MBA - My Notes

Corporate orientation towards marketplace

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Marketing is a social and managerial process by which individuals and groups obtain what they need and want through creating. offering and exchanging products of value with others.

Marketing has its origins in the fact that humans are creatures of needs and wants. Need and wants create a state of discomfort, which is resolved through acquiring products that satisfy these needs and wants. Since many products can satisfy a given need, and satisfaction. These products are obtainable in several ways: Self – production, coercion, begging and exchange. Most modern societies work on the principle of exchange, which means that people specialize in producing particular products and trade them for the other things they need. The engage in transaction and relationship building. A market is a group of people who share similar needs. Marketing encompasses those activities involved in working with markets, that is, in trying to actualize potential exchanges.

Marketing management is the conscious effort to achieve desired exchange outcome with target markets. The marketer’s basis skill lies in influencing the level, timing and composition of demand for a product service, organization, place, person or idea.

Marketing is so basic that it cannot be considered a separate function. It is the whole business seen from the point of view of its final result, that is, from the customer’s point of view. The marketing concept rests on four main pillars, namely a market focus, customer orientation, coordinated marketing and profitability.

Market Focus: No Company can operate in every market and satisfy every need. Nor can it even do a good job within one broad market. Companies do best when they define their target markets carefully. The do best when they prepare a tailored marketing programme for each target market.

Customer Orientation: a company can define its market carefully but still needs customer orientated thinking i.e. satisfy customer needs from the customer point of view, and not from its own point of view. Company’s sales come from two groups: new customer’s and repeat customers. It always costs more t attract new customers than to certain current customers. Therefore, customer retention is customer satisfaction. A satisfied customer:

Buys again
Talks favourably to other about the company
Pays less attention to competing brands
Buys other products from the same company

Thus a Company would be wise to regularly measure customer satisfaction. The delighted customers are more effective advertisers than the advertisement placed in media.

Coordinated Marketing: Marketing requires the company to carry out internal marketing as well as external marketing. Internal marketing is the task of successfully hiring trained and motivating able employees to serve the customers well. Internal marketing must precede the external marketing. It makes no sense to promise excellent service before the company’s staff is ready to provide excellent service.

Coordinated marketing means two things, first the various marketing functions – sales force, advertising product management, marketing research, and so on must be coordinated among themselves. Second, marketing must be well coordinated with the other company department. Marketing does not work when it is merely a department. It only works when all employees appreciate the effect they have on customer satisfaction.

Profitability: The purpose of the marketing concept is to help organizations achieve their goals. In case of private firms, the major goal is profit, in the case of non-profit and public organizations; it is surviving and attracting enough funds to perform their work. The key is not to aim for profits as such but to achieve them as a buy product of doing the job well. A company makes money by satisfying customer’s needs better than a profitable way to satisfy some target group’s wants for personal satisfaction.

What is Marketing? Different Philosophies

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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.

According to the American Marketing Association, “Marketing is the process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services to create exchanges that satisfy individual and organizational goods”

There are six competing philosophies under which organizations conduct marketing activities “the production concept, product concept, selling concept, marketing concept, customer concept; and societal concept.

1) The Production Concept: The production concept is one of the oldest concepts in business. The production concept holds that consumers will prefer products that are widely available and inexpensive. Managers of production-oriented businesses concentrate on achieving high production efficiency, low costs and mass distribution.

They assume that consumers are primarily interested in products availability and low prices. This philosophy makes sense in developing countries, where consumers are more interested in obtaining the product than its features. It is also used when a company wants to expand the market.

2. The product Concept – Product concept holds that consumer will favour these products that offer the most quality, performance and innovative features. Managers in these organizations focus on making superior products and improving them over time. They assume that buyers admire well-made products and can evaluate quality and performance product oriented companies often trust that their engineers can design exceptional products. They get little or no customer input, and very often they will not even examine competitor’s products.

3. The Selling Concept: The selling concept holds that consumers and businesses, if left alone, will ordinarily not buy enough of the organization’s products. The organization most, therefore, undertakes an aggressive selling and promotion effort. This concept assumes that consumers typically show buying inertia or resistance and must be coaxed into buying. It also assumes that the company has a whole battery of effective selling and promotion tools to stimulate more buying. The selling concept is epitomized by the thinking that “The purpose of marketing is to sell more stuff to more people for more money in order to make more profit

Most firms practice the selling concept when they have over capacity. Their aim is to sell what they make rather then make what market wants.

4. The Marketing Concept: The marketing concepts hold that the key to achieving its organizational goals consists of the company being more effective then competitors in creating, delivering and communicating superior customer value to its chosen target markets.

The marketing concept rests on four pillars: target market, customer needs, integrated marketing and profitability. There is a contrast between 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 ideas of satisfying the needs of the customers by means of the product and the whole cluster of things associated with creating, delivering and finally consuming it.

5. The customer Concept: Under customer concept, companies shape separate offers, services and messages to individual customers. These companies collect information on each customer’s past transactions, demographics, psychographics and media and distribution preferences. They hope to achieve profitable growth through capturing a larger share of each customer’s expenditures by building high customer loyalty and focusing on customer lifetime value.

