MARKETING COMMUNICATION

(Second Year)

MA Journalism and Mass Communication

School of Distance Education
Bharathiar University Coimbatore - 641046

1
UNIT I

Lesson 1: Marketing

Marketing may be defined as “Discovering consumer needs and wants, creating the
goods and services that meet those needs and then pricing, promoting and delivering those
goods and services.” Using this approach consumer and other businesses are the key targets of
the marketing process. Groups of consumers and businesses or markets, lead companies to
produce and merchandise the goods and services they desire.

The American Marketing Association (AMA) notes that marketing activities include a
set of institutions, and processes for creating, communicating, delivering and exchanging
offerings that has value for customers, clients, partners and society at large. This viewpoint
expands the overall concept of marketing to include any exchange of value. The money that
buyers use to make purchases has value, as do the goods and services offered by sellers.

Understanding Marketing

Money represents the most common vehicle used to facilitate a marketing exchange,
but it does not need to be present for an exchange to be considered marketing. Individuals
trade physical products, such as when an Italian swaps an AC Milan team jersey to another for
a fashionable jacket made in Germany. Also two people mar barter for services: A man who
has difficulty reading and writing could agree to help an acquaintance repaint his living room.
In the exchange, the acquaintance helps the illiterate man’s child fill out application forms for
college. When the two trade these services, a marketing exchange has taken place. On the
ideal, an exchange leads to satisfaction for both parties. In this context, the nature of
international marketing takes on addition dimensions, including trading goods for services
and much more complex trade practices.

Marketing is a vast field that encompasses many activities: a hawker pricing his wares
is marketing; a hotel manager taking customer feedback is marketing, a barber placing a big
hoarding announcing his services is marketing, a movie theatre distributing cinema tickets
through the internet is marketing and a salesman selling a refrigerator to an Eskimo is also
marketing. Most people misunderstand marketing as selling and advertising. But these

2
functions are only the tip of the marketing iceberg. In reality, marketing is a composite of
many activities related to customer need fulfilment and satisfaction. Historically, these
activities were a part of allied fields,(for example, pricing was left to accountancy, demand
estimation to economics, communication to advertising, supply chain to production, and so
on) or were simply not explored (for example, consumer behaviour, management of
distribution partners, relationship management, etc). It was only in the early 1900’s when the
relatively young discipline of marketing was born that these activities were brought under one
roof to improve the relationships between buyers and sellers and to create mutually beneficial
exchanges. In its formative years, marketing was more concerned with tactics to ‘sell more’.
However, towards the mid 1900’s, several factors like increasing competition and greater
consumer awareness led companies to mend their old selling ways and focus more on
consumer satisfaction and long-term relationships. This led to the development of the
“marketing concept” that placed the customer at the centre of all business activities. All
functions from production to selling were relegated to the end, to be performed only after
finding out what the customers wanted, where and how. In essence, marketing its customer-
centered and products are often developed to meet the needs of groups of customers, or at
times, specific customers.

Marketing includes many tasks right from identifying consumer needs and wants to
fulfill them. These include marketing research, new product development, distribution
management, pricing, promotion, analysis of competition, etc. The American Marketing
Association defines marketing as the process of planning and executing the conception,
pricing, promotion and distribution of ideas, goods and services to create exchanges that
satisfy individual and organizational objectives. For marketing to be effective, it requires
successful co-ordination of all these activities at different levels in an organization.

Marketing is not limited to the exchange of tangible goods, but can be for various
types of entities – goods, services, people, places, events, properties, organizations,
information, experiences and ideas. What do you think is being marketed at the fun park
Queens Land? Not physical goods like merry – go – rounds or Ferris wheels, but an
entertaining experience! And what is marketed when the government runs a campaign
advising people not to have more than two children? The idea of family planning! Think

3
about what public service organizations get in exchange when you give them or to the society
a small family.

What is marketing?

Marketing is about identifying and meeting human and social needs. One of the
shortest good definitions of marketing is "meeting needs profitably." When eBay recognized
that people were unable to locate some of the items they desired most, it created an online
auction clearinghouse. When IKEA noticed that people wanted good furniture at a
substantially lower price, it created knockdown furniture. These two firms demonstrated
marketing savvy and turned a private or social need into a profitable business opportunity.

The American Marketing Association offers the following formal definition:

Marketing is an organizational function and a set of processes for creating, communicating,
and delivering value to customers and for managing customer relationships in ways that
benefit the organization and its stakeholders:" 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.

We can distinguish between a social and a managerial definition of marketing. A

social definition shows the role marketing plays in society; for example, one marketer has
said that marketing's role is to "deliver a higher standard of living." Here is a social definition
that serves our purpose: Marketing is a societal process by which individuals and groups
obtain what they need and want through creating, offering, and freely exchanging products
and services of value with others.

Managers sometimes think of marketing as "the art of selling products," but many
people are surprised when they hear that selling is not the most important part of marketing!
Selling is only the tip of the marketing iceberg. Peter Drucker, a leading management theorist,
puts it this way:

4
 There will always, one can assume, be need for some selling. But the aim of marketing
is to make selling superfluous. The aim of marketing is to know and understand the customer
so well that the product or service fits him and sells itself. Ideally, marketing should result in a
customer who is ready to buy. All that should be needed then is to make the product or service
available.

Lesson 2: CONCEPTS OF MARKETING

Marketers operate consistently with different marketing concepts. Let us review the
evolution of earlier marketing concepts.

The Production Concept

The Production Concept is one of the oldest concepts in business. It holds that
consumers will prefer products that are widely available and inexpensive. Managers of
production-orientated businesses concentrate on achieving high production efficiency, low
costs and mass distribution. The business leader who gave America the affordable car and the
business approach called “The Production Concept” was Henry Ford. Before the early 1900’s,
only wealthy consumers could afford automobiles because cars were assembled individually
and they took considerable time and expense to produce each car. In the early 1900’s, Henry
Ford became consumed with the idea of producing cars that average Americans could afford.
In 1908, Ford began selling the sturdy and reliable model T for $850 – an inexpensive price
for that day. Soon he found out that, he could not meet the overwhelming consumer demand
for his cars and, in 1913, he introduced the assembly line. The new production method
enabled Ford to produce good quality cars more quickly and much less expensively. In 1916,
Ford sold model T’s for $360 and sold more than 100 times as many cars as he did in 1908.
This concept makes sense when consumers are more interested in obtaining the product than
they are in specific features, and will buy what’s available rather than wait for what they
really want.

This orientation makes sense in developing countries such as China, where the largest
PC manufacturer Lenovo and domestic appliances giant Haier, take advantage of the

5
country’s huge and inexpensive labor pool to dominate the market. Marketers also use the
production concept when a company wants to expand a market.

The Product Concept

The Product concept proposes that consumers will buy the product that offers them the
highest quality, the best performance and the most features. Managers in these organizations
focus on making superior products and improving them over time. However, these managers
are sometimes caught up in a love affair with their products. They might commit the “better
mouse trap” fallacy, believing that a better mouse trap will lead people to beat a path to their
door. This means that a product orientation leads the company to strive constantly to improve
the quality of its product and to add new features that are technically feasible, without finding
out first whether or not consumers really want these features. A product orientation often
leads to “marketing myopia,” that is, a focus on the product rather than on the consumer needs
it presumes to satisfy. Marketing myopia may cause a company to ignore crucial changes in
the market-place because it causes marketers to look in the mirror rather than through the
window. Thus, American railroads today are a far less significant economic force than they
were some 50 years ago because their management was convinced that travelers wanted trains
and overlooked the competition for the transportation from personal cars, airlines, buses and
trucks. These railroad executives focused on the product (i.e. trains) rather than the need that
it satisfies (transportation).

The Selling Concept

A natural evolution from both the Production Concept and the Product Concept is the
selling concept in which the marketer’s primary focus is selling the product(s) that he has
unilaterally decided to produce. The selling concept holds that consumers and businesses, if
left alone, won’t buy enough of the organization’s products. The organization must, therefore,
undertake an aggressive selling and promotion effort. The selling concept is expressed in the
thinking of Sergio Zyman, Coca-Cola’s former vice president of marketing, who said: “The
purpose of marketing is to sell more stuff to more people, more often for more money in order
to make more profit.”

6
 The selling concept is practiced more aggressively with unsought goods, goods that
buyers normally do not think of buying, such as insurance, encyclopedias and cemetery plots.
The problem with this approach is that it fails to consider consumer satisfaction as their aim is
to sell what they make rather than what the market wants. However, marketing based on hard
selling carries high risks. When consumers are induced to buy products which they do not
want or need, they will not buy them again. Also they are likely to communicate any
dissatisfaction with the product through negative word-of-mouth that serves to dissuade
potential consumers from making similar purchases. Today this selling concept is typically
utilized by political parties “selling” their candidates aggressively to apathetic voters and by
firms that have excess inventory.

