Marketing Orientation

Marketing Orientation

COMPANY ORIENTATION TOWARDS MARKETPLACE1. PRODUCTION - EASY AVAILABILITY AND LOW COST2. PRODUCT - SUPERIOR PRODUCTS, INNOVATIVE FEATURES3. SELLING - AGGRESSIVE SELLING & PROMOTION4. MARKETING / CUSTOMER - FOCUS ON CUSTOMER5. SOCIETAL MARKETING - CUSTOMER & SOCIETY

3HOLISTIC MARKETING DIMENSIONS Internal Marketing

Marketing Department Senior Management OtherDepartments

Socially Responsible Marketing

Holistic Marketing Integrated Marketing

Communications Product &Services

Channels

RelationshipMarketing

Customers Channel Partners

Ethics Environment Legal Community

SELLING V/S MARKETING SELLING MARKETINGSTARTING POINT

MEANS

ENDSPRODUCT

AGGRESSIVE SELLING & PROMOTION

PROFITS THRU SALES VOLUMECUSTOMER NEEDS

SUPERFLUOUS SELLING

PROFITABILITY THROUGH CUSTOMER SATISFACTION

PILLARS OF MARKETING / CUSTOMER ORIENTATION1. CLEAR DEFINITION OF TARGET MARKET (DEMOGRAPHICS, PSYCHOGRAPHICS, MEDIAGRAPHICS, GEOGRAPHICS) 2. PERFECT UNDERSTANDING OF CUSTOMER NEEDS3. INTEGRATE / COORDINATE ALL ACTIVITIES (INTER & INTRA DEPT)4. PROFITABILITY THROUGH CUSTOMER SATISFACTION

THUS CUSTOMER ORIENTATION MEANS 1. OBSESSED WITH CUSTOMER & AWARE OF COMPETITOR2. MONITOR UNFULFILLED NEEDS CONTINUOUSLY THROUGH RESEARCH.3. FUTURISTIC - MARKETING EXPENDITURE AN INVESTMENT4. MARKETING CULTURE - CUSTOMER OVERRIDES ORGANISATIONAL INTERESTS5. SPEED IN RESPONSE TO CUSTOMERS PROBLEMS6. CONSISTENCY IN DELIVERY OF VALUES, SATISFACTION7. CUSTOMER RETENTION STRATEGIES8. MASS CUSTOMIZATION9. INTERACTIVE AND CUSTOMER FRIENDLY DELIVERY SYSTEMS10. LOOKING AT CONSUMPTION SYSTEM RATHER THAN PRODUCT FOR AUGMENTATION11. ALL DEPARTMENTS THINK CUSTOMER12. CUSTOMER SATISFACTION - GOAL & MARKETING TOOL13.GLOCALISATION

WHAT IS MARKETINGALL ACTIVITIES DESIGNED TO GENERATE AND FACILITATE EXCHANGE OF PRODUCTS AND VALUES INTENDED TO SATISFY HUMAN NEEDS AND WANTS.MARKETING MANAGEMENT IS THE PROCESS OF PLANNING AND EXECUTING THE CONCEPTION, PRICING, PROMOTION, AND DISTRIBUTION OF IDEAS, GOODS, AND SERVICES TO CREATE EXCHANGE THAT SATISFY INDIVIDUAL AND ORGANIZATIONAL GOALS.

MARKETERS TASKDEMAND MANAGEMENT (Level, Timing & Composition)STATES OF DEMANDNEGATIVE - Redesign MixNO DEMAND Connect Benefits to NeedLATENT MeasureFALLING Creative RemarketingIRREGULAR - Use Synchro MarketingFULL MaintainOVERFULL Use Selective DemarketingUNWHOLESOME Use Laws, Fear, Price Hike, Reduced Availability

CORE CONCEPTS OF MARKETINGNEEDS Deprivation of basic satisfaction WANTS specific satisfiers of needDEMAND-wants backed by ability and willingness to buyPRODUCTS- anything( Physical good, service,person, idea0 that can satisfy a need or wantUTILITY & VALUE &-SATISFACTIONEXCHANGE-A value creating processTRANSACTION-Trade of values between partiesRELATIONSHIPS-relationship marketing V/s transaction marketingMARKETS-all potential customers

MARKETINGPRODUCTS

SERVICES

PERSONS

PLACES

ACTIVITIES

IDEAS

11

The Four P Components of the Marketing Mix Marketing Mix

Product Product variety Quality Design Features Brand name Packaging Sizes Services Warranties Returns Price List PriceDiscounts Allowances Payment period Credit terms PromotionSales promotionAdvertising Sales force Public relations Direct marketing PlaceChannelsCoverage Assortments(mixture) Locations Inventory Transport Target market

MARKETING MIX - 7 PSPRODUCTPRICEPLACEPROMOTIONPEOPLEPACE (PROCESS)PROOF OF PERFORMANCE

CHOICE OF MARKETING MIX DEPENDS ON TARGET MARKET & POSITIONING

13Expanded Marketing Mix For Product/ServiceProductPlacePromotionPrice

Physical good featuresChannel type - Promotion blendFlexibilityQuality levelcoverage - SalespeoplePrice levelServices Intermediaries NumberCreditTermsPackagingOutlet locations SelectionDifferentiationsizes Training Payment periodWarrantiesTransportation IncentivesDiscounts Storage- AdvertisingAllowanceBranding Targets variety Media typesDesign ,style Types of ads Copy thrust- Sales promotion- Publicity -direct mktg

14PeoplePhysical evidenceProcess

- EmployeesFacility design - Flow of activities RecruitingEquipmentStandardized TrainingSignageCustomized MotivationEmployees dress - Number of steps Rewards - Other tangiblesSimple TeamworkReportsComplex- CustomersBusiness cards - Customer involvement EducationStatements TrainingGuarantees

RESPONSIVE V/S CREATIVE MARKETER 1. STATED NEED - PRODUCT DEMANDED E.g. INEXPENSIVE CAR2. REAL NEED - FUNCTIONAL BENEFIT DESIRED E.g. LOW MAINTENANCE COST3. UNSTATED NEED - EXPECTATION FROM COMPANY E.g. DEALER SERVICE4. DELIGHT NEED-Eg COMPLIMENTARY GIFT5. SECRET NEED - EMOTIONAL BENEFIT - E.g. SEEN BY OTHERS AS VALUE ORIENTED BUYER

CUSTOMER SATISFACTION V/S DELIGHT PERCEIVED PERFORMANCE = EXPECTATIONS OK / SATISFIED

PERCEIVED PERFORMANCE < EXPECTATIONS DISSATISFIED/ UNHAPPY

PERCEIVED PERFORMANCE > EXPECTATIONS DELIGHTED

DELIGHTED CUSTOMERS HAVE EMOTIONAL AFFINITY WITH BRAND & HENCE LOYALTY.EXPECTATIONS BASED ON PAST BUYING EXPERIENCE, ADVERTISEMENTS, FRIENDS, COMPETITORS EXPECTATIONS, PRICE, BENCHMARKING.EXPECTATIONS DIFFER BASED ON PRODUCT, CUSTOMER.

17Tools to track customer satisfactionComplaint and suggestion systemsCustomer satisfaction surveysGhost shopping lost customer analysis

Cautions to be exercised in C.S. surveysDefinition in detailManipulation by customers and managers

18The Customer-Development Process Suspects

Prospects

First-timecustomers

Repeatcustomers

Clients Members

Advocates

Partners

Disqualified Prospects

Inactive of Ex-customers

DEFINING CUSTOMER VALUE EXCELLENT PRODUCT IS OF NO USE IF IT FAILS TO MEET CUSTOMER NEEDS. A COMPANY SHOULD BE SKILLED IN MARKET ENGINEERING NOT JUST PRODUCT ENGINEERING.

CUSTOMER DELIVERED VALUECUSTOMER DELIVERED VALUE is the difference between total customer value and total customer cost. TOTAL CUSTOMER VALUE is the bundle of benefits customers expect from a given product or service. TOTAL CUSTOMER COST is the bundle of costs customers expect to incur in evaluating, obtaining, and using the product or service.

CUSTOMER DELIVERED VALUEPRODUCTSERVICEPERSONNELIMAGEMONETARY VALUETIME COSTENERGY COSTPSYCHIC COSTTOTAL CUSTOMER VALUETOTAL CUSTOMER COSTCUSTOMER DELIVERED VALUE

DELIVERING CUSTOMER VALUE1. MICHAEL PORTERS GENERIC VALUE CHAIN2. BENCHMARK AGAINST COMPETITION3. VALUE CHAIN OF SUPPLIERS, DISTRIBUTORS, CUSTOMERS TO CREATE SUPERIOR VALUE-DELIVERY NETWORK

23GENERIC VALUE CHAINPRIMARY ACTIVITIESInbound LogisticsOperationsOutbound LogisticsMarketing and SalesServiceSUPPORT ACTIVITIESProcurementTechnology developmentHuman resource ManagementFirm Infrastructure

CORE BUSINESS PROCESS1. NEW PRODUCT REALIZATION PROCESS2. INVENTORY MANAGEMENT PROCESS3. ORDER TO REMITTANCE PROCESS4 CUSTOMER SERVICE PROCESS5 MARKET SENSING PROCESSCUSTOMER ACQUISITION PROCESSCUSTOMER RELATIONSHIP MANAGEMENT PROCESS

CUSTOMER VALUE BUILDING APPROACHES - BERRY & PARASHURAMAN1. ADDING FINANCIAL BENEFITS-FREQUENCY MARKETING PROGRAMS AND CLUBS2. ADDING SOCIAL BENEFITS-INDIUALIZING AND PERSONALIZING RELATIONSHIPS3. ADDING STRUCTURAL TIES-SUPPLY CUSTOMERS WITH SPECIAL EQUIPMENT OR COMPUTER LINKAGESTHAT HELP CUSTOMERS MANAGE THEIR ORDERS,PAYROLL, INVENTORY ETC

CUSTOMER RELATIONSHIP BUILDINGBASIC MARKETING Simply SellREACTIVE MARKETING Sell & encourage customer to call if any Questions, comments or complaints.ACCOUNTABLE MARKETING Salesman phones after salePROACTIVE MARKETING Salesperson contacts from time to time with suggestions about improved product uses or new productsPARTNERSHIP MARKETING Company works continuously with customer to discover ways to effect customer savings or help customer perform better.

