Marketing Management – Module-4

27. Identifying market segments, targets.

Levels of market segmentation.

Most companies are turning to micro-

marketing at one of the four levels:
segments, niches, local areas, and
individuals.

Segment marketing.
A market segment consists of a group of
customers who share a similar set of
needs and wants. The marketers task is to
identify such segments, and decide
which one(s) to target.
The key benefits that segment marketing
offers over mass marketing are –
The company can better design, price,
disclose and deliver the product or
service and also can fine-tune the
marketing program and activities to
better reflect competitors’ marketing. But
a segment of this sort, where all are
alike, is a fiction, as not everyone in the
segment wants the same thing. It is
therefore, suggested to have flexible
market offerings to all members of a
segment.
A flexible market offering consists of
two parts: (1) a naked solution
containing the product and service
elements that all segment members
value, and (2) discretionary options that
some segment members value. Each of
the discretionary option will carry an
additional charge.
e.g., Automobile companies in India
offer different versions of the same
model with different features. The base
model may not have air conditioner or
power steering, or power windows.
Domestic airlines in India offer economy
class and business or executive class.
Prices for the two options are
significantly different. The executive or
business-class passengers get extra
facilities – comfortable seats, better
menu for food, and greater preference
while checking in and boarding the
aircraft as well as in luggage clearance.

Niche Marketing.

A niche is a more narrowly defined

customer group seeking a distinctive
mix of benefits. Niche is identified by
dividing segments into sub-segments.
Niche products: EZEE – mild detergent
for woolen and other delicate clothes.
CRACK – ointment from Paras
Chemicals for female segment for
prevention of cracks in the feet.
ITCHGUARD – treating itching
sensation caused by perspiration in
summer.
NEEM ACTIVE tooth paste from
Henkel has survived more than 75 years.
VICCO VAJRADANTI, MESWAK,
BABOOL, have carved out their own
segments.
COLGATE HERBAL – based on neem,
clove, mint and tulsi.
TV Channels: AASTHA and QTV
(Pakistan) – religion and spirituality.
STAR sports, ESPN, Ten Sports, Zee
sports – sports. STAR Cricket – cricket
lovers.

In a Niche, customers have a distinct set

of needs; they pay a premium to the firm
that best satisfies them; the niche is fairly
small but has size, profit and growth
potential and is unlikely to attract many
competitors.

Even some large companies have turned

to Niche marketing: Hallmark personal
expression products can be found in
more than 43000 retail outlets,
accounting for one out of every two
greeting cards sold in the US.

Nichers willingly pay a premium.

Ayurvedic products and “all natural”
products usually command a premium.
Pirulina, an extract of a specific “blue-
green algae” promoted as a natural food
supplement commands a premium.
Himalaya Drug Co.specializes in
ayurvedic products for general health as
well as for specific therapeutic functions.
Local marketing.

Target marketing is leading to marketing

programs tailored to the needs and wants
of local customer groups in trading areas,
neighborhoods, even individual stores.
Many banks in India have specialized
branches for Corporate customers. In
Kerala, there are “NRI branches” to cater
to the needs of families whose relatives
remit money from abroad. There are
local couriers, in many cities in India,
who deliver the mail the same day within
the city. Spiderman-3 dubbed in five
difference local languages including
Bhojpuri, was released, breaking all
records for a foreign movie released in
India.
Local marketing reflects a growing trend
called grassroots marketing. Marketing
activities concentrate on getting as close
and personally relevant to individual
customers as possible.
Those who favor localized marketing,
see national advertising wasteful. Those
against local marketing argue that it
drives up manufacturing and marketing
costs by reducing economy of scale and
magnifying logistical problems.

Individual marketing.

