MARKET

 ‘MARKET’ – derived from the latin word ‘MERCATUS’ – means ‘to trade’

 In ordinary sense the term ‘Market’ refers to a place where buyers and sellers personally

meet to effect purchase and sale.

 Broadly, it is the atmosphere or a region in which buyers and sellers are brought into

contact with one another and by means of which the prices of the goods and services

tend to be equalised easily and quickly.

 Prof. Philip Kotler – “Market is an area or atmosphere for a potential exchange”

 Clark and Clark – “Market is an area in which the forces leading to exchange of title to a

particular product operate, and towards which and from which the actual goods tend to

travel.” 1
Thus ‘Market’ does not mean a place of exchange.

It is “an atmosphere or a region or a supra-system in which, the forces of demand

and supply operate directly and indirectly to bring about the transfer in the title of

goods and services. Market is an arrangement that provides opportunity of

exchanging goods and services for money or money’s worth.”

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 CLASSIFICATION OF MARKETS - Traditional

I II III IV V VI VII VIII

Geographical Position of Volume of Nature of Goods Economic
Time Regulation
Area Sellers Business transacted transaction transacted Basis
Very short Perfect
Local Primary Wholesale Spot Market Commodity Regulated
period Market
Capital - Stock Unregulated or Imperfect
Regional Secondary Short period Retail Future Market
and Money Free Market Market

Monopoly
National Terminal Long period
Market

World or
International
3
 Classification of Markets - Modern

 Consumer Markets

 Business Markets

 Global Markets

 Non-profit and Governmental Markets

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 Marketing – An Introduction

 Marketing is as old as civilization.

 Though marketing talked and discussed in business terms today, its origin goes

back to the ancient civilization when man used symbols, signs and material

articrafts to transact and communicate with others.

 The first signs man made to communicate with others gave birth to the idea of

marketing.

 Marketing in the real sense has become an integral part of regular life of human beings.

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 It is a philosophy that guides the entire organisation towards sensing, serving

and satisfying consumer needs.

 Hence marketing calls upon everyone in the organisation to “think

customer”.

 Marketing is the belt that connects the two major wheels of any economy

namely, producers and consumers.

 Therefore, the economic jargon “MARKETING” is ‘a process comprising of all

the activities involved in the creation of place, time and possesion utilities.’

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 Definitions

Social definition of marketing

“Marketing is a societal process by which individuals and groups obtain

what they need and want through creating, offering and freely

exchanging products and services of value with others.”

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Managerial definition of marketing

Marketing has often been described as “the art of selling products, but people are

surprised when they hear that the most importance part of marketing is not

selling! Selling is only the tip of the marketing iceberg.”

Kotler & Armstrong defines "Marketing is a social and managerial process by

which individuals and groups obtain what they need and want through creating

and exchanging products and value with others."

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The American Marketing Association defines marketing as “the

process of planning and executing the conception, pricing,

promotion, and distribution of ideas, goods, and services to create

exchanges that satisfy the perceived needs, wants, and objectives of

the customer and the organization.”

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Objectives / Importance / Significance

 To convert luxuries into necessities.

 Acts as a link between Producers and Consumers.

 Increases Employment opportunities.

 Increases GDP Growth.

 Increases National Economy.

 Increases Standard of Living.

 New Product Development.

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 Marketing
Functions

Exchange Functions of Physical Facilitating

Function Supply Function

Buying Transportation Financing

Selling Storage and Risk-bearing

Warehousing
Market
Information

Standardisation
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Other Functions of Marketing

 Traditional Function

 Societal Function

 Integrative Function

 Connective Function

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 Difference between Selling and Marketing

Sl. Selling Marketing

Revolves around the needs and interests of the Revolves around the needs and interests of the
1
seller. buyer.
It is a more broder term. It includes selling and
2 It is one of the parts of the marketing process.
pervades all the activities.
Starts with the customers - present and potential and
Starts with the existing products of the
views business as a task of meeting the needs of the
3 corporation and views business as a task of
customers by producing and supplying those
somehow promoting these products.
products and services that would meet such needs.
4 Product focused. Focoused towards consumer needs.

5 Quickly converts 'products' into 'cash' Converts 'needs' into 'product'

It is at the end of the production process. It is the It comes at the beginning of the production process
6
last activity in the cycle of manufacturing. as it includes even buying of raw materials.
It creates only possession utility as the ownership
7 It creates place, time and also possession utilities.
gets transferred.
It is concerned with the transfer of goods and It aims at making available the goods and services
8
services what vendor has. required by the end users. 13
Fundamental Marketing Concept

 Needs, Wants and Demands

 Target Markets, Positioning and Segmentation

 Offerings and Brands

 Value and Satisfaction

 Marketing Channels

 Supply Chain

 Competition

 Marketing Environment

 Marketing Planning
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 Company Orientations toward the Marketplace

 Self Sufficiency Stage  The Selling Concept

 Barter System  The Marketing Concept

 The Exchange Concept  The Societal-Marketing Concept

 The Production Concept  The Green Concept

 The Product Concept  The Morph Marketing Concept

 The Holistic Marketing Concept

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The Exchange Concept :

 Involves the exchange of products between the seller and the buyer

usually based on money.

 The other important aspects of marketing such as concern for

consumers, formulation of marketing strategies, marketing mix, creative

selling and advertising, serving the customer and so on are completely

overshadowed in the exchange concept.

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The Production Concept

 Is the one of the oldest concept in business.

 It believes that marketing can be managed by managing production.

 This concept was built on “Good wine needs no push”.