The ability of a company to deal with customers are at a time become practical as a result of advances in factory customization, computers, the internet and database marketing software.

6. The Societal Marketing Concept: The societal marketing concept holds that the organization’s goal is to determine the needs, wants and interests of target markets and to deliver the desired satisfactions more effectively and efficiently than competitors in a way that preserves or enhances the consumer’s and the society’s well being.

The 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.

Companies see cause-related marketing as an opportunity to enhance their corporate reputation, raise brand awareness, increase customer loyalty, build sales and increase press coverage. They believe that consumers will increasingly look for signs of good corporate citizenship that go beyond supplying rational and emotional benefits.

Scope of Market Research

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Market research is the systematic design, collection, analysis and reporting of data and findings relevant to a specific marketing situation facing the company.

Market researchers have expanded their activities and techniques. The ten most common activities of market research are –

Determination of marketing characteristics
Measurement of market potentials
Market share analysis
Sales analysis
Studies of business trends
Short range forecasting
Competitive product studies
Long range forecasting
Pricing studies, and
Testing of existing products

Marketing Research Process

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Marketing research is undertaken to understand a marketing problem better. Effective marketing research involves five steps –

Defining the problem and research objectives
Developing the research plan
Collecting the information
Analysing the information
Presenting the findings.

I. Defining the problem and research objectives: The first step in research calls for the marketing manager is to define the problem carefully and agree on the research objectives. A problem will defined is half solved.

Three types of research projects can be distinguished. Some research is exploratory i.e. to gather preliminary data to shed light on the real nature of the problem and possibly suggest some hypothesis or new ideas. Some research is descriptive i.e. to describe certain magnitudes. Some research is casual – that is t, test a cause and effect relationship.

II. Developing the Research Plan: The second stage of marketing research calls for developing the most efficient plan for gathering the needed information. Research plan calls for decisions on the data sources, research approaches, research instruments, sampling plans and contact methods.

Data Source: The research plan can call for gathering secondary data, primary data or both. Secondary data consists of information that already exists somewhere, having been collected for another purpose. Primary data consist of original information gathered for the specific purpose at hand.

Research Approaches: Primary data can be collected in four broad ways: observation, focus group, Surveys and experiments.

Observation – Fresh data can be gathered by observing the relevant actors and settings.

Focus Group - A focus group is a gathering of six to ten persons who spend a few hours with a skilled interviewer to discuss a project, service, and organization of other marketing entity.

Survey Research – Companies undertake surveys to learn about people’s beliefs, preferences, satisfaction and so on and to measure these magnitudes in the population.

Experiments – Experimental research calls for selected matched groups of subjects, subjecting them to different treatments, controlling extraneous variables and checking whether response differences are statically significant.

Generally speaking observation and focus groups are best suited for exploratory research, surveys are best suited for descriptive research and experiments are best suited for casual research.

Research Instruments – Marketing researchers have a choice of two main research instruments in collecting primary data: the questionnaire and mechanical devices.

Questionnaire consists of a set of questions presented to respondents for their answers. The questionnaire is very flexible in that there is any number of ways to ask questions.

Mechanical instruments are less frequently used in marketing. Galvanometers are used to measure the strength of a subject’s interest on emotions aroused by an exposure to a specific and or picture. The tachistoscope is a device that flashes on and to a subject with an exposure interval that may range from less then one-hundredth of a second to several seconds. After each exposure, the respondent describes everything he recalls. Eye cameras are used to study respondent’s eye moments to see at what points their eyes land first, how long they linger on a given item? The audiometer is an electronic device that is attached to television sets in participating homes to record when the set is on and to which channel it is tuned.

Sampling Plan – The marketing researcher must design a sampling plan, which calls for three decisions

Sampling Unit – This answers who is to be surveyed.
Sample Size – This answers why many people should be surveyed.
Sampling Procedure – This answers who should the respondents to chosen.

Contact Methods – This answers how should the subject be contacted? Choices are meant, telephone or personal interviews.

III. Collecting the information – The researcher must now arrange for collecting the data. This phase is generally the most expensive and most liable to error. Four major problems arise. Some respondents will not be at home and must be re-contacted or replaced. Other respondents will refuse to cooperate. Still other will give biased or dishonest answers. Finally, some interviewers will occasionally be biased or dishonest.

IV. Analyzing the information – The next step is the marketing research process is to extract pertinent findings from the data. The researcher tabulates the data and develops one way and two-way frequency distributions. Averages and measures of dispersion are computed for the major variables.

V. Presenting the findings – the researcher should present major findings that are relevant to the major marketing decisions facing management. The study is useful when it reduces management’s uncertainty concerning the right move to take.

CHARACTERISTICS OF GOOD MARKETING RESEARCH

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Scientific Method: Effective marketing research was the principles of scientific method: careful observation, formulation of hypothesis, prediction and testing.

Research Creativity: At its best, marketing research develops in various ways to solve a problem.

Multiple Methods: Competent marketing researches shy away from over reliance on any one method, preferring to adopt the method to the problem rather than the other way around. They also recognize the desirability of gathering information from multiple to give greater confidence.