The Marketing Concept

The marketing concept emerged in the mid-1950s. Instead of a product-centered,

“make-and-sell” philosophy, business shifted to a customer-centered, “sense-and-respond”
philosophy. The job is not to find the right customers for your products, but to find the right
products for your customers. Dell Computer doesn’t prepare a perfect computer for its target
market. Rather, it provides product platforms on which each person customizes the features he
desires in the computer.

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 chosen target markets.

Theodore Levitt of Harvard drew a perceptive contrast between the selling and
marketing concepts:

Selling focuses on the needs of the seller; marketing on the needs of the buyer. Selling
is preoccupied with the seller’s need to convert his product into cash; marketing with the idea
of satisfying the needs of the customer by means of the product and the whole cluster of
things associated with creating, delivering and finally consuming it.

Several scholars have found that companies that embrace the marketing concept
achieve superior performance. This was first demonstrated by companies practicing a reactive

7
 market orientation – understanding and meeting customer’s expressed needs. Some critics say
this means companies develop only very basic innovations. Narver and his colleagues argue
that more advanced, high – level innovation is possible if the focus is on customers’ latent
needs. Narver calls this a proactive marketing orientation. Companies such as 3M, Hewlett
Packard and Motorola have made a practice of researching latent needs through a “probe-and-
learn” process. Companies that practice both a reactive and a proactive marketing orientation
are implementing a total market orientation and are likely to be the most successful.

The Holistic Marketing Concept

Without question, the trends and forces defining the 21st Century are leading business
firms to a new set of beliefs and practice. Today’s best marketers recognize the need to have a
more complete, cohesive approach that goes beyond traditional applications on the marketing
concept. “Marketing Memo: Marketing Right and Wrong” suggests where companies go
wrong – and how they can get it right – in their marketing.

The Holistic marketing concept is based on the development, design and

implementation of marketing programs, processes and activities that recognizes their breadth
and interdependencies. Holistic marketing recognizes that “everything matters” in marketing
– and that a broad, integrated perspective is often necessary.

Marketing Memo

WRONGS RIGHTS
1. The company is not sufficiently market The company segments the market, chooses
focused and customer driven the best segments and develops a strong
position in each chosen segment.
2. The company does not fully understand its The company maps its customers’ needs,
target customers. perceptions, preferences and behavior and
motivates its stakeholders to obsess about
serving and satisfying the customers.
3. The company needs to better define and The company knows its major competitors
monitor its competitors. and their strengths and weaknesses.

8
4. The company has not properly managed its The Company builds partners out of its
relationships with its stakeholders. stakeholders and generously rewards them.
5. The company is not good at finding new The company develops systems for
opportunities. identifying opportunities, ranking them and
choosing the best ones.
6. The Company’s marketing plans and The company manages a marketing
planning process are deficient. planning system that leads to insightful long
– term and short – term plans.
7. The Company’s product and service The company exercises strong control over
policies need tightening. its product and service mix.
8. The Company’s brand – building and The Company builds Strong brands by
communication skills are weak. using the most cost – effective
communication and promotion tools
9. The Company is not well organized to carry The company builds marketing leadership
on effective and efficient marketing and a team spirit among its various
departments.
10. The company has not made maximum use The company constantly adds technology
of technology. that gives it a competitive advantage in the
marketplace.

Holistic marketing is thus an approach that attempts recognize and reconcile the scope
and complexities of marketing activities. Figure 1.1 provides a schematic overview of four
broad components characterizing holistic marketing: Relationship marketing, Integrated
marketing, Internal marketing and Performance marketing.

9
 Marketing Department

Internal Senior Management

Sales Revenue marketing
Other Departments

Ethics

Communications
Environment Performance Holistic Integrated
Channels
Marketing Marketing marketing
Products & Services
Legal

Community Customers
Relationship Channel
Marketing
Brand & Customer Partners
Equity

Fig. 1.1 Holistic Marketing Dimensions

Successful companies will be those that can keep their marketing changing with the
changes in their marketplace – and market space. “Breakthrough Marketing: Nike” describes
how that company has successfully changed – and thrived – through the years.

Relationship Marketing

Increasingly, a key goal of marketing is to develop deep, enduring relationships with

people and organizations that could directly or indirectly affect the success of the firm’s
marketing activities. Relationship marketing aims to build mutually satisfying long – term
relationships with key constituents in order to earn and retain their business.

Four key constituents for relationship marketing are customers, employees, marketing
partners (Channels, suppliers, distributors, dealers, agencies) and members of the financial
community (shareholders, investors, analysts). Marketers must respect the need to create
prosperity among all these constituents and develop policies and strategies to balance their
turns to all key stakeholders. To develop strong relationships with these constituents requires
an understanding of their capabilities and resources, as well as their needs, goals and desires.

10
 The ultimate outcome of relationship marketing is a unique company asset called a
marketing network. A marketing network consists of the company and its supporting
stakeholders – customers, employees, suppliers, distributors, retailers, ad agencies, university
scientists and others – with whom it has built mutually profitable business relationships. The
operating principle is simple: build an effective network of relationships with key
stakeholders, and profits will follow. Following this reasoning, more companies are choosing
to own brands rather than physical assets. They are also increasingly subcontracting activities
to outsourcing firms that can do them better and more cheaply, while retaining core activities.

A growing number of today’s companies are also shaping separate offers, services and
messages to individual customers, based on information about past transactions,
demographics, psychographics and media and distribution preferences. By focusing on their
most profitable customers, products and channels, these firms hope to achieve profitable
growth, capturing a larger share of each customer’s expenditures by building high customer
loyalty. They estimate individual customer lifetime value and design their market offerings
and prices to make a profit over the customer’s lifetime.

These activities fall under what Columbia Business School professor Larry Selden and
his wife and Business consulting partner, Yoko Sugiura Selden, call “Customer Centricity”.
They offer the Royal Bank of Canada as an example:

In thinking of its business in terms of customer segments rather than product segments, Royal
bank of Canada (RBC) has tagged each of it roughly 11 million clients and put them into
meaningful segments. Now it can focus on measuring and managing the customer profitablity of
these segments. In the process, RBC discovered a sizeable subsegment of customers hidden
within its broader categories of "welath preservers" and "wealth accumulators". Dubbed
"snowbirds", these individuals spent a number of months each winter in Florida, where they were
expecting difficulties establishing credit as well as missing their Canadian communities,
particularly the familiarity of the French - Canadian Accent and fluency in French. In order to
meet their unique needs, RBC created a Canadian banking experience in Florida.

11
 Another goal of relationship marketing is to place much more emphasis on customer
retention. Attracting a new customer may cost five times as much as doing a good enough job
to retain an existing one. A bank aims to increase its share of the customer’s wallet; the
supermarket aims to capture a larger share of the customer’s “Stomach”. Companies build
customer share by offering a larger variety of goods to existing customers. They train their
employees in cross – selling and up – selling.

Marketing must skilfully conduct not only customer relationship management (CRM),
but partner relationship management (PRM) as well. Companies are deepening their
partnering arrangements with key suppliers and distributors, thinking of these intermediaries
not as customers but as partners in delivering value to final customers so everybody benefits.
For example, tired of having its big rigs return empty as often as 15% of the time after making
a delivery, General Mills entered a program with fort James and a dozen other companies to
combine one – way shipping routes in to a cross – country loop served by a tag team of
contracted trucks. As a result, General Mills reduced its empty – truck time to 6%, saving 7%
on shipping costs in the process.

Integrated Marketing

The marketer’s task is to devise marketing activities and assemble fully integrated
marketing programs to create, communicate and deliver value for consumers. Marketing
activities come in all forms. McCarthy classified these activities as marketing – mix tools of
four broad kinds, which he called the four Ps of marketing: product, price, place and
promotion.

Fig 1.2

12
 Marketing Mix

Product Promotion
Price Place
Product variety, uality Sales promotion,
<Design, Features< Brand List price, Discounts, Channels Coverage,
Advertising, Sales force,
name< Packaging, Sizes, Allowances, payment Assortments, Locations,
Services, Warranties, Public relations, Direct
periods, Credit terms. Inventory, Transport.
Returns marketing.

The particular marketing variable under each P are given in fig.1.2.

PRODUCT: This includes all activities related to the conception and planning of the actual
product that fulfils consumer’s needs and wants, i.e. decisions regarding product quality,
design, features, sizes, varieties, brand name, warranty, guarantee and other services.

PRICE: This area deals with activities related to setting the price for a product. Decisions
regarding retail and wholesale prices, margins of channel members, discounts and allowances,
credit terms, payment periods, etc. are part of the ‘pricing’ function of the marketing mix.

