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Chapters Contents Pages

1 Marketing Environment and Environment Scanning 3-13

2 Marketing Information System and Marketing 1-8

Research

3 Consumer Behaviour 1-10

4 Industrial Buying Behaviour 1-11

5 Demand Measurement and Forecasting 1-5

6 Marketing Segmentation 1-11

7 Product Decisions 1-10

8 Product Life-Cycle Marketing Strategies and 1-11

Product Development

9 Branding and Packaging 1-6

10 Pricing 1-7

11 Marketing Channels and Distribution 1-13

12 Marketing Communications & Promotions 1-5

13 Internet Marketing 1-3

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 CHAPTER 1

MARKETING ENVIRONMENT AND ENVIRONMENT

SCANNING
MARKETING INTRODUCTION
Marketing is about identifying and meeting human and social needs. One of the
shortest good definitions of marketing is meeting needs profitably. The American
Marketing Association offers the following formal definition: Marketing is the activity, set of
institutions, and process for creating, communicating, delivering, and exchanging offerings
that have value for customers, clients, partners, and society at large. Coping with these
exchange processes calls for a considerable amount of work and skill. Marketing
management takes place when at least one party to a potential exchange thinks about the
means of achieving desired responses from other parties. Thus we see marketing management
as the art and science of choosing target markets and getting, keeping, and growing customers
through creating, delivering, and communicating superior customer value.
Peter Drucker, defines There will always, one can assume, be need forsome selling.
But the aim of marketing is to make selling superfluous. The aim of marketing is to know and
understand the customer in a customer who is ready to buy. All that should be needed then is
to make the product or service available.

Marketing Scope
Marketers market 10 main types of entities: goods, services, events, experiences,
persons, places, properties, organizations, information, and ideas.
1. Goods: Physical goods constitute the bulk of most countries production and marketing
efforts.
2. Services: AAs economies advance, a growing proportion of their activities focuses on the
production of services. Services include the work of airlines, hotels, car rental firms, etc.
3. Events: Marketers promote time-based events, such as major trade shows, artistic
performances, and company anniversaries.
4. Experiences: By orchestrating several services and goods, a firm can create, stage, and
market experiences.
5. Persons: Artists, musicians, CEOs, physicians, high-profile lawyers and financiers, and
other professionals all get help from celebrity marketers.
6. Places: Cities, states, regions and whole nations compete to attract tourists, residents,
factories, and company headquarters.
7. Properties: Properties are intangible rights of ownership to either real property (real
estate) of financial property (stock and bonds). The are bought and sold, and these
exchanges require marketing.
8. Organizations: Organizations work to build a strong, favorable, and unique image in the
minds of their target publics.
9. Information: The production, packaging, and distribution of information are major
industries. Information is essentially what books, schools, and universities produce,
market, and distribute at a price to parents, students, communities.

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10. Ideas: Evert market offering includes a basic idea. Products and services are platforms
for delivering some idea or benefit.

PARTIES TO MARKETING
Marketers and Prospects
A marketer is someone who seeks a response-attention, a purchase, a vote, a
donation-from another party, called the prospect.
Marketers are skilled at stimulating demand for their products, but thats
limited view of what they do. The seek to influence the level, timing and composition
of demand to meet the organizations objectives. Eight demand states are possible.
1. Negative demand- Consumers dislike the product and may even pay to avoid it.
2. Nonexistent demand- Consumers may be unaware of or uninterested in the product.
3. Latent demand- Consumers may share a strong need that cannot be satisfied by an
existing product.
4. Declining demand- Consumers begin to buy the product less frequently or not at all.
5. Irregular demand- Consumer purchase vary on a seasonal, monthly, weekly, daily, or
even hourly basis.
6. Full demand- Consumers are adequately buying all products put into the marketplace.
7. Overfull demand- More consumers would like to buy the product than can be satisfied.
8. Unwholesome demand- Consumers may be attracted to products that have undesirable
social consequences.

Markets
The word Market is derived from the Latin word Marcatus meaning a place
where business is conducted. The different definitions of market are as follows:
Marketing includes both place and region in which buyers and sellers are in the
competition with one another.-Pyle.
Market, for most commodities, may be thought of not as a geographical meeting
place but as getting together of buyers and sellers in person, by mail, telephone, telegraph
or any other means of communications.-Mitchell.

Marketplaces, Marketspaces, and Metamarkets

The marketplace is physical, such as a store you shop in; the marketspace is
digital, as when you shop on the Internet. Northwestern Universitys Mohan Sawhney has
proposed the concept of a metamarket to describe a cluster of complementary products
and services closely related in the minds of consumers, but spread across a diverse set of
industries.
Metamarkets are the result of marketers packaging a system that simplifies
carrying out these related product/service activities.

THE EVOLUTION OF EARLIER MARKETING IDEAS

The Production Concept

The production concept is one of the oldest concepts in business. It holds that
consumers prefer products that are widely available and inexpensive. Managers of

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production-oriented business concentrate on achieving high production efficiency, low
costs and mass distribution. Marketers also use the production concept when they want to
expand the market.

The Product Concept

The product concept proposes that consumers favor products offering the most
quality, performance, or innovative features. A new or improved product will not
necessarily be successful unless its priced, distributed, advertised, and sold properly.

The product concept leads to the kind of marketing myopia. This concept was
given by Theodore Levitt.

According to this concept manufacturer often make the mistake of paying more
attention to their physical products than to the services produced by those products. They
see themselves as selling a product rather than providing a solution to a need. A carpenter
isn't buying a drill; he is buying a hole. A physical object is a means of packaging a
service. The marketer's job is to sell the benefits or services built into physical products
rather than just describe their physical features. Sellers who concentrate their thinking on
the physical product instead of the customer's need are said to suffer from marketing
myopia.

The Selling Concept

The selling concept holds that consumers and business, if left alone, wont buy
enough of the organizations products. It is practiced most aggressively with unsought
goods-goods buyers dont normally think of buying such as insurance and cemetery plots-
and when firms with overcapacity aim to sell what they make, rather than make whatthe
market wants. Marketing based on hard selling is risky. It assumes customers coaxed into
buying a product not only wont return or badmouth it or complain to consumer
organizations but might even buy it again.

The Marketing Concept

The marketing concept emerged in the mid-1950s as a customer-centered, sense
and-respond philosophy. The job is to find not the right customers for your products, but
the right products for your customers. The marketing concept holds that the key to
achieving organizational goals is being more effective than competitors in creating,
delivering, and communicating superior customer value to your target markets.

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 CHAPTER 2

MARKETING INFORMATION SYSTEM AND MARKETING RESEARCH

Introduction:
The marketing environment is changing at an accelerating rate, so the need for real
time market information is greater than at any time in the past. The shifts are dramatic: from
local to national to global marketing, from buyer needs to buyer wants, from price to non
price competition. As companies expand their geographical market coverage, their managers
need more information more quickly. As incomes improve, buyers become more selective in
their choices of goods. To predict buyers responses to different features, styles, and other
attributes, sellers must turn to marketing research. As sellers increase their use of branding,
product differentiation, advertising, and sales promotion, they require information on the
effectiveness of these marketing tools.