LEVELS OF RELATIONSHIP MARKETINGHIGH MARGINMEDIUM MARGINLOW MARGINMany customers/ distributorsAccountableReactiveAccountableBasic or reactiveProactiveReactiveMedium number of customers/ distributorsProactiveAccountableFew customers / distributorsPartnership

LIFE TIME VALUE OF CUSTOMER

Lost customer revenueLost opportunity revenueCustomer replacement costs

COST OF ACQUISITION1. COST OF AVERAGE SALES CALL = TOTAL COST (SALARY, COMMISSION, BENEFITS, TOTAL SALES CALLS EXPENSES)

2. AVERAGE NUMBER OF SALES CALLS = TOTAL SALES CALLS TO CONVERT AVERAGE PROSPECT TOTAL NO. OF NEW TO CUSTOMER CUSTOMERS

3. COST OF ATTRACTING NEW CUSTOMER = 2 X 1

30Service Encounters or Moments of TruthService encounters are the building blocks of service quality & satisfaction- Every experience with product, service or person which allows customer to judge/ form impressions about the qualityof service is a moment of truth.-It takes 10 good moments of truth to wipe one bad moment oftruth. -Disney Corporation 74 service encounters in amusementpark. Marriott Hotels - 4 of the top 5 factors come into play infirst 10 minutes of guests stay. Types of service encounters- remote, phone, face to face.-In remote - tangible evidence & technical quality important.-In phone- process quality -In face to face - customer also play role.

31

CUSTOMER / PRODUCT PROFITABILITY ANALYSISCustomersProducts C1 C2 C3P1+ + + Highly profitable productP2+ Profitable productP3 - - Losing productP4+ - Mixed bag productHigh-profit customerMixed-bag customerLosing customer

32Sample Marketing Metrics

I. External II. Internal Awareness Awareness of goals Market share (volume or value) Commitment to goals Relative price (market share value/volume) Active innovation support Number of complaints (level of dissatisfaction) Resource adequacy Customer satisfaction Staffing/skill levels Distribution/availability Desire to learn Total number of customers Willingness to change Perceived quality/esteem Freedom to fail Loyalty/retention Autonomy Relative perceived quality Relative employee satisfaction

33 Sample Customer-Performance Scorecard Measures

Percentage of new customers to average number of customers. Percentage of lost customers to average number of customers. Percentage of win-back customers to average number of customers. Percentage of customers falling into very dissatisfied, dissatisfied, neutral, satisfied, and very satisfied categories. Percentage of customers who say they would repurchase the product. Percentage of customers who say they would recommend the product to others. Percentage of target market customers who have brand awareness or recall. Percentage of customers who say that the companys product is the most preferred in its category. Percentage of customers who correctly identify the brands intended positioning and differentiation. Average perception of companys product quality relative to chief competitor. Average perception of companys service quality relative to chief competitor.

STRATEGIC PLANNING

STRATEGIC PLANNING MARKET-ORIENTED STRATEGIC PLANNING - is the managerial process of developing and maintaining a viable fit between the organizaitons objectives, skills, and resources and its changing market opportunities. The aim of strategic planning is to shape and reshape the companys business and products so that they yield target profits and growth.

Thus strategic planning is concerned withTreating business as an investment portfolio.Building game plan for each business based on industry position opportunity, resources, mission, objectives.Future potential and not just current potential.

SEE APPENDIX 18 (THE STRATEGIC PLANNING, IMPLEMENTATION, AND CONTROL PROCESS) Corporate planning

Division planning

Business planning

Product planningMeasuring Results

Diagnosing results

Taking correctiveactionOrganizing

Implementing

Planning ImplementingControlling

CORPORATE & DIVISION STRATEGIC PLANNING DEFINING THE CORPORATE MISSION ESTABLISHING STRATEGIC BUSINESS UNITS (SBUS) ASSIGNING RESOURCES TO EACH SBU PLANNING NEW BUSINESSES

DEFINING THE CORPORATE MISSION Shaped by History, current preferences of owners and management, market environment, resources, distinctive competences. Provides sense of purpose, direction, and opportunity. Good mission statements, limited number of goals and values and major competitive scopes. Provides direction for 10 12 years.

ESTABLISH STRATEGIC BUSINESS UNITS AND ASSIGN RESOURCES Assigning resources by evaluating by using analytical tools for classifying its businesses by profit potential. 1. Boston Consulting Group Model2. General Electric Model

40Boston Consulting Group Model

Stars Question MarksCash CowDogs

10 X

4 X

2 X1.5 X

1 X

0.5 X0.4X0.3 X

0.2 X

0.1X

Relative Market Share

20%18%16%14%12%10%

8%6%4%2%

0

Market Growth Rate

BCGs GROWTH SHARE MATRIXAn unbalanced portfolio would have too many dogs or question marks and/or too few stars and cash cows.BUILD for stars HOLD - strong cash cows HARVEST weak cash cows, question marks, dogs. DIVEST dogs, question marks.SBUs - change their position in the growth-share matrix.

GENERAL ELECTRIC MODELEach business is rated in terms of two major dimensions, market attractiveness and business strength.MARKET ATTRACTIVENESS Overall market size,,mkt growth rate,profit margin,competitive intensity,inflationary vulnerability.,technological requiremnets,environmental impact..STRENGTH OF SBU / FIRM = Market share,share growth,product quality,brand reputation,distribution network,promotion effectiveness,production capacity,productive effeciency,R&D performance,managerial personnel,Each of these factors is assigned weights and business is measured of 5 point scale.

43(a)ClassificationBUSINESS STRENGTH Hydraulicpumps

Fuel Pumps

Aerospacefittings

Flexible diaphragmsClutchesReliefvaluesJointsStrongMediumWeakHigh5.003.672.331.00LowMedium1.002.333.675.00MARKET ATTRACTIVENESS

44(B) StrategiesBUSINESS STRENGTHPROTECT POSITION

Invest to grow at maximum digestible rate. Concentrate effort on maintaining strength.BUILD SELECTIVELY Invest heavily in most attractive segments. Build up ability to counter competition. Emphasize productivity by raising productivity.PROTECT AND REFOCUSManage for current earnings. Concentrate on attractive segments. Defend strength.MANAGE FOR EARNINGSProtect position in most profitable segments.Upgrade product line. Minimize investment.

DIVEST Sell at time that will maximize cash value.Cut fixed costs and avoid investment meanwhile.

SELECTIVITY / MANAG FOR EARNING Protect existing program.Concentrate investmentsin segments where profitability is good and risks are relatively low.LIMITED EXPANSIONOR HARVESTLook for ways to expand without high risk;otherwise, minimize investment and rationalize operations.INVEST TO BUILD Challenge for leadership. Build selectively on strengths. Reinforce vulnerable areasBUILD SELECTIVELY Specialize around limited strength. Seek ways to overcome weaknesses. Withdraw if indications ofsustainable growth arelacking.MARKET ATTRACTIVENESSStrongMediumWeakLowMediumHigh

CORPORATE NEW BUSINESS PLAN When gap between future desired sales and projected sales, then three options.INTENSIVE GROWTH current businessINTEGRATIVE GROWTH build or acquire businesses related to the companys current businesses.DIVERSIFICATION GROWTH opportunities in unrelated business.

GROWTH STRATEGIESINTENSIVE GROWTH (Ansoffs Product / Market Expansion Grid )

INTEGRATIVE GROWTH Backward, Forward, Horizontal

DIVERSIFICATION GROWTH Concentric (Same technology / Marketing synergy), Horizontal (Appeals to current customers), Conglomerate (No relationship to the companys current technology, products, or markets).

47

1. Market- penetration strategy(DiversificationStrategy)2. Market- development strategy3. Product- development strategyCurrent ProductNew ProductCurrent MarketsNew Markets

THE BUSINESS STRATEGIC PLANNING PROCESSBUSINESS MISSIONSWOT ANALYSISGOAL FORMULATIONSTRATEGY FORMULATIONPROGRAM FORMULATIONIMPLEMENTATIONFEEDBACK AND CONTROL

OPPORTUNITY AND THREATA 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.AN ENVIRONMENTAL THREAT - is a challenge posed by an unfavorable 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 their seriousness and probability of occurrence.

50CHECKLIST FOR STRENGTHS / WEAKNESSES ANALYSISImportance of factor(High ,Medium , Low) and performance rating (Major/minor strengh,Neutral,,Major/Minor weakness)on dimensions in Marketing Company reputation,marketshare,product/service quality,pricing/distribution/advtg/salesforce/innovation effectiveness,geog coverageFinance-cost/availability of capital,cash folw/,financial stabilityManufacturiing-facilities,economies of scale,capacity,mfg skill ,dedicated workforceOrganization-visionary leadership,dedicated employees,entrepreneurial orientation,flexible/responsive

GOAL FORMULATION OBJECTIVES MUST BE HIERARCHICAL QUANTITATIVE REALISTIC CONSISTENT

STRATEGY FORMULATIONMICHAEL PORTERS THREE GENERIC STRATEGIES OVERALL COST LEADERSHIP firms should be good at engineering, purchasing, manufacturing and distribution. DIFFERENTIATION on key customer benefit area e.g. services, quality, style, technology. FOCUS on narrow market segment and pursue either cost leadership or differentiation. CLEAR STRATEGY IMPORTANT - Dont be middle of the roaders Firms pursuing same strategy in same to market constitute strategic group.

53STRATEGIC ALTERNATIVES

Long -term profits

Growth insales or market share

Market DevelopmentMarket Penetration

New segmentsExisting CustomersConvert nonusersCompetitorscustomers

New product developments

Efficiency,short-run profits

Decrease inputsIncrease outputsReducecostsIncrease priceImproveassetutilizationImprovesales mix

PROGRAM FORMULATION AND IMPLEMENTATION, FEEDBACK & CONTROLPROGRAM FORMULATION - Develop programs in line with strategy e.g. Technology leadership strengths R&D, gather technological intelligence, develop leading edge products, train technical sales force, develops ads to communicate technology leadership.IMPLEMENTATION The McKinsey 7-S Framework(Hardware-strategy,structure,systems and Software-Style, Staff, Skills, Shared Values)FEEDBACK & CONTROL - Need to review and revise implementation, programs, strategies, or even objectives.

MARKETING PROCESSInvolvesAnalysing Marketing OpportunitiesDeveloping marketing strategies (Differentiating and positioning)Developing marketing programs (Marketing mix)Managing marketing effort through - Annual plan control (Achievement of sales, profits and other goods). - Profitability control (Analysis of profitability of products, customers, trade channels and order sizes, Marketing profitability analysis and marketing efficiency studies). - Strategic control (Appropriateness of companies marketing strategy to market conclusions through marketers audit).