 This concept is based on the assumption that :

1. Any thing that can be produced can be sold.

2. The most important task of management is to keep the cost of production

down.

3. A firm should produce only certain basic products.

 This concept can work only in sellers market. It fails to retain market under keen

competition in buyers market. 17

The Product Concept

 This concept focus more on making superior products and improving them

overtime.

 It believes that if the products have superb features, customer response is

bound to be favourable and all promotional efforts are needless.

 Over emphasis on product excellence may lead to ignore many other

aspects of consumer needs and desires. This is called the phenomena of

‘Marketing Myopia’
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 ‘Marketing Myopia’
 Means a coloured or crooked perception of marketing and a short-

sightedness about business.

 Excessive attention to production or the product or selling aspects at the cost

of customer and his actual needs creates myopia.

 Such a myopia leads to wrong or inadequate understanding of the market

and hence failure in the marketplace.

 It even leads to wrong or inadequate understanding of the very nature of the

business in which the organisation is involved.

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The Selling Concept

 It states that mere making available the best product is not enough; it is futile

unless the firm resorts to aggressive salesmanship.

 Heavy advertising, high power personal selling, large-scale sales promotion,

heavy price discounts and strong publicity and public relations are the normal

tools used under this concept.

 The essence of sales orientation philosophy is “Goods are not bought but sold”

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The Marketing Concept

 Was born out of the awareness that a business should start with the

determination of consumer wants and ends with the satisfaction of those wants.

 Instead of product centered “make-and-sell” philosophy, business shifted to

customer centered “sense-and-respond” philosophy.

 The job is not to find the right customers to your products, but the right

products for your customers.

 The concept puts the consumer at both the beginning and at the end of the

business cycle. 21
The Societal Concept

 It is a broadened marketing concept.

 The new concept goes beyond understanding the consumer

needs and matching the products accordingly.

 This philosophy cares for not only consumer satisfaction but

for consumer welfare or social welfare.

 The firm has to discharge is social responsibilities.

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The Societal Concept, contd..

 The Societal-marketing Concept is based on the following assumptions :

1) The marketer has to fulfill the customer demand and also to contribute

to enrichment or quality life.

2) The marketer should not offer a product to consumers if it is not in the

best interests of consumers.

3) The marketer will offer long run consumer welfare.

4) Such a social welfare speaks of pollution free environment and quality

of human life.

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The Green Concept – concern for environment and ecology

The Morph Concept

- convert the product into services and offer the service to

customer beyond their expectation.

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 The Holistic Marketing Concept

 Is based on the development, design and implementation of marketing programmes,

processes and activities that recognizes their breadth and interdependencies.

 Holistic marketing recognizes that “everything matters” with marketing – and that a

broad, integrated perspective is often necessary.

 Holistic marketing is thus an approach to marketing that attempts to recognise and

reconcile the scope and complexities of marketing activities.

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 Products &
Senior
Services
Management
Other Communications Channels
Marketing
Development Departments
Integrated
Internal
Marketing
Marketing

Holistic
Marketin
g

Socially Responsible Relationship

Marketing Marketing

Ethics Community Customers Partners

Environment Legal Channel

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 Marketing and Customer Value

• The task of any business is to deliver customer value at a profit.

• Value as seen from the angle of customer, is the capacity of a product or

service from which consumer derives a certain level of satisfaction.

• A value is judged by the level of satisfaction.

• A firm extends the benefits sought by the customer through its market

offering.

• The customer assigns different weightages for the different benefits that he

seeks from the offer and makes a note of the total value provided by the offer.
27
 Marketing is a Value Creating and Value Delivering Process

 Earlier it was said that value creation and value delivery is the main task of

marketing.

 But now marketing in its entirety is a value creating and value delivering process.

 Four distinct steps in the value providing process :

A)     Value Selection

B)     Value Creation / Value Delivery

C)     Value Communication (making value proposition and communicating it)

D)    Value Enhancement

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Value Selection :

 The firm can proceed with production, sales and promotion, only after

selecting the value to be offered.

 Here the firm finds out what constitutes value for the consumer and accepts

it as the value to be offered.

 For ex : marketing planning, buyer analysis, market segmentation and

targeting are the tools concerned with value selection.

 Value selection is thus not only the first step in the sequence but also the

most crucial one.

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Value Creation / Value Delivery :

 The firm has to provide what it has promised to the customers.

 The product offering must carry the benefits what the firm has promised and it must

reach them in the most satisfying manner.

 Value creation / Value delivery signifies the successful execution of the firm’s promise.

 Most of the firms fumble here because they promise to provide all sorts of things but

they fail to deliver; their products fail to carry the value promised.

 The entire firm, all the functions and activities is involved in this step.

 For ex : product development, manufacturing, service planning, pricing, distribution

and servicing are concerned with value creation and value delivery.

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Value Communication :

• After selecting the value to be offered and deciding how to create and deliver

the value, the firm tries to communicate that value to the customer.

• Two components are involved in this step :

• A)     Making Value Proposition

• B)     Communicating it to the customers

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 Making a Value Proposition :

 It is not a mere physical product that the firm offers to the customers; it

offers a value proposition.

 The product offering consisting of the best benefit is put forth as a value

proposition, by explaining how that offer matches the customers

requirement and how it is the best among the competing offers.

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Communicating the value proposition :

 The firm communicates the value proposition to the customers.

 It explains the uniqueness of its offer through a well formulated marketing

communication mix.

 The customer’s start assessing the value of an offer from this stage.

 Personal selling, advertising, sales promotion and publicity are concerned

with value communication.

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 Value Enhancement :
 The firm continuously and proactively enhances the value.