The expanded information requirements have given rise to impressive new

information technologies: computers, cable television, copy machines, fax machines,
scanners, audio and video recorders, videodisc players, CD-ROMs, camcorders, cellular
phones, and most impressive of all, the Internet.

Marketing Information System:

Some firms have developed marketing information systems that provide management
with rapid and incredible detail about buyer wants, preferences, and behaviour.

Every firm must organise and distribute a continuous flow of information to its
marketing managers. Companies study their managers information needs and design
marketing information systems (MIS) to meet these needs. A marketing information
system (MIS) consists of people, equipment, and procedures to gather, sort, analyse,
evaluate, and distribute needed, timely, and accurate information to marketing decision
makers.
The companys marketing information system should represent a cross between what
managers think they need, what managers really need, and what is economically feasible.
An internal MIS committee can interview a cross-section of marketing managers to discover
their information needs. The following are also a part of MIS.
(a) Order generation, processing, delivery, and payment cycle.
(b) Sales management information, giving details on a firms sales, market share,
profitability, and trends in each market.
(c) Payment history
(d) Orders lost / won
(e) Brand monitors
(f) Distribution / audit reports
(g) Service monitor reports
(h) Product performance reports

Internal Records System

Marketing managers rely on internal reports on orders, sales, prices, costs inventory
levels, receivables, payables, and so on. By analysing this information, they can spot
important opportunities and problems.

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(1) The Order-to-Payment Cycle:
The heart of the internal records system is the order-to-payment cycle. Sales
representatives, dealers, and customers dispatch orders to the firm. The sales
department prepares invoices and transmits copies to various departments. Out-of-
stock items are back ordered. Shipped items are accompanied by shipping and billing
document that are sent to various departments.

(2) Sales Information Systems:

Marketing managers need timely and accurate reports on current sales. This enables it
to transmit generally orders to suppliers for new shipments of replacement stock.
Companies must carefully interpret the sales data so as not to get the wrong signals.

(3) Data Bases, Data Warehouses, Data Mining:

Data Bases:
Today companies organise their information in data bases customer databases,
product data bases, salesperson databases, and so forth and then combine data from
the different data bases.
Data Warehouses:
Data Warehouse is an IT architecture, aimed at storing and organising information in
a
meaningful manner. Typically, a data warehouse system consists of a set of
programmes, that extract data from the operational environment like reports on sales
call, branch and regional performance, product / brand performance / customer
complaints, service calls, and so on. The strategy of data warehousing involves
providing data to the users in a meaningful manner, thereby helping them in taking
operational and strategic decisions. Typically, successful data warehousing involves
the following:

(a) Providing Information to both the operational and strategic decision maker:
To the marketing chief, who takes strategic decisions, the data warehouse should
be able to provide data on brand movement, intensity of competition in served
markets, and shifts in customer preferences. On the strength of this information,
the marketing chief would be able to take decisions relating to brand
repositioning, market penetration strategy, or strategies to enhance customer
loyalty. It is important, that data warehouse architecture should be able to
separate operational and decision support functionality.
(b) Data Warehouse often supports analysis of trends over a period of time and
comparisons of current and historical data:

Data Mining:
The term data mining is just one of several terms, including knowledge extraction,
data archaeology, information harvesting, sift ware, and even data dredging, that
actually describe the concept of knowledge discovery in databases.
The idea behind data mining, then, is the nontrivial process of identifying valid,
novel, potentially useful, and ultimately understandable patterns in data. On the
other hand, it automates the detection of relevant patterns in a database.
Marketing researchers and statisticians have mind data looking for statistically
significant patterns. Data mining tools today are both well established, statistical and
computing techniques, both of which help to build customer response models. Data

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 mining and CRM allow users to analyse large databases to solve business decision
problems.

Marketing Intelligence System:

Whereas the internal records system supplies results data, the marketing intelligence
system supplies happenings data. A marketing intelligence system is a set of procedures
and sources used by managers to obtain everyday information about developments in the
marketing environment. Marketing managers collect marketing intelligence by reading
books, newspapers, and trade publications; talking to customers, suppliers, and distributors;
and meeting with other company managers. A company can take several steps to improve the
quality of its marketing intelligence.

Marketing is a war that requires continuous surveillance of markets (customers),

competition, and other structural components like government policy. Based on this
continuous surveillance, successful enterprises evolve their tactics to win smaller battles
which help it win the war of market shares. The entire concept of market intelligence is
similar to military sciences, where it is a known fact that no army can win a war without
good, effective, and timely information on enemy forces and the terrain on which the war is
going to be fought.

Components of Intelligence System:

In marketing, the intelligence system has two components:
Customer intelligence
Competitor intelligence

Customer Intelligence:
This provides useful information on a customers business, preferences or loyalties,
personal demographic details, and also whims and fancies. A good intelligence system will
even tell a marketer what to do and not to do when, he or she, is with the customer. Like,
what words to use and which ones to avoid, the proper dress code, habits or tendencies to
watch out for, and so on. This information becomes useful in planning sales calls on
customers. It is also useful in evolving advertising and promotion programmes. Most often,
this data is collected by sales people either as a separate stand-alone exercise or as a part of
their regular sales calls.
Competitor Intelligence:
This gives information on strengths and weaknesses of each competitor in the
territory, the strategy and tactics being used by them, and how the customer procures
competitor brands. This also, provides inputs on the key persons in competitor firms. This
information is collected on a regular basis by sales people and is continuously updated.

Marketing Research
Marketing research is a key to evolution of successful marketing strategies and
programmes. It is an important tool to study buyer behaviour, changes in consumer lifestyles,
consumption patterns, brand loyalty, and also tom forecast market changes. Research is also
used to study competition and analyse the competitors product positioning and how to gain
competitive advantage.

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 The research problem must be properly framed, and while collecting and analyzing
the data, researchers must keep the context in mind. Also, the researchers needs to construct
appropriate questions and must have the skill to elicit responses, and sift through them.

The Research Process

Having considered the pros and cons of marketing research, let us now turn to the marketing
research process itself. This process has seven stages, which are:

Research Definition

Research Objectives

Research Design

Sources Of Data

Data Collection

Data Analysis
(Primary Secondary
and Advanced)
Report and
Presentation
1. Problem Definition:
This is the starting point in the marketing research exercise. In any enterprise there are
several marketing issues that may require examination and invariably, every decision
maker perceives his information need as being the most important.

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 CHAPTER 3
CONSUMER BEHAVIOUR

Consumer / Buyer:
Although it is important for the firm to understand the buyer and accordingly evolve
its marketing strategy, the buyer or consumer continues to be an enigma sometimes,
responding the way the marketer wants and on other occasions just refusing to buy the
product from the same marketer. For this reason, the buyers mind has been termed as a
black box. The marketer provides stimuli but he is uncertain of the buyers response. This
stimulus is a combination of product, brand name, colour, style, packaging, intangible
services, merchandising, shelf display, advertising, distribution, publicity, and others.

