs change their positions in the growth-share matrix. Each has its own life
cycle. The growth-share matrix has done much to help strategic planning study; however, there are
problems and limitations with the method.
1). They can be difficult, time-consuming, and costly to implement.
2). Management may find it difficult to define SBUs and measure market share and growth.
3). They focus on classifying current businesses but provide little advice for future planning.
4). They can lead the company to place too much emphasis on market-share growth or
growth through entry into attractive new markets. This can cause unwise expansion into hot, new,
risky ventures or giving up on established units too quickly. In spite of the drawbacks, most firms
are still committed to strategic planning. Based upon this analysis company designs the growth
strategies:
Developing Growth Strategies
Companies should always be looking to the future. One useful device for identifying growth
opportunities for the future is the product/market expansion grid. The product/market
expansion grid is a portfolio-planning tool for identifying company growth opportunities
through:
1). Market Penetration—making more sales to present customers without changing
products in any way. Market penetration means trying to increase sales of a firm’s present products
in its present markets probably through a more aggressive marketing mix. The firm may try to
strengthen its relationship with customers to increase their rate of use or repeat purchases, or try to
attract competitors’ customers or current
nonusers. New promotion appeals alone
may not be effective. A firm may need to
add a home page on the Internet to make it
easier and faster for customers to place an
order. Or, it may need to add more stores
in present areas for greater convenience.
2). Market Development—a strategy
for company growth by identifying and
developing new markets for current
company products (example, demographic
markets). Market development means trying
to increase sales by selling present products in new markets. Firms may try advertising in different
media to reach new target customers. Or they may add channels of distribution or new stores in
new areas, including overseas.
3). Product Development—a strategy for company growth by offering modified or new
products to current markets. Product development means offering new or improved products for
present markets. By knowing the present market’s needs, a firm may see new ways to satisfy
customers. Computer software firms like Microsoft boost sales by introducing new versions of
popular programs.
4). Diversification—a strategy for company growth by starting up or acquiring businesses
outside the company’s current products and markets. Diversification means moving into totally
different lines of business perhaps entirely unfamiliar products, markets, or even levels in the
production-marketing system.
Planning Cross-Functional Strategies
The final step in the strategic planning process is planning functional strategies.
1). Once the strategic plan is in place, more detailed planning must take place within each
business unit.
2). Each department (such as marketing, finance, et cetera) provides information for strategic
planning.
Marketing plays a key role in the company’s strategic planning process by:
Marketpenetration
strategy
(Diversification
strategy)
Productdevelopment
strategy
Marketdevelopment
strategy
Current Current
markets markets
New New
markets markets
Current Current
products products
New New
products products
1). Providing a guiding philosophy.
2). Providing inputs to strategic planners by helping to identify attractive market
opportunities and by assessing the firm’s potential to take advantage of them.
3). Within individual business units, marketing designs strategies for reaching the unit’s
objectives.
4). Marketers are challenged to find ways to get all departments to “think customer.”
Strategic Planning, Implementation, and Control Process
The process of developing and
maintaining a strategic fit between
the organization’s goals and
capabilities and its changing
marketing opportunities. It relies on
developing a clear company
mission, supporting objectives, a
sound business portfolio and
coordinated functional strategies.
Business plans are more customers
and competitor-oriented and better
reasoned and more realistic than
they were in the past. The plan is
variously called a "business plan," a
"marketing plan," and sometimes an
"operating plan." Most marketing plans cover one year, but some cover a few years. The plans
vary in their length from under ten pages to over 50 pages. Some companies take their plans very
seriously, while others see them as only a rough guide to action. The most frequently cited
shortcomings of current marketing plans, according to marketing executives, are lack of realism,
insufficient competitive analysis, and a short-run focus.
IMPLEMENTING THE MARKETING PLAN: Planning good strategy is only the start - it
counts very little if the organization fails to implement it correctly. Main reasons for the poor
implementation are isolated planning, Some organizations employ ‘professional planners’ while
others leave the task of developing strategic plans to top management and leaving the details of
implementation to lower-level managers can spell poor or no implementation at all.
Marketing strategy and marketing performance are linked by an implementation system consisting
of five related elements. Finally
marketing control involves
evaluating the results of
marketing strategies and plans
and taking corrective action to
ensure that objectives are
attained. It then measures its
performance in the marketplace
and evaluates the causes of any
differences between expected
and actual performance. Finally,
management takes corrective
action to close the gaps between
its goals and its performance.
Corporate
planning
Division
planning
Business
planning
Product
planning
Organizing
Implementing
Measuring
results
Diagnosing
results
Taking
corrective
action
Planning Planning Implementation Implementation Control Control
Customers
Needs and other
Segmenting
Dimensions
Competitors
Current &
Prospective
S.
W.
O.
T.
External Market Environment External Market Environment
Targeting &
Segmentation
Positioning &
Differentiation
Narrowing down to focused strategy with quantitative
and qualitative screening criteria
Company
Mission, Objectives,
& Resources
Strategy Planning Process
Whenever performing the marketing function company needs courses of the action known as the
strategies. Marketing strategies and the planning process are based on the It is based on the SWOT
analysis. SWOT analysis means to analyze the threats and opportunities that are part of external
environment and strengths and weaknesses of the organization, which are part of the internal the
environment. Based on this environmental analysis company formulates the strategies to find out
the target customers designs objectives and mission statements to fulfill the needs of the target
customers and strategies to respond to the competitive environment. After conducting SWOT
analysis companies decides strategies about the marketing mix i.e. 4Ps (Product, Price, Place and
Promotion) .
Marketing Process
The marketing process is the process of analyzing market opportunities, selecting target markets,
developing the marketing mix, and managing the marketing effort.
This process has following main steps:
1. Analyzing marketing opportunities
2. Selecting target markets
3. Developing the marketing Mix
4. Managing the marketing effort

[bonddonraj]

Lesson – 8
Lesson overview and learning objectives:
In last Lesson we tried to understand the concept of Portfolio in detail and had a brief concept
regarding the marketing process. The marketing process consists of four steps: analyzing market
opportunities; developing marketing strategies; planning marketing programs, which entails
choosing the marketing mix (the four Ps of product, price, place, and promotion); and organizing,
implementing, and controlling the marketing effort. Today we will be covering Marketing process
in more detail:
A. MARKETING PROCESS
The Marketing Process
Once the strategic plan has defined the company’s overall mission and objectives, marketing plays
a role in carrying out these objectives.
The marketing process is the process of analyzing market opportunities, selecting target markets,
developing the marketing mix, and managing the marketing effort. Target customers stand at the
center of the marketing process. There are following steps in Marketing Process:
5. Analyzing marketing opportunities
6. Selecting target markets
7. Developing the marketing Mix
8. Managing the marketing effort
a. Analyzing marketing opportunities
First step of the marketing process is analyzing market opportunities and availing these
opportunities to satisfy the customer’s requirements to have competitive advantage. The marketing
function of analyzing market opportunities is important in the marketing planning process. Any
marketing manager must analyses the long-run opportunities in the market to improve the business
unit's performance. To evaluate its opportunities firms needs to operate a reliable marketing
information system.
Marketing research is an indispensable marketing tool for this purpose. Researching the market
allows the company to gather information about their customers, competitors and any
environmental changes to determine the market opportunities. Once the market opportunities
have been analyzed then modern marketing practice calls for dividing the market into major
market segments, evaluating each segment, and selecting and targeting those market segments that
the company can best serve
b. Selecting the target Market:
To succeed in today’s competitive marketplace, companies must be customer centered. They must
win customers from competitors and keep them by delivering greater value.
• Sound marketing requires a careful, deliberate analysis of consumers.
• Since companies cannot satisfy all consumers in a given market, they must divide up the
total market (market segmentation), choose the best segments (market targeting), and
design strategies for profitably serving chosen segments better than the competition
(market positioning).
Market segmentation is the process of dividing a market into distinct groups of buyers with different
needs, characteristics, or behavior who might require separate products or marketing mixes.
Market targeting is the process of evaluating each market segment’s attractiveness and selecting one
or more segments to enter. A company should target segments in which it can generate the greatest
customer value and sustain it over time. A company may decide to serve only one or a few special
segments, or perhaps it might decide to offer a complete range of products to serve all market
segments. Special segments may be called “market niches.” Most companies enter a new market
by serving a single segment, and if this proves successful, they add segments.
Market positioning is arranging for a product to occupy a clear distinctive and desirable place relative
to competing products in the minds of target consumers. In positioning a product, a company
first needs to identify possible competitive advantages upon which to build the position. To gain
competitive advantage, the company must offer greater competitive advantage to the target
segment. The company’s entire marketing program should support the chosen positioning strategy.
Effective positioning begins with actually differentiating the company’s marketing offer so that it
gives consumers more value than they are offered by the competition.
c. Developing the Marketing Mix
Once the company has decided on its overall competitive marketing strategy, it is ready to
begin planning the details of the marketing mix. The marketing mix is the set of controllable
marketing variables that the firm blends to produce the response it wants in the target market. The
marketing mix consists of everything that the firm can do to influence the demand for its product.
These variables are often referred to as the “four Ps.”
1). Product stands for the “goods-and-service” combination the company offers to the target
market.
2). Price stands for the amount of money customers have to pay to obtain the product.
3). Place stands for company activities that make the product available to target consumers.
4). Promotion stands for activities that communicate the merits of the product and persuade
target consumers to buy it.
An effective marketing program blends all of the marketing mix elements into a coordinated
program designed to achieve the company’s marketing objectives by delivering value to consumers.
Some critics feel that the four Ps omit or underestimate certain important activities.
1). “Where are services?” they ask.
2). “Where is packaging?”
3). The 4 Ps seems to take the seller’s view rather than the buyer’s view.
4). Perhaps a better classification would be the 4 Cs:
a). Product = Customer Solution.
b). Price = Customer Cost.
c). Place = Convenience.
d). Promotion = Communication.
d. Managing the Marketing Effort
The company wants to design and put into action the marketing mix that will best achieve its
objectives in target markets. This involves four marketing management functions. The four
functions are: analysis, planning, implementation, and control
a. Marketing Analysis:
Marketing analysis involves a complete analysis of the company’s situation. The company performs
analysis by Identifying environmental opportunities and threats. Analyzing company strengths and
weaknesses to determine which opportunities the company can best pursue. Feeding information
and other inputs to each of the other marketing management functions.
b. Marketing Planning:
Within each business unit, functional plans must be prepared, including marketing plans. Such
plans include marketing plans which are aggregate plans consisting of plans for product lines,
brands and markets.
Marketing planning involves deciding on marketing strategies that will help the company to attain
its overall strategic objectives. A detailed plan is needed for each business, product, or brand. A
product or brand plan
should contain the following
sections: executive
summary, current marketing
situation, threats and
opportunity analysis,
objectives and issues,
marketing strategies, action
programs, budgets, and
controls.
Contents of Marketing
Plan
1. Executive
summary - The
opening section
of the marketing plan that presents a short summary of the main goals and
recommendations to be presented in the plan.
2. Current marketing situation - The section of a marketing plan that describes the
target market and the company’s position in it. The current marketing situation is the
section of a marketing plan that describes the target market and the company’s position
in it. Important sections include:
1). A market description.
2). A product review.
3). Analysis of the competition.
4). A section on distribution.
3. Opportunities and Issues Analysis- This section requires the marketing manager to
look ahead for threats and opportunities that the product(s) might face. A company
marketing opportunity would be an attractive arena for marketing action in which the
company would enjoy a competitive advantage. In the threats and opportunities
section, managers are forced to anticipate important developments that can have an
impact, either positive or negative, on the firm. Having studied the product’s threats
and opportunities, the manager can now set objectives and consider issues that will
affect them.
4. Objectives - Objectives should be stated as goals the company would like to reach
during the plan’s term.
5. Marketing strategy - The marketing logic by which the business unit hopes to achieve
its marketing objectives. Marketing strategy consists of specific strategies for target
markets, marketing mix and marketing expenditure level. Strategies should be created
for all marketing mix components. The marketing budget is a section of the marketing
plan that shows projected revenues, costs, and profits. The last section of the
marketing plan outlines the controls that will be used to monitor progress. This allows
for progress checks and corrective action.
Executive Summary
Current Marketing Situation
Threats and Opportunity Analysis
Objectives and Issues
Marketing Strategy
Action Programs
Budgets
Controls
Contents of a Marketing Plan
6. Action programs - This section sets out what will be done, when, by whom and how
much will be spent doing it.
7. Projected profit-and-loss statement - The marketing budget section of the plan
shows projected revenues, costs and profits/surpluses.
8. Controls - This last section outlines the control measures that will be used to monitor
progress. Goals may be set out weekly, monthly, quarterly, annually or for all such
periods. Following evaluation of results, actions are recommended and implemented in
the next period.
c. Marketing Implementation:
Marketing Implementation is the process that turns marketing plans into marketing actions in
order to accomplish strategic marketing objectives. Whereas marketing planning addresses the and
“why” of marketing activities, implementation addresses the “who”, “where”, “when”, and “how”.
One firm can have essentially the same strategy as another, yet win in the market- place through
faster or better execution. Successful implementation depends on an action program that pulls all
of the people and activities together and forms sound formal organizational structure its decision
and reward structure (HRM functions and procedures) and the firm’s marketing strategies fitting
with its company culture (the shared system of values and beliefs).
Marketing Department Organization
The company must design a marketing department that can carry out marketing analysis, planning,
implementation, and control. Formats for organizing the department include:
1). The functional organization where different marketing activities are headed by a
functional specialist (such as a sales manager, advertising manager, etc.).
2). The geographic organization where sales and marketing people are assigned to
specific countries, regions, or districts.
3). A product management organization where a product manager develops a complete
strategy for a product or brand. Today, many firms are shifting to customer equity management
where customer profitability is important.
4). A market or customer management organization where a specific market plan is
developed for each specific market or customer.
5). A combination plan where large companies many times combine elements of any of the
above.
d. Marketing Control
Marketing control is the process of measuring and evaluating the results of marketing strategies
and plans, and taking
corrective action to ensure
that marketing objectives
are attained.
Implementation requires
four steps:
1). Set specific goals
(What do we want to
achieve?).
2). Measure
performance (What is
happening?).
3). Evaluate
performance (Why is it happening?).
4). Take corrective action (What should we do about it?).
M a rk e t in g C o n t ro l
P ro c e s s
S e t
G o a ls
M e a s u re
P e r fo rm a n c e
E va lu a te
P e r fo rm a n c e
T a k e
C orre c tive
A ctio n
Two broad forms of control are important:
1). Operating control involves checking ongoing performance against the annual plan and
taking corrective action when necessary.
2). Strategic control involves looking at whether the company’s basic strategies are well
matched to its opportunities. The major tool for accomplishing this form of control is the
marketing audit. The marketing audit is a comprehensive, systematic, independent, and periodic
examination of a company’s environment, objectives, strategies, and activities to determine
problem areas and opportunities. The purpose is to recommend a plan of action to improve the
company’s marketing performance.
1). The marketing plan covers all major marketing areas of a business, and not just trouble
spots.
2). If done correctly, the audit is normally conducted by an objective and
experienced outside party who is independent of the marketing department.

[bonddonraj]

Lesson – 9
Lesson overview and learning objectives:
In last Lesson we discussed the marketing process. Marketing process consists of four steps:
analyzing market opportunities; developing marketing strategies; planning marketing programs,
which entails choosing the marketing mix (the four Ps of product, price, place, and promotion);
and organizing, implementing, and controlling the marketing effort. This marketing process is
influenced by some environmental factors that can be internal to organization or external to
organization, today we will be covering Marketing Environment:
MARKETING ENVIRONMENT
In order to correctly identify opportunities and monitor threats, the company must begin with a
thorough 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 this
environment.
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.
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 decision making. The second component includes the marketing channel firms that
cooperate to create value: the suppliers and marketing intermediaries (middlemen, physical
distribution firms, marketing-service 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 the competitors
facing the organization. The fifth component consists of all the publics that have an actual 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 the
microenvironment consists of six forces close to the company that affect its ability to serve its
customers:
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 ability to
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 be deemed the internal
environment.
1). Top management is responsible
for setting the company’s mission,
objectives, broad strategies, and policies.
2). Marketing managers must make
decisions within the parameters established
by top management.
3). Marketing managers must also
work closely with other company
departments.
Areas such as finance, R & D, purchasing, manufacturing, and accounting all produce
better results when aligned by common objectives and goals.
4). All departments must “think consumer” if the firm is to be successful. The goal is to
provide superior customer value and satisfaction.
b. Suppliers
Suppliers are firms and individuals that provide the resources needed by the company and its
competitors to produce goods and services. They are an important link in the company’s overall
customer “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 costs must be carefully monitored.
Company Company
Customers Customers
Publics Publics Suppliers Suppliers
Competitors Competitors Intermediaries Intermediaries
Forces Affecting a
Company’s Ability to
Serve
Customers
Forces Affecting a
Company’s Ability to
Serve
Customers
c. Marketing Intermediaries
Marketing intermediaries are firms that help the company to promote, sell, and distribute its goods
to final buyers.
1). Resellers are distribution channel firms that help the company find customers or make
sales to them.
2). These include wholesalers and retailers who buy and resell merchandise.
3). Resellers often perform important functions more cheaply than the company can
perform itself. However, seeking and working with resellers is not easy because of the power that
some demand and use.
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 before
they move to the next destination).
Marketing service agencies (such as marketing research firms, advertising agencies, media firms,
etc.) help the company target and promote its products.
Financial intermediaries (such as banks, credit companies, insurance companies, etc.) help
finance transactions and insure against risks.
d. Customers
The company must study its customer markets closely since each market has its own special
characteristics. These markets normally
include:
1). Consumer markets (individuals and
households that buy goods and services for
personal consumption).
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 advantage
over competitors by positioning their offerings to be successful in the marketplace. No single
competitive 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’s
ability 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.
Company Company
Consumer
Markets
International
Markets
Government
Markets
Business
Markets
Reseller
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.

[bonddonraj]

Lesson – 10
Lesson overview and learning objectives:
In last Lesson we discussed the marketing microenvironment factors or forces. Today we will
continue the topic of Marketing environment and will discuss the Macro environmental factors in
detail so our today’s topic is:
B. MARKETING MACRO ENVIRONMENT
Marketing Environment
The Company’s Macro environment
The company and all of the other actors operate in a larger macro environment of forces that
shape 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 the
company’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 interesting ones are.
1). The world’s population (though not all countries) rate is growing at an explosive rate
that will soon exceed food supply and ability to adequately service the population. The greatest
danger is in the poorest countries where poverty contributes to the difficulties. Emerging markets
such as China are receiving increased attention from global marketers.
2). The most important trend is the changing age structure of the population. The
population is aging 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’s age 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
distinguishing characteristics. They are a very cynical group because of all the difficulties that have
surrounded and impacted their group.
b). Echo boomers (baby boomlets) are the large growing kid and teen market. This group
is used to affluence on the part of their parents (as different from the Gen Xers). One
distinguishing characteristic is their utter fluency and comfort with computer, digital, and Internet
technology (sometimes called Net-Gens).
c). Generational marketing is possible, however, caution must be used to avoid
generational alienation.
Many in the modern family now “telecommute”--work at home or in a remote office and conduct
their business using fax, cell phones, modem, or the Internet In general, the population is
Company
Demographic
Economic
Natural
Technological
Political
Cultural
Company
Customers
Intermediaries
Suppliers
Competitors
Publics
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. Technical skills (such as in
computers) will be a must in the future. The final demographic trend is the increasing ethnic and
racial diversity of the population. Diversity is a force that must be recognized 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 and spending
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). Value marketing (trying to offer the consumer greater value for their dollar) is a very
serious strategy 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 still
account for the majority of consumer dollars. It is also of note that distribution of income has
created a “two-tiered market” where there are those that are affluent and less affluent. Marketers
must carefully monitor economic changes so they will be able to prosper with the trend, not suffer
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 concerns have
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-renewable such 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-sighted companies are becoming “environmentally friendly” and are producing
environmentally safe and recyclable 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 and necessary 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 the material and energy problems facing the world.
4). Environmentally sustainable strategies. The so-called green movement has
encouraged or even demanded that firms produce strategies that 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). 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
the expanding fields of health care, the space shuttle, robotics, and biogenetic industries.
c). The challenge is not only technical but also commercial--to make practical,
affordable versions 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 to any 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 that influence 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.
Some trends 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. (See Table 3.2 for the various acts used to regulate and protect commerce
and our economy.)
3). Increased emphasis on ethics and socially responsible actions. Socially responsible firms
actively 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 right thing.”
b). Recent scandals have increased concern about ethics and social responsibility.
c). The boom in e-commerce and Internet marketing has created a new set of social and
ethical issues. 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 basic values,
perceptions, preferences, and behaviors. Certain cultural characteristics can affect marketing
decision-making. 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 by
schools, churches, business, and government.
Secondary beliefs and values are more open to change.
2). Shifts in secondary cultural values. Since secondary cultural values and beliefs are open
to change, marketers want to spot them and be able to capitalize on the change potential. Society’s
major cultural views are expressed in:
a). People’s views of themselves. 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 but expect 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. Love of nature and sports associated with nature are expected to be significant trends in the
next several years.
f). People’s views of the universe. Studies of the origin of man, religion, and
thought-provoking ad campaigns are on the rise. Currently, Americans are on a spiritual journey.
This will probably take the form of “spiritual individualism.”

