MARKETING MANAGEMENT

BY PROF. R B TANDAN

SYLLABUS1. Overview of marketing.2. Marketing management. 3. Marketing environment. 4. Customer demand & Market Segmentation. 5. Buyer behavior. 6. Demand & Sales forecasting. 7. Marketing information & Research process. 8. Marketing planning & Strategy. 9. Consumerism & Consumer protection act.

Contd.10. Product plan. 11. Product related strategies. 12. Price. 13. Promotion. 14. Personal selling. 15. Sales management. 16. Advertising.

Reference Booksy Marketing Management

By Philip Kotler, Kevin Lane Keller, Abraham Koshy, Mithileshwar Jha.

MarketingThe aim of marketing is to meet and satisfy the target customer s needs and wants better than competitors. Marketers are always looking for emerging customer trends that suggest new marketing opportunities. For example, the emergence of the mobile phone, especially with teens and young adults, has marketers rethinking their practices.

Overview of MarketingMarketing is everywhere. Formally or informally, people and organizations engage in a vast number of activities that we could call marketing. Good marketing has become an increasingly vital ingredient for business success. Marketing profoundly affects our day to day lives. It is embedded in every thing we do from the clothes we wear, to the web sites we click on, to the ads we see .

Contd.Good marketing is no accident, but a result of careful planning and execution. It is both an art and a science there s a constant tension between its formulated side and its creative side. It s easier to learn its formulated side, but we will also study how real creativity and passion operate in many companies.

The Scope of MarketingTo prepare to be a marketer, you need to understand what marketing is, how it works, what is marketed, and who does the marketing? What is Marketing?Marketing is about identifying and meeting human and social needs. It is also defined as Meeting needs profitably.

Contd.The American Marketing Association offers the following definition Marketing is an organizational function and a set of processes for creating, communicating and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders. Thus, we see Marketing management as the art and science of choosing target markets and getting, keeping and growing customers through creating, delivering, communicating superior customer value.

Contd.Managers sometimes think of marketing as the art of selling products, but selling is not the most important part of marketing. Peter Drucker put it this way There will always, one can assume, be need for some selling. But the aim of marketing is to make selling superfluous. The aim of marketing is to know and understand the customer so well that the product or service fits him and sells itself. Ideally, marketing should result in a customer who is ready to buy. All that should be needed then is to make the product or service available.

Contd.Marketing originates with the recognition of a need on the part of a consumer and terminates with the satisfaction of that need by the delivery of a usable product at the right time, right place and at an affordable price. The consumer is found both at the beginning and at the end of the marketing process. Customer Integrated Mktng. Product thru CS

Contd.What is Marketed? Marketing people market 10 types of entities: Goods, services, events, experiences, persons, places, properties, organizations, information and ideas. Goods Physical goods constitute the bulk of most countries production and marketing efforts. Services As economies advance a growing proportion of their activities focuses on production of services. Service includes airlines, hotels, care rentals bankers , lawyers, etc.

Contd.Events Marketers promote time bound events such as trade shows, sporting events, exhibitions, etc. Experiences By orchestrating several services and goods, a firm can create, stage, and market experiences. Ex. A theme park or a theme restaurant. Persons Celebrity marketing is big business.

Contd.Places Cities, states, regions and whole nations compete actively to attract tourists, companies, factories, etc. Properties They are either intangible( real estate) or financial property( stocks and bonds). Properties are bought and sold and the require marketing. Organizations They work to build a strong, favorable, and unique image in the mind of their target publics. Corporate identity campaigns are result of intensive market research programs.

Contd.Information Information is essentially what books, schools and universities produce, market and distribute to parents, students and communities. The production , packaging and distribution of information are some of our society s major industries. For ex. CEO of Siemens Medical Systems Tom McCausland says, our product is not X-Ray or MRI, but information. Ideas Every market offering includes a basic idea. Charles Revson of Revlon once observed, In the factory, we make cosmetics, in the store we sell Hope.

Who Markets?Marketers and Prospects A marketer is someone who seeks a response attention, a purchase, a vote, a donation from another party, called the prospect. If two parties are seeking to sell something to each other, we call them both marketers. Eight demand states are possible: Negative demand -consumers dislike the product and may even pay a price to avoid it. Nonexistent demand - consumers may be unaware of or uninterested in the product.

Contd.Latent demand - consumers may share a strong need that cannot be satisfied by an existing product. Declining demand - consumers begin to buy the product less frequently or not at all. Irregular demand - consumers purchases vary on a seasonal, monthly, weekly, daily or even hourly basis. Full demand - consumers are adequately buying all products put into the market place.

Contd.Overfull demand - more consumers would like to buy the product then can be satisfied. Unwholesome demand - consumers may be attracted to products that have undesirable social consequences.

The Marketing ConceptDifferent concepts of marketing: 1. The Exchange Concept. 2. The Production Concept. 3. The Product Concept. 4. The Sales Concept. 5. The Marketing Concept. We will study and understand each og these concepts individually.

Contd.y The exchange concept - exchange of a product y y y y

between a seller and a buyer. The production concept - production dominates in the company. The product concept - Product dominates in the company. The sales concept promote and push the product aggressively. Products don t sell automatically. The marketing concept - Drucker says the essence here is that the entire business has to be seen from the point of view of the customer.

Contd.Marketing Myopia Prof. Theodore Levitt explained that- A colored or crooked perception of marketing and a short sightedness about business with excessive attention to production or product or selling aspects at the cost of customer and his actual needs creates Marketing Myopia. He further says, They don t get so excited about their customers in their own backyard as about the oil in the distant Sahara.