The ultimate level of segmentation leads

to “segments of one”, “customized
marketing” or “one-to-one marketing”.
Customers today are taking more
individual initiative in determining what
and how to buy. They log on to the net;
look up informatioin and evaluations of
product or service offers; conduct
dialogue with suppliers, users, and
product critics; and in many cases design
the product they want.
Customerization combines
operationally driven mass customization
with customized marketing in a way that
empowers consumers to design the
product and service offering of their
choice. The firm provides a platform and
‘tools’ and gives to its customers the
means to design their own products. A
company is customerized when it is able
to respond to individual customers by
customizing its products, services, and
messages on a one-to-one basis.
E.g.Siemens – hearing aid, Dell
computers.
Though customization cannot be applied
for all products, it has worked well for
some.
Paint companies Asian Paints, Nerolac,
Jenson & Nicholson, Berger – facilitate
customers to mix and match colors from
the catalogue, and the desired colors are
mixed and quantities using equipments
installed at retail points.
Arvind Mills lauched Ruff-n-Tuff Jeans,
branded ready-to-stitch jeans. The
product positioned in the economy
segment, offered branded denim at a low
cost with flexibility of customization at
the neighbourhood trained tailor.
Galleria credit card offered by United
Bank Ltd., Pakistan allowed customers
to have the photograph of their choice on
their credit cards making UBL cards
distinct and exclusive.

Bases for segmenting consumer

markets.
The major segmentation variables are:
1. Geographic – Region, city, Rural and
semi-urban areas.
2. Demographic – Age, family size,
gender, income, occupation, education.
3. Psychographic – socio-economic
classification (SEC), lifestyle,
personality.
4. Behavioral – occasions, benefits, user
status, usage rate, loyalty status,
readiness stage,
attitude towards product.

Geographic segmentation.
Geographic segmentation calls for
division of market into different
geographical units such as nations,
states, regions, countries, cities or
neighborhoods. In India, geographic
segmentation assumes importance due to
variations in consumer preferences and
purchase habits across different regions
and across different states.
One of the major geographic
segmentation variables relevant for
marketers is the division of markets into
rural and urban markets. Ref. Rural
marketing M-6-L1.

Demographic segmentation.

Here, we divide the market into groups

on the basis of variables such as age,
family size, family life cycle, gender,
income, occupation, education, religion,
race, generation, nationality and social
class.
Age & Life cycle: Consumer wants and
abilities change with age.
Infants and children: J&J babysoap,
HLL’s pink Pears soap, Magic Pot
magazine for nursery children. ‘No
tears” shampoo children, Clearasil –
pimple cream.
JAM magazine – young adults
TV channels: Aastha Sanskar – older
generation; Cartoon network, Pogo,
Nick, Disney, Hungama TV – children.
MTV and VTV – youngsters.

Lifestage: defines a person’s major

concern, such as getting married,
deciding to buy a home, sending child to
school, taking care of older family
members, marrying off children,
planning for retirement, etc.
When a person gets married and starts
his family, a host of products and
services, such as furniture, kitchen
appliances, cooking gas connection,.
Planning education of children, getting
them married, or planning retirement –
savings-cum-insurance schemes.
Gender: Gender differentiation has been
applied to product categories such as
clothing, hairstyling, cosmetics and
magazines.
Park Avenue, Van Huesen, Allen Solly –
Men’s brand of clothing. ‘Be’ for
women.
Motorcycles target men – Bajaj Wave
and Hero Honda Pleasure for women.
Fair and lovely for women; fair and
handsome for men.
‘Fa’ deo for women, Nivea for men.

Income: Income determines the ability of

consumers to participate in the market
exchange and hence this is a basic
segmentation variable. (Ref.M-6, L-1)
Nirma – priced low, targeted at middle
income group.
Detergents, shampoo, hair oil marketed
in villages in “sachet marketing” or small
packs.

Generation: Each generation is

influenced by the times in which it grows
up – music, movies, politics and defining
events of that period. Members share the
same cultural, political, and economic
experiences and have similar outlooks
and values. Younger generations play
significant roles, not only as consumers
but also as initiators and influencers of
buying decisions.

