PRINCIPLES OF MARKETING

HEALTH DRINKPRESENTED TO: PROF. ZIA UR REHMAN PRESENTED BY: M. Zahid Naeem M. Wasif Tofique M. Noman Idrees M. Usman Ishaq Hassan Raza Bhatti Bilal Ismat Ullah BC08-427 BC08-418 BC08-401 BC08-410 BC08-418 BC08-420

B.Com (Hons) 5th Semester Section (F)

HAILEY COLLEGE OF COMMERCE UNIVERSITY OF THE PUNJAB LAHORE1

Market Segmentation and TargetingTarget market is a specific market segment (people or organization) on which a seller focuses on its efforts is called a target market. In target market there are two kinds: 1. Market Aggregation 2. Market Segmentation In defining the market or markets it will sell to, an organization has its choice of two general approaches. In one, the total market is viewed as a single unitas one mass, aggregate market. This approach leads to market aggregation. In the other approach, the total market is seen as being composed of many smaller, homogeneous segments. This approach leads to strategy of market segmentation, in which one or more or these segments are selected as target markets.

Market Factors to Analyze:In market people are with: 1) Wants to satisfy 2) The money to spend, and 3) The willingness to spend it. Therefore in the course of selecting the target markets, management should analyze these three components in detail. The decision between market aggregation and market segmentation is an important one because a company view of its market greatly affects its marketing mix and possibly its production, research and development and other operating departments.

Market Aggregation:By adopting the strategy of market aggregation, an organization treats its total market as a unit---as one mass, aggregate market whose parts are considered to be alike in all major aspects. Basically, market aggregation is production oriented strategy. It enables a company to maximize its economies of scale in production, physical distribution and promotion. Producing and marketing

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one product for one market means longer production runs at lower unit costs. Inventory cost is minimized when there is no variety of colors and sizes of products. Warehousing and transportation efforts are most efficient when one product is going to one market. In market aggregation we employ shotgun approach (one program broad target).

Market Segmentation:In market segmentation, the total heterogeneous market far a product is divided into several segments, each of which tends to be homogenous in all significant aspects. Management then selects one or more of these segments as the organizations target market. Finally, a separate marketing mix is developed for each segment to this target market. The market for any product is normally made up of several segments. A market after all is the aggregate of consumers of a given product. And, consumer (the end user), who makes a market, are of varying characteristics and the user buying behavior. There are different factors contributing for varying mind set of consumers. It is thus natural that many differing segments occur within a market. In order to capture this heterogeneous market for any product, marketers usually divide or disintegrate the market into a number of sub-markets/segments and the process is known as market segmentation. Thus we can say that market segmentation is the segmentation of markets into homogenous groups of customers, each of them reacting differently to promotion, communication, pricing and other variables of the marketing mix. Market segments should be formed in that way that difference between buyers within each segment is as small as possible. Thus, every segment can be addressed with an individually targeted marketing mix. The importance of market segmentation results from the fact that the buyers of a product or a service are no homogenous group. Actually, every buyer has individual needs, preferences, resources and behaviors. Since it is virtually impossible to cater for every customers individual characteristics, marketers group customers to market segments by variables they have in common. These

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common characteristics allow developing a standardized marketing mix for all customers in this segment. Through segmentation, the marketer can look at the differences among the customer groups and decide on appropriate strategies/offers for each group. This is precisely why some marketing gurus/experts have described segmentation as a strategy of dividing the markets for conquering them.

MARKETING STRATEGY AND MARKET SEGMENTATION: When it comes to marketing strategies, most people spontaneously think about the 4P (Product, Price, Place, Promotion) maybe extended by three more Ps for marketing services (People, Processes, Physical Evidence). Market segmentation and the identification of target markets, however, are an important element of each marketing strategy. They are the basis for determining any particular marketing mix. Basic steps in marketing strategy are as follows:-

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Market segmentation is a customer oriented philosophy. We first identify the needs of customer within a submarket and then satisfy those needs. In market segmentation, we employ a rifle approach (separate programs, pinpointed targets) in our marketing activities. In adopting the target market strategy management can further chose either single segmentation or multiple segmentation.

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TARGET MARKET STRATEGIESThere are several different target-market strategies that may be followed. Targeting strategies usually can be categorized as one of the following: Single-segment strategy: strategyIt is also known as a concentrated strategy. One market segment (not the entire market) is served with one marketing mix. A single-segment approach often is the strategy of choice for smaller companies with limited resources. A single segmentation strategy involves selecting as the target market one homogenous group from within the total market. For example, McDonalds target those people whose income is more than 30000 rupees means their customers are of the one nature in the sense that of income based.

Selective specialization/ Multiple Segmentation:specializationThis is a multiple-segment strategy, also known as a differentiated strategy. Different marketing mixes are offered to different segments. The product itself may or may not be different - in many cases only the promotional message or distribution channels vary. In the strategy of multiple segmentation two or more different groups of potential customers are identified as target market. For example, Lux, Rexona or Lifebuoy, for thse every product the marketing mix will be seprate from each other.

Product specialization- The firm specializes in a particular product specializationand tailors it to different market segments.

Market specialization- The firm specializes in serving a particular specializationmarket segment and offers that segment an array of different products.

Full market coverage - The firm attempts to serve the entire market.This coverage can be achieved by means of either a mass market strategy in which a single undifferentiated marketing mix is offered to the entire market, or by a differentiated strategy in which a separate marketing mix is offered to each segment 6

A firm that is seeking to enter a market and grow should first target the most attractive segment that matches its capabilities. Once it gains a foothold, it can expand by pursuing a product specialization strategy, tailoring the product for different segments, or by pursuing a market specialization strategy and offering new products to its existing market segment. Choosing the target market is a part of marketing strategy formulation, the other two parts being positioning and marketing mix formulation. Without right targeting, the firm cannot formulate an effective strategy. It is through careful segmentation and targeting that firm pick up right group of consumers. Also, it is through this process that the firm gain vital knowledge about the need and buying behavior of the consumer in each segment and the differences between one segment and the other. And, it is by using this knowledge that the firm develops marketing programmes that match the specific requirement of different segments. In other words, segmentation and targeting help the firm not only the characteristics of each of the segments but also the distinctive excellence that is required for catering to the specific needs of the consumers in each of them. Another strategy whose use is increasing is individual marketing, in which the marketing mix is tailored on an individual consumer basis. While in the past impractical, individual marketing is becoming more viable thanks to advances in technology.

DECISIONS INVOLVED IN TARGETING STRATEGY INCLUDE:INCLUDE

1. which segments to targeting. 2. how many products to offer. 3. which products to offer in which segments.

TARGETING STRATEGY DECISIONS ARE INFLUENCED BY: Market maturity. Diversity of buyers' needs and preferences. Strength of the competition. The volume of sales required for profitability. profitability

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Benefits of Market Segmentation:Following are the benefits of market segmentation: 1) Management can do a better marketing job, 2) Management can make more efficient use of marketing resources, 3) A small firm with limited resources might compete very effectively in one or two market segments, and 4) Advertising media can be used more effectively because promotional messages can be more specifically aimed toward each segment of the market.

ADVANTAGES OF MARKET SEGMENTATIONVarious advantages of market segmentation are:1. Helps distinguish one customer group from another within a given market. 2. Facilitates proper choice of target market. 3. Facilitates effective tapping of the market. 4. Helps divide the markets and conquer them. 5. Helps crystallize the needs of the target buyers and elicit more predictable responses from them ; helps develop marketing programmes on a more predictable base; helps develop market offer that are most suited to each group. 6. Helps achieve the specialization required in product; distribution, promotion, and pricing for matching the customer group and develop marketing offers and appeal that match the need of each group. 7. Makes the marketing effort more efficient and economic. 8. Helps concentrate efforts on the most productive and profitable segment, instead of frittering them over irrelevant, or unproductive, or unprofitable segment.9. Helps spot the less satisfied segments and succeed by satisfying such

segments.

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EVALUATION OF THE SEGMENTS:Whether market segmentation is successful or not can be evaluated by the following questions-

1. Is it sizeable: Size-wise, the popular segment is a bigger compared to the premium segment. In term of tonnage, of the total market of around 6, 00,000 tones, the popular segment account for 80 percent and the premium segment for the remaining 20 percent. If the firm wants a very large volume, it has to think of the popular segment. At the same time, it has to note that the premium segment too is sizeable, as it account for over 120,000 tones. In term of value, the premium segment is even more sizeable, formerly nearly 30 percent of the total market. Clearly, the segment cannot be ruled out as lacking in size.