Contd.Difference between Selling and Marketing. Marketing is much wider than selling and more dynamic. Selling revolves around the needs and interests of the seller; Marketing revolves around the needs and interests of the buyer. Selling starts with the existing products and views business as a task of somehow promoting these products. Marketing on the contrary starts with the customers present and potential and views the business as a task of meeting the needs of the customer. Marketing views the entire business as consisting of a tightly integrated effort to discover, create, arouse an satisfy customer needs.

Contd.In other words marketing concept represents a shift in orientation;- From Production Marketing orientation Product Customer orientation Supply Demand orientation Sales Satisfaction orientation Internal External orientation.

Contd.Definition of marketing concept.Marketing concept is essentially a point of view about business. It enunciates that business is basically a need satisfying process and that business must be managed keeping the consumer and his need as the focus. The concept prescribes that all goals of business, including profit, must be realized through consumer orientation and generation of consumer satisfaction. Creating and delivering better consumer value is the only route by which firms implement marketing concept.

Contd.The marketing concept holds that the key to achieving organizational goals is being more effective than competitors in creating, delivering, and communicating superior customer value to your chosen target markets. Theodore Levitt drew a perspective contrast between the selling and marketing concepts: Selling focuses on the needs of the seller; marketing on the needs of the buyer. Selling is preoccupied with the seller s need to convert his product into cash; marketing with the idea of satisfying the needs of the customer by means of the product and the whole cluster of things associated with creating, delivering and finally consuming it.

Contd.This brings us to the Modern definition of Marketing . It is a total system of business, an ongoing process of Discovering and translating consumer needs and desires into products and services. Creating demand for these products and services. Serving consumer demand with the help of marketing channels, and Expanding the market even in the face of competition. Marketing is a system of integrated business activities designed to develop strategies and plans to the satisfaction of customer wants of selected market segments or targets.

Contd.y Marketing Functions Contractual searching of buyers and sellers. Merchandising matching products to customer needs. Pricing. Promotion. Physical distribution.

Marketing functions are performed by the manufacturers middlemen. The marketing process has four components 1. Marketing management. 2. Marketing channels. 3. Marketing functions. 4. Market demand.

Contd.The Old Concept Products Selling & Promotion Profit thru Sales vol.

The New Concept Customers Integrated Marketing Profits thru CS.

The new marketing realitiesThe market place is not what it used to be. Marketers must attend and respond to a number of significant developments. Major Societal Forces. Network information technology. Globalization. Deregulation. Privatization. Heightened competition. Industry convergence. Consumer resistance. Retail transformation. Disintermediation.

New consumer capabilities.Customers today perceive fewer real product differences and show less brand loyalty, and they are becoming more price and quality sensitive in their search for value. Consider what customers have today over the past A substantial increase in buying power. A greater variety of available goods and services. A great amount of information about practically any thing. Greater ease in interacting and placing and receiving orders. An ability to compare notes on products and services. An amplified voice to influence peer and public opinion

The ten deadly sins of marketing.1. The company is not sufficiently market 2. 3. 4. 5.

focused and customer driven. Th company does not fully undersatnd its target customers. The company needs to better define and monitor its competitors. The company has not properly managed its relationship with its stakeholders. The company is not good at finding new opportunities.

Contd.6. The company s marketing plans and planning process are deficient. 7. The company s product and service policies need tightening. 8. The company s brand building and communication skills are weak. 9. The company is not well organized to carry an effective and efficient marketing. 10. The company has not made maximum use of technology.

The ten commandments of marketing.1.

2. 3. 4. 5.

The company segments the market, chooses the best segments and develops a strong position in each chosen segment. The company maps its customer s needs, perceptions, preferences and behavior and motivates its stakeholders to obsess about serving and satisfying the customers. The company knows its major competitors and their strengths and weaknesses. The company builds partners out of its stakeholders and generously rewards them. The company develops systems for identifying opportunities, ranking them and choosing the best ones.

Contd.6. The company manages a marketing planning system that leads to insightful long-term and short-term plans. 7. The company exercises strong control over its product and service mix. 8. The company builds strong brands by using the most effective communication and promotion tools. 9. The company builds marketing leadership and a team spirit among its various departments. 10. The company constantly adds technology that gives it a competitive advantage in the market place.

Quotesy Don t fear pressure, for pressure is what turns

rough stones into diamonds.y Our greatest glory is not in never falling but

in rising every time we fall.

Relationship MarketingA key goal of marketing is to develop deep, enduring relationships with people and organizations that could directly or indirectly affect the success of the firm s marketing activities. Relationship marketing aims to build mutually satisfying long-term relationships with key constituents in order to earn and retain their business.

Relationship MarketingMarketing department Senior Management Other departments Products & Services Communications Channels

Internal Marketing

Integrated Marketing

Holistic Marketing

Performance Marketing

Relationship Marketing

Contd.Four key components for relationship marketing are: Customers. Employees. Marketing partners( channels, suppliers, distributors, dealers, agencies) Members of the financial community( shareholders, investors, analysts). The ultimate outcome of relationship marketing is a unique company asset called a marketing network. A marketing network consists of the company and its supporting stakeholders customers, employees, suppliers, distributors, retailers, ad agencies, and others with whom it has built mutually profitable business relationships.