Further, todays customer is greatly influenced by the media, especially electronic.

Technological developments in the field of information, biotechnology and genetics, and
intensive competitions in all products and services are also impacting consumer choices.
Stages in Customer Life Cycle are as follows:
(i) Prospects
(ii) First time buyer
(iii)Repeat buyer
(iv) Core buyer
(v) Defector
(i) Prospects:
These are all those individuals who have not yet bought the firms product / brand.
They are being targeted for acquisition.
This stage requires huge investments in awareness creation especially when the
product or the firm or brand is new in the market. In the case of consumer products
and services, the marketer has to invest in the communication channels which reach
the target market. Hence data relating to readership and viewership of the print and
electronic media is required for media selection.

(ii) First Time Buyer:

Once the prospect has decided to buy, the customer enters the trail stage. The
customer is now evaluating the firm, product and the entire purchase and consumption
experience. The firms strategy should be to create an experience for the customer to
repeat his purchase. It has to continuously reassure the customer that his decision was
correct.
Also, the firm needs to reinforce the customers belief in the superiority of the product.
In order to achieve the above objectives, the company needs to focus on factors that
create an everlasting experience. This includes the experience at product delivery with
sales and customer service personnel. Follow up customer care calls with appropriate
advertising campaigns can create a satisfied customer.
(iii) Repeat Buyers:
These are the customers repeating their purchase. They are satisfied with their first
experience and find value in the current offer of the company. At this stage, firm need
to keep in mind that these customers are still vulnerable to competitor poaching.

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 Hence it needs to continuously strengthen the product value by removing any
dissatisfaction.

(iv) Core Customers:

They are the fulcrum of any company as they account for its overall profitability.
Hence core customers are very critical and precious. In most companies, they are
generally about two or three percent of their total customers. Firms evolve strategies
to expand this base and also to keep them happy and satisfied. Core customers are
those who do not switch their brand / supplier. They perceive their switching costs to
be high as they understand the product and the brand, are familiar with sales and
service personnel and know the company better than other customers. Core customers
are also those, who despite competition, prefer to remain with the company and the
product / brand. They buy not just the core product but also several other products
from the company. They also induce other customers.
(v) Defectors:
These are customers who have rejected the companys offerings. Defection occurs
across all the above stages of customer life cycle. One needs to analyse the causes of
such defection and take steps to correct the situation. Some of the most common
causes of defection are:
(a) Poor after sales service of the company
(b) Rude, discourteous and indifferent sales personnel
(c) Lack of personal touch as the company automates all its operations and customer
interfaces
(d) Delayed or no response to customer complaints

What does the Customer Buy?

To most of us, there appears to be an obvious answer to this question product /
service. But this is not a comprehensive description. For, when one examines the
different products or services bought by a customer, one can categorise them into two
groups, namely:
(a) High involvement products
(b) Low involvement products.
The differentiation between products and services is created on the basis of the customer
involvement level in product selection. This is based on the extent to which the customer
perceives the product as representing his or her personality and lifestyle. There are two
types of the Products:

1. High Involvement Products:

These have the following characteristics:
(a) High Price:
Generally, these products are priced high in a particular product group. For example, a
colour TV is a high involvement product within the entertainment electronics segment,
but, perhaps, pocket transistors are not.

(b) Complex Features:

High involvement products have complex features, requiring the customer to spend more
time on familiarizing and internalizing them. It is no wonder colour TVs, VCRs, DVD
Players, cars, motorcycles, computers, washing machines, or refrigerators come with an
easy-to-understand product manual describing the features in simple terms.

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(c) Large Differences between Alternatives:
If the customers perceive significant differences between alternatives, then the product is
a high involvement one. For example, if the customer perceives major differences
between Indian, Japanese, or American cars, then the car purchase decision is a high
involvement one. This is because these perceived differences enhance the need to learn
about them and evaluate each of the given alternatives against a decision criteria.

(d) High Perceived Risks:

If the customer perceives a high risk in using the product, then he or she may spend
considerable time in
(i) Evaluating what constitutes risk
(ii) How to minimise it, and
(iii) How to avoid it. Besides, the customer may even evaluate whether the risk is worth
taking. Cosmetics, hair dyes, flying an airplane for the first time, and the like, are all
perceived high risk situations. Hence these are high involvement product use situations.

Reflect Self-concept of Buyer:

This is the single most important factor in making a product a high
involvement one. Each of us has a self image and we behave in a manner that will
help us reinforce this image for others. We buy products and services that reflect this
self concept. Choice of cars, houses, clothes, restaurants, perfumes, cosmetics, and
jewellery all reflect a customers self-concept. Often, customers spend considerable
time in selecting a brand in these product groups.

2. Low Involvement Products:

(a) Does not Reflect Buyers Self-concept:
In the first place, these products are more personal to the buyer and they do not reflect his
or her self-concept. Toilet soaps and other toiletries are examples of products that are
perceived by customer as not expressing his or her image.

(b) Alternatives within the Same Product Class are Similar:

The customer does not perceive much difference between different brands in the same
product class.
(c) Frequent Brand Switching Behaviour:
Due to the perceived lack of difference between brands, brand loyalty in these products is
low.

(d) Buying Situations:

It is not only that products differ. Even the buying situation differs. Each time the buyer
is to take a purchase decision, it may or may not be the same as the previous one. The
differentiation between the two buying situations may be caused by the absence of any or
all of the following factors.
(a) awareness about competing brands in a product group
(b) customer has a decision criteria
(c) customer is able to evaluate and decide on his choice.
Viewed against these parameters, one may observe that it is not the product that
differentiates one buying situation from another; rather it is the time that the buyer spends

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 in learning and evaluating the alternatives or finally selecting one of them. Howard and
Sheth have described these buying situations as being:
(a)routinised response behaviour
(b) limited problem solving
(c)extensive problem solving

(a) Routinised Response Behaviour or Straight Rebuy:

This buying situation is characterised by the presence of all the above three criteria. In
other words, here the customer is aware of his choices and, knows what he is looking for
as the decision is based on experience of either self or others. Generally, the customer
spends little or no time in choosing an alternative. Brand loyalty is relatively high here.

(b) Limited Problem Solving or Modified Rebuy:

This is a buying situation with a difference. This could be, for example, introduction of a
new brand or product often requiring a change in the customers decision criteria.

(c) Extensive Problem Solving or New Task:

This is a buying situation perceived to be high on risk. This situation requires extensive
learning on the part of the customer. The reason for this is that here, the customer is not
aware of available alternatives, has no decision criteria, and hence is unable to evaluate
different brands. This could be caused by relocation of the customer to a new and
unknown environment, or by the introduction of a technologically superior product.