PLACE: Placement or distribution refers to all activities involved in getting the product to
the final consumer. Decisions under this ‘P’ relate to distribution channels, market coverage,
locations, inventory, transportation, etc.

PROMOTIONS: Promotions refers to all activities concerned with informing consumers

about an organization’s offering, persuading them to buy it, and reminding them about it from
time to time. Activities like advertising, sales promotions; direct marketing, public relations,
personal selling, and other unconventional media comprise the ‘P’ of Promotion.

Marketers make marketing – mix decisions for influencing their trade channels as well as
their final consumers. Once they understand these groups, marketers make or customize an

13
 offering or solution, inform consumers – recognizing that many other sources of information
also exist – set a price that offers real value and choose places where the offering will be
accessible.

The firm can change its price, sales, force size and advertising expenditures in the
short run. It can develop new products and modify its distribution channels only in the long
run. Thus the firm typically make fewer period – to – period marketing – mix changes in the
short run than the number of marketing – mix decision variables might suggest.

The four Ps represent the sellers’ view of the marketing tools available for influencing
buyers. From a buyer’s point of view, each marketing tool is designed to deliver a customer
benefit. A complementary breakdown of marketing activities has been proposed that centers
on customers. Its four dimensions (SIVA) and the corresponding customer questions these are
designed to answer are:

1. Solution: How can I solve my problem?

2. Information: Where can I learn more about it?

3. Value: What is my total sacrifice to get this solution?

4. Access: Where can I find it?

Winning companies satisfy customer needs and surpass their expectations

economically and conveniently and with effective communication.

Two key themes of integrated marketing are that (1) many different marketing
activities communicate and deliver value and (2) when coordinated, marketing activities
maximize their joint effects. In other words, marketers should design and implement any one
marketing activity with all other activities in mind.

For example, using an integrated communication strategy means choosing

communication options that reinforce and complement each other. A marketer might
selectively employ television, radio and print advertising, public relations and events and PR
and Web site communication, so that each contributes on its own as well as improving the
effectiveness of the others. Each communication must also deliver a consistent brand image to

14
customers at every brand contact. Applying an integrated channel strategy ensures that direct
and indirect channels, such as online and retail sales, work together to maximize sales and
brand equity.

Internal Marketing

Holistic Marketing incorporates internal marketing, ensuring that everyone in the

organization embraces appropriate marketing principles, especially senior management.
Internal marketing is the task of hiring, training and motivating able employees who want to
serve customers well. Smart marketers recognize that marketing activities within the company
can be as important or even more important that marketing activities directed outside the
company. It makes no sense to promise excellent service before the company’s staff is ready
to provide it.

Internal Marketing must take place in two levels. At one level, the various marketing
functions – sales force, advertising, customer service, product management, and marketing
research - must work together. Too often, the sales force thinks product managers set prices or
sale quotas “too high”; or the advertising director and a brand manager cannot agree on an
advertising campaign. All these marketing functions must be coordinated from the customer’s
point of view. The following example highlights the coordination problem:

The marketing vice president of a major European airline wants to increase the
airline’s traffic share. His strategy is to build up a customer satisfaction by providing better
food, cleaner cabins, better – trained cabin crews, and lower fares, yet he has no authority in
these matters. The catering department chooses food that keeps cleaning costs down; the
human resources department hires people without regard to whether they are naturally
friendly; the finance department set the fares. Because these departments generally take a cost
or production point of view, the vice president of marketing is stymied in his efforts to create
an integrated marketing mix.

At the second level, other departments must embrace marketing; they must also “think
customer.” Marketing is not a department so much as a company orientation.

15
 Internal marketing thus requires vertical alignment with senior management and
horizontal alignment with other departments, so everyone understands, appreciates and
supports the marketing effort. As former Yahoo! CMO Cammie Dunaway states, “You want
to be connecting at the very senior levels of the organization, and you also want to be
connecting in with the engineers and scientists who are doing a lot of work on the front lines.”
Dunaway also emphasizes the importance of integrated marketing, comparing her job to that
of an orchestra conductor “you have to figure out how to pull all those instruments together in
a way that’s delivering great marketing accountability and engaging marketing programs.

A study conducted by Booz Allen Hamilton and the Association of National

Advertisers, I conjunction with Brandweek magazine, asked 2,000 executives to describe the
marketing structure within their organizations and to detail the tasks they consider integral to
their mission. The researchers identified six types of marketing organizations such as, Growth
Champions, Marketing Masters, Senior Counselors, Best Practices Advisors, Brand Builders
and Service Providers. In the most successful type, Growth Champions, marketing heavily
influenced all aspects of the organization. Growth Champions were 20% more likely to
deliver revenue growth and profitability than the other types of marketing organizations.

Performance Marketing

Holistic marketing incorporates performance marketing and understanding the returns

to the business from marketing activities and programs, as well as addressing broader
concerns and their legal, ethical, social and environmental effects. Top management is going
beyond sales revenue to examine the marketing scorecards and interpret what is happening to
market share, customer loss rate, customer satisfaction, product quality and other measures.

Financial Accountability

Marketers are thus being increasingly asked to justify their investments to senior
management in financial and profitability terms, as well as in terms of building the brand and
growing the customer base. As a consequence, they’re employing a broader variety of
financial measures to assess the direct and indirect value their marketing efforts create.
They’re also recognizing that much of their firms’ market value comes from intangible assets,
customer loss rate, employees, distributor and supplier relations, and intellectual capital.
16
Lesson 3: Marketing Environment

Economic Environment

The available purchasing power in an economy depends on current income, prices,

savings, debt, and credit availability. Marketers must pay careful attention to trends affecting
purchasing power, because they can have a strong impact on business, especially for
companies whose products are geared to high-income and price-sensitive consumers.

Income Distribution

There are four types of industrial structures: subsistence economies like Papua New
Guinea, with few opportunities for marketers; raw-material-exporting economies like
Democratic Republic of Congo (copper) and Saudi Arabia (oil), with good markets for
equipment, tools, supplies, and luxury goods for the rich; industrializing economies like India,
Egypt, and the Philippines, where a new rich class and a growing middle class demand new
types of goods; and industrial economies like countries in Western Europe, which are rich
markets for all sorts of goods.

Marketers often distinguish countries using five different income distribution patterns:
(1) very low incomes; (2) mostly low incomes; (3) very low, very high incomes; (4) low,
medium, high incomes; and (5) mostly medium incomes. Consider the market for
Lamborghinis, an automobile costing more than $150,000. The market would be very small in
countries with type (1) or (2) income patterns. One of the largest single markets for
Lamborghinis turns out to be Portugal (income pattern 3)-one of the poorer countries in
Western Europe, but one with enough wealthy families to afford expensive cars.

Over the past three decades in the United States, the rich have grown richer, the
Middle class has shrunk, and the poor have remained poor. From 1973 to 1999, earnings for
U.S. households in the top 5% of the income distribution grew 65%, compared with growth of
11 % for the middle one-fifth of households during the same period. This is leading to a two-

17
tier U.S. market, with affluent people able to buy expensive goods and working-class people
having to spend more carefully, shopping at discount stores and factory outlet malls, and
selecting less-expensive store brands.

Conventional retailers who offer medium-priced goods are the most vulnerable to
these changes. Companies that respond to the trend by tailoring their products and pitches to
these two very different Americas stand to gain.42 Recognizing that it could be trapped in
"no-man's land," given its channel strategy that emphasized retailers like Sears selling
primarily to the middle class, Levi-Strauss introduced premium lines such as Levi's Capital E
to upscale retailers Bloomingdales, Barney's New York, and others while also introducing the
less-expensive Levis Strauss Signature line to mass-market retailers such as Wal-Mart.

Savings, Debt and Credit

Consumer expenditures are affected by savings, debt, and credit availability. U.S.
consumers have a high debt-to-income ratio, which slows down further expenditures on
housing and large- ticket items. Credit is readily available in the United States but at fairly
high interest rates, especially to lower-income borrowers. An economic issue of increasing
importance to many unemployed U.S. consumers is the migration of manufacturers and
service jobs off shore. From India, Infosys provides outsourcing services for Cisco,
Nordstrom, Microsoft, and others. The 15,000 employees that the fast-growing $1.6 billion
company hires every year receive training in Infosys' $120 million facility outside Bangalore.
There they learn technical skills as well as "softer" skills concerning team building,
interpersonal communication, and the importance of being an ambassador for the brands they
serve.

Social – Cultural Environment

Society shapes the beliefs, values, and norms that largely define consumer tastes and
preferences. People absorb, almost unconsciously, a world view that defines their
relationships to themselves, to others, to organizations, to society, to nature, and to the
universe.