Integrated marketingThe Marketing Mix. The marketers task is to devise marketing activities and assemble fully integrated marketing programs to create, communicate, and deliver value for consumers. McCarthy classified these activities as marketing mix tools of four broad kinds, which he called the four P s of marketing Product Place Promotion Price

Contd.Product

Marketing Mix

Product variety Quality Design Price Features Brand name List price Packaging Discounts Sizes Allowances Services Payment period Warranties Credit terms Returns

Promotion

Place

Sales promotion Channels Advertising Coverage Sales force Assortments Public relations Locations Direct marketing Inventory Transport

Internal MarketingHolistic marketing incorporates internal marketing, ensuring that everyone in the organization embraces appropriate marketing principles. Internal marketing is the task of hiring, training and motivating able employees who want to serve customers well. Internal marketing must take place on two levels. At one level the various marketing functions sales force, advertising, customer service, product management, marketing research must work together from the customers point of view. At the second level, other departments must embrace marketing, they must also think customer.

Performance MarketingHolistic marketing incorporates performance marketing and understanding the returns to the business from marketing activities and programs, as well as addressing broader concerns and their legal, ethical, social and environmental effects. Management is going beyond sales revenue to examine the marketing scorecard and interpret what is happening to market share, customer loss rate, customer satisfaction, product quality, distributor and other measures. Financial Accountability. Social responsibility marketing.

Marketing EnvironmentEnvironment plays a crucial role in marketing and that securing the right fit between the firm and the environment using the marketing mix as the tool is the crux of Marketing. Opportunities and Threats is the starting point and spotting them is important as it is their that the economy achieves its growth objectives. Purpose of marketing environment analysis To know where the environment is heading? To discern which events are favorable. To assess scope of various opportunities. To help secure the right fit between environment and business unit crux of marketing.

Contd.Mega/Macro Environment Factors. Demographic environment. Socio-cultural environment. Culture religion, language, education, Social class. Economic Environment. General economic conditions Economic conditions of different segments of the population. Rate of growth of each sector. Credit availability and interest rates, tax rates. Savings, inflation, foreign exchange reserves, etc.

Contd.Facts of Indian Economy 6% plus growth Per capita still low Industrial growth 6.2% Capital markets healthy trend Political trend - stable Natural Environment Ecology Natural Resources Climate Technology Environment Legal environment/ Business Legalization corporate affairs, consumer protection, employee protection.

Business, Government & EnvironmentEconomic System We find that millions are engaged in work, a few of which work for pleasure, but, the vast majority work to earn a living and to secure an income needed for satisfying their wants. Human wants are unlimited but resources are limited. This applies to individuals and society as a whole. Societies Resources - land, labor and capital which are scarce. Thus, this creates a need for economizing resources or from an economists point of view it means making the best use of what is available.

Contd.Economics thus deals fundamentally with choices in the use of resources. It develops principles for making the best use of available resources. These principles can be used for making policy. Professor Lionel Robbins defined economics as a Science which studies human behavior as a relationship between ends and scarce means which have alternative uses. Economic Organization It refers to the arrangement by which the basic problems of an economy allocation of resources, fuller employment and growth of resources are settled.

Contd.Capitalism Capitalism has been defined as an economic system in which commodity production is dominant, ie. Goods are produced with hired labor for sale in the market to earn profits. It prevails in many countries. It was frist developed in England and later spread. It now embraces North America( USA & Canada), Western Europe, Japan, New Zealand & Australia.

Contd.Some of the features are: Private Property Dominant in capitalist countries. Land, capital and business enterprises are privately owned. Management maybe in the hand of professional managers. Profit making the motivating force. Role of the price mechanism. Basic question of what, how, for whom are decided by price mechanism. It guides resources into production where profit is high. Prices are determined by the market forces of supply and demand.

Contd. Inequalities of income and wealth -

Such capitalist societies tell us that while growth is necessary, it has to be growth with social justice. Socialism Public ownership in property. State ownership industry Collective ownership agriculture Planned economy Four basic ways by which product of society is used Private consumption of workers who participate in production. Collective consumption of people in the form of health, education and other services. Maintenance of the state. Investment or creation of physical capital assets.

Contd. Income inequalities

Two sources private property and wages/salaries. A socialist society has only the latter. Mixed Economy Defined as an economy in which the state or the public sector exists side by side with the private sector.

Market SegmentationMarket Segmentation implies that the entire market is broken down into smaller groups having similar wants. The concept of divide and rule applies to the market segmentation. You divide the market, choose your target market and then master it. If the marketing effort is spread over a wide area it does not have that effect but if it is concentrated on a point it can go much further and can be more effective.

Contd.Companies cannot connect with all customers in large, broad, or diverse markets. But they can divide such markets into groups of consumers or segments with distinct needs or wants. A company then needs to identify which market segments it can serve effectively. This decision requires a keen understanding of consumer behavior and careful strategic thinking. To develop the best marketing plans, management need to understand what makes each segment unique and different.

Contd.Market segmentation is a process of dividing a potential market into distinct sub-sets of consumers with common needs and characteristics and selecting one or more segments to target with a distinct marketing mix. Thus, market segmentation has proved to be a positive force for both consumers and markets alike. Today every product category in the consumer market is highly segmented. Ex. Vitamin market, hotels, automobiles, etc.

Customer Demand & Market SegmentationTo compete more effectively, many companies are now embracing target marketing. Instead of scattering their marketing efforts , they re focusing on those consumers they have the greatest chance of satisfying. Effective target marketing requires 1. Identify and profile distinct group of buyers who differ in their needs and preferences(market segmentation). 2. Select on or more market segments to enter(target marketing). 3. For each target segment, establish and communicate the distinctive benefits of the company s market offering(market positioning).