[bonddonraj]

Lesson – 11
Lesson overview and learning objectives:
In last Lesson we discussed the marketing environment factors or forces. Today we will study
some strategies that a company designs to meet the requirements of the environment, to analyze
the opportunities available. In order to analyze the environment company needs information that
is acquired through marketing information system. Keeping in view this importance of the
marketing information and research we will be covering the topic of MIS or marketing research
system in this Lesson. Main objective of this Lesson is to eexplain the concept of marketing
information system, emphasising ways of assessing information needs, the sources used for
developing information and ways of distributing information.
So our today’s topics are:
A. ANALYZING MARKETING OPPORTUNITIES AND DEVELOPING
STRATEGIES
B. MIS
Analyzing Marketing opportunities and developing strategies
We discussed in last two Lessons those companies and their marketing departments’ success
depends upon the careful analysis of the marketing environment. Opportunities are need to be
analyzed and capture in order to make the profits. Changing market opportunities must be
explored and pursued.
In order to correctly identify opportunities and monitor threats, the company must begin with a
thorough 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. 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.
Company
Customers
Competitors
•Market Potential
(size, growth rate)
•Customer
Behavior (wants
and needs,
segmentation,
price sensitivity)
•Market Potential
(size, growth rate)
•Customer
Behavior (wants
and needs,
segmentation,
price sensitivity)
•Industry
Structure
Analysis
(entry/exit
barriers, buyers,
sellers,
substitutes)
•Competitor
Response
Profiles
(capabilities,
current and future
actions)
•Industry
Structure
Analysis
(entry/exit
barriers, buyers,
sellers,
substitutes)
•Competitor
Response
Profiles
(capabilities,
current and future
actions)
•Economic
Analysis (costs,
break-even,
profitability)
•Company Fit
(strengths,
weaknesses,
resources, culture,
goals)
•Economic
Analysis (costs,
break-even,
profitability)
•Company Fit
(strengths,
weaknesses,
resources, culture,
goals)
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.
A. Marketing Information System:
Marketing information is a critical element in effective marketing as a result of the trend toward
global marketing, the transition from buyer needs to buyer wants, and the transition from price to
non-price competition. All firms operate some form of marketing information system, but the
systems vary greatly in their sophistication. In too many cases, information is not available or
comes too late or cannot be trusted. Too many companies are learning that they lack an
appropriate information system, still do not have an information system, lack appropriate
information, or they do not know what information they lack or need to know to compete
effectively.
a. The Marketing Information System
No matters what type of marketing organization we refer to, marketing managers need a great deal
of information to carry out their marketing so as to provide superior value and satisfaction for
customers. However, despite the growing supply of information, managers often lack enough
information of the right kind or have too much information of the wrong kind. To overcome
these problems, many companies are taking steps to improve their marketing information systems.
In this Lesson the marketing information system is discussed, along with the marketing research
process thus showing the types of information gathered and how it is gathered.
If a marketing organization is to produce superior value and satisfaction for customers, marketing
managers need information at almost every turn. They need information about customers such as
resellers, end-users (who tend to be called consumers), as well as competitors, governmental and
other forces in the marketplace. A marketing information system (MIS) consists of people,
equipment and procedures to gather, sort, analyze, evaluate and distribute needed, timely and
accurate information to marketing decision makers. MIS works in the following way:
• A well-designed marketing information system (MIS) begins and ends with the user. The
MIS first assesses information needs by interviewing marketing managers and surveying
their decision environment to determine what information is desired, needed, and feasible
to offer.
• The MIS next develops information and helps managers to use it more effectively. Internal
records provide information on sales, costs, inventories, cash flows, and accounts
receivable and payable. Such data can be obtained quickly and cheaply, but must often be
adapted for marketing decisions.
• Marketing intelligence supplies marketing executives with everyday information about
developments in the external marketing environment. Intelligence can be collected from
company employees, customers, suppliers, and resellers; or by monitoring published
reports, conferences, advertisements, competitor actions, and other activities in the
environment. Marketing research involves collecting information relevant to a specific
marketing problem facing the company.
• Finally, the
marketing
information
system
distributes
information
gathered
from
internal
sources,
marketing
intelligence,
and
marketing
research to
the right
managers at
the right
times.
More and
more companies are decentralizing their information systems through networks that allow
managers to have direct access to information.
b. The working of the Marketing Information System:
If a marketing organization is to produce superior value and satisfaction for customers, marketing
managers need information at almost every turn. They need information about customers such as
resellers, end-users (who tend to be called consumers), as well as competitors, governmental and
other forces in the marketplace. A marketing information system (MIS) consists of people,
equipment and procedures to gather, sort, analyze, evaluate and distribute needed, timely and
accurate information to marketing decision makers.
I. Assessing information needs:
Marketing organizations must establish what information is needed or likely to be needed. This is a
key feature of the MIS that underscores the importance of information.
II. Developing information:
Internal Records - provide a wealth of information, which is essentially raw data for decisionmaking.
An effective MIS organizes and summaries balance sheets, orders, schedules, shipments,
and inventories into trends that can be linked to management decisions on marketing mix changes.
III. Marketing Intelligence:
Provides the everyday information about environmental variables that managers need as the
implement and adjust marketing plans. Sources for intelligence may vary according to needs but
may include both internal and external sources.
IV. Marketing Research:
The Marketing
Information System
Marketing
managers
Analysis
Planning
Implementation
Control
Assessing
information
needs
Distributing
information
Internal
records
Marketing decisions and communication Marketing decisions and communication
Marketing
environment
Test
markets
Marketing
channels
Competitors
Publics
Macroenvironment
forces
Marketing Information System
Developing information
Marketing
intelligence
Marketing
research
Marketing
decision
support
analysis
Marketing research links the consumer, customer, and public to the marketer through an exchange
of information.
c. Subsystems of Marketing Information System:
A well-designed market information system consists of four subsystems.
• The first is the internal records system, which provides current data on sales, costs,
inventories, cash flows, and accounts receivable and payable. Many companies have
developed advanced computer-based internal reports systems to allow for speedier and
more comprehensive information.
• The second market information subsystem is the marketing intelligence system, supplying
marketing managers with everyday information about developments in the external
marketing environment. characterized by the scientific method, creativity, multiple
methodologies, model building, and cost/benefit measures of the value of information.
• The third subsystem, marketing research, involves collecting information that is relevant to
specific marketing problems facing the company. The marketing research process consists
of five steps: defining the problem and research objectives; developing the research plan;
collecting information; analyzing the information; and presenting the findings.
• The fourth system is the Marketing Decision Support System (MDSS marketing system)
that consists of statistical and decision tools to assist marketing managers in making better
decisions. MDSS is a coordinated collection of data, systems, tools, and techniques with
supporting software and hardware. Using MDSS software and decision models, the
organization gathers and interprets relevant information from the business and the
environment and turns it into a basis for marketing action. MDSS experts use descriptive
or decision models, and verbal, graphical, or mathematical models, to perform analysis on a
wide variety of marketing problems.
d. Why to acquire information:
Managers mostly want to be able to predict the future for a company and its products. That future
embraces the total market demand and the nature of such demand, the company’s share by brand
and what competitors will be doing. They want this information so they can chart their own firm’s
future and thereby are proactive rather than be forced into reacting to a competitor’s actions.
1. The firm’s internal record system should be set up in such a way as to easily provide
information in a form the manager can act on. But this is largely historical information such as
sales by account, by territory, by salesperson and so on. Acquiring forward-looking information is
the name of the game. By monitoring the relevant intervening variables, firms are able to monitor
intentions to purchase among many other factors such as competitor’s activities. Such intervening
variables differ by industry sector and company. For consumer goods companies’ measures of
awareness, attitudes toward the brand, and distribution levels — among others — are indicators of
future sales performance. In the case of industrial companies, relationships between buyers and
sellers are all important. So measures of customer service levels, product performance measures
and acceptability of the technical knowledge of the salespeople will be partial indicators of whether
particular suppliers will be chosen. In both instances, economic indicators are scanned before
companies decide on the level of marketing expenditure. That is, whether an expanding or
contracting local and global economy faces the industry and firm.
2. Well accepted salespeople invariably have stronger relationships with their clients, and
being closer to them, are privy to more information on the buying company’s performance,
expectations of the future and even the views on the supplying companies strengths and
weaknesses as well as their competitors. Often it is necessary to establish performance rankings in
a formal manner.
In much the same manner as consumer companies assess the important criteria that
consumers user to decide between brands, industrials conduct research that identifies the criteria
purchasers use to choose and maintain suppliers, as well as the ratings for individual companies.
Given the generally high education level of such as sales engineers, it is not uncommon for the
field force to administer such research. Others use research companies.
e. Marketing Research
The systematic design, collection, analysis, and reporting of data relevant to a specific marketing
situation facing an organization
Steps in the Marketing Research Process
The marketing research process consists of four steps:
1. Defining the problem and research objectives
2. Developing the research plan,
3. Implementing the research plan, and
4. Interpreting and reporting the findings.
f. Why to Conduct Business Research?
Marketing Research is a Systematic & objective process of designing, gathering, analyzing &
reporting information that is used to solve a specific problem. It Provides information for aid in
making business related decisions, to Identify opportunities and generate & refine actions. It is
important for the mangers for many decisions like:
• Helps reduce risk inherent in decision-making
• Provides an important link to customers
• Allows implementation of the business concept
• Enables managers to identify & understand stakeholders wants & needs and to develop
appropriate strategies to meet these needs

[bonddonraj]

Lesson – 12
Lesson overview and learning objectives:
In last Lesson we discussed the marketing information system. Today’s Lesson Outlines the
marketing research process, including defining the problem and research objectives and developing
the research plan. We will also discuss the key issues of planning primary data collection,
implementing the research plan and interpreting and reporting the findings.
So our today’s topics are:
A. THE MARKETING RESEARCH PROCESS:
a. Marketing Research an Introduction:
Every marketer needs marketing research, and most large companies have their own marketing
research departments. Marketing research involves a four-step process. The first step consists of
the manager and researcher carefully defining the problem and setting the research objectives. The
objective may be exploratory, descriptive, or causal. The second step consists of developing the
research plan for collecting data from primary and secondary sources. Primary data collection calls
for choosing a research approach (observation, survey, experiment); choosing a contact method
(mail, telephone, personal); designing a sampling plan (whom to survey, how many to survey, and
how to choose them); and developing research instruments (questionnaire, mechanical). The third
step consists of implementing the marketing research plan by collecting, processing, and analyzing
the information. The fourth step consists of interpreting and reporting the findings. Further
information analysis helps marketing managers to apply the information and provides advanced
statistical procedures and models to develop more rigorous findings from the information.
Some marketers face special marketing research considerations, such as conducting research in
small-business, non-profit, or international situations. Marketing research can be conducted
effectively by small organizations with small budgets. International marketing researchers follow
the same steps as domestic researchers but often face more challenging problems. All
organizations need to understand the major public policy and ethics issues surrounding marketing
research.
b. Uses & Application of Research in Marketing:
Decision-making is crucial process in all types of the organization. This decision-making requires
then information that is collected and acquired through the marketing research process this
information can be regarding customers companies or competitor or the other environmental
factors. Major uses of the marketing research in the organizations are as following:
�� Measurement of market potential.
�� Analysis of market share.
�� Determination of market characteristics
�� Sales analysis.
�� Product testing.
�� Forecasting.
�� Studies of business trends
�� Studies of competitors' products.
c. THE MARKETING RESEARCH PROCESS
Before researcher can
provide managers with
information, they must
know what kind of
problem the manager
wishes to solve. Marketing
research process has
following steps:
1. Defining the
problem and
research objectives
2. Developing the
research plan,
3. Implementing the
research plan, and
4. Interpreting and
reporting the
findings.
Now we will discuss these steps in detail:
Step 1 Defining the Problem and Research Objectives
The marketing manager and the researcher must work closely together to define the problem
carefully and agree on the research objectives. Marketing managers must know enough about
marketing research to help in the planning and to interpret research results. Defining the problem
and research objectives is often the hardest step in the process. After the problem has been defined
carefully, the manager and researcher must set the research objectives. The three general types of
objectives are:
1). Exploratory research where the objective is to gather preliminary information that
will help to better define problems and suggest hypotheses for their solution.
2). Descriptive research is where the intent is to describe things such as the market
potential for a product or the demographics and attitudes of customers who buy the product.
3). Casual research is research to test hypotheses about cause-and-effect relationships.
The statement of the problem and research objectives will guide the entire research process. It is
always best to put the problem and research objectives statements in writing so agreement can be
reached and everyone knows the direction of the research effort.
Step 2 Developing the Research Plan
In developing the research plan, the attempt is to determine the information needed (outline
sources of secondary data), develop a plan for gathering it efficiently, and presenting the plan to
marketing management. The plan spells out specific research approaches, contact methods,
sampling plans, and instruments that researchers will use to gather new data. The firm should
know what data already exists before the process of collecting new data begins. The steps that
should be followed are. Developing the research plan involves all of the following:
1. Determining Specific Information Needs
2. Gathering Secondary Information
3. Planning Primary Data Collection
1. Problem Definition and the
Research Objectives
1. Problem Definition and the
Research Objectives
2. Developing the Research Plan 2. Developing the Research Plan
3. Implementation 3. Implementation
4. Interpretation and Reporting
of Findings
4. Interpretation and Reporting
of Findings
1). Determine specific information needs. In this step research objectives are translated
into specific information needs. For example, determine the demographic, economic, and lifestyle
characteristics of a target audience.
2). Gathering secondary information.
a). Secondary data is information that already exists somewhere, having been
collected for another purpose. Sources of secondary data include both internal and external
sources. Companies can buy secondary data reports from outside suppliers (i.e., commercial data
sources).
Information can be obtained by using commercial online databases. Examples include
CompuServe, Dialog, and Lexis-Nexus. Many of these sources are free. Advantages of secondary
data include:
1. It can usually be obtained more quickly and at a lower cost than primary data.
2. Sometimes data can be provided that an individual company could not collect on its own.
Some problems with collecting secondary data include:
1. The needed information might not exist.
2. Even if the data is found, it might not be useable.
3. The researcher must evaluate secondary information to make certain it is relevant,
accurate, current, and impartial. Secondary data is a good starting point; however, the company will
often have to collect primary data.
b). Primary data is information collected for the specific purpose at hand.
Planning Primary Data Collection. A plan for primary data collection calls for a number of
decisions on research approaches, contact methods, sampling plans, and research instruments.
Research Approaches:
a). Research approaches can be listed as:
1. Observational research where information is gained by observing relevant
people, actions, and situations. However, some things such as feelings,
attitudes, motives, and private behavior cannot be observed. Mechanical
observation can be obtained through single source data systems. This is
where electronic monitoring systems link consumers’ exposure to television
advertising and promotion (measured using television meters) with what they
buy in stores (measured using store checkout scanners). Observational
research can be used to obtain information that people are unwilling or
unable to provide.
2. Survey research is the gathering of primary data by asking people questions
about their knowledge, attitudes, preferences, and buying behavior. Survey research is best suited
for gathering descriptive information. Survey research is the most widely used form of primary
data collection The major advantage of this approach is flexibility while the disadvantages include
the respondent being unwilling to respond, giving inaccurate answers, or unwilling to spend the
time to answer.
3. Experimental research involves the gathering of primary data by selecting
matched groups of subjects, giving them different treatments, controlling related factors, and
checking for differences in-group responses. This form of research tries to explain cause-andeffect
relationships. Observation and surveys may be used to collect information in experimental
research. This form is best used for causal information.

[bonddonraj]

Lesson – 13
Lesson overview and learning objectives:
In last Lesson we discussed the marketing research process first two steps were discussed in that
Lesson today we will continue the same topic and will be discussing the remaining steps of the
marketing research process. Second topic of today’s Lesson is an introduction to the consumer
behavior.
So our today’s topics are:
A. THE MARKETING RESEARCH PROCESS (Continued)
B. CONSUMER MARKET
Contact Methods:
Contact methods are used to obtain the information Contact methods can be listed as:
1. Mail questionnaires--used to collect large amounts of information at a low cost.
2. Telephone interviewing--good method for collecting information quickly.
3. Personal interviewing (which can be either individual or group interviewing).
A form of personal interviewing is “focus group interviewing”.
Focus-group interviewing consists of inviting six to ten people to gather for a few hours with a
trained interviewer to talk about a product, service, or organization. The interviewer “focuses”
the group discussion on important issues.
4. Online (Internet) marketing research can consist of Internet surveys or online focus groups.
Many experts predict that online research will soon be the primary tool of marketing researchers.
5. Computer interviewing is a new method being used in the technology age. Consumers read
questions from a computer screen and respond.
Sampling plans are used to outline how samples will be constructed and used.
1. A sample is a segment of the population selected for marketing research to represent the
population as a whole.
2. Marketing researchers usually draw conclusions about large groups of consumers by
studying a small sample of the total consumer population.
3. Designing a sample calls for three decisions:
a. Who is to be surveyed (what sampling unit)?
b. How many people should be surveyed (what sample size)?
c. How should the sample be chosen (what sampling procedure)?
4. Kinds of samples include:
a. Probability samples--each population member has a known chance of being
included in the sample, and researchers can calculate confidence limits for sampling
error.
b. Nonprobability samples--sampling error cannot be measured.
Research Instruments:
In collecting primary data, marketing researchers have a choice of two main research
instruments—the questionnaire and mechanical devices. The questionnaire is by far the most
common instrument, whether administered in person, by phone, or online. Questionnaires are very
flexible—there are many ways to ask questions. However, they must be developed carefully and
tested before they can be used on a large scale. A carelessly prepared questionnaire usually contains
several errors.
In preparing a questionnaire, the marketing researcher must first decide what questions to ask.
Questionnaires frequently leave out questions that should be answered and include questions that
cannot be answered, will not be answered, or need not be answered. Each question should be
checked to see that it contributes to the research objectives.
The form of each question can influence the response. Marketing researchers distinguish between
closed-end questions and open-end questions. Closed-end questions include all the possible
answers, and subjects make choices among them. Examples include multiple-choice questions and
scale questions. Open-end questions allow respondents to answer in their own words. Open-end
questions often reveal more than closed-end questions because respondents are not limited in their
answers. Open-end questions are especially useful in exploratory research, when the researcher is
trying to find out what people think but not measuring how many people think in a certain way.
Closed-end questions, on the other hand, provide answers that are easier to interpret and tabulate.
Researchers should also use care in the wording and ordering of questions. They should use
simple, direct, unbiased wording. Questions should be arranged in a logical order. The first
question should create interest if possible, and difficult or personal questions should be asked last
so that respondents do not become defensive.
Although questionnaires are the most common research instrument, mechanical instruments also
are used. We discussed two mechanical instruments, people meters and supermarket scanners,
earlier in the chapter. Another group of mechanical devices measures subjects' physical responses.
Step 3 Implementing the Research Plan
The researcher next puts the marketing research plan into action. This involves collecting,
processing, and analyzing the information. Data collection can be carried out by the company's
marketing research staff or by outside firms. The company keeps more control over the collection
process and data quality by using its own staff. However, outside firms that specialize in data
collection often can do the job more quickly and at a lower cost.
The data collection phase of the marketing research process is generally the most expensive and
the most subject to error. The researcher should watch fieldwork closely to make sure that the plan
is implemented correctly and to guard against problems with contacting respondents, with
respondents who refuse to cooperate or who give biased or dishonest answers, and with
interviewers who make mistakes or take shortcuts.
Step 4 Interpreting and Reporting the Findings
The final step in the marketing research process is interpreting and reporting the findings. The
researchers should keep from overwhelming managers with numbers and fancy statistical
techniques. Researchers should present important findings that are useful in the major decisions
faced by management. Interpretation should not be left only to researchers. Marketing managers
will also have important insights into the problems. Interpretation is an important phase of the
marketing process. The best research is meaningless if the manager blindly accepts wrong
interpretations from the researcher.
The researcher must now interpret the findings, draw conclusions, and report them to
management. The researcher should not try to overwhelm managers with numbers and fancy
statistical techniques. Rather, the researcher should present important findings that are useful in
the major decisions faced by management.
However, interpretation should not be left only to the researchers. They are often experts in
research design and statistics, but the marketing manager knows more about the problem and the
decisions that must be made. In many cases, findings can be interpreted in different ways, and
discussions between researchers and managers will help point to the best interpretations. The
manager will also want to check that the research project was carried out properly and that all the
necessary analysis was completed. Or, after seeing the findings, the manager may have additional
questions that can be answered through further sifting of the data. Finally, the manager is the one
who ultimately must decide what action the research suggests. The researchers may even make the
data directly available to marketing managers so that they can perform new analyses and test new
relationships on their own.
Interpretation is an important phase of the marketing process. The best research is meaningless if
the manager blindly accepts faulty interpretations from the researcher. Similarly, managers may be
biased—they might tend to accept research results that show what they expected and to reject
those that they did not expect or hope for. Thus, managers and researchers must work together
closely when interpreting research results, and both must share responsibility for the research
process and resulting decisions
A. Consumer Market:
a. Defining Consumer Market:
All individuals and households who buy or acquire goods and services for personal consumption
are termed as consumers. Markets have to be understood before marketing strategies can be
developed. People using consumer markets buy goods and services for personal consumption.
Consumers vary tremendously in age, income, education, tastes, and other factors. Consumer behavior
is influenced by the buyer's characteristics and by the buyer's decision process. Buyer characteristics
include four major factors: cultural, social, personal, and psychological.
All individuals and
households who buy or
acquire goods and
services for personal
consumption
Consumer Markets:
Consumer Buying Behavior refers to the buying
behavior of final consumers—individuals and
households who buy goods and services for
personal consumption.
The world consumer market consists of more than 6 billion people. At present growth rates, the
world population will reach almost 8 billion people by 2025
Consumers around the world vary tremendously in age, income, education level, and tastes. They
also buy an incredible variety of goods and services. How these diverse consumers connect with
each other and with other elements of the world around them impacts their choices among various
products, services, and companies. Here we examine the fascinating array of factors that affect
consumer behavior.
b. Why to Study Consumer Behavior:
Basic objective of the studying consumer behavior is that the firm needs to know who buys their
product? How they buy? When and where they buy? Why they buy? How they respond to
marketing stimuli. Because they study consumer behavior (CB) what Consumer Behavior is about?
How, why, where and when consumers make purchase decisions? Considers who influences the
decisions? What is Consumer Behavior about? All these are important questions, which are to be
known to the companies so that they can design, and implement marketing strategies to satisfy the
customers. Consumers determine the sales and profits of a firm by their purchase decisions, thus
the economic viability of the firm. In late 1990, US consumers were spending enough dollar bills to
stretch from the Earth to the Sun and back, with enough left over for over 600 lines to the moon!
Along with these questions companies should also be knowing some other factors like what is
Disposable income and what is Discretionary income what is the stage of family life cycle stage
because these all these factors influence the consumer behaviors which are very important to the
marketers.
c. Consumer Behavior
Consumer behavior is the process through which the ultimate buyer makes purchase decisions.
This can be defined as the processes involved when individuals or groups select, purchase, use, or
dispose of products, services, ideas, or experiences to satisfy needs and desires (Solomon, 1996).
Those actions directly involved in obtaining, consuming and disposing of products and services,
including the decision processes that precede and follow those actions (Engel et al. 1995).
Consumer behavior examines mental and emotional processes in addition to the physical activities
as by (Wilkie 1990).
d. Marketing Applications:
Consumer behaviors plays important role in almost all types of decisions to be made in marketing.
For the reason being that all functions performed in marketing revolve around the customers and
consumers. Like:
Positioning: Arranging for a product to occupy a clear, distinctive, and desirable place relative to
competing products in the minds of target consumers.
Some firms find it easy to choose their positioning strategy. For example, a firm well known for
quality in certain segments will go for this position in a new segment if there are enough buyers
seeking quality. But in many cases, two or more firms will go after the same position. Then, each
will have to find other ways to set itself apart. Each firm must differentiate its offer by building a
unique bundle of benefits that appeals to a substantial group within the segment.
The positioning task consists of three steps: identifying a set of possible competitive advantages
upon which to build a position, choosing the right competitive advantages, and selecting an overall
positioning strategy. The company must then effectively communicate and deliver the chosen
position to the market.
Segmentation: Dividing a market into distinct groups of buyers on the basis of needs,
characteristics, or behavior who might require separate products or marketing mixes. Market
segmentation reveals the firm's market segment opportunities. The firm now has to evaluate the
various segments and decide how many and which ones to target. We now look at how companies
evaluate and select target segments. The company also needs to examine major structural factors
that affect long-run segment attractiveness. For example, a segment is less attractive if it already
contains many strong and aggressive competitors. The existence of many actual or potential substitute
products may limit prices and the profits that can be earned in a segment. The relative power of buyers
also affects segment attractiveness. Buyers with strong bargaining power relative to sellers will try
to force prices down, demand more services, and set competitors against one another—all at the
expense of seller profitability. Finally, a segment may be less attractive if it contains powerful suppliers
who can control prices or reduce the quality or quantity of ordered goods and services.
Product development: A strategy for company growth by offering modified or new products to
current market segments. Developing the product concept into a physical product in order to
ensure that the product idea can be turned into a workable product.
Product development—offering modified or new products to current markets.
Market development: A strategy for company growth by identifying and developing new market
segments for current company products.
International marketing