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 CHAPTER 4

INDUSTRIAL BUYING BEHAVIOUR

Business organisations do not only sell. They also buy vast quantities of raw
materials, manufactured components, plant and equipment, supplies, and business services.
Sellers need to understand these organisations needs, resources, policies, and buying
procedures.

Factors Involved in Industrial Buyers Decision Making Process:

(a) Continuous and Reliable Product Performance:
Here the emphasis is on the product performing to the customers satisfaction, every time
that it is used. In a way, here the customers concern is to maximize his benefits from the
product or, in other words, optimal utilisation of the product throughout its life.
(b) Guaranteed Delivery:
Organisational buyers today demand that suppliers manage their deliveries. In specific
terms, organisational buyers are expecting suppliers to deliver the right product mix, in
the right quantity, as per the committed time schedule. Increasingly, Indian buyers are
realizing, that if they do not manage their supply chain, they will be out of business.
While at one end of this chain is the customer, at the other end is the supplier of goods
and services. The Indian buyers desire to have lower inventories of consumables. Hence,
sellers have to manage their distribution function more effectively.
(c) Technology Fit:
Most Indian buyer firms work on old plants and equipments. This poses a significant
challenge to their suppliers, who may want to introduce new technology products.
(d) Price:
Price is an important component of decision making. Organisational buyers are now
price sensitive and hence look for suppliers who offer them the above three requirements,
at the lowest price. Supplier costs, credit terms, payment terms / mode, and even
financial arrangements offered by them go a long way in the buyers decision to place an
order with the supplier. It is for this reason, that suppliers strike an alliance with financial
institutions, who offer necessary credit to the buyer. This is particularly true in the
context of large capital projects, like those in the infrastructure sector.
(e) Service:
Industrial buyers now demand better quality after sales service. Service has come to have
a new meaning. It is not just repairs and maintenance of equipment in the shortest time.
It also includes complaint management and being continuously available to the customer,
like online (this includes customer service offered through toll free.
(f) Company Sales Forces:
Last but not the least, Indian buyer firms expect the supplier sales force to be
knowledgeable, available, and willing to help him resolve his problems. It is in this
context, that today industrial buyers expect cross function teams from suppliers to visit
them. This is particularly useful in technology products, where suppliers operations
team can help explain product features and also resolve application problems.

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 Participants in the Industrial Buying Price/Buying Centre:
The organisational purchase decisions are joint decisions. All individuals,
who participate in decision making are referred to as the decision making unit
(DMU). To be part of a DMU, it is important that the concerned individuals have a
common goal and share the responsibility for the decisions. These individuals, may
or may not be a part of the buying organisation like an external consultant but play
a key role in the decision making process. Also, these individuals may directly or
indirectly be involved in the decision making process.
The marketer should identify all the DMUs in the client organisation and understand
the expectations and parameters on which vendor recommendation will be done by
them. All these DMUs will then constitute the buying centre.
(a) Initiators:
Those who request that something be purchased. They may be users or others in the
organisation.

(b) Actual User:

Actual User is a person, who actually uses the vendors product. These people are
typically shop-floor individuals. They could be foremen and workmen in a factory, lab
technicians and chemists in a chemical firm, and programmers in a software firm. These
people often lay down product specifications. They also lay down service requirements
and more often than not, even the training requirements. They are technical personnel for
whom the only considerations are uninterrupted hassle free production and familiarity
with machines and processes. The actual user is also an indenter of goods and services.

(c) Influencers:
Influencer is a person or persons who may or may not be part of a customer organisation,
but whose opinion is valued significantly by the customer. Within the organisation, the
actual user plays the influencers role. Outsiders, like consultants, also play significant
influencing role.

(d) Deciders:
Decider is the person who actually takes the decision to buy. The decider will invariably
consider both the technical and economic factors in decision making. Thus, he will
consider commercial terms like price, payment options, delivery schedules, and so forth.
In choosing a vendor, the general rule is that the level at which the decision will be taken
is based on cost and perceived risks associated with a decision.

(e) Approvers:
People who authorise the proposed actions of deciders or buyers.

(f) Buyers:
Buyer is the person who actually buys on behalf of the organisation. This person or
department is typically known as a purchaser or buyer. He is part of the purchase or
materials department. For the buyer, the most critical factor is on-time delivery as he
does not want to spend sleepless nights, due to uncertain deliveries.

(g) Gatekeeper:
This is often a critical role and is played by an individual who facilitates the flow of
information in the organisation. This role could be played by a receptionist, a secretary to
the DMU, or even by a finance person. The gatekeeper is an important source of

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 information. To him / her, technical or economic parameters are not at all important. It is
therefore critical that the marketer understands who is playing the gatekeeper role, and
make him / her / his salesperson inside the organisation.

Decision Making in Buying Process:

The organisational buyers decision making is an eight stage process. These stages have even
been termed as buy phases. They are as follows:
1. Need Recognition:
This is the stage where the customer perceives a need for a product. But the exact
specifications of the product are generally not defined at this stage. Typically, this is the
stage where the customer has a problem and is looking for an acceptable solution. These
problem definitions may emanate from concerns like cost reduction, better efficiency, and
higher productivity.
2. Product Specification:
Here, the customer is more specific about what he is looking for. He lays down
specifications for the product he wants. He also spells out the service requirements.

3. Laying down Qualifications for Potential Vendors:

At times, organisational buyers lay down the technical and commercial qualifications for
potential vendors. This is one of the ways by which buyers are able to screen out a large
number of vendors, who may not be able to meet their requirements.

4. Inviting Proposals from Qualified Vendors:

This is the stage when proposals, often sealed, are invited from qualified vendors. This
invitation is either an open tender notice for allpre-qualified vendors or the supplier may
float an enquiry or seek proposals from only a few pre-qualified vendors.

5. Evaluating the Proposals:

The proposals are evaluated for their technical content and capability to meet the
customers requirements.

6. Selecting the Vendor:

Once the technical evaluation is complete and vendors shortlisted for final selection, the
proposal is commercially evaluated. Vendors, too, are now assessed more closely on their
competence in meeting customer requirements. This is the stage where negotiations often
take place. Having evaluated and negotiated,the vendor is then selected. In actual
practice, the buyer generally selects two vendors so as to ensure uninterrupted supplies.
He apportions the order between the two.

7. Determination of Order Size and Placement of Order:

During this stage, the buyer determines the size of the order lot. In case, the product in
question is a raw material or any other consumable, this stage will involve determining
specific quantities the customer wants at specific time intervals. But if the customer has
selected two or more suppliers, he may choose to apportion the order among them at this
stage. Actual placement of order is also a part of this stage.

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 CHAPTER 5
DEMAND MEASUREMENT AND FORECASTING

Market to Measure Study

Whenever the issues of forecasting are discussed, the marketer is faced with a
choice of studying it at different aggregate levels. It could be at the global level or at
the existing customers level.