Market SegmentationThe market for any product is normally made up of several segments. A market is the aggregate of consumers of a given product, and, consumers who make a market are seldom one homogenous lot. They vary in their characteristics and buying behavior. It is thus natural that many differing segments occur within a market. Market segmentation rests on the recognition that 1. Any market is made up of several sub-markets or subgroups of consumers, distinguished from one another by their varying needs and buying behavior. 2. It is feasible to disaggregate the consumers into segments in such a manner that in needs, characteristics and buying behavior the members would vary significantly among/across segments. But would be homogenous within each segment.

Contd.Why segment the market? 1. Facilitates proper choice of target market. 2. Facilitates tapping of the market, adapting the offer to the market. 3. Helps to divide the market and conquer them. 4. Makes the marketing effort more efficient and economic. 5. Helps identify less satisfied segments and concentrate on them. 6. Benefits the customer as well.

Contd.Advantages of market segmentation Helps distinguish one customer group from another within a given market. Facilitates proper choice of target market. Helps crystallize the needs of the target buyers and elicit more predictable responses. Helps develop marketing programs on a more predictable basis. Helps develop marketing offers that are most suited to each group. Helps achieve specialization required in product distribution, promotion and pricing for matching the customer group and develop marketing offers and appeals that match needs of such groups. Makes the marketing efforts more efficient and economic.

Contd.Bases for segmenting consumer markets. The major basis that marketers use for segmenting markets are Geographic South, West, North, East India State, District, Rural/Urban, Race. Demographic Age, sex, education, religion, language, income, illiterate, etc Among demographics purchasing capacity/price preference forms a major base.

Contd.Ex. Passenger cars based on price preference Segment Car Budget car 800/omni 60% market Compact car Zen. Santro, Indica -15% Family car Esteem, Ford, Swift 10% Premium car Honda, Lancer - 10% Super Luxury Mercedes, Audi - 05% Psychographic Personality traits, attitude, lifestyle, value system.

Contd.y Psychographic Segmentation a. Needs Motivation .... safety, shelter, security, b. c. d. e. f.

affection, sense of self-worth. Personality Extrovert, introvert, aggressive, compliants. Perception Low risk, moderate, high risk. Learning Involvement Low, High Attitudes .Positive, Negative Psychographic( lifestyle) Swingers, straights, conservatives, status seekers

Psychographic or Lifestyle SegmentationIt is your attitudes, interests and opinions that project your lifestyle

Introduction It is defined simply as how one lives and spends money. It is determined by our past experiences, innate characteristics and current situations. The products we consume are related to our lifestyle. Lifestyles segmentation is based on activities and interests and opinions of groups. Demographic and Psychographic lifestyles are complimentary and work best together. Demographic variables help to locate the target markets, and psychographics provide insights into the segments.

Characteristics of LifestyleLifestyle is a group phenomenon which influences others in the society. A person having a particular lifestyle can influence others in a social group. 2. Lifestyle influences all area s of one s activities. A person having a certain lifestyle shows consistency of behavior in other areas as well. You can always predict that a person shopping from elite or specialty stores, would not shop from common places. The same applies to eating habits and other habits as well.1.

Contd.3. Lifestyle implies a certain life interest. A person may have interest in education, leisure, adventure work, sexual exploits, etc. which may become their main interest in life. 4. Social changes in society affect lifestyles: For example, as the society becomes more affluent, lifestyles of people change, sometimes drastically. As one would become richer ones lifestyle changes accordingly.

Lifestyle SegmentationThis is known as lifestyle segmentation and was introduced in 1978 by Arnold Mitchell. It provides a systematic segmentation of adults into nine segments. These were widely used. VALS( value & life style segmentation). They can be described as follows: 1. Survivors They are disadvantaged people who are poor, depressed, and withdrawn. Their purchases are price dominant and they like to buy products which are economical and suit their pocket. They are not very knowledgeable. 2. Sustainers They are motivated by brand names. They look for guarantee and are impulse buyers. These people are disadvantaged and want to get out of poverty.

Contd.3. Belongers They buy products which are popular. They are careful and brand loyal shoppers. They are people who are conventional, conservative and unexperimental. 4. Emulators They are status conscious and upwardly mobile. They emulate others, and buy products to impress other people. They have high aspirations in life. 5. Achievers They buy top of the line products. They are brand conscious and loyal. They are leaders and make things happen. They want to enjoy a good life. 6. I am me These people are typically young, self engrossed and given to whims. They go after fads and do not mind taking the lead.

Contd.7. Experimental These people pursue a rich inner life and want to directly experience what life has to offer. 8. Societal conscious people They are simple, frugal persons, who read labels carefully and seek information. They are conscious of society and social responsibility. They want to improve conditions in society. 9. Integrated These are fully matured people and constitute the best of outer and inner directed.

Contd.These segments did not appeal to many marketers and therefore, VALS 2 was introduced in 1989. This system has more of psychological base than the original, which was more activity and interest based. VALS 2 is based on attitudes and values. It has identified three primary self orientations: 1. Principle oriented they are guided by their beliefs and principles. 2. Status oriented these individuals are heavily influenced by actions, approval and opinion of others. 3. Action oriented they desire social and physical activity, variety and risk taking.