18
 Views of themselves. In the United States during the 1960s and 1970s, "pleasure seekers"
sought fun, change, and escape. Others sought "self-realization." People bought dream cars
and dream vacations and spent more time in health activities (jogging, tennis), in
introspection, and in arts and crafts (see Table 3.3 for a summary of top consumer leisure-time
activities and how they have changed over the past decade). Today, some people are adopting
more conservative behaviors and ambitions.

 Views of others. People are concerned about the homeless, crime and victims, and other social
problems. At the same time, they seek out their "own kind" for serious and long-lasting
relationships and avoid strangers. These trends portend a growing market for social-support
products and services that promote direct relationships between human beings, such as health
clubs, cruises, and religious activity. They also suggest a growing market for "social
surrogates" such as television, home video games, and chat rooms on the Internet.

 Views of organizations. After a wave of company downsizings and corporate accounting

scandals, there has been an overall decline in organizational loyalty. Many people today see
work not as a source of satisfaction, but as a required chore to earn money to enjoy
their non-work hours. Companies need to find new ways to win back consumer and employee
confidence. They need to make sure they are good corporate citizens and that their consumer
messages are honest.

 Views of society. Some people defend society (preservers), some run it (makers), some take
what they can from it (takers), some want to change it (changers), some are looking for
something deeper (seekers), and still others want to leave it (escapers). Consumption patterns
often reflect social attitude. Makers tend to be high achievers who eat, dress, and live well.
Changers usually live more frugally, drive smaller cars, and wear simpler clothes. Escapers
and seekers are a major market for movies, music, surfing, and camping.

 Views of nature. People have awakened to nature's fragility and the finiteness of its resources.
Business has responded to increased interest in being in harmony with and experiencing
nature by producing wider varieties of camping, hiking, boating, and fishing gear such as
boots, tents, backpacks, and accessories.

19
 Views of the universe. Most U.S. citizens are monotheistic, although religious conviction and
practice have been waning through the years. Certain evangelical movements are reaching out
to bring people back into organized religion. Some of the religious impulse has been
redirected into an interest in Eastern religions, mysticism, the occult, and the human potential
movement.

Other cultural characteristics of interest to marketers are the persistence of core

cultural values and the existence of subcultures. Let's look at both.

High Persistence of Core Cultural Values

Most people in the United States still believe in work, in getting married, in giving to
charity, and in being honest. Core beliefs and values are passed on from parents to children
and reinforced by major social institutions – schools, churches, businesses, and governments.
Secondary beliefs and values are more open to change. Believing in the institution of marriage
is a core belief; believing that people ought to get married early is a secondary belief.

Marketers have some chance of changing secondary values, but little chance of
changing core values. For instance, the nonprofit organization Mothers Against Drunk Drivers
(MADD) does not try to stop the sale of alcohol, but it does promote lower legal blood-
alcohol levels for driving and more-limited operating hours for businesses permitted to sell
alcohol. Although core values are fairly persistent, cultural swings do take place. In the 1960s,
hippies, the Beatles, Elvis Presley, and other cultural phenomena had a major impact on
young people's hairstyles, clothing, sexual norms, and life goals. Today's young people are
influenced by new heroes and new activities: U2's Bono, the NBA's LeBron James, and
skateboarder Tony Hawk.

Existence of Subcultures

Each society contains subcultures, groups with shared values, beliefs, preferences, and
behaviors emerging from their special life experiences or circumstances. There are sometimes
unexpected rewards in targeting subcultures. Marketers have always loved teenagers because
they are society's trendsetters in fashion, music, entertainment, ideas, and attitudes. Marketers
also know that if they attract someone as a teen, there's a good chance they will keep the

20
customer later in life. Frito – Lay, which draws 15% of its sales from teens, said it saw a rise
in chip snacking grown – ups. “We think it’s because we brought them in as teenagers,” said
Frito – Lay’s marketing director.

Technological Environment

One of the most dramatic forces shaping people's lives is technology. Through the
years, technology has released such wonders as penicillin, open-heart surgery, and the birth
control pill, and such horrors as the hydrogen bomb, nerve gas, and the sub machine gun. It
has also released such mixed blessings as cell phones and video games.

Every new technology is a force for "creative destruction." Transistors hurt the
vacuum-tube industry, xerography hurt the carbon-paper business, autos hurt the railroads,
and television hurt the newspapers. Instead of moving into the new technologies, many old
industries fought or ignored them, and their businesses declined. Yet it is the essence of
market capitalism to be dynamic and tolerate the creative destructiveness of technology as the
price of progress.

The number of major new technologies we discovered affects the economy's growth
rate. Unfortunately, technological discoveries do not arise evenly through time-the railroad
industry created a lot of investment, and then investment petered out until the auto industry
emerged. In the time between major innovations, an economy can stagnate. In the mean time,
minor innovations fill the gap: freeze-dried coffee, combination shampoo and conditioner,
antiperspirants and deodorants, and the like. They require less risk, but they can also divert
research effort away from major breakthroughs.

New technology also creates major long-run consequences that are not always
foreseeable. The contraceptive pill, for example, helped lead to smaller families, more
working wives, and larger discretionary incomes-resulting in higher expenditures on vacation
travel, durable goods, and luxury items. Cell phones, video games, and Internet are not only
reducing attention to traditional media, they are reducing face-to-face social interaction as
people listen to music, watch a movie on their cell phone, and so on. Technologies also
compete with each other.

21
 Marketers should monitor the following four trends in technology: the accelerating
pace of change, the unlimited opportunities for innovation, varying R&D budgets, and the
increased regulation of technological change.

Accelerating Pace of Change

Many of today's common products were not available 40 years ago. Electronic
researchers are building smarter chips to make our cars, homes, and offices connected and
more responsive to changing conditions. More ideas than ever are in the works, and the time
between the appearance of new ideas and their successful implementation is all but
disappearing. So is the time between introduction and peak production. Apple quickly ramped
up in a little over five years to sell 23.5 million iPod's in 2006.

Unlimited Opportunities for Innovation

Some of the most exciting work today is taking place in biotechnology, computers,
microelectronics, telecommunications, robotics, and designer materials. The Human Genome
project promises to usher in the Biological Century as biotech workers create new medical
cures, new foods, and new materials. Researchers are working on AIDS vaccines, totally safe
contraceptives, and non-fattening foods. They are designing robots for fire fighting,
underwater exploration, and home nursing.

Varying R&D Budgets

A growing portion of U.S. R&D expenditures is going into the development side of
R&D as opposed to the research side, raising concerns about whether the United States can
maintain its lead in basic science. Many companies are content to put their money into
copying competitors' products and making minor feature and style improvements. Even basic
research companies such as DuPont, Bell Laboratories, and Pfizer are proceeding cautiously,
and more consortiums than single companies are directing their research efforts toward major
breakthroughs.

22
 Increased Regulation of Technological Change

Government has expanded its agencies' powers to investigate and ban potentially
unsafe products. In the United States, the Federal Food and Drug Administration must
approve all drugs before they can be sold. Safety and health regulations have also increased in
the areas of food, automobiles, clothing, electrical appliances, and construction.

Legal Factors

Regulation Governing Direct Marketing

Direct marketing is governed by many of the acts that regulate advertising. In addition,
the Indian Post Office Act of 1898 imposes a prohibition on the transmission of injurious
items, advertisements or material related to unauthorized lotteries and obscene or offensive
matter through post. The Customs Act 1962 also provides for the detention and seizure of any
obscene matter imported into the country.

India also has the Indian Direct Selling Association (IDSA), formed in 1996, which is
a self – regulatory body for the direct selling member companies in India. The IDSA has
outlined a Code of Ethics for its members. The Code lays down guidelines for behavior
towards consumers and fellow direct sellers. In general the Code:

 prohibits misleading, deceptive or unfair sales practices, product description, claims or

illustrations, as well as unfair competitive advertising;

 Requires all explanation and demonstration of the product to be accurate and complete in
terms of price, credit terms, warranty and guarantee, return rights, after sales services, etc.

 requires direct sellers to only make verbal promises concerning the product which are
authorized by the company;

 prohibits unauthorized, untrue, obsolete, unrelated to the offer, or misleading testimonials and
endorsements;

 Mandates direct sellers to respect consumers’ privacy, contact them in a reasonable manner
during reasonable hours and avoid intrusion.

23
 prohibits exploiting the lack of commercial experience or abusing the trust of consumers;

 Prohibits inducing consumers into referral selling.