2. Is it growing: Growth rate and likely future position of the segment will be the next consideration in the evaluation process. Usually, business firms seek out the high growth segments. Analysis will readily indicate to the firm that in bath drinks, the premium segment happens to be the high growth segment. Whereas the popular segment has been growing at 10 percent per annum, the premium segment has been growing at over 20 percent annum. When this fact is taken into consideration, the firms choice may tilt toward the premium segment. The tilt will be particularly pronounced if the firms natural disposition is to strive for a position in the high growth segment of the business.

3. Is it profitable: Next consideration will be the extend of profitability. In the present example, the firms quickly sense that the premium segment is more profitable one. Even a relatively lower volume in the segment may bring in good returns. On the contrary, in the popular segment, a much larger volume will be necessary for the business to be viable, since prices and margins in the segment are low. Another point is that costs of marketing, distribution and promotion in the business are quite high and are constantly on the rise. Costs of launching a

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new brand are particularly high. The market is very competitive, aggressive promotional support through expensive media like TV becomes essential. In this background, the firm may come to the conclusion that it may be worthwhile to gamble in the premium segment rather than the popular segment.

4. Is it accessible: The firm has to now consider whether the segments are accessible to it. This may need further analysis. The market realities will have to be taken into consideration. The popular segment will be accessible only to the firm with a cost advantage, since price is a major determinant in this segment. Premium segment will be accessible only to firms, which enjoy a differentiation advantage, and which are also marketing savvy. At the upper end of the segment, HLLs Pears and Dove are well entrenched. Several other brands of different companies are competing in the segment. The firm has to take due note of this reality. At the same time, analysis also reveals that new brands do keep entering the segment every now and then, and some of them do manage to stay. So, the firm has no reason to believe that the premium segment is not accessible to it, unless it is convinced that it is very weak in marketing.

5. Is it compatible with the firms resources and capabilities: Having reached the conclusion that the premium segment is sizeable, growth oriented, profitable and accessible, the firm has to now find out if the segment matches its resources. For some firms, the popular segment may be the natural choice and for others, the premium segment. And, for some other choosing both. The premium segment is a highly competitive segment. Only firms endowed with strong resources and an aggressive marketing strategy/culture can fight and survive in the market. The firm therefore has to assess whether the particular segments are compatible with its resources and capabilities. Thus by this following analysis a firm can easily evaluate it market segmentations and also can tackle its problem.

ATTRIBUTES OF EFFECTIVE SEGMENTATION

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Market segmentation is resorted to for achieving certain practical purpose. For example, it has to be useful in developing and implementing effective and practical marketing programmes. For this to happen, the segments arrived at must meet certain criteria such:-

a. Identifiable: b. Accessible: c. Sizeable:

The differentiating attributes of the segments must be

measurable so that they can be identified. The segments must be reachable through communication

and distribution channels. The segments should be sufficiently large to justify the

resources required to target them. A very small segment may not serve commercial exploitation.

d. Profitable: - There is no use in locating segments that are sizeable butnot profitable.

e. Unique needs: To justify separate offerings, the segments must responddifferently to the different marketing mixes.

f. Durable: The segments should be relatively stable to minimize the cost offrequent changes.

g. Measurable:

The potential of the segments as well as the effect of a

specific marketing mix on them should be measurable.

h. Compatible: capabilities.

Segments must be compatible with firms resources and

CONDITIONS FOR EFFECTIVE SEGMENTATIONFollowing are the conditions for effective segmentation: 1) The basis for segmentingthat is, the characteristics used to categorize customersmust be measurable and the data must be accessible. 2) The market segment itself should be accessible through existing marketing institutionschannels of distribution, advertising media, company sales force, and so onwith a minimum of cost and waste. 3) Each segment should be large enough to be profitable.

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REASONS FOR MARKET SEGMENTATIONSegmentation is the basis for developing targeted and effective marketing plans. Furthermore, analysis of market segments enables decisions about intensity of marketing activities in particular segments. A segment-orientated marketing approach generally offers a range of advantages for both, businesses and customers.

1 . Facilitates proper choice of target marketing:marketing:Segmentation helps the marketers to distinguish one customer group from another within a given market and thereby enables him to decide which segment should form his target market.

2 . Higher Profits: It is often difficult to increase prices for the whole market. Nevertheless, it is possible to develop premium segments in which customers accept a higher price level. Such segments could be distinguished from the mass market by features like additional services, exclusive points of sale, product variations and the like. A typical segment-based price variation is by region. The generally higher price level in big cities is evidence for this. When differentiating prices by segments, organizations have to take care that there is no chance for cannibalization between high-priced products with high margins and budget offers in different segments. This risk is the higher, the less distinguished the segments are.

3 . Facilitates tapping of the market, adapting the offer to the target:Segmentation also enables the marketer to crystallize the needs of target buyers. It also helps him to generate an accurate prediction of the likely responses from each segment of the target buyer. Moreover, when buyers are handled after careful segmentation, the responses for each segment will be homogeneous. This in turn, will help the marketer develop marketing offer/programmers that most suited to each groups. He can achieve specialization that is required in product, distribution, promotion and pricing for

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matching the particular customer group and develop offers and appeals for the segmented group.

4 . Stimulating Innovation: An undifferentiated marketing strategy that targets at all customers in the total market necessarily reduces customers preferences to the smallest common basis. Segmentations provide information about smaller units in the total market that share particular needs. Only the identification of these needs enables a planned development of new or improved products that better meet the wishes of these customer groups. If a product meets and exceeds a customers expectations by adding superior value, the customers normally is willing to pay a higher price for that product. Thus, profit margins and profitability of the innovating organizations increase.

5 . Makes the marketing effort more efficient and economic: Segmentation ensures that the marketing effort is concentrated on well defined and carefully chosen segments. After all, the resources of any firm are limited and no firm can normally afford to attack and tap the entire market without any delimitation whatsoever. It would benefit the firm if the efforts were concentrated on segments that are more profitable and productive ones. Segmentation also helps the marketer assess as to what extend existing offer from competitors match the needs of different customer segments. The marketer can thus identify the relatively less satisfied segments and succeed by concentrating on them and satisfying their needs.

6 . Benefits the customer as well: Segmentation brings benefits not only to the marketer, but to the customer as well. When segmentation attains higher levels of sophistication and perfection, customers and companies can conveniently settle down with each other, as at such a stage, they can safely rely on each others discrimination. The firm can anticipate the wants of the customers and the customers can anticipate the capabilities of the firm.

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7 . Sustainable customer relationships in all phases of customer lifecycle: Customers change their preferences and patterns of behavior over time. Organizations that serve different segments along a customers life cycle can guide their customers from stage to stage by always offering them a special solution for their particular needs. For example, many car manufacturers offer a product range that caters for the needs of all phases of a customer life cycle: first car for early teens, fun-car for young professionals, family car for young families, etc. Skin care cosmetics brands often offer special series for babies, teens, normal skin, and elder skin.

8 . Targeted communication: It is necessary to communicate in a segment-specific way even if product features and brand identity are identical in all market segments. Such a targeted communications allows to stress those criteria that are most relevant for each particular segment (e.g. price vs. reliability vs. prestige).

9 . Higher market Shares: In contrast to an undifferentiated marketing strategy, segmentation supports the development of niche strategies. Thus marketing activities can be targeted at highly attractive market segments in the beginning. Market leadership in selected segments improves the competitive position of the whole organization in its relationship with suppliers, channel partners and customers. It strengthens the brand and ensures profitability. On that basis, organizations have better chances to increase their market shares in the overall market.

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BASES FOR SEGMENTATIONMarkets can be segmented using several relevant bases. There are huge number of variables which leads to market segmentation. They comprise easy to determine demographic factors as well as variables on user behavior or customer preferences. Segmentation is done for consumer market and industrial market.

BASES FOR SEGMENTATION IN CONSUMER MARKETConsumer characteristics: market can be segmented on the following customer

1. Geographic Segmentation. 2. Demographic Segmentation. 3. Psychographic Segmentation.4.

Behaviouralistic Segmentation.