Independence of models and Data: Competent marketing researches recognize that the facts derive their meaning from models of the problem. These models guide the type of information sought and therefore should be made as explicit as possible.

Value and cost of information: Competent marketing researches show concern for measuring the value of information against its cost. Value / cost helps the marketing research department which research project to conduct, which research to use etc.

MARKETING ENVIRONMENTS

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Marketing managers can effectively monitor changes in the marketing environment using marketing intelligence system.

“A marketing intelligence system is a set of procedures and sources used by managers to obtain their everyday information about pertinent developments in the marketing environment”.

Managers scan the environment in four ways:

Undirected viewing: General exposure to information where the manager has no specific purpose in mind.
Conditional viewing: Directed exposure, not involving active search, to a more or less cleanly identified area or type of information.
Informed Search: A relatively limited and unstructured effort to obtain specific information or information for a specific purpose.
Formal Search: A deliberate effort usually following a pre-established plan, procedure or methodology – to secure specific information or information relatively to a specific issue.

Marketing Managers carry on marketing intelligence mostly on their own by reading books, newspapers and trade publications, talking to customers, suppliers, distributors and other outsiders and talking with other managers within the company. Well-run companies take additional steps to improve the quality and quantity of marketing intelligence. First, they train and motivate the sales force to spot and report new developments. Sales representatives are the company’s ‘eye and ears’. They are in an excellent position to pick up information missed by other means. Secondly, the company motivates distributors, retailers and other middlemen to pass along important intelligence. Some companies appoint specialists to gather marketing intelligence. They send out “Ghost Shoppers” to monitor the presentations of retail personnel. Much can be learned about competitors through purchasing their products, attending open houses and trade shows, reading competitor’s published reports and attending stock holders meeting; talking to their former employees and present employees, dealers, distributors, suppliers and freight agents collecting competitors’ ads.

Thirdly, the company purchases information from outside suppliers such as NRS (National Readership Survey Report) etc. These research firms can gather store and consumer-panel data at much less cost than it each company carried out its own panel operations.

Why the study of marketing environment is important for a marketer?

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The marketing environment consists of the task environment and the broad environment.

The task environment includes the immediate actors involved in producing, distributing and promoting the offering. The main actors are the company, suppliers, distributors, dealers and target customers. Includes in the supplier group are – material suppliers and service suppliers such as marketing research agencies, advertising agencies, banking and insurance companies, transportation and telecommunication companies. Included with distributors and dealers are agents, brokers and others who facilitate finding and selling to customers.

The broad environment consists of six components: demographic environment, economic environment, natural environment, technological environment, political-legal environment and social-cultural environment. these environments contain forces that can have major impact on the actors in the task environment.

The major responsibility for identifying significant market place changes falls to the company’s marketers. More than any other group in the company, they must be the trend trackers and opportunity sectors.

Marketers are keenly interested in the size and growth rate of population in cities, regions and nations; age distribution etc. Exposure population growth has major implications for business. A growing population does not mean growing markets unless these markets have sufficient power nonetheless the companies that carefully analyse their markets and find major opportunities.

National populations vary in their age mix. At one extreme is Mexico a country with a very young population and rapid population growth. At the other extreme is Japan, a country with one of the world’s oldest populations. Milk diapers, school supplies and toys would be important products in Mexico. Japan’s population would consume many more adult products. A population can be sub divided into six age groups – pre-school, school-age children, teens, young, adults age 25 to 40, middle-aged adults aged 40 to 65 and older adults aged 65 and up. For marketers, the most populous age groups shape up the marketing environment.

Marketing require purchasing power as well as people. The available purchasing power in an economic depends on current income, prices, saving, debt and credit availability. Marketers must pay close attention to major trends in income and consumer-spending patterns because they can have a strong impact on business especially for companies whose products are geared to high income price-sensitive consumers.

The deterioration of the natural environment is a major global concern. Steel companies and public utilities have hard to invest billions of dollars in pollution-control equipment and more environmentally friendly fuels marketers need to be aware of the threats and opportunities associated with four trends in the natural environment, the storage of raw materials especially the water, the increased cost of energy, increased pollution levels and the changing rate of the governments.

Consumer decision-making process

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Consumer passes through five stages: Problem recognition, information search evaluation of alternatives, purchase decision and post purchase behaviour, while deciding the purchase of product/services.

Consumer decision-making process: Problem Recognition

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The buying process starts when the buyer recognizes a problem of need. The buyer senses a difference between his or her actual state and desired state. The need can be triggered by internal or external; stimuli. In the former case, one Person’s normal needs- hunger thirst-rises to be threshold level and becomes a drive. From previous experiences, the person has learned hoe to cope with this drive and its motivated towards a class of objects that will satisfy the drive. Or a need can be aroused by an external stimulus. A person passes a bakery and sees freshly baked bread that stimulates her hunger, she admires a neighbour’s car, or she watches a television commercial advertisement a Jamacian vacation. All these stimuli can trigger problem or need.