 It collects the feedback from the customer about the level of satisfaction with

the product and upgrades the value.

 Competing products, including substitute products, keep attacking the value

proposition of the firm. Customers’ expectations too keep changing.

 The firm has to search for the new expectations of the customers, locate the

product / value gaps and keep making new and better offers to the customers

to stay ahead of the competition in value rankings.

 What is needed is a sustained and ongoing effort, not short lived big bangs.
34
 Sales promotion measures like customer deals and trade deals result in just a

temporary shift in the value cost equation in favour of the consumer.

 When the deals are withdrawn, consumers turn away from the products.

 What is needed is lasting value addition, which normally accrues only through

factors like enhancement of the functional utility / convenience of the product.

 Activities like market research and marketing control assess the effectiveness

of the value delivery process, the level of satisfaction the customer has actually

received and how it compares with the firm’s intention as well as with other

competing offers for the purpose of enhancing values.

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 The Value Chain
 Michael Porter of Harvard has proposed the value chain as a tool for

identifying ways to create more customer value.

 According to this model, every firm is a synthesis of activities performed to

design, produce, market, deliver and support its product.

 The value chain identifies nine strategically relevant activities that create

value and cost in a specific business.

 These nine value-creating activities consist of five primary activities and

four support activities.

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 Firm Infrastructure
Human Resource Management

M
Support

a rg
Activities Technology Development

in
Procurement

Marketing
Inbound Outbound Services

M
Operations Logistics and

ar
Logistics

g i
n
Sales

Primary Activities

37
 Strategic Planning

 Successful marketing requires companies to have capabilities such as

understanding customer value, creating customer value, delivering

customer value, capturing customer value and sustaining customer value.

 Only handful of companies stand out as master marketers.

 These companies focus on the customer and are organized to respond

effectively to changing customer needs.

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 To ensure that the proper activities are selected and executed, strategic

planning is paramount.

 Strategic planning calls for action in three key areas :

1) Managing the company’s businesses as an investment portfolio.

2) Assessing each business’s strength by considering the market growth rate

and the company’s position and fit in that market.

3) Establishing a strategy. For each business, the company must develop a

game plan for achieving its long run objectives.

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 Marketing plays a critical role in this process.

 To understand marketing management, we must understand strategic

planning.

 Most large companies consists of four organizational levels :

1) The Corporate level

2) The Division level

3) The Business unit level

4) The Product level 40

 Corporate headquarters is responsible for designing a corporate strategic plan

to guide the whole enterprise; it makes decisions on the amount of resources to

allocate to each division, as well as on which business to start or eliminate.

 Each division establishes a plan covering the allocation of funds to each

business unit within the division.

 Each business unit develops a strategic plan to carry that business unit into

profitable future.

 Finally each product level within a business unit develops a marketing plan for

achieving its objectives in its product market.

41
 Implementing Controlling
Planning

Corporate Planning Organising

Measuring results

Division Planning Implementing

Diagnosing
results
Business Planning

Taking corrective
action
Product Planning

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 Marketing Plan
 A marketing plan is a written document that summarizes what the marketer has

learned about the marketplace and indicates how the firm plans to reach its marketing

objectives.

 It contains tactical guidelines for the marketing programmes and financial allocations

over the planning period.

 It is one of the most important outputs of the marketing process.

 Marketing plans are becoming more customer – and competitor – oriented and better

reasoned and more realistic than in past.

 Planning is becoming a continuous process to respond to rapidly changing market

conditions. 43
 Marketing planning procedures and content vary considerably among

companies.

 The plan is variously called a “business plan”, a “marketing plan”, and some

times a “battle plan”.

 In preparing for the battle it is found that the plans are useless but planning

is indispensable.

 The most frequently cited shortcomings of current marketing plan,

according to marketing executives are lack of realism, insufficient

competitive analysis and a short-run focus. 44

Contents of the Marketing Plan

 Executive summary and table of contents

 Situation analysis

 Marketing strategy

 Financial projections

 Implementation controls

45
 Customer Value, Satisfaction and Loyalty

 Customer value is seen from different angles.

 The possible angles or perspectives can be “customer” and “marketing

firm”.

 From the customer angle, value is understood as what he or she is

willing to pay and, therefore, customer value refers to the perceived

value by the customer for an offering.

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 Customer Perceived Value

 Customer perceived value is difference between the prospective

customer’s evaluation of all the benefits and all the costs of an

offering and perceived alternatives.

 Total customer value is the perceived monetary value of the bundle

of economic, functional and psychological benefits customers

expect from a given market offering.

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 Total customer cost is the bundle of costs customers expect to

incur in evaluating, obtaining, using and disposing of the

given market offering including monetary, time, energy and

psychic costs.

 Customer perceived value is thus based on the difference

between what customer gets and what he or she gives for

different possible choices.

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 Total Customer Satisfaction

 Satisfaction is a persons feelings of pleasure or disappointment resulting

from comparing a products perceived performance in relation to his or her

expectations.

 If the performance falls short of expectations, the customer is dissatisfied

and disappointment.

 If the performance matches the expectations, the customer is satisfied.

 If the performance exceeds expectations, the customer is highly satisfied or

delighted.
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 Factors affecting customer satisfaction

 Customer satisfaction is the outcome that results from product

and vendor performance in comparison with his or her level

of expectations.

 The factors influencing the customer satisfaction can be

divided into two groups as “human” and “product”.