A GOOD MARKETING STRATEGY CO-ORDINATES FUNCTIONAL AREAS OF ORGANISATION ALLOCATES RESOURCES EFFICIENTLY HELPS PRODUCT ATTAIN MARKET POSITION COMPETITIVE

OBJECTIVES OF MARKETING PLANTO,Define current situation facing the product (and how we got there)Define problems and OpportunitiesEstablish objectivesDefine strategies and programs necessary to achieve objectivesPinpoint responsibility to achieveEncourage careful and disciplined thinkingEstablish customer-competitor orientation

CONTENTS OF A MARKETING PLANI.Executive summary and table of contentsPresents a brief over of the proposed planII.Current marketing situationPresents relevant background data on the market, product, competition, distribution, and macro-environment. III.Opportunity and issue analysisIdentifies the main opportunities/threats, strengths/weaknesses, and issues facing the product line.IV.ObjectivesDefines the plans financial and marketing goals in terms of sales volume, market share, and profit V.Marketing strategyPresents the broad marketing approach that will be used to achieve the plans objectives.VI.Action programsPresents the special marketing programs designed to achieve the business objectives.VII.Projected profit-and-loss statementForecasts the plans expected financial outcomes.VIII.ControlsIndicates how the plan will be monitored

FREQUENT MISTAKES IN PLANNING PROCESSSpeed of planningAmount of data collectionsWho does the planningStructureLength of planFrequency of planningNumber of courses of action consideredWho sees the planInsufficient senior management leadershipTying compensation to efforts

MARKETING ENVIRONMENT

MARKETING ENVIRONMENT ANALYSISOUTSIDE - IN VIEW TO TRACK TRENDS, OPPORTUNITIES & THREATSFOLLOWED BY MARKET RESEARCH TO DETERMINE AN OPPORTUNITYS PROFIT POTENTIAL.OPPORTUNITIES CAN BE CLASSIFIED ON ATTRACTIVENESS & SUCCESS PROBABILITY (COMPETITIVE ADVANTAGE).THREATS ARE CLASSIFIED ON BASIS OF SERIOUSNESS & PROBABILITY OF OCCURRENCE.

CHECKLIST FOR STRENGTHS / WEAKNESSES ANALYSISImportance of factor and performance rating on dimensions in Marketing Company reputation,marketshare,product/service quality,pricing/distribution/advtg/salesforce/innovation effectiveness,geog coverageFinance-cost/availability of capital,cash flow/,financial stabilityManufacturing-facilities,economies of scale,capacity,mfg skill ,dedicated workforceOrganization-visionary leadership,dedicated employees,entrepreneurial orientation,flexible/responsive

MARKETING ENVIRONMENTI. MAJOR FACTORS - (MACROENVIRONMENT)A) DEMOGRAPHIC - (BREAKUP & CHANGES IN AGE, INCOME, SEX, EDUCATION, URBAN-RURAL, LIFE EXPECTANCY, OCCUPATION, PERSONS PER HOUSEHOLD).B) SOCIO / CULTURAL - (FAMILY STRUCTURE, DECISION-MAKING, PESTERPOWER VALUES LIFESTYLES).C) TECHNO LOGICAL - (CREATIVE DESTRUCTION, IMPACT ON PRODUCT, PACKAGING, ADVERTISING).D) POLITICAL / LEGAL - (LAWS TO PREVENT UNFAIR COMPETITION, CONSUMERS & SOCIETY).E) ECONOMIC - (PER CAPITA INCOME, CREDIT AVAILABILITY, SAVINGS, STAGE OF BUS CYCLE).F) PHYSICAL - (GOVTAL INTERVENTION, NEW OPPORTUNITIES).

MARKETING ENVIRONMENTII. ACTORS - (MICROENVIRONMENT)A) COMPANY B) SUPPLIERSC) MARKETING INTERMEDIARIESD) CUSTOMERSE) COMPETITORSF) PUBLIC - ASCI, CONSUMER ACTION GROUP

CONSUMER BEHAVIOUR

7 Os FRAMEWORK WHO BUYS - OCCUPANT WHAT DOES HE BUY - OBJECT WHY DOES HE BUY - OBJECTIVE WHEN DOES HE BUY - OCCASION WHERE DOES HE BUY - OUTLET HOW DOES HE BUY - OPERATIONS WHO ARE INVOLVED - ORGANISATION

MODEL OF BUYER BEHAVIOUR

Marketing stimuli Other stimuli

Product Economic PriceTechnologicalPlacePoliticalPromotion Cultural

Buyers Buyerscharacteristics Decision Process

Cultural Buying rolesSocial Buying typesPersonal Buying StagesPsychological

Buyers decisions

Product choiceBrand choiceDealer choicePurchase timingPurchase amount

Factors influencing behavior

CULTURAL

CULTURE

SUBCULTURE

SOCIAL CLASS

SOCIAL

REFERENCE GROUP

FAMILY

ROLES AND STATUSESPERSONALAGE AND LIFE CYCLE STAGE

OCCUPATION

ECONOMIC CIRCUMSTANCES LIFESTYLE

PERSONALITYAND SELF-CONCEPTPSYCHOLOGICAL MOTIVATION

PERCEPTION

LEARNING

BELIEFS ANDATTITUDESBUYER

BUYING ROLES INITIATOR INFLUENCER DECIDER PURCHASER USER

BUYING BEHAVIOUR TYPESHigh InvolvementLow InvolvementDifference between brands perceivedDifference between brands not perceived COMPLEX

B A P

VARIETY SEEKINGWB P A

DISSONANCE REDUCINGB P New B A

HABITUAL WB P A

STAGES OF BUYING DECISION PROCESS PROBLEM RECOGNITION INFORMATION SEARCH Criteria, Alternatives EVALUATION OF ALTERNATIVES PURCHASE DECISION POSTPURCHASE BEHAVIOUR

INFORMATION SEARCH SOURCES PERSONAL SOURCES COMMERCIAL SOURCES PUBLIC SOURCES EXPERIENTIAL SOURCES

SUCCESSIVE SETS INVOLVED IN CONSUMER DECISION MAKING TOTAL SET

AWARENESS SET

CONSIDERATION SET

CHOICE SET

PURCHASE DECISION

POST-PURCHASE BEHAVIOUR

74Profiling the Customer Buying Decision Process1)Introspective method Marketers think how they would act if they were consumers2)Retrospective method Ask consumers who have bought to recall the event3)Prospective method Ask prospective consumers who plan to buy to think aloud. 4)Prescriptive method Ask consumers ideal way.

ALTERNATIVE EVALUATIVE TECHNIQUESCOMPENSATORY MODEL EXPECTANCY VALUE MODEL IDEAL BRAND MODEL

NON-COMPENSATORY MODEL CONJUNCTIVE MODEL DISJUNCTIVE MODEL LEXI COGRAPHIC MODEL

EXPECTANCY VALUE MODEL OF CONSUMER CHOICECARATTRIBUTESENGINE CAPACITYEXTERIORSPRICEMILEAGEPERCEIVED VALUESWTS. 0.4 0.2 0.3 0.1FORD ESCORT 10 8 6 8 8.2OPEL ASTRA 8 9 6 6 7.4HONDA CITY 610 8 9 7.7CIELO 4 6 5 5 4.8

STRATEGIES FOR MARKETERS MODIFY THE BRAND REAL REPOSITIONING ALTER BELIEFS ABOUT THE BRAND PSYCHOLOGICAL REPOSITIONING ALTER BELIEFS ABOUT COMPETITORS BRAND COMPETITIVE DEPOSITIONING ALTER IMPORTANCE WEIGHTS CALL ATTENTION TO NEGLECTED ATTRIBUTES SHIFT BUYERS IDEALS

PERCEIVED RISK FINANCIAL

PHYSICAL

SOCIAL

PERSONAL

79COMPETITION

80PORTERS MODEL Threat of new entrants

Intensity of Competitive rivalry

Bargaining power of buyers

Bargaining power of suppliers

Threat of substitutes

81Five Forces Determining Segment Structural Attractiveness Potential entrants(Threat of mobility)

Suppliers (Supplier Industry competitors (Segment rivalry) Substitutes (Threat of substitutes)

power)

Buyers (Buyer power)

82Identifying Competition Industry Concept of Competition Group of firms that offer a class of products that are close substitutes classified on basis ofI.Number of sellers & degree of differentiationPure monopoly Oligopoly Pure oligopoly (oil, steel) & differentiated oligopoly (auto, computers) Monopolistic competition restaurantsPure competition stock marketII.Entry, mobility & exit barriers.

83Identifying Competition Contd of Slide . III.Cost structure shapes strategic conduct e.g. steelmaking involves heavy manufacturing & raw material costsDegree of vertical integration Degree of globalization some industries are highly local (babycare) others are global (e.g. oil, cameras)B.Market Concept of competition Brand/Form/Category/Desire

84COMPETITIONWHAT DO YOU NEED TO KNOW WHO ARE OUR COMPETITORS - IDENTIFY & SELECT

WHAT ARE THEIR OBJECTIVES

WHAT ARE THEIR STRATEGIES

WHAT ARE THEIR STRENGTHS & WEAKNESSES

WHAT ARE THEIR REACTION PATTERNS

85IDENTIFYING COMPETITION

CORRECT DEFINITION IMPORTANT TO MARKET PLANNING & STRATEGY KEY QUESTION IS DEGREE EXTENT BALANCE BETWEEN TOO MANY & TOO FEW NOT EASY AS EMERGING COMPETITION WRONG DEFINITION LEADS TOa) MARKETING MYOPIAb) AMBIGUITY IN MARKET RELATED STATISTICS

86IDENTIFYING COMPETITORS

I. INDUSTRY CONCEPT OF COMPETITION -

II. MARKET CONCEPT OF COMPETITION

87INDUSTRY CONCEPT OF COMPETITION1)Number of sellers and degree of differentiationa)Pure Monopolyb)Oligopoly- a small no. of large firms Pure eg oil,steel Or Differentiated automobiles,refrigeratorsc)Monopolistic competitionMany competitors and differentiated eg restaurants,beauty parlorsd)Pure competition eg stock market2)Entry,Mobility,exit barriers3)Cost structure4)Degrree of vertical integration5)Degree of Globalisation

88Market concept of competition Stimulates long run strategic market planningKey to identify is mapping product/market grid Opens eyes to broader set of actual & potential competitorsa) Brand b) Product form competitionc) Category / Generic / Industry Competition d) Desire / Budget

89COMPETITIVE LEVEL & TASKS

Competitive LevelBrand(inward oriented)

Product Form (inward)

Generic / Category(Outward)

Desire / BudgetProduct Managers taskConvince customers brand is better than others in product form

Convince product form is best in the category

Convince product category is best to satisfy need

Convince Generic need / benefit is best way to spend discretionary income

90METHODS FOR DETERMINING COMPETITORS

I. PREDETERMINED CATEGORIES - ORG

II. MANAGERIAL JUDGEMENT

III. CUSTOMER BASED MEASURESa) PURCHASE DATA FOR BRAND SWITCHING MATRIXb) CROSS ELASTICITY OF DDc) CONSUMER JUDGEMENTSc.1. JUDGED OVERALL SIMILARITY c.2. SIMILARITY OF CONSIDERATION SETc.3. PRODUCT DELETION SETc.4. SUBSTITUTION IN USE

91BRAND SWITCHING MATRIXA.6.2.2 0.1

B.2.3.3.1 0TIME (++1)C.2.4.5.1 0D 0.1 0.5.4ABCDEE 0 0 0.3.5

TIME t

92FIGURE 3.13: METHODS VERSUS COMPETITION LEVELS AND INFORMATION REQUIRED Typical Data Sources Level of CompetitionApproach

BrandProduct FormGenericBudgetPrimarySecondaryExisting definitions X X XTechnology substitution X X X XManagerial judgment X X X XCustomer behavior based: Brand switching X X X Interpurchase times X X X Cross-elasticities X X X X

93FIGURE 3.13: METHODS VERSUS COMPETITION LEVELS AND INFORMATION REQUIRED Typical Data Sources Level of CompetitionApproach

BrandProduct FormGenericBudgetPrimarySecondaryCustomer evaluation based: Overall similarity X X X X Similarity of consideration X X X X X sets Product deletion X X X X Substitution in use X X X X

Note: An X indicates that either the method is useful for determining competition at that level or it employs data of a certain type.