Market:
Market refers to a set of existing and potential buyers of a product / service. Place is only
a facilitator. In todays marketing situation, where buyers buy on the Internet or through
cell phones and get their order delivered at home, place has ceased to even perform the
facilitating role. Sellers represent competition to the firm or the alternatives from whom
the buyer buys.
There are many productive ways to break down the market.
I. Potential Market:
It is the set of consumers with a sufficient level of interest in a market offer.
However, their interest is not enough to define a market unless they also have
sufficient income and access to the product.
II. Available Market:
The set of consumers who have interest, income, and access to a particular offer.
The company or government may restrict sales to certain groups; a particular state
might ban the sale of alcohol to anyone under 25 years of age.
The eligible adults constitute the qualified available market the set of
consumers who have interest, income, access, and qualifications for the particular
market offer.
III. Target Market:
The company will end up selling to a certain number of buyers in its target
market.
This is also called served market and refers to the market segment which a firm
chooses to serve.
IV. Market Penetration:
The penetrated market is the set of consumers who are buying the companys
product.
Market penetration ratio refers to the total number of such consumers to the total
number of consumers in the target market. This ratio indicates the opportunity for
growth in the target market.

Demand Measurement:
1. Market Demand:
Market Demand is not a fixed number, but rather a function of the stated conditions.
Market Demand refers to the total volume that would be bought by a defined customer
group in a defined geographical area in a defined time period in a defined marketing
environment under a defined marketing programme. It is important to note that demand
among be measured in physical or monetary terms. Demand is always within a specific
time frame.

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 Another important dimension to be understood, is the fact that market demand is not a
fixed number but a function of specific conditions. It is for this reason that it is called
market demand function or market response function.

2. Market Forecast:
We know that at any given time, there is only one level of industry marketing
expenditure. The market demand corresponding to this level is called market forecast.
The market forecast shows expected market demand, not maximum market demand. For
the latter, we have to visualize the level of market demand resulting from a very high
level of industry marketing expenditure, where further increases in marketing effort
would have little effect in stimulating further demand. Market potential is the limited
approached by market demand as industry marketing expenditure approach infinity for a
given marketing environment.

2. Company Demand:
This refers to a companys share of the total market demand. It is subject to all the
determinants of market demand, plus the determinants of the companys market share.
(i) Company potential:
Company potential is the limit approached by company demand, as its marketing effort
increases relative to its competitors. The absolute limit to this potential is the market
potential and this will be so, only in a monopolistic situation.
(ii) Sales Forecast:
Sales forecast refers to the estimates of future sales of the companys products. In a way,
this is the same as company demand.

Tools for Estimating Future Market Demand

There are two kinds of tools that one can use to estimate market demand.
One, the qualitative (mainly surveys) and the other, quantitative. Let us examine
these tools in greater detail.

Qualitative Tools:
Qualitative tools involve opinion surveys. Some of the more prominently used
ones are described as follows:
1. Survey of Buying Intention:
This involves surveying the buyers, to assess their intentions to buy the product.
This is very useful in estimating the market demand for consumer durables or even a
new product. This method could also be used to measure the demand for a product,
at a different level of the marketing effort.
For example, change in price and its effect on consumer demand can be studied
through this method. The purchase intention of the buyer can be measured on a
seven-point scale from a definitely buy to a definitely not buy. The response so
obtained, constitutes purchase probability for a given product and hence an index of
purchase probability can be made. This method is also suitable in industrial
marketing.

2. Composite of Sales Force Opinion:

In this method, the company asks individual sales personnel to estimate sales of the
given product, in his or her territory. These estimates, are then pooled and a national

[19]
 level forecast of sales is obtained. Very few companies use this tool as, most often,
sales people are believed to underestimate sales in their territories. The reason is that
they would like to show a positive variance of sales against targets to their top
management. It is for this reason, that not many companies rely on sales force opinion
polls.

3. Delphi Technique:
This involves constituting a panel of experts and tasking them to estimate the market
demand for a given product. They are also asked to mention their assumption, about the
future market environment. Individual experts do not know who else is on the panel.
Since each expert works from his or her office, the chances of him or her getting
influenced by others does not arise. Once the marketer gets the estimates, he or she
isolates extreme opinions and estimates and reverts back to the concerned expert, giving
them the assumptions, which others have made.

4. Expert Opinion:
It is the opinion poll in which a firm may interview experts in its industry. These
experts could be dealers, large buyers, marketing consultants, and trade associations.
These polls too, have the same limitations, as that of the consumer survey.
Nevertheless, these polls are commonly used by many firms, for estimating market
demand and the companys market share.

5. Market Test Method:

When buyers do not plan their purchases carefully or experts are not available or
reliable, a direct-market test is desirable. A direct market test is especially desirable in
forecasting new-product sales or established product sales in a new distribution channel
or territory.

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 CHAPTER 6

MARKET SEGMENTATION

Definition:
Market segmentation is the process of dividing a heterogeneous market into
homogeneous subunits. The customers are too numerous and diverse in their buying
requirements. A company needs to identify the market segments it can serve
effectively.

Thus, the total population of a given market indicates only the market size.
This, however, does not indicate anything more. To succeed, a firm needs to
appreciate that the market is a heterogeneous one. And the marketer must also
identify similarities, among different groups of customers.

Levels of Market Segmentation:

Levels of Market Segmentation

Macro Level Micro Level

Mass Market
Segment
Marketing
Niches Marketing
Local Areas
Marketing
Macro level: Individuals
1. Mass Market: Marketing
The starting point for discussing segmentation is mass marketing. In mass marketing, the
seller engages in the mass production, mass distribution, and mass promotion of one
product for all buyers.
The need for mass marketing is that it creates the largest potential market, which leads to
the lowest costs, which in turn can lead to lower prices or higher margins.

Micro Level:
1. Segment Marketing:
Market segment consists of a group of customers who share a similar set of wants.
The marketer does not create the segments; the marketers task is to identify the segments
and decide which one(s) to target.
The company can create a more fine-tuned product or service offering and price it
appropriately for the target segment. The company can more easily select the best
distribution and communications channels, and it will also have a clearer picture of its
competitors, which are the companies going after the same segment.

2. Niche Marketing:
A niche is a more narrowly defined group seeking a distinctive mix of benefits.
Marketers usually identify niches by dividing a segment into sub segments.

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 An attractive niche is characterised as follows: The customers in the niche have a distinct
set of needs; they will pay a premium to the firm that best satisfies their needs; the niche
is not likely to attract other competitors; the nicher gains certain economies through
specialisation; and the niche has size, profit, and growth potential.
Whereas segments are fairly large and normally attract several competitors, niches are
fairly small and normally attract only one or two.

3. Local Marketing:
Target marketing is leading to marketing programs tailored to the needs and wants of
local customer groups (trading areas, neighbourhood, and even individual stores).
Those favouring localizing company are marketing see national advertising as wasteful
because it fails to address local needs. Those against local marketing argue that is drives
up manufacturing and marketing costs by reducing economies of scale. Logistical
problems become magnified when companies try to meet local requirements. A brands
overall image might be diluted if the product and message differ in different localities.