Contd.These three orientations determine the types of goals and behaviors that consumers will pursue and the goods they will get interested in. This classification is based on Maslow s hierarchy of needs. 1.Strugglers These are poor people, struggling for existence. Education is low, low skilled, without strong social bonds. They are despairing and have a low status in society. Their chief concern is to fulfill their primary needs of physiological security and safety needs. They represent a modest market and are loyal to their favorite brands. 2. Makers They are in the action oriented category. They have construction skills and value self sufficiency. They buy stuff which helps them in achieving their purpose.

Contd.3. Strivers They are a status oriented category, but have a low income as they are striving to find a secure place in life. They are low in economic, social, and psychological resources. They are concerned about the opinion of others. They see success with money. They like to be stylish. They wish to be upwardly mobile and strive for more. 4. Believers They are in the principle oriented category. They are conservative, conventional people with their needs, strong faiths, and beliefs. Have modest resources sufficient to meet their needs. Use established brands. 5. Experiencer s They are action oriented, young, enthusiastic, impulsive, and rebellious. They have enough resources and experiment in new ventures. They are avid consumers and spend much on entertainment, clothes, food, music, videos, movies, etc.

Contd.6. Achievers They are also placed high in the Maslow s hierarchy of needs and are career and work oriented. They make their dreams come true. Work provides them with a sense of duty, material rewards and prestige. They live conventional lives, authority and image is important to them. 7. Fulfilled They are satisfied and mature people who are well educated, value order, knowledge and responsibility. They are practical consumers. They look for products which are durable, have value and function properly. 8. Actualiser s They have abundant resources and are sophisticated in their taste and habits. They are active and have high self-esteem.

Contd.y Sociocultural Segmentation a. Culture ..American, Italian, Chinese, b. c. d. e.

Mexican. Subculture Religion Jewish, Catholic, protestant, Hindu, Muslim, Race/Ethnicity ..oriental, Hispanic, upper, lower, Brahmin SC/OBC Social Class Lower, middle, upper Family lifestyle .bachelor, young married

Contd.y Use-Related Segmentation a. Usage rate Heavy, medium, light, non-users. b. Awareness status unaware, aware, interested, c. a. b. c. d.

enthusiastic. Brand Loyalty None, some, strong. Use-Situational Segmentation Time .work, rush, morning, night. Objective gift. Fun, snack, personal. Location ..home, work, friend s home. Person self, friends, boss, peer.

Contd.y Benefit Segmentation

Convenience, prestige, economy, value-for-the money. Hybrid Segmentation a. Demographic / Psychographic Profile Combination of their characteristics. Geodemographics ..young suburbia, blue estate. VALS 2 ..Actualizer, believer, achiever, striver, fulfilled.

Contd.Behavioral. Different customer groups epect different benefits from the same product and accordingly they will be different in their motives in owning it and their behavior in buying it. Benefits quality, service, economy, speed Usage rate light, heavy, medium Loyalty status none, medium, strong, absolute.

Tasks involved in segmentation. Assessing the difference between one customer group and the other in terms of their needs and their likely responses to the product and other marketing mix elements. Finding out by what descriptive characteristics can consumers of a particular disposition be tagged on to a specified segment. Disaggregating the consumers into suitable segments based on above. Analyzing whether it is possible to formulate separate marketing program/marketing mix for different segments.

Contd. Finding out which segments will be particularly

happy with the offerings of the firm and can, therefore, be considered as the natural targets of the firm. Estimating the likely levels of purchase by each of the segments. Selecting those segments which offer higher potential and which will also be amiable to the offerings of the firm.

Contd.Attributes of Effective Segmentation. For segments to be effective they must be Distinguishable from one another. Measurable(potential of the segments as well as effect of a specific marketing mix on them should be measurable). Accessible Sizable Growing Profitable Compatible with the firms resources and capabilities.

Market TargetingOnce the firm has identified its market segment opportunities, it must decide how many and which ones to target. Marketers are increasingly combining several variables in an effort to identify smaller, better defined target groups. This has led some market researchers to advocate a needs based market segmentation approach. Effective segmentation criteria To be useful, market segments must rate favorably on five key criteria -

Contd. Measurable - the size, purchasing power and

characteristics of the segments can be measured. Substantial - the segments are large and profitable enough to serve. A segment should be the largest possible homogenous group worth going after with a tailored marketing program. It would not pay, for example, for an automobile manufacturer to develop cars for people who are less than four feet tall. Accessible - the segments can be effectively reached and served.

Contd.y Differentiable - the segments are conceptually

distinguishable and respond differently to different marketing mix elements and programs. If married and unmarried woman respond similarly to a sale on perfume, they do not constitute separate segments. y Actionable - effective programs can be formulated for attracting and serving the segments.

Evaluating and Selecting the Market SegmentsIn evaluating different market segments, the firm must look at two factors, the segment s overall attractiveness and the company s objectives and resources How well does a potential segment score on the five criteria? Does a potential segment have characteristics that make it generally attractive- such as size, growth, profitability, scale economics and low risk. Does investing in the segment make sense given the firm s objectives, competencies and resources?

Contd.concentrated marketing, the firm gains a strong knowledge of the segment s needs and achieves a strong market presence. Furthermore, the firm enjoys operating economies through specializing its production, distribution and promotion. However there are risks. A particular market segment can turn sour or a competitor may invade the segment. Ex. Mahindra tractors, Zodiac on formal shirts, specialty hospitals, etc.y Single segment concentration - through

Contd.y Selective Specialization - a firm selects a number of segments, each objectively attractive and appropriate. There may be little or no synergy between the segments, but each promises to be a money maker. This multi segment strategy has the advantage of diversifying the firm s risk. Ex. Fair and lovely both males and females use it. Product Specialization - the firm makes a certain product that it sells to several different market segments. Ex. Microscopes sold to university, govt. and commercial labs. The downside risk is a new technology.

