Chapter 1. Marketing function Four P’s in marketing Different concepts in marketing Production...

Chapter 1

Marketing function Four P’s in marketing Different concepts in marketing Production concept Product concept Selling concept Marketing concept Societal and holistic concept

Method of demand fprecasting

Survey of buyers’ intention Sales force opinion Expert opinion Market test Time series analysis Statistical demand analysis

Marketing demand

•Meaning •Importance•Different bases of market segmentation with reference to consumer product and industrial product

What is 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.

What is Marketing management ?Marketing Management is the art and

science of choosing target markets and getting, keeping and growing customers through creating, delivering and communicating superior customer value.

What is marketed ?GoodsServicesEventsExperiencesPersonsPlacesPropertiesOrganizationsInformationIdeas

What is marketed ?Goods

Cars, electronic items, industrial chemicals etcServices

Airlines, hotels, Banking, beauticians, doctorEvents

World Cups, Award Functions, Olympics

What is marketed ?Experiences

Amusement park, water park, theme restaurant

Persons Celebrity Marketers

Places Cities, State and Nations

What is marketed ?Properties

Real Property, Financial PropertyOrganizations

Universities, Non Profit organizationInformation

Discount, Offers, ChangeIdeas

Child Labor, Discouraging Smoking, education

Four P’s in Marketing

• Product• Price• Promotion• Place

Marketing Mix

ProductQualityDesign FeaturesPackagingSizesServicesWarrantiesReturnVariety

Price Price listDiscountsAllowancesPayment PeriodCredit terms

PromotionSales PromotionAdvertisingSales ForcePublic relationsDirect MarketingOnline advertising

PlaceChannelsCoverageAssortmentsLocationsInventoryTransport

Different concepts in marketingThe Production ConceptThe Product ConceptThe Selling ConceptThe Marketing ConceptThe societal and holistic Concept

The Production ConceptOldest concept in businessConsumer prefer products that are widely

available and inexpensiveBusinesses concentrate on achieving high

production efficiency, low costs and mass distributions

Applicable for developing countries and also in expanding market

E.g. inexpensive toys, electronics

The Product ConceptProducts with high quality, performance or

innovative featuresManagers focus on superior products and

improving them over the timeLittle or no customer inputRarely examine competitor’s productFor success it’s necessary to be perfectly

priced, distributed, advertise and sold properlyLeads to marketing myopiaE.g HMT, ambassador car

The Selling ConceptConsumers and businesses if left alone will not

buy enoughIt undertake an aggressive selling and promotion

effortThe selling concept is practiced most aggressively

with unsought goods that buyers normally don't think of buying such as insurance.

Sell more stuff to more people for more profitMany use it at the time of over capacity or

competitionE.g. consumer durables

The Marketing ConceptCustomer – centric conceptReactive market orientation and proactive

marketing orientationMore effective than competitors in creating,

delivering and communicating superior customer value

Fulfilling buyer’s needsHP and Motorola have made a practice of

researching latent need through a :Probe – and – learn” process.

Selling conceptStart Focus Means End

Factory Products Selling & Profit through promotion high sales

volume

Marketing concept

Customer Customer Integrated Profit throughneeds marketing customer

satisfac

Distinction between marketing and sellingMarketing Selling Focuses on customer’s

needsCustomer enjoys

supreme importanceProduct planning and

development to match products with markets

Integrated approach achieve long term goals

Converting customer’s needs into products

Focuses on seller’s nee dsProduct enjoys supreme

importanceHigh pressure selling to

sell goods already produced

Fragmented approach to achieve immediate gains

Converting products into cash

Marketing Selling Let the seller beware

principle is followedProfits through customer

satisfaction

Let the buyer beware principle is followed

Profits through sales volume

The societal and and holistic ConceptThe societal marketing concept calls upon

marketers to build social and ethical considerations into their marketing practices. They must balance and juggle the often conflicting criteria of company profits, consumer want satisfaction, and public interest. Yet a number of companies have achieved notable sales and profit gains by adopting and practicing the societal marketing concept.

To determine the needs, wants and interest of the target market and deliver the desired satisfaction that preserves the society’s well being

They see it as affording an opportunity for companies to enhance their corporate reputation, raise brand awareness, increase customer loyalty, build sales, and increase press coverage. They believe that customers will increasingly look for demonstrations of good corporate citizenship. Smart companies will respond by adding “higher order” image attributes than simply rational and emotional benefits.

Environment deterioration

Method of demand fprecasting

Survey of buyers’ intention Sales force opinion Expert opinion Market test Time series analysis Statistical demand analysis

Marketing demand

Demand forecastingDemand forecasting means expectations

about the future course of the market demand for the product.

Survey of buyer’s intention method• A firm can determine the demand for its products through

a market survey. It may launch a new products, if the survey indicates that there is a demand for that particular product in the market.

• For example, Coke in India expanded its product range beyond carbonated drinks, after the company conducted a nation wide survey. The survey revealed that about 80% of the youth preferred to drink tea or coffee rather than carbonated drinks at regular intervals. The remaining 20% preferred to have milk products while only 2% preferred to drink carbonated drinks like coke.

• The company is now trying to bring tea and coffee brands to India by installing vending machines. It is also planning to introduce a coconut flavored drink in kerala and a black currant in Tamilnadu named portello.

Merits of survey of buyer’s intention methodThe forecast comes straight from the horse’s

mouth – the customer himself and hence more reliable.

It gives readymade forecast user-wise and user industry-wise.

