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Marketing Management

Marketing: A Short IntroThe shortest definition of Marketing is meeting needs profitably. Marketingenables value creation and value extraction for a firm. Value creation is

meaningless if a firm cannot extract that value for itself. Marketing Strategy helpsguide the organisations efforts in both new and existing markets. It is theprocess of matching the companys strengths to the markets needs as well asselecting the markets that best meet the companys objectives. Customers arevalue maximisers who look at total customer value and total customer cost tomake their buying decision.

Market AnalysisThe goal of a market analysis is to determine the attractiveness of a market andto understand its evolving opportunities and threats as they relate to thestrengths and weaknesses of the firm. David A. Aaker outlined the following

dimensions of a market analysis:* Market size (current and future)* Market growth rate* Market profitability* Industry cost structure* Distribution channels* Market trends* Key success factors

The 5 Stage Buying Decision ProcessThis is a simple but yet useful framework for marketers to think about how

consumers make buying decisions. Although it implies sequentiality, consumersmay sometimes skip stages or go in reverse.

Problem Recognition > Information Search > Evaluation of Alternatives >Purchase Decision > Postpurchase Behaviour

The Marketing Planning ProcessThe firm must find a way to discover unfulfilled customer needs and bring tomarket products that satisfy those needs. The process of doing so can bemodeled in a sequence of steps:

Situation Analysis: Based on 5 Cs [Consumers, Company, Competitors,Collaborators, Context]Possible Strategic Options: Evaluating Target Markets and Positioning OptionsImplementation:The Marketing Mix [Product, Price, Place, Promotion]

Segmentation : Segmentation is the process of grouping customers who youexpect to respond similarly to your marketing action based on identifiablecharacteristics. The characteristics of good segments are

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a) segments are homogenous within them but heterogenous among themb) measurable, substantial, accessible, differentiable and actionablec) economically viable

Focusing on multiple segments with a tailored marketing mix increases costs andhence a segment-based strategy should offer higher prices or increased sales.

Segmentation can be geographic, demographic, psychographic or behavioural.These variables can be used individually or in combination.

Once a firm has identified market-segments, it evaluates the various segmentsand decides how many and which ones to target: a single segment, severalsegments, a specific product, a specific market or full market. In targeting the fullmarket, it can use either differentiated or undifferentiated marketing.

Positioning: Theposition of a brand is its perception among target consumers.This perception is based on functional attributes or emotional associations.Because it is a perception, it is coloured by the targets own attitudes, beliefs and

experience. Different segments may perceive the same brand in different ways.The concept of perceptual map forms the basis for positioning, represented onan x-y axis. Positioning is finally a pursuit of differential advertising.Talking Fact: When lite beers were launched, they were positioned to women asbeers with less calories. The product failed. Miller Lite positioned itself for theheavy drinker with strong masculine image as the less filling beer. Hence, theheavy drinker could now drink more beer. The launch as been called the mostsuccessful new beer introduced in the US.

Bottomline on STP - Segmentation is Analysis, Targeting and Positioning isStrategy.

Brand Positioning Statement: Has three elements target audience,compelling benefit and reason why.Talking Fact: Tata Nano is an inexpensive small car that is a safe and practicalalternative to a two-wheeler owning urban family.

Brand: A brand is a bundle of associations around a product or service.Branding is aimed at creating differences among products. The advantages of astrong brand include greater loyalty price premium additional brand extension opportunities improved perceptions of product performance increased marketing communication effectiveness greater trade cooperation and support

Talking Fact: Coca Cola is the most valuable brand in the world ($66bn).Although India boasts of 7 companies in the Fortune Global 500, there are noIndian brands inInterbrands Top 100 Best Global Brands.

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Talking Fact: Infosys reported a brand value of Rs 32000 crore in its balancesheet. This figure is 42% of its market cap and one and a half times its earnings.

Branding Strategy: Reflects the number and nature of common and distinctivebrand elements applied to the different products sold by the firm. The strategies

include individual brand names (Lux), blanket family names (GE) or corporatename combined with individual product names (Toyota Camry). There can bemany variations to the above strategies.

Brand extension is using the leverage of a well known brand name in onecategory to launch a new product in a different category (for ex. KingfisherAirlines). A product line extension is the use of an established products brandname for a new item in the same product category (for ex. Dettol liquid handwash).

Advantages of a Brand Extension

Extensions reduce the cost of a new launch Provide feedback benefits. Clarify a brands meaning further to itscustomers

Disadvantages of a Brand Extension Risk of brand dilution

Advertising Management: Theframework for advertising is the 5 Ms - Money,Markets (Who/Target), Media, Message (Execution), Measurement. Advertisingbudgets can be selected by the following methods Whats affordable Percent of Sales Competitive Parity (Share of voice) Objective and task to be accomplished

A broad classification of advertising is whether it is based on rational oremotional appeal.Talking Fact: P&G is the worlds largest advertiser. Unilever is the Indias largestspender.Talking Fact II: Apples Think Different Campaign uses emotional appeal toenhance Apples brand equity.

PriceBecause of inherent tradeoffs between marketing mix elements, pricing dependson other product, distribution, and promotion decisions. The firm's pricingobjectives must be identified in order to determine the optimal pricing. Commonobjectives include the following: Current profit maximization Current revenue maximization Maximize quantity - to harness network effects Maximize profit margin Quality leadership - use price to signal high quality

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Survival - in situations such as market decline and overcapacity

For new products, the pricing objective often is either to maximize profit marginor to maximize quantity (market share). To meet these objectives, skim pricingand penetration pricing strategies often are employed. Skim pricing attempts to

"skim the cream" off the top of the market by setting a high price and selling tothose customers who are less price sensitive. Skimming is most appropriatewhen demand is expected to be relatively inelastic, large cost savings are notexpected at high volumes and the company does not have the resources tofinance the large capital expenditures necessary for high volume production.

Penetration pricing pursues the objective of quantity maximization by means of alow price. It is most appropriate when demand is expected to be highly elastic,large decreases in cost are expected as cumulative volume increases, theproduct is of the nature of something that can gain mass appeal fairly quickly andthere is a threat of impending competition.

ChannelsThe two primary uses of a channel are flow of information and flow of goods.Other uses include promotion, financing and risk taking.

Marketing MathCustomer Lifetime Value: CLV is the net present value of the future cash flowsattributed to a customers lifetime purchases. It allows firms to decide their mostprofitable customers as well as how much to invest in acquiring new customers.The cost of acquisition of a new customer is estimated to be five times the cost ofkeeping a current customer happy.

LTVC = (Revenue-Cost) Probability of Retention(1+Discount Rate)t

Share of Market = Share of Preference x Share of Voice x Share of Distribution

Break Even Analysis = Fixed Cost/(Selling Price Variable Cost)