Social class:
In India, the concept of social class is
influenced by the caste system. The caste
system even transcends to the income
level resulting in complicating the
segmentation schemes.
This gave rise the SEC – “socio-
economic classification” Senior level
executives with higher educatioinal
qualifications exhibit different purchase
preferences compared to persons with
similar income level but a different
occupation, and lower education level.

Psychographic segmentation:

In psychographic segmentation, buyers

are divided into different groups on the
basis of psychological/personality traits,
lifestyle, or values. Values and lifestyles
significantly affect product and brand
choices. Religion has a significant
influence on values and lifestyles. The
strict norms that consumers follow with
respect to food habits or even dress
codes are representative examples in this
regard. A significant number of
consumers in India are vegetarians.
Some of non-vegetarians avoid beef.
Beef is excluded in McDonal’s menu;
vegetarian burger is served.
Time starved segments are offered
instant noodles, ready-to-eat, fast to cook
food brands, such as Maggi, Top Ramen,
MTR, Aashirvad.

Behavioral Segmentation.

Many marketers believe behavioral

variables – occasions, benefits, user
status, usage rate, buyer-readiness stage,
loyalty status and attitude.
Occasions: Archie’s greeting cards for
different occasions – birthdays,
weddings, Id, Diwali, Raksha Bandhan.
Amul chocolates – ‘gift for someone you
love’.
A number of products – chocolates
(Cadbury’s), Snacks/sweets (Lay’s
Haldiram’s, Kurkure) offer special gift
packs. Biscuits as accompaniments with
tea and coffee.
Monaco with suggestions for toppings to
be served to guests.

Benefits : Products are targeted at people

who seek benefits.
Shampoo – cleaning of hair,
conditioning, dandruff,
Lyril – “freshness”, Cinthol – ‘body
odour’, Dettol ‘total protection’ Lifebuoy
‘Health’.

User status:Mothers to be, are potential

users who will turn into heavy users.
Producers of infant products and services
learn their names and shower them with
products and ads to capture a share of
their future purchases.

Usage rate: Markets can be segmented to

light, medium and heavy users. In mobile
phone market, heavy users account for a
significant portion of revenue. Cell
phone service providers offer low tariffs
at the entry level to attract them to the
service. A potential problem is that heavy
users are extremely loyal to one brand or
never loyal to any brand and always
looking to lowest prices. They also may
have less room to expand their purchase
and consumption.

Buyer-readiness stage: Some people are

unaware of the product, some are aware,
some are informed, some are interested,
some desire, and some intend to buy. The
relative numbers pf consumers at
different stages make a difference in
designing the marketing program.

Loyalty status: Four groups:

1.Hard-core loyals – consumers who
buy only one brand all the time.
2.Split loyals – consumers who are
loyal to two or three brands.
3.Shifting loyals – consumers who shift
loyalty from one brand to another.
4.Switchers – consumers who show no
loyalty to any brand.

Hard-core loyals can help identify the

product’s strengths; split-loyals can show
which brands are most competitive with
its own. Company can know about its
marketing weakness from the switchers.
In Industries such as retailing, hospitality
and airlines, companies offer loyalty
programs like award, or mileage points,
discount coupons and gifts to retain the
loyalty of customers. Loyalty programs
tend to reduce customer switching.

Market Targeting.
Once 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. To
be useful, market segments must rate
favourably on five key criteria:

 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.
 Differentiable: The segments are
conceptually distinguishable and
respond differently to different
marketing-mix elements and
programs. If married and unmarried
women respond similarly to a sale on
perfume, they do not constitute
separate segments.
 Actionable. Effective programs can
be formulated for attracting and
serving he segments.
A firm must evaluate the various
segments and decide how many and
which ones to target: a single segment,
several segments, a specific product, a
specific market, or the full market. If it
serves the full market, it must choose
between differentiated and
undifferentiated marketing. Firms must
also monitor segment relationships and
seek economies of scope and the
potential for marketing to super
segments.
Marketers must develop segment-by-
segment invasion plans and choose target
markets in a socially responsible manner
at all times.