[bonddonraj]

Lesson – 14
Lesson overview and learning objectives:
In last Lesson we discussed the Consumer Markets and consumer behavior and its importance and
applications for the marketing process. Today we will be continuing the same topic and will discuss
the Consumer buying model. Some factors that can influence the consumer decision regarding
purchases will also be discussed in today’s Lesson.
So our today’s topic is:
CONSUMER BUYING BEHAVIOR:
A. Model of consumer behavior
Consumers make many buying decisions every day. Most large companies research consumer
buying decisions in great detail to answer questions about what consumers buy, where they buy,
how and how much they buy, when they buy, and why they buy. Marketers can study actual
consumer purchases to find out what they buy, where, and how much. But learning about the whys
of consumer buying behavior is not so easy—the answers are often locked deep within the
consumer's head.
The central question for marketers is: How do consumers respond to various marketing efforts the
company might use? The company that really understands how consumers will respond to
different product features, prices, and advertising appeals has a great advantage over its
competitors. The starting point is the stimulus-response model of buyer behavior shown in Figure
. This figure shows that marketing and other stimuli enter the consumer's "black box" and produce
certain responses. Marketers must figure out what is in the buyer's black box.3
Model of consumer behavior
Marketing stimuli consist of the four Ps: product, price, place, and promotion. Other stimuli
include major forces and events in the buyer's environment: economic, technological, political, and
cultural. All these inputs enter the buyer's black box, where they are turned into a set of observable
buyer responses: product choice, brand choice, dealer choice, purchase timing, and purchase
amount.
The marketer wants to understand how the stimuli are changed into responses inside the
consumer's black box, which has two parts. First, the buyer's characteristics influence how he or
she perceives and reacts to the stimuli. Second, the buyer's decision process itself affects the
buyer's behavior. This chapter looks first at buyer characteristics as they affect buying behavior,
and then discusses the buyer decision process.
Consumer purchases are influenced strongly by cultural, social, personal, and psychological
characteristics, as shown in Figure For the most part, marketers cannot control such factors, but
they must take them into account.
B. Factors influencing consumer behavior
Markets have to be understood
before marketing strategies can be
developed. People using consumer
markets buy
goods and
services for
personal consumption.
Consumers vary tremendously in age,
income, education, tastes, and other factors.
Consumer behavior is influenced by the buyer's characteristics and by the buyer's decision process.
Buyer characteristics include four major factors: cultural, social, personal, and psychological. We
can say that following factors can influence the Buying decision of the buyer:
a. Cultural
b. Social
c. Personal
d. Psychological
a. Cultural Factors
Cultural factors exert the broadest and deepest influence on consumer behavior. The marketer
needs to understand the role played by the buyer's culture, subculture, and social class.
I. Culture
Culture is the most basic cause of a person's wants and behavior. Human behavior is largely
learned. Growing up in a society, a child learns basic values, perceptions, wants, and behaviors
from the family and other important institutions. A person normally learns or is exposed to the
following values: achievement and success, activity and involvement, efficiency and practicality,
progress, material comfort, individualism, freedom, humanitarianism, youthfulness, and fitness and
health.
Every group or society has a culture, and cultural influences on buying behavior may vary greatly
from country to country. Failure to adjust to these differences can result in ineffective marketing or
embarrassing mistakes. For example, business representatives of a U.S. community trying to
market itself in Taiwan found this out the hard way. Seeking more foreign trade, they arrived in
Taiwan bearing gifts of green baseball caps. It turned out that the trip was scheduled a month
before Taiwan elections, and that green was the color of the political opposition party. Worse yet,
the visitors learned after the fact that according to Taiwan culture, a man wears green to signify
that his wife has been unfaithful. The head of the community delegation later noted, "I don't know
whatever happened to those green hats, but the trip gave us an understanding of the extreme
Principles of Marketing – MGT301 VU
© Copyright Virtual University of Pakistan 64
differences in our cultures." International marketers must understand the culture in each
international market and adapt their marketing strategies accordingly.
II. Subculture
Each culture contains smaller subcultures or groups of people with shared value systems based on
common life experiences and situations. Subcultures include nationalities, religions, racial groups,
and geographic regions. Many subcultures make up important market segments, and marketers
often design products and marketing programs tailored to their needs. Here are examples of four
such important subculture groups.
III. Social Class
Almost every society has some form of social class structure. Social Classes are society's relatively
permanent and ordered divisions whose members share similar values, interests, and behaviors.
Social class is not determined by a single factor, such as income, but is measured as a combination
of occupation, income, education, wealth, and other variables. In some social systems, members of
different classes are reared for certain roles and cannot change their social positions. Marketers are
interested in social class because people within a given social class tend to exhibit similar buying
behavior.
Social classes show distinct product and brand preferences in areas such as clothing, home
furnishings, leisure activity, and automobiles.
b. Social Factors
A consumer's behavior also is influenced by social factors, such as the consumer's small groups,
family, and social roles and status.
I. Groups
Many small groups influence a person’s behavior. Groups that have a direct influence and to which
a person belongs are called membership groups. In contrast, reference groups serve as direct (faceto-
face) or indirect points of comparison or reference in forming a person's attitudes or behavior.
Reference groups to which they do not belong often influence people. Marketers try to identify
the reference groups of their target markets. Reference groups expose a person to new behaviors
and lifestyles, influence the person's attitudes and self-concept, and create pressures to conform
that may affect the person's product and brand choices.
The importance of group influence varies across products and brands. It tends to be strongest
when the product is visible to others whom the buyer respects. Manufacturers of products and
brands subjected to strong group influence must figure out how to reach opinion leaders—people
within a reference group who, because of special skills, knowledge, personality, or other
characteristics, exert influence on others.
Many marketers try to identify opinion leaders for their products and direct marketing efforts
toward them. In other cases, advertisements can simulate opinion leadership, thereby reducing the
need for consumers to seek advice from others.
The importance of group influence varies across products and brands. It tends to be strongest
when the product is visible to others whom the buyer respects. Purchases of products that are
bought and used privately are not much affected by group influences because neither the product
nor the brand will be noticed by others.
II. Family
Family members can strongly influence buyer behavior. The family is the most important
consumer buying organization in society, and it has been researched extensively. Marketers are
interested in the roles and influence of the husband, wife, and children on the purchase of different
products and services.
Husband-wife involvement varies widely by product category and by stage in the buying process.
Buying roles change with evolving consumer lifestyles.
Such changes suggest that marketers who've typically sold their products to only women or only
men are now courting the opposite sex. For example, with research revealing that women now
account for nearly half of all hardware store purchases, home improvement retailers such as
Depot and Builders Square have turned what once were intimidating warehouses into femalefriendly
retail outlets. The new Builders Square II outlets feature decorator design centers at the
front of the store. To attract more women, Builders Square runs ads targeting women in Home,
House Beautiful, Woman's Day, and Better Homes and Gardens. Home Depot even offers bridal
registries.
Similarly, after research indicated that women now make up 34 percent of the luxury car market,
Cadillac has started paying more attention to this important segment. Male car designers at Cadillac
are going about their work with paper clips on their fingers to simulate what it feels like to operate
buttons, knobs, and other interior features with longer fingernails. The Cadillac Catera features an
air-conditioned glove box to preserve such items as lipstick and film. Under the hood, yellow
markings highlight where fluid fills go.
Children may also have a strong influence on family buying decisions. For example, it ran ads to
woo these "back-seat consumers" in Sports Illustrated for Kids, which attracts mostly 8- to 14-
year-old boys. "We're kidding ourselves when we think kids aren't aware of brands," says Venture's
brand manager, adding that even she was surprised at how often parents told her that kids played a
tie-breaking role in deciding which car to buy.
In the case of expensive products and services, husbands and wives often make joint decisions.
III. Roles and Status
A person belongs to many groups—family, clubs, organizations. The person's position in each
group can be defined in terms of both role and status. A role consists of the activities people are
expected to perform according to the persons around them.
Principles of Marketing – MGT301 VU
© Copyright Virtual University of Pakistan 66
Lesson – 15
Lesson overview and learning objectives:
In last Lesson we discussed the Consumer Buying behavior its model and characteristics that can
influence the decision for buying process. Today we will be continuing the same topic and will
discuss the remaining factors that influence the buying process and decision of consumers.
So our today’s topic is:
CONSUMER BUYING BEHAVIOR (CONTINUED):
c Personal Factors
A buyer's decisions also are influenced by personal characteristics such as the buyer's age and lifecycle
stage, occupation, economic situation, lifestyle, and personality and self-concept.
I. Age and Life-Cycle Stage
People change the goods and services they buy over their lifetimes. Tastes in food, clothes,
furniture, and recreation are often age related. Buying is also shaped by the stage of the family life
cycle—the stages through which families might pass as they mature over time. Marketers often
define their target markets in terms of life-cycle stage and develop appropriate products and
marketing plans for each stage. Traditional family life-cycle stages include young singles and
married couples with children.
II. Occupation
A person's occupation affects the goods and services bought. Blue-collar workers tend to buy
more rugged work clothes, whereas white-collar workers buy more business suits. Marketers try to
identify the occupational groups that have an above-average interest in their products and services.
A company can even specialize in making products needed by a given occupational group. Thus,
computer software companies will design different products for brand managers, accountants,
engineers, lawyers, and doctors.
III. Economic Situation
A person's economic situation will affect product choice. Marketers of income-sensitive goods
watch trends in personal income, savings, and interest rates. If economic indicators point to a
recession, marketers can take steps to redesign, reposition, and reprice their products closely.
IV. Lifestyle
People coming from the same subculture, social class, and occupation may have quite different
lifestyles. Life style is a person's pattern of living as expressed in his or her psychographics. It
involves measuring consumers' major AIO dimensions—activities (work, hobbies, shopping, sports,
social events), interests (food, fashion, family, recreation), and opinions (about themselves, social
issues, business, products). Lifestyle captures something more than the person's social class or
personality. It profiles a person's whole pattern of acting and interacting in the world.
Several research firms have developed lifestyle classifications. It divides consumers into eight
groups based on two major dimensions: self-orientation and resources. Self-orientation groups
include principle-oriented consumers who buy based on their views of the world; status-oriented buyers
who base their purchases on the actions and opinions of others; and action-oriented buyers who are
driven by their desire for activity, variety, and risk taking. Consumers within each orientation are
further classified into those with abundant resources and those with minimal resources, depending on
whether they have high or low levels of income, education, health, self-confidence, energy, and
other factors. Consumers with either very high or very low levels of resources are classified
without regard to their self-orientations (actualizers, strugglers). Actualizers are people with so
many resources that they can indulge in any or all self-orientations. In contrast, strugglers are
people with too few resources to be included in any consumer orientation.
V. Personality and Self-Concept
Each person's distinct personality influences his or her buying behavior. Personality refers to the
unique psychological characteristics that lead to relatively consistent and lasting responses to one's
own environment. Personality is usually described in terms of traits such as self-confidence,
dominance, sociability, autonomy, defensiveness, adaptability, and aggressiveness. Personality can
be useful in analyzing consumer behavior for certain product or brand choices. For example,
coffee marketers have discovered that heavy coffee drinkers tend to be high on sociability. Thus,
to attract customers, Starbucks and other coffeehouses create environments in which people can
relax and socialize over a cup of steaming coffee.
Many marketers use a concept related to personality—a person's self-concept (also called self-image).
The basic self-concept premise is that people's possessions contribute to and reflect their identities;
that is, "we are what we have." Thus, in order to understand consumer behavior, the marketer
must first understand the relationship between consumer self-concept and possessions. For
example, the founder and chief executive of Barnes & Noble, the nation's leading bookseller, notes
that people buy books to support their self-images:
d Psychological Factors
A person's buying choices are further influenced by four major psychological factors: motivation,
perception, learning, and beliefs and attitudes.
I. Motivation
A person has many needs at any given time. Some are biological, arising from states of tension such
as hunger, thirst, or discomfort. Others are psychological, arising from the need for recognition,
esteem, or belonging. Most of these needs will not be strong enough to motivate the person to act
at a given point in time. A need becomes a motive when it is aroused to a sufficient level of
intensity. A motive (or drive) is a need that is sufficiently pressing to direct the person to seek
satisfaction. Psychologists have developed theories of human motivation. Two of the most
popular—the theories of Sigmund Freud and Abraham Maslow—have quite different meanings
for consumer analysis and marketing.
II. Maslow's Theory of Motivation
1.
Physiological Needs
2.
Safety Needs
Physiological Needs
3.
Social Needs
Safety Needs
Physiological Needs
4.
Safety Needs
Social Needs
Physiological Needs
Personal
Needs
Abraham Maslow sought to explain why people are driven by particular needs at particular times.
Why does one person spend much time and energy on personal safety and another on gaining the
esteem of others? Maslow's answer is that human needs are arranged in a hierarchy, from the most
pressing to the least pressing. Maslow's hierarchy of needs is shown in Figure. In order of
importance, they are physiological needs, safety needs, social needs, esteem needs, and self-actualization
needs. A person tries to satisfy the most important need first. When that need is satisfied, it will
stop being a motivator and the person will then try to satisfy the next most important need. For
example, starving people (physiological need) will not take an interest in the latest happenings in
the art world (self-actualization needs), nor in how they are seen or esteemed by others (social or
esteem needs), nor even in whether they are breathing clean air (safety needs). But as each
important need is satisfied, the next most important need will come into play.
III. Perception
A motivated person is ready to act. How the person acts is influenced by his or her own perception
of the situation. All of us learn by the flow of information through our five senses: sight, hearing,
smell, touch, and taste. However, each of us receives, organizes, and interprets this sensory
information in an individual way. Perception is the process by which people select, organize, and
interpret information to form a meaningful picture of the world.
People can form different perceptions of the same stimulus because of three perceptual processes:
selective attention, selective distortion, and selective retention. People are exposed to a great
amount of stimuli every day. For example, the average person may be exposed to more than 1,500
ads in a single day. It is impossible for a person to pay attention to all these stimuli. Selective
attention—the tendency for people to screen out most of the information to which they are
exposed—means that marketers have to work especially hard to attract the consumer's attention.
Even noted stimuli do not always come across in the intended way. Each person fits incoming
information into an existing mind-set. Selective distortion describes the tendency of people to
interpret information in a way that will support what they already believe. Selective distortion
means that marketers must try to understand the mind-sets of consumers and how these will affect
interpretations of advertising and sales information.
IV. Learning
When people act, they learn. Learning describes changes in an individual's behavior arising from
experience. Learning theorists say that most human behavior is learned. Learning occurs through
the interplay of drives, stimuli, cues, responses, and reinforcement.
V. Beliefs and Attitudes
Through doing and learning, people acquire beliefs and attitudes. These, in turn, influence their
buying behavior. A belief is a descriptive thought that a person has about something.
Buying behavior differs greatly for a tube of toothpaste, a tennis racket, an expensive camera, and a
new car. More complex decisions usually involve more buying participants and more buyer
deliberation. Figure shows types of consumer buying behavior based on the degree of buyer
involvement and the degree of differences among brands.
C. Types Buying Behaviors:
• Complex Buying Behavior
Consumers undertake complex buying behavior when they are highly involved in a purchase and
perceive significant differences among brands. Consumers may be highly involved when the
product is expensive, risky, purchased infrequently, and highly self-expressive. Typically, the
consumer has much to learn about the product category. For example, a personal computer buyer
may not know what attributes to consider. Many product features carry no real meaning: a
"Pentium Pro chip," "super VGA resolution," or "megs of RAM."
This buyer will pass through a learning process, first developing beliefs about the product, then
attitudes, and then making a thoughtful purchase choice. Marketers of high-involvement products
must understand the information-gathering and evaluation behavior of high-involvement
consumers. They need to help buyers learn about product-class attributes and their relative
importance, and about what the company's brand offers on the important attributes. Marketers
need to differentiate their brand's features, perhaps by describing the brand's benefits using print
media with long copy. They must motivate store salespeople and the buyer's acquaintances to
influence the final brand choice.
• Dissonance-Reducing Buying Behavior
Dissonance reducing buying behavior occurs when consumers are highly involved with an
expensive, infrequent, or risky purchase, but see little difference among brands. For example,
consumers buying carpeting may face a high-involvement decision because carpeting is expensive
and self-expressive. Yet buyers may consider most carpet brands in a given price range to be the
same. In this case, because perceived brand differences are not large, buyers may shop around to
learn what is available, but buy relatively quickly. They may respond primarily to a good price or to
purchase convenience.
After the purchase, consumers might experience post purchase dissonance (after-sale discomfort) when
they notice certain disadvantages of the purchased carpet brand or hear favorable things about
brands not purchased. To counter such dissonance, the marketer's after-sale communications
should provide evidence and support to help consumers feel good about their brand choices.
• Habitual Buying Behavior
Habitual buying behavior occurs under conditions of low consumer involvement and little
significant brand difference. For example, take salt. Consumers have little involvement in this
product category—they simply go to the store and reach for a brand. If they keep reaching for the
same brand, it is out of habit rather than strong brand loyalty. Consumers appear to have low
involvement with most low-cost, frequently purchased products.
In such cases, consumer behavior does not pass through the usual belief-attitude-behavior
sequence. Consumers do not search extensively for information about the brands, evaluate brand
characteristics, and make weighty decisions about which brands to buy. Instead, they passively
receive information as they watch television or read magazines. Ad repetition creates brand
familiarity rather than brand conviction. Consumers do not form strong attitudes toward a brand; they
select the brand because it is familiar. Because they are not highly involved with the product,
consumers may not evaluate the choice even after purchase. Thus, the buying process involves
brand beliefs formed by passive learning, followed by purchase behavior, which may or may not be
followed by evaluation.
Because buyers are not highly committed to any brands, marketers of low-involvement products
with few brand differences often use price and sales promotions to stimulate product trial. In
advertising for a low-involvement product, ad copy should stress only a few key points. Visual
symbols and imagery are important because they can be remembered easily and associated with the
brand. Ad campaigns should include high repetition of short-duration messages. Television is
usually more effective than print media because it is a low-involvement medium suitable for
passive learning. Advertising planning should be based on classical conditioning theory, in which
buyers learn to identify a certain product by a symbol repeatedly attached to it.
Marketers can try to convert low-involvement products into higher-involvement ones by linking
them to some involving issue. Procter & Gamble does this when it links Crest toothpaste to
avoiding cavities. At best, these strategies can raise consumer involvement from a low to a
moderate level. However, they are not likely to propel the consumer into highly involved buying
behavior.
a. Variety-Seeking Buying Behavior
Consumers undertake variety seeking buying behavior in situations characterized by low consumer
involvement but significant perceived brand differences. In such cases, consumers often do a lot of
brand switching. For example, when buying cookies, a consumer may hold some beliefs, choose a
cookie brand without much evaluation, then evaluate that brand during consumption. But the next
time, the consumer might pick another brand out of boredom or simply to try something different.
Brand switching occurs for the sake of variety rather than because of dissatisfaction.
In such product categories, the marketing strategy may differ for the market leader and minor
brands. The market leader will try to encourage habitual buying behavior by dominating shelf
space, keeping shelves fully stocked, and running frequent reminder advertising. Challenger firms
will encourage variety seeking by offering lower prices, special deals, coupons, free samples, and
advertising that presents reasons for trying something new.
D. Buyer Decision Process
Now that we have looked at the influences that affect buyers, we are ready to look at how
consumers make buying decisions. Figure shows that the buyer decision process consists of five
stages: need recognition, information search, evaluation of alternatives, purchase decision, and post purchase
behavior. Clearly, the buying process starts long before actual purchase and continues long after.
Marketers need to focus on the entire buying process rather than on just the purchase decision.
The figure implies that consumers pass through all five stages with every purchase. But in more
routine purchases, consumers often skip or reverse some of these stages. A woman buying her
regular brand of toothpaste would recognize the need and go right to the purchase decision,
skipping information search and evaluation. However, we use the model in Figure because it
shows all the considerations that arise when a consumer faces a new and complex purchase
situation.
• Need Recognition
The buying process starts with need recognition—the buyer recognizes a problem or need. The
buyer senses a difference between his or her actual state and some desired state. The need can be
triggered by internal stimuli when one of the person's normal needs—hunger, thirst—rises to a level
high enough to become a drive. A need can also be triggered by external stimuli. At this stage, the
marketer should research consumers to find out what kinds of needs or problems arise, what
brought them about, and how they led the consumer to this particular product.
By gathering such information, the marketer can identify the factors that most often trigger interest
in the product and can develop marketing programs that involve these factors.
• Information Search
An aroused consumer may or may not search for more information. If the consumer's drive is
strong and a satisfying product is near at hand, the consumer is likely to buy it then. If not, the
consumer may store the need in memory or undertake an information search related to the need.
At one level, the consumer may simply enter heightened attention. The consumer can obtain
information from any of several sources. These include personal sources (family, friends, neighbors,
acquaintances), commercial sources (advertising, salespeople, dealers, packaging, displays, Web sites),
public sources (mass media, consumer-rating organizations), and experiential sources (handling,
examining, using the product). The relative influence of these information sources varies with the
product and the buyer. Generally, the consumer receives the most information about a product
from commercial sources—those controlled by the marketer. The most effective sources, however,
tend to be personal. Commercial sources normally inform the buyer, but personal sources legitimize
or evaluate products for the buyer.
People often ask others—friends, relatives, acquaintances, professionals—for recommendations
concerning a product or service. Thus, companies have a strong interest in building such word-ofmouth
sources. These sources have two chief advantages. First, they are convincing: Word of mouth
is the only promotion method that is of consumers, by consumers, and for consumers. Having loyal,
satisfied customers that brag about doing business with you is the dream of every business owner.
Not only are satisfied customers repeat buyers, but they are also walking, talking billboards for
your business. Second, the costs are low. Keeping in touch with satisfied customers and turning
them into word-of-mouth advocates costs the business relatively little.
As more information is obtained, the consumer's awareness and knowledge of the available brands
and features increases. The information also helped her drop certain brands from consideration. A
company must design its marketing mix to make prospects aware of and knowledgeable about its
brand. It should carefully identify consumers' sources of information and the importance of each
source. Consumers should be asked how they first heard about the brand, what information they
received, and what importance they placed on different information sources.
• Evaluation of Alternatives
We have seen how the consumer uses information to arrive at a set of final brand choices. How
does the consumer choose among the alternative brands? The marketer needs to know about
alternatives evaluation—that is, how the consumer processes information to arrive at brand
choices. Unfortunately, consumers do not use a simple and single evaluation process in all buying
situations. Instead, several evaluation processes are at work.
The consumer arrives at attitudes toward different brands through some evaluation procedure.
How consumers go about evaluating purchase alternatives depends on the individual consumer
and the specific buying situation. In some cases, consumers use careful calculations and logical
thinking. At other times, the same consumers do little or no evaluating; instead they buy on
impulse and rely on intuition. Sometimes consumers make buying decisions on their own;
sometimes they turn to friends, consumer guides, or salespeople for buying advice.
Marketers should study buyers to find out how they actually evaluate brand alternatives. If they
know what evaluative processes go on, marketers can take steps to influence the buyer's decision.
• Purchase Decision
In the evaluation stage, the consumer ranks brands and forms purchase intentions. Generally, the
consumer's purchase decision will be to buy the most preferred brand, but two factors can come
between the purchase intention and the purchase decision. The first factor is the attitudes of others. The
second factor is unexpected situational factors. The consumer may form a purchase intention based on
factors such as expected income, expected price, and expected product benefits. However,
unexpected events may change the purchase intention. Thus, preferences and even purchase
intentions do not always result in actual purchase choice.
• Post purchase Behavior
The marketer's job does not end when the product is bought. After purchasing the product, the
consumer will be satisfied or dissatisfied and will engage in post purchase behavior of interest to
the marketer. What determines whether the buyer is satisfied or dissatisfied with a purchase? The
answer lies in the relationship between the consumer's expectations and the product's perceived
performance. If the product falls short of expectations, the consumer is disappointed; if it meets
expectations, the consumer is satisfied; if it exceeds expectations, the consumer is delighted.
The larger the gap between expectations and performance, the greater the consumer's
dissatisfaction. This suggests that sellers should make product claims that faithfully represent the
product's performance so that buyers are satisfied. Some sellers might even understate
performance levels to boost consumer satisfaction with the product. For example, Boeing's
salespeople tend to be conservative when they estimate the potential benefits of their aircraft. They
almost always underestimate fuel efficiency—they promise a 5 percent savings that turns out to be
8 percent. Customers are delighted with better-than-expected performance; they buy again and tell
other potential customers that Boeing lives up to its promises.
Almost all major purchases result in cognitive dissonance, or discomfort caused by post purchase
conflict. After the purchase, consumers are satisfied with the benefits of the chosen brand and are
glad to avoid the drawbacks of the brands not bought. However, every purchase involves
compromise. Consumers feel uneasy about acquiring the drawbacks of the chosen brand and
about losing the benefits of the brands not purchased. Thus, consumers feel at least some post
purchase dissonance for every purchase.
Why is it so important to satisfy the customer? Such satisfaction is important because a company's
sales come from two basic groups—new customers and retained customers. It usually costs more to
attract new customers than to retain current ones, and the best way to retain current customers is
to keep them satisfied. Customer satisfaction is a key to making lasting connections with
consumers—to keeping and growing consumers and reaping their customer lifetime value.
Satisfied customers buy a product again, talk favorably to others about the product, pay less
attention to competing brands and advertising, and buy other products from the company. Many
marketers go beyond merely meeting the expectations of customers—they aim to delight the
customer. A delighted customer is even more likely to purchase again and to talk favorably about
the product and company.
A dissatisfied consumer responds differently. Whereas, on average, a satisfied customer tells 3
people about a good product experience, a dissatisfied customer gripes to 11 people. In fact, one
study showed that 13 percent of the people who had a problem with an organization complained
about the company to more than 20 people. Clearly, bad word of mouth travels farther and faster
than good word of mouth and can quickly damage consumer attitudes about a company and its
products.
Therefore, a company would be wise to measure customer satisfaction regularly. It cannot simply
rely on dissatisfied customers to volunteer their complaints when they are dissatisfied. Some 96
percent of unhappy customers never tell the company about their problem. Companies should set
up systems that encourage customers to complain. In this way, the company can learn how well it is
doing and how it can improve. The 3M Company claims that over two-thirds of its new-product
ideas come from listening to customer complaints. But listening is not enough—the company also
must respond constructively to the complaints it receives.
• The Buyer Decision Process for New Products
We have looked at the stages buyers go through in trying to satisfy a need. Buyers may pass quickly
or slowly through these stages, and some of the stages may even be reversed. Much depends on
the nature of the buyer, the product, and the buying situation.
We now look at how buyers approach the purchase of new products. A new product is a good,
service, or idea that is perceived by some potential customers as new. It may have been around for
a while, but our interest is in how consumers learn about products for the first time and make
decisions on whether to adopt them. We define the adoption process as "the mental process
through which an individual passes from first learning about an innovation to final adoption, and
adoption as the decision by an individual to become a regular user of the product.
Stages in the Adoption Process
Consumers go through five stages in the process of adopting a new product:
• Awareness: The consumer becomes aware of the new product, but lacks information about
it.
• Interest: The consumer seeks information about the new product.
• Evaluation: The consumer considers whether trying the new product makes sense.
• Trial: The consumer tries the new product on a small scale to improve his or her estimate
of its value.
• Adoption: The consumer decides to make full and regular use of the new product.
This model suggests that the new-product marketer should think about how to help consumers
move through these stages. A manufacturer of large-screen televisions may discover that many
consumers in the interest stage do not move to the trial stage because of uncertainty and the large
investment. If these same consumers were willing to use a large-screen television on a trial basis for
a small fee, the manufacturer should consider offering a trial-use plan with an option to buy.