4. Individual Customer Marketing:

The ultimate level of segmentation leads to segments of one, customized marketing,
or one to one marketing. Ultimately, every individual has a unique set of wants and
preferences. In past centuries, producers customized their offerings to each customer:
The tailor fitted a suit and a cobbler made shoes for each individual. Now companies
made standard goods in advance of orders and left it to individuals to fit into whatever
was available. Producers moved from built-to-order marketing to built-to-stock
marketing. Today the Information Revolution is enabling a growing number of
companies to mass-customise their offerings. Mass-customization is the ability of a
company to prepare on a mass basis individually designed products, services, programs,
and communications, to meet each customers requirements.

Patterns of Market Segmentation:

Market segments can be built up in many ways. One way is to identify preference
segments. Three different patterns can emerge.
1. Homogeneous Preferences:
A market where all the consumers have roughly the same preferences. The market
shows no natural segments of the existing product.
We would predict that existing brands would be similar and cluster around the middle
of the scale.
2. Diffused Preferences:
At the other extreme, consumer preferences may be scattered throughout the space
indicating that consumers vary greatly in their preferences. The first brand to enter
the market is likely to position in the centre to appeal to the most people. A second
competitor could locate next to the first brand and fight for market share, or it could
locate in a corner to attract a customer group that was not satisfied with the centre
brand. If several brands are in the market, they are likely to position throughout the
space and show real differences to match consumer-preference differences.
3. Clustered Preferences:
The market might reveal distinct preference clusters, called natural market
segments. The first firm in this market has three options. It might position in the

[22]
 centre, hoping to appeal to all groups. It might position in the largest market segment
(concentrated marketing). It might develop several brands, each positioned in a
different segment. If the first developed only one brand, competitors would enter and
introduce brands in the other segments.

Bases for Segmenting the Market:

The bases of market segmentation can be broadly divided into three major groups:
1. Customer based segmentation;
2. Product related segmentation;
3. Competition related segmentation

1. Customer based Segmentation:

The three important factors in this type of segmentation are:
(a) Geographic Location of Customers
(b) Psychographic Variables and
(c) Buyer Readiness

(a) Geographic Location of Customers:

This is generally the starting point of all market segmentation strategy. The geographic
location of customers helps the firm in planning its marketing offer. The rural and urban
divide is quite common in the consumer market. Another common base for segmentation
are the metro or non-metro markets.
The assumption in using this basis for segmentation, is that people in a particular
geographic area, have similar preferences and consumption patterns.

i. Demographic Characteristics:
The next commonly used basis for market segmentation is the demographic
characteristics of the market. Factors like age, education, income, occupation, sex,
family size, and marital status are used singly or in combination, to segment the
market.
A very commonly used basis, the assumption being that people in the same age group
will behave in an identical manner. Based on this factor, one can have:
(a) Infants market
(b) Child market
(c) Teens market
(d) Adolescent market
(e) Youth market
(f) Middle-aged market
(g) Elders or seniors market (50 years and above)

ii. Income:
The next commonly used variable is income. It is believed that as the consumers
income increases, his / her consumption behaviour also changes. Research findings
indicate that expenditure on food and other basic amenities as a percentage of total
expenditure declines as consumer income increases. In other words, with an increase
in income, the customer starts buying other branded products and the so called
luxuries like holiday packages, air travel, perfumes, microwave ovens, cooking
ranges, washing machines, and automobiles.

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 One the basis of income, the market can be segmented as being:
(a) Low income
(b) Low middle income
(c) Middle income
(d) Upper middle income
(e) Higher income

iii. Gender:
The male market is different from the female market. Hence, gender is used for
segmenting the market for different products. While some products, like textiles, are
exclusively made for each segment, there are others which are not exclusively made or
marketed for any one gender. A cosmetics firm will have to take a decision whether it
wants to manufacture and market cosmetics exclusively for men or women or for both.

iv. Occupation:
The occupation of the consumer is also an important variable in segmenting the market.
Whether a person is self-employed, works full time or part time, his / her position in an
enterprise affects the consumption behaviour. On the basis of consumption, one may find
segments like professionals (like a doctor, chartered accountant, or a consultant), traders
or shopkeepers, businessmen or industrialists, sales personnel, teachers, university
professors, self-employed people, students, housewives, and the like.

v. Education:
The education profile of the customer will also affect his or her preferences and level of
awareness. It is a known fact that as literacy increases and people get educated, they
become more aware about the environment and about different products. They also
become more aware of their rights. Based on education, the Indian market can be
segmented as illiterates, literates, high school educated, and secondary or university
educated persons.

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 CHAPTER 7
PRODUCT DECISIONS

Product Key Concepts:

Many people think a product is tangible, but a product is anything that can be offered
to a market to satisfy a want or need, including physical goods, services, experiences, events,
persons, places, properties, organisations, information and ideas.

Definition:
The product is a bundle of satisfaction that a customer buys. It represents solution to
customers problems. It is in this context that the marketing definition of a product is more
than just what the manufacturer understands it to be. As Peter Drucker puts it, so long as a
product is not bought and consumed, it remains a raw material or at best an intermediate.
The product is almost always a combination of tangible and intangible benefits.

Constituents of Product:
(A) Core :
To understand and appreciate a product, we need to perceive it as a four-layer item. At the
heart of it is the core or generic part. As Levitt puts it, this is the table stakes of business,
or what is needed to play the game of market participation.
But in todays competitive world, there is hardly any difference between firms on the generic
component of the product. Also, because of the standardisation of technology, customers are
never able to perceive any significant difference among core or generic products of
competing firms in the industry.

(B) Formal Product and Augmented Product:

To differentiate its product from all others, the firm names it (branding), packs it, puts
additional features like laminated top, a stand, or a water tap on the door of the refrigerator
uses colours and aesthetics to give a distinctive appeal. This makes a core product a
formal product or the expectant product. But as inter-firm rivalry intensifies, differentiation
on the basis of the formal product ceases to exist.
It is here, that the marketer searches for possible differentiation. When technology ceases to
give one and it becomes a price and promotions war, the marketer looks for the intangibles.
Intangibles are services, like after sales service, delivery and installation schedules, and
helping buyers purchase the product through low cost financing options. There is no fixed
range of services that a marketer may offer. It is based on customer needs and the marketers
creative strategy to serve it. This intangible component of the product alongwith formal and
core components is called augmented product. Levitt believes that future competition will
be in the augmented product. The marketer keeps expanding the service component, thus
enhancing the product value.

Product Levels: The Customer-Value Hierarchy

In planning its market offering, the marketer needs to address five product levels.
Each level adds more customer value, and the five constitute a customer-value hierarchy.
1. The fundamental level is the core benefit:
The service or benefit the customer is really buying. A hotel guest is buying rest and
sleep. The purchaser of a drill is buying holes. Marketers must see themselves as benefit
providers.