Contd.y Market Specialization - the firm concentrates on serving many needs of a particular customer group.

Ex. An assortment of products only to university labs. The downside risk is the customer group may suffer budget cuts or shrink in size. Full market coverage - the firm attempts to serve all customer groups with all the products they might need. Large firms can cover a whole market in two broad ways through undifferentiated marketing or differentiated marketing.

Contd.y In undifferentiated marketing - the firm ignores segment differences and goes after the whole market with one offer. It designs a product and a marketing program that will endow the product with a superior image and appeal to the broadest number of buyers, and it relies on mass distribution and advertising. The narrow product line keeps down the cost of research and development, production, inventory, transportation, marketing research, advertising and product management. The company can turn its lower costs into lower prices to win the price sensitive segments of the market.

Contd.y In differentiated marketing - the firm operates in

several market segments and designs different products for each. Differentiated marketing typically creates more total sales than undifferentiated marketing. However, it also increases costs of doing business. Ex. HUL wide range of products for all segments.

Market Targeting/ Choosing Target Markety Choosing the target market is relegated to, but not y y y y y y

synonymous with market segmentation. Segmentation is the means or the tool, choosing the target market is the purpose. Segmentation can also be viewed as the prelude to target market selection. Choosing the target market usually follows multi-level segmentation using different bases. Choosing the target market involves several other tasks in addition to segmentation. Looking at each segment as a distinct marketing opportunity. Selecting those segments which are most appropriate for the firm.

Contd.y Evaluating the worth of each segment. y Evaluating whether the segment is distinguishable,

measurable, sizable, accessible, growing, profitable, compatible with firms resources. y Examining whether it is better to choose whole market or only a few segments and deciding which ones should be chosen. y Looking for segments which are relatively less satisfied by the current offers in the market from competing brands. y Evaluating the firms resources and checking whether it is possible to put in the marketing programs required for capturing the spotted segments with these resources.

Overview of consumer/buyer behaviorCustomer is profit, all else is overload .. All of us are consumers. We consume things of daily use, we also consume and buy these products according to our needs, preferences and buying power. These can be consumable goods, durable goods, specialty goods or, industrial goods. What we buy, how we buy, where and when we buy, in how much quantity we buy depends on our perception, selfconcept, social and cultural back-grounds and our age and family cycle, our attitudes, beliefs, values, motivation, personality, social class and many other factors that are both internal and external to us.

Contd.While buying, we also consider whether to buy or not to buy and, from which source or seller to buy. In some societies, there is a lot of affluence and, these societies can afford to buy in greater quantities and at shorter intervals. In poor societies, the consumer can barely meet his barest needs. Consumer behavior can be defined as the decision making process and physical activity involved in acquiring, evaluating, using and disposing of goods and services.

Contd.Some consumer behavior roles: Initiator

The individual who determines that certain need or want is not being fulfilled and purchases a product to fulfill the need.Influencer

A person who by some intentional or unintentional word or action influences the purchase decision.

Contd.Buyer

The individual who actually makes the purchase transaction mostly is the head of the family.User

The person or persons who consume or use the purchased product.

Contd.Reasons for studying consumer behavior. The most important reason for studying consumer behavior is the role that it plays in our lives. Consumer decisions are affected by their behavior. Therefore, consumer behavior is said to be an applied discipline. This leads to the micro perspective and societal perspective.

Contd.Micro Perspective

It involves understanding consumer for the purpose of helping a firm or organization to achieve its objectives.Societal Perspective

It is on the macro level. Consumers collectively influenced economic and social conditions within a society. Consumers strongly influence what will be the product, what reasons will be used and it affects our standard of living.

Contd.Management is the youngest of sciences and oldest of arts and Consumer Behavior in management is a very young discipline. Marketing starts with the needs of the customer and ends with his satisfaction. When everything revolves around the customer then the study of consumer behavior becomes a necessity. To understand the likes and dislikes of the consumer extensive research studies are being conducted. They try to find out:

Contd.1. What the consumer thinks of the company s 2. 3. 4. 5.

products and those of its competitors? How can the product be improved in their opinion? How the customers use the product? What is the customer s attitude towards the product and its advertising? What is the role of the customer in his family?

Contd.Consumer behavior is a complex, dynamic, multi-dimensional process, and all marketing decisions are based on assumptions about consumer behavior. Marketing strategy is the game plan which the firms must adhere to, in order to outdo the competitor or the plans to achieve the desired objective. In formulating the marketing strategy, to sell the product effectively, costbenefit analysis must be undertaken.

Applying consumer behavior knowledge1)

2) 3) 4) 5)

Consumer behavior knowledge is applied in Marketing Management. A sound understanding of the consumer behavior is essential to the long term success of any marketing program. Consumer behavior is also important in non-profit and social organization. Consumer behavior is applied to improve the performance of govt. agencies as well. Consumer behavior also helps in marketing of various goods which are in scarcity. Consumer benefit from the investigation of their own behavior.

Marketing strategy and consumer behaviory Marketing Analysis a) Consumer b) Company c) Competition d) Condition.

. Marketing Segmentation a) Identify product related needs. b) Group customers with similar need sets. c) Describe each group. d) Select target market.

Contd.y Marketing Strategy a) Product. b) Price. c) Distribution. d) Communication. e) Service.