[bonddonraj]

Lesson – 16
Lesson overview and learning objectives:
In last Lesson we discussed the Consumer Buying behavior. Today
We will discuss business buyer behaviour, types of buying situations, participants in the business
buying process, and major influences on business buyers so our today’s topic is:
BUSINESS MARKETS AND BUYING BEHAVIOR
The business market includes firms that buy goods and services in order to produce products and
services to sell to others. It also includes retailing and wholesaling firms that buy goods in order to
resell them at a profit. Because aspects of business-to-business marketing apply to institutional
markets and government markets, we group these together. The business marketer needs to know the
following: Who are the major participants? In what decisions do they exercise influence? What is
their relative degree of influence? What evaluation criteria does each decision participant use? The
business marketer also needs to understand the major environmental, interpersonal, and individual
influences on the buying process.
A. What is a Business Market?
The business market comprises all the organizations that buy goods and services for use in the
production of other products and services that are sold, rented, or supplied to others. It also
includes retailing and wholesaling firms that acquire goods for the purpose of reselling or renting
them to others at a profit. In the business buying process business buyers determine which
products and services their organizations need to purchase, and then find, evaluate, and choose
among alternative suppliers and brands. Companies that sell to other business organizations must
do their best to understand business markets and business buyer behavior.
B. Characteristics of Business Markets
In some ways, business markets are similar to consumer markets. Both involve people who assume
buying roles and make purchase decisions to satisfy needs. However, business markets differ in
many ways from consumer markets. The main differences, are in the market structure and demand,
the nature of the buying unit, and the types of decisions and the decision process involved.
Business markets also have their own characteristics. In some ways, they are similar to consumer
markets, but in other ways they are very different. The main differences include:
1. Market structure and demand.
Business markets typically deal with far fewer but far larger buyers. They are more geographically
concentrated. Business markets have derived demand (business demand that ultimately comes from
or derives from the demand for consumer goods). Many business markets have inelastic demand; that
is, total demand for many business products is not affected much by price changes, especially in
the short run. A drop in the price of leather will not cause shoe manufacturers to buy much more
leather unless it results in lower shoe prices that, in turn, will increase consumer demand for shoes.
Finally, business markets have more fluctuating demand. The demand for many business goods and
services tends to change more—and more quickly—than the demand for consumer goods and
services does. A small percentage increase in consumer demand can cause large increases in
business demand. Sometimes a rise of only 10 percent in consumer demand can cause as much as a
200 percent rise in business demand during the next period.
2. Nature of the Buying Unit:
Compared with consumer purchases, a business purchase usually involves more decision
participants and a more professional purchasing effort. Often, business buying is done by trained
purchasing agents who spend their working lives learning how to make better buying decisions.
Buying committees made up of technical experts and top management are common in the buying
of major goods. Companies are putting their best and brightest people on procurement patrol.
Therefore, business marketers must have well-trained salespeople to deal with well-trained buyers.
3. Types of Decisions and the Decision Process
Business buyers usually face more complex buying decisions than do consumer buyers. Purchases
often involve large sums of money, complex technical and economic considerations, and
interactions among many people at many levels of the buyer's organization. Because the purchases
are more complex, business buyers may take longer to make their decisions. The business buying
process tends to be more formalized than the consumer buying process. Large business purchases
usually call for detailed product specifications, written purchase orders, careful supplier searches,
and formal approval. The buying firm might even prepare policy manuals that detail the purchase
process.
Finally, in the business buying process, buyer and seller are often much more dependent on each
other. Consumer marketers are often at a distance from their customers. In contrast, business
marketers may roll up their sleeves and work closely with their customers during all stages of the
buying process—from helping customers define problems, to finding solutions, to supporting
after-sale operation. They often customize their offerings to individual customer needs. In the
short run, sales go to suppliers who meet buyers' immediate product and service needs.
C. Business Buyer Behavior
The model in Figure suggests four questions about business buyer behavior: What buying
decisions do business buyers make? Who participates in the buying process? What are the major
influences on buyers? How do business buyers make their buying decisions?
a. A Model of Business Buyer Behavior
At the most basic level, marketers want to know how business buyers will respond to various
marketing stimuli. Figure shows a model of business buyer behavior. In this model, marketing and
other stimuli affect the buying organization and produce certain buyer responses. As with
consumer buying, the
marketing stimuli for
business buying consist
of the four Ps: product,
price, place, and
promotion. Other
stimuli include major
forces in the
environment: economic,
technological, political,
cultural, and
competitive. These
stimuli enter the
organization and are
turned into buyer
responses: product or service choice; supplier choice; order quantities; and delivery, service, and
payment terms. In order to design good marketing mix strategies, the marketer must understand
what happens within the organization to turn stimuli into purchase responses.
Th e B u yin g O rg an ization The B u ying O rg an ization
M ark e tin g an d
O ther S timuli
M arketin g and
O ther S timuli
B uyer’s R esponse B uyer’s R esponse
Produ ct
P rice
P lace
P rom otion
Econom ic
Techn olo gical
Political
C ultural
In te rp e rso n a l
an d In d ividu al
In flu en c e s
Org an izational
Influ en ces
Prod u ct o r S ervice
C h o ice
Sup plier C ho ice
O rd e r Q u an titie s
D eliv e ry T erm s
and T im es
S ervice T erm s
P a ym ent
T he B uying C enter
B u ying D e c is ion
P rocess
Within the organization, buying activity consists of two major parts: the buying center, made up of
all the people involved in the buying decision, and the buying decision process. The model shows
that the buying center and the buying decision process are influenced by internal organizational,
interpersonal, and individual factors as well as by external environmental factors.
b. Major Types of Buying Situations
There are three major types of buying situations. At one extreme is the straight rebuy, which is a
fairly routine decision. At the other extreme is the new task, which may call for thorough research.
In the middle is the modified rebuy, which requires some research.
In a straight rebuy the buyer reorders something without any modifications. It is usually handled
on a routine basis by the purchasing department. Based on past buying satisfaction, the buyer
simply chooses from the various suppliers on its list. "In" suppliers try to maintain product and
service quality.
In a modified rebuy, the buyer wants to modify product specifications, prices, terms, or suppliers.
The modified rebuy usually involves more decision participants than the straight rebuy. The in
suppliers may become nervous and feel pressured to put their best foot forward to protect an
account. Out suppliers may see the modified rebuy situation as an opportunity to make a better
offer and gain new business.
A company buying a product or service for the first time faces a new-task situation. In such cases,
the greater the cost or risk, the larger the number of decision participants and the greater their
efforts to collect information will be. The new-task situation is the marketer's greatest opportunity
and challenge. The marketer not only tries to reach as many key buying influences as possible but
also provides help and information.
The buyer makes the fewest decisions in the straight rebuy and the most in the new-task decision.
In the new-task situation, the buyer must decide on product specifications, suppliers, price limits,
payment terms, order quantities, delivery times, and service terms. The order of these decisions
varies with each situation, and different decision participants influence each choice.
c. Participants in the Business Buying Process
The decision-making unit of a buying organization is called its buying center: all the individuals and
units that participate in the business decision-making process. The buying center includes all
members of the organization who play any of five roles in the purchase decision process.
• Users are members of the organization who will use the product or service. In many cases,
users initiate the buying proposal and help define product specifications.
• Influencers often help define specifications and also provide information for evaluating
alternatives. Technical personnel are particularly important influencers.
• Buyers have formal authority to select the supplier and arrange terms of purchase. Buyers
may help shape product specifications, but their major role is in selecting vendors and
negotiating. In more complex purchases, buyers might include high-level officers
participating in the negotiations.
• Deciders have formal or informal power to select or approve the final suppliers. In
routine buying, the buyers are often the deciders, or at least the approvers.
• Gatekeepers control the flow of information to others. For example, purchasing agents
often have authority to prevent salespersons from seeing users or deciders. Other
gatekeepers include technical personnel and even personal secretaries.
The buying center is not a fixed and formally identified unit within the buying organization. It is a
set of buying roles assumed by different people for different purchases. Within the organization,
the size and makeup of the buying center will vary for different products and for different buying
situations. Business marketers working in global markets may face even greater levels of buying
center influence. The buying center concept presents a major marketing challenge. The business
marketer must learn who participates in the decision, each participant's relative influence, and what
evaluation criteria each decision participant uses. The buying center usually includes some obvious
participants who are involved formally in the buying decision.
d. Major Influences on Business Buyers
Business buyers are subject to many influences when they make their buying decisions. Some
marketers assume that the major influences are economic. They think buyers will favor the supplier
who offers the lowest price or the best product or the most service. They concentrate on offering
strong economic benefits to buyers. However, business buyers actually respond to both economic
and personal factors. Far from being cold, calculating, and impersonal, business buyers are human
and social as well. They react to both reason and emotion.
Today, most business-to-business marketers recognize that emotion plays an important role in
business buying decisions. When suppliers' offers are very similar, business buyers have little basis
for strictly rational choice. Because they can meet organizational goals with any supplier, buyers
can allow personal factors to play a larger role in their decisions. However, when competing
products differ greatly, business buyers are more accountable for their choice and tend to pay more
attention to economic factors. Figure lists various groups of influences on business buyers—
environmental, organizational, interpersonal, and individual.
Major Influences on Business Buyers
• Environmental Factors
Business buyers are influenced heavily by factors in the current and expected economic environment,
such as the level of primary demand, the economic outlook, and the cost of money. As economic
uncertainty rises, business buyers cut back on new investments and attempt to reduce their
inventories.
An increasingly important environmental factor is shortages in key materials. Many companies now
are more willing to buy and hold larger inventories of scarce materials to ensure adequate supply.
Business buyers also are affected by technological, political, and competitive developments in the
environment. Culture and customs can strongly influence business buyer reactions to the
marketer's behavior and strategies, especially in the international marketing environment. The
business marketer must watch these factors, determine how they will affect the buyer, and try to
turn these challenges into opportunities.
• Organizational Factors
Each buying organization has its own objectives, policies, procedures, structure, and systems. The
business marketer must know these organizational factors as thoroughly as possible. Questions such
as these arise: How many people are involved in the buying decision? Who are they? What are their
evaluative criteria? What are the company's policies and limits on its buyers?
Interpersonal Factors
The buying center usually includes many participants who influence each other. The business
marketer often finds it difficult to determine what kinds of interpersonal factors and group dynamics
enter into the buying process. Participants may have influence in the buying decision because they
control rewards and punishments, are well liked, have special expertise, or have a special
relationship with other important participants. Interpersonal factors are often very subtle.
Whenever possible, business marketers must try to understand these factors and design strategies
that take them into account.
Individual Factors
Each participant in the business buying decision process brings in personal motives, perceptions,
and preferences. These individual factors are affected by personal characteristics such as age,
income, education, professional identification, personality, and attitudes toward risk. Also, buyers
have different buying styles. Some may be technical types who make in-depth analyses of
competitive proposals before choosing a supplier. Other buyers may be intuitive negotiators who
are adept at pitting the sellers against one another for the best deal.
D. The Business Buying Process
There are eight stages of the business buying process. Buyers who face a new-task buying situation
usually go through all stages of the buying process. Buyers making modified or straight rebuys may
skip some of the stages. We will examine these steps for the typical new-task buying situation.
a. Problem Recognition
The buying process begins when someone in the company recognizes a problem or need that can
be met by acquiring a specific product or service. Problem recognition can result from internal or
external stimuli. Internally, the company may decide to launch a new product that requires new
production equipment and materials. Or a machine may break down and need new parts. Perhaps
a purchasing manager is unhappy with a current supplier's product quality, service, or prices.
Externally, the buyer may get some new ideas at a trade show, see an ad, or receive a call from a
salesperson who offers a better product or a lower price. In fact, in their advertising, business
marketers often alert customers to potential problems and then show how their products provide
solutions.
b. General Need Description
Having recognized a need, the buyer next prepares a general need description that describes the
characteristics and quantity of the needed item. For standard items, this process presents few
problems. For complex items, however, the buyer may have to work with others—engineers,
users, consultants—to define the item. The team may want to rank the importance of reliability,
durability, price, and other attributes desired in the item. In this phase, the alert business marketer
can help the buyers define their needs and provide information about the value of different
product characteristics.
c. Product Specification
The buying organization next develops the item's technical product specifications, often with the
help of a value analysis engineering team. Value analysis is an approach to cost reduction in which
components are studied carefully to determine if they can be redesigned, standardized, or made by
less costly methods of production. The team decides on the best product characteristics and
specifies them accordingly. Sellers, too, can use value analysis as a tool to help secure a new
account. By showing buyers a better way to make an object, outside sellers can turn straight rebuy
situations into new-task situations that give them a chance to obtain new business.
d. Supplier Search
The buyer now conducts a supplier search to find the best vendors. The buyer can compile a small
list of qualified suppliers by reviewing trade directories, doing a computer search, or phoning other
companies for recommendations. Today, more and more companies are turning to the Internet to
find suppliers. For marketers, this has leveled the playing field—smaller suppliers have the same
advantages as larger ones and can be listed in the same online catalogs for a nominal fee:
The newer the buying task, and the more complex and costly the item, the greater the amount of
time the buyer will spend searching for suppliers. The supplier's task is to get listed in major
directories and build a good reputation in the marketplace. Salespeople should watch for
companies in the process of searching for suppliers and make certain that their firm is considered.
e. Proposal Solicitation
In the proposal solicitation stage of the business buying process, the buyer invites qualified
suppliers to submit proposals. In response, some suppliers will send only a catalog or a
salesperson. However, when the item is complex or expensive, the buyer will usually require
detailed written proposals or formal presentations from each potential supplier.
Business marketers must be skilled in researching, writing, and presenting proposals in response to
buyer proposal solicitations. Proposals should be marketing documents, not just technical
documents. Presentations should inspire confidence and should make the marketer's company
stand out from the competition.
f. Supplier Selection
The members of the buying center now review the proposals and select a supplier or suppliers.
During supplier selection, the buying center often will draw up a list of the desired supplier
attributes and their relative importance. In one survey, purchasing executives listed the following
attributes as most important in influencing the relationship between supplier and customer: quality
products and services, on-time delivery, ethical corporate behavior, honest communication, and
competitive prices. Other important factors include repair and servicing capabilities, technical aid
and advice, geographic location, performance history, and reputation. The members of the buying
center will rate suppliers against these attributes and identify the best suppliers.
As part of the buyer selection process, buying centers must decide how many suppliers to use. In
the past, many companies preferred a large supplier base to ensure adequate supplies and to obtain
price concessions. These companies would insist on annual negotiations for contract renewal and
would often shift the amount of business they gave to each supplier from year to year.
Increasingly, however, companies are reducing the number of suppliers. There is even a trend
toward single sourcing, using one supplier. With single sourcing there is only one supplier to
handle and it is easier to control newsprint inventories. Using one source not only can translate
into more consistent product performance, but it also allows press rooms to configure themselves
for one particular kind of newsprint rather than changing presses for papers with different
attributes.
Many companies, however, are still reluctant to use single sourcing. They fear that they may
become too dependent on the single supplier or that the single-source supplier may become too
comfortable in the relationship and lose its competitive edge. Some marketers have developed
programs that address these concerns.
g. Order-Routine Specification
The buyer now prepares an order-routine specification. It includes the final order with the chosen
supplier or suppliers and lists items such as technical specifications, quantity needed, expected time
of delivery, return policies, and warranties. In the case of maintenance, repair, and operating items.
h. Performance Review
In this stage, the buyer reviews supplier performance. The buyer may contact users and ask them
to rate their satisfaction. The performance review may lead the buyer to continue, modify, or drop
the arrangement. The seller's job is to monitor the same factors used by the buyer to make sure
that the seller is giving the expected satisfaction.
We have described the stages that typically would occur in a new-task buying situation. The eightstage
model provides a simple view of the business buying decision process. The actual process is
usually much more complex. In the modified rebuy or straight rebuy situation, some of these
stages would be compressed or bypassed. Each organization buys in its own way, and each buying
situation has unique requirements. Different buying center participants may be involved at
different stages of the process. Although certain buying process steps usually do occur, buyers do
not always follow them in the same order, and they may add other steps. Often, buyers will repeat
certain stages of the process.
E. Institutional and Government Markets
So far, our discussion of organizational buying has focused largely on the buying behavior of
business buyers. Much of this discussion also applies to the buying practices of institutional and
government organizations. However, these two nonbusiness markets have additional
characteristics and needs. In this final section, we address the special features of institutional and
government markets.
a. Institutional Markets
The institutional market consists of schools, hospitals, nursing homes, prisons, and other
institutions that provide goods and services to people in their care. Institutions differ from one
another in their sponsors and in their objectives. Many institutional markets are characterized by
low budgets and captive patrons. For example, hospital patients have little choice but to eat
whatever food the hospital supplies. A hospital-purchasing agent has to decide on the quality of
food to buy for patients. Because the food is provided as a part of a total service package, the
buying objective is not profit. Nor is strict cost minimization the goal—patients receiving poorquality
food will complain to others and damage the hospital's reputation. Thus, the hospitalpurchasing
agent must search for institutional-food vendors whose quality meets or exceeds a
certain minimum standard and whose prices are low. Many marketers set up separate divisions to
meet the special characteristics and needs of institutional buyers.
b. Government Markets
The government market offers large opportunities for many companies, both big and small. In
most countries, government organizations are major buyers of goods and services. Government
buying and business buying are similar in many ways. But there are also differences that must be
understood by companies that wish to sell products and services to governments. To succeed in
the government market, sellers must locate key decision makers, identify the factors that affect
buyer behavior, and understand the buying decision process.
Government organizations typically require suppliers to submit bids, and normally they award the
contract to the lowest bidder. In some cases, the government unit will make allowance for the
supplier's superior quality or reputation for completing contracts on time. Many companies that
sell to the government have not been marketing oriented for a number of reasons. Total
government spending is determined by elected officials rather than by any marketing effort to
develop this market. Government buying has emphasized price, making suppliers invest their
effort in technology to bring costs down. When the product's characteristics are specified carefully,
product differentiation is not a marketing factor. Nor do advertising or personal selling matter
much in winning bids on an open-bid basis.
Key Terms
Business Markets: The business market includes firms that buy goods and services in order to
produce products and services to sell to others.
Straight Re-buy the buyer reorders something without any modifications.
Modified Re-buy the buyer wants to modify product specifications, prices, terms, or
suppliers.
New Task Buying A company buying a product or service.
Users are members of the organization who will use the product or service. In many cases, users
initiate the buying proposal and help define product specifications.
Influencers Often help define specifications and also provide information for evaluating
alternatives. Technical personnel are particularly important influencers.
Buyers have formal authority to select the supplier and arrange terms of purchase.
Deciders have formal or informal power to select or approve the final suppliers.
Gatekeepers control the flow of information to others.
Lesson – 17
Lesson overview and learning objectives:
The Lesson emphasizes the key steps in: market segmentation; market targeting, and market
positioning. Market segmentation provides a method to divide or segment the market into narrow
segments (using a variety of different meaningful variables. Today we will be discussing the major
variables that can be used to segment the consumer markets.
MARKET SEGMENTATION
A. Market Segmentation:
Markets consist of buyers, and buyers differ in one or more ways. They may differ in their wants,
resources, locations, buying attitudes, and buying practices. Through market segmentation,
companies divide large, heterogeneous markets into smaller segments that can be reached more
efficiently and effectively with products and services that match their unique needs. Companies
today recognize that they cannot appeal to all buyers in the marketplace, or at least not to all buyers
in the same way. Buyers are too numerous, too widely scattered, and too varied in their needs and
buying practices. Moreover, the companies themselves vary widely in their abilities to serve
different segments of the market. Rather than trying to compete in an entire market, sometimes
against superior competitors, each company must identify the parts of the market that it can serve
best and most profitably.
Thus, most companies are more selective about the customers with whom they wish to connect.
Most have moved away from mass marketing and toward market segmentation and targeting—
identifying market segments, selecting one or more of them, and developing products and
marketing programs tailored to each. Instead of scattering their marketing efforts firms are
focusing on the buyers who have greater interest in the values they create best.
B. Steps in Target Marketing:
Figure shows the three major steps in target marketing. The first is market segmentation—
dividing a market into smaller groups of buyers with distinct needs, characteristics, or behaviors
who might require separate products or marketing mixes. The company identifies different ways to
segment the market and develops profiles of the resulting market segments. The second step is
market targeting—evaluating each market segment's attractiveness and selecting one or more of
the market segments to enter. The third step is market positioning—setting the competitive
positioning for the product and creating a detailed marketing mix. We discuss each of these steps
in turn.
C. Levels of Market Segmentation
Because buyers have unique needs and wants, each buyer is potentially a separate market. Ideally,
then, a seller might design a separate
marketing program for each buyer.
However, although some companies
attempt to serve buyers individually, many
others face larger numbers of smaller buyers
and do not find complete segmentation
worthwhile. Instead, they look for broader
classes of buyers who differ in their product
needs or buying responses. Thus, market
segmentation can be carried out at several
different levels. Figure shows that
companies can practice no segmentation
(mass marketing), complete segmentation
Market Segmentation
1. Identify bases for
segmenting the market
2. Develop segment profiles
Market Targeting
3. Develop measure of
segment attractiveness
4. Select target segments