1)

Geographic Segmentation: - Potential customers are in a local,state, regional or national marketplace segment. If a firm selling a product such as farm equipment, geographic location will remain a major factor in segmenting your target markets since their customers are located in particular rural areas. While for retail store, geographic location of the store is one of the most important considerations, in this case city areas are preferred. Segmentation of customers based on geographic factors are:a.

Region: - Segmentation by continent / country / state / district /city.

b.

Size: - Segmentation on the basis of size of a metropolitanarea as per its population size.

c.

Population density: - Segmentation on the basis ofpopulation density such as urban / sub-urban / rural etc.

d.

Climate: - Segmentation as per climatic condition or weather.

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2)

Demographic Segmentation: - Segmentation of customers basedon demographic factors are:1) Regional Population Distribution 2) Urban-suburban-rural population 3) Age4) Sex (Segmentation on the basis of Male and Female. It is also a

Dominant Factor.) 5) Family Life Cycle Stage 6) Others: race, religion, nationality, education, occupation

3)

Psychographic Segmentation: -

Psychographic Segmentation

groups customers according to their life-style and buying psychology. Many businesses offer products based on the attitudes, beliefs and emotions of their target market. The desire for status, enhanced appearance and more money are examples of psychographic variables. They are the factors that influence your customers' purchasing decision. A seller of luxury items would appeal to an individual's desire for status symbols Psychographic Segmentation includes variables such as:a. Activities. b. Interests. c. Opinions. d. Attitudes.e. Values. Values

Activities, Interests, and Opinions (AIO) surveys are one tool of measuring Activities, Interests lifestyle.

4)

Behaviouralistic Segmentation: -

Markets can be segmented

on the basis of buyer behaviour as well. Since all Segmentation is in a way

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related to buyer behavior, one might be tempted to ask why buyer behavior-based segmentation should be a separate method. It is because there is some distinction between buyers characteristics that are reflected by their geographic, demographic and psychographic profiles, and their buying behaviour. Marketers often find practical benefit in using buying behaviour as a separate segmentation base in addition to bases like geographic, demographics, and psychographics. The primary idea in buyer behaviour segmentation is that different customer groups expect different benefits from the same product and accordingly, they will be different in their motives in owing it and their behavior in buying it. Variables of buyer behavior are:a.

Benefit sought: - Quality / economy / service / look etc ofthe product.

b.

Usage rate: - Heavy user / moderate user / light user of aproduct.

c.

User status: - Regular / potential / first time user / irregular/occasional.

d.

Brand Loyalty: - Hard core loyal / split loyal / shifting /switches.

e. Readiness to buy.f.

Occasion: - Holidays and occasion stimulate customer to Occasionpurchase products.

g.

Attitude toward offering: - Enthusiastic / positive attitude /negative attitude / indifferent / hostile.

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SEGMENTATION BASES FOR CONSUMER MARKETSGeographic Region City or Metro-area Size Urban-Rural Climate Demographic Income Age Gender Family Life Cycle Social Class Education Occupation Psychographic Personality Life style Values

POSSIBLE MARKET SEGMENTSPunjab, Sindh and census region Population Under 1000000; 25000005000000; 5000001-10000000 etc Urban, Suburban, Rural Hot, Cold, Sunny, Rainy, Cloudy Under Rs.25000; Rs.25000-50000; Rs.50001-75000; over Rs.75000. Under 6; 6-12, 13-19, 20-34, 35-49, 5064, 65 and over Male, Female Young, single; young, married, no children; etc Upper class, upper middle, lower middle, upper lower etc Grade school only, high school graduate, college graduate Professional, Manager, clerical, sales, student, homemaker, unemployed, etc Ambitious, Self-confident, aggressive, introverted, extroverted, sociable, etc Activities(golf, travel); Interests(politics, modern art); opinion(conservation, capitalism) Values and lifestyle, List of values.

Behavioral Benefits Desired Examples vary widely depending on product: appliancecost, quality, operating life; toothpasteno cavities, plaque control, bring teeth, good taste, low price Nonuser, light user, heavy user

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SEGMENTATION BASES FOR CONSUMER MARKETSUsage rate

POSSIBLE MARKET SEGMENTS

BASES FOR SEGMENTATION IN INDUSTRIAL MARKETIn contrast to consumers, industrial customers tend to be fewer in number and purchase larger quantities. They evaluate offerings in more detail, and the decision process usually involves more than one person. These characteristics apply to organizations such as manufacturers and service providers, as well as resellers, governments, and institutions. Many of the consumer market segmentation variables can be applied to industrial markets. Industrial markets might be segmented on characteristics such as:

1. Location. 2. Company type. 3. Behavioral characteristics.1)

Location

In industrial markets, customer location may be important in some cases. Shipping costs may be a purchase factor for vendor selection for products having a high bulk to value ratio, so distance from the vendor may be critical. In some industries firms tend to cluster together geographically and therefore may have similar needs within a region.2)

Company Type:

Business customers can be classified according to type as follows:

a. Company size:-Whether size

the company is a large scale industry / a

small scale industry. Large industry always tries to order in bulk commodities while opposite for small scale sector.

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b. Industry: -

Whether the industry is manufacturing industry / service

industry. Also sometime differentiation is done between public sector industry or a private sector industry.

c. Purchase Criteria: It involves quality, price, durability, and lead time.3) Behavioral CharacteristicsIn industrial markets, patterns of purchase behavior can be a basis for segmentation. Such behavioral characteristics may include:

Usage rate: Nonuser, light user, heavy user Buying status: potential, first-time, regular, etc. Purchase procedure: sealed bids, negotiations, etc.

Multi-level Segmentation: A Market can be segmented, usingseveral bases in successionWhile discussing about bases of segmentation we must discuss about multi-level segmentation, as it is not as through segmentation bases discussed above are mutually exclusive and a market can be segmented only with one particular base, on either / or basis. Since customer characteristic are spread over several variables, any market can be segmented through several bases. Different bases can be used in combination in segmenting a given market. They just have to be relevant for the concerned market. Actually, the different bases can be used in succession in a suitable order, and the market can be segmented at multi-levels. For example, a market can be segmented using the demographic base in the first instance, followed by the psychographic base and the buyer behavior/benefit base. Or, the market can be segmented using volume as the base in the first instance, followed by the demographic/psychographic/buyer behavior/benefit base. Assuming for example, that the firm first carries out volume segmentation of its market, it can know who the heavy user of its product are, but it cannot know the purpose for which they buy the product. The firm can then pick up the heavy users and carry out a multi-level segmentation, and continue its probe more deeply.

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Since each of these bases has several sub-bases, the numbers of levels in which a market can be segmented are indeed numerous. Actually, the aim should always be to go as deep as possible in segmenting the market so that segments that are most attractive and most suited can be chosen.

Multi-level segmentation enables better selection of target market and better choice of marketing mix: mixMulti-level segmentation enables the marketers to choose his target market better. It also helps him to make the winning strategy and strike the right product offer and the right marketing mix. With the information generated from multi-level segmentation, he can obtain a deeper understanding of the customers in each segment, their needs, buying motives and buying behaviour. He can understand in what way each of the different segments want the product to be, he can then tailor his product, marketing offer and promotional appeal, to fit the individual segment; he can select the priced, distribution method/channels, media vehicles, advertising massages and sales appeal, which will be appropriate.

Example of General Motors:GM has identified about 40 different customer needs and correspondingly, 40 different market segments in which it would present with its vehicles. For example, it has targeted the Pontiac at active, sports-oriented, young couples, the Chevrolet at price-conscious young families, the Oldsmobile at affluent families, and the Buick at older, more conservative couples.