94IDENTIFYING COMPETITORS STRATEGIESA group of firms following same strategy in given target market is called a strategic group.Dimensions include level of technological sophistication,geographicalscope, manufacturing methods,marketing strategies etc

95ASSESSING COMPETITORS CURRENT STRATEGY1. TARGET MARKET2. CORE MARKETING STRATEGYa) POSITIONINGb) DIFFERENTIAL ADVANTAGE3. MARKETING MIX

96ASSESSING COMPETITORS CURRENT OBJECTIVES growth v/s hold v/s harvest v/s divest.Short term v/s long term profits, satisfycing v/s maximizing profits, cash flow,,market sharegrowth,,technological/,service /cost leadership objectives shaped by size, history, management perspective, financial situation, place in larger organisation objectives can be assesseda) from strategyb) geographical home of parentc) ownership of firm - private / public/ government

97ASSESSING COMPETITORS STRENGTHS & WEAKNESSES1. THROUGH - SECONDARY DATA- PERSONAL EXPERIENCE- PRIMARY SOURCES (CUSTOMERS, SUPPLIERS, DEALERS)2. ANALYSIS SHOULD BE FOR BOTH CORPORATE & BRAND LEVELS3. ANY INVALID ASSUMPTIONS THAT COMPETITOR IS MAKING4. SHARE OF MARKET, MIND, HEART5. SATISFACTION / DISSATISFACTION AREA6. COMPARISION VIS-A-VIS OUR BRAND

98ESTIMATING COMPETITORS REACTION PATTERNSDEPENDS ON a) IMPORTANCE OF BUSINESS OR PRODUCT b) HOW COMMITTED IS THE COMPETITOR (PHILOSOPHY, MIND-SET)c) AGGRESSIVENESS OF MANAGERS

99ESTIMATING COMPETITORSREACTION PATTERNS

TYPES OF COMPETITORS LAID BACK SELECTIVE TIGER STOCHASTIC

100

1. COSTLY SIGNALS

2. CHEAP TALK SIGNALS

PRODUCT MANAGER MUST COLLECT BOTH TYPES OF INFORMATION BUT BE WARY OF (2)

DESIGNING COMPETITOR INTELLIGENCE SYSTEM

101

I. SECONDARY II. PRIMARYIII. OTHERSIV. UNETHICAL

SOURCES OF INFORMATION OF COMPETITORS

102SELECTING COMPETITION1. LEVEL2. SELECTING COMPETITOR FOCUSCHOOSING WHO TO COMPETE HAS IMPLICATIONS ON PERFORMING STDS (MARKET SHARE) & COMPETITIVE STRATEGY DEPENDS ON a) TIME HORIZON b) STAGE OF PLC c) RATE OF CHANGE OF TECHNOLOGY

1031. STRONG V/S WEAK COMPETITORS 2. CLOSE V/S DISTANT3. GOOD V/S BAD

SELECTING COMPETITORS TO ATTACK & AVOID

104 BALANCING CUSTOMER & COMPETITOR ORIENTATION

105 COMPETITIVE POSITIONS DOMINANT-Controls behavior of other competitors ,wide choice of strategic options STRONG-can take independent actions and maintain its long term position FAVOURABLE-exploitable strength and above average opportunity to improve position TENABLE-exists at sufferance of dominant company and has lesser than average opportunity to improve position WEAK-poor performance.must change or exit NON-VIABLE-poor performance and no opportunity for improvement

106 MARKET LEADER STRATEGIESEXPANDING TOTAL MARKET DEFENDING MARKET SHAREIII EXPANDING MARKET SHARE

107Market- Leader Strategies Expanding Total Market

NEW USERS :Non-users or competitors users (Market penetration)Different segments (New Market Strategy)Geographical segments (Geographical Expansion Strategy)NEW USES :For example Vaseline as lubricant. Skin ointment, healing agent, hair dressing.MORE USAGE :Shampoo

108 MARKET LEADER DEFENSIVE STRATEGIESa) POSITION DEFENSE not enough today. e.g. Coke has also diversified.b) FLANK DEFENSE Erect outposts to protect a weak front or serve as an invasion base for counter attacking. E.g. Asian Paints Tractors.c) PREEMPTIVE DEFENSE Launch attack before enemy starts offense across market with many models.

Through continuous innovation, increasing competitive effectiveness and value to customers.

109Market Leader Defensive Strategies d) COUNTER OFFENSIVE DEFENSE e.g. HLL reaction to Tide.MOBILE DEFENSE Stretch Domain over new territories through market broadening i.e. shifting focus from current product to generic need E.g. Bank to insurance, Mutual Funds etc. Aquafina & KinleyCONTRACTION DEFENCE- Recognising that there is no sense to spread too thin. (Strategic withdrawal)

110 EXPANDING MARKET SHAREIncreased market share above 40% earns ROI of 38.5%,more than 3 times that of those firms with shares under 10%

But important to consider 3 factorsProvoking monopolist actionEconomic costholdout customersWrong marketing mix

111MARKET CHALLENGER STRATEGIES

Firms that occupy 2nd,3rd or lower ranks are called runner ups. These firms can either attack leader and make aggressive bid for further market share( market challenger ) or play ball and not rock boat ( market follower)

112Market challenger strategiesCan attack Market leader- high risk-high payoff.Makes good sense if false leaderCan attack firms of own size that are not doing well or are under financed.Small and regional firms

113 MARKET CHALLENGER STRATEGIES FRONTAL ATTACK-attacking opponents strength rather than weakness.Matching opponent on product,advertising,price with 3:1 advantage otherwise cant succeedMODIFIED FRONTAL ATTACK-Match leaders offer on all and beat on price FLANK ATTACK-Blind spots. Flank attack can be geog or segmental eg Nirma. Much more likely to succeed than frontal attack

114MARKET CHALLENGER STRATEGIESENCIRCLEMENT ATTACK-Comprehensive Blitz attack on front,sides rear.Offer everything opponent offers and more BYPASS ATTACK-is an indirect assault strategy.like diversifying into unrelated products,new geographical markets and leapfrogging into new technology GUERRILLA ATTACK-waging small intermittent attacks. Harass , Demoralise eg price cuts, promotional blitz,legal action

115 MARKET FOLLOWER STRATEGIES1. COUNTERFEITER2. CLONER-The cloner emulates the leaders products,distribution, advertising etc Sudar dust3. IMITATOR-copies some things of leader but maintains differentiation on packaging, advertising, pricing etc 4. ADAPTER adapts or improves leaders product. Can become future challenger E.g. Japanese firms Company prefers to follow than to challenge.

116 MARKET NICHER STRATEGIESSPECIALIZATION- Customer, geographic product line,MULTIPLE NICHING BETTER THAN SINGLE NICHING

117MARKETING ROLES NICHE SPECIALIST ROLES The key idea in successful nichemanship is specialization. Here are some possible niche roles:

End user specialist:

Vertical-level specialist:

Customer-size specialist:

Specific-customer specialist:

Geographic specialist:

Product or product line specialist:

Product - feature specialist:

Job shop specialist:

Quality price specialist:

Service specialist:

Channel specialist:

118Marketing Information System

Marketing Information SystemHelps develop &manage information necessary to conduct marketing activities.

MARKETING INFORMATIONMARKETING INFORMATIONMARKETING INFORMATION SYSTEMSMARKETING ENVIRONMENT Macro environment Target market Marketing channels Competition PublicINTERNAL REPORTS SYSTEMMARKETING RESEARCH SYSTEMMARKETING INTELLIGENCE SYSTEMANALYTICAL MARKETING SYSTEM

MARKETING MANAGERS Analysis Planning Implementation Control

MARKETING DECISIONS & COMMUNICATIONS

Marketing Information SystemInternal Records System (result data) - Order to payment cycle (invoices, bills), sales reporting system (sales reports, call reports). Marketing intelligence system(happening data)- *Newspapers, trade publications, talking to customers, suppliers, distributors, trade show, analyzing products & ads. talking to competitors, employees, syndicated reports (ORG).*Need to train sales representatives & motivate distributors & retailers.Marketing research - formal study of specific problem / situation. Marketing decision support systems - Statistical tools, models & optimization routines.

SCOPE OF MARKETING RESEARCH1. NEW PRODUCTS - Concept testing,Brand name generation,& testing,Product testing,packaging tests, Test-marketing, Market feasibility.PRODUCT RESEARCH - Competitive - product studies, SALES & MARKET - Market potential, Market characteristics, Market share analysis, Sales analysis, Distribution channel studies.4. PROMOTION - Copy research, Media research, Ad effectiveness, sales promotion effectiveness.,public image studies, sales force effectiveness5. BUSINESS & CORPORATE RESEARCH - Business trend studies,, International scope studies, Internal employees studies, Operations research, Location studies etc.CORPORATE RESPONSIBILITY - Ecological studies, Values PRICING-Competitive pricing analysis,price elasticity BUYING BEHAVIOUR-Brand preference, attitude,product satisfaction,purchase behaviour,purchase intentions,brand awareness,segmentation studies

THE RESEARCH PROCESSI. DEFINE THE PROBLEM - not too broad or narrow, watch for symptoms.II. RESEARCH OBJECTIVES - measurable and specific (except exploratory)III. RESEARCH DESIGN APPROACHESA) EXPLORATORYB) DESCRIPTIVE CONCLUSIVE C) CAUSAL IV. DEVELOP RESEARCH PLANA) DATA SOURCES SECONDARY CENSUS PRIMARY SAMPLE

B) SAMPLING PLAN

SAMPLE UNIT SAMPLING FRAME SAMPLE SIZE SAMPLING PROCEDUREA) PROBABILITY B) NON-PROBABILITY

THE RESEARCH PROCESS

E) CONTACT METHODS-MAIL,TELEPHONE,PERSONAL(ARRANGED,INTERCEPT) COLLECT INFORMATION-Problems of not at home,non co-operation,biased,dishonest answers or fudgingvi) DATA ANALYSISvii) REPORT & PRESENTATION

Sampling proceduresA) PROBABILITY SAMPLING :1.Simple Random Sampling : random selection through lottery without replacement.Unrestricted random sampling is with replacement.2.Systematic Sampling : involved a system of selecting every nth item in sampling frame after 1st name / unit is selected at random.3.Random Route sampling: used for sampling households, shops etc. An address is selected at random & every nth address is selected therefrom.4.Stratified Random Sampling: Population is divided into mutually exclusive groups & within each group, units are selected through random methods.5.Cluster (Area) sampling: The area to be surveyed is broken into smaller areas. A few of these areas are then selected by random methods. Every unit or some units randomly selected may be interviewed in these selected areas.