Market positioning
5. Develop positioning for
target segments
6. Develop a marketing
mix for each segment
bonddonraj
(micromarketing), or something in between (segment marketing or niche marketing).
Levels of marketing segmentation
a) Mass Marketing
Companies have not always practiced target marketing. In fact, for most of the 1900s, major
consumer products companies held fast to mass marketing—mass producing, mass distributing,
and mass promoting about the same product in about the same way to all consumers. Henry Ford
epitomized this marketing strategy when he offered the Model T Ford to all buyers; they could
have the car” in any color as long as it is black." Similarly, Coca-Cola at one time produced only
one drink for the whole market, hoping it would appeal to everyone.
The traditional argument for mass marketing is that it creates the largest potential market, which
leads to the lowest costs, which in turn can
translate into either lower prices or higher
margins. However, many factors now make
mass marketing more difficult. The
proliferation of distribution channels and
advertising media has also made it difficult
to practice "one-size-fits-all" marketing.
b) Segment Marketing
A company that practices segment
marketing isolates broad segments that make
up a market and adapts its offers to more
closely match the needs of one or more
segments. Thus, Marriott markets to a variety of segments—business travelers, families, and
others—with packages adapted to their varying needs. Segment marketing offers several benefits
over mass marketing. The company can market more efficiently, targeting its products or services,
channels, and communications programs toward only consumers that it can serve best and most
profitably. The company can also market more effectively by fine-tuning its products, prices, and
programs to the needs of carefully defined segments. The company may face fewer competitors if
fewer competitors are focusing on this market segment.
c) Niche Marketing
Market segments are normally large, identifiable groups within a market—for example, luxury car
buyers, performance car buyers, utility car buyers, and economy car buyers. Niche marketing
focuses on subgroups within these segments. A niche is a more narrowly defined group, usually
identified by dividing a segment into sub segments or by defining a group with a distinctive set of
traits who may seek a special combination of benefits. Whereas segments are fairly large and
normally attract several competitors, niches are smaller and normally attract only one or a few
competitors. Niche marketers presumably understand their niches' needs so well that their
customers willingly pay a price premium.
Segmentation
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d) Micro marketing
Segment and niche marketers tailor their offers and marketing programs to meet the needs of
various market segments. At the same time, however, they do not customize their offers to each
individual customer. Thus, segment marketing and niche marketing fall between the extremes of
mass marketing and micro marketing. Micro marketing is the practice of tailoring products and
marketing programs to suit the tastes of specific individuals and locations. Micro marketing
includes local marketing (Local marketing involves tailoring brands and promotions to the needs
and wants of local customer groups—cities, neighborhoods, and even specific stores. Citibank
provides different mixes of banking services in its branches depending on neighborhood
demographics) and individual marketing (tailoring products and marketing programs to the needs
and preferences of individual customers).
D. Segmenting Consumer Markets
There is no single way to segment a market. A marketer has to try different segmentation variables,
alone and in combination, to find the best way to view the market structure. The major variables
that might be used in segmenting are major geographic, demographic, psychographics, and
behavioral variables.
a) Geographic Segmentation
Geographic segmentation calls for dividing the market into different geographical units such as
nations, regions, states, counties, cities, or neighborhoods. A company may decide to operate in
one or a few geographical areas, or to operate in all areas but pay attention to geographical
differences in needs and wants. It is common to localize products, advertising, promotions, and
sales efforts to fit the needs of geographical areas (regions, cities, and even neighborhoods).
b) Demographic Segmentation
Demographic segmentation divides the market into groups based on variables such as age, gender,
family size, family life cycle, income, occupation, education, religion, race, and nationality.
Demographic factors are the most popular bases for segmenting customer groups. One reason is
that consumer needs, wants, and usage rates often vary closely with demographic variables.
Another is that demographic variables are easier to measure than most other types of variables.
Even when market segments are first defined using other bases, such as benefits sought or
behavior, their demographic characteristics must be known in order to assess the size of the target
market and to reach it efficiently. Demographic variables are easier to measure than most other
types of variables.
I. Age and Life-Cycle Stage
Age and life cycle segmentation consists of offering different products or using different marketing
approaches for different age and life-cycle groups. Marketers must guard against stereotypes when
using this form of segmentation. While certain age and life cycle groups do behave similarly, age is
often a poor predictor of a person’s life cycle, health, work or family status, needs, and buying
power. Consumer needs and wants change with age. Some companies use age and life cycle
segmentation, offering different products or using different marketing approaches for different age
and life-cycle groups.
II. Gender segmentation
calls for dividing a market into different groups based on sex. This segmentation form has long
been used for clothing, cosmetics, toiletries, and magazines. New opportunities in this area are
emerging such as automobiles, deodorants, and financial services. There is an increased emphasis
on marketing and advertising to women. Specialized Web sites are becoming very popular with this
group.
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III. Income segmentation
It consists of dividing a market into different income groups. Marketers for automobiles, boats,
clothing, cosmetics, financial services, and travel have long used this form of segmentation. Using
this form, marketers must remember that they do not always have to target the affluent. Other
income groups are also viable and profitable market segments.
c) Psychographics segmentation
It calls for dividing a market into different groups
based on social class, lifestyle, or personality characteristics. People in the same demographic class
can exhibit very different psychographics characteristics. As previously seen in, lifestyle also
affects people’s interest in various goods, and the goods they buy express those lifestyles. This
method of segmentation is gaining in popularity. Personality variables can also be used to
segment markets. Marketers will give their products personalities that correspond to consumer
personalities.
d) Behavioral segmentation
It involves dividing a market into groups based on consumer knowledge, attitudes, uses, or
responses to a product. Many marketers believe that behavior variables are the best starting point
for building market segments. Occasion segmentation consists of dividing the market into groups
according to occasions when buyers get the idea to buy, actually make their purchase, or use the
purchased item. Benefit segmentation involves dividing the market into groups according to the
different benefits the consumers seek from the product. Companies can use benefit segmentation
to clarify the benefit segment to which they are appealing, its characteristics, and the major
competing brands. They can also search for new benefits and establish brands that deliver them.
User status can also be used to divide the market. Segments of nonusers, ex-users, potential
users, first-time users, and regular users of a product are potential ways to segment. Usage rates
are another way that marketers segment markets. These categories might be light, medium, and
heavy user groups. Loyalty status can also be used to segment markets. Consumers can be loyal
to brands, stores, and companies. Consumers can be completely loyal, somewhat loyal, or not loyal
at all. An amazing amount of information can be uncovered by studying loyalty patterns.
Today there is a trend toward targeting multiple segments. Very often, companies begin their
marketing with one targeted segment, and then expand into other segments. This often boosts a
company’s competitive advantage and knowledge of the customer base. One of the most
promising developments in multivariable segmentation is “geodemographic” segmentation based
upon both geographic and demographic variables.
KEY TERMS
Market segmentation dividing a market into smaller groups
Market targeting evaluating each market segment's attractiveness and selecting one or
more of the market segments to enter
Market positioning setting the competitive positioning for the product
Geographic segmentation dividing the market into different geographical units
Demographic segmentation divides the market into groups based on variables such as age,
gender, family size, family life cycle, income, occupation, education,
religion, race, and nationality.
Behavioral segmentation involves dividing a market into groups based on consumer
knowledge, attitudes, uses, or responses to a product.
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Lesson – 18
Lesson overview and learning objectives:
In last Lesson we studied the segmentation to day we will continue the same topic and market
targeting, and market positioning
MARKET SEGMENTATION (CONTINUED)
A. Segmenting Business Markets
Consumer and business marketers use many of the same variables to segment their markets.
Business buyers can be segmented geographically or by benefits sought, user status, usage rate, or
loyalty status. Additional variables unique to this market would be business customer demographics
(industry, company size), operating characteristics, purchasing approaches, situational
factors, and personal characteristics. By going after segments instead of the whole market,
companies have a much better chance to deliver value to consumers and to receive maximum
rewards for close attention to customer needs. Within a chosen industry, a company can further
segment by customer size or geographic location. Many marketers believe that buying behavior
and benefits provide the best basis for segmenting business markets.
Segmenting International Markets Companies can segment international markets using one or
more of a combination of variables. The chief factors that can be used are: Geographic location.
Economic factors. Political and legal factors. Cultural factors. Many companies use an
approach called intermarket segmentation. In this approach, companies form segments of consumers
who have similar needs and buying behavior even though they are located in different countries.
For example, the world’s teens have a lot in common.
B. Requirements for Effective Segmentation
There are many ways to segment, but not all segmentations are effective. To be useful, market
segments must have certain characteristics. Among the most significant of these are:
1) Measurability is the degree to which the size, purchasing power, and profiles of a
market segment can be measured.
2) Accessibility refers to the degree to which a market segment can be reached and served.
3) Substantiality refers to the degree to which a market segment is sufficiently large or
profitable.
4) Differentiation refers to the degree to which a market segment can conceptually be
distinguished and has the ability to respond differently to different marketing
mix elements and programs.
5) Action ability is the degree to which effective programs can be designed for attracting
and serving a given market segment.
C. Market Targeting
Market segmentation reveals the firm's market segment opportunities. The firm now has to
evaluate the various segments and decide how many and which ones to target. We now look at
how companies evaluate and select target segments.
a) Evaluating Market Segments
In evaluating different market segments, a firm must look at three factors: segment size and
growth, segment structural attractiveness, and company objectives and resources. The company
must first collect and analyze data on current segment sales, growth rates, and expected
profitability for various segments. It will be interested in segments that have the right size and
growth characteristics. But "right size and growth" is a relative matter. The largest, fastest-growing
segments are not always the most attractive ones for every company. Smaller companies may lack
the skills and resources needed to serve the larger segments or may find these segments too
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competitive. Such companies may select segments that are smaller and less attractive, in an
absolute sense, but that are potentially more profitable for them.
The company also needs to examine major structural factors that affect long-run segment
attractiveness. For example, a segment is less attractive if it already contains many strong and
aggressive competitors. The existence of many actual or potential substitute products may limit prices
and the profits that can be earned in a segment. The relative power of buyers also affects segment
attractiveness. Buyers with strong bargaining power relative to sellers will try to force prices down,
demand more services, and set competitors against one another—all at the expense of seller
profitability. Finally, a segment may be less attractive if it contains powerful suppliers who can control
prices or reduce the quality or quantity of ordered goods and services.
Even if a segment has the right size and growth and is structurally attractive, the company must
consider its own objectives and resources in relation to that segment. Some attractive segments
could be dismissed quickly because they do not mesh with the company's long-run objectives.
Even if a segment fits the company's objectives, the company must consider whether it possesses
the skills and resources it needs to succeed in that segment. If the company lacks the strengths
needed to compete successfully in a segment and cannot readily obtain them, it should not enter
the segment. Even if the company possesses the required strengths, it needs to employ skills and
resources superior to those of the competition in order to really win in a market segment. The
company should enter only segments in which it can offer superior value and gain advantages over
competitors.
a) Undifferentiated Marketing
Using an undifferentiated marketing (or mass-marketing) strategy, a firm might decide to ignore
market segment differences and go to the whole market with one offer. This mass-marketing
strategy focuses on what is common in the needs of consumers rather than on what is different. The
company designs a product and a marketing program that will appeal to the largest number of
buyers. It relies on mass distribution and mass advertising, and it aims to give the product a
superior image in people's minds. As noted earlier in the chapter, most modern marketers have
strong doubts about this strategy. Difficulties arise in developing a product or brand that will
satisfy all consumers. Moreover, mass marketers often have trouble competing with more focused
firms that do a better job of satisfying the needs of specific segments and niches.
b) Differentiated Marketing
Using a differentiated marketing strategy, a firm decides to target several market segments or
niches and designs separate offers for each. General Motors tries to produce a car for every "purse,
purpose, and personality." Nike offers athletic shoes for a dozen or more different sports, from
running, fencing, and aerobics to bicycling and baseball. By offering product and marketing
variations, these companies hope for higher sales and a stronger position within each market
segment. Developing a stronger position within several segments creates more total sales than
undifferentiated marketing across all segments. Procter & Gamble gets more total market share
with eight brands of laundry detergent than it could with only one. But differentiated marketing
also increases the costs of doing business. A firm usually finds it more expensive to develop and
produce, say, 10 units of 10 different products than 100 units of one product. Developing separate
marketing plans for the separate segments requires extra marketing research, forecasting, sales
analysis, promotion planning, and channel management. Trying to reach different market segments
with different advertising increases promotion costs. Thus, the company must weigh increased
sales against increased costs when deciding on a differentiated marketing strategy.
c) Concentrated Marketing
A third market-coverage strategy, concentrated marketing, is especially appealing when company
resources are limited. Instead of going after a small share of a large market, the firm goes after a
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large share of one or a few segments or niches. Today, the low cost of setting up shop on the
Internet makes it even more profitable to serve seemingly minuscule niches. Concentrated
marketing provides an excellent way for small new businesses to get a foothold against larger, more
resourceful competitors. Through concentrated marketing, firms achieve strong market positions
in the segments or niches they serve because of their greater knowledge of the segments' needs and
the special reputations they acquire. They also enjoy many operating economies because of
specialization in production, distribution, and promotion. If the segment is well chosen, firms can
earn a high rate of return on their investments.
At the same time, concentrated marketing involves higher-than-normal risks. The particular market
segment can turn sour. Or larger competitors may decide to enter the same segment.
d) Choosing a Market-Coverage Strategy
Many factors need to be considered when choosing a market-coverage strategy. Which strategy is
best depends on company resources. When the firm's resources are limited, concentrated marketing
makes the most sense. The best strategy also depends on the degree of product variability.
Undifferentiated marketing is more suited for uniform products such as grapefruit or steel.
Products that can vary in design, such as cameras and automobiles, are more suited to
differentiation or concentration. The product's life-cycle stage also must be considered.
When a firm introduces a new product, it is practical to launch only one version and
undifferentiated marketing or concentrated marketing makes the most sense. In the mature stage
of the product life cycle, however, differentiated marketing begins to make more sense. Another
factor is market variability. If most buyers have the same tastes, buy the same amounts, and react the
same way to marketing efforts, undifferentiated marketing is appropriate. Finally, competitors'
marketing strategies are important. When competitors use differentiated or concentrated marketing,
undifferentiated marketing can be suicidal. Conversely, when competitors use undifferentiated
marketing, a firm can gain an advantage by using differentiated or concentrated marketing.
e) Socially Responsible Target Marketing
Smart targeting helps companies to be more efficient and effective by focusing on the segments
that they can satisfy best and most profitably. Targeting also benefits consumers—companies
reach specific groups of consumers with offers carefully tailored to satisfy their needs. However,
target marketing sometimes generates controversy and concern. Issues usually involve the targeting
of vulnerable or disadvantaged consumers with controversial or potentially harmful products. In
market targeting, the issue is not really who is targeted but rather how and for what. Controversies
arise when marketers attempt to profit at the expense of targeted segments—when they unfairly
target vulnerable segments or target them with questionable products or tactics. Socially
responsible marketing calls for segmentation and targeting that serve not just the interests of the
company but also the interests of those targeted.
f) Positioning for Competitive Advantage
Once a company has decided which segments of the market it will enter, it must decide what
positions it wants to occupy in those segments. A product's position is the way the product is
defined by consumers on important attributes—the place the product occupies in consumers' minds
relative to competing products. Positioning involves implanting the brand's unique benefits and
differentiation in customers' minds. Thus, Tide is positioned as a powerful, all-purpose family
detergent; In the automobile market, Toyota and Subaru are positioned on economy, Mercedes
and Cadillac on luxury Consumers are overloaded with information about products and services.
They cannot re evaluate products every time they make a buying decision. To simplify the buying
process, consumers organize products into categories—they "position" products, services, and
companies in their minds. A product's position is the complex set of perceptions, impressions, and
feelings that consumers have for the product compared with competing products. Consumers
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position products with or without the help of marketers. But marketers do not want to leave their
products' positions to chance. They must plan positions that will give their products the greatest
advantage in selected target markets, and they must design marketing mixes to create these planned
positions.
b) Choosing a Positioning Strategy
Some firms find it easy to choose their positioning strategy. For example, a firm well known for
quality in certain segments will go for this position in a new segment if there are enough buyers
seeking quality. But in many cases, two or more firms will go after the same position. Then, each
will have to find other ways to set itself apart. Each firm must differentiate its offer by building a
unique bundle of benefits those appeals to a substantial group within the segment.
The positioning task consists of three steps: identifying a set of possible competitive advantages
upon which to build a position, choosing the right competitive advantages, and selecting an overall
positioning strategy. The company must then effectively communicate and deliver the chosen
position to the market.
c) Identifying Possible Competitive Advantages
The key to winning and keeping customers is to understand their needs and buying processes
better than competitors do and to deliver more value. To the extent that a company can position
itself as providing superior value to selected target markets it gains competitive advantage. But
solid positions cannot be built on empty promises. If a company positions its product as offering the
best quality and service, it must then deliver the promised quality and service. Thus, positioning
begins with actually differentiating the company's marketing offer so that it will give consumers more
value than competitors' offers do.
To find points of differentiation, marketers must think through the customer's entire experience
with the company's product or service. An alert company can find ways to differentiate itself at
every point where it comes in contact with customers. In what specific ways can a company
differentiate its offer from those of competitors? A company or market offer can be differentiated
along the lines of product, services, channels, people, or image.
Companies can gain a strong competitive advantage through people differentiation—hiring and
training better people than their competitors do. Thus, Disney people are known to be friendly and
upbeat. Singapore Airlines enjoys an excellent reputation largely because of the grace of its flight
attendants.
d) Choosing the Right Competitive Advantages
Suppose a company is fortunate enough to discover several potential competitive advantages. It
now must choose the ones on which it will build its positioning strategy. It must decide how many
differences to promote and which ones.
I. How Many Differences to Promote?
Many marketers think that companies should aggressively promote only one benefit to the target
market. Each brand should pick an attribute and tout itself as "number one" on that attribute.
Thus, Crest toothpaste consistently promotes its anti cavity protection. A company that hammers
away at one of these positions and consistently delivers on it probably will become best known and
remembered for it.
Other marketers think that companies should position themselves on more than one
differentiating factor. This may be necessary if two or more firms are claiming to be the best on
the same attribute. Today, in a time when the mass market is fragmenting into many small
segments, companies are trying to broaden their positioning strategies to appeal to more segments.
In general, a company needs to avoid three major positioning errors. The first is under positioning—
failing to ever really position the company at all. Some companies discover that buyers have only a
vague idea of the company or that they do not really know anything special about it. The second
error is over positioning—giving buyers too narrow a picture of the company.
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II. Which Differences to Promote?
Not all brand differences are meaningful or worthwhile; not every difference makes a good
differentiator. Each difference has the potential to create company costs as well as customer
benefits. Therefore, the company must carefully select the ways in which it will distinguish itself
from competitors. A difference is worth establishing to the extent that it satisfies the following
criteria:
• Important: The difference delivers a highly valued benefit to target buyers.
• Distinctive: Competitors do not offer the difference, or the company can offer it in a
more distinctive way.
• Superior: The difference is superior to other ways that customers might obtain the same
benefit.
• Communicable: The difference is communicable and visible to buyers.
• Preemptive: Competitors cannot easily copy the difference.
• Affordable: Buyers can afford to pay for the difference.
• Profitable: The company can introduce the difference profitably.
Many companies have introduced differentiations that failed one or more of these tests.
e) Selecting an Overall Positioning Strategy
Consumers typically choose products and services that give them the greatest value. Thus,
marketers want to position their brands on the key benefits that they offer relative to competing
brands. The full positioning of a brand is called the brand's value proposition—the full mix of
benefits upon which the brand is positioned. It is the answer to the customer's question "Why
should I buy your brand?" Volvo's value proposition hinges on safety but also includes reliability,
roominess, and styling, all for a price that is higher than average but seems fair for this mix of
benefits.
f) Communicating and Delivering the Chosen Position
Once it has chosen a position, the company must take strong steps to deliver and communicate the
desired position to target consumers. All the company's marketing mix efforts must support the
positioning strategy. Positioning the company calls for concrete action, not just talk. If the
company decides to build a position on better quality and service, it must first deliver that position.
Designing the marketing mix—product, price, place, and promotion—essentially involves working
out the tactical details of the positioning strategy. Thus, a firm that seizes on a "for more" position
knows that it must produce high-quality products, charge a high price, distribute through highquality
dealers, and advertise in high-quality media. It must hire and train more service people, find
retailers who have a good reputation for service, and develop sales and advertising messages that
broadcast its superior service. This is the only way to build a consistent and believable "more for
more" position. Companies often find it easier to come up with a good positioning strategy than to
implement it. Establishing a position or changing one usually takes a long time. In contrast,
positions that have taken years to build can quickly be lost. Once a company has built the desired
position, it must take care to maintain the position through consistent performance and
communication. It must closely monitor and adapt the position over time to match changes in
consumer needs and competitors' strategies. However, the company should avoid abrupt changes
that might confuse consumers. Instead, a product's position should evolve gradually as it adapts to
the ever-changing marketing environment.
Principles of Marketing
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[bonddonraj]

