Principles of Marketing

Neeru KapoorAssociate Professor

Department of Commerce Delhi College of Arts and Commerce

University of Delhi

Delhi-1100922014

PRINCIPLES OF MARKETINGNeeru Kapoor

© 2014 by PHI Learning Private Limited, Delhi. All rights reserved. No part of this book may be reproduced in any form, by mimeograph or any other means, without permission in writing from the publisher.

ISBN-978-81-203-4889-9

The export rights of this book are vested solely with the publisher.

Published by Asoke K. Ghosh, PHI Learning Private Limited, Rimjhim House, 111, Patparganj Industrial Estate, Delhi-110092 and Printed by Raj Press, New Delhi-110012.

iii

Preface xviiAcknowledgements xix

1 MARKETING—AN INTRODUCTION 1–29

1.1 DEFINITION OF MARKETING 21.2 CORE CONCEPTS IN MARKETING 3

1.2.1 The Concept of Need, Want and Demand 31.2.2 The Concept of Product 41.2.3 Value and Satisfaction 41.2.4 Exchange and Transaction 41.2.5 The Concept of a Market 51.2.6 The Concept of a Marketer 6

1.3 CHARACTERISTICS OF MARKETING 61.3.1 Economic Activity 61.3.2 Consumer Oriented Philosophy 61.3.3 Integrated Approach 61.3.4 Focuses on Target Market 71.3.5 Dynamic and Competitive 71.3.6 Aggressive Promotional Efforts 71.3.7 Social and Managerial Process 71.3.8 Involves Special Skills and Abilities 71.3.9 Improving Standard of Living of Society 71.3.10 Relationship Building 71.3.11 Universally Applicable Activity 71.3.12 EnsuringProfitwithCustomerSatisfaction 7

1.4 MARKETING CONCEPTS OR EVOLUTION STAGES OF MARKETING 81.4.1 Stage I: The Production Concept/the Production Stage/or the Production

Orientation 91.4.2 Stage II: The Product Concept/the Product Stage/the Product Orientation 91.4.3 Stage III: The Selling Concept/the Selling Stage/the Selling Orientation 10

Contents

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1.4.4 Stage IV: The Marketing Concept/the Marketing Stage/the Marketing Orientation 11

1.4.5 Stage V: The Societal Marketing Concept/the Societal Marketing Stage/the Societal Marketing Orientation 12

1.5 DIFFERENCE BETWEEN SELLING, MARKETING AND SOCIETAL MARKETING 14

1.6 PRESENT DAY IMPORTANCE OF MARKETING 161.6.1 From the Point of View of a Business Enterprise/Manufacturer 161.6.2 From the Customer’s Point of View 171.6.3 From Society’s Point of View 17

1.7 LIMITATIONS OF MARKETING 181.7.1 Social Effects of Marketing 191.7.2 Economic Effects of Marketing 191.7.3 Ethical Effects of Marketing 20

1.8 THE CONCEPT OF MARKETING MIX 201.8.1 Product Mix 221.8.2 Price Mix 221.8.3 Promotion Mix 231.8.4 Distribution Mix 23

1.9 NEW CONCEPTS IN MARKETING 25LET US SUM UP 27QUESTIONS TO CHECK YOUR PROGRESS 28

Short Answer Questions 28Long Answer Questions 28

2 MARKETING ENVIRONMENT 30–42

2.1 MICRO ENVIRONMENT VARIABLES 312.1.1 Suppliers 312.1.2 Market Intermediaries 322.1.3 Customers 322.1.4 Competitors 322.1.5 Public 32

2.2 MACRO-ENVIRONMENTAL VARIABLES 332.3 IDENTIFYING AND RESPONDING TO THE MAJOR MACRO-ENVIRONMENTAL FORCES 33

2.3.1 Demographic Environment 342.3.2 Economic Environment 362.3.3 Natural Environment 372.3.4 Technological Environment 372.3.5 Political and Legal Environment 382.3.6 Socio-Cultural Environment 38

2.4 ENVIRONMENTAL SCANNING AND ANALYSIS 392.4.1 Reasons for Conducting Environmental Scanning and Analysis 40

LET US SUM UP 40QUESTIONS TO CHECK YOUR PROGRESS 41

Short Answer Questions 41Long Answer Questions 41

Contents l v

3 MARKETING INFORMATION SYSTEMS AND MARKETING RESEARCH 43–57

3.1 REASONS FOR MANAGING INFORMATION 443.2 INTERNAL REPORTING SYSTEMS 45

3.2.1 The Order-to-Payment Cycle 453.2.2 Sales Information Systems 45

3.3 MARKETING INTELLIGENCE SYSTEM 463.3.1 Train and Motivate Sales Force 463.3.2 Motivate Dealers and Distributors 473.3.3 GatherKnowledgeaboutCompetitor’sMoves 473.3.4 Collect Customer’s Feedback 473.3.5 Purchase Information 473.3.6 Establish a Marketing Information Centre 47