Another problem plaguing the direct marketing industry is that of unsolicited

telephone calls from various banks, financial companies, cell phone operators, credit card
companies, insurance companies, etc. The banking industry alone account for about 90% of
the unsolicited calls, according to the Telecom Regulatory Authority of India (TRAI)
estimates. Many of these companies do not appoint direct sales agents who are covered by
any rules and regulations nor have a license from any government authority. However all this
is set to change with the new regulations proposed by TRAI. The Direct Marketing Telephone
Calls (Regulation) Bill, 2006, proposes forbidding marketers from making telephone calls to
an individual subscriber for direct marketing purposes without his consent.

TRAI also has proposed maintain a central do – not call (DNC) list on a national level.
Subscribers who do not wish to be disturbed can register themselves in this list, which ensures
that their telephone numbers are no longer available to organizations, including charity and
voluntary organizations, for making direct calls. Currently, most banks maintain individual
NDC lists, which make it difficult for subscribers who have to register in each of these lists
separately. Once TRAI’s regulation becomes effective, telemarketers and service provides
will have to register themselves with the Department of Telecommunications (DoT) within a
period of 3 months. Moreover, the lists of all individual marketers will be merged with
National DNC list and only those numbers, which are not a part of the registry, will be
transferred back to the telemarketer for making calls. Further it is proposed that the telephone
numbers and other personal details of any subscriber shall not be disclosed by any marketer to
another person or establishment. If marketers call registered subscribers of the DNC list, they
would be fined to the tune of Rs. 500 to Rs. 1000 for every unwarranted call, till as such time
the complaint is processed and the penalty imposed. As opposed to this, in countries like US,
UK and Australia, where DNC lists are strictly maintained; violators have to pay huge fines.
For instance, in the US, the fines are up to $1,100 per call.

24
 In addition to the legislation against unsolicited Tele – calling, the Indian Banks’
Association has also proposed a model code of conduct for its direct selling agents. The code
proposes:

 A prospect is to be contacted for telemarketing only if:

^ The prospect has expressed a desire to acquire a product, or has been referred to by another
prospect, or is an existing customer of the bank who has given consent for accepting calls on
other products of the bank;

^ The prospect’s name, telephone number and address are available and have been taken from
one of the lists approved by the Direct selling agent’s manager;

^ The Prospect’s number is not in a DNC list.

 Telephone contacts must normally be limited between 9:30 am to 7:00 pm. Calls at any other
time may be made only if the prospect so wishes.

 Direct selling agents should respect the prospect’s privacy and should not discuss the
prospect’s interest to anyone not authorized by the prospect.

 If the prospect is not available, a brief message may be left indicating the purpose of the call.

 Telemarketing etiquettes must be maintained before, during and after the call, such as
apologizing if denied permission, limiting the conversation to business matters, offering to
call back on landline, talking in the language comfortable to the prospect, not interrupting or
arguing, not calling customers regarding products already sold, etc. Similar etiquettes should
also be maintained during personal visits.

Lesson 4: Marketing and Economic Development

The economic level of a country is the single most important environmental element to
which the foreign marketer must adjust the marketing task. The stage of economic growth
within a country affects the attitudes toward foreign business activity, the demand for goods,
the distribution systems found within a country, and the entire marketing process. In static
25
economies, consumption patterns become rigid and marketing is typically nothing more than a
supply effort. In a dynamic economy, consumption patterns change rapidly. Marketing is
constantly faced with the challenge of detecting and providing for new levels of consumption,
and marketing efforts must be matched with ever-changing market needs and wants.

Economic development presents a two-sided challenge. First, a study of the general

aspects of economic development is necessary to gain empathy regarding the economic
climate within developing countries. Second, the state of economic development must be
studied with respect to market potential, including the present economic level and the
economy's growth potential. The current level of economic development dictates the kind and
degree of market potential that exists, while knowledge of the dynamism of the economy
allows the marketer to prepare for economic shifts and emerging markets.

Economic development is generally understood to mean an increase in national

production that result in an increase in the average per capita gross domestic product (GDP).
Besides an increase in average per capita GDP, most interpretations of the concept also imply
a widespread distribution of the increased income. Economic development, as commonly
defined today, tends to mean rapid economic growth and increases in consumer demand-
improvements achieved "in decades rather than centuries."

The degree of economic development present in a region constitutes an

important consideration for marketing teams. In the literature associated with
evaluation of the economic and social status of a nation, many political and
ideological controversies have arisen. At the core, an argument regarding what
constitutes "development" and "modernization" continues. These debates are not
likely to be resolved by marketers or scholars in the near future. At the same time, it
is evident that various nations exhibit differing patterns of work activity, product
development and sale, levels of employment, and consumption based on some
notion of the "stages" of development or economic activity. These distinctions are
often useful in assessing the business potential of a country.

26
Stages of Economic Development

The best-known model for classifying countries by stage of economic development

is the five-stage model presented by Walt Rostow.2 Each stage is a function of the cost of
labor, the technical capability of the buyers, the scale of operations, interest rates, and the
level of product sophistication. Growth is the movement from one stage to another, and
countries in the first three stages are considered to be economically underdeveloped.

Briefly, the stages are as follows.

Stage 1: The traditional society. Countries in this stage lack the capability of significantly
increasing the level of productivity. There is a marked absence of systematic application of
the methods of modern science and technology. Literacy is low, as are other types of social
infrastructure.

Stage 2: The preconditions for take-off. This second stage includes those societies in the
process of transition to the take-off stage. During this period, the advances of modern science
are beginning to be applied in agriculture and production. The development of transportation,
communications, power, education, health, and other public undertakings has begun in small
but important ways.

Stage 3: The take-off. At this stage, countries achieve a growth pattern that becomes a
normal condition. Human resources and social overhead have been developed to sustain
steady development, and agricultural and industrial modernization lead to rapid expansion.

Stage 4: The drive to maturity. After take-off, sustained progress is maintained and the
economy seeks to extend modern technology to all fronts of economic activity. The economy
takes on international involvement. In this stage, an economy demonstrates that it has the
technological and entrepreneurial skills to produce not everything, but rather anything it
chooses to produce.

Stage 5: The age of high mass consumption. The age of high mass consumption leads to
shifts in the leading economic sectors toward durable consumer goods and services. Real
income per capita rises to the point where a very large number of people have significant
amounts of discretionary income.

27
 Although Rostow's classification has met with some criticism because of the difficulty
of distinguishing among the five stages, it provides the marketer with some indication of the
relationship between economic development and the types of products a country needs, and of
the sophistication of its industrial infrastructure.

Alternatively, the United Nations classifies a country's stage of economic development

based on its level of industrialization. It groups countries into three categories:

1. MDCs (more-developed countries). Industrialized countries with high per capita incomes,
such as Canada, England, France, Germany, Japan, and the United States.

2. LDCs (less-developed countries). Industrially developing countries just entering world trade,
many of which are in Asia and Latin America, with relatively low per capita incomes.

3. LLDCs (least-developed countries). Industrially underdeveloped, agrarian, subsistence

societies with rural populations, extremely low per capita income levels and little world trade
involvement. LLDCs are found in Central Africa and parts of Asia.

The UN classification has been criticized because it no longer seems relevant in the
rapidly industrializing world today. In addition, many countries that are classified as LDC’s
are industrializing at a very rapid rate whereas others are advancing at more traditional rates
of economic development. It is interesting to note in Exhibit 9.1 the differences in consumer
spending among the Latin American countries and the United States.

Countries that are experiencing rapid economic expansion and industrialization and do
not exactly fit as LDCs or MDCs are more typically referred to as newly industrialized
countries (NICs). These countries have shown rapid industrialization of targeted industries
and have per capita incomes that exceed other developing countries. They have moved away
from restrictive trade practices and instituted significant free market reforms; as a result, they
attract both trade and foreign direct investment. Chile, Brazil, Mexico, South Korea,
Singapore, and Taiwan are some of the countries that fit this description NICs have become
formidable exporters of many products, including steel, automobiles machine tools, clothing,
and electronics, as well as vast markets for imported products.

28
 Brazil provides an example of the growing importance of NICs in world trade,
exporting everything from alcohol to carbon steel. Brazilian orange juice, poultry, soybeans
and weapons (Brazil is the world's sixth-largest weapons exporter) compete with U.S.
products for foreign markets. Embraer, a Brazilian aircraft manufacturer, sold planes to over
60 countries and provides a substantial portion of the commuter aircraft used in the United
States and elsewhere. Even in automobile production, Brazil is a world player: ships more
than 200,000 cars, trucks, and buses to Third World countries annually. Volkswagen
produced more than 3 million VW Beetles in Brazil and invested more than $500 million in a
project to produce the Golf and Passat automobiles. The firm also recently announced a deal
to sell $500 million worth of auto parts to a Chinese partner.' General Motors has invested
$600 million to create what it calls "an industrial complex" - a collection of 17 plants
occupied by suppliers such as Delphi, Lear, and Goodyear to deliver pre assembled modules
to GM's line workers. All in all, auto and auto parts makers are investing more than $2.8
billion aimed at the 200 million people in the Mercosur "market, the free trade group formed
by Argentina, Brazil, Paraguay, and Uruguay.