“Brand is a name, term, sign, symbol, or

design or a combination of them,
indented to identify the goods or services
of one seller or a group of sellers and to
differentiate them from those of
competitors”.
The differences may be functional
rational or tangible- related to product
performance of the brand. They may also
be more symbolic, emotional, or
intangible- related to what the brand
represents.
Brand is a perpetual entity rooted in
reality but reflecting the perceptions and
idiosyncrasies of consumers.

Branding is endowing products and

services with the power of a brand.
Branding creates mental structures that
help consumers organize their
knowledge about products and services
in a way that clarifies their decision
making and, in the process, provides
value to the firm.
Marketers can apply branding virtually
anywhere a consumer has a choice. It is
possible to brand a physical good (Maggi
noodles, Lux soap, Tata Indica
automobile), a service ICICI Bank, Jet
Airways, Blue Dart courier service) a
store (Big Bazaar, Pantaloon, Shoppers’
Stop, a person (Aamir Khan, Tendulkar,
Karishma Kapoor), a place (the state of
Goa, the city of Bangalore, or the
country of India), an organization
(UNICEF, Automobile Associations of
India), or an idea (family planning, blood
donation, freedom of speech).
Role of Branding:
1. Brand is a massive asset – all
physical assets can be duplicated very
easily; it is almost impossible to
duplicate a brand name.
2.Brand is a promotional tool – Sales
promotion is founded on the idea of
product identification or product
differentiation , which is
accomplished by a brand. We cannot
effectively advertise without a brand
name; the work of a salesman will be
a failure without a brand name.
3. Brand is a weapon to protect market
and is a means of identification –
once a consumer has tried and liked
the product, the brand enables him to
identify it and buy again.
4.Brand is antidote for middlemen’s
survival – The class of middlemen
always go for successful brands
representing products tried, tested
and liked by consumers. Brand names
can be so strong and penetrating that
the very survival of middlemen rests
 on their ability to sell a powerfully
branded product.
Characteristics of a good Brand
Name:

1.It must be easy to pronounce and

remember. “HOECHST” is difficult
to pronounce.
2.It should be short and sweet. Bata,
Tata, Panama.
3.It should point out the producer:
NELCO, AMUL, MICO, INDAL.
4.It should be legally protectable:
Trade mark must be registered.
5.It should be original: It must not be
general but specific and not easily
copiable.
6.It should reflect product dimensions:
It should indicate dimensions such as
product benefit, function, results and
so on. EZEE, GOOD-NIGHT.
Merits of Branding:
Merits to Manufacturers:
1. Products get individuality. “Colgate

is Colgate”, “Promise is Promise”

where customers are divided and the
producers have their own market
share.
2.Control of Product prices: Each pack
or wrapper contains MRP and so the
middlemen cannot alter the selling
price.
3.Increase in bargaining power: Good
brand gives greater bargaining power
to the manufacturers with the dealers
as it is easier to sell and the
middlemen would like to sell
established branded products rather
than unbranded ones.
4. It reduces the advertising costs: Once

the brand is established, it does not

 require frequent advertising, but only
reminder ads.
5.Ever increasing demand: Powerful
brands have the capacity to create,
maintain and extend the demand for a
product. Once the brand is built, and
is in sight and mind, it leads to word
of mouth advertising, leading to
increased demand.
6.Introduction of new product is made
easy: A company whose products are
well established, has created such
strong trust in the company, that their
new products will be easily accepted
by the same consumers.
7. It is a powerful weapon for product

differentiation: Product
differentiation combats keen
competition by positioning and
repositioning the product. E.g., Coca-
cola and Pepsi war ; “Kuch bhi ho jai,
 Coca cola enjoy”, Pepsi “Dil mange
more”, Pepsi, “Le Chil, Le Chil”
Coca Cola “Thunda matlab coca
cola”.