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2. Basic Product:
The marketer must turn the core benefit into a basic product. Thus, a hotel room includes
a bed, bathroom, towels, desk, dresser, and closet.

3. Expected Product:
A set of attributes and conditions buyers normally expect when they purchase this
product. Hotel guests minimally expect a clean bed, fresh towels, working lamps, and a
relative degree of quiet.

4. Augmented Product:
The marketer prepares an augmented product that exceeds customer expectations. In
developed countries, brand positioning and competition take place at this level. In
developing and emerging markets such as India and Brazil, however, competition takes
place mostly at the expected product level.

5. Potential Product:
It encompasses all the possible augmentations and transformations the product or offering
might undergo in the future. Here is where companies search for new ways to satisfy
customers and distinguish their offering.

Product Classifications:
Marketers classify products on the basis of durability, tangibility, and use
(consumer or industrial). Each type has an appropriate marketing mix strategy.
(A) Durability and Tangibility:
Products fall into three groups according to durability and tangibility.
1. Nondurable goods:
They are tangible goods normally consumed in one or a few uses, such as soft drinks and
shampoo. Because these goods are purchased frequently, the appropriate strategy is to
make them available in many locations, charge only a small markup, and advertise
heavily to induce trial and build preference.

2. Durable goods:
Durable goods are tangible goods that normally survive many uses: refrigerators, machine
tools, and clothing. Durable products normally require more personal selling and service,
command a higher margin, and require more seller guarantees.

3. Services:
They are tangible, inseparable, variable, and perishable products that normally require
more quality control, supplier credibility, and adaptability. Examples include haircuts,
legal advice, and appliance repairs.

(B) Consumer Goods Classification:

1. Convenience Goods:
The consumer usually purchases convenience goods frequently, immediately, and with
minimal effort. Examples include soft drinks, soaps, and newspapers. Staples are
convenience goods consumers purchase on a regular basis.

2. Impulse Goods:
Impulse Goods are purchased without any planning or efforts, like chocolates, candy bars,
and potato chips.

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 3. Emergency goods:
Emergency goods are purchased when a need is urgent umbrellas and raincoats with the
advent of the monsoons and pullovers, sweaters, and shawls with the advent of the winter
season.
4. Shopping Goods:
They are those the consumer characteristically compares on such bases as suitability,
quality, price, and style. Examples include furniture, clothing, and major appliances.
a) Homogeneous shopping Goods:
They are similar in quality but different enough in price to justify shopping comparisons.
b) Heterogeneous shopping goods
Differ in product features and services that may be more important than price. The seller
of heterogeneous shopping goods carries a wide assortment to satisfy individual tastes
and trains salespeople to inform and advise customers.
5. Specially goods:
They have unique characteristics or brand identification for which enough buyers are willing
to make a special purchasing effort.
6. Unsought goods:
They are those the consumer does not know about or normally think of buying, such as
smoke detectors. Classic examples of known but unsought goods are life insurance,
encyclopedias, and reference books. Unsought goods require advertising and personal-selling
support.

(C) Industrial Goods Classification:

We classify industrial goods in terms of their relative cost and how they enter the production
process: materials and parts, capital items and supplies and business services.
a. Materials and parts are goods that enter the manufacturers product completely. They
fall into two classes: raw materials, and manufactured materials and parts, Raw
Materials fall into two major groups: farm products (wheat, cotton, livestock, fruits,
and vegetables) and natural products (fish, lumber, crude petroleum, iron ore).
b. Capital Items are long-lasting goods that facilitate developing or managing the finished
product. They include two groups: installations and equipment. Installations consist of
buildings (factories, offices) and heavy equipment (generators, drill presses, mainframe
computers, elevators).
Equipment includes portable factory equipment and tools (hand tools, lift trucks) and
office equipment (personal computers, desks). These types of equipment dont become
part of a finished product. They have a shorter life than installations but a longer life than
operating supplies.
c. Supplies and business services are short-term goods and services that facilitate
developing or managing the finished product. Supplies are to two kinds: maintenance
and repair items (paint, nails, and brooms) and operating supplies (lubricants, coal,
writing paper, pencils). Together, they go under the name of MRO goods. Supplies are
the equivalent of convenience goods; they are usually purchased with minimum effort on
a straight-rebuy basis.

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 CHAPTER 8
PRODUCT LIFE-CYCLE MARKETING STRATEGIES AND
PRODUCT DEVELOPMENT
Definition:
A companys positioning and differentiation strategy must change as the product,
market, and competitors change over the product-life cycle (PLC). To say a product
has a life cycle is to assert four things.
1. Products have a limited life.
2. Product sales pass through distinct stages, each posing different challenges,
opportunities, and problems to the seller.
3. Profits rise and fall at different stages of the product life cycle.
4. Products require different marketing, financial, manufacturing, purchasing and human
resource strategies in each life-cycle stage.

Product Life Cycles

Most product life-cycle curves are portrayed as bell-shaped. This curve is typically
divided into four stages: introduction, growth, maturity, and decline.
1. Introduction:
A period of slow sales growth as the product is introduced in the market. Profits are
nonexistent because of the heavy expenses of product introduction.
2. Growth:
A period of rapid market acceptance and substantial profit improvement.
3. Maturity:
A slowdown in sales growth because the product has achieved acceptance by most
potential buyers. Profit stabilize or decline because of increased competition.
4. Decline:
Sales show a downward drift and profits erode.

We can use the PLC concept to analyse a product category, a product form, a
product or a brand. Not all products exhibit a bell shaped PLC. Three common
alternate patterns are as follows:
a. Growth slump-maturity-pattern:
Sales grow rapidly when the product is first introduced and then fall to a petrified level
sustained by late adopters buying the product for the first time and early adopters
replacing it.

b. Cycle-recycle pattern:
The cycle-recycle pattern often describes the sales of new drugs. The pharmaceutical
company aggressively promotes its new drug, producing the first cycle. Later, sales start
declining, and another promotion push produces a second cycle (usually of smaller
magnitude and duration).

c. Sales pass through a succession of life cycles based on the discovery of new-product
characteristics, uses, or users.

Style, Fashion, and Fad Life Cycles:

1. Style:

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 A style is a basic and distinctive mode of expression appearing in a field of human
endeavour. Styles appear in homes clothing (formal, business casual sporty), and art
(realistic, surrealistic, abstract). A style can last for generations and go in and out of
vogue.
2. Fashion:
A fashion is a currently accepted or popular style in a given field. Fashions pass through
four stages: distinctiveness, emulation, mass fashion, and decline.
The length of a fashion cycle is hard to predict. One view is that fashions end because
they represent a purchase compromise, and consumers soon start looking for the missing
attributes.
Another explanation is that too many consumers adopt the fashion, thus turning others
away. Still another is that the length of a particular fashion cycle depends on the extent to
which the fashion meets a genuine need, is consistent with other trends in the society,
satisfies societal norms and values, and keeps within technological limits as it develops.
3. Fads:
Fads are fashions that come quickly into public view, are adopted with great zeal, peak
early, and decline very fast. Their acceptance cycle is short, and they tend to attract only
a limited following who are searching for excitement or want to distinguish themselves
from others. Fads fall to survive because they dont normally satisfy a strong need. The
marketing winners are those who recognise fads early and leverage them into products
with staying power.