3.4 MARKETING MODELS 473.5 MARKETING RESEARCH SYSTEM 48

3.5.1 Designing the Market Research Brief or Design 483.5.2 Suppliers of Marketing Research 493.5.3 The Marketing Research Process 493.5.4 Barriers to Effective Marketing Research 55

LET US SUM UP 56QUESTIONS TO CHECK YOUR PROGRESS 57

Short Answer Questions 57Long Answer Questions 57

4 CONSUMER BUYING BEHAVIOUR 58–82

4.1 WHY SHOULD MARKETERS STUDY CONSUMER BUYING BEHAVIOUR 594.1.1 ClearCutIdentificationofConsumerNeedsandWants 604.1.2 Understanding Consumers’ Perceptions 604.1.3 KnowingConsumers’BuyingMotives 604.1.4 Shopping and Buying Pattern 604.1.5 Intensive Competition 604.1.6 AwarenessandConsciousnessamongsttheCustomers 614.1.7 DifferencesinPurchasingPower 614.1.8 Willingness to Spend 61

4.2 A MODEL OF CONSUMER BUYING BEHAVIOUR 614.3 MAJOR FACTORS INFLUENCING BUYING BEHAVIOUR 62

4.3.1 Cultural Factors 624.3.2 Social Factors 644.3.3 Personal Factors 654.3.4 Psychological Factors 67

4.4 CONCEPT OF BUYING MOTIVES 694.4.1 Variations in Buying Motives 694.4.2 KnowledgeofBuyingMotives 704.4.3 Kinds of Buying Motives 70

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4.4.4 Various Types of Buying Roles 744.4.5 The Buying Decision Process 744.4.6 Types of Consumer Buying Behaviour 77

LET US SUM UP 80QUESTIONS TO CHECK YOUR PROGRESS 81

Short Answer Questions 81Long Answer Questions 81

5 MARKET SEGMENTATION 83–100

5.1 CHARACTERISTICS OF MARKET SEGMENTATION 845.2 STEPS IN TARGET MARKETING 845.3 LEVELS OF MARKET SEGMENTATION 85

5.3.1 Level I—Market Segment 865.3.2 Level II—Niche Marketing 865.3.3 Level III—Local Marketing 865.3.4 Level IV—Individual Marketing 86

5.4 PATTERNS OF MARKET SEGMENTATION 875.4.1 Homogenous Preference 875.4.2 Diffused Preference 875.4.3 Clustered Preference 87

5.5 MARKET SEGMENTATION PROCEDURE 885.5.1 Step One—Survey Stage 885.5.2 StepTwo—AnalysisStage 885.5.3 StepThree—ProfilingStage 88

5.6 BASES FOR SEGMENTING CONSUMER MARKETS 885.6.1 Geographic Segmentation Variables 895.6.2 Demographic Segmentation Variables 905.6.3 Psychographic Segmentation 915.6.4 Behavioural Segmentation 915.6.5 Multi Attribute Segmentation (Geo-Clustering) 93

5.7 ESSENTIALS FOR EFFECTIVE SEGMENTATION 935.8 MARKET TARGETING 935.9 PATTERN FOR MARKET TARGETING 94

5.9.1 Single Segment Concentration 945.9.2 Selective Specialisation 945.9.3 Product Specialisation 945.9.4 Market Specialisation 945.9.5 Full Market Coverage 94

5.10 PRODUCT POSITIONING 955.11 DIFFERENT POSITIONING STRATEGIES 95

5.11.1 Attribute Positioning 965.11.2 BenefitPositioning 965.11.3 Use or Application Positioning 965.11.4 User Positioning 965.11.5 Competitor Positioning 96

Contents l vii

5.11.6 Product Leader Positioning 965.11.7 Quality or Price Positioning 96

LET US SUM UP 98QUESTIONS TO CHECK YOUR PROGRESS 99

Short Answer Questions 99Long Answer Questions 99

6 PRODUCT DECISIONS 101–130

6.1 COMPOSITION OF A PRODUCT 1026.1.1 Core Product 1026.1.2 Basic Product 1036.1.3 Expected Product 1036.1.4 Augmented Product 1036.1.5 Potential Product 103

6.2 PRODUCT CLASSIFICATION 1046.2.1 Tangibility and Durability 1046.2.2 ConsumerGoodsClassification 1056.2.3 IndustrialGoodsClassification 107

6.3 NEW PRODUCT DEVELOPMENT PROCESS 1096.3.1 Idea Generation Stage 1096.3.2 Idea Screening Stage 1106.3.3 Concept Development and Testing Stage 1106.3.4 Business Analysis Stage 1106.3.5 Product and Marketing Mix Development Stage 1106.3.6 Market Testing Stage 1116.3.7 Commercialisation Stage 111

6.4 PRODUCT LIFE CYCLE 1116.4.1 Theory of Diffusion and Adaptation 1126.4.2 The Product Life Cycle Stages 1136.4.3 Summary of the Product Life Cycle 118