Merits to wholesalers and retailers:

1.Quicker sales: Unbranded goods are
slow moving, while branded products
move faster, giving them better
profitability because of quicker
turnround. Thus profitability of
retailers and wholesalers increase.
2.Advertising and display of products is
rendered easier: An established brand
has better brand recall and it get sold
easily by display advertising both
window and counter and POP displays.
3. Increases market share and control

over market: Because of brand value,

each supply chain increases its share in
 the total market sales and have an edge
over competition.
4. Introduction of new products is

rendered easier. Retailers will have no

hesitation to recommend a new product
introduced as a brand extension of an
established brand, to customers.
5.Branded products have more stable
prices: When price differentials are
marginal, consumers go by quality and
if a brand and its quality are
recognized by consumers, competition
cannot take away its share by price
difference alone.
6.Economical way of doing business:
When wholesales and retailers decide
to trade on the established brands of
manufacturers, they need not create a
new brand.

Merits to consumers:
1.Brand stands for quality.
2. Consumer protection against

cheating. Manufacturers print, the

MRP, expiry date on the branded
packs. Thus consumers cannot be
overcharged, and they can avoid
buying stale goods.
3.Branded products reflect their
lifestyle. Branded products speak of
the personality of the product.
Consumers can go in for such
products as reflects their lifestyle.
4.Steady and regular supply of
products: There is a steady supply of
branded products in the supply chain
which is well organized. So the
customer is able to get his brands
regularly and in time.
5.Prevalence of stable prices: Prices of
branded products stabilise over a
period of time and the MRP ensures
 that consumers are not overcharged
by intermediaries.
Unlike branded products, unbranded
ones have no such control.

Brand Equity:

David Aaker defines brand equity as the

unique set of brand assets and liabilities
that is linked to a brand. Brand equity is
the net result of all the investments and
effort that a marketer puts into building a
brand.
Usership of the brand, consumer loyalty
towards it, its perceived quality, positive
symbols and favourable associations
around the brand…….a bundle of all
these attributes together result in brand
equity. By continuously monitoring all
these aspects, the marketer converts what
really is a product into a brand. And that
is how brand equity is built up. Simply
put, brand equity is the value or worth of
the brand.

According to the model – BAV(Brand

Asset Valuator) developed by Young and
Republicam (Y&R) Advertising Agency,
based on a survey of 500,000 consumers
in 44 countries, there are five
components of Brand Equity:

 Differentiation – measures the degree

to which a brand is seen as different
from others.
 Energy – measures the brand’s sense
of momentum.
 Relevance – measures the breadth of
a brand’s appeal.
 Esteem – measures how well the
brand is regarded and respected.
  Knowledge – measures how familiar
and intimate consumers are with the
brand.

Differentiation, Energy, and Relevance

combine to determine Energised Brand
Sgtrength
These three pillars point to the brand’s
future value. Esteem and Knowledge
together create Brand Stature, which is
more of a “report card” on past
performance.

28. Creating brand equity & brand

strategy

29. Brand positioning

Product Differentiation:
There are two basic routes to marketing
strategy – the price route and the
differentiation (non-price) route.
Differentiation allows the firm to fight
on a non-price plank, with all benefits
associated with it. Through
differentiation, firms move to a position
where they can claim a premium in the
market.
Differentiation can be achieved in many
ways.
Modi Xerox – collaboration with Rank
Xerox.
Garden Silks – design. L&T – highly
qualified engineers – superiority in
execution.
DuPont’s – chemical technology.
Caterpillar Tractor – distribution
channels.
Eureka Forbes – Personal selling.
Maximum scope for differentiation
remains with the product. While other
marketing mix Ps go as elaborations of
the offer, the product forms its core.
Product differentiation has two major
planks : 1. Tangible product attributes &
functions (2) Intangible characteristics
and emotional associations.
Differentiation through Tangible
product attributes
Close-up with Gel – Colgate compelled
to copy this differentiation.
TTK Prestige with Teflon coating.
Promise toothpaste with clove oil.
Vatika with herbal ingredients –
cocoanut oil, brahmi, lime, mehandi.
New Ariel with carezyme (Microshine).