SAMPLING PROCEDURESB)NON - PROBABILITY SAMPLING used when a)Probability sampling not feasible because population not known or no suitable sampling frame.b)Random sampling too costly & time consuming.c)When information is exploratory in nature.

SAMPLING PROCEDURESB) Non probability sample:1.Convenience sample: The researcher selects the easiest population members from which to obtain information.2Judgement sample: The researcher uses his/ her judgement to select population members who are good prospects for accurate information.3.Quota sample: The researcher decides on prescribed no. of people in each category (age, gender, income) & then finds & interviews.

Contact MethodsContact Methods

TELEPHONEMAILPERSONAL- Quick - Interview should be short.- Cannot be personal.- Not strictly representative.- Screening of calls.- Non-verbal cues missing.- Poor response rate- No chance of clarification- Most versatile - Non- verbal cues-Costly- Bias- Cold calls to prevent mall intercept interviews.

QUESTIONNAIRE

Open - ended(Useful in exploratory research)Close - ended(Easy to interpret and tabulate)1. Completely unstructured2. Word association3. Sentence completion4. Story completion5. Picture completionThematic apperception test (TAT)

1. Dichotomous (2 choice)2. Multiple choice (3 or more)3. Likert scale 5 point scale of agree-disagree4. Semantic Differential5. Importance Scale Monadic RatingIntention to buy scale

QUESTIONNAIRE Most common instrument must be carefully developed, tested and debugged before they are administered on a large scale. Each question should contribute to research objectives. Logical sequence Wording / Styling Simple, direct, and unbiased. Not too long. Lead question should be interesting. Sensitive questions at the end and give range.

A QUESTIONABLE QUESTIONNAIRE1. What is your total income to the nearest dollar.2. Are you an occasional or frequent flyer.3. Do you like this restaurant?4. How many ads did you see on TV last week?5. What are the most salient factors in buying a car ?6. Do you think it is right for the government to ban common salt and deprive a lot of people of jobs ?

Characteristics of good Marketing ResearchScientific method

Creativity

Multiple methods

Value & cost of information

Look at background - Classic failure of coke. Dont look at problem in isolation.

Dont give in to temptations of giving management what they want to hear.

133Emerging Trends in Marketing

Emerging Trends in Marketing Markets1.Cause related marketing - Social cause, (P & G) ecological cause (Orchid Hotels).2.Ambush Marketing (Coke 1996 world cup official sponsor, Reebok Atlanta Olympics 1996).3.Viral Marketing - hotmail4.Mousetrapping - (on internet)5.Guerilla marketing - (unconventional & creative attention grabbing techniques). E.g. Burger king used McDonalds Ronald.6.Buzz marketing - By revealing only partial information. (JJKN).7.Glocalization - McDonalds, Coca-Cola, L & G Sampoorna, Nokia 1100.8.Permission marketing (Seth Godin)9.Experience Marketing - Sonys CD stores,Parryware experiencentres, Shoppers Stop10.Collaborative Marketing - design (DC car ) Pricing (Zodiac grill) segmentation (Dell) Co creation of products- eg starbucks asking customers to create a coffee and acknowledging customers contribution

11.Lifestyle marketing - adopt promotional activity to customers lifestyle. E.g. Cellphones.Ethical marketing - Pfizer, J & J TylenolUse of social media in mktg and emarketing and ecommerceRise of consumerism-seller bewareStrategic alliances in product,branding,distribution,advertising,sales promotionetc

Customer Management : 1.Relationship management - Jet airways flying returns,Shoppers stop First Citizens Club.Affinity group & online communities.

Product & Branding :1.Mass customization - e.g. Scorpio, Asian Paints, Dell.Umbrella Branding

Pricing :1.Target pricing2.Announcing price upfront

Packaging :Sachet marketing Packaging innovations New inforamtion necessary on packages eg dot to indicate veg/nonveg,expiry date Distribution :Non- traditional methods - Multilevel (Avon , Oriflame ),Party plan (Tupperware)Organised retail and power shift from manufacturer to retailer

Advertising, Media, sales promotion:1.In film advertising - Baghban, Castaway (Fedex)2.Surrogate advertising.3.Comparative advertising.4.Use of new, unconventional media, below the line media. (e.g.. Surf Vans).5.Increase in sales promotion.6.Using colours & sensory methods - e.g. Blue (Cool), Red (Hot).

SEGMENTATION, TARGETING & POSITIONING

138Levels of Market Segmentation Segment Marketing Niche Marketing Local Marketing Customerization or segments of one or customized marketing or one to one marketing.

139Steps in the Segmentation Process Description

Need-Based Segmentation Group customers into segments based on similar needs and benefits sought by customer in solving a particular consumption problem.Segment IdentificationFor each needs-based segment, determine which demo-graphics, lifestyles, and usage behaviors make the segment distinct and identifiable (actionable). Segment Attractiveness Using predetermined segment attractiveness criteria (such as market growth, competitive intensity, and market access), determine the overall attractiveness of each segment. Segment Profitability Determine segment profitability.Segment Positioning For each segment, create a value proposition and product-price positioning strategy based on that segments unique customer needs and characteristics. Segment Acid TestCreate segment storyboards to test the attractiveness of each segments positioning strategy. Marketing-Mix StrategyExpand segment positioning strategy to include all aspects of the marketing mix: product, price, promotion and place.

REQUIREMENTS FOR EFFECTIVE MARKET SEGMENTATION RELEVANT MEASURABLE SUBSTANTIAL ACCESSIBLE ACTIONABLE

STEPS IN SEGMENTATION 1. IDENTIFY BASES OF SEGMENTATION2. PROFILING

BASIS FOR SEGMENTING CONSUMER MARKETS I. CONSUMER CHARACTERISTICS1. GEOGRAPHIC (REGION, URBAN-RURAL)2. DEMOGRAPHIC (AGE, SEX, OCCUPATION, INCOME, EDUCATION, FAMILY LIFE CYCLE, FAMILY SIZE).3. PSYCHOGRAPHICS (SOCIAL CLASS, LIFESTYLE, PERSONALITY)II. CONSUMER RESPONSES1. BENEFITS SOUGHT2. OCCASIONS3. USAGE RATE (HEAVY, MEDIUM, LIGHT)4. USER STATUS (EX, CURRENT, NON, POTENTIAL, REGULAR, 1ST TIME)5. LOYALTY STATUS (HARDCORE, SOFT CORE, SHIFTING, SWITCHERS)6. BUYER READINESS (UNAWARE, AWARE, INFORMED, INTERESTED)7. ATTITUDE TO PRODUCT (ENTHUSIASTIC, POSITIVE, INDIFFERENT, NEGATIVE, HOSTILE).

MAJOR SEGMENTATION VARIABLES FOR BUSINESS MARKETS

DEMOGRAPHIC

1. Industry : which industries should we serve?2. Company size: What size companies should we serve?3. Location: Which geographical areas should we serve ?

OPERATING VARIABLES

4.Technology : What customer technologies should we focus on?5. User / customer status: Should we serve heavy users, medium users, light users, or nonusers?6. Customer capabilities: Should we serve customers needing many or few services?

PURCHASING APPROACHES

7. Purchasing -function organization : Should we serve companies with highly centralized or decentralized purchasing organizations?8. Power structure: Should we serve companies that are engineering dominated, financially dominated, and so forth?9. Nature of existing relationships: Should we serve companies with which we have strong relationships or simply go after the most desirable companies?10. General purchase policies: Should we serve companies that prefer leasing? Service contracts? Systems purchases? Sealed bidding?11. Purchasing criteria: Should we serve companies that are seeking quality? Service? Price?

MAJOR SEGMENTATION VARIABLES FOR BUSINESS MARKETSSITUATIONAL FACTORS12. Urgency: Should we serve companies that need quick and sudden delivery or service?13. Specific application: Should we focus on certain applications of our product rather than all applications?14. Size of order: Should we focus on large or small orders?

PERSONAL CHARACTERISTICS15. Buyer-seller similarity: Should we serve companies whose people and values are similar to ours?16. Attitudes toward risk: Should we serve risk- taking or risk-avoiding customers?17. Loyalty: Should we serve companies that show high loyalty to their suppliers?

STEPS IN MARKET TARGETING 1. DEVELOP MEASURE OF SEGMENT ATTRACTIVENESS AND EVALUATE.2. SELECT TARGET SEGMENTS.

BASIS FOR EVALUATION & SELECTION OF TARGET SEGMENTS 1. SIZE2. GROWTH3. STRUCTURAL ATTRACTIVENESS (PORTERS MODEL)4. OBJECTIVES & RESOURCES5. ECONOMIES OF SCOPE

PATTERNS OF TARGET MARKET SELECTION 1. SINGLE SEGMENT CONCENTRATION2. MARKET SPECIALISATION3. PRODUCT SPECIALISATION4. SELECTIVE SPECIALISATION5. FULL MARKET COVERAGE

ALTERNATIVE TARGETING STRATEGIESCOS MARKETING MIXWHOLE MARKET

MARKETING MIX 1 M M 2 M M 3 SEGMENT 1 SEGMENT 2 SEGMENT 3DIFFERENTIATED MARKETING SEGMENT 1 SEGMENT 2 SEGMENT 3MARKETING MIXCONCENTRATED MARKETS

UNDIFFERENTIATED MARKETING

149Additional Considerations 1)Segment by segment invasion plans mega marketing to counter blocked markets2)Updating segmentation schemes market partitioning3)Ethical choice of Target markets4)Counter segmentation.