Consumer decision-making process: Information Search

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An aroused consumer will be inclined to search for more information. This search can be at two levels:

The middle search State called heightened attention. Here the consumer simply becomes more receptive to information about product in which he/she is interested. He/She pays attention to products ads, similar products purchased by friends, and conversation about product.

Or consumer may go into active information search where consumer looks for reading material, and engages in other search activities to learn about product in which he/she is interested. How many search consumers undertakes depends upon strength of his/her drive; the amount of information he/she initially has, the ease of obtaining additional information etc. Consumer information sources fall into four groups:

Personal sources: Family, friends, neighbour, acquaintances
Commercial sources: Advertising, Salesperson, dealers, displays etc.
Public sources: Mass media, consumer rating organization.
Experiential sources: handling, examining, and using the product.

The relative amount and influence of these information sources varies with the product category and the buyer’s characteristics. Generally speaking, the consumer receives the sources, that is, marketer dominated sources. On the other hand, the most effective exposures come from personal sources. Each information source performs a somewhat different function in influencing the buying decision. Commercial information normally performs and informing function and personal sources performs a legitimizing and /or evaluation function. For example, physicians often learn of new drugs from commercial sources but turn to other doctors fro evaluation information.

Consumer decision-making process: Evaluation of alternatives

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Consumers form product judgments regarding brand choices largely on a conscious and rational basis.

Consumer is trying to satisfy some need and is looking for certain benefits from the product solution. The consumer sees each product as bundle of attributes with varying capabilities of delivering the sought benefits and satisfying this need.

Consumers will differ as to which product attributes are seen as relevant or salient. They will pay the most attention to the ones that will delivery the sought benefits. The consumer is likely to develop a set of brand beliefs about where each brand stands on each attribute. The brand beliefs make up the brand image. The consumer’s brand belief will vary with his/her experiences and the effect of selective retention. The consumer is assumed to have a utility function for each attribute. The consumer arrives at attributes (judgement, preferences) towards the brand alternatives through evaluation procedure.

Consumer decision-making process:Purchase Decision

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In the evaluation steps the consumer forms preferences among the brands. The consumer may also forms a purchase intention to buy the most preferred brand. But actual purchase decision is influenced by (a) attitudes of other and (b) unanticipated situational factors.

The extent to which another person’s attitude reduces one’s preferred alternative depends upon two thins (i) the intensity of the other person’s negative attitude towards the consumer’s preferred alternative and (ii) the consumer’s motivation to comply with the other person’s wishes.

Purchase intention is also influenced by unanticipated situational factors. A Consumer’s decision to modify, postpone or avoid a purchase decision is heavily influenced by perceived risk varies with the amount of money at stake, the amount of attribute uncertainty and the amount of consumer self confidence.

A consumer who decides to execute a purchase intention will be making up to five purchase sub decisions: (a) brand decision (b) vendor decision (dealer) (c) quality decision (d) timing decision and (e) payment method decision.

Consumer decision-making process:Post purchase behaviour

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The buyer’s satisfaction is a function of the closeness between the buyer’s product expectations and the product’s perceived performance falls short of customer expectation, the customer is disappointed, if it exceeds expectations, the customer is delighted. The feelings make a difference in whether the customer buys the product again and talks favourably or unfavourably about the product

What do you understand by Consumer Behaviour?

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The aim of marketing is to meet and satisfy target customer’s needs and wants. The field of consumer behaviour studies how individuals, groups and organizations select, buy, use and dispose of goods, services, ideas or experiences to satisfy their needs and desires.

A consumer’s buying behaviour is influenced by cultural, social, personal and psychological factors.

I. Culture, sub-cultures and social class are particularly important in buying behaviour. Culture is a fundamental determinant of a person’s wants and behaviour. The growing child acquires a set of values, perceptions, preferences and behaviours through his or her family and other key institutions.

Each culture consists of smaller subcultures that provides more specific identification and socialization for their members. Subcultures include nationalities, religions, social groups and geographic regions. Enough companies often design specialized marketing programs to serve them. Such are known as “diversity marketing”

Virtually all human societies exhibit social satisfaction, stratification sometimes takes the form of caste system where the members of different castes are reared for certain roles and cannot change their caste membership. More frequently, it takes the form of ‘Social Classes’ relatively homogeneous and enduring divisions in a society, which are hierarchically ordered and whose members share similar values, interests and behaviour. Social classes show distinct product and brand preferences in many areas, including clothing, home furnishings, leisure activities and automobiles. Social classes differ in media, magazines & books and lower class consumers preferring television. Even within a media category such as TV, upper-class consumers prefer news and drama, and lower-class consumers prefer soaps operas and sports programmes

II. Social Factors – In addition to cultural factors, a consumer’s behaviour is influenced by such social factors as reference groups, family and social roles and statuses.

A person’s reference group consists of all the groups that have a direct (face to face) or indirect influence on the person’s attitudes or behaviour. Groups having direct influence on a person called “ membership groups”. Some members groups are primary groups, such as family, friends, neighbours and co-workers with whom the person interacts fairly continuously and informally. People also belong to secondary groups, such as religious, professional and trade-union groups, which tend to be more formal and require less continuous interaction.