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 Factors affecting customer satisfaction

Human Factors Product Factors

 Response  Performance

 Service  Efficiency

 Commitment  Technology
 Adherence  Maintenance

 Complaint Management  Requirement

 Life Span
 Customer Importance
 Price
 Orientation
 Appearance
 Attitude
 Customer-friendly Features
 Quality
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 Trouble-free operation
 Measuring Customer Satisfaction
 Many companies are systematically measuring customer satisfaction and the factors

shaping it.

 A company would be wise to measure customer satisfaction regularly because one

key to customer retention is customer satisfaction.

 A highly satisfied customer generally stays loyal longer

 buys more as the company introduces new products and upgrades existing products,

 talks favourably about the company and its products,

 pays less attention to competing brands and is less sensitive to price,

 offers product or service ideas to company.

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 A number of methods exist to measure customer satisfaction.

 Periodic surveys can track customer satisfaction directly.

 Respondents can also be asked additional questions to measure repurchase

intention and the likelihood or willingness to recommend the company and

the brand to others.

 Companies can monitor the customer loss rate and contact customers who

have stopped buying their products.

 Companies can hire mystery shoppers to pose as potential buyers and report

on strong and weak points experienced in buying the company’s and

competitors products.
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 Managers themselves can enter company and competitors sales situations

where they are unknown and experience firsthand treatment they receive,

or phone to their own company with questions and complaints to see how

the calls are handled.

 For customer-centered companies, customer satisfaction is both a goal and a

marketing tool.

 Companies need to be especially concerned today with their customer

satisfaction level because the Internet provides a tool for consumers to

spread bad word of mouth as well as good word of mouth to the rest of the

world. 54
 Customer Loyalty
• ‘Customer Loyalty’ is the measure of success of the supplier or the marketer

to retain the customer with him.

• ‘Loyalty’ means that the customer is sticking to the marketing organisation or

the supplier though he may be having other options.

• It is quite possible that the company may not have the product or may not be

able to deliver in time or may have other constraints but still the customer

might ignore other options and prefer to continue with the supplier because

that supplier provides him more value for money benefits and comforts.
55
 Majority of suppliers or marketers consider “customer satisfaction” and “customer

loyalty” as one and the same.

 They feel that if a satisfied customer is created, they created a loyal customer. It is

not always true.

 A customer can be satisfied or he may even be delighted yet he may or may not be

loyal.

 Customer satisfaction is an emotional and sentimental issue.

 It is a feeling, a feeling of satisfaction over a job well done in the past.

 Loyalty is something related to the act of the customer in future.

 Thus, satisfaction is about past feeling while loyalty is the future action on the part

of customer. 56
 Customer Life Time Value

 Customer lifetime value (CLV) is the net present value of the stream

of future profits expected over the customer’s lifetime purchases.

 That is, what the firm is going to earn from each customer over his

lifetime taken at appropriate discounted rate.

57
What is customer profitability?
 A profitable customer is a person, household, or company that

over a time yields revenue stream that exceeds by an acceptable

amount the company’s cost stream of attracting, selling and

servicing that customer.

 Here, the emphasis is on the life-time stream of revenue and cost,

not on the profit from a particular transaction.

 Customer lifetime value depends on how a company can

maximize long-term customer profitability.

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 Customer profitability analysis (CPA) is best conducted with the tools

of an accounting technique called Activity Based Costing (ABC).

 The company estimates all revenue coming from the customer, less all

costs.

 The costs should include not only the cost of making and distributing

the products and services, but also such costs as taking phone calls

from the customer, traveling to visit the customer, entertainment and

gifts – all the company resources that went into serving that customer.

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 When this is done for each customer, it is possible to classify customers into

different profit tires :

 Platinum customers (most profitable)

 Gold customers (profitable)

 Iron customers (low profitability but desirable)

 Lead customers (unprofitable and undesirable)

 The company’s job is to move iron customers into the gold tier and gold

customers into the platinum tier, while dropping the lead customers or

making them profitable by raising their prices or lowering the cost of serving

them. 60
 Maximizing Customer Lifetime Value

 The case for maximizing long-term customer profitability is captured in the

concept of customer lifetime value.

 Customer lifetime value (CLV) describes the net present value of the stream

of future profits expected over the customer’s lifetime purchases.

 The company must subtract from the expected revenues the expected cost of

attracting, selling and servicing that customer, applying the appropriate

discount rate.

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 Customer Equity

 The aim of customer relationship management (CRM) is to produce

high customer equity.

 Customer Equity is the total of the discounted lifetime values of all the

firm’s customers.

 The more loyal the customers, the higher the customer equity.

 Rust, Zeithaml and Lemon distinguish three drivers of customer

equity : value equity, brand equity and relationship equity.

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 Value Equity
 Value equity is the customer’s objective assessment of the utility of an

offering based on perceptions of its benefits relative to its costs.

 The sub-drivers of value equity are quality, price and convenience.

 Value equity makes the biggest contribution to customer equity when

products are differentiated and when they are more complex and need to be

evaluated.

 Value equity especially drives customer equity in business markets.

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 Brand Equity

 Brand equity is the customer’s subjective and intangible assessment of the

brand, above and beyond its objectively perceived value.

 The sub-drivers of brand equity are customer brand awareness, customer

attitude toward the brand and customer perception of brand ethics.

 Companies use advertisements, public relations and other communication

tools to affect these sub-drivers.

 Brand equity is more important than the other drivers of customer equity

where products are less differentiated and have more emotional impact.
64
 Relationship Equity
 Relationship equity is the customer’s tendency to stick with the brand,

above and below objective and subjective assessments of its worth.

 Sub-drivers of relationship equity include loyalty programmes, special

recognition and treatment programmes, community-building

programmes and knowledge-building programmes.

