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MARKETING

Prof. Jogendra NayakDepartment of Management Studies

IIT Roorkee

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CHANGES IN LIFESTYLE

Earlier

• Tap water• Newspaper• Sports• Telephone• Typewriter• Ticket booking• Kirana stores

Present

• Mineral water• Virtual paper• Video games• Mobile• Computer• Online booking• Shopping centres

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Marketing – Marketing is the process of communicating the value of a

product or service to customers, for the purpose of selling that product or service.

– From a societal point of view, marketing is the link between a society’s material requirements and its economic patterns of response. Marketing satisfies these needs and wants through exchange processes and building long term relationships. Marketing can be looked at as an organizational function and a set of processes for creating, delivering and communicating value to customers, and managing customer relationships in ways that also benefit the organization and its shareholders. Marketing is the science of choosing target markets through market analysis and market segmentation, as well as understanding consumer buying behavior and providing superior customer value.

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• There are five competing concepts under which organizations can choose to operate their business; the production concept, the product concept, the selling concept, the marketing concept, and the holistic marketing concept.

• The four components of holistic marketing are relationship marketing, internal marketing, integrated marketing, and socially responsive marketing.

• The set of engagements necessary for successful marketing management includes, capturing marketing insights, connecting with customers, building strong brands, shaping the market offerings, delivering and communicating value, creating long-term growth, and developing marketing strategies and plans.

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• Needs, wants and demands• Markets• Market place• Virtual• Meta markets

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DEMAND• Negative demand- Consumers dislike the product and may even pay a

price to avoid it. (Hospitals, Life Insurance)• Nonexistent demand – Consumers may be unaware or uninterested in

the product. (Pager, Typewriter)• Latent demand – Consumers may share a strong need that cannot be

satisfied by an existing product. (Private Autorickshaws)• Declining demand – Consumers begin to buy the product less frequently

or not at all. (CD Players, Picture Tubes)• Irregular demand – Consumer purchases vary on a seasonal, monthly,

weekly, daily, or even hourly basis. (Fire Crackers, Ice Creams)• Full demand – Consumers are adequately buying all products put into

the marketplace. (Ideal Situation where supply = demand)• Overfull demand – More consumers would like to buy the product than

can be satisfied.(Energy, Maruti Swift which still has a waiting list)• Unwholesome demand – Consumers may be attracted to products that

have undesirable social consequences. (Drugs, Cigarettes)

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What is marketed?• Goods• Services• Events• Experiences• Persons• Places• Properties• Organizations• Information• Ideas

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Challenges in Indian market

• High volatility in market• Diversity • Disparity in income• Accessibility• Concern for ecology• Role of social channels• Fast change in lifestyle (DINK’s)

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The customer

• Customer life cycle– Prospect– First time buyer– Repeat buyer– Core buyer– defector

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Barriers to entry and exit• Government policy• Presence of strong brands• Technology• Customer preferences• Economies of size• Capital intensive• Intellectual property• High switching costs• Investment in specialized equipment• Specialized skills

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MARKET STRUCTURE• In economics, market structure is the number of firms

producing identical products which are homogeneous. The types of market structures include the following:

• Monopolistic competition, also called competitive market, where there is a large number of firms, each having a small proportion of the market share and slightly differentiated products.

• Oligopoly, in which a market is run by a small number of firms that together control the majority of the market share. – Duopoly, a special case of an oligopoly with two firms.

• Monopsony, when there is only one buyer in a market.• Oligopsony, a market where many sellers can be present but

meet only a few buyers.

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• Monopoly, where there is only one provider of a product or service. – Natural monopoly, a monopoly in which economies of scale

cause efficiency to increase continuously with the size of the firm. A firm is a natural monopoly if it is able to serve the entire market demand at a lower cost than any combination of two or more smaller, more specialized firms.

• Perfect competition, a theoretical market structure that features no barriers to entry, an unlimited number of producers and consumers, and a perfectly elastic demand curve.

• The imperfectly competitive structure is quite identical to the realistic market conditions where some monopolistic competitors, monopolists, oligopolists, and duopolists exist and dominate the market conditions. The elements of Market Structure include the number and size distribution of firms, entry conditions, and the extent of differentiation.

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Competition Merriam-Webster defines competition in business as "the effort of two or more parties acting independently to secure the business of a third party by offering the most favorable terms". It was described by Adam Smith in The Wealth of Nations (1776) and later economists as allocating productive resources to their most highly-valued uses and encouraging efficiency.