Among the NICs, South Korea, Taiwan, Hong Kong, and Singapore have had such
rapid growth and export performance that they are known as the "Four Tigers" of Southeast
Asia. The Four Tigers have almost joined the ranks of developed economies in terms of GDP
per head. These countries managed to dramatically improve their living standards by
deregulating their domestic economies and opening up to global markets. From typical Third
World poverty, each has achieved a standard of living equivalent to that of industrialized
nations, with per capita incomes in Hong Kong and Singapore rivaling those of the wealthiest
Western nations.

These four countries began their industrialization as assemblers of products for U.S.
and Japanese companies. They are now major world competitors in their own right. Korea
exports such high-tech goods as petrochemicals, electronics, machinery, and steel, all of
which are in direct competition with Japanese and U.S.-made products. In consumer products,
Hyundai, Kia, Samsung, and Lucky- Gold star are among the familiar Korean made brand
names in automobiles, microwaves, and televisions sold in the United States.

29
 Korea is also making sizable investments outside its borders. A Korean company
recently purchased 58 percent of Zenith, the last remaining TV manufacturer in the United
States. At the same time, Korea depends on Japan and the United States for much of the
capital equipment and components needed to run its factories.

Most-, Less-, and Least-Developed Economies

The various views of economic development have been summarized by the

terms most-, less-, and least-developed. These categories are used by the United Nations
and have replaced the first, second, and third world categorization system that was
previously used. Table 2.2 indicates some of the nations that have been identified in
each of these categories. Purchases of products and services are affected by the status
of each, which in turn affects the ability for international companies to secure new
market segments.

The stage of economic development determines the potential to market and

sell goods and services in a given region. In a least-developed nation, fewer items
may be salable and most would be targeted at basic needs. Greater development
affords an increased number of potential products to be sold to an expanding number
of potential customers. A mobile phone "app" that makes it possible to find a
restaurant and place a reservation online would be most viable in the most-developed
countries especially Germany and the United Kingdom, which have the greatest
number of cell phone owners per capita. In least-developed nations, especially Burma
(Myanmar) and Niger, the marketing team would expect few potential consumers for
both the app and for restaurants with online booking facilities.

POPULATION GDP PER NUMBEROF PHONES

CAPITA MOBILE PER 100
PHONES PEOPLE
Most-Developed Countries (Industrialized with high per capita incomes)
Canada 33,487,000 $38,400 21,455,000 64.1
Germany 82,329,000 $34,200 107,245,000 130.3
United 61,113,000 $35,400 75,565,000 123.6

30
Kingdom
France 64,057,000 $32,800 59,259,000 92.5
Japan 127,078,000 $32,600 110,395,000 86.9
United States 307,212,000 $46,400 270,000,000 87.9
Less-Developed Countries (Industrially developing with some world trade)
Colombia 43,677,000 $9,200 41,365,000 94.7
Thailand 65,998,000 $8,100 62,000,000 93.9
Chile 16,601,000 $14,700 14,797,000 89.1
1
China $6,500 634,000,000 47.36
,338,612,000
Brazil 198,739,000 $10,200 150,641,000 75.7
India 1,156,897,000 $3,100 545,000,000 47.1
Least-Developed Countries (Industrially underdeveloped, agrarian, subsistence)
Niger 15,306,000 $2,400 1,677,000 11.0
Chad 10,329,000 $1,500 1,809,000 17.5
Sudan 41,087,000 $2,300 11,186,000 27.2
Myanmar
48,137,000 $1,200 375,000 0.78
(Burma)
Cambodia 14,494,000 $1,900 4,237,000 29.2
Haiti 9,035,000 $1,300 3,200,000 35.4

Table 2.2: Consumption Rates in Most-, less-, and least-Developed Countries

Lesson 5: Green Marketing

In the past two decades, an increasing number of more environmentally friendly

products have been developed in the international arena. When conducting a market
segmentation program for these items, the distinction may be drawn between consumer
preferences for green products when as a matter of choice versus when it becomes a matter of
necessity.

31
Consumer Preferences

One of the primary challenges facing Green marketers has been the inability to entice
consumers to spend more for environmentally safe products. In essence, the majority of
customers only purchase green products when the item maintains the same level of price,
quality, convenience and performance.

Green By Necessity

In many bottom – of – the – pyramid nations, sustainability has become a driving

force in purchases. Any item that saves or reuses water, runs on solar power or renewable
batteries, or helps in some other way to preserve natural resources has a better chance to be
accepted and purchased. Part of the reason for this advantage is that such products also save
the consumer money. A growing amount of evidence suggests that sustainable products create
one of the largest growing marketing opportunities in nations where the majority of citizens
live below the poverty line.

SC Johnson has focused on developing sustainable agricultural processed for the

production of a key ingredient, pyrethrum, to the company’s botanical pesticides. The
company sources much of this ingredient, which is made from chrysanthemums, from East
Africa. Working with farmers in the region, the company established sustainable practices
that are ensuring its own profit and long – term viability of the crop for East African farmers.

Green Marketing and Product Development

A quality issue of growing importance the world over, especially in Europe and the
United States is green marketing. Europe is at the forefront of the "green movement," with
strong public Opinion and specific legislation favoring environmentally friendly marketing
and products. Green marketing is a term used to identify concern with the environmental
consequences of a variety of marketing activities. In the United States, Japanese car
manufacturers are taking advantage of their gas-guzzling American cousins as consumers
become more concerned about the environmental effects of SUV s like the General Motors
Hummer. The European Commission passed legislation to control all kinds of packaging
waste throughout the European Community. Two critical issues that affect product

32
development are the control of the packaging component of solid waste and consumer
demand for environmentally friendly products.

The European Commission (EC) issued guidelines for eco-labeling that became
operational in 1992. Under the directive, a product is evaluated on all significant
environmental effects throughout its life cycle, from manufacturing to disposal-a cradle-to-
grave approach. A detergent formulated to be biodegradable and nonpolluting would be
judged friendlier than a detergent whose formulation would be harmful when discharged into
the environment. Aerosol propellants that do not deplete the ozone layer are another example
of environmentally friendly products. No country's laws yet require products to carry an eco-
label to be sold, however. The designation that a product is "environmentally friendly" is
voluntary, and environmental success depends on the consumer selecting the eco-friendly
product.

Since the introduction of the eco-label idea, Hoover washing machines are the only
products that gained approval for the eco-label, interestingly enough, the benefits of winning
the symbol resulted in Hoover trebling its market share in Germany and doubling its share of
the premium sector of the U.K. washing-machine market. The approval process seems to be
deterring many European manufacturers, many of whom are using their own, unofficial
symbols. The National Consumer Council, a consumer watchdog group, reports that many
consumers are so confused and cynical about the myriad symbols that they are giving up
altogether on trying to compare the green credentials of similar products.

Laws that mandate systems to control solid waste, while voluntary in one sense, do
carry penalties. The EC law requires that packaging material through all levels of distribution,
from the manufacturer to the consumer, be recycled or reused. Currently, between 50 percent
and 65 percent of the weight of the packaging must be recovered, and between 25 percent and
45 percent of the weight of the totality of packaging materials contained in packaging waste
are recycled.

Each level of the distribution chain is responsible for returning all packaging, packing,
and other waste materials up the chain. The biggest problem is with the packaging the
customer takes home; by law the retailer must take back all packaging from the customer if no

33
central recycling locations are available. For the manufacturer's product to participate in direct
collection and not have to be returned to the retailer for recycling, the manufacturer must
guarantee financial support for curbside or central collection of all materials. The growing
public and political pressure to control solid waste is a strong incentive for compliance.

Although the packaging and solid waste rules are burdensome, there are successful
cases of not only meeting local standards but also being able to transfer this approach to other
markets. Procter & Gamble's international operations integrated global environmental
concerns as a response to increasing demands in Germany. It introduced Lenor; a fabric
softener in a super concentrated form, and sold it in a plastic refill pouch that reduced
packaging by 85 percent. This move increased brand sales by 12 percent and helped set a
positive tone with government regulators and activists. The success of Lenor was transferred
to the United States, where P&G faced similar environmental pressures. A super concentrated
Downy, the U.S. brand of fabric softener, was repackaged in refill pouches that reduced
package size by 75 percent, thereby costing consumers less and actually increasing Downy
market share. The global marketer should not view green marketing as a European problem;
concern for the environment is worldwide and similar legislation is sure to surface elsewhere.
This is another example of the need to adapt products for global marketing.