 Relationship equity is especially important where personal

relationships count for a lot and where customers tend to continue

with suppliers out of habit or inertia. 65

 Customer Database

A Customer Database is an organized collection of

comprehensive information about individual customers or

prospects that is current, accessible and actionable for such

marketing purposes as lead generation, lead qualification, sale

of a product or service, or maintenance of customer

relationships.

66
 Database Marketing

Database marketing is the process of building, maintaining

and using customer databases and other databases

(products, services, resellers) for the purpose of contacting,

transacting and building customer relationships.

67
 Data Warehouse

• Companies are capturing information every time a customer comes

into contact with any of its departments.

• The data are collected by the company’s contact center and

organized into data warehouse.

• Company personnel can capture, query and analyse the data.

• Inferences can be drawn about an individual customers needs and

responses.
68
 Data Mining

• Through Data mining, marketing statisticians can extract useful

information about individuals, trends and segments from the mass data.

• Data mining involves the use of sophisticated statistical and mathematical

techniques such as cluster analysis, automatic interaction detection,

predictive modeling and neural networking.

69
 Marketing Environment
 Marketing is essentially an externally focused function of an

organisation.

 The firm’s environment defines its threat and opportunities

because organisation is a sub-system of a broader supra-system.

 In simple terms environment implies everything that is external

to the organisation.

70
 It is something that surrounds an enterprise, the sum total of external factors

within which the enterprise operates.

 It is made up of tangible and intangible factors both controllable and

uncontrollable.

 A business organisation is a socio-economic system of a larger

environmental system. It must continuously adapt and adjust to the

opportunities and threats or risks and uncertainties presented by changes in

the environmental forces.

71
 Mega or Macro Environment
The factors influencing these are :

1) Demographic Environment
 Demographic features deal with population such as size, birth rate,

growth rate, age, family size, level of education, language, income level,

religious composition etc.

 Thus, demography offers consumers profile, which is necessary in market

segmentation and determination of target markets.

72
2) Economic Environment

 People constitute only one element of a market.

 The second essential element is purchasing power and the willingness to

spend.

 It deals with the disposable income of the individuals, purchasing power,

money supply, interest rates, price level, consumption patterns etc.

73
3) Socio-cultural Environment

 Socio-cultural environment is another important factor in mega

environment.

 Culture, traditions, beliefs, values and lifestyles of the people in a given

society constitute the socio-cultural environment.

 These elements decide to a large extent, what the people will consume and

how they will buy.

74
4) Political Environment
 Economic environment is a byproduct of political environment, since

economic and industrial policies followed greatly depend on its political

environment.

 Developments on the political fronts keep affecting the economy, industrial

growth and legislations regulating the business.

 Political environment has several factors : form of government adopted,

political stability, elements like social and religious organisations, media and

pressure groups and lobbies of various kinds are part of the political

environment.
75
 5) Legal Environment
 Businesses have to operate within the framework of the prevailing legal
environment.
 Business legislations can be classified into the following categories:
a. Corporate affairs
b. Consumer protection
c. Employee protection
d. Sectoral protection
e. Corporate protection (protecting companies from each others, preventing
unfair competition)
f. Protection of the society as a whole against unbridled business behaviour
g. Regulation on product, price and distribution
h. Control on trade practices 76
6) Natural Environment

The analysis of macro-environment should also cover aspects like

extent of endowment of natural resources in the country, ecology

climate etc. These are the part of natural environment.

77
7) Technological Environment

 Technology is a major force, which industry and business have to reckon with.

 Technology leads all the forces that shape people’s lives.

 For business firm, technology affects not only its final products but also its raw

materials, process and operation as well as its customer segments.

 The elements influencing technological environment are: options available in

technology, government’s approach in respect of technology and technology

selection.
78
 Microenvironment or Environmental
factors specific to business concerned

1. Market / Demand
The aspects to be studied under this area are :

 Nature of demand

 Size of the demand, present and potential

 Changes taking place in demand

 Invasion of substitute products

 Changes taking place in consumption pattern / buying habits

79
2. Consumer

 Consumer tastes and preference keep fluctuating.

 Changes in customer preferences, if properly monitored, often

end up as attractive business opportunities.

 Only by keeping track of ‘what the customer want’ one can grab

the opportunities emerging in the environment.

 That is why great importance is given to consumer analysis as

part of environmental survey.

80
3. Industry and Competition

 Knowledge about the industry and competition is a fundamental

requirement for developing marketing strategy.

 Competitive advantage building too depends on a proper grasp of

the position of the industry and competition.

81
4. Government Policies
 Besides influencing mega environment, government policies profoundly affect the

specific environment of any business / industry.

 Governments play roles, which have a bearing on the functioning of a firm.

 Governments are often large purchasers of goods and services.

 Governments subsidies select firms and industry.

 Governments protect home producers against foreign competitions.

 Governments ban fresh entry in select industry.

 Governments off and on ban certain technologies and products.

 In some cases, government happens to be producers, and therefore, function as

competitors. 82
 5. Supplier
 Suppliers constitute one of the five forces shaping competition in any industry.

 They have their own bargaining power, influence the costs of raw materials

and other inputs to the firm.

 Suppliers also keep introducing frequent changes in their products, process

and business practices.

 Sometimes, suppliers suddenly become direct competitors to a firm, by

themselves becoming end product manufacturers.

 Obviously, firms have to closely monitor the supplier environment.

83
 Environmental Scanning
Environmental scanning is that exercise that involves continuous process of
monitoring the dynamic interplay of all those forces namely, economic,
competitive, technological, socio-cultural, demographic and political forces
to determine the opportunities.
 