MARKET TARGETINGINTRODUCTION: - There was a time when finding the best customers waslike throwing darts in the dark. Target marketing changed all that...Today's savvy 21

marketers know that finding their best prospects and customers hinges on well thought out targeted marketing strategies. Defining a target market requires market segmentation, the process of pulling apart the entire market as a whole and separating it into manageable, disparate units based on demographics. Target market is a business term meaning the market segment to which a particular good or service is marketed. It is mainly defined by age, gender, geography, socio-economic grouping, or any other combination of demographics. It is generally studied and mapped by an organization through lists and reports containing demographic information that may have an effect on the marketing of key products or services. Target Marketing involves breaking a market into segments and then concentrating your marketing efforts on one or a few key segments. Target marketing can be the key to a small businesss success. The beauty of target marketing is that it makes the promotion, pricing and distribution of your products and/or services easier and more cost-effective. Target marketing provides a focus to all of your marketing activities. Market targeting simply means choosing ones target market. It needs to be clarified at the onset that marketing targeting is not synonymous with market segmentation. Segmentation is actually the prelude to target market selection. One has to carry out several tasks beside segmentation before choosing the target market. Through segmentation, a firm divides the market into many segments. But all these segments need not form its target market. Target market signifies only those segments that it wants to adopt as its market. A selection is thus involved in it. In choosing target market, a firm basically carries out an evaluation of the various segments and selects those segments that are most appropriate to it. As we know that the segments must be relevant, accessible, sizable and profitable. The evaluation of the different segments has to be actually based on these criteria and only on the basis of such an evaluation should the target segments be selected.

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PROCESS OF CHOOSING THE TARGET MARKETThe process of choosing the target Market are:-

Choosing the target market is related to, but not synonymous with, marketsegmentation.

Segmentation is the means or the tool; choosing the target market is thepurpose.

Segmentationselection.

can also be viewed as the prelude to target market

Choosing the target market usually follows multi-level segmentation usingdifferent bases.

Choosing

the target market involves several other tasks in addition to

segmentation.

Looking at each segment as a distinct marketing opportunity. Evaluating the worth of each segment (sales/profit potential). Evaluating whether the segment is: Distinguishable. Measurable. Sizable. Accessible. Growing. Profitable. Compatible with the firms resources.

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Examining whether it is better to choose the whole market, or the only afew segment, and deciding which ones should be chosen.

Looking

for segments, which are relatively less satisfied by the current

offers in the market from competing brands.

Checking

out if the firm has the differential advantage / distinctive

capability for serving the selected segments.

Evaluating the firms resources and checking whether it is possible to putin the marketing programmes required for capturing the spotted segments with those resources.

Finally selecting those segments that are most appropriate for the firm.FACTORS TO BE CONSIDERED WHILE TARGET MARKET SELECTIONTarget marketing tailors a marketing mix for one or more segments identified by market segmentation. Target marketing contrasts with mass marketing, which offers a single product to the entire market. Two important factors to consider when selecting a target market segment are the attractiveness of the segment and the fit between the segment and the firm's objectives, resources, and capabilities. capabilities

Attractiveness of a Market SegmentThe following are some examples of aspects that should be considered when evaluating the attractiveness of a market segment:

Size of the segment (number of customers and/or number of units). Growth rate of the segment. Competition in the segment. Brand loyalty of existing customers in the segment.

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Attainable market share given promotional budget and competitors' expenditures. Required market share to break even. Sales potential for the firm in the segment. Expected profit margins in the segment.

Market research and analysis is instrumental in obtaining this information. For example, buyer intentions, sales force estimates, test marketing, and statistical demand analysis are useful for determining sales potential. The impact of applicable micro-environmental and macro-environmental variables on the market segment should be considered. Note that larger segments are not necessarily the most profitable to target since they likely will have more competition. It may be more profitable to serve one or more smaller segments that have little competition. On the other hand, if the firm can develop a competitive advantage, for example, via patent protection, it may find it profitable to pursue a larger market segment.

Suitability of Market Segments to the FirmMarket segments also should be evaluated according to how they fit the firm's objectives, resources, and capabilities. Some aspects of fit include:

Whether the firm can offer superior value to the customers in the segment The impact of serving the segment on the firm's image Access to distribution channels required to serve the segment The firm's resources vs. capital investment required to serve the segment

The better the firm's fit to a market segment and the more attractive the market segment, the greater the profit potential to the firm.

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POSITIONINGINTRODUCTION: - Positioning is a concept in marketing which was firstpopularized by Al Ries and Jack Trout in their bestseller book Positioning - a Positioning battle for your mind". According to them Positioning is what you do to mind of the mind prospect. They iterate that any brand is valued by the perception it carries in the prospect or customer's mind. Each brand has thus to be 'Positioned' in a particular class or segment. Example: Mercedes is positioned for luxury segment, Volvo is positioned for safety. The position of a product is the sum of those attributes normally ascribed to it by the consumers its standing, its quality, the type of people who use it, its strengths, its weaknesses, any other unusual or memorable characteristics it may possess, its price and the value it represents. Although there are different definitions of Positioning, probably the most common is: "A product's position is how potential buyers see the product", and is expressed relative to the position of competitors. Positioning is a platform for the brand. It facilitates the brand to get through to the mind of the target consumer. The position of the brand has thus to be carefully maintained and managed. Example: when Malboro cut down its prices, its sales dropped immediately, as it began being associated with the generic segment. Watches like Rolex are positioned as luxury segment watches, thus they being one of the most expensive have become a symbol for accomplishment in life. If Rolex reduces its prices, it loses its perceived image and hence is in danger of losing its customers. This differs slightly from the context in which the term was first published in 1969

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by Al Ries and Jack Trout in the paper "Positioning" is a game people play in todays me-too market place" in the publication Industrial Marketing, in which the case is made that the typical consumer is overwhelmed with unwanted advertising, and has a natural tendency to discard all information that does not immediately find a comfortable (and empty) slot in the consumers mind. It was then expanded into their ground-breaking first book, "Positioning: The Battle for Your Mind", in which they define Positioning as "an Positioning: Mind organized system for finding a window in the mind. It is based on the concept that communication can only take place at the right time and under the right circumstances."

POSITIONING CONCEPTS:- Generally, there are three types of positioning concepts:

Functional positions

Solve problems. Provide benefits to customers. Get favorable perception by investors (stock profile) and lenders. Symbolic positions

Self-image enhancement. Ego identification. Belongingness and social meaningfulness. Affective fulfillment. Experiential positions

Provide sensory stimulation. Provide cognitive stimulation.27

APPROACHES OF POSITIONINGThe main positioning strategy is to either developing or reinforcing a particular image for the brand in the mind of the customer. The main approaches to positioning strategy are:-

Customer benefits approach. The price-quality approach. The use or application approach. The product user approach. The product class approach. The cultural symbol approach. The competitor approach.

Customer benefit approach: approachThis is an important positioning strategy. It involves putting the brand above competitors, based on specific brand attributes and customer benefit. In the automobiles sector we can see many car manufacturer give emphasis on different technical aspects such as fuel efficiency, safety, engine performance, power windows etc. Generally marketers identify positioning in respect of product characteristics that have been ignored by the competitor. Often we can see that firms attempts to position their brands along with two or more characteristic simultaneously, this is done to give an extra edge to the product from its rival and also helps increase the products life cycle. Thus a single product can solve many problem is the main theme behind the product.

Price quality approach: -

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Sometimes brands attempts to offer more in term of service, feature, quality, or performance. Manufacturer of such brands charge higher prices partly to cover the cost and partly to communicate the fact that they are of high quality. In fact in the same product category there are brands, through comparable in qualities, which appeal on the basis of price. For example brands like Rado and Timex use quality and price positioning technique respectively. Rado competes for quality and Timex competes for price. It is difficult to use both quality and price positioning together because there is a risk that high quality-low price positioning technique may infer the image of the product in the mind of the consumer.

The use and application approach: In this strategy the product is positioned with a use or application approach. For example: - Largest Mobile manufacturer in the world Nokia positioned its few variant of N-series mobiles as music phones with enhanced memory and multimedia capabilities.

The product user approach:In this approach, the brand identifies and determines the target segement for which the product will be positioned. Many brand uses a model or a celebrity to position their product. The expectation are that a model or a celebrity is likely to influence the products image by reflecting their own image to it.

The cultural symbol approach: The positioning strategy is based on deeply entrenched cultural symbol. The use of cultural symbol can help to differentiate the brand from competitors brands. For example:- The positioning technique of Marlboro cigarettes use the image of typical American cowboy .

The competitor approach:Many brands use competitor as a dominant plank in their campaign. These brands are positioned following its competitor. This is an offensive strategy.