Lesson 6: Corporate Social Responsibility

Corporate Public affairs and Community Relations.

Corporate Public relations essentially involves developing a favorable image for a

company in the minds of its target publics through investment in socially responsible causes.
This very often gets termed as a part of the corporate social responsibility (CSR) of the
Corporation, where it tries to project the image of being a good citizen. CSR can take many
forms. It could involve healthcare for the community where the company is located,
scholarships for needy children for education, contribution towards the sanitation programs
run by the local municipality, etc. Today many companies such as the Birlas, Tatas, Reliance,

34
etc. have engaged in CSR which has contributed significantly towards creating a positive
impact for the company.

The main activities of the Tata group revolve around community health, women and
children with concentration on basic education and vocational training, drinking water,
irrigation and farming. The Piramal group runs several educational institutions and has also
invested money in student hostels. The CK Birla group spends a lot on scientific institutions
and its other work includes building and restoration work on temples, balwadi’s and medical
centers.

Justice or fairness-Does the action respect the canons of justice or fairness to all
parties involved? Answers to these questions can help the marketer ascertain the degree to
which decisions are beneficial or harmful, right or wrong, or whether the consequences of
actions are ethically or socially responsible. Perhaps the best framework to work within is
defined by asking: Is it legal? Is it right? Can it withstand disclosure to stockholders to
company officials, and to the public?

Although the United States has clearly led the campaign against international bribery,
European firms and institutions are apparently putting more effort and money into the
promotion of what they call "corporate social responsibility. For example the watch dog group
Corporate Social Responsibility (CSR) Europe, in cooperation with the INSEAD business
school outside Paris, is studying the relationship between investment attractiveness and
positive corporate behaviors on several dimensions. Their studies find a strong link between
firms' social responsibility and European institutional investors' choices for equity
investments." All this is not to say that European firms do not still have their own corporate
misbehaviors. However, we expect more efforts in the future to focus on measuring and
monitoring corporate social responsibility around the world.

Culture’s Influence on Strategic Thinking

Perhaps Lester Thurow provided the most articulate description of how culture
influences managers' thinking about business strategy. He distinguished between the British-
American "individualistic" kind of capitalism and the "communitarian" form of capitalism in
Japan and Germany. The business systems in the latter two countries are typified by

35
cooperation among government, management, and labor, particularly in Japan. On the other
hand, adversarial relationships among labor management and government are more the norm
in the United Kingdom, and particularly in the United States. We see these cultural
differences reflected in Hofstede's results-on the IDV scale the United States is 91, the United
Kingdom is 89, Germany is 6 and Japan is 46.

We also find evidence of these differences in a comparison of the performance of

American, German, and Japanese firms. In the less individualistic cultures labor and
management cooperate-in Germany labor is represented on corporate boards, and in. Japan
management takes responsibility for the welfare of the labor force. Because the welfare of the
workforce matters to Japanese and German firms, their sales revenues are more stable over
time. American-style layoffs are eschewed. The individualistic American approach to labor-
management relations is adversarial-each side takes care of itself. Therefore we have
damaging strikes and huge layoffs that result in more volatile performance for American
firms.

At the start of this century, the American emphasis on competition seems to be the
best approach. But it is important to recall that key word in Adam Smith's justification for
competition “frequently” It's worth repeating here, "By pursuing his own interest he
frequently promotes that of society ....” Smith wrote frequently, not always, most of the time,
or even often. A competitive, individualistic approach works well in the context of an
economic boom. During the late 1990s American firms dominated Japanese and European
ones. The latter seemed today, conservative, and slow in the global information economy.
However, downturns in a competitive culture can be ugly things. A review of the performance
and layoffs at Boeing during the commercial aircraft busts out the late 1990s and early 2000
are instructive. It should also be mentioned that Thurow and others writing in the area
omitted a fourth kind of cap"-that found in Chinese cultures. Its distinguishing
characteristics area amore entrepreneurial approach and an emphasis on guanxi (one’s
network of personal connections) as the coordinating principle among firms. This fourth kind
of capitalism is also predicted by culture. Chinese cultures are high in PDI and low in IDV
and the strong reciprocity implied by the notion of guanxi fits the profile well.

36
Social Responsibility Marketing

The effects of marketing clearly extend beyond the company and the customer to
society as a whole. Marketers must carefully consider their role in broader term, and the
ethical, environmental, legal and social context of their activities. Increasingly, consumers
demand such behavior, as Starbucks Chairman Howard Schultz has observed:

We see a fundamental change in the way consumers buy their products and services.
… Consumers now commonly engage in a cultural audit of providers. People want to know
your value and ethics demonstrated by how you treat employees, the community in which you
operate. The implication for marketers is to strike the balance between profitability and social
consciousness and sensitivity. … It is not a program or a quarterly promotion, but rather a
way of life. You have to integrate this level of social responsibility into your operation.

This realization calls for a new term that enlarges the marketing concept. We propose
calling it the “social marketing concept.” The social marketing concept holds that the
organization’s task is to determine the needs, wants and interests of target marketers and to
deliver the desired satisfaction more effectively and efficiently than competitors in a way that
preserves or enhances the consumer’s and society’s long term well – being. Sustainability has
become a major corporate concern in the face of the challenging environmental forces. Firms
such as Hewlett – Packard have introduced recyclable computers and printers and reduced
greenhouse emissions; McDonald’s strives for a “socially responsible supply system”
encompassing everything from healthy fisheries to redesigned packaging.

The societal marketing concept calls upon marketers to build social and ethical
considerations into their marketing practices. They must balance and juggle the often
conflicting criteria of company profits, consumers want satisfaction, and public interest

As goods become more commoditized, and as consumers grow more socially

conscious, some companies – including the body shop, Timberland and Patagonia – are
adding social responsibility as a way to differentiate themselves from competitors, consumer
preference and achieve notable sales and profit gains. They believe customers will
increasingly look for signs of good corporate citizenship.

37
UNIT II

Lesson 1: Consumer Behavior

Its Origin and Strategic Applications

Consumer behavior has changed dramatically in the past decade. Today, consumers
can order online many customized products ranging from sneaker to computers. Many have
replaced their daily newspaper with customized, online editions of these media and are
increasingly receiving information from online sources. Students choosing a university no
longer rely on information from mailed catalogs; instead, they have online access to all the
pertinent information about the university’s courses and professors and, in some cases, can
visit, virtually, actual classes. People wanting to sell their old computers or grandma’s antique
credenza no longer need to advertise in the local newspaper or rely on a pricy auction house;
instead, they can sell these items via ebay.com. Consumer who want out – of – print – books
no longer have to visit out – of – the – way stores with hundreds of poorly organized dusty
shelves, and those who wish to purchase a book published in another country no longer have
to call foreign publishers or deal with the bureaucratic nuances of overseas shipping; instead,
they visit amazon.com, where they can easily locate and place orders for the books they seek.
TV viewers can now avoid advertising commercials using the ‘skip’ features on their digital
video recorders and order on – demand previously shown TV programs as well as movies. All
of these new ways of selling products and services became available to consumers during the
past fifteen years and are the result of digital technologies. And they also have another thing
in common: They exist today because they reflect and understanding of consumer needs and
consumer behavior.

The term consumer behavior is defined as the behavior that consumers display in
searching for, purchasing, using, evaluation and disposing of products and services that they
expect will satisfy their needs. Consumer behavior focuses on hoe individuals make decisions
to spend their available resources (time, money, effort) on consumption – related items. That
includes what they buy, why they buy it, when they buy it, where they buy it, how often they
buy it, how often they use it, how they evaluate it after the purchase, the impact of such
evaluations on future purchases, and how they dispose of it.

38
 Clearly, as individuals, we are all unique. However, one of the most important
constants among all of us, despite our differences, is that, above all, we are consumers. We
use or consumer on a regular basis food, clothing, shelter, transportation, education,
equipment, vacations, necessities, luxuries, services and even ideas. As consumers, we play a
vital role in the health of the economy – local, national and international. The purchase
decisions we make affect the demand for basic raw materials, for transportation, for
production, for banking; they affect the employment of workers and the deployment of
resources, the success of some industries and the failure of others. In order to succeed in any
business and especially in today’s dynamic and rapidly evolving marketplace, marketers need
to know everything they can about consumers – what they want, what they think, how they
work, how they spend their leisure time. They need to understand the personal and group
influences that affect consumer decisions and how these decisions are made. And in these
days of ever – widening media choices, they need to not only identify their target audiences,
but they need to know where and how to reach them.