3M scotch magic tape – functional value

- long lasting, invisible, no yellowing,
can be written on.
Videocon computer controlled fridge.
Standard Furukawa Calci charge
batteries.
Paints with insecticide – Vinicide
launched by Indecor Paints.
Roti Chef – Roti maker.
Dunlop’s Olympus tyres – special tyres
for each car.

Through packaging:
Frooti – tetrapack
Brylcream – handy tube.
Harpic – Baygon spray - application
friendly nozzle.

Product design :
Kinetic Honda scooter – electronic
ignition – easy starting. Differentiation to
‘kick-start’
Tatan watches –Classic in gold case and
leather. Rayale – all gold and precious
metals. Aurum range in 18 carat gold
studded with gems.
Microsoft and Ford – through service.
FexEx, DHL, Blue Dart – speed.

Diffrerentiation through intangible

characteristics & emotional
associations

Dinesh suitings – ‘prestige’ “Dinesh

suitings..the world in your stride’.
Reid & Taylor : the legend of a cloth,
James Bond the legend of a man.
Luxury suitings – ‘bond with the best.’

Ray Ban glasses – aesthetics ‘RayBan

for exhilaration’.

The major task involved in

differentiating a product is to identify
certain product attributes that can attract
buyers. The attributes may be tangible
and real or intangible and psychological.
It may be centering on the product
quality and characteristics or image,
prestige dimension. The success depends
on the way it is built in and
communicated. The name of the game is
to make the product distinct. For this it is
necessary to understand the distinct
attributes of competitors’ products. It
also requires a thorough appreciation of
the expectations of the buyers and their
motives in respect of the product.

For differentiation to succeed, it should

be perceptible; should be rooted in
competitive advantage.

Product Positioning.
Positioning is the act of designing the
company’s offering and image to occupy
a distinctive place in the minds of the
target market. The goal is to locate the
brand in the minds of consumers to
maximize the potential benefit to the
firm. A good brand positioning helps
guide marketing strategy by clarifying
the brand’s essence; what goals it helps
the consumer achieve, and how it does so
in a unique way. The result of
positioning is the successful creation of a
customer-focused value proposition, a
cogent reason why the target market
should buy the product.

Brand, Target Benefits Value

Produc Custome Propositi
t and rs on
Compa
ny
Scorpio Lifestyle- Ruggedne A vehicle
, SUV, oriented ss, luxury, that
M&M customers and provides
comfort the
luxury
and
comfort
of a car,
and the
adventur
e and
thrill of a
SUV
Indica, Small-car Spaciousn A
Car, consumer ess spacious,
Tata s who small car
Motors want a without
more extra
spacious costs
vehicle
Domin Convenie Delivery, A good,
o’s nce speed hot pizza
Pizza minded and good delivered
 Pizza quality to your
lovers door
within 30
minutes
of
ordering

Positioning is the act of designing the

company’s image and value offer so
that the segment’s customers
understand and appreciate what the
company stands for in relation to its
competitors. -Prof.
Philip Kotler.

‘The aim of product positioning is to

create a perception for our brand in
the prospect’s mind so that it stands
apart from competing brands…We
must cover the space in the
consumer’s mind as if we had won a
long-term lease. We must find a strong
position in that mind and sit on it…..’
– Sengupta.

Brand Positioning requires that

similarities and differences between
brands be defined and communicated.
Specifically, deciding on a positioning
requires determining a frame of
reference by identifying the target market
and the competition and identifying the
ideal points-of-parity and points-of-
difference in brand associations.

Points of difference (POD) are

attributes or benefits consumers strongly
associate with a brand, positively
evaluate, and believe they could not find
to the same extent with a competitive
brand. Associations that make up points-
of-difference may be based on any type
of attribute or benefit – say, design,
performance or quality.