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DIFFERENT POSITIONING PLANKS / BASES:- Different types ofpositioning planks /bases are used by the marketers are:-

Economy:- Product positioned toward a particular segment keeping inmind it economy.Example-Maruti 800, detergent powder etc are positioned for Maruti the economy segment

Benefit:- Product positioned with some beneficial features. ExampleColgate total, Clinic plus etc.

Gender:- Product positioned for a particular segment. Gender: Luxury and exclusiveness:- Product or services positioned towardluxury segment. Mercedes Benz E-class etc.

Fashion for elite class:- Product positioned for fashionable eliteclass or member of the society, who always want to stay ahead in term of fashion and demands exclusive products only. Example Peter England, Van Heusen, Raymond etc. etc

Technology and value added features:- Positioning of a productaccording to its technological advancement and value added features. Example:- Microsofts positioning of its recent operating system Windows Vista as the advanced operating system, Sony with various elecronic goods, LG etc

PRODUCT POSITIONING AND BRAND POSITIONINGIt is essential to understand the relationship between product positioning and brand positioning. The two terms are synonymously and interchangeably used, technically they are different. Product positioning denotes the specific product category / product class in which the given product is opting to compete. And brand positioning denotes the positioning of the brand viz-a-viz the competing brands in the chosen product category.

ISSUES IN PRODUCT POSITIONING

The main issues in product positioning are:

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Where is the new offer going to compete? As what? Which product function/customer need is it trying to meet? What other product categories serve this need? In other words, what are the substitute products that serve the same need? Where the real gap is, where is such a new offer welcome and wanted by the market? What are the companys competencies to fight here?

In fact, these are the issues the firm agitates in target market decision selection too. The linkage is only natural because in product positioning, the firm is actually bridging the product offer with the right target market.

ISSUES IN BRAND POSITIONING

The issues in brand positioning are: Which are the competing brands in the chosen product category? What are the unique claims/strength of the various brands? What position do they enjoy in consumers evaluation and perception? According to the consumer rating of the brands, is there a wide gap in expectation performance? What kind of a product/new attribute/new functions will attract the consumer? What is the most favoured position and yet vacant?

Can the new brand claim the needed distinction and take the position and satisfy that need?

CRITERIAS FOR SUCCESSFUL POSITIONINGCertain criteria are needed to be fulfilled for successful positioning are:Cer Clarity: - While positioning its brand the firm must be able to position itself in both distinct value, proposition, and to its target audience.

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Consistency: - Consistency in positioning means keeping the positioning plank/bases intact for longtime. Planks should be carefully chosen while positioning. But it does not mean that the firm must change its positioning bases even though its survival is at stake. The firm must be flexible to the changing environment. Credibility: - The firm must deliver trustworthy and believable value proposition. There should be perfect match between promise and action. Competitiveness: - For surviving in this competitive and changing environment innovative resources, talent pool, competitive advantage, strong financial backup etc are very important.

Conclusion: - Thus we can say that the total process of marketsegmentation, targeting and positioning is a very important attribute of marketing mix. All these three process is very closely interrelated with each other.

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Once the organization has decided which customer groups within which market segments to target, it has to determine how to present the product to this target audience. This allows to exactly addressing the needs and expectations of the target groups with a tangible marketing mix that consists of product characteristics, price, promotional activities and places to present the product. Effective strategies of segmentation, targeting and positioning gives an extra advantage in changing and highly competitive environment. To make this three marketing process effective a thorough SWOT analysis of the firm is very important. Keeping in mind the strength, weakness, opportunity and threat the firm can formulate and implement its total marketing mix. Marketing EnvironmentThe actors and forces outside marketing that affect marketing managements ability to build and maintain successful relationships with target customers.

Micro EnvironmentThe actors close to the company that affects its ability to serve its customers- the company, suppliers, marketing intermediaries, customer markets, competitors and publics are called macro environment.

CompetitorsThe marketing concept states that to be successful, a company must provide greater customer value and satisfaction than its competitors do. Thus, marketers must do more than simply adapt to the needs of target consumers.Zombie has many direct and indirect competitors which are competing with Zombie to gain larger market share.

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Direct CompetitorsBy direct competitors, we mean brands which are targeting the same market segment targeted by Zombie. Our direct competitors are:

Speed Red Bull TwisterSpeed drink:Speed drink is one of Unilever's oldest brands, a brand that was truly 'global' before the term 'global brand' was invented. Speed energy drink was launched in 1894 as an affordable new product in the UK. Since 2000, major changes have been made to the Speed to ensure that it provides improved healthy protection and a more enjoyable healthy brusting experience for its billions of consumers.

Red Bull:Red Bull is a product of Pepsi Co. It is a energetic drink. It contains an active healthy body, leaves skin reassuringly fresh and better, and available in 250 ml tin.

Indirect CompetitorsBy indirect competitors, we mean brands which are targeting the same market- drink market- but different segment. Indirect competitors of Zombie are

Blue Charge BatteryBlue Charge

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Blue Charge is the brand name of an energy drink, produced in the UK by Asda as an alternative to such products as Red Bull and Powerade.

IngredientsThe ingredients in Blue Charge, similar to those used in Red Bull, are: Carbonated Water, sucrose, glucose, sodium citrate, taurine, glucuronolactone, caffeine, inositol, niacinamide, calciumpantothenate, pyridoxine HCL, Vitamin B12, natural and artificial flavours, and colours.

Blue ChargeBlue Charge is the brand name of an energy drink, produced in the UK by Asda as an alternative to such products as Red Bull and Powerade.

IngredientsThe ingredients in Blue Charge, similar to those used in Red Bull, are: Carbonated Water, sucrose, glucose, sodium citrate, taurine, glucuronolactone, caffeine, inositol, niacinamide, calciumpantothenate, pyridoxine HCL, Vitamin B12, natural and artificial flavours, and colours.

Financial ConditionThe financial condition of Protection Group of Industries is very sound. It has shown good growth rate in recent years. So, company can easily satisfy all its transactions and is able to support all its products as well as Zombie.

Macro EnvironmentThe large societal forces that affect the microenvironment- demographic, economic, technological and political is called macro environment. The company

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and all other actors operate in a larger macro environment of forces that shape opportunities and poses threats to the company.

Target market for ZombieBefore we describe the target market for Zombie we must look first what the target marketing is .

Target marketing:The process of evaluating each market segments attractiveness and selecting one or more segments to enter To understand the target marketing we must understand that what is market segmentation.

Market segmentationDividing a market into two smaller groups of buyers distinct needs characteristics or behavior we might require separate product or marketing mix. There is no single way to segment a market, company use different segmentation variables in market structure. For their product they use the main segmentation to find out their target consumer market is that they divide the drink market into three main segments.

Our productOur Product target the anti septic market segment, the consumer of this segment are well aware to the anti septic function of the product ,they are more concern with health care they try their best to clean their body ,as much as possible, from the dangerous germs as well as from dust. They may include sportsmen, worker, engineers, medical staff, and specially children. We early mentioned that for product they use different segmentation variables in combination here we describe some of them in detail.

Demographic segmentationOur product is for the whole family everyone can use it but as there is a large fraction of kids in age 1-16 years in Pakistan ,we take more interest in them it is basically due to our market strategy, but kids are not our only market segment

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our product is for the whole family .We also segmented our market with respect to the income of the family ,a family earning Rs = 10000 or more per month can afford it .Education also helps us to find out the target market , we mainly target educated people or at least who can understand the benefit and function of our product easily, thats why our target segment are usually concentrated in the towns where literacy rate is high than in the villages where people do not concern mainly with their health..

Psychographic segmentationPsycho graphically our product target three social classes mainly. 1-Middle class. 2-Upper middle class. 3- Lower-upper also include to some extent.

Behavioral segmentationBehaviorally we target the consumer who believes in quality and economy, regular users are also our target.

Geographic segmentationGeographically there is no specific segmentation , they launched theeir product in the whole country ,and deliver it where we can reach, but cities have more density of our consumers than in villages. So these are the main segment s which company use to make the target market for their product they use these segments in combination to make the whole target market for their product.