People are significantly influenced by their reference groups in at least three ways. Reference group expose an individual to new behaviours and lifestyles and influence attitudes and self-concept; they create pressure for conformity that may effect actual product and brand choices.

Family is the most important consumer buying organization in society, and family members constitute the most influential primary reference group. The family orientation consists of parents and siblings. From parents a person acquires an orientation towards religion, politics and economics and a sense of personal achievement, self-worth and love. Even if the buyer no longer interacts very much with is parents, their influence on the buyer’s behaviour can be significant.

Role and statuses: A person participates in many groups- family, clubs, organizations. The person position in each group can be defined in terms of role and status. A “role” consists of the activities a person is expected to perform. Each role carries a “Status”. A Supreme Court justice has more status than a sales manager, and a sales manager has more status than an office their role and status in society.

III Personal Factors: A buyer’s decision are also influenced by personal characteristics. These include the buyer’s age and stage in the life cycle, occupation, economic circumstances, lifestyles and personality and self concept.

People buy different goods and services over a lifetime. The eat baby food in the early years, most foods in the growing and mature years and special diets in the later years. Taste in clothes, furniture and recreation is also age related.

Occupation also influences consumption pattern. A blue-coller worker will buy work clothes, work shoes and lunch boxes. A company president will buy expensive suits, air travel and country club membership.

IV. Psychological Factors: A Person buying choices are influenced by four major psychological factors- motivation perception, learning and beliefs and attitudes.

A Person has many needs at any given time. Some needs are biogenic, they arise from psychological states of tension such as hunger, thurst or discomfort. Other needs are psychogenic; they arise from psychological states of tension such as the need for recognition, esteem or belonging. A need becomes a motive when it is aroused to a sufficient level of intensity. A motive is need that is sufficiently pressing to drive a person to act.

When people act, they learn. Learning involves changes in an individual’s behaviour arising from experience. Most human behaviour is learned. Learning theorists believe that learning produced through the interplay of derives, stimuli, cues, responses and reinforcement. A derive is a strong internal stimulus impelling action. Cues are minor stimuli that determine when, where and how a person responds. Learning theory teaches marketers that they can build up demand for a product by cues and providing positive reinforcement.

Through doing and learning, people acquire beliefs and attitudes. These in turn influence buying behavior. A belief is a descriptive thought that a person holds about something. People’s beliefs about product or brand influence their buying decisions.

Market segmentation

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Market segmentation is the process of diving a market into subsets of consumers with common needs or characteristics.

The bases for segmenting the market can be a) Geographic segmentation b) Demographic segmentation c) Phychographic segmentation and d) Behavioral segmentation.

Marketing - Geographic Segmentation

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Geographic Segmentation calls for diving the market into different geographical units such as nations, states, regions, cities, etc. The company can decide to operate in one or a few graphic areas or operate in all but pay attention to local variations in geographic needs and preferences eg. Bagh Bakri tea brand has 60% market share in state of Gujrat (90% in Ahemdabad).

Marketing - Demographic Segmentation

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Demographic Segmentation consists of diving the market into groups on the basis of demographic variables such as age, sex, family size, family life cycle, income occupation, education, religion, race and nationality demographic variables are the most popular bases for distinguishing customer groups. One reason is that consumer wants preferences and usage rates are often associated with demographic variables. Another is that demographic variables are easier to measure than most other type of variable. Even when the target market is described in non-demographic terms, the link back to demographic characteristics is necessary in order to know the size of the target market and how to reach it efficiently eg. Sex segmentation is applied in clothing, cosmetic and magazines. Income segmentation is used in products like automobile etc.

Marketing - Psychographic Segmentation

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In psychographic segmentation, buyers are divided into different groups on the basis of social class, lifestyle, and /or personality characteristics. People within the same demographic group can exhibit very different psychographic profiles.

Social class has a strong influence on the person’s preference in cars, clothing, home furnishing, reading habits and so on.

Marketing - Behavioral segmentation

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In behavioural segmentations buyers are divided into groups on the basis of occasions benefits, loyalty states, attitude towards products etc.

A powerful form of segmentation is the classification of buyers according to the different they seek from the product. Benefit segmentation calls for identifying the major benefits that people look for in the product class, the kinds of people who look for each benefit and the major brands the deliver each benefit. Benefit segmentation usually implies that a company should focus on satisfying one benefit group. Thus ‘Anchor’ toothpaste offered the benefit of “anticavity protection” which became its unique selling proposition.

Requirement for Effective Segmentation

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To be maximally useful, market segments must exhibit four characteristics:

Measurability:- The degree to which the size and purchasing power of the segments can be measured.
Substantiality :- The degree to which the segments are large and/or profitable enough. A segment should be the largest possible homogeneous group worth going after with tailored marketing programme.
Accessibility :- A degree to which the segment can be effectively reached and served.
Actionability :-The degree to which effective programs can be formulated for attracting and serving the segments.

TARGET MARKETING

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In target marketing, the seller distinguishes the major market segments, targets on or more of these segments and develop products and marketing programs tailored to each selected segment. Target marketing help sellers indentify marketing opportunities better. The sellers can develop the right offer for each target market. They can adjust their prices, distribution channels and advertising to reach the target market effectively.