L R Jauch and W F Glueck - “Environmental analysis is the process by which
strategies monitor the environmental factors to determine opportunities for
and threats to their firms. Environmental diagnosis consists of managerial
decisions made by assessing the significance of the data of the environmental
analysis.”
84
Emerging trends in Indian Marketing Environment
 Customer Empowerment

 Incredible Customerisation

 Intense Competition

 Retail Revolution

 Impact of Digital Age

 Impact of Globalisation, Privatisation, Deregularistion

 More Socially Responsible Marketing

 Major Inroads in Rural Marketing

 Ever increasing Service Marketing

 Industry Convergence
85
 Economic Model
 It is assumed that with limited purchasing power and asset of needs and

tastes, a consumer will allocate his / her expenditure over different

products at a given prices so as to maximize utility.

 Economic model of consumer behaviour is unidimensional.

 This model is based on certain predictions :

1] Price Effect

2] Substitution Effect

3] Income Effect

86
 Learning Model (S-R Model)

 Unlike the economists, classical psychologists have been interested in the

formation and satisfaction of needs and tastes.

 They argued that living beings were influenced by both innate needs such as

primary needs of hunger, thirst, shelter and learned needs like fear and guilt.

 An internal stimulus when directed towards a drive reducing object becomes a

motive.

 The various products or services will act as a stimulus to satisfy drives.

 This response of feeling satisfied reinforces the relationship between drive and

the drive reducing stimulus. 87

 Psychoanalytical Model

According to this model, the individual consumer has a complex set of deep motives,

which drive him towards certain buying decisions.

ID SUPER EGO
PERSUADERS DISSADERS

EGO

Moderated Action

88
 Sociological Model

 According to this model the individual buyer is a part of the institution

called society.

 He plays many roles in the society as a member of the family, employee of an

organisation etc.

 Each individual is recognized as belonging to a certain social class.

 As member of a particular class he enjoy certain status and prestige.

 Each class has its own standard of living and buying behaviour pattern.

89
 Howard Seth Model of Consumer Decision Making

Perpetual Learning Output

Stimuli Inputs
Constructs Constructs

Significative Attention

Comprehension

Symbolic Consumer Consumer Attitude

Intension
Social
Purchase
90
 Nicosia Model

 This model tries to explain buyer behaviour by establishing a link between

the organisation and its consumer.

 This model is divided into four fields:

1.      The consumers attitude based on message exposure.

2.      The consumer’s product search and evaluation.

3.      The act of purchase.

4.      Feedback in the form of consumer experience.

91
 NICOSIA MODEL
Field 1

Firm’s Attribute Consumers Attribute Attitude

Message
Exposure
Search &
Field 2 Evaluation
Field 4 Experience

Motivation

Consumption

Decision Field 3

92
 Product

• Anything offered to a market for attention, acquisition, use

and consumption that might satisfy a need or want.

• Products that are marketed include physical goods,

services, experiences, events, persons, places, properties,

organisations, information and ideas.

93
Classification of Product

• Based on tangibility

• Based on durability

• Based on usage

94
 Types of Consumer Goods
Marketing Convenience
Shopping Products Specialty Products Unsought Products
Consideration Products

Exclusive distribution
Wide spread Selected
in only one or a few
Distribution distribution; distribution in Varies
outlets per market
convenient locations fewer outlets
area

Advertising & Aggressive

More carefully
Personal Selling advertisement and
Mass promotion by targeted promotion by
Promotion both by the personal selling
the producers both producers and
producer and both by producer &
resellers
reseller reseller

Higher than
Price Low price High price Varies
Convenience goods

Little product
Strong brand
Less frequent awareness, aware
Purchases Frequent purchases preference, requires
purchases but negative
special purchase effort
interest
Tooth paste,
Major appliances,
magazines,
Example TV’s, furniture, Luxury goods Life Insurance
toiletries, cigarettes,
clothing etc.
etc. 95
Types of Industrial Goods

1. Materials and Parts

2. Capital Items

3. Supplies and Services

96
 Product Levels

1. Core Benefit

2. Basic Product

3. Expected Product

4. Augmented Product

5. Potential Product
97
 Product Packaging

• Packing is a process that speaks of company’s ability to contain

economically man made or natural products for shipment, storage,
sale or final use.
• A package is a wrapper or a container in which a product is
enclosed, encased, housed or sealed.
• Packaging on the other hand, deals with activities of planning and
designing of different means of packing the products.
• “Packaging is an activity which is concerned with the protection,
economy, convenience and promotional considerations”. – Prof.
Philip Kotler 98
 Product Labelling

• Labelling is the act of attaching or tagging labels.

• A label is anything – piece of paper, printed statement, which is

either a part of package or attached with it, indicating – the

contents of – price, product name, place of produces.

• Thus, a label is an informative tag, wrapper or seal attached to a

product or product’s package.

99
 Product Line

- A group of products that are closely related because they may:

• Function in a similar manner

• Be sold to the same customer groups,

• Be marketed through the same types of outlets

• Fall within given price ranges

100
 Product line length

• Line Stretching

– Stretching Down

– Stretching Up

– Two way stretching

• Line filling
101
Product Mix Decisions

• Width

• Length

• Depth

• Consistency

• Inconsistency
102
 New Product Development

• Development of original products, product

improvements, product modifications, and new
brands through the firm’s own R & D efforts.

• New products can be obtained via acquisition or

development

103
 Causes for New Product Failures

• Over estimation of market size.

• Product design problem.

• Poor timing.

• Product incorrectly positioned, priced or advertised.

• Costs of product development.

• Competitive actions.