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Product:Product may be an idea, a physical entity (a good), or a service, or any combination of three. It exists for the purpose of exchange in satisfaction of individual organizational objectives. A well-structured product plan enables a company to pinpoint opportunities, develop appropriate marketing programs, coordinate a mix of products, maintain successful products as long as possible, reappraise faltering products, and delete undesirable products. A firm should define its products in three different distinct ways; tangible, augmented and generic. By considering all three definitions, the company is better able to identify consumer needs, competitive offering and distinctive product attributes.

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Tangible product is a basic physical entity, service or idea.

It has precise specifications and is offered under a given description or model number.

Augmented

product

includes

not

only

the

tangible

elements of a product, but also the accompanying cluster of image and service features.

Generic product focuses on what a product means to the

customer, not the seller

Product planningProduct planning is systemic decision making relating to all aspects of the development and management of a firms product, including branding and packaging. Each product consists of bundle of attributes capable of exchange and use, or usually a mix of tangible and intangible forms.

Goods:Goods marketing entail the sale of physical products. Durable goods are physical products that are used over an extended period of time, such as furniture and heavy machinery. Nondurable goods are physical products that are made from materials other than metals, hard plastic and wood; are rather quickly consumed or worn out; or become dated and unfashionable, or in some other way no longer popular.

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Good are tangible. They are objectives, things and materials. Value is based on ownership. Goods can be stored. Surpluses in one period can be applied against shortage in another. Goods can be manufactured by one firm and marketed by another. The quality of a good can be differentiated from a distribution intermediarys quality. Goods can be standardized. Mass production and quality control can be used.

Services:Services marketing encompass the rental of goods, the alteration or repair of the goods owned by the consumers, and personal services. A rented-goods service involves the leasing of the goods for a specified period of time. An owned goods service involves an alteration or repair of the goods owned by consumers. Non-goods services involve personal services on the part of the seller; it does not include a good. Services are often intangible. They may involve acts, deeds, performances, efforts. Many services cannot be physically possessed. The value of a service may be based on an experience. Services are usually perishable. Unused capacity cannot be stored or shifted from one time to another.

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Services are frequently inseparable. The quality of many services cannot be separated from the service provider. Service may vary in quality over time. It is difficult to standardize some services because of their labor intensiveness and the involvement of the service user in diagnosing or her service needs.

Raw material:Raw material, component material, and fabricated parts are used up in production or become part pf final product. They are expense rather than capital items. They require limited decision making by the buyer, are inexpensive on a per-unit basis, and are rapidly consumed. Raw material are unprocessed primary materials from extractive and agricultural- minerals e.g. crude petroleum, coal, crops, an iron ore etc. Component materials are semi manufactured goods that undergo further changes in form, e.g steel, cement, wire, textile, and basic chemicals. Fabricated parts are placed in products without further changes in form, e.g. electric motors, vehicle batteries and microprocessor. The major marketing tasks for materials and parts are to ensure continuity in shipments, quality, and prompt delivery; actively pursue reorder; implement standardized pricing; employ aggressive distributors or sales personnel; seek long-term contract; and satisfy specifications set by buyers.

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Industrial services:Maintenance and repair services include painting, machinery repairs, and janitorial services. Business advisory services include management consolatory, advertising agency services etc. Maintenance and repair services usually involve a low degree of consumer decision making, are relatively inexpensive, and are consumed quickly. They may become part of the final product and undergo a change in form. The major marketing thrust in on consistent, efficient service at a reasonable price. Business advisory service may involve a moderate to high level of consumer decision making when these service providers are first hired. Costs are relatively low. The benefits of these services may be long lasting. They do not become part of final products. The major marketing emphasis is on presenting an image of expertise and clearly conveying the reasons for a client to use the service. Both types of industrial services are frequently purchased on a contract or retainer basis, and some firms may decide to undertake the services internally.

Brand/model:A product item is a specific model/ brand/ size of a product that a company sells, such as college course on the principles of marketing, a general motor truck. Usually a firm sells a group of closely related products items as part of a product line. In each product line, the items have some common characteristics,

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customers,

and/or uses; they may also share technologies,

distribution channels, prices, related services, and so on, as an example, Revlon Markets lipstick, eye makeup and other cosmetics. The product mix consists of all the different product lines a firm offers. Tyco Laboratories is a world wide manufacturing company with the three major product lines: fire protection/flow control, packaging materials, and electric and electronic components. A firm seeks a new market, reformulates a product or change or updates product positioning; or new technology becomes available. For instance, Stroh changed to bright blue cans and bottle labels because its white cans didnt stand out against the competition, Valvoline added more colors to its motor oil cans and increased the type size denoting the oils grade after consumer focus group said its oil cans looked dated. Clearasil acne medication gets a new packaging looks every few years because teens tend to buy the newest product in the market.

Packaging:Sometime a distinction is made between packing and packaging-the former is concerned with protection and latter with promotion. But now a day this distinction is not concerned, modern packaging involves protecting and promoting the product. The purchasing agent used to be in charge of packaging in many companies- when protection was major job of package. But now, some companies have a corporate packaging staff. And in some companies, the product managers or specialists in packaging has taken over the job. General foods corporation

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appointed a manager of packaging development and procurement services which it decided that packaging is an important management tool. This manager coordinates packaging activities with the various product managers. This new-found status for packaging occurred in part because of growing competitiveness in many markets. This status also reflects the costliness of packaging errors- and the difficulty to correcting them. A poor packaging could have long term effects-killing the product ford customer who try it-and creating bad will among middlemen. In other words, packaging can have great strategic importance.

Key factors of packaging:Several key factors must be weighed in making packaging decisions. A discussion of each follows: Package design affects a firm seeks for its products. Color, shape and material all influence consumer perceptions of a firm and its products. Plan packaging fosters a lower-quality image for generics. In family packaging, a firm uses a common element on each package in a product line. It parallels family branding. Campbell has virtually identical packages for its traditional soups, distinguished only by flavor or content identification. An international firm must determine if a standardized package can be used throughout the world. Standardization increases44

world wide recognition. For this reason, Coke and Pepsi utilize standard packages wherever possible. However, some colors, symbols, and shapes have negative meanings in certain nations. Package cost must be considered on both a total per unit basis. Total costs can run into the millions of $s. and per unit costs can go as high as 40 percent of a products selling pricedepending upon the purpose and extent of packaging. A firm has a number of packaging materials from which to choose, such as paper board, plastic, metal, glass, and cellophanes. In the selection, trade-offs are probably necessary. Also a firm must determine how innovative it wants its packaging to be. There is a wide range of package features from which to choose, depending on the product. These features include pour spouts, hinged lids, screw-on tops, pop-tops, see-through bags, tuck-or seal end cartoons. A firm selects the sizes, color, and shapes of its packaging. In selecting the package size, shelf life, convenience, traditions and competition must be determined. The choice of package color depends upon the image sought for the brand. Package shapes also affects the products image. The number of packages used with any one product depends on competition and the companys use of differential marketing. By selling small, medium and large sizes, an existing firm may ensure maximum shelf space, appeal to different consumers, and make

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it difficult and expensive for a new one to gain wholesaler and retailer support. The placement, content, size and performance of the label must be determined. Both company and brand names need to appear on the label. Package inserts in range from recipes to directions for use to safety tips to coupons for future purchases, and their inclusion should be noted on the label. Sometimes, a redesigned label may be confusing to the customers and hurt a products sale. Multiple packaging couples two or more product items in one container. It may involve the same product or a combination of different products. The goals of multiple packaging are to increase consumption, get the consumer to buy an assortment of items, or have the consumer to try a new item. Many multiple packs are versatile because they can be sold as they are shipped or broken into single units. Individually wrapping portion of a divisible product may offer a competitive advantage. It may also be quite costly. For certain items, some dealers desire preprinted pries-such as for shirts, books, magazines, watches, and candy. The dealer has the option of charging those prices or adhering their own labels. Some retailers prefer only a space for the price on the package and insert their own price labels automatically. Because of the growing use of computer technology by wholesalers and retailer in monitoring inventory levels, more of them are insisting on pre marked inventory codes on packages. And this code would be called and used as Universal Product46

Code (UPC). Universal Product Code, manufactures Premark items with a series of thick and thin vertical lines. Price and inventory data codes are presented b these lines, which appear on outer package labels-but not readable by employees and customers. These lines are read by the computerized optical scanning equipment at a checkout counter. In these instances, the cashier does not have to ring up a transaction manually and inventory data is instantly transmitted to the main computer of the retailer. A firm must be sure that the package designs fit in with the rest of its marketing mix. A well-known brand of perfume may be extravagantly packaged, distributed in select stores, advertised in upscale magazines, and sold at a high price. Although the two perfumes brands may cost an identical amount to make, the imitator would spend only a fraction as much on packaging.