Target marketing calls for three major steps. The first is market segmentation, the act of dividing the market into distinct of buyers who might require separate products and/or marketing mixes. The second step is market targeting, the act of developing measures of segment attractiveness and selecting one or more market segment to enter. The third step is product positioning, the act of establishing a variable competitive positioning of the firm and its offer in each target market.

Market targeting involves two steps:-

a) Segment Evaluation b) Selection

In evaluating different market segments, the firm must look at three factors namely segment size and growth, segment structural attractiveness and company objective and resources.

i) Segment size and growth :- The first criteria of segment evaluation is whether a potential segment and right growth and size characteristics. The right size is a relative term. Large companies prefer segments with large sales volumes and often overlook or avoid small segments. Small companies in turn avoid large segments because they require too many resources.

Segment growth is a describe characteristics, since companies generally want growing sales and profit.

ii) Segment Structural Attractiveness:- A segment might have desirable size and growth and still not be attractive from a profitability point of view. The company has to appraise the impact on long run profitability of five groups: a) industry competitors b) Potential entrants c) substitute d) buyer e) supplier.

a) Threat of Intense segment Rivalry: A segment is unattractive if it already contains numerous strong or aggressive competitors.

b) Threat of view entrants: A segment is unattractive if it is likely to attract new competitors who will bring in new capacity, substantial resources and a drive for market share growth.

c) Threat of substitute Products: A segment is unattractive if there exist actual or potential substitutes for a product. Substitute place a limit on the potential prices and profits that can be earned in a segment.

d) Threat of growing bargaining power of buyers: A segment is unattractive if the buyers possess strong or increasing bargaining power. Buyers will try to force prices down, demand more quality or services and set competitors against each other, all at the expense of seller profitability.

e) Threat of Growing Bargaining Power of Suppliers: A segment is unattractive if the company’s suppliers raw material and equipment suppliers, bank, trade unions and the like-are able to raise prices or reduce the quality or quality of ordered goods and services.

III) Company Objectives and Resources: The company needs consider its own objectives and resources in relation to a segment under consideration. Some attractive segments could be dismissed because they do not mesh with company’s long-run objectives. They may be tempting segments in themselves, but they do not move the company forward towards its goods. Even if the segment fits the company’s objectives, the company must consider whether it possesses the requisite skills and resources to succeed in that segment. But even if the company possesses the requisite competences, it needs to develop some superior advantages to the competition. It should not enter markets or market segments where it cannot produce some form of superior value.

II. Selecting the Market Segment: a target market consists of a set of buyers sharing common needs or characteristics that the company decides to serve. The company can consider five patterns: a) Single-segment concentration b) Selective specialization c) Market Specialization d) Product Specialization and e) Full Coverage.

a) Single- Segment Concentration:- In the simplest care, the company selects a single segment. Through concentrated marketing, the firm achieves a strong market position in the segment owing to its greater knowledge of the segment’s needs and the special reputation it builds. At the same time, concentrated marketing involves higher than normal risks. The particular market segment can turn sour. Or the competitors may decide to enter the same segment. Foe these reasons, many companies prefer operate in more than one segment.

b) Selective specialization:- Here the firm selects a number of segments, each of which is objectively attractive and matches the firm’s objectives and resources. Each segment promises to be a money maker. This strategy of multi segment coverage has an advantage over single segment coverage of diversifying the firm’s risk. Even if one segment becomes unattractive, the firm can continue to earn money in other segments.

c) Product Specialization:- Here the firm concentrates on making a certain product that it sells to several segments. Through this strategy, the firm builds up a strong reputation in the specific product area.

d) Market Specialization:- Here the firm concentrates on serving many needs of a particular customer group. The firm gains a strong reputation of specializing in serving this customer group and becomes a channel agent for all new products that this customer group could feasibly use.

e) Full Market Coverage:- Here the firm attempts to serve all customer groups with all the products that they might need. Only large firms can undertake a full market coverage strategy. Examples would include coca cola (non-alcoholic be verage) ; IBM (Computer market) etc.

Large Firms can cover a whole market in two broad ways:- namely through undifferentiated marketing or differentiated marketing.

Undifferentiated Marketing:- The firm might ignore market segment differences and go after whole market with one market offer. It desigues a product and a marketing programme that will appeal to the broadest number of buyers. It relies on mass distribution and mass advertising.

Undifferentiated Marketing is depended on the grounds of cost economics. The narrow product line keeps down production, inventory and transportation cost.

Differentiated Marketing:- Here the firm operates is most market segments but designs different programmes for each segment. General motor claims to do this when it says that if produces car for every purse, purpose and personality. However, it also increases the cost of doing business.

Brand POSITIONING

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Positioning is an act of designing the company’s offer so that it occupies a distinct and valued position in the target customer’s mind. Positioning is not what you do to a product, positioning is what you do to the mind of prospect.

Many marketers advocate promoting only one benefit to the target market. A company should develop a unique selling proposition (U.S.P) for each brand & stick to it. Buyers tend to remember “Number one” better than other message, specially in & over communicated society.