. Consumer Decision Process a) Problem recognition. b) Information search internal, external. c) Alternative evaluation. d) Purchase. e) Use. f) Evaluation. . Outcomes a) Customer satisfaction b) Sales c) Product / Brand image.

Market AnalysisMarket analysis requires an understanding of the 4 Cs which are: Consumer, Conditions, Competitor and Company. Consumer - Is anyone who engages himself in physical activities of evaluating, acquiring, using or disposing of goods and services. Customer - Is one who actually purchases a product or service from a particular organization or shop. A customer is always defined in terms of a specific product or company.

Market SegmentationThe market is divided into segments which are a portion of a larger market whose needs are similar and, they are homogenous in themselves. Such segments are identified with similar needs. Need sets It is meant that there are products which satisfy more than one need. Ex. An automobile. Demographic and psychographic characteristics these groups are identified and they are described in terms of their demographic and psychographic characteristics. The company finds out how and when the product is purchased and consumed. Target Segment the target customer group known as the target segment is chosen. Different target segments require different marketing strategies.

Marketing strategyStrategies are formulated to provide superior customer value. In formulating marketing strategies, the 4 Ps are directed at the Target market. Product - product is any thing that is offered to the consumer which is tangible and can satisfy a need and has some value. Price - Price is the amount of money one must pay to obtain the right to use the product.

Contd.Distribution ( Place ) - The goods can be distributed

by many channels. These can be retailers, wholesalers, agents, or by direct selling. Promotion - Is the means of changing the attitude of the consumer, so that it becomes favorable towards the company s products. Various means of promotion are advertising, personal selling, sales promotion and publicity. Service - It refers to the auxiliary service that enhances the value of the product or the service. Ex. Car service

Contd.Buyer s skills come from an innate selfishness that when we are spending money we should get the money s worth. The term Value for money is born out of this desire. It is said that no one buys a product. They buy the benefits, which they derive from the product. If the benefits outweigh the cost the buyers have paid then they have received value for money.

Contd.Let us define Customer Value as follows: Total customer value The sum total of all the benefits the customer is likely to derive from the product. Total customer cost The sum of money the customer is to spend while selecting, buying, using and disposing off the product. Product perceived value The difference of total customer value and total customer cost represents the customer s idea of the usefulness of the product.

Contd.The product purchase decisions are taken on the basis of : Product brand image / brand equity. Buyer s usage value. Value of the service provided with the product. Intrinsic value of the product. The above add-up to the total customer value of the product.

Contd.The other aspect of decision to buy comes from the following : Product price. Product search expensive. Decision time delay cost. Cost while using the product. The above add-up to total customer costs for the purchase of the product.

Contd.Customer satisfaction from the usage of the product is measured as follows : Actual benefit derived as compared to the benefit perception the customer had before the product was purchased. Benefits derived as compared to those obtained from a competitive product. Benefits get enlarged if the product cost are in consonance with the perceived benefits and in such cases the customers derive a sense of pride besides satisfaction, which in today s marketing technology is stated as customer delight. Customer s delight also comes from being known as an intelligent buyer among the peer group.

Buyer BehaviorBuyers are of two types Individual consumer. Business buyer. In the two buyers motivation, attitude and purchase behavior are different. Individual behavior What motivates? What induces? Why does he buy a specific brand? Why does he buy from a specific shop? Why does he shift brand or shop? How does he react to a new product? What are the stages he travels through before making a buying decision?

Contd.All these need to be understood that there is no unified, tested established theory to study buyer behavior. Influence of social sciences on buyer behavior. Influence of economics As per economists man is a rational buyer. Price is regarded as the strongest motivation for the economic man s behavior. Influence of psychology Any human activity is directed towards meeting certain needs. Maslow has categorized it as Physiological needs Safety needs Social needs Esteem needs Self-actualization needs.

Contd. Influence of sociology and anthropology

According to scholars group, pressure is the motive force behind buying. Buyer Behavior Models. 1. Maslow s hierarchy of needs. 2. The economic model - buyer is a rational man and buying decisions are totally governed by the concept of utility.

Contd.3. The learning model - this takes it cue from the Pavlovian stimulus-response theory. Buyer behavior can be influenced by manipulating the drives, stimuli, and responses of the buyer. The model rests on man s ability at learning, forgetting and discriminating. 4. The psychoanalytical model - it draws mainly from Freudian psychology. The individual customer has a complex set of deep seated motives that drive him towards certain buying decisions. 5. The sociological model the buyer is influenced by society, by intimate groups as well as social classes. His buying decisions are not totally governed by utility; he has a desire to emulate, follow and fit in with his immediate environment.

Contd.6. The Nicosia Model - this model was developed by Nicosia in 1966. It establishes a link between the firm and the buyer. It groups the activity of buying into four basic fields. Field One has two sub fields the firms attributes and the consumers attributes. An advertising message from the firm reaches the consumers attributes. Depending on the way the message is received by the customer a certain attitude develops and this becomes input for field two.

Contd. Field Two is the area of search and evaluation of

the advertised product and other alternatives. If the process results in a motivation to buy it becomes input for field three. Field three consists of act of purchase. Field four consists of the use of the product item. There is an output from field four feedback of sales results to the firm.

Contd.6. The Howard Sheth Model John Howard and Jagdish Sheth put forward this model in 1969. The logic of the model is There are inputs in the form of stimuli and there are outputs beginning with attention to a given stimuli and ending with purchase. In between the inputs and the outputs, there are variables affecting perception and learning. These variables are considered Hypo ethical since they cannot be measured at the time of occurrence.