6.5 PRODUCT MIX AND PRODUCT LINE 1196.5.1 Product Mix 1196.5.2 Product Line 1196.5.3 Width of Product Mix 1196.5.4 Length of Product Line 1206.5.5 Depth of a Product Line 1206.5.6 Constant Appraisal of Each Product/Brand in the Line 120

6.6 PACKAGING 1216.6.1 Importance/Functions of Packaging 1216.6.2 Requisites of a Good Package 123

6.7 BRANDING 1236.7.1 Features of Branding 1246.7.2 Characteristics of a Good Brand 1256.7.3 Functions of Branding 1256.7.4 Brand Equity 126

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6.7.5 High Brand Equity Provides a Number of Competitive Advantages 1266.7.6 Brand-Strategy Decisions 127

6.8 LABELING 127LET US SUM UP 127QUESTIONS TO CHECK YOUR PROGRESS 128

Short Answer Questions 128Long Answer Questions 129

7 PRICING DECISIONS 131–148

7.1 FACTORS AFFECTING THE PRICE 1337.1.1 Selecting the Pricing Objectives 1347.1.2 Determining the Demand of Goods 1367.1.3 Estimating the Costs of the Product 1367.1.4 Analysing Competitor’s Costs, Prices and Offers 1377.1.5 Other Environmental Factors 138

7.2 SELECTING A PRICING METHOD 1387.2.1 Cost-Based Pricing Methods 1397.2.2 Market-Based Pricing Method 140

7.3 SELECTING THE FINAL PRICING METHOD 1437.4 DEVELOPING A PRICING STRUCTURE 1447.5 GEOGRAPHICAL PRICING POLICIES 1447.6 PRICE DISCOUNTS AND ALLOWANCES 145LET US SUM UP 146QUESTIONS TO CHECK YOUR PROGRESS 147

Short Answer Questions 147Long Answer Questions 148

8 PROMOTION STRATEGY 149–167

8.1 NEED/FUNCTION/IMPORTANCE OF PROMOTION 1508.1.1 IncreasingDistancebetweenthePlaceofProductionandPlaceof

Consumption 1508.1.2 Promotion Affects the Demand and Demand Elasticity of the Product 1518.1.3 Persuasion Function 1518.1.4 Reminder Function 1518.1.5 During the Period of Product Shortages as Well 1518.1.6 Improve the Overall Standard of Living of People 1518.1.7 To Overcome the Problem of Economic Recession 151

8.2 PROMOTIONAL TOOLS 1518.2.1 Advertising 1528.2.2 Personal Selling 1538.2.3 Sales Promotion 1548.2.4 Public Relations and Publicity 1548.2.5 Direct Marketing 156

Contents l ix

8.3 DETERMINING THE PROMOTION MIX 1578.3.1 Factors Affecting Promotional Mix 157

8.4 INTEGRATED MARKETING PROMOTION 1618.4.1 ReasonsforGrowingImportanceofIntegratedMarketingPromotion 162

LET US SUM UP 164QUESTIONS TO CHECK YOUR PROGRESS 165

Short Answer Questions 165Long Answer Questions 166

9 CHANNELS OF DISTRIBUTION 168–189

9.1 CHANNEL LEVELS 1699.1.1 A Zero-Level Channel 1699.1.2 A One-Level Channel 1699.1.3 ATwo-LevelChannel 1699.1.4 A Three-Level or Multilevel Channel 170

9.2 IMPORTANCE OF MIDDLEMAN 1709.3 FUNCTIONS OF CHANNELS OF DISTRIBUTION 171

9.3.1 Research 1719.3.2 Promotion 1719.3.3 Negotiation 1719.3.4 Contact 1719.3.5 Financing 1729.3.6 Risk-Taking 1729.3.7 Transportation 1729.3.8 Warehousing 172

9.4 FACTORS AFFECTING THE CHOICE OF DISTRIBUTION CHANNELS 1739.4.1 Market Considerations 1739.4.2 Product Considerations 1749.4.3 Middlemen Considerations 1759.4.4 Company Considerations 175

9.5 INTENSITY OF MARKET COVERAGE 1769.5.1 Exclusive Distribution 1769.5.2 Selective Distribution 1769.5.3 Intensive Distribution 177

9.6 CHANNEL MANAGEMENT DECISIONS 1779.6.1 Selecting the Channel Members 1779.6.2 Motivating Channel Members 1789.6.3 Evaluating and Modifying Channel Arrangements 179

9.7 TYPES OF MIDDLEMEN 1799.7.1 Agent Middlemen 1799.7.2 Merchant Middlemen 180

9.8 CHANNEL DYNAMICS 1829.8.1 Vertical Marketing System (VMS) 1829.8.2 Horizontal Marketing System (HMS) 1829.8.3 Multichannel Marketing System (MMS) 183

Principles Of Marketing

Publisher : PHI Learning ISBN : 9788120348899 Author : Neeru Kapoor

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