DIFFERENTIATION & POSITIONING DIFFERENTIATION IS THE ACT OF DESIGNING A SET OF MEANING DIFFERENCES TO DISTINGUISH THE COMPANYS OFFERS FROM COMPETITORS OFFERS.POSITIONING IS THE ACT OF DESIGNING COMPANYS OFFER AND IMAGE SO THAT IT OCCUPIES A DISTINCT AND VALUED PLACE IN THE TARGET CUSTOMERS MIND.

151Developing a Positioning Strategy Involves: Defining the Target Market

Competitive frame of reference

Points of Parity & Points of Difference

152Choosing POPs & PODs POP are driven by needs of category membership (to create category POPs) & need to negate competitors PODs ( to create competitive POPs).

Consumer desirability criteria for PODs.

1)Relevance e.g. tallest hotel (irrelevant)

2)Distinctive

3)Believable & credible

153Choosing POPs & PODs Contd. Of slide Deliverability criteria

Feasibility in terms of resources,image of company

Communicability Verifiable evidence or proof points need to be created e.g. zpto

Sustainability enduring

Marketers must decide at which level (s) to anchor brands PODs At lowest level are brand attributes, then brand benefits & at top are brand values.

EFFECTIVE POSITIONING REQUIRES 1. DETERMINING IMPORTANT DIMENSIONS2. ASSESSING IDEAL POSITIONS3. ASSESSING CURRENT POSITION OCCUPIED BY COMPETITORS

STEPS IN POSITIONING 1. DEVELOP ALTERNATIVE POSITIONING CONCEPTS2. SELECT POSITIONING STRATEGY3. SIGNAL THROUGH MARKETING MIX

156Positioning StrategyATTRIBUTE for e.g. clinic with zptoBENEFIT USE/ APPLICATIONUSERCOMPETITORLEADERSHIP quality , technology, servicePRODUCT CATEGORY DISASSOCIATIONEXCLUSIVE CLUB

POSITIONING STRATEGY TO BE AVOIDED 1. UNDERPOSITIONING - VAGUE IDEA2. OVERPOSITIONING - TOO NARROW AN IMAGE3. CONFUSED POSITIONING4. DOUBTFUL POSITIONING

158PRODUCT REPOSITIONING 1. CHANGING TARGET CONSUMER PROFILE 2. COMPETITOR TOO CLOSE3. INCREASE MARKET - E.g. CADBURY4. COMMUNICATE TECHNOLOGICAL ADVANCEMENT / UPGRADATION IN THE PRODUCT - E.g. SURF.5. CHANGING CUSTOMER NEED.

DIFFERENTIATION VARIABLES PRODUCTSERVICESPERSONNELCHANNELIMAGE

FeaturesOrdering easeCompetenceCoverageSymbolPerformanceDeliveryCourtesyExpertiseWritten andConformanceInstallationCredibilityPerformanceaudiovisualDurabilityCustomer trainingReliabilitymediaReliabilityCustomer consultingResponsivenessAtmosphereReparabilityMaintenance andcommunicationEventsStylerepairDesignMiscellaneous

160MEASURING CUSTOMER EFFECTIVENESS VALUE - METHOD FOR COMPETITIVE ADVANTAGE SELECTION

FEATURECOMPANY COSTCUSTOMER VALUE CUSTOMER EFFECTIVENESS (1) (2) (3 = 2/ 1)

Rear window defrosting$100$2002Cruise control 600 6001Automatic transmission 80024003

161Technology88L LMHoldCost68H MMMonitorQuality86L LLMonitorService43H HLInvestMethods for competitive - Advantage selection2CompanyStanding3CompetitorStanding1CompetitiveAdvantages4Importance ofImprovingStanding(H-M-L)*5Affordabilityand speed(H-M-L)6Competitors Ability toImprove standing(H-M-L)

7RecommendedAction

* H = High; M = Medium; L= Low

PRODUCT & BRANDING

5 LEVELS OF PRODUCT 1. CORE BENEFIT2. BASIC PRODUCT - FEATURES, BENEFITS, DESIGN & STYLE, PACKAGING, BRAND NAME.3. EXPECTED PRODUCT - CREATES NO PREFERENCE4. AUGMENTED PRODUCT - TOTAL CONSUMPTION SYSTEM5. POTENTIAL PRODUCTTHE 5 LEVELS CONSTITUTE CUSTOMER VALUE HIERARCHY WITH EACH LEVEL ADDING MORE CUSTOMER VALUE.

CLASSIFICATION OF PRODUCTS-CONSUMER GOODSDURABILITY & TANGIBILITYNON-DURABLE GOODS tangible, consumed in few uses. Many locations, small mark up, heavy advertising.DURABLE GOODS personal selling, guarantees, higher margin.SERVICES intangible, variable, credibility of supplier very important.SHOPPING HABITSCONVENIENCE GOODS staples, impulse & emergency goodsSHOPPING GOODS comparison shopping .Homogenous & heterogenous strategies differ.SPECIALITY GOODS goods with unique characteristics and or brand identification.Location should be advertised.UNSOUGHT GOODS advertising and personal selling.

Classification Of Products

Most goodsMost servicesClothingJewelryFurnitureHousesAutomobilesVacationHaicutsChild careTelevision repairLegal servicesRoot canalAuto repairMedical diagnosisEasy to evaluateDifficult toevaluateRestaurant meals{{{High in search qualities{{High in experience qualities{

High in credence qualities

166The Product Hierarchy Need family thirst Product family All product classes that serve a core need with reasonable effectiveness Non-alcoholic beverages, alcoholic beveragesProduct class A group of products within a product family having certain functional coherence e.g. Aerated soft drinks

167The Product Hierarchy Contd of Slide . Product line A group of products within a product class that are closely related because they perform a similar function, are sold to same customer groups, are marketed through same outlets or channels or fall within price ranges. Soft drinkProduct type share same form. Cola drink. Item (SKU or variant) Coke 300 ml.

168Product systems & Mixes A product system is a group of diverse but related items that function in a compatible manner. A product mix (product assortment is set of all products & items a particular seller offers for sale.A product mix has width, length, depth & consistency.

BRAND A BRAND IS ESSENTIALLY A SELLERS PROMISE TO CONSISTENTLY DELIVER A SPECIFIC SET OF FEATURES, BENEFITS AND SERVICES TO BUYERS.A BRAND IS ABOUT INTANGIBLE AND TANGIBLE ASSOCIATIONS

170BrandA brand is a product or service that is differentiated on dimensions functional, rational, tangible (brand performance) and/or symbolic, emotional, intangible (what brand represents).

BRANDING DECISIONS 1. BRAND OR NOT Advantages of branding easy processing, legal protection, brand loyalty, segmentation ,corporate image. Also distributors and consumer s prefer brands.SPONSOR Manufacturer / Distributor / LicensedBRAND NAME Individual / Blanket / Separate family / Co. + Individual. Company names legitimizes and individual name individualizesBRANDING STRATEGY Line extensions (success rate higher), Brand extensions (risk of brand dilution test association), Multi-brands, New brands, Co brands (also called dual branding).REPOSITIONING shifting customer preferences or competitor too close.

172Devising a Branding Strategy 4 General Strategies:

Individual names or house of brands Blanket family names or branded houseSeparate family names Corporate name + individual product name.

173Devising a Branding Strategy Contd of Slide . Brand extension line extensions & category extensionsParent brand & sub brandBrand line consists of all products original as well as line and category extensions sold under a particular brand. Brand mix (or brand assortment) is the set of all brand lines that a particular seller makes available to buyers.Licensed brands, co-branding, ingredient branding.

ESSENTIALS OF A GOOD BRAND NAMEEasy to pronounce, spell and remember.Suggest about benefits, quality, use or action.Unique, distinctive.Versatile can be added to new products / global reach.Registered and protected.

BRAND NAME TESTS A. ASSOCIATION TESTB. LEARNING TESTS (PRONOUNCABILITY)C. MEMORYD. PREFERENCEE. GLOBAL REACH PACKAGING TESTS1. ENGINEERING2. VISUAL3. DEALER & CONSUMER TESTS

BRAND - MEANING 1. ATTRIBUTES2. BENEFITS - FUNCTIONAL & EMOTIONAL3. VALUE4. CULTURE5. PERSONALITY6. USER

DEEP V/S SHALLOW BRAND

Brand-nameand symbolProduct attributesIntangiblesCustomer benefitsRelative priceUse/applicationUser/customerCelebrity/personLifestyle/personalityProduct classCompetitorsCountry/geographic area

BRAND ASSOCIATIONS

HOW VALUES AFFECT BRAND CHOICEBRAND CHOICE

CONDITIONALVALUE

SOCIAL VALUE

FUNCTIONAL VALUE

EMOTIONALVALUE

EPISTEMICVALUE

BRAND EQUITY (DAVID AAKER) 1. BRAND AWARENESS2. PERCEIVED BRAND QUALITY AND FUNCTIONALITY3. POSITIVE BRAND MENTAL & EMOTIONAL ASSOCIATIONS4. BRAND LOYALTY5. OTHER ASSETS - PATENTS, TRADEMARKS ,CHANNEL RELATIONSHIPS

ATTITUDE TOWARDS BRAND 1. CUSTOMER WILL CHANGE BRAND FOR PRICE REASONS2. CUSTOMER IS SATISFIED - NO REASON TO CHANGE 3. CUSTOMER IS SATISFIED & WOULD INCUR COSTS BY CHANGING BRAND4. CUSTOMER VALUES THE BRAND AND SEES IT AS A FRIENDCUSTOMER IS DEVOTED TO BRAND.

BRAND EQUITY IS RELATED TO 3, 4, 5.

181IMPORTANCE OF PROPER PACKAGINGPROTECTION ADVERTISING VALUECONVENIENCE TO CONSUMERSBENEFIT TO RETAILERSAFTER-USE VALUEIDENTIFICATIONINFORMATION

182FACTORS TO BE CONSIDERED FOR PACKAGE DESIGNINGLANGUAGECOLOURSIZECLIMATENATURE OF THE PRODUCTLENGTH OF DISTRIBUTION CHANNELACCEPTED NORMSMETHOD OF TRANSPORT USEDTRENDS IN PACKAGINGCOST-BENEFIT ANALYSIS

PACKAGING

183PRIMARY SECONDARYSHIPPING

DECISIONSThe first task is to establish packaging concept. What packaging should be or do. e.g. protection, novel dispensing method, visibility.Decision on packing elementsTests engineering tests, visual tests, dealer tests and consumer tests.Labeling identify, describe and promote.

Pricing methods Cost basedCustomer based Competitor based

Selecting the Pricing MethodMarkup pricing

Target return pricing

Perceived value pricing

Value pricing

Going rate pricing

Sealed bid pricing

Pricing strategies at entrySkimming Penetration

Some pricing terminologyTarget costing(pricing)- due to psychological price barrierPsychological pricing(odd end,psychological discounting)Loss leader pricingReferencing pricing - fair price, price bandwidth..