Once a brand has occupied a specific position in the mind of the customer, a competitor has only three strategy options:-

Once strategy is to strengthen its own current position in the mind of customers.

The second strategy is to search for a new unoccupied position that is valued by enough customer & to grab it.

The third strategy is to deposition or reposition the competitor.

Tools of product Differentiation.

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Differentiation can be defined as the process of adding a set of meaningful & valued difference to distinguish the companies offering from competitors offerings.

All products can be differentiated to some extend, but not all differences are meaningful or worthwhile. A difference will be stronger to the extend that it satisfy the following criteria:-

Important : The difference delivered a highly valued benefit to a sufficient number of buyers.
Distinctive: The difference delivered in a distinctive way.
Superior: The difference is superior to other ways of obtaining the benefit.
Preemptive: The difference can not be easily copied by the competitors.
Affordable: The buyer can afford to pay for the difference.
Profitable: The company will find it profitable to introduce the difference.

The number of differentiation opportunities varies with the type of industry. There exist four types of industry based on the numbers of available competitive advantages & their sizes.

Volume Industry: One in which company is can gain only a few but large competitive advantages. In the construction equipment industry, a company can strive for a low cost position or highly differentiated position & win big on either basis. Profitability is correlated with the company size & market shares.
Stalemated Industry: One in which there are few potential competitive advantages & each is small. In the steel industry it is hard to differentiate the product or decrease manufacturing costs. Company can try to heir better sales people, entertain more lavishly, and the like, but these are small advantages. Profitability is unrelated to company market share.
Fragmented Industry: One in which companies face many for competitive advantages is small. A restaurant can differentiated in many ways but end upnot gaining a large market share. Both small and large restaurant can be profitable or unprofitable.
Specialized Industry: One in which companies face many differentiation opportunities, and each differentiation can have a high pay off. Among companies making specialized machinery for selected market segments, some small companies can be profitable as some large companies.

Company Differentiation

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A company can differentiated its market. Offering along five dimensions:-

a) Product;

b) Services;

c) Personnel;

d) channel and

e) Image.

Product Differentiation: Here the seller faces an abundance of design parameters, including form, features, performance quality, conformance quality, durability, reliability, style, reparability and design.

Form:- Many product can be differentiated in form the size, shape of physical structure of a product.
Features:- Most products can be offered with varying features that supplement the product’s basic functions. Being the first to introduce valued new features is one of the most effective ways to compete.
Performance Quality: Most products are established one of four performance levels: low, average, high or superior. Performance Quality is the level at which the products primary characteristics operate.
Conformance Quality: Buyers expect products to have a high conformance quality, which is the degree to which all produced units are identical and meet the promised specifications.
Durability: Durability, a measure of the products expected operating life under natural stressful conditions, is a valued attribute for certain products.
Reliability: Reliability is a measure of the probability that a product will not malfunction or fail within specified time period.
Repairability: Repairability is a measure of the ease of repairing a product when it malfunctions or fails.
Style: style describes the product’s look and feel to the buyer. Style has the advantage of creating distinctiveness that is difficult to copy.
Design: As competition intensifies, design offers a potent way to differentiate and position a company’s products and services. Design is the totality of features that effect how a product looks and functions in terms of customer requirements.

Service Differentiation : When the physical product can not easily be differentiated, the key to competitive success may lie in adding valued service and improving their quality. The main service differentiators are ordering ease, delivery installation, customer training, customer consulting and maintenance and repair.

Ordering Ease: Ordering ease refers to how easy it is for the customer to place an order with the company.
Delivery: Delivery refers to how well the product or service is delivered to the customer. It includes speed, accuracy and care attending the delivery process.
Installation: Installation refers to the work done to make a product operational in its planned location. Buyers of heavy equipment expect good installation service. Differentiation at this point in the consumption chain is particularly important for companies with complex products.
Customer Training: Customer training refers to training the customer’s employers to use the vender’s equipment properly and efficiently.
Customer Consulting: Customer consulting refers to data, information systems and advice services that the seller offers to buyers
Maintenance and Repair: Maintenance and repair describes the service programme for helping customers keep purchased products in good working order.

Personal Differentiation: Companies can gain strongly through having better- trained people. Better trained personnel exhibit six characteristics:-

i) Competence: They posses the required skill and knowledge.

ii) Courtesy: They are friendly, respectful and considerate.

iii) Credibility: They are trustworthy.

iv) Reliability: They perform the service consistently and accurately.

v) Responsiveness: They respond quickly to customer’s requests and problems.

vi) Communication: They make an effort to understand the customer and communicate clearly.

Channel Differentiation: Companies can achieve competitive advantage through the way they design their distribution channel’s coverage expertise and performance.

Image Differentiation: Buyers respond differently to company and brand image. Image is the way the public perceives the company or its product.

The process of new product development

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Every company must develop new products. New product development shapes the company’s future. Improved or replacement products must be created to maintain or build sales. Customers want new products and competitors will do their best to supply them. Companies that fail to develop new products are putting themselves at great risk.