Lesson – 19
Lesson overview and learning objectives:
In this chapter we commence an examination of the marketing mix elements the so-called 4P's of
marketing, or if considering the extended marketing mix, the 7P's of marketing. 1st p of these 4PS
is Product is a complex concept that must be defined carefully.
A. 4PS
o Product
a. Marketing Mix
Marketing is a process that revolves around the customers and in order to meet the requirements
of the customer marketers formulate and design the marketing mix that is also known as 4Ps (–
Four marketing activities—product, Price, Place and Promotion—that a firm can control to meet
the needs of customers within its target market ). The marketing mix variables are: Product:
Goods, services, or ideas that satisfy customer needs, Price: Decisions and actions that establish
pricing objectives and policies
and set product prices. Place:
The ready, convenient, and
timely availability of products
and finally the Promotion:
Promotion can be defined as
activities that are used to inform
customers about the
organization and its products.
These elements of the
marketing mix and strategies
related to these elements or the
variables are designed by
keeping in view all the
environmental factors either
macro or micro that can
influence the marketing in any
context. Today is the era of
value driven marketing, Value can be defined as a customer’s subjective assessment of benefits
relative to the costs in determining the worth of a product. Customer is ready to pay the cost of
given product if that product is of some value. This value can be determined as a capability of the
product to satisfy the customer’s needs and wants.
When ever customer or the consumer makes the purchasing decisions they (Consumers) don’t buy
products; they buy benefits that can be functional benefits( relating to the practical purpose a
product serves) or the Psychological benefits (relating to how a product makes one feel) for the
reason being products are always purchased in order to fulfill certain needs that are definitely
fulfilled through acquiring certain benefits of the product. Today, as products and services become
more and more commoditized, many companies are moving to a new level in creating value for
their customers. To differentiate their offers, they are developing and delivering total customer
experiences. Whereas products are tangible and services are intangible, experiences are memorable.
Whereas products and services are external, experiences are personal and take place in the minds
of individual consumers. Companies that market experiences realize that customers are really
Marketing is the involved
process of determining the 4
P’s of the Marketing Mix
–Product
–Price
–Promotion
–Place (Distribution)
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buying much more than just products and services. They are buying what those offers will do for
them—the experiences they gain in purchasing and consuming these products and services.
b. WHAT IS A PRODUCT?
A product is anything that can be offered to a market for attention, acquisition, use, or
consumption and that might satisfy a want or need. It includes physical objects, services, persons,
places, organizations, and ideas.’ Pure' Services are distinguished from 'physical' products on the
basis of intangibility, inseparability, variability and perish ability. Services are a form of product that
consist of activities, benefits, or satisfactions offered for sale that are essentially intangible and do
not result in the ownership of anything.
Product is a complex concept that must be carefully defined. As the first of the four marketing mix
variables, it is often where strategic planning begins. Product strategy calls for making coordinated
decisions on individual products, product lines, and the product mix.
a) Levels of Product and Services
As shown in the fig each product item offered to customers can be viewed on three levels.
Therefore product planners need to think about products and services on three levels:
1). The core product is the core, problem solving benefits that consumers are really buying
when they obtain a product or service. It answers the question what is the buyer really buying?
2). The actual product may have as many as five characteristics that combine to deliver
core product benefits. They are:
a). Quality level.
b). Features.
c). Design.
d). Brand name.
e). Packaging.
3). The augmented
product includes any additional
consumer services and benefits
built around the core and actual
products.
Therefore, a product is more
than a simple set of tangible
features. Consumers tend to
see products as complex
bundles of benefits that satisfy
their needs. When
developing products, marketers
must: 1). Identify the core consumer needs that the product will satisfy. 2). Design the actual
product and finally 3). Find ways to augment the product in order to create the bundle of
benefits that will best satisfy consumer’s desires for an experience. The product. For example, a
Sony camcorder is an actual product. Its name, parts, styling, features, packaging, and other
attributes have all been combined carefully to deliver the core benefit—a convenient, high-quality
way to capture important moments. Sony must offer more than just a camcorder. It must provide
consumers with a complete solution to their picture-taking problems. Thus, when consumers buy a
Sony camcorder, Sony and its dealers also might give buyers a warranty on parts and workmanship,
instructions on how to use the camcorder, quick repair services when needed, and a toll-free
telephone number to call if they have problems or questions (augmented level).
Brand
Name
Quality
Level
Packaging
Design
Features
Delivery
& Credit
Installation
Warranty
After-
Sale
Service
Core
Benefit or
Service
Core
Benefit or
Service
Actual
Product
Actual
Product
Core
Product
Core
Product
Augmented
Product
Augmented
Product
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Therefore, a product is more than a simple set of tangible features. Consumers tend to see
products as complex bundles of benefits that satisfy their needs. When developing products,
marketers first must identify the core consumer needs the product will satisfy. They must then
design the actual product and find ways to augment it in order to create the bundle of benefits that
will best satisfy consumers.
b) Product Classification
There are three basic types of product classifications. Durable products are used to over an
extended period of time. Nondurable products are more quickly consumed, usually in a single use
or a few usage occasions. 'Pure' Services are activities or benefits offered for sale which are
intangible, inseparable from the consumer, perishable in that they are experiential and do not result
in ownership of anything. Either consumer or industrial customers can buy each of these
products. Consumer products are sold to the final end-user for personal consumption.
Individuals and other organizations to use in their administrative or processing operations buy
business-to-business products. Industrial products are the most widely used of these products and
consist of consumables such as paper clips or raw materials that are converted to finished
products. Lets discuss these classifications in detail:
I. Consumer Products
Consumer products are those bought by final consumers for personal consumption. Marketers
usually classify these goods further based on how consumers go about buying them. Consumer
products include convenience products, shopping products, specialty products, and unsought products. These
products differ in the ways consumers buy them and therefore in how they are marketed
• Convenience products are consumer products and services that the customer
usually buys frequently, immediately, and with a minimum of comparison and
buying effort. Examples include soap, candy, newspapers, and fast food.
Convenience products are usually low priced, and marketers place them in many
locations to make them readily available when customers need them.
• Shopping products are less frequently purchased consumer products and services
that customers compare carefully on suitability, quality, price, and style. When
buying shopping products and services, consumers spend much time and effort in
gathering information and making comparisons. Examples include furniture,
clothing, used cars, major appliances, and hotel and motel services.
• Shopping products marketers usually distribute their products through fewer
outlets but provide deeper sales support to help customers in their comparison
efforts.
• Specialty products are consumer products and services with unique characteristics
or brand identification for which a significant group of buyers is willing to make a
special purchase effort. Examples include specific brands and types of cars, highpriced
photographic equipment, designer clothes, and the services of medical or
legal specialists. A Lamborghini automobile, for example, is a specialty product
because buyers are usually willing to travel great distances to buy one. Buyers
normally do not compare specialty products. They invest only the time needed to
reach dealers carrying the wanted products.
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• Unsought products are consumer products that the consumer either does not
know about or knows about but does not normally think of buying. Most major
new innovations are unsought until the consumer becomes aware of them through
advertising. Classic examples of known but unsought products and services are life
insurance and blood donations to the Red Cross. By their very nature, unsought
products require a lot of advertising, personal selling, and other marketing efforts.
II. Industrial Products
Industrial products are those purchased for further processing or for use in conducting a business.
Thus, the distinction between a consumer product and an industrial product is based on the
purpose for which the product is bought. If a consumer buys a lawn mower for use around home,
the lawn mower is a consumer product. If the same consumer buys the same lawn mower for use
in a landscaping business, the lawn mower is an industrial product.
The three groups of industrial products and services include materials and parts, capital items, and
supplies and services. Materials and parts include raw materials and manufactured materials and
parts. Raw materials consist of farm products (wheat, cotton, livestock, fruits, vegetables) and
natural products (fish, lumber, crude petroleum, iron ore). Manufactured materials and parts
consist of component materials (iron, yarn, cement, wires) and component parts (small motors,
tires, castings). Most manufactured materials and parts are sold directly to industrial users. Price
and service are the major marketing factors; branding and advertising tend to be less important.
The demand for industrial products is derived from the demand for consumer products. This is
known as "derived demand." Capital items are industrial products that aid in the buyer's
production or operations, including installations and accessory equipment. Installations consist of
major purchases such as buildings (factories, offices) and fixed equipment (generators, drill presses,
large computer systems, elevators). Accessory equipment includes portable factory equipment and
tools (hand tools, lift trucks) and office equipment (fax machines, desks). They have a shorter life
than installations and simply aid in the production process.
The final group of business products is supplies and services. Supplies include operating supplies
(lubricants, coal, paper, pencils) and repair and maintenance items (paint, nails, brooms). Supplies
are the convenience products of the industrial field because they are usually purchased with a
minimum of effort or comparison. Business services include maintenance and repair services
(window cleaning, computer repair) and business advisory services (legal, management consulting,
advertising). Such services are usually supplied under contract.
III. Organizations, Persons, Places, and Ideas
In addition to tangible products and services, in recent years marketers have broadened the
concept of a product to include other "marketable entities” namely, organizations, persons, places,
and ideas. Organizations often carry out activities to "sell" the organization itself. Organization
marketing consists of activities undertaken to create, maintain, or change the attitudes and
behavior of target consumers towards an organization. Both profit and nonprofit organizations
practice organizational marketing. People can also be thought of as products. Person marketing
consists of activities undertaken to create, maintain, or change attitudes or behavior toward
particular people. All kinds of people and organizations practice person marketing. Ideas can also
be marketed. In one sense, all marketing is the marketing of an idea, whether it is the general idea
of brushing your teeth or the specific idea that Crest provides the most effective decay prevention
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[bonddonraj]