(i) Marketing strategies: Introduction Stage and the Pioneer Advantage:

Because it takes time to roll out a new product, work out the technical problems, fill
dealer pipelines, and gain consumer acceptance, sales growth tends to be slow in the
introduction stage. Profits are negative or low, and promotional expenditures are at their
highest ratio to sales because of the need to
(i) inform potential consumers,
(ii) induce product trial
(iii) secure distribution in retail outlets.
Firms focus on buyers who are the most ready to buy. Prices tend to be higher
because costs are high.
Companies that plan to introduce a new product must decide when to enter the
market. To be first can be rewarding, but risky and expensive. To come in later
makes sense if the firm can bring superior technology, quality, or brand strength to
create a market advantage.
Most studies indicate the market pioneer gains the greatest advantage.
What are the sources of the pioneers advantage? Early users will recall the
pioneers brand name if the product satisfies them. The pioneers brand also
establishes the attributes the product class should possess. It normally aims at the
middle of the market and so captures more users. Customer inertia also plays a role;
and there are producer advantages: economies of scale, technological leadership,
patents, ownership of scarce assets, and other barriers to entry.

Introduction Strategies:
(A) Rapid Skimming:
This strategy of high price and high promotion works effective, only when
customer awareness for the product is not very high, or for those who are aware,

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 willingness to buy at any price is high. This strategy also works, when the market
size for the product is large and the threat from competition is imminent.
(B) Slow Skimming:
This strategy is based on the assumption that a firm has sufficient time to recover
its pre-launch expenses. This happens, when the technology being used by the
firm is highly sophisticated and competition will have to invest substantial
resources to acquire this technology. Further, since most competitors may not
have the required resources, competition may be limited to just one or two large
companies. Another environmental characteristic supporting this strategy, is that
the market size for the product is limited and those who are aware are willing to
pay any price to acquire it.
(C) Rapid Penetration Strategy:
The strategy of rapid penetration is based on the same assumptions and
environmental conditions, as the ones mentioned under the rapid skimming
strategy. The only difference between rapid skimming and penetration is the
firms long term objectives. If the objective is market share and profit
maximisation in the long run and the market is characterised by intensive
competition or other entry barriers, a firm may choose to enter the market with
this strategy.
(D) Slow Penetration Strategy:
This strategy delivers results, when the threat from competition is minimal,
market size is large, the market is predominantly price sensitive, and majority of
the market is familiar with the product. The firms objective is to maximum sales
or profits in the long run.

(ii) Marketing Strategies: Growth Stage:

The growth stage is marked by a rapid climb in sales. Early adopters like the product
and additional consumers start buying it. New competitors enter attracted by the
opportunities. They introduce new product features and expand distribution.
Prices stabilize or fall slightly, depending on how fast demand increases. Companies
maintain promotional expenditures or raise them slightly, to meet competition and
continue to educate the market. S ales rise much faster than promotional expenditures,
causing a welcome decline in the promotion sales ratio. Profits increase as
promotion costs are spread over a larger volume, and unit manufacturing costs fall
faster than price declines, owing to the producer-learning effect. Firms must watch
for a change to a decelerating rate of growth in order to prepare new strategies.

To sustain rapid market share growth now, the firm:

Improves product quality and adds new features and improved styling.
Adds new models and flanker products (of different sizes, flavours, and so forth)
to protect the main product.
Enters new market segments.
Increases its distribution coverage and enters new distribution channels.
Shifts from awareness and trial communications to preference and loyalty
communications.
Lowers prices to attract the next layer of price-sensitive buyers.

(iii) Marketing Strategies: Maturity Stage:

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 At some point, the rate of sales growth will slow, and the product will enter a stage of
relative maturity. Most products are in this stage of the life cycle, which normally
lasts longer than the preceding ones.

The maturity stage divides into three phases: growth, stable, and decaying
maturity. In the first, sales growth starts to slow. There are no new distribution
channels to fill. New competitive forces emerge. In the second phase, sales per
capita flatten because of market saturation. Most potential consumers have tried the
product, and future sales depend on population growth and replacement demand. In
the third phase, decaying maturity, the absolute level of sales starts to decline, and
customers begin switching to other products.

This third phase poses the most challenges. The sales slow down creates
overcapacity in the industry, which intensifies competition. Weaker competitors
withdraw. A few giants dominate perhaps a quality leader, a service leader, and a
cost leader and profit mainly through high volume and lower costs. Surrounding
them is a multitude of market nichers, including market specialists, product
specialists, and customizing firms.

(iv) Decline Phase:

This is the phase when sales decline, because customer preferences have change in
favour of more efficient and better products. The number of competing firms. Also
gets reduced and generally the industry now has limited product versions available to
the customer. Customers value perception of the product, also undergoes a change.
However, the firm may see a rise in its profit curve, largely coming from people, who
will be willing to pay a higher price to possess it either for its antique value or
because they resist any change. The marketing task becomes one of diverting and
gradual withdrawal of the product. To cater to a small niche, a firm may consider
generating primary demand for the product, rather than the brand demand.
Nonetheless, products having entered a decline phase need to be pruned.

Summary of product Life Cycle Characteristics, Objectives, and Strategies

Introduction Growth Maturity Decline
Characteristics
Sales Low sales Rapidly rising sales Peak sales Declining sales
Costs High cost per customer Average cost per Low cost per customer Low cost per customer
Profits Negative customer High profits Declining profits
Customers Innovators Rising profits Middle majority Laggards
competitors Few Early adopters Stable number beginning to Declining number
Growing number decline
Marketing Objectives
Create Product Maximise Market Maximise profit while Reduce expenditure
awareness and trial share defending and milk the brand
market share
Strategies
Product Offer a basic product Offer product Diversify brands and items Phase out weak products
extensions, service, models
warranty
Price Charge cost-plus Price to penetrate Price to match or best Cut price
market competitors
Distribution Build selective Build intensive Build more intensive Go selective: phase out
distribution distribution distribution unprofitable outlets

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Communications Build product awareness Build awareness and Stress brand differences and Reduce to minimal level
and trial among early interest in the mass benefits and encourage brand needed to retain hard-
adopters and dealers market switching core loyals

Product-Category, Product-Form, Product, and Brand Life Cycles

The PLC concept can be used to analyze a product category (liquor), a product
form (white liquor), a product (vodka), or a brand (Smirnoff).
1. Product categories have the longest life cycles: Many product categories stay in the
mature stage indefinitely, since they grow only at the population growth rate.
2. Product forms follow the standard PLC: More faithfully than do product categories.
3. Products follow either the standard PLC or one of several variant shapes.
4. Branded Products can have a short or long PLC, though many new brands die an
early death.

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