104
Stages of the New Product Development Process

Stage 1: Idea Generation

Stage 2: Idea Screening

Stage 3: Concept Development and Testing

Stage 4: Marketing Strategy Development

Stage 5: Business Analysis

Stage 6: Product Development

Stage 7: Test Marketing

Stage 8: Commercialization
105
 Time of Adoption of Innovation

34% 34%

16%
2.5% 13.5%

Innovators Early Early Late Laggards 106

Adopters Majority Majority
 Product Life Cycle

• Product life cycle is simply graphic portrayal of the sales

history of a product from the time it is introduced to the time

when it is withdrawn.

• According to Prof. Philip Kotler – it is an attempt to recognize

distinct stages in the sales history of the product.

107
The product has a life is to assert four things :

1. Products have limited life.

2. Product sales pass through distinct stages, each posing different

challenges, opportunities and problem to the seller.

3. Profits rise and fall at different stages of the product life cycle.

4. Products require different marketing, financial, manufacturing,

purchasing and human resource strategies in each life cycle stage.

108
• Product life cycle concept can be applied to a

 Product category

 Product form

 A Product

 Brand

109
 Product Differentiation

• Physical products vary in their potential for differentiation

• At one extreme we find products that allow little variation

• At the extreme are products capable of high differentiation

110
 Product Positioning

• Product Positioning is a creative exercise tried with every

existing product.

• Product positioning is not what you do to a product;

positioning what you do to the mind of a prospect.

• That is, it is the act of positioning the product in the mind of

prospect.
111
Determinants of successful Product
Positioning

1. Design creative product proposition

2. Existence of warranted competition

3. Sizeable and profitable market segment

4. Sensitive market segment

5. Adequate customer behaviour information

112
 Steps in Product Positioning

1. Identifying potential competitive advantages

2. Choosing the competitive advantages

3. Signaling the competitive advantages

113
Errors in Product Positioning

 Error of under positioning

 Error of over positioning

 Error of confused positioning

114
 Brand
“Brand as a name, term symbol or a design or a combination of

them which is intended to identify the goods or services of one

seller and to differentiate them from those of competitors. On

the other hand, branding is the process of finding and fixing the

means of identification.” Committee of Definitions AMA

115
 Role of Branding

1.      Brand is a massive asset

2.      Brand is a promotional tool

3.      Brand is a weapon to protect market

4.   Brand is antidote for middlemen’s survival

5.      Brand is a means of identification for customers

116
 Advantages / Purpose

1. Increase market share

2. Protecting the company as well as customers

3. Increase goodwill

4. Helpful for identifying / segmentation

117
Types of Branding

1. Individual Branding

2. Family Branding

3. Alpha Numeric

4. Founders Name

5. Functional Value

118
 Branding Decisions

1. Branding Expansion

2. Private (store) / middlemen’s brands

3. Licensed brands

4. Co-branding

119
 Brand Positioning

• Three levels of positioning:

• Product attributes

• Benefits

• Beliefs and values

120
 Pricing

• Price is the only element in the marketing

mix of a firm that generates revenue.

• All else generate only cost.

121
 Price

• The amount of money charged for a product or

service, or the sum of the values that consumers

exchange for the benefits of having or using the

product or service.

122
 Price Has Many Names

• Rent for an apartment, Tuition Fees for education, Rate,

Commission, Assessment, Fare, Premium, Bribe, Salary, Wage,

Interest, Tax.

• “Price is the amount of money and / or other items with utility

needed of acquire a product” - W J Stanton, M J Etzel and B J

Walker
123
Pricing – is the art of translating into quantitative terms
(rupees and paise) the value of the product or a unit of a
service to customers at a point in time.

• “Pricing is a managerial task that involves establishing

pricing objectives, identifying the factors governing the
price, ascertaining their relevance and significance,
determining the product value in monetary terms and
formulation of price polices and strategies, implementing
them and controlling them for the best results.” Prof. K C Kite
124
 Factors influencing the product pricing decisions

Internal Factors External Factors

[Controllable Factors] [Uncontrollable Factors]

• Organizational Factors • Product Demand

• Marketing Mix • Competition

• Product life cycle • Economic Conditions

• Functional Position • The Buyer Behaviour

125
 Methods of price determination

1. Cost Based Pricing 2. Competition Based Pricing

• Cost Plus Pricing • Going Rate Pricing

• Target Return Pricing • Sealed Bid Pricing

3. Demand Based Pricing

• Demand Modified Break Even Analysis

• Perceived value Pricing

126
 Pricing Policies and Strategies

• Variable Price Policy • Premiums

• Non-Variable Price Policy • Leader Price Policy

• Single Price Policy • Skimming Price Policy

• Discounts • Penetration Price Policy

• Rebates

127
 Marketing Information System (MIS)

• Consists of people, equipment, and procedures to gather, sort, analyze,

evaluate, and distribute needed, timely, and accurate information to

marketing decision makers.

• “MIS is an organised set of procedures, information handling, routines

and reporting techniques designed to provide information required for

making marketing decisions”. – Prof. Cundiff, Still and Govani.

128
The need for Marketing Information

• Knowledge of consumer demand

• Growing complexity of marketing

• Changing economic parameters

• Changing competitive conditions

• Strides in science and technology

• Fast growing consumerism

129
Developing Marketing Information

1. Internal data

2. Marketing intelligence

• Sources of Competitive Intelligence

130
 Marketing Research

• Marketing research is the systematic design,

collection, analysis, and reporting of data relevant

to a specific marketing situation facing an

organization.