Lesson – 20
Lesson overview and learning objectives:
In last Lesson we discussed the concept of the marketing mix elements. We had a detailed view
about the classification of the product today we will continue with same topic i.e. Product.
o PRODUCT
A. Individual product decisions
We will focus on the important decisions in the development and marketing of individual products
and services. These decisions are about product attributes, branding, packaging, labeling, and
product support services. Companies have to develop strategies for the items of their product
lines. Marketers make individual product decisions for each product including: product attributes
decisions, brand, packaging, labeling, and product-support services decisions. Product attributes
deliver benefits through tangible aspects of the product including features, and design as well as
through intangible features such as quality and experiential aspects. A brand is a way to identify
and differentiate goods and services through use of a name or distinctive design element, resulting
in long-term value known as brand equity. The product package and labeling are also important
elements in the product decision mix, as they both carry brand equity through appearance and
affect product performance with functionality. The level of product-support services provided can also
have a major effect on the appeal of the product to a potential buyer.
Individual product decisions
a) Product Attributes
Developing a product or service involves defining the benefits that it will offer. These benefits are
communicated to and delivered by product attributes such as quality, features, style and design.
i. Product Quality
Quality is one of the marketer's major positioning tools. Product quality has two dimensions—
level and consistency. In developing a product, the marketer must first choose a quality level that will
support the product's position in the target market. Here, product quality means performance
quality—the ability of a product to perform its functions beyond quality level, high quality also can
mean high levels of quality consistency. Here, product quality means conformance quality—freedom
from defects and consistency in delivering a targeted level of performance. All companies should
strive for high levels of conformance quality.
ii. Product Features
A product can be offered with varying features. A stripped-down model, one without any extras, is
the starting point. The company can create higher-level models by adding more features. Features
are a competitive tool for differentiating the company's product from competitors' products. Being
the first producer to introduce a needed and valued new feature is one of the most effective ways
to compete.
How can a company identify new features and decide which ones to add to its product? The
company should periodically survey buyers who have used the product and ask these questions:
How do you like the product? Which specific features of the product do you like most? Which
features could we add to improve the product? The answers provide the company with a rich list
of feature ideas. The company can then assess each feature's value to customers versus its cost to the
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company. Features that customers value little in relation to costs should be dropped; those that
customers value highly in relation to costs should be added.
iii. Product Style and Design
Another way to add customer value is through distinctive product style and design. Some companies
have reputations for outstanding style and design. Design is a larger concept than style. Style simply
describes the appearance of a product. Styles can be eye catching or yawn producing. A sensational
style may grab attention and produce pleasing aesthetics, but it does not necessarily make the
product perform better. Unlike style, design is more than skin deep—it goes to the very heart of a
product. Good design contributes to a product's usefulness as well as to its looks.
Good style and design can attract attention, improve product performance, cut production costs,
and give the product a strong competitive advantage in the target market
b) Branding
Perhaps the most distinctive skill of professional marketers is their ability to create, maintain,
protect, and enhance brands of
their products and services. A
brand is a name, term, sign,
symbol, or design, or a
combination of these, that
identifies the maker or seller of
a product or service.
Consumers view a brand as an
important part of a product,
and branding can add value to
a product. For example, most
consumers would perceive a
bottle of White Linen perfume
as a high-quality, expensive
product. But the same perfume
in an unmarked bottle would
likely be viewed as lower in
quality, even if the fragrance
were identical. Branding has
become so strong that today hardly anything goes unbranded. Branding helps buyers in many ways.
Brand names help consumers identify products that might benefit them. Brands also tell the buyer
something about product quality. Buyers who always buy the same brand know that they will get
the same features, benefits, and quality each time they buy. Branding also gives the seller several
advantages. The brand name becomes the basis on which a whole story can be built about a
product's special qualities. The seller's brand name and trademark provide legal protection for
unique product features that otherwise might be copied by competitors. Branding also helps the
seller to segment markets.
i. Brand:
A brand is a name, sign, symbol, or design, or a combination of these that identifies the
maker or seller of a product or service.
ii. Brand equity
is the value of a brand, based on the extent to which it has high brand loyalty, name awareness,
perceived quality, strong brand associations, and other assets such as patents, trademarks, and
channel relationships. Powerful brand names command strong consumer preference and are
BET on Jazz
Children’s
Cable Net
Knowledge
TV
Mus eum
Channel
Booknet
Arena
Clas s ical
Mus ic
Travel
Channel
DIY
Classic Arts
Showcase
Animal
Planet
New Science
Network
BLOOMBERG
NEWS INFORMATION
C-SPAN
Noggin
Theater
Channel
Anthropology
P&E
Ovation Ovation
Arts & Antiques
SCIENCE
KIDS
CIVILIZATION
EOP
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powerful assets. Perhaps the most distinctive skill of professional marketers is their ability to
create, maintain, protect, and enhance brands. Measuring the actual equity of a brand name is
difficult. However, the advantages of having it include:
1). High consumer awareness and loyalty.
2). Easier to launch brand extensions because of high brand credibility.
3). A good defense against fierce price competition.
4). It is believed to be the company’s most enduring asset. Customer equity tends to aid
marketing planning in assuring loyal customer lifetime value.
iii. Selecting The Brands Name:
Selecting a brand name is an important step. The brand name should be carefully chosen since a
good name can add greatly to a product’s success. Desirable qualities of a good brand name
include:
1). It should suggest something about the product’s benefits and qualities.
2). It should be easy to pronounce, recognize, and remember.
3). It should be distinctive.
4). It should translate easily into foreign languages.
5). It should be capable of registration and legal protection. Once chosen, the brand name
must be protected.
iv. Sponsorship options for Branding:
A manufacturer has four sponsorship options:
1). A manufacturer’s brand (or national brand) is a brand created and owned by the
producer of a product or service (Examples include IBM and Kellogg).
2). A private brand (or middleman, distributor, or store brand) is a brand created and
owned by a reseller of a product or service.
3). A licensed brand (a company sells it’s output under another brand name).
4). Co-branding occurs when two companies go together and manufacture one product
(General Mills and Hershey’s make Reese’s’ Peanut Butter Puffs cereal).
Combined brands create broader customer appeal and greater brand equity.
It may allow a company to expand its existing brand into a category it might otherwise have
difficulty entering alone. But at the same time there are certain disadvantages of combine branding
like:
�� Complex legal contracts and licenses are involved.
�� Coordination efforts are often difficult.
�� Trust is essential between partners. It is often hard to come by.
At one time manufacturer’s brands were the most popular and profitable. Today, however, an
increasing number of private brands are doing well. Though hard to establish and maintain,
private brands can yield higher profit margins. “The battle of the brands” (the competition
between manufacturer’s and private brands) causes resellers to have advantages, and they charge
manufacturer’s slotting fees (payments demanded by retailers from producers before they will
accept new products and find “slots” for them on the shelves). As store brands are improving in
quality, they are posing a stronger threat to the manufacturer’s brands. This is especially true in
supermarkets.
v. Branding Strategy:
A company has four choices when it comes to brand strategy. It can:
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1). Introduce line extensions. Existing brand names are extended to new forms, sizes, and
flavors of an existing product category. A company might introduce line extensions as a low-cost,
low-risk way of introducing new products in order to:
a). Meet consumer desires for variety.
b). Meet excess manufacturing capacity.
c). simply command more shelf space.
Risks include:
a). An overextended brand might lose its specific meaning.
b). Can cause consumer frustration or confusion.
2). Introduce brand extensions. Existing brand names are extended to new or modified
product categories. Advantages include:
a). Helps a company enter new product categories more easily.
b). Aids in new product recognition.
c). Saves on high advertising cost.
3). Introduce multibrands. New brand names are introduced in the same product
category. Advantages include:
a). They gain more shelf space.
b). Offering several brands to capture “brand switchers.” The company can establish
flanker or fighter brands to protect its major brand.
c). It helps to develop healthy competition within the organization.
Drawbacks include:
a). Each brand may only obtain a small market share and be unprofitable.
4). Introduce new brands. New brand names in new categories are introduced.
Advantage include:
a). Helps move away from a brand that is failing.
b). Can get new brands in new categories by corporate acquisitions. Some companies
are now pursuing mega brand strategies.
Drawbacks can include:
a). Spreading resources too thin.
c) Packaging
Packaging involves designing and producing the container or wrapper for a product. The package
may include the product's primary container (the tube holding Colgate toothpaste); a secondary
package that is thrown away when the product is about to be used (the cardboard box containing
the tube of Colgate); and the shipping package necessary to store, identify, and ship the product (a
corrugated box carrying six dozen tubes of Colgate toothpaste). Labeling, printed information
appearing on or with the package, is also part of packaging.
Traditionally, the primary function of the package was to contain and protect the product. In
recent times, however, numerous factors have made packaging an important marketing tool.
Increased competition and clutter on retail store shelves means that packages must now perform
many sales tasks—from attracting attention, to describing the product, to making the sale.
Companies are realizing the power of good packaging to create instant consumer recognition of
the company or brand. Developing a good package for a new product requires making many
decisions. First, the company must establish the packaging concept, which states what the package
should be or do for the product. Should it mainly offer product protection, introduce a new
dispensing method, suggest certain qualities about the product, or something else? Decisions then
must be made on specific elements of the package, such as size, shape, materials, color, text, and
brand mark. These elements must work together to support the product's position and marketing
strategy. The package must be consistent with the product's advertising, pricing, and distribution.
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d) Labeling
Labels may range from simple tags attached to products to complex graphics that are part of the
package. They perform several functions. At the very least, the label identifies the product or
brand, such as the name Sunkist stamped on oranges. The label might also describe several things
about the product—who made it, where it was made, when it was made, its contents, how it is to
be used, and how to use it safely. Finally, the label might promote the product through attractive
graphics.
e) Product Support Services
Customer service is another element of product strategy. A company's offer to the marketplace
usually includes some services, which can be a minor or a major part of the total offer. Later in the
chapter, we will discuss services as products in themselves. Here, we discuss product support services—
services that augment actual products. More and more companies are using product support
services as a major tool in gaining competitive advantage.
A company should design its product and support services to profitably meet the needs of target
customers. The first step is to survey customers periodically to assess the value of current services
and to obtain ideas for new ones. For example, Cadillac holds regular focus group interviews with
owners and carefully watches complaints that come into its dealerships. From this careful
monitoring, Cadillac has learned that buyers are very upset by repairs that are not done correctly
the first time.
Once the company has assessed the value of various support services to customers, it must next
assess the costs of providing these services. It can then develop a package of services that will both
delight customers and yield profits to the company.
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[bonddonraj]

Lesson – 21
Lesson overview and learning objectives:
In last Lesson we discussed the concept regarding some individual decisions about the product like
product attributes, labeling and packaging. Today we will continue the same topic and will discuss
the process of new product development again as well.
o PRODUCT
o NEW PRODUCT DEVELOPMENT PROCESS
A. Product Line Strategies
We have looked at product strategy decisions such as branding, packaging, labeling, and support
services for individual products and services. But product strategy also calls for building a product
line. A product line is a group of products that are closely related because they function in a similar
manner, are sold to the same customer groups, are marketed through the same types of outlets, or
fall within given price ranges. For example, Nike produces several lines of athletic shoes and
Motorola produces several lines of telecommunications products. In developing product line
strategies, marketers face a
number of tough decisions.
The major product line
decision involves product
line length—the number of
items in the product line.
The line is too short if the
manager can increase profits
by adding items; the line is
too long if the manager can
increase profits by dropping
items. Company objectives
and resources influence
product line length. Product
lines tend to lengthen over
time. The sales force and
distributors may pressure the
product manager for a more complete line to satisfy their customers. Or, the manager may want to
add items to the product line to create growth in sales and profits. However, as the manager adds
items, several costs rise: design and engineering costs, inventory costs, manufacturing changeover
costs, transportation costs, and promotional costs to introduce new items. Eventually top
management calls a halt to the mushrooming product line. Unnecessary or unprofitable items will
be pruned from the line in a major effort to increase overall profitability. This pattern of
uncontrolled product line growth followed by heavy pruning is typical and may repeat itself many
times.
The company must manage its product lines carefully. It can systematically increase the length of
its product line in two ways: by stretching its line and by filling its line. Product line stretching
stretches its line downward, upward, or both ways.
Many companies initially locate at the upper end of the market and later stretch their lines
downward. A company may stretch downward to plug a market hole that otherwise would attract a
new competitor or to respond to a competitor's attack on the upper end. Or it may add low-end
products because it finds faster growth taking place in the low-end segments.
Product Line Extensions Product Line Extensions Product Line Extensions
Stretching Stretching
Adding new
items to line
Filling Filling
Adding sizes or
styles
Downward
Upward
Contracting a
Product Line
Dropping items
Contracting a Contracting a
Product Line Product Line
Dropping items
Two-way
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B. New-product development
Given the rapid changes in consumer tastes, technology, and competition, companies must
develop a steady stream of new products and services. A firm can obtain new products in two
ways. One is through acquisition—by buying a whole company, a patent, or a license to produce
someone else's product. The other is through new-product development in the company's own
research and development department. By new products we mean original products, product
improvements, product modifications, and new brands that the firm develops through its own
research and development efforts. In this chapter, we concentrate on new-product development.
New products continue to fail at a disturbing rate. One source estimates that new consumer
packaged goods (consisting mostly of line extensions) fail at a rate of 80 percent. Moreover, failure
rates for new industrial products
may be as high as 30 percent.3Why
do so many new products fail?
There are several reasons.
Although an idea may be good, the
market size may have been
overestimated. Perhaps the actual
product was not designed as well
as it should have been. Or maybe
it was incorrectly positioned in the
market, priced too high, or
advertised poorly. A high-level
executive might push a favorite
idea despite poor marketing
research findings. Sometimes the
costs of product development are
higher than expected, and
sometimes competitors fight back harder than expected.
Because so many new products fail, companies are anxious to learn how to improve their odds of
new-product success. One way is to identify successful new products and find out what they have
in common. Another is to study new-product failures to see what lessons can be learned. Various
studies suggest that new-product success depends on developing a unique superior product, one
with higher quality, new features, and higher value in use. Another key success factor is a welldefined
product concept prior to development, in which the company carefully defines and
assesses the target market, the product requirements, and the benefits before proceeding. Other
success factors have also been suggested—senior management commitment, relentless innovation,
and a smoothly functioning new-product development process. In all, to create successful new
products, a company must understand its consumers, markets, and competitors and develop
products that deliver superior value to customers.
So companies face a problem—they must develop new products, but the odds weigh heavily
against success. The solution lies in strong new-product planning and in setting up a systematic
new-product development process for finding and growing new products. Figure shows the eight
major steps in this process.
a) Idea generation
New-product development starts with idea generation—the systematic search for new-product
ideas. A company typically has to generate many ideas in order to find a few good ones. Major
sources of new-product ideas include internal sources, customers, competitors, distributors and
suppliers, and others. Using internal sources, the company can find new ideas through formal
research and development. It can pick the brains of its executives, scientists, engineers,
Idea
Generation
Idea
Screening
Concept
Development
and Testing
Marketing
Strategy
Business
Analysis
Product
Development
Test
Marketing
Commercialization
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manufacturing, and salespeople. Some companies have developed successful "entrepreneurial"
programs that encourage employees to think up and develop new-product ideas. Good newproduct
ideas also come from watching and listening to customers. The company can analyze
customer questions and complaints to find new products that better solve consumer problems.
The company can conduct surveys or focus groups to learn about consumer needs and wants. Or
company engineers or salespeople can meet with and work alongside customers to get suggestions
and ideas. Finally, consumers often create new products and uses on their own, and companies can
benefit by finding these products and putting them on the market. Customers can also be a good
source of ideas for new product uses that can expand the market for and extend the life of current
products. Competitors are another good source of new-product ideas. Companies watch
competitors' ads and other communications to get clues about their new products. They buy
competing new products, take them apart to see how they work, analyze their sales, and decide
whether they should bring out a new product of their own. Finally, distributors and suppliers
contribute many good new-product ideas. Resellers are close to the market and can pass along
information about consumer problems and new-product possibilities. Suppliers can tell the
company about new concepts, techniques, and materials that can be used to develop new products.
Other idea sources include trade magazines, shows, and seminars; government agencies; newproduct
consultants; advertising agencies; marketing research firms; university and commercial
laboratories; and inventors.
The search for new-product ideas should be systematic rather than haphazard. Otherwise, few new
ideas will surface and many good ideas will sputter in and die. Top management can avoid these
problems by installing an idea management system that directs the flow of new ideas to a central point
where they can be collected, reviewed, and evaluated. In setting up such a system, the company can
do any or all of the following:
• Appoint a respected senior person to be the company's idea manager.
• Create a multidisciplinary idea management committee consisting of people from R&D,
engineering, purchasing, operations, finance, and sales and marketing to meet regularly and
evaluate proposed new-product and service ideas.
• Set up a toll-free number for anyone who wants to send a new idea to the idea manager.
• Encourage all company stakeholders—employees, suppliers, distributors, dealers— to send
their ideas to the idea manager.
• Set up formal recognition programs to reward those who contribute the best new ideas.
The idea manager approach yields two favorable outcomes. First, it helps create an innovationoriented
company culture. It shows that top management supports, encourages, and rewards
innovation. Second, it will yield a larger number of ideas among which will be found some
especially good ones. As the system matures, ideas will flow more freely. No longer will good ideas
wither for the lack of a sounding board or a senior product advocate
b) Idea Screening
The purpose of idea generation is to create a large number of ideas. The purpose of the succeeding
stages is to reduce that number. The first idea-reducing stage is idea screening, which helps spot
good ideas and drop poor ones as soon as possible. Product development costs rise greatly in later
stages, so the company wants to go ahead only with the product ideas that will turn into profitable
products. As one marketing executive suggests, "Three executives sitting in a room can get 40
good ideas ricocheting off the wall in minutes. The challenge is getting a steady stream of good
ideas out of the labs and creativity campfires, through marketing and manufacturing, and all the
way to consumers."
Many companies require their executives to write up new-product ideas on a standard form that
can be reviewed by a new-product committee. The write-up describes the product, the target
market, and the competition. It makes some rough estimates of market size, product price,
development time and costs, manufacturing costs, and rate of return. The committee then
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evaluates the idea against a set of general criteria such as these: Is the product truly useful to
consumers and society? Is it good for our particular company? Does it mesh well with the
company's objectives and strategies? Do we have the people, skills, and resources to make it
succeed? Does it deliver more value to customers than do competing products? Is it easy to
advertise and distribute? Many companies have well-designed systems for rating and screening
new-product ideas.
c) Concept Development and Testing
An attractive idea must be developed into a product concept. It is important to distinguish
between a product idea, a product concept, and a product image. A product idea is an idea for a
possible product that the company can see itself offering to the market. A product concept is a
detailed version of the idea stated in meaningful consumer terms. A product image is the way
consumers perceive an actual or potential product.
Concept testing calls for testing new-product concepts with groups of target consumers. The
concepts may be presented to consumers symbolically or physically For some concept tests, a
word or picture description might be sufficient. However, a more concrete and physical
presentation of the concept will increase the reliability of the concept test. Today, some marketers
are finding innovative ways to make product concepts more real to consumer subjects. For
example, some are using virtual reality to test product concepts. Virtual reality programs use
computers and sensory devices (such as gloves or goggles) to simulate reality.
d) Marketing strategy Development
The next step is marketing strategy development, designing an initial marketing strategy for
introducing this car to the market.
The marketing strategy statement consists of three parts. The first part describes the target market; the
planned product positioning; and the sales, market share, and profit goals for the first few years.
The second part of the marketing strategy statement outlines the product's planned price,
distribution, and marketing budget for the first year. The third part of the marketing strategy
statement describes the planned long-run sales, profit goals, and marketing mix strategy:
e) Business Analysis
Once management has decided on its product concept and marketing strategy, it can evaluate the
business attractiveness of the proposal. Business analysis involves a review of the sales, costs, and
profit projections for a new product to find out whether they satisfy the company's objectives. If
they do, the product can move to the product development stage.
To estimate sales, the company might look at the sales history of similar products and conduct
surveys of market opinion. It can then estimate minimum and maximum sales to assess the range
of risk. After preparing the sales forecast, management can estimate the expected costs and profits
for the product, including marketing, R&D, operations, accounting, and finance costs. The
company then uses the sales and costs figures to analyze the new product's financial attractiveness.
f) Product Development
So far, for many new-product concepts, the product may have existed only as a word description, a
drawing, or perhaps a crude mock-up. If the product concept passes the business test, it moves
into product development. Here, R&D or engineering develops the product concept into a
physical product. The product development step, however, now calls for a large jump in
investment. It will show whether the product idea can be turned into a workable product.
The R&D department will develop and test one or more physical versions of the product concept.
R&D hopes to design a prototype that will satisfy and excite consumers and that can be produced
quickly and at budgeted costs. Developing a successful prototype can take days, weeks, months, or
even years. Often, products undergo rigorous functional tests to make sure that they perform
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safely and effectively. The prototype must have the required functional features and also convey
the intended psychological characteristics.
g) Test Marketing
If the product passes functional and consumer tests, the next step is test marketing, the stages at
which the product and marketing program are introduced into more realistic market settings. Test
marketing gives the marketer experience with marketing the product before going to the great
expense of full introduction. It lets the company test the product and its entire marketing
program—positioning strategy, advertising, distribution, pricing, branding and packaging, and
budget levels.
The amount of test marketing needed varies with each new product. Test marketing costs can be
enormous, and it takes time that may allow competitors to gain advantages. When the costs of
developing and introducing the product are low, or when management is already confident about
the new product, the company may do little or no test marketing. Companies often do not testmarket
simple line extensions or copies of successful competitor products.
h) Commercialization
Test marketing gives management the information needed to make a final decision about whether
to launch the new product. If the company goes ahead with commercialization—introducing the
new product into the market—it will face high costs. The company will have to build or rent a
manufacturing facility. The company launching a new product must first decide on introduction
timing Next, the company must decide where to launch the new product—in a single location, a
region, the national market, or the international market. Few companies have the confidence,
capital, and capacity to launch new products into full national or international distribution. They
will develop a planned market rollout over time. In particular, small companies may enter attractive
cities or regions one at a time. Larger companies, however, may quickly introduce new models into
several regions or into the full national market.
Speeding Up New-Product Development
Many companies organize their new-product development process into the orderly sequence of
steps starting with idea generation and ending with commercialization. Under this sequential
product development approach, one company department works individually to complete its stage
of the process before passing the new product along to the next department and stage. This
orderly, step-by-step process can help bring control to complex and risky projects. But it also can
be dangerously slow. In fast-changing, highly competitive markets, such slow-but-sure product
development can result in product failures, lost sales and profits, and crumbling market positions.
"Speed to market" and reducing new-product development cycle time have become pressing
concerns to companies in all industries.
In order to get their new products to market more quickly, many companies are adopting a faster,
team-oriented approach called simultaneous (or team-based) product development. Under this
approach, company departments work closely together, overlapping the steps in the product
development process to save time and increase effectiveness. Instead of passing the new product
from department to department, the company assembles a team of people from various
departments that stay with the new product from start to finish. Such teams usually include people
from the marketing, finance, design, manufacturing, and legal departments, and even supplier and
customer companies.
Top management gives the product development team general strategic direction but no clear-cut
product idea or work plan. It challenges the team with stiff and seemingly contradictory goals—
"turn out carefully planned and superior new products, but do it quickly"—and then gives the team
whatever freedom and resources it needs to meet the challenge. In the sequential process, a
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bottleneck at one phase can seriously slow the entire project. In the simultaneous approach, if one
functional area hits snags, it works to resolve them while the team moves on.
KEY TERMS
New-product development: The development of original products, product improvements,
product modifications, and new brands through the firm's own R&D efforts.
Idea generation: The systematic search for new-product ideas.
Idea screening: screening new-product ideas in order to spot good ideas and drop poor ones as
soon as possible.
Product concept: A detailed version of the new-product idea stated in meaningful consumer
terms.
Concept testing: Testing new-product concepts with a group of target consumers to find out if
the concepts have strong consumer appeal.
Business analysis: A review of the sales, costs, and profit projections for a new product to find
out whether these factors satisfy the company's objectives.
Product development: A strategy for company growth by offering modified or new products to
current market segments. Developing the product concept into a physical product in order to
ensure that the product idea can be turned into a workable product.
Commercialization: Introducing a new product into the market.
Test marketing: The stage of new-product development in which the product and marketing
program are tested in more realistic market settings.
Sequential
product
development A
new-product
development
approach in which
one company
department works
to complete its
stage of the process
before passing the
new product along
to the next
department and
stage.
T ime
Product
Developm ent
Stage
Introduction
Profits
Sales
Grow th Matu rity Decline
Sales and
Profits ($)
Sales and Profits O ver
the Product’s L ife F rom
Inception to Demise
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[bonddonraj]