• Innovative solutions to existing problems• Price war• Switching channels of distribution• Service based competition• Experience based competition

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Market opportunity

• Demand analysis• Segment analysis• Industry analysis• Competitor analysis

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SOURCES OF INFORMATION FOR MARKET OPPORTUNITY ANALYSIS

• Published Sources– Periodicals and newspapers– Trade association reports– Standardized information service reports– Government documents– Company reports

• Personal observation– Of customers– Of competitors– Of macroenvironmental influences

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SOURCES OF INFORMATION FOR MARKET OPPORTUNITY ANALYSIS (continued)

• Interviews with experts– Managers of suppliers– Managers of trade companies– Managers of trade associations– Consultants– Salespersons

• Primary marketing research– Cross-sectional surveys– Longitudinal panels– Experiments

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TYPES OF ADOPTERS BY ADOPTION TIME REQUIREDPr

opor

tion

ofev

entu

al a

dopt

ers

2 1/2%

13 1/2%

34%34%

16%

Innovators

Earlyadopters

Earlymajority

Latemajority

Laggards

Time to adoption decision

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Marketing planning

• PIMS approach• Portfolio methods

– BCG Approach– GE Approach

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Segmentation

• Definition• Need for segmentation• Mass marketing• Niche marketing• Local marketing• Individual marketing

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Segmenting consumer markets

• Geographic • Demographic• Psychographic• Behavioural• VALS Framework

Segmentation Bases

• Geographic– Country– Region– County size– SMSA population– Density

• Demographic– Age– Sex– Income– Education– Occupation– Race– Family life cycle

Segmentation Bases

• Psychographic– Social class– Personality– Lifestyle– Activities, interests,

& opinions (AIO’s)

• Behavioralistic– Decision unit– Usage rate– Readiness– Benefits sought– Occasion– Brand loyalty

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Segmenting business markets

• Demographic• Operating variables• Purchasing approaches• Situational factors• Personal characteristics

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Positioning

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Product strategy• Levels of a product

– Core– Basic– Expected– Augmented– potential

• Product classifications– Durability and tangibility(durable, nondurable, services)– Consumer goods classification(convenience, shopping, specialty,

unsought)– Industrial goods classification(materials and parts, capital items,

supplies and business services)

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Product mix

• Product mix – Length– Width– Depth– Consistency

• Line stretching• Line filling• Line pruning• Co branding

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Setting the price

• Setting the pricing objective• Determining demand• Estimating costs• Analyzing competitor’s costs, prices and offers• Selecting a pricing method• Selecting the final price

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Pricing objectives

• Survival• Maximize profit• Maximize market share• Maximum market skimming• Product quality leadership

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Pricing

• Product line pricing• Optional feature pricing• Captive product pricing• Two part pricing• By-product pricing• Product bundling pricing

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Pricing method

• Markup pricing• Target return pricing• Perceived value pricing• Value pricing• Going rate pricing

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ALTERNATIVE MARKETING CHANNELS

Manufacturers / producers

Agents / brokers

Wholesalers /distributors

Retailers Retailers

Consumers and organizational end-users

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Channel design decisions

Identification of channel alternatives

Evaluation and selection of

channel(s) to be used

Selection of channelparticipants

Design stages Decision criteria

Intensity of distributionAccess to end-userPrevailing distribution practicesNecessary activities

and functions

Revenue-cost analysisTime horizon for developmentControl considerationsLegal constraintsChannel availability

Market coverageCapabilityIntermediary’s needsFunctions providedAvailability

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PROMOTION MIX TOOLS

Advertising

Print adsBroadcast adsBillboard adsPackaging logos and information

Personal selling

In-person sales presentationsTelemarketing

Sales promotion

Games, contestsFree samplesTrade showsCouponingTrading stampsPrice promotionSigns and displays

Publicity

Print media news storiesBroadcast media news storiesAnnual reportsSpeeches by employees

Thepromotion mix

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PROMOTION TOOL’S STRENGTHS AND WEAKNESSES

Low Low Very low

Veryhigh

Poorto good Good Moderate

Verygood

Poorto good Poor

Poor to good

Verygood

None NoneLow tomoderate

Verygood

Low Low High Moderate to high

AdvertisingSalespromotion Publicity

PersonalsellingCriteria

Cost perAudiencemember

Confined totarget markets

Deliver aComplicated message

Interchangewith audiences

Credibility

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Marketing channels

• Role of channels• Levels of channel• Channel design decisions

– Lot size– Waiting and delivery time– Variety– Service backup

• Channel conflict