131
R – Recognition of needs P – Past and Present situation

E – Effective decision making R – Resources

S – Systematic O – Objectives

E – Exude [Disseminate] B – Buyer Behaviour

A – Analysis L – Legal environment

R – Recognition for action E – Economic environment

C – Collect information M – Managerial Behaviour

H – Helpful to the managers

132
Steps in Marketing Research
Step 1 : Identify the Problem
Step 2 : Formulate the Objective
Step 3 : Research Methodology
A] Research Design
B] Types of Data
C] Sampling Technique
D] Data gathering
E] Size of the sample
F] Sampling Area
G] Limitations
Step 4 : Analysis and Interpretation
Step 5 : Findings
Step 6 : Statistical Tools
Step 7 : Suggestions
Step 8 : Report
Step 9 : Validity and Reliability 133
 Methods and techniques of marketing research

• Quantitative marketing research

• Qualitative marketing research

• The most common methods and techniques used in marketing

research are :

 Survey Method

 Observation Method

 Experimental Method

 In-depth Interview

 Projective Technique 134

 Difference between Marketing Research and Marketing
Information System
Sl. Marketing Research Marketing Information System

Emphasis on internal and external

1 Emphasis on external information
information

It not only solves the problem also

2 It gives a solution for a problem
prevents the problem

Research is made on project by project

3 [when there is a need marketing It is an continuous process
research is done]

4 Use of computer is not mandatory Use of computer is a must

It is a sub-system of marketing
5 It is a holistic approach
information system

Applicable in micro level

6 It is an advanced strategic function
[particular area] 135
 Sales forecasting methods
Demand Measurement
• Jury method / Executive Opinion

Method
• Total Demand
• The Delphi Technique
• Area Demand
• Sales force Composite Method

• Simple moving average method

• Weighted moving average method

• Regression analysis

• Trend projections 136

 Marketing Communications

• Marketing Communications are the means by which firms

attempt to inform, persuade, and remind consumers directly

or indirectly about the products and brands that they sell.

• Elements of communication process

137
Six major modes of Marketing Communication

• Advertising

• Sales Promotion

• Events and experiences

• Public Relations and Publicity

• Direct Marketing

• Personal Selling

138
 Advertising

• “Advertising is any paid form of non-personal presentation of

ideas, goods or services by an identified sponsor”. AMA

• Functions of Advertisement

 To inform

 To persuade

 To remind

139
 Objectives of advertisement

Primary objectives Secondary objectives

• Increase sales • Generate more employment

• Increase brand image opportunity

• Increase market share • Offer many choices to customer

• To educate customer (by continuous advertisement)

• Arresting competition • Reduce the cost by increasing

• Increase profits sales

140
 Objections against advertising

 Advertising increases the price of goods

 Advertisement does not increase sales

 Many advertisements are deceptive and misleading

 Advertising is a waste

 Advertising creates monopoly

 Advertising encourages extravagance

141
Advertisement Copy
1. Attention Value

2. Suggestive Value

3. Convincing Value

4. Remembrance Value

5. Sentimental Value

6. Education Value

7. Simplicity
142
• Media of advertisement

• Different medias of advertisement

143
 Sales Promotion

• It is communicating with an audience through a variety of

non-personal, non-media vehicles such as free samples, gifts,

and coupons; the audience perceives the source of messages

as the firm is paying for their delivery.

144
Types of Sales Promotion

• Consumer Promotions

• Trade Promotions

• Sales Force Promotions

145
 Events and Experiences

• An event is an occasion where a gathering of target audience

meets to celebrate or experience an occurrence, designed and

organized to communicate and interpret and interact with a

purpose to achieve an objective.

• Experience is something faced by the individual or group of

individuals

146
 Public Relations

• Building good relations with the company’s various

publics by obtaining favorable publicity, building up

a good corporate image, and handling or heading

off unfavorable rumors, stories, and events.

147
 Role and Impact of Public Relations

• Strong impact on public awareness at lower cost than advertising

• Greater credibility than advertising

• Publicity is often underused

• Good public relations can be a powerful brand-building tool

148
 Direct Marketing

• Direct Marketing Association of America – “Direct

Marketing is an interactive marketing system that uses

one or more advertising media to effect a measurable

response and transition or response or transaction at any

location”.

149
Methods of Direct Marketing
 Direct Selling

 Tele-Marketing

 Television Marketing

 Mail Order Houses

 Franchising

 Internet or Online Marketing

 Automatic Vending Machines

 Catalog Marketing

 Kiosk Marketing
150
Causes for Environmental Degradation

• Social factors

• Economic factors

• Institutional factors

• Technological factors

151
 Green Marketing Strategies

• Identifying the green needs

• Manufacturing environment friendly and safe products

• Sourcing green components and consumables

• Using green packaging

• Green pricing

• Green promotion

• Green distribution
152
 Related Marketing terms

• Internal Marketing • Flattening

• Out Sourcing • Focusing

• Bench Marking • Accelerating

• Empowering
• Supplier partnering
• Customer Engagement
• Merging

153
 RURAL MARKETING

“Rural Marketing is a process which starts with a decision to produce

a saleable farm commodity and involves all the aspects of market

structure or system, both functional and institutional, based on

technical and economic considerations and includes pre and post

harvest operations, assembling, grading, storage, transportation and

distribution.” - National Commission on Agriculture

154
Rural Market Environment

1. Population

2. Literacy Rate

3. Household Pattern

4. Lifestyle

5. Occupational Pattern

155
 Buying Behaviour

1. Influence of Culture

2. Geographic Location

3. Exposure to urban lifestyles

4. The way the consumer uses the product

5. Place of purchase

6. Involvement of others in the purchase

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