Demerits of survey of buyer’s intention methodIt is expensive.

It is time consuming.

Sales force opinion methodSales forecasts are made on the basis of the

opinion of the salesmen or top management in the respective areas.

Salesmen are more in personal contact with the customers, their opinions and estimates can be more reliable.

Merits of salesforce opinion method

Demerits of salesforce opinion method

It is easy and simple.As salesmen’s opinions are

used for sales forecasting they do feel that their importance is accepted by the management.

The forecasts developed by this method have greater stability and reliability because of the largeness of the sample.

Their opinions cannot be of much use if their knowledge is limited.

Salesmen are certainly not experts in forecasting, they cannot use sophisticated techniques.

Expert Opinion methodThe expert opinion method, also known as “EXPERT

CONSENSUS METHOD”, is being widely used for demand forecasting.

This method utilizes the findings of market research and the opinions of management executives, consultants, and trade association officials, trade journal editors and sector analysts. When done by an expert, qualitative techniques provide reasonably good forecasts for a short term because of the expert’s familiarity with the issues and the problems involved.

DELPH I METHOD:- The Delphi method is primarily used to forecast the demand for “NEW PRODUCTS”.

Merits of expert opinion method

Demerit of expert opinion method

As expert’s knowledge is used, forecasting will be accurate.

It is also suitable where past record of sales is not available or a new product is to be introduced.

It is time consuming.It is expensive.

Market Test method• In this case, a test area is selected, which should be

a representative of the whole market in which the new product is to be launched. A test area may include several cities and towns, or a particular region of a country or even a sample of consumers.

• More than one test area can be selected if the firm wants to assess the effects on demand due to various alternative marketing mix.

• Advertising or packaging can be done in various market areas. Then the demand for the product can be compared at different levels of price and advertising expenditure. In this way, consumer’s response to change in price or advertising can be judged.

Demerits of market test method1) The test experiments are that they are very

costly and much time consuming.2) If in a test market prices are raised, consumer

may switch to the competitor’s products. 3) It may be difficult to regain lost customers

even if the price is reduced to the previous level. Moreover, it is often difficult to select an area, which accurately represents the potential market.

Time series analysis method 1)TREND:- Past data is used to predict the future

sales of firm .2)SEASONAL VARIATIONS:- It is taken into account

the variations in demand during different seasons.

Eg:- The sale of cotton dresses increases in summer. The sale of Woolen clothes increases in winter.

3)CYCLICAL VARIATIONS:- This variations in demand due to the fluctuations in the business cycle – Boom, recession and depression.

4) RANDOM FLUCTUATIONS:- It may happen due to Natural calamities like flood, earthquake, etc. which cannot be predicted accurately.

Statistical demand analysisIf two variables are correlated in a definite

manner, the behaviour of one of them can be predicted on the basis of the data about the other variable.

For example, in many developed countries sales of toothbrush clearly seem to be related with the size of population.

Thus if any two variables are correlated and if reliable data about one of them is available, the value of the other variable can be predicted with accuracy.

Demerit of this method is that it depends too much on the past events.

Importance of advertisingTo producers and traders1.Meeting competition- by creating brand loyalty2.Steady demand e.g. hot and cold coffeee3.Higher sales volume4.Introduction of new products5.Economies of scale6.Goodwill7.Employee morale- product is known to

customers so task of salesmen becomes easy

To customers1.Convenience2.Education of consumers3.Fair prices4. Better quality

• To society1.Employment2.Standard of living3.Sustain the press4.Stimulates research and development5.Incentive to progress6.Art and culture

•Meaning •Importance•Different bases of market segmentation with reference to consumer product and industrial product

Meaning of market segmentationThe concept of market segment is based on

the fact that the market of commodity are not homogeneous but they are heterogeneous. Market represent a group of customer having common characteristics but two customers are never common in their nature, habits, hobbies, income and purchasing techniques.

According to Philip kotler,“Market segmentation is sub-dividing a

market into distinct and homogeneous subgroups of customers where any group can conceivably be selected as a target market to be met with distinct marketing mix.”

Dividing large market into small group

Each group should have common characteristic

Importance of market segmentationFacilitates consumer-oriented marketingFacilitates introduction of suitable marketing

mix Facilitates introduction of effective product

strategyFacilitates the selection of promising marketsFacilitates exploitation of better marketing

opportunities Facilitates selection of proper marketing

programme

• Facilitates effective advertising• Provides proper direction to marketing effortsProvides special benefits to small firmsFacilitates optimum use of resources

Different bases of market segmentation of consumer productDemographic Geographic Psychographic Behavioral

Demographic segmentationAge and life-cycle stageGenderIncomeGenerationSocial class

Geographic segmentationRegion CityRural and semi-urban areas

Psychographic segmentationLifestylePersonality Values

Behavioral segmentationOccasions Benefits Usage rate Loyalty statusReadiness stageAttitude toward product

Different bases of market segmentation of industrial productDemographicOperating variablesPurchasing approachesSituational factorsPersonal characteristics

Demographic Industry Company sizeLocation

Operating variablesCompany Technology Product and brand use statusCustomer capabilities

Purchasing approachesPurchasing function organisation- highly

centralised or decentralised purchasing organisation

Power structure- engineering dominated, financially dominated

Nature of existing relationship among buyers and sellers

General purchasing policies- leasing, service contract, system purchases, sealed bidding

Purchasing criteria- Quality, service, price

Situational factorsUrgency Product applicationSize of the order

Personal characeristicsBuyer-seller similarityAttitude towards riskLoyalty