Factors influencing Buyer BehaviorA number of factors influence buyer behavior. They can be grouped under three broad categories 1.Factors that are part of the buyer as an individual We have three categories a. Personal factors - age, status, education, etc. b. Cultural factors religion, language, etc. c. Psychological factors beliefs, attitudes, etc. 2. Buyer social environment ( group influence) Influence if intimate group. Influence of broad social class. 3. Information from a variety of sources -

Buying MotivesBuying motives can be defined as all the impulses, desires and considerations which induce a buyer to purchase a given product. Why does a person buy? What are his motives? Product motives and Patronage motives. It is often said that dissatisfaction of human beings creates new products and new markets. Those impulses, desires and considerations that make people buy a given product are called product motives. The influences that explain why they buy from particular shops/firms are called patronage motives.

Contd.Product motives two categories Emotional product motives. Rational product motives. Emotional motives are those that appeal to the buyers pride or ego, his urge to imitate others, or his desire to be distinctive. Rational product motives involve a logical analysis of the intended purchase.

Contd.Alternative classification Operational and Psychological product motives. This is a more meaningful classification of product motives. Products have a utility dimension as well as a prestige dimension. A buyer can gain satisfaction from the functional or physical utility of a product and/or the socio-psychological significance he attaches to the product. The former is the operational product motive and the latter the socio-psychological product motive.

Contd.Patronage motives Why does the buyer patronize specific shops? What are the considerations or impulses that persuade him to do so? Here also they can be grouped into Emotional Rational categories. Buying Habits Buying habits vary depending on types of goods ex. Consumer goods are classified as Convenience goods daily consumption type Shopping goods clothes, shoes, etc. Specialty goods cars, ornaments, etc.

The Buying Process1. 2. 3.

Problem recognition( Need recognition). Awareness for the product. Comprehension( evaluation) This comes out of his ability to reason with information. The awareness and comprehension stages represent the information processing stage. These two stages constitute the cognitive field of the purchase process. Cognition refers to acquisition of knowledge. 4. Attitude it is the sum total of the individuals faith and feelings towards the product. As a result of his awareness and comprehension. The consumer develops an attitude favorable or unfavorable. The purchase process will continue only if he develops a favorable attitude or a liking.

Contd.5. Legitimization the buyer must be convinced that the purchase of the product is the legitimate course of action. Attitude and legitimization constitute the attitude field of the purchase process. 6. Trial conviction leads to try the product on a small scale. 7. Adoption successful trial leads him to buy/adopt the product. Trial and adoption stages constitute the behavioral field in the buying process. 8. Post purchase behavior usually creates restlessness in the mind of the individual. He is not sure about the product and feels other brands are better. He will seek by himself all means to recover his conviction and poise. Stages in buying process may vary depending on buyers personality.

Five Adopter CategoriesEverett Rogers in his book Diffusion of Innovations discusses how new products spread through societies and how at what rate different segment of people adopt them. He classifies people into 5 categories Innovators Early adopters Early majority Late majority Laggards.

How consumers really make decisionsOne of the most active academic research areas in marketing is behavioral decision theory(BDT). Researchers have uncovered many fascinating influences and outcomes in consumer decision making often challenging predictions from economic theory and assumptions about rationality. Consumers are most likely to choose an alternative( a home bread bakery) after a relatively inferior option( a slightly better but significantly expensive bakery) is added to the choice set Consumers are more likely to choose an alternative that appears to be a compromise in the particular choice set under consideration.

Contd.y The choices that consumers make influence their assessment of their own tastes. y Shifting attention to one of two considered alternatives tends to enhance the perceived attractiveness and choice probability of that alternative. y The manner in which consumers compare products that vary in terms of price and perceived quality( features, brand name) and the way those products are displayed in the store( by brand or by model type) affect their willingness to pay more for additional features or a better known brand.

Contd.y Consumers who think about the possibility that their purchase decision will turn out to be wrong are more likely to choose well known brands. y Consumers for whom possible feelings of regret are made more relevant are more likely to choose a product that is currently on sale rather than wait for a better sale or buy a higher priced item. y Consumers choices are influenced by subtle and theoretically inconsequential changes in the way alternatives are described. y Consumers who make purchases for later consumption appear to make systematic errors in predicting their future preferences.

Contd.y Consumers predictions of their future tastes are not accurate they do not really know how they will feel after consuming the same flavor of yogurt or icecream several times. y Consumers often overestimate the duration of their overall emotional reactions to future events( movies, financial windfalls, out-comes of sporting events). y Consumers often overestimate their future consumption, especially if there is limited availability( which may explain why mangoes have higher sales when availability is limited to several months per year than they are offered year round).

Contd.y In anticipating future consumption opportunities

consumers often assume they will want or need more variety then they actually do. y Consumers are less likely to choose alternatives with product features or promotional premiums that have little or no value, even when these features and premiums are optional( like the opportunity to purchase a collector s item) and do not reduce the actual value of the product in any way.

Contd.y Consumers are less likely to choose products selected by

other consumers for reasons that they find irrelevant, even though these other reasons would not suggest anything positive or negative about the products values. y Consumers interpretations and evaluations of past experiences are greatly influenced by the ending and trend of events. A positive event at the can end of a service experience can color later reflections and evaluations of the experience as a whole. What all these and other studies reinforce is that consumer behavior is very constructive and that the context of decisions really matter. Understanding how these effects show up in the market place can be crucial for marketers.