Growing importance of Packaging:The importance of packaging is partly shown by its cost. The rising costs for packaging are due in part to a shift from an earlier emphasis on protection. A new package can make the important difference in a new marketing strategy-by improving the product. A better box, wrapper, can or bottle may even let a relatively small, unknown firm complete successfully with established competitors. A package change can often creates a new productby giving customers a more desirable quantity. Multiple packs can be the basis of a new marketing strategy too. Consumer surveys showed

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that some customers were buying several units at a time of products like soft drinks etc. this suggested a new market. Manufacturers tried packaging in 4, 6 and 8 packs- and have been very successful. Better protective packaging is especially important to manufacturers and wholesalers. They often have to pay the cost of the goods damaged in shipment. There are also costs for selling such claims- and getting them settled is a nuisance. Goods damaged in shipment also may delay production or cause lost sales. Retailer needs good packaging which provides better protection can reduce store costs by cutting breakage, preventing discoloration etc. packages which are easy to handle can cut costs by speeding price marketing, improving handling and display, and saving. Promotion-oriented advertisement: Packaged goods are regularly seen in retail stores. They may actually be seen by many more potential customers than the companys advertisement. A good package sometimes gives a firm more promotion effect than it could possibly afford. An attractive package may speed turnover so much that total costs will decline as a percentage of sales. Total distribution cost can also rise because of packaging. But customers may be satisfied because the packaging improves the product. Package cost as a percentage of a manufacturers selling varies widely. packaging may be better than

Branding:

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Branding means the use of a name, term, symbol, or a design-or a combination of these-to identify a product. It includes the use of brand names, trademarks, and particularly all other means of products identification. Brand name has a narrower meaning. A brand name is a word, letter, or a group of words that the law says are trademark. A trademark is a legal term.

Importance of brands:Each producer has to mark his product so that the output can be cut back when necessary. This also means that poor quality can be trade back to the guilty producers. Early trademarks were also the protection to the buyer. Branding is advantageous to customers because: It makes shopping feasible and more efficient. Assures regular satisfaction to customers. It is dependable guides to quality. It may satisfy the status needs.

Branding is advantageous to branders because: Encourages repeat buying and lower costs. May develop loyal customers.49

May build corporate images. Five levels of brand familiarities: Rejection. Non recognition. Recognition. Preference. Insistence.

Choosing a brand name:Brand name selection is an art, because it is difficult to define what is a good brand name? A brand name can make a difference. Its helps something to be sold. Because just using the company name or a family member's name is not enough. The trademark or brand name, which is chosen by a company, is protected by that company.

Raw Materials:The ingredients in Zombie, similar to those used in Red Bull, are: Carbonated Water, sucrose, glucose, sodium citrate, taurine, glucuronolactone, caffeine, inositol, niacinamide, calciumpantothenate, pyridoxine HCL, Vitamin B12, natural and artificial flavours, and colours.

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HVAC System Although HVAC is often not a significant part of energy consumption in a soft drink manufacturing plants, it can be a major energy user in the administration part of the facilities. Major sources of energy savings in HVAC systems are: Controlling the HVAC system to heat and cool when needed by programmable thermostat or better with an energy management system. Proper zoning the HVAC air supply and return. Use of high EER package units with the

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minimum requirements of ASHRAE Standard 90.1. Use of variable frequency drive (VFD) controllers on air handlers in place of dampers Heat recovery from the ammonia vapor at the compressor exit to pre-heat the boiler feed water. This measure also results in energy savings in the cooling tower/ evaporative cooler system because it reduces the heat load. Use of VFD on cooling tower fans, using sump temperature for feedback. Use of VFD on cooling tower supply water pumps, using return water temperature or chiller condenser pressure for feedback. Modification of refrigeration parameters (e.g. suction pressure, head pressure) to conform to process requirements Heating System Heating is needed to warm the containers before they are packaged in order to prevent condensation on container surface. Hot water for52

heating the containers is usually heated to about 130-140 F. Two types of heating systems are used for this purpose, steam from steam boiler or hot water from hot water boiler that in turn heats the warming water through heat exchangers. Use of hot water boilers is much more efficient because small hot water boilers can be installed near the points of application (rather than installation of steam boilers in a more remote area). Installation of a central hot water boiler is also an option. Main advantages using local hot water boilers are: Use of lengthy piping can be avoided Redundancy is built into the system, due to multiple hot water boilers rather than one or two large steam boilers Modern hot water boilers are much more efficient than steam boilers. The issue of maintaining steam traps are totally avoided Compressed Air Systems As Figure 2 shows, air compression can be a significant portion of the electrical energy consumption in these facilities. Major sources of air consumption include air jets used for directing cans and bottles along the conveyor lines, air jets for drying the containers after various stages of washing, air leaks and pneumatic actuators. Significant saving can be achieved by using blowers in place of air jets for drying applications, and wherever possible for moving the containers. Table 1 compares the power consumption of a compressor versus blowers of various pressures. For majority of drying53

applications and some displacing applications, blowers can easily replace the compressed air. Refer to Compressed Air Challenge, 1998 for other energy efficiency measures for compressed air systems. Combined Heat and Power Carbonated soft drink facilities are ideal cases where distributed generation in the form of combine heat and power (CHP, the same as cogeneration) can be used. This is due to the fact that both heating and electrical energy are required simultaneously. In the plants we have audited, the ratio of electrical energy usage to heating energy usage have been 70% to 83%, which are in the bulk part range of electrical to thermal ratio of natural gas reciprocating engine cogeneration systems. Natural gas fueled reciprocating engines are suitable for this type of facility because, Low pressure steam or hot water production capability of these engines Suitability of the size of these engines to carbonated soft drink facilities, a few hundred kW to a few MW. Air pollution control technology is readily available for these engines even in a stringent air pollution control environment such as South Coast Air Quality Management District in California. Several percentage points of higher efficiency compared to gas turbines of the similar capacity. Buildings and grounds Refrigeration System High Efficiency Lighting In production of carbonated soft drinks, the refrigeration system and its accessories such as cooling towers/evaporative coolers use a significant amount of energy. The refrigeration systems mostly use ammonia as the refrigerant.54

In the plants we have audited, between 25% to 35% of plants electrical energy is used for refrigeration. Significant levels of energy savings can be achieved through: Soft drink manufacturers usually have very large high bay warehouses that are usually illuminated with high intensity discharge (HID) lamps, such as metal halide and high-pressure sodium. These types of lamps can not be turned on and off on demand, but they can be dimmed on demand, with an energy saving of 50 to 60%. Major savings can be attained by installing bi-level lighting control systems that are activated by occupancy sensors upon detection of a person or a forklift in an aisle and shifting to full brightness. Sequencing the compressors Use of high efficiency refrigeration compressors with VFD controllers 3

Marketing Mix:The set of controllable tactical marketing tools ___ product, price, place and promotion____ that the firm blends to produce the response it wants in the target market.

Product:Anything that can be offered to market for attention, acquisition, use or consumption that might satisfy a want or need.

Brand:

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A name, term, sign, symbol, or design, or a combination of theseintended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors.

PRICING STRATEGIESPricing is the process of determining what a company will receive in exchange for its products. Pricing factors are manufacturing cost, market place, competition, market condition, Quality of product. Pricing is a fundamental aspect of financial modeling, and is one of the four Ps of the marketing mix. The other three aspects are product, promotion, and place. It is also a key variable in microeconomic price allocation theory. Price is the only revenue generating element amongst the four Ps, the rest being cost centers. Pricing is the manual or automatic process of applying prices to purchase and sales orders, based on factors such as: a fixed amount, quantity break, promotion or sales campaign, specific vendor quote, price prevailing on entry, shipment or invoice date, combination of multiple orders or lines, and many others. Automated systems require more setup and maintenance but may prevent pricing errors.