New product development requires senior management to define business domains, product categories and specific criteria. Senior management must decide how much to budget for new product development. New product development undergoes eight stages: (i) Idea generation (ii) Idea screening (iii) Concept development and Testing (iv) Marketing strategy development (v) Business analysis (vi) Product development (vii) Market Testing (viii) Commercialisation.

I) Idea Generation: The new product development process starts with the search of ideas. New product ideas can come from interacting with various groups and from using creative generating techniques.

Ideas for new products can come from customers, scientists, competitors, employees, channel members and top management.

Several creative techniques can be used for generating ideas for new products. These techniques include:

Attribute listing: List the attributes of an object and then modify each attribute.
Forced listing: List several ideas and consider each one in relation to each other one.

II) Idea Screening: A company should motivate its employees through rewards to reward to submit their new ideas. Ideas should be written down and reviewed each week by an idea committee. The company then sorts the proposed ideas into three groups: Promising ideas, marginal ideas and rejects. The promising ideas then move into a full scale screening process. The purpose of screening is to drop poor ideas as early as possible. The rational is that product development cost rise substantially with each successive development stage.

III) Attractive Development and Testing: Attractive ideas must be refined into testable product concepts. A product idea is a possible product the company might offer to the market. A product concept is an elaborated version of the idea expressed in meaningful consumer terms. Each concept represents a category concept that defines the product’s competition.

Next, the product concept has to be turned into brand concept.

Concept testing involves presenting the product concept to appropriate target customers and getting their reactions. The concept can be presented physically or symbolically. The more the tested, concept resembles the final product or experience, the more dependable concepting testing is.

IV) Marketing Strategy: Following a successful concept test, the new product manager will develop a primarily marketing strategy plan for introducing the new product into the market. The plan consists of three parts. The first part describes the target market size, structure and behaviour, the planned product positioning : and the sales market share and profit goals sought in the first few years.

The second part outlines the planned price, distribution strategy are marketing budget for the first year.

The third part of the marketing- strategy plan describe the long run sales and profit goals and marketing mix strategy over time.

V) Business Analysis: After management develops the product concept and marketing strategy, it can evaluate the proposal’s business attractiveness. Management needs to prepare sales, cost and profit projections to determine whether they satisfy company objectives.

Total estimated sales are the sum of estimated first time sales, replacement sales and repeat sales. Sales estimation method depends upon whether the product is one-time purchase (such as engagement ring etc), an infrequently purchased product, or a frequently purchased product. For one-time purchased products, sales rise at the beginning, peak and later approach zero as the number of potential buyers is exhausted. Infrequently purchased products such as automobiles, toasters and industrial equipment – exhibit replacement cycles dictated by physical wearing, out or by obsolescence associated with changing styles, features and performance. Sales forecasting for this product category scale seperately.

In case of frequently purchased goods such as consumer and industrial non- durables, the number of first time buyers initially increases and then deceases as fewer buyers are left. Repeat purchases occur soon, providing that the product satisfies some buyers. The sales curve eventually falls t a plateau representing a level of steady repeat-purchase volume, by this time, the product is no longer a new product.

Cost are estimated by the R&D manufacturing, marketing and finance companies use various financial measures to evaluate the merit of a new product proposal. The simplest is break-even-analysis, in which management estimates how many units of the product the company would have to sell to break-even with the given price and cost structure. Or the estimate may be in terms of how many years it will take to break even. If the management believes sales could easily reach the break-even number, it is likely to move the project into product development.

VI) Product Development: at this stage the company will determine whether the product can be translated into a technically and commercially feasible product. The job is to translate customer requirement into a working prototype. When the prototypes are ready, they must be put through rig rows functional tests and customer tests. The product is tested to see how it performs in different applications. Consumer testing can take several forms, from bringing consumers into a laboratory to giving them samples to use in their homes.

VII) Market Testing: After management is satisfied with functional and psychological performance, the product is ready to be dressed up with a brand name and packing, and put into a market test. The new product B introduced into an authentic setting to learn how large the market is and how consumers and dealers react to handling, using and repurchasing the product.

The amount of market testing to influenced by the investment cost and risk on one hand, at the time pressure and research cost on the other. High investment-high risk products, where the changes of failure to high, must be market tested; the cost of market tests will be insignificant percentage of the total project cost, high-risk products-those that create new product categories, or have novel features- warrant more market testing than modified products.

The amount of market testing may be severely reduced if the company is under great time pressure because competitors are about to launch their brands. The company may therefore prefer to face the risk of a product failure to the risk of losing distribution or market penetration on a highly successful product.

VIII) Commercialisation: If the company goes ahead with commercialization, it will face its largest cost to date. The company will have to contract for manufacture or build or rent a full scale manufacturing facility. Plant size will be critical promotion.

The company must decide whether to launch the new product in a single locality, a region, several region, the national market or the international market. The company size is an important factor here. Small companies will select an attractive city to put on a blitz campaign. They will enter other cities one at a time. Large companies will introduce their product into a whole region and then move to a next region. Companies with national market, such as auto companies will launch their new models in the national market. Most companies design new products to sell primarily in the domestic market. If the product does well, the company considers exporting to foreign countries, redesigning if necessary.