The term consumer behavior describes two different kinds of consuming entities: the
personal consumer and the organizational consumer. The personal consumer buys goods and
services for his or her own use, for the use of the household, or as a gift for a friend. In each
of these contexts, the products are bought for final use by individuals, who are referred to as,
end users or ultimate consumers. The second category of consumer – the organizational
consumer – includes profit and non – profit businesses, government agencies (local, state and
national) and institutions (e.g., schools, hospitals and prisons) all of which must buy products,
equipment and services in order to run their organizations. Despite the importance of both
categories of consumers – individuals and organizations – this book will focus on the
individual consumer, who purchases for his or her own personal use or for household use. End
– use consumption is perhaps the most pervasive of all types of consumer behavior, for it
involves every individual, of every age and background, in the role of either buyer or user, or
both.

Consumer Research Paradigms

The early consumer researchers gave little thought to the impact of mood, emotion, or
situation on consumer decisions. They believed that marketing was simply applied economics

39
and those consumers were rational decision makers who objectively evaluated the goods and
services available to them and selected those that gave them the highest utility (satisfaction at
the lowest cost. Later on, researchers realized that consumers were not always consciously
aware of why they made the decisions they did. Even when they were aware of their basic
motivations, consumers were not always willing to reveal those reasons. In 1939, a Viennese
psychoanalyst named Ernest Dichter began to use Freudian psychoanalytic techniques to
uncover the hidden motivations of consumers. By the late 1950s, his research methodology
(called motivational research), which was essentially qualitative in approach, was widely
adopted by consumer researchers. As a result of Dichter’s work and subsequent research
designed to search deep within the consumer’s psyche, consumer researchers today use two
different types of research methodology to study consumer behavior: quantitative research
and qualitative research.

Quantitative Research

Quantitative research is descriptive in nature and is used by researchers to understand

the effects of various promotional inputs on the consumer, thus enabling marketers to
"predict" consumer behavior. This research approach is known as positivism. The research
methods used in quantitative research consists of experiments, survey techniques, and
observation. The findings are descriptive, empirical, and if collected randomly (i.e., using a
probability sample), can be generalized to larger populations. Because the data collected are
quantitative, they lend themselves to sophisticated statistical analysis.

Qualitative Research

Qualitative research methods include depth interview, focus groups, metaphor

analysis, collage research, and projective techniques. The e techniques are administered by
highly trained interviewer-analyst who al analyze the findings; thus, the findings tend to be
somewhat subjective. Because sample sizes are necessarily small, findings cannot be
generalized to larger populations. They are primarily used to obtain new ideas for promotional
campaigns and product that can be tested more thoroughly in larger, more comprehensive
studies.

40
Qualitative methods are also used by consumer behavior researchers who are interested in the
act of consumption rather than in the act of buying (i.e., decision making). They view
consumer behavior as a subset of human behavior, and increased understanding as a key to
reducing negative aspects of consumer behavior- the so-called "dark side" of consumer
behavior-such as drug addiction, shoplifting, alcoholism, and compulsive buying. Research
focused on understanding consumer experiences is called interpretivsm.

Combining qualitative and quantitative research findings

Marketers often use a combination of quantitative and qualitative research to help

make strategic marketing decisions. For example- they use qualitative research findings to
discover new ideas and to develop promotional strategy and quantitative research findings to
predict consumer reactions to various promotional inputs. Frequently, ideas stemming
from qualitative research are tested empirically through quantitative studies. The predictions
made possible by quantitative research and the understanding provided by qualitative research
together produce a richer and more robust profile of consumer behavior than either research
approach used alone. The combined findings enable marketers to design more meaningful and
effective marketing strategies.

Lesson 2: Market Segmentation

A market consists of people with wants and needs, money to spend, and the
willingness to spend money on those wants and needs. International markets vary due
to several factors. Marketers consider these factors when developing international
segmentation strategies. This chapter focuses on cultural elements associated with
markets and segmentation language, political and legal systems, economic conditions,
and infrastructure. Market segmentation consists of identifying all potential customer
groups that are viable for the purposes of marketing products. When identifying market
segments marketers first seek to understand the cultural factors that exist across
marketplaces, as well as all of the other forces in the international marketing context."

Market segmentation and diversity are complementary concepts. Without a diverse

marketplace composed of many different peoples with different backgrounds, countries of
origin, interests, needs and wants, and perceptions, there would be little reason to segment
41
markets. Diversity in the global marketplace makes market segmentation an attractive, viable,
and potentially highly profitable strategy. The necessary conditions for successful
segmentation of any market are a large enough population with sufficient money to spend
(general affluence) and 'sufficient diversity to lend itself to partitioning the market into sizable
segments on the basis of demographic, psychological, or other strategic variables. The
presence of these conditions in the United States, Canada, Western Europe, Japan, Australia,
and other industrialized nations makes these marketplaces extremely attractive to global
marketers.

When marketers provide a range of product or service choices to meet diverse

consumer interests, consumers are better satisfied, and their overall happiness, satisfaction,
and quality of life are ultimately enhanced. Thus, market segmentation is a positive force for
both consumers and marketers alike.

What Is Market Segmentation?

Market segmentation can be defined as the process of dividing a market into

distinct subsets of consumers with common needs or characteristics and selecting one or more
segments to target with a distinct marketing mix. Before the widespread acceptance of market
segmentation, the prevailing way of doing business with consumers was through mass
marketing – that is, offering the same product and marketing mix to all consumers. The
essence of this strategy was summed up by the entrepreneur Henry Ford, who offered the
Model T automobile to the public "in any color they wanted, as long as it was black."

If all consumers were alike-if they all had the same needs, wants, and desires, and
the same background, education, and experience-mass (undifferentiated) marketing
would be a logical strategy. Its primary advantage is that it costs less: Only one advertising
campaign is needed, only one marketing strategy is developed, and usually only one
standardized product is offered. Some companies, primarily those that deal in agricultural
products or very basic manufactured goods, successfully follow a mass-marketing
strategy. Other marketers, however, see major drawbacks in an undifferentiated marketing
approach. When trying to sell the same product to every prospective customer with a single
advertising campaign, the marketer must portray its product as a means for satisfying a

42
common or generic need and, therefore, often ends up appealing to no one. A refrigerator may
fulfill a widespread need to provide the home with a place to store perishable food that needs
to be kept either cold or frozen (so that it does not spoil), but a standard-size refrigerator may
be too big for a grandmother who lives alone and too small for a family of six, without market
differentiation, both the grandmother and the family of ix would ha e to make do with the
very same model, and, as we all know "making do-is a far cry from being satisfied.

The strategy of segmentation allows producers to avoid head-on competition in the

marketplace by differentiating their offerings, not only on the basis of price but also through
styling, packaging, promotional appeal, method of distribution, and superior service.
Marketers have found that the costs of consumer segmentation research, shorter production
runs, and differentiated promotional campaigns are usually more than offset by increased
sales. In most cases, consumers readily accept the passed-through cost increases for products
that more closely satisfy their specific needs.

Market segmentation is just the first step in a three-phase marketing strategy. After
segmenting the market into homogeneous clusters, the marketer then must select one or more
segments to target to accomplish this, the marketer must decide on a specific marketing mix-
that is a specific product, price, channel, and/or promotional appeal for each distinct segment.
The third step is positioning the product so that it is perceived by the consumers in each target
segment as satisfying their needs better than other competitive offerings.

Who Uses Market Segmentation?

Because the strategy of market segmentation benefits both the consumer and the
marketer, marketers of consumer goods are eager practitioners. For example, Chevrolet
(www.chevrolet.com) targets its new Cobalt automobile with its sporty styling, minimal rear
seat, and small trunk to young singles; it targets its Impala, a much larger vehicle at the family
car buyer needing a roomier vehicle. Another example is the market segmentation of
marketers of wristwatches. To illustrate, Fossil (www.fossil.com), a manufacturer of popular
priced fashion-conscious wristwatches, makes wristwatches to appeal to the demographics
and functional-lifestyle need of consumers. More specifically, Fossil’s watches (and those of
many other wristwatch manufacturers) can be segmented in terms of four segments: (1)

43
gender of the wearer (e.g., adult male versus adult female users), (2) age of users (e.g., first or
starter watches, children's watches, or adult watches); (3) function or lifestyle (business
dress, runners' watches, swimmers or divers watches, cell phone watches, etc.), and (4) price
(e.g., watches costing less than $100, $100-$200, more than $200). Some limited edition and
highly collectable wristwatches (e.g., some of those manufactured by firms like Carter, Rolex,
and Patek Philippe) can cost $50,000 and up!

Industrial firms also segment their markets, as do not-for-profit organizations. For

example, Peterbilt Motors Company (www.peterbilt.com) produces different models of truck
to meet the needs of long-haul truckers, construction projects, refuse collection