What a price should doA well chosen price should do three things: achieve the financial goals of the company (e.g., profitability) Fit the realities of the marketplace (Will customers buy at that price?) support a product's positioning and be consistent with the other variables in the marketing mix 56

o price is influenced by the type of distribution channel used, the type of promotions used, and the quality of the product price will usually need to be relatively high if manufacturing is expensive, distribution is exclusive, and the product is supported by extensive advertising and promotional campaigns a low price can be a viable substitute for product quality, effective promotions, or an energetic selling effort by distributors From the marketer's point of view, an efficient price is a price that is very close to the maximum that customers are prepared to pay. In economic terms, it is a price that shifts most of the consumer surplus to the producer. A good pricing strategy would be the one which could balance between the price floor (the price below which the organization ends up in losses) and the price ceiling (the price beyond which the organization experiences a no demand situation).

The 9 Laws of Price SensitivityIn their book, "The Strategy and Tactics of Pricing", Thomas Nagle and Reed Holden outline 9 laws or factors that influence a buyer's price sensitivity with respect to a given purchase: 1) Reference Price Effect. 2) Difficult Comparison Effect. 3) Switching Costs Effect.

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4) Price-Quality Effect. 5) Expenditure Effect. 6) End-Benefit Effect. 7) Shared-cost Effect. 8) Fairness Effect. 9) The Framing Effect.

Competition-based pricingSetting the price based upon prices of the similar competitor products. Competitive pricing is based on three types of competitive product: Products have lasting distinctiveness from competitor's product. Here we The product has low price elasticity. The product has low cross elasticity. The demand of the product will rise. that : The product has high price elasticity. The product has some cross elasticity. No expectation that demand of the product will rise. Products have perishable distinctiveness from competitor's product, Products have little distinctiveness from competitor's product. assuming assuming the product features are medium distinctiveness. can assume:

Cost-plus pricingCost-plus pricing is the simplest pricing method. The firm calculates the cost of producing the product and adds on a percentage (profit) to that price to give the

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selling price. This method although simple has two flaws; it takes no account of demand and there is no way of determining if potential customers will purchase the product at the calculated price. Cost-plus pricing is a pricing method used by companies. It is used primarily because it is easy to calculate and requires little information. There are several varieties, but the common thread in all of them is that one first calculates the cost of the product, and then includes an additional amount to represent profit. It is a way for companies to calculate how much profit they will make. Cost-plus pricing is often used on government contracts, and has been criticized as promoting wasteful expenditures. The method determines the price of a product or service that uses direct costs, indirect costs, and fixed costs whether related to the production and sale of the product or service or not. These costs are converted to per unit costs for the product and then a predetermined percentage of these costs is added to provide a profit margin.

Advantages of cost-plus pricing Easy to calculate Minimal information requirements Easy to administer Tends to stabilize markets - insulated from demand variations and competitive factors Insures seller against unpredictable, or unexpected later costs 59

Ethical advantages Simplicity

Disadvantages of cost-plus pricing Provides no incentive for efficiency Tends to ignore the role of consumers Tends to ignore the role of competitors Uses historical accounting costs rather than replacement value Uses normal or standard output level to allocate fixed costs Includes sunk costs rather than just using incremental costs Ignores opportunity costs Price = Cost of Production + Margin of Profit.

Creaming or skimmingSelling a product at a high price, sacrificing high sales to gain a high profit, therefore skimming the market. Usually employed to reimburse the cost of investment of the original research into the product commonly used in electronic markets when a new range, such as DVD players, are firstly dispatched into the market at a high price. This strategy is often used to target "early adopters" of a product or service. These early adopters are relatively less price-sensitive because either their need for the product is more than others or they understand the value of the product better than others. This strategy is employed only for a limited duration to recover most of investment made to build the product. To gain further market share, a seller must use other pricing tactics such as economy or penetration. This method can come with some setbacks as it could leave the product at a high price to competitors.

Limit pricing

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A limit price is the price set by a monopolist to discourage economic entry into a market, and is illegal in many countries. The limit price is the price that the entrant would face upon entering as long as the incumbent firm did not decrease output. The limit price is often lower than the average cost of production or just low enough to make entering not profitable. The quantity produced by the incumbent firm to act as a deterrent to entry is usually larger than would be optimal for a monopolist, but might still produce higher economic profits than would be earned under perfect competition. The problem with limit pricing as strategic behavior is that once the entrant has entered the market, the quantity used as a threat to deter entry is no longer the incumbent firm's best response. This means that for limit pricing to be an effective deterrent to entry, the threat must in some way be made credible. A way to achieve this is for the incumbent firm to constrain itself to produce a certain quantity whether entry occurs or not. An example of this would be if the firm signed a union contract to employ a certain (high) level of labor for a long period of time.

Loss leaderIn the majority of cases, this pricing strategy is illegal under EU and US Competition rules. No market leader would wish to sell below cost unless this is part of its overall strategy. The idea of selling at a loss may appear to be in the public interest and therefore not often challenged. Only when the leader pushes up prices, it then becomes suspicious. Loss leadership can be similar to predatory pricing or cross subsidization; both seen as anti-competitive practices.

Price discriminationSetting a different price for the same product in different segments to the market. For example, this can be for different ages or for different opening times, such as cinema tickets. Market orientated pricing is also a very simple form of pricing used by very new businesses. What it involves is, setting the price of your product/service according to research conducted on your target market. Price 61

discrimination exists when sales of identical goods or services are transacted at different prices from the same provider. In general, the practice of charging different customers different prices is called price discrimination.[1] In a theoretical market with perfect information, no transaction or prohibition on secondary exchange (or re-selling) to prevent arbitrage, price discrimination can only be a feature of monopolistic and oligopolistic markets[2], where market power can be exercised. Otherwise, the moment the seller tries to sell the same good at different prices, the buyer at the lower price can arbitrage by selling to the consumer buying at the higher price but with a tiny discount. However, product heterogeneity, market frictions or high fixed costs (which make marginalcost pricing unsustainable in the long run) can allow for some degree of differential pricing to different consumers, even in fully competitive retail or industrial markets. Price discrimination also occurs when the same price is charged to customers which have different supply costs. Types of price discrimination First degree price discrimination Second degree price discrimination Third degree price discrimination Price skimming Combination

Premium pricingPremium pricing is the practice of keeping the price of a product or service artificially high in order to encourage favorable perceptions among buyers, based solely on the price. The practice is intended to exploit the (not necessarily justifiable) tendency for buyers to assume that expensive items enjoy an exceptional reputation or represent exceptional quality and distinction.

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Predatory pricingAggressive pricing intended to drive out competitors from a market. It is illegal in some places. Predatory pricing is the practice of selling a product or service at a very low price, intending to drive competitors out of the market, or create barriers to entry for potential new competitors. If competitors or potential competitors cannot sustain equal or lower prices without losing money, they go out of business or choose not to enter the business. The predatory merchant then has fewer competitors or is even a de facto monopoly, and hypothetically could then raise prices above what the market would otherwise bear.In many countries there are legal restrictions for using this pricing strategy, which may be deemed anticompetitive. It may not be fact illegal, but have severe restrictions.

Contribution margin-based pricingContribution margin-based pricing maximizes the profit derived from an individual product, based on the difference between the product's price and variable costs (the product's contribution margin per unit), and on ones assumptions regarding the relationship between the products price and the number of units that can be sold at that price. The product's contribution to total firm profit (i.e., to operating income) is maximized when a price is chosen that maximizes the following: (contribution margin per unit) X (number of units sold). Price Variable cost per unit= Contribution margin per unit Contribution margin per unit * units sold = Products contribution to profit Contribution to profit from all products Firms fixed cost= total firms profit

Dynamic pricing

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A flexible pricing mechanism made possible by advances in information technology, and employed mostly by Internet based companies. By responding to market fluctuations or large amounts of data gathered from customers - ranging from where they live to what they buy to how much they have spent on past purchases - dynamic pricing allows online companies to adjust the prices of identical goods to correspond to a customers willingness to pay. The airline industry is often cited as a dynamic pricing success story. In fact, it employs the technique so artfully that most of the passengers on any given airplane have paid different ticket prices for the same flight.

Price leadershipPrice leadership is an observation made of oligopolistic business behavior in which one company, usually the dominant competitor among several, leads the way in determining prices, the others soon following. In the long run price leadership could have a negative impact on the dominant firm. Over time,