DISTRIBUTIONA COMPANY LAUNCHING A PRODUCT NEEDS 1. SALES CHANNEL (TALKING ABOUT PRODUCT)2. DELIVERY CHANNEL (HOME DELIVERY, INSTALLATION)3. SERVICE CHANNELTHE 3 NEED NOT BE SAME.

189Marketing Channels & Value NetworksMarketing channel/trade channel/distribution channel are set of intermediaries involved in process of making product or service available for use or consumption. Merchants (wholesalers, retailers)Agents (Brokers, sales agents, manufacturers representatives) Facilitators (transportation companies, independent warehouses, banks, insurance companies) In Managing its intermediaries, a firm must decide how much effort to devote to push vs. pull strategies.

CHANNEL LEVELS

EACH INTERMEDIARY WHO BRINGS PRODUCT AND ITS TITLE CLOSER TO BUYER CONSITUTES CHANNEL LEVEL. ZERO CHANNEL(Direct marketing channel) - Door to door ,home parties, mail order, telemarketing, TV selling,,internet selling manufacturer stores. ONE LEVEL TWO LEVEL THREE LEVEL

Intermediaries No. of Intermediaries Intensive,selective exclusiveTypes of intermediaries eg for cellphones

INTRODUCTION TO INTEGRATED MARKETING COMMUNICATIONS

by AAAA a concept of marketing communications planning that recognizes the added value of a comprehensive plan that evaluates the strategic roles of a variety of communications disciplines-for example, general advertising, direct response, sales promotion and public relations-and combines these disciplines to provide clarity, consistency, and maximum communications impact through the seamless integration of discrete messages

Thus IMC can help us deliverDifferent media for same message: Consistency over time: LuxDifferent message over different audience: Fair & Lovely- Urban Vs Rural areas Same message in different languages: Coke

MARKETING COMMUNICATIONS MIXALSO CALLED PROMOTION MIX CONSISTS OFADVERTISING SALES PROMOTIONPUBLIC RELATIONS AND PUBLICITYPERSONAL SELLINGDIRECT MARKETINGMERCHANDISINGEVENT SPONSORSHIPPRODUCT DESIGNONLINE ADVERTISINGWORD OF MOUTH RECOMMENDATION

COMMON COMMUNICATION PLATFORMSCatalogsMailingsTelemarketingElectronic shoppingTV shoppingFax mailE-mailVoice mailSales presentationsSales meetingsIncentive programsSamplesFairs and trade showsPress kitsSpeechesSeminarsAnnual reportsCharitable donationsSponsorshipsPublicationsCommunity relationsLobbyingIdentity mediaCompany magazineEventsContests, games, sweepstakes, lotteriesPremiums and giftsSamplingFairs & trade showsExhibitsDemonstrationsCouponsRebatesLow-interest financingEntertainmentTrade-in allowancesContinuity programsTie-insPrint and broadcast adsPackagingouterPackaging insertsMotion picturesBrochures & bookletsPosters and leafletsDirectoriesReprints of adsBillboardsDisplay signsPoint-of-purchase displaysAudio-visual materialSymbols and logosVideotapes

DIRECT MARKETINGPERSONAL SELLINGPUBLIC RELATIONSSALES PROMOTIONADVERTISING

PROMOTIONAL TOOLS UNDERSTANDING UNIQUE CHARACTERISTICS AND COSTS OF EACHADVERTISING Strategic and long term, most economical form of consumer contact, transforms products into brands. Persuasive, expressive public presentation hence perceived as legitimate but impersonal .SALES PROMOTION Short term, tactical Creates quick response but not effective in building long-run brand preference.PUBLIC RELATIONS & PUBLICITY High credibility, dramatization, catch buyers off guard.PERSONAL SELLING Useful in later stages but long-term cost commitment.DIRECT MARKETING Customized, interactive, secrecy.MERCHANDISING or Point of Purchase activity for traffic building in outlets especially self-service outlets

PROMOTIONAL TOOLSEVENT SPONSORSHIP should be relevant target audience,involving.PRODUCT DESIGN and packaging and brand name acts as silent salesmen.ONLINE ADVERTISING internet users few, but interactive.WORD OF MOUTH recommendations need to be stimulated through proper identification of opinion leaders

199PRODUCT LIFE CYCLE

200 1. INTRODUCTION2. GROWTH3. MATURITY 4. DECLINEPLC PHASES

201PRODUCT LIFE CYCLE THE LAUNCH PHASE DEFINING THE POSITIONING; ACHIEVING WHOLESALE DISTRIBUTION; ACHIEVING RETAIL DISTRIBUTION; AROUSING CONSUMER AWARENESS; ATTRACTING CONSUMER TRIAL; CONVERTING CONSUMERS TO THE PRODUCT; AND ACHIEVING BUYING CONTINUITY

202

FOUR INTRODUCTORY MARKETING STRATEGIES PromotionHighLowHighLowPriceRapid- skimming strategySlow- skimming strategyRapid- penetration strategySlow- penetration strategy

203PRODUCT LIFE CYCLE THE GROWTH PHASE INCREASING THE USER BASE; EXPANDING DISTRIBUTION; EXPANDING SHELF FACINGS; INCREASING PURCHASE FREQUENCY; SHIFT FROM PRODUCT AWARENESS ADVERTISING TO BRAND PREFERENCE ADVERTISING; LOWER PRICES TO ATTRACT NEW LAYER OF PRICE SENSITIVE BUYERS ENSURING ADEQUATE INVENTORIES AT WHOLESALE AND RETAIL LEVELS; AND EXPLORING LINE EXTENSIONS

204 MATURITY PHASE1. GROWTH MATURITY - SALES GROWTH RATE DECLINE, LAGGARDS2. STABLE MATURITY - SALES FLATTEN; SALES GOVERNED BY POPULATION GROWTH & REPLACEMENT DEMAND3. DECAYING MATURITY - ABSOLUTE LEVEL OF SALES STARTS TO DECLINE, CUSTOMERS SWITCHING TO OTHER PRODUCTS

205PRODUCT LIFE CYCLE THE MATURITY PHASE RETAINING CURRENT USERS; ATTRACTING NEW USERS; RETAINING DISTRIBUTION; OPTIMISING PRODUCT LINE AND PACKAGING; AND OPTIMISING PRODUCT COSTS

206 MATURITY PHASE1. MARKET MODIFICATION VOLUME = NO. OF BRAND USERS X USAGE PER USERa) INCREASING USERSCONVERT NON-USERSENTER NEW MARKET SEGMENTSSNATCH COMPETITORS CUSTOMERSb) INCREASING USAGEMORE FREQUENT USEMORE USAGE PER OCCASIONNEW AND MORE VARIED USES2. PRODUCT MODIFICATION3. MARKETING MIX MODIFICATION

207PRODUCT LIFE CYCLE REJUVENATION DEVELOP AND QUALIFY MAJOR PRODUCT IMPROVEMENT; REPOSITION PRODUCT VIA ADVERTISING; ACHIEVE NEW DISTRIBUTION OUTLETS; ACHIEVE CONSUMER TRIAL AND CONVICTION; AND ATTRACT NEW USERS AND NEW USES.

208PRODUCT LIFE CYCLE DECLINE PHASE RETARDING ATTRITION IN USER BASE; ATTRACTING BARGAIN BUYERS; RESTRICTING PRODUCT LINE; REDUCING PRODUCT COSTS; RETARDING DISTRIBUTION LOSSES; MAXIMISING IMMEDIATE PROFITS

209PRODUCT LIFE CYCLE THE NEW PRODUCT / ESTABLISHED PRODUCT DISTINCTIONFOR THE NEW PRODUCT: ASCERTAIN THAT YOU REALLY HAVE A VIABLE PRODUCT BEFORE YOU START MARKETING IT; CONCENTRATE EFFORTS ON DEVELOPING EFFECTIVE POSITIONING AND ADVERTISING THAT REFLECTS THAT POSITIONING OPTIMALLY; WITH THE TRADE, AIM AT DISTRIBUTION BEFORE ANYTHING ELSE; CLEARLY ESTABLISH THE PRICE LEVEL THAT YOU WANT.

210PRODUCT LIFE CYCLE THE NEW PRODUCT / ESTABLISHED PRODUCT DISTINCTIONFOR THE ESTABLISHED PRODUCT: DO NOT WANTONLY CHANGE POSITIONING OR ADVERTISING UNLESS YOU HAVE REAL EVIDENCE THAT THEY ARE FUNDAMENTALLY WRONG; ENSURE YOUR PRODUCT HAS SUFFICIENT SUPERIORITY TO THE COMPETITION TO MAKE IT VIABLE IN THE MARKET; CONCENTRATE AS A FIRST PRIORITY ON HOLDING THE VOLUME YOU HAVE INHERITED AND THE USER BASE THAT HAS BEEN BUILT UP; SEEK TO FIND EXPANSION POSSIBILITIES FOR NEW VOLUME - NEW USERS, NEW TRADE OUTLETS, VOLUME PACKS AND PROMOTIONS; UNDERSTAND AND RESPECT THE PRODUCTS AND THE BRANDS HERITAGE.

211PRODUCT LIFE CYCLE STRATEGIES (SEE APPENDIX NO.6)

IntroductionGrowthMaturityDeclineSalesTime

212PRODUCT LIFE CYCLE STRATEGIESSales Low salesRapidly risingPeak salesDeclining salessales

CostsProfitsCustomers

CompetitorsHigh cost per customerNegativeInnovatorsFewAverage cost per customer Rising profitsEarly adoptersGrowing numberLow cost percustomerHigh profitsMiddle majorityStable numberbeginning to declineLow cost percustomerDeclining profitsLaggardsDeclining numberMarketing Objectives

Create product awareness and trial Maximize market shareMaximize profit whiledefending market shareReduce expenditure andmilk the brand

Characteristics

213Strategies

Product

Price

Distribution

Advertising

Sales Promotion

Offer a basic product

Charge cost-plus

Build selective Distribution

Build product awareness among early adopters anddealers Use heavy salespromotion to entice trialOffer productextensions, service,warrantyPrice to penetrate market

Build intensive distribution

Build awareness andinterest in the massMarket

Reduce to takeadvantage of heavy consumer demand

Diversify brands and models

Price to match or Best competitors

Build more intensiveDistribution

Stress brand differences and Benefits

Increase to encourage Brand switching

Phase out weak items

Cut price

Go selective: Phase out unprofitableOutlets

Reduce to levelNeeded to retainHard-core loyalsReduce to minimallevel

214

Innovators

2.5%EarlyAdopters13.5%EarlyMajority34%LateMajority34%Laggards16%

Percentage of Adopters by Category Sequence

215Adopter CategoriesADOPTERDESCRIPTIONRELATIVE PERCENTAGECATEGORYPOPULATION WITHIN THE THAT EVENTUALLY ADOPTSInnovatorsVenturesome - very eager to try new Ideasacceptable if risk is daring; more 2.5%cosmopolite social relationships; communicates with other innovators.