Points of Parity (POP), on the other

hand, are associations that are not
necessarily unique to the brand but may
in fact be shared with other brands.
These are of two basic forms : category
POP, and competitive POP.
Category POP are associations
consumers view as essential to a
legitimate and credible offering within a
certain product or service category. They
represent necessary –but not sufficient-
conditions for brand choice. Consumers
might not consider a travel agency truly
a travel agency unless it is able to make
air and hotel reservations, provide advice
about leisure packages, and offer various
ticket payment and delivery options.
Competitive POP are associations
designed to negate competitors’ points-of
difference. If, in the eyes of the
consumers, a brand can ‘break-even’ in
those areas where the cojmpetitors are
trying to find an advantage and achieve
advantages in other areas, the brand
should be in a strong-and perhaps
unbeatable-competitive position.

POP vs POD;
For an offering to achieve a point-of-
parity on a particular attribute or benefit,
a sufficient number of consumers must
believe the brand is “good enough” on
that dimension. There is a zone of
tolerance or acceptance with POP. The
brand does not literally need be seen as
equal to competitors, but consumers
must feel that the brand does well
enough on that particular attribute or
benefit. If so, they may be willing to base
their evaluations and decisions on oher
factors potentially more favorable to the
brand.
With points-of-difference, however, the
brand must demonstrate clear superiority.
Consumers must be convinced that Louis
Vuitton has the most stylish handbags;
Energiser is the longest-lasting battery;
Merrill Lynch offers the best financial
advice and planning.
The key to positioning is not so much
achieving a POD as achieving POP.

32. PLC marketing strategies

PRODUCT LIFE CYCLE:

A product passes through certain distinct

stages during its life, and this is called
the Product Life Cycle. The PLC is
normally presented as a sales curve
spanning the product’s course from
introduction to exit.

Four distinct stages in PLC:

A typical product passes through four

distinct stages during the course of its
life as shown below:

• Market pioneering stage

(Introduction)
• Market growth stage
• Market maturity stage
• Market decline stage

Market Pioneering Stage.

Now the product is in its introductory

stage. At this stage, there may not be a
ready market for the product. Sales are
low; the product undergoes teething
troubles; profits seem a remote
possibility; demand has to be created and
developed; and customers have to be
prompted to try out the product.
This stage poses several problems for the
marketer. The complexity of the problem
and the duration of the stage depend
upon the nature of the product, its price,
its technological newness and the
consumer’s view of the product.

One of the crucial decisions to be taken

at this stage is the pricing decision. Since
the product is new, no past data or
comparisons are available. The firm opts
for one of the following pricing
strategies: (1) market skimming (2)
market penetration.
The skimming strategy involves high
prices, taking advantage of early entry
and the relative novelty of the product in
the pioneering stage.
Penetration pricing involves low pricing,
with a view to having good market
coverage and eventually a mass market
for the product. This strategy also aims at
keeping the competitors out.
The kind of pricing strategy to be
adopted will depend on the
characteristics of the product, market
characteristics and the firm’s objectives.
Another crucial area demanding attention
at this stage is market development and
promotion. This is the stage when
demand has to be created and developed.
The firm has to invest heavily on
promotion and wait for the reward.
Market Growth Stage.
During the market growth stage, demand
for the product increases and the size of
the market grows. The pioneer’s sales
and profits go up. By the time the
pioneer thinks of settling down with the
product, competitors may enter the scene
with similar or improved versions. The
pioneer may then have to alter his
strategies. He has to stay ahead of
competitors and persuade the customer
to prefer his brand. He cannot dictate the
price to the customer. He cannot dictate
the terms to the channel members. If he
had adopted the price skimming strategy
at the pioneering stage, this is the time to
reconsider his pricing strategy. He is
forced to follow competition-oriented
pricing, because the total market is now
being shared among many firms, though
he may still remain the market leader.
Marketing and distribution efficiency
become decisive factors at this stage.
During the growth stage, the firm uses
several strategies to sustain rapid market
growth:
• It improves product quality and adds
new product features and improved
styling.
• It adds new models and flanker
products i.e. products of different
sizes, flavors and so forth that protect
the main product.
• It enters new market segments.
• It increases its distribution coverage
and enters new distribution channels.
• It shifts from product-awareness
advertising to product-preference
advertising.
 • It lowers prices to attract the next
layer of price-sensitive buyers.