Lesson – 22
Lesson overview and learning objectives:
In last Lesson we discussed the process of new product development in detail today we will discuss
the types of new products new product development process and strategies and stages of Product
life cycle.
A. NEW PRODUCT DEVELOPMENT
B. PRODUCT LIFE- CYCLE STAGES AND STRATEGIES
A. Types of New Products Include
Types of the new products include mainly two categories either to introduce totally new product
like entirely new product for the world or increasing the product line second way is sometimes
modifications in the existing product are adopted like existing product is repositioned or strategies
are formulated to improve the products.
B. Consumer Adoption Process
a) Stages in the Adoption Process
1. Awareness. In this stage the consumer is aware of the new product but lacks further
information about it.
2. Interest. The consumer is motivated to seek information about the new product.
3. Evaluation. The consumer determines whether or not to try the new product.
4. Trial. The consumer tries the new product on a small scale to test its efficacy in meeting
his or her needs. Trial can be imagined use of the product in some cases.
5. Adoption. The consumer decides to make use of the product on a regular basis.
b) Individual differences in the adoption of innovations
1. Innovators. Innovators help get the product exposure but are not often perceived by the
majority of potential buyers as typical consumers.
2. Early Adopters. This group serves as opinion leaders to the rest of the market.
3. Early Majority. Some 34% of the market that is the "typical consumer" but likely to
adopt innovations a little sooner.
4. Late Majority. This group is skeptical and adopts innovations only after most of the
market has accepted the product.
5. Laggards. This group is suspicious of change and adopts only after the product is no
longer considered an innovation.
C. Product Life-Cycle Strategies
After launching the new product, management wants the product to enjoy a long and happy life.
Although it does not expect the product to sell forever, the company wants to earn a decent profit
to cover all the effort and risk that went into launching it. Management is aware that each product
will have a life cycle, although the exact shape and length is not known in advance. Figure shows a
typical product life cycle (PLC), the course that a product's sales and profits take over its lifetime.
The product life cycle has five distinct stages:
a) Product development begins when the company finds and develops a new-product idea.
During product development, sales are zero and the company's investment costs mount.
b) Introduction is a period of slow sales growth as the product is introduced in the market.
Profits are nonexistent in this stage because of the heavy expenses of product introduction.
c) Growth is a period of rapid market acceptance and increasing profits.
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d) Maturity is a period of slowdown in sales growth because the product has achieved
acceptance by most potential buyers. Profits level off or decline because of increased
marketing outlays to defend the product against competition.
e) Decline is the period when sales fall off and profits drop.
Not all products follow this product life cycle. Some products are introduced and die quickly;
others stay in the mature stage for a long, long time. Some enter the decline stage and are then
cycled back into the growth stage through strong promotion or repositioning.
a) Product development
Product development begins when the company finds and develops a new-product idea. During
product development, sales are zero and the company's investment costs mount.
b) Introduction stage
The introduction stage starts when the new product is first launched. Introduction takes time, and
sales growth is apt to be slow. In this stage, as compared to other stages, profits are negative or low
because of the low sales and high distribution and promotion expenses. Much money is needed to
attract distributors and build their inventories. Promotion spending is relatively high to inform
consumers of the new product and get them to try it. Because the market is not generally ready for
product refinements at this stage, the company and its few competitors produce basic versions of
the product. These firms focus their selling on those buyers who are the readiest to buy.
A company, especially the market pioneer, must choose a launch strategy that is consistent with the
intended product positioning. It should realize that the initial strategy is just the first step in a
grander marketing plan for the product's entire life cycle. If the pioneer chooses its launch strategy
to make a "killing," it will be sacrificing long-run revenue for the sake of short-run gain. As the
pioneer moves through later stages of the life cycle, it will have to continuously formulate new
pricing, promotion, and other marketing strategies. It has the best chance of building and retaining
market leadership if it plays its cards correctly from the start.
c) Growth Stage
If the new product satisfies the market, it will enter a growth stage, in which sales will start
climbing quickly. The early adopters will continue to buy, and later buyers will start following their
lead, especially if they hear favorable word of mouth. Attracted by the opportunities for profit, new
competitors will enter the market. They will introduce new product features, and the market will
expand. The increase in competitors leads to an increase in the number of distribution outlets, and
sales jump just to build reseller inventories. Prices remain where they are or fall only slightly.
Companies keep their promotion spending at the same or a slightly higher level. Educating the
market remains a goal, but now the company must also meet the competition.
Profits increase during the growth stage, as promotion costs are spread over a large volume and as
unit manufacturing costs fall. The firm uses several strategies to sustain rapid market growth as
long as possible. It improves product quality and adds new product features and models. It enters
new market segments and new distribution channels. It shifts some advertising from building
product awareness to building product conviction and purchase, and it lowers prices at the right
time to attract more buyers.
In the growth stage, the firm faces a trade-off between high market share and high current profit.
By spending a lot of money on product improvement, promotion, and distribution, the company
can capture a dominant position. In doing so, however, it gives up maximum current profit, which
it hopes to make up in the next stage.
d) Maturity Stage
At some point, a product's sales growth will slow down, and the product will enter a maturity
stage. This maturity stage normally lasts longer than the previous stages, and it poses strong
challenges to marketing management. Most products are in the maturity stage of the life cycle, and
therefore most of marketing management deals with the mature product.
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The slowdown in sales growth results in many producers with many products to sell. In turn, this
overcapacity leads to greater competition. Competitors begin marking down prices, increasing their
advertising and sales promotions, and upping their R&D budgets to find better versions of the
product. These steps lead to a drop in profit. Some of the weaker competitors start dropping out,
and the industry eventually contains only well-established competitors.
Although many products in the mature stage appear to remain unchanged for long periods, most
successful ones are actually evolving to meet changing consumer needs. Product managers should
do more than simply ride along with or defend their mature products—a good offense is the best
defense. They should consider modifying the market, product, and marketing mix.
In modifying the market, the company tries to increase the consumption of the current product. It
looks for new users and market segments, as when Johnson & Johnson targeted the adult market
with its baby powder and shampoo. The manager also looks for ways to increase usage among
present customers. Campbell does this by offering recipes and convincing consumers that "soup is
good food." Or the company may want to reposition the brand to appeal to a larger or fastergrowing
segment, as Arrow did when it introduced its new line of casual shirts and announced,
"We're loosening our collars."
The company might also try modifying the product—changing characteristics such as quality,
features, or style to attract new users and to inspire more usage. It might improve the product's
quality and performance—its durability, reliability, speed, or taste. Or it might add new features
that expand the product's usefulness, safety, or convenience. For example, Sony keeps adding new
styles and features to its Walkman and Discman lines, and Volvo adds new safety features to its
cars. Finally, the company can improve the product's styling and attractiveness. Thus, car
manufacturers restyle their cars to attract buyers who want a new look. The makers of consumer
food and household products introduce new flavors, colors, ingredients, or packages to revitalize
consumer buying.
Finally, the company can try modifying the marketing mix—improving sales by changing one or
more marketing mix elements. It can cut prices to attract new users and competitors' customers. It
can launch a better advertising campaign or use aggressive sales promotions—trade deals, centsoff,
premiums, and contests. The company can also move into larger market channels, using mass
merchandisers, if these channels are growing. Finally, the company can offer new or improved
services to buyers.
e) Decline Stage
The sales of most product forms and brands eventually dip. The decline may be slow, as in the
case of oatmeal cereal, or rapid, as in the case of phonograph records. Sales may plunge to zero, or
they may drop to a low level where they continue for many years. This is the decline stage.
Sales decline for many reasons, including technological advances, shifts in consumer tastes, and
increased competition. As sales and profits decline, some firms withdraw from the market. Those
remaining may prune their product offerings. They may drop smaller market segments and
marginal trade channels, or they may cut the promotion budget and reduce their prices further.
Carrying a weak product can be very costly to a firm, and not just in profit terms. There are many
hidden costs. A weak product may take up too much of management's time. It often requires
frequent price and inventory adjustments. It requires advertising and sales force attention that
might be better used to make "healthy" products more profitable. A product's failing reputation
can cause customer concerns about the company and its other products. The biggest cost may well
lie in the future. Keeping weak products delays the search for replacements, creates a lopsided
product mix, hurts current profits, and weakens the company's foothold on the future.
For these reasons, companies need to pay more attention to their aging products. The firm's first
task is to identify those products in the decline stage by regularly reviewing sales, market shares,
costs, and profit trends. Then, management must decide whether to maintain, harvest, or drop
each of these declining products. Management may decide to harvest the product, which means
reducing various costs (plant and equipment, maintenance, R&D, advertising, sales force) and
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hoping that sales hold up. If successful, harvesting will increase the company's profits in the short
run. Or management may decide to drop the product from the line. It can sell it to another firm or
simply liquidate it at salvage value. If the company plans to find a buyer, it will not want to run
down the product through harvesting.
the Product Life Cycle can be extended by two ways either by modifying the target market by
finding and adding new users etc or by modifying the product Adding new features, variations,
model varieties will change the consumer reaction - create more demand therefore you attract
more users To prevent the product going into decline you modify the product
KEY TERMS
Introduction stage The product life-cycle stage in which the new product is first distributed
and made available for purchase.
Growth stage The product life-cycle stage in which a product's sales start climbing quickly.
Maturity stage The stage in the product life cycle in which sales growth slows or levels off.
Decline stage The product life-cycle stage in which a product's sales decline.
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[bonddonraj]

Lesson – 23
Lesson overview and learning objectives:
Today’s Lesson is devoted to revision of the first p of the marketing mix which is Product.
KEY TERMS
New-product development The development of original products, product
improvements, product modifications, and new brands
through the firm's own R&D efforts.
Idea generation The systematic search for new-product ideas.
Idea screening Screening new-product ideas in order to spot good ideas
and drop poor ones as soon as possible.
Product concept A detailed version of the new-product idea stated in
meaningful consumer terms.
Concept testing Testing new-product concepts with a group of target
consumers to find out if the concepts have strong consumer
appeal.
Business analysis A review of the sales, costs, and profit projections for a new
product to find out whether these factors satisfy the
company's objectives.
Product development A strategy for company growth by offering modified or new
products to current market segments. Developing the
product concept into a physical product in order to ensure
that the product idea can be turned into a workable product.
Commercialization Introducing a new product into the market.
Test marketing The stage of new-product development in which the
product and marketing program are tested in more realistic
market settings.
Sequential product development A new-product development approach in which one
company department works to complete its stage of the
process before passing the new product along to the next
department and stage.
Introduction stage The product life-cycle stage in which the new product is
first distributed and made available for purchase.
Growth stage The product life-cycle stage in which a product's sales start
climbing quickly.
Maturity stage The stage in the product life cycle in which sales growth
slows or levels off.
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Decline stage The product life-cycle stage in which a product's sales decline.
Innovators Innovators help get the product exposure but are not often
perceived by the majority of potential buyers as typical consumers.
Early Adopters This group serves as opinion leaders to the rest of the market.
Early Majority Some 34% of the market that is the "typical consumer" but likely to
adopt innovations a little sooner.
Late Majority This group is skeptical and adopts innovations only after most of
the market has accepted the product.
Laggards This group is suspicious of change and adopts only after the
product is no longer considered an innovation.
Core product Is the core, problem solving benefits that consumers are really
buying when they obtain a product or service. It answers the
question is what is the buyer really buying?
Actual product May have as many as five characteristics that combine to deliver
core product benefits.
Augmented product Includes any additional consumer services and benefits built around
the core and actual products.
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[bonddonraj]

Lesson – 24
Lesson overview and learning objectives:
Price goes by many names in our economy. In the narrowest sense, price is the amount of money
charged for a product or service. Price is the only element in the marketing mix that produces
revenue; all other elements represent costs. Price is also one of the most flexible elements of the
marketing mix. Unlike product features and channel commitments, price can be changed quickly.
At the same time, pricing and price competition is the number-one problem facing many
marketing executives. Yet, many companies do not handle pricing well. The most common
mistakes are pricing that is too cost oriented rather than customer-value oriented; prices that are
not revised often enough to reflect market changes; pricing that does not take the rest of the
marketing mix into account; and prices that are not varied enough for different products, market
segments, and purchase occasions. This Lesson looks at the factors marketers must consider when
setting prices so our today’s topic is:
Price the 2nd P of Marketing Mix.
A. Introduction
All profit and nonprofit organizations must set prices on their products and services. Price goes by
many names (rent, tuition, fee, fare, rate, interest, toll, premium, et cetera). Price is the amount of
money charged for a product or service or the sum of the values that consumers exchange for the
benefits of having or using the product or service. Historically, price has been the major factor
affecting buyer choice. Recently, however, nonprice factors have become increasingly important in
buyer-choice behavior. Throughout history, prices were set by negotiation between buyers and
sellers. Fixed price policies--setting one price for all buyers--is a relatively modern idea that arose
with the development of large-scale retailing at the end of the nineteenth century. Today, we may
be returning to dynamic pricing--charging different prices depending on the individual customers
and situations. The Internet is helping to tailor products and prices. It should be remembered that
price is the only element in the marketing mix that produces revenue; all other elements represent
costs. Price is also one of the most flexible of elements of the marketing mix. It has been stated
that pricing and price competition is the number-one problem facing many marketing executives.
Many companies do not handle pricing well. Common mistakes that they make are:
1. Pricing is too cost-oriented.
2. Prices are not revised often enough to reflect market changes.
3. Prices do not take into account the other elements of the marketing mix.
4. Prices are not varied for different products, market segments, and purchase occasions.
All profit organizations and many nonprofit organizations must set prices on their products or
services. Price goes by many names Price is all around us. You pay rent for your apartment, tuition
for your education, and a fee to your physician or dentist. The airline, railway, taxi, and bus
companies charge you a fare; the local utilities call their price a rate; and the local bank charges you
interest for the money you borrow.
In the narrowest sense, price is the amount of money charged for a product or service. More
broadly, price is the sum of all the values that consumers exchange for the benefits of having or
using the product or service. Historically, price has been the major factor affecting buyer choice.
This is still true in poorer nations, among poorer groups, and with commodity products. However,
non-price factors have become more important in buyer-choice behavior in recent decades.
Throughout most of history, prices were set by negotiation between buyers and sellers. Fixed price
policies—setting one price for all buyers—is a relatively modern idea that arose with the
development of large-scale retailing at the end of the nineteenth century. Now, some one hundred
years later, the Internet promises to reverse the fixed pricing trend and take us back to an era of
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Internal
Factors
��Marketing
Objectives
��Marketing Mix
Strategy
��Costs
��Organizational
�� considerations
Internal
Factors
��Marketing
Objectives
��Marketing Mix
Strategy
��Costs
��Organizational
�� considerations
External
Factors
��Nature of the
market and
demand
��Competition
��Other
environmental
factors (economy,
resellers,
government)
External
Factors
��Nature of the
market and
demand
��Competition
��Other
environmental
factors (economy,
resellers,
government)
Pricing
Decisions
Pricing
Decisions
dynamic pricing—charging different prices depending on individual customers and situations. The
Internet, corporate networks, and wireless setups are connecting sellers and buyers as never before.
New technologies allow sellers to collect detailed data about customers' buying habits,
preferences—even spending limits—so they can tailor their products and prices.
B. Factors to Consider When Setting Prices
A company's
pricing decisions
are affected by
both internal
company factors
and external
environmental
factors
a) Internal Factors Affecting Pricing Decision
Internal factors affecting pricing include the company's marketing objectives, marketing mix
strategy, costs, and organizational considerations.
I. Marketing Objectives
Before setting price, the company must decide on its strategy for the product. If the company has
selected its target market and positioning carefully, then its marketing mix strategy, including price,
will be fairly straightforward. Pricing strategy is largely determined by decisions on market
positioning. At the same time, the company may seek additional objectives. The clearer a firm is
about its objectives, the easier it is to set price. Examples of common objectives are survival,
current profit maximization, market share leadership, and product quality leadership.
Companies set survival as their major objective if they are troubled by too much capacity, heavy
competition, or changing customers’ wants. To keep a plant going, a company may set a low price,
hoping to increase demand. In this case, profits are less important than survival. As long as their
prices cover variable costs and some fixed costs, they can stay in business. However, survival is
only a short-term objective. In the long run, the firm must learn how to add value that consumers
will pay for or face extinction.
Many companies use current profit maximization as their pricing goal. They estimate what
demand and costs will be at different prices and choose the price that will produce the maximum
current profit, cash flow, or return on investment. In all cases, the company wants current financial
results rather than long-run performance. Other companies want to obtain market share
leadership. They believe that the company with the largest market share will enjoy the lowest costs
and highest long-run profit. To become the market share leader, these firms set prices as low as
possible.
A company might decide that it wants to achieve product quality leadership. This normally
calls for charging a high price to cover higher performance quality and the high cost of R&D. A
company might also use price to attain other, more specific objectives. It can set prices low to
prevent competition from entering the market or set prices at competitors' levels to stabilize the
market. Prices can be set to keep the loyalty and support of resellers or to avoid government
intervention. Prices can be reduced temporarily to create excitement for a product or to draw more
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customers into a retail store. One product may be priced to help the sales of other products in the
company's line. Thus, pricing may play an important role in helping to accomplish the company's
objectives at many levels.
Nonprofit and public organizations may adopt a number of other pricing objectives. A university
aims for partial cost recovery, knowing that it must rely on private gifts and public grants to cover
the remaining costs. A nonprofit hospital may aim for full cost recovery in its pricing. Marketing
Mix Strategy: Price is only one of the marketing mix tools that a company uses to achieve its
marketing objectives. Price decisions must be coordinated with product design, distribution, and
promotion decisions to form a consistent and effective marketing program. Decisions made for
other marketing mix variables may affect pricing decisions. For example, producers using many
resellers who are expected to support and promote their products may have to build larger reseller
margins into their prices. The decision to position the product on high-performance quality will
mean that the seller must charge a higher price to cover higher costs.
Companies often position their products on price and then base other marketing mix decisions on
the prices they want to charge. Here, price is a crucial product-positioning factor that defines the
product's market, competition, and design. Many firms support such price-positioning strategies
with a technique called target costing, a potent strategic weapon. Target costing reverses the usual
process of first designing a new product, determining its cost, and then asking, "Can we sell it for
that?" Instead, it starts with an ideal selling price based on customer considerations, and then
targets costs that will ensure that the price is met.
Other companies de emphasize price and use other marketing mix tools to create nonprice
positions. Often, the best strategy is not to charge the lowest price,