Early AdoptersRespect - more integrated into the localsocial system; the persons to check with13.5%before adopting a new idea; category contains greatest number of opinion leaders; are rolemodels.

Early Majoritydeliberate - adopt new ideas just prior to theaverage time; seldom hold leadership positions;34.0deliberate for some time before adopting.

Late MajoritySkeptical- adopt new ideas just after the averagetime; adopting may be both an economic necessity34.0and a reaction to peer pressures;innovationsapproached cautiously.

LaggardsTraditional - the last people to adopt an innovation;most localite in outlook; oriented to the past;16.0suspicious of the new.

100.0%

216 Forecasting & Demand MeasurementDemand can be measured at 6 product levels (item, form, line, company sales, industry sales, all sales), 5 space levels (customer, territory, region, country, global) & 3 time levels (short-term, medium & long-term).

217Market can be defined as.

Potential market = interest in a market offer.

Available market = interest + income + access.

Qualified available market = interest + income + access + qualifications (beer 21 yrs.)

Target market = part of qualified available market that company decides to pursue.

Penetrated market

These definitions are a useful tool for market planning.

218 Market DemandMarket demand for a product is the total volume that would be bought by a defined customer group in a defined geographical area in a defined time period in a defined marketing environment. (e.g. recession V/s prosperity) under a defined marketing program. Hence, market demand is a function.

Market minimum (base sales) & market potential (upper limit).

219Market sensitivity of demand (expansible market V/s non-expansible market)

Organizations selling in non-expansible market must accept the market size (level of primary demand for product class) & direct effort to winning larger market share (selective demand).

Market penetration index (current level of market demand vis--vis potential demand level) & companys share penetration index (current market share vis--vis potential market share).Market forecast is market demand corresponding to one level of industry marketing expenditure.

220 Company DemandCompany demand is companys estimated share of market demand at alternative levels of company marketing effort in a given time period. This depends on size & effectiveness of marketing expenditure relative to competitors.

Company sales forecast is expected level of company sales based on chosen marketing plan and an assumed marketing environment.

221Sales quota is sales goal set for a product line, company division or sales representative. Sales quota higher than sales forecast.

Sales budget is conservative estimate used for current purchasing, production & cash flow decisions.

Company sales potential is maximum company demand as company marketing effort increases relative to competition. This will always be less than market potential.

222 Estimating Current DemandTotal Market Potential

Total Market Potential = Potential No. of Buyers X Average Quality purchased by a buyer X Price

Chain Method Potential for sweetened milk for urban adults = Urban population above 18 years X Personal discretionary income (urban) per capita X Average percentage of discretionary income spent on food X Average percentage of amount spent on food that is spent on beverages X Average percentage of amount spent on beverages that is spent on dairy beverages X Expected percentage of amount spent on dairy beverages that will be spent on sweetened milk.

223Market Buildup Method Identify all potential buyers in each market & estimating their potential purchases (based on some norm e.g. lathes per hundred employees or per Rs. 1 million sales).

Multiple-factor Index Method can use existing market indices or develop own market indices based on assumptions.RK Swamy BBDO Guide for urban markets uses 18 variables.MICA Rural Market Ratings for rural markets uses 6 variables.

Developing own market indices.

224 MULTIPLE FACTOR BUYING POWER INDEX

Step 1.Specific customer profile in terms of factors. E.g. Demographic > 30 yearsEconomic MHI > 20,000Step 2.For each market, calculate percentage of each factor V/s totale.g. Demographic % = Markets men > 30 years All India men> 30 yearsStep 3.Determine importance weight of each factorDemographic = 40%Economic = 60%Step 4.BPI of a market = 0.4 X Demographic % + 0.6 X Economic %

225CATEGORY DEVELOPMENT INDEXNATIONALMUMBAI

BANGALORE

DELHI

CALCUTTA BPI100

14

7

5

1 ESTIMATED SALES (BASED ON BPI)2,00,000

28,000

14,000

10,000

2,000ACTUAL SALES2,00,000

56,000

42,000

10,000

1,000 CDI -

200

300

100

50

226BRAND DEVELOPMENT INDEXNATIONALMUMBAI

BANGALORE

DELHI

CALCUTTA BPI100

14

7

5

1 ESTIMATED SALES (BASED ON BPI) 30,000

4,200

2,100

1,500

300ACTUAL SALES 60,000

8,400

4,200

2,250

300 BDI -

200

200

150

100SAY FIRM A HAS A MARKET SHARE OF 15% = 30,000

227 Estimating Future DemandTime series

Econometric Models of forecasting involving 3 stages macroeconomic forecast, industry forecast, company sales forecast.

For business buyers-- buyer-intention surveys.

228All forecasts are based on

What people say survey of buyers opinions or those close to them.

What people do test market.

What people have done analysing records of past buying behaviour or using time-series analysis or statistical demand analysis.

229MethodsSurveys of buyers intentions eg. Consumer durables, industrial products. Buyers should have clear intentions, will be implementing them, willing to disclose.

Composite of sales force opinion need to take with pinch of salt as pessimistic or optimistic. Also tend to be unaware of larger economic developments. May deliberately underestimate, or have no time.To encourage better estimating ,share records of past forecasts with actual sales & also description of company assumptions on business outlook, competitor behaviour & market plans. Benefits are that sales force best single group, greater confidence & incentive to achieve (as self driven) & the grass roots forecast provides detailed estimates broken down by product, territory, customer & sales rep.

Expert Opinion Dealers, Distributors, suppliers, marketing consultants, Trade associations. Group discussion method or pooling of individual estimates or Delphi method.

230Past-sales analysis

Time Series break down past sales into trend, cycle, seasonal & erratic & project into future.

Exponential smoothing consists of projecting the next periods sales by combining an average of past sales and the most recent sales, giving more weight to the latter.

Statistical demand analysis consists of measuring the impact level of each of a set of causal factors (e.g., income, marketing expenditures, price) on the sales level.

Econometric analysis consists of building sets of equations that describe a system, and proceeding to fit the parameters statistically.

5)Market test method- especially desirable in forecasting new product sales or established product sales in new distribution channel or territory.

231Organizational Buying Behavior

Organizational buying behaviour Organizational Buying is the decision-making process by which formal organizations establish the need for purchased products and services and identify , evaluate, and choose among alternative brands and suppliers.Organizations could be corporate, manufacturing firms,Service firms,Institutional & Government markets.

Business Market V/S Consumer Market1. Fewer buyers2. Larger buyers3. Close supplier-customer relationship - Customization4. Geographically oriented buyers5. Derived demand -business marketer must closely monitor buying patterns of ultimate consumers.6. Inelastic demand - in short run as producer cannot make quick changes in production methods, also small percentage of items total cost.7. Fluctuating demand - given 10% increase in consumer demand can cause 200% increase in business demand.8. Professional purchasing - Policies, constraints, requirements.9. Several buying influences - buying committees10. Direct purchasing11. Leasing - e.g. Heavy construction equipment, computers, etc.12. Reciprocity - Chemical manufacturer & Paper manufacturer

Buying Situations1. Straight rebuy - recorder on routine basis automatic recording system from approved list of suppliers. Insuppliers & outsuppliers strategy.2. Modified rebuy - modifying in product specifications. Prices, delivery requirements or other terms.3. New task - Buying for first time * Greater cost or risk, more the decision participants & greater the information gathering.* Missionary sales force used by marketer* Mass media in awareness stage, stage sales people in interest stage & technical sources in evaluation stage.

Participants in Business Buying ProcessStraight rebuy & modified rebuy situations- purchasing agent important.

New buy- engineering or other departments.

Purchasing agent dominate in selecting suppliers.

Buying roles in Buying centre1.Initiators - Users or others.2.Users - Users may initiate & help define product requirements.3. Influencers - help define specifications & provide information for evaluating alternatives technical personnel.4. Decider - decide on product requirements & suppliers.5.Approver - authorize actions of decider buyer.6.Buyer - formal authority to select suppliers, negotiate.7.Gatekeeper - Prevent sellers or info reaching buying center.e.g. - purchasing agents, telephone, operators, receptionists.

Major influences on Industrial Buying BehaviourBusiness buyers responds both to economic & personal factors. Personal (treatment etc)when similarity in supplier offers.

ENVIRONMENTALLevel of demand Economic outlookInterest rateRate of technological changePolitical and regulatory developmentscompetitive developmentsSocial responsibility concerns

ORGANIZATIONAL

Objectives

Policies

Procedures

Organizational Structures

SystemsINTERPERSONAL

Interest

Authority

Status

Empathy

PersuasivenessINDIVIDUAL

AgeIncome Education Job positionPersonalityRisk attitudesCultureBUSINESSBUYER

Trends in Organizational Buying1.Purchase department upgrading2. Centralized purchasing - in multidivisional companies3. Decentralized purchasing for small ticket items.4.Long-term contracts5.Purchasing performance evaluation & rewards hence pressure put on suppliers.6.Just- in-time7.Single sourcing & early supplier involvement.

Purchasing / Procurement Process(Buy Phases)1.Problem recognition - as a result of internal or external stimuli2.General need description - items general characteristics, attributes & quantity.3.Product specification- Technical specifications.4.Supplier search - buyer can examine trade directories, computer search, trade shows, advertisements, recommendations of others.5.Proposal solicitation - Buyer invites qualified suppliers to submit proposal, make presentations.6.Supplier selection - based on important factors e.g. product reliability, technical service, price, supplier flexibility, reputation.7.Routine order specification - Trend especially in MRO items is blanket contract/ stockless purchase plan.8.Performance review

Buying stages in buying classes BUYCLASSES NEW TASKMODIFIED STRAIGHTREBUY REBUY 1.Problem recognitionYesMaybeNo 2. General need description Yes Maybe No 3. Product specification YesYesYes 4. Supplier search YesMaybe NoBUYPHASES 5. Proposal solicitation Yes Maybe No 6. Supplier selection Yes Maybe No 7. Order-routine specification Yes Maybe No 8. Performance review Yes YesYes

Vendor analysisAn example of vendor AnalysisRating scale

ATTRIBUTESIMPORTANCE(1)(2)(3)(4)WEIGHTSPOORFAIRGOODEXCELLENT

Price.30XSupplier reputation.20XProduct reliability.30XService reliability.10XSupplier flexibility.10X

Total score: .30(4) + .20(3) + .30(4) + .10(2) + .10(3) = 3.5