Market maturity stage.

In the market maturity stage, demand
tends to reach a saturation point. There is
enough supply from several competing
sources. Dealers may dictate terms to the
various competing firms. Price
competition becomes intense and the
pioneer tries to distinguish his brand by
subtle product differentiation and
exploits the brand loyalty he has built up.
The pioneer feels compelled to
communicate directly with the
consumers, since, by now, dealers have
become multi-brand dealers. The pioneer
may try product and packaging
modifications, and promotional deals and
make special offers to new market
segments so that his sales volume does
not shrink.
Long-term and short-term marketing
plans are implemented to possibly
prolong the maturity stage; if this is not
done, it could easily lead to the stage of
decline. Relatively low prices, increased
marketing costs, keener competition and
lesser profits characterize this stage.
Some companies abandon weaker
products to concentrate on more-
profitable and new products. Faced with
situation of declining demand for
scooters, Bajaj, one of the largest
manufacturers of scooters in the world,
focused on motorcycles.
Three potential ways to change the
course for a brand are market
modification, product modification and
marketing program modification.
Market modification: A company might
try to expand the market for its mature
brand by working with the two factors
that make up sales volume: Volume =
number of brand users x usage rate per
user.
Expand number of brand users: Convert
non-users; enter new market segments;
attract competitors’ customers.
Increase the usage rates among users:
Have consumers use the product on more
occasions; have consumers use more of
the product on each occasion; have
consumers use the product in new ways.
Product modification: Managers try to
stimulate sales through quality
improvement, feature improvement, or
style improvement.
Marketing Program modification:
Product managers might also try to
stimulate sales by modifying marketing
program elements such as Prices,
Distribution, Advertising, Sales
promotion, Personal selling, Services.
Market decline stage.
In the decline stage, sales begin to fall.
The demand for the product shrinks
probably due to new and functionally
advanced products becoming available in
the market, or the market becoming
apathetic to the product. In any case,
prices and margins get depressed, total
sales and profits diminish. Some firms
try to link up the sale of these products
with some other premium products they
have developed and thus try to stretch
the life of the declining product. Firms
do perceive the impending total decline
and prepare for the gradual phasing out
of the product. Successful firms quite
often keep new products ready in queue
to fill the vacuum created by the decline
of existing products.
The knowledge that a product will pass
through such a cycle is helpful in
evolving proper product policies and
promotion and pricing strategies. A
marketer can also try to foresee the
pattern of life of the proposed product
and plant product, pricing and promotion
strategies, so as to shape the life cycle of
the product to suit his objectives and
requirements.
When firms leave the declining market
earlier than others, it is tempting for the
remaining firms to stay and attract the
withdrawing firms’ customers. A
company that is in an unattractive
industry but possesses competitive
strength should consider shrinking
selectively. A company that is in an
attractive industry but has competitive
strength should consider strengthening
its investment. Companies that
successfully restage or rejuvenate a
mature product often do so by adding
value to the original offering.
Strategies for withdrawing can be
harvesting or divesting. Harvesting calls
for gradually reducing a product or
business’s costs while trying to maintain
sales. The first step is to cut R&D costs
and plant and equipment investment. The
company might also reduce product
quality, sales force size, marginal
services, and advertising expenditure. It
would try to cut these costs without
letting customers, competitors and
employees know what is happening.
Harvesting can increase cash flow
substantially.
When the company decides to drop a
product: if the product has strong
distribution and residual goodwill, the
company can sell it to another firm. If
the company can’t find buyers, it must
decide whether to liquidate the brand
quickly or slowly and how much
inventory and service to maintain.

33. Pricing strategies and programs

34. Managing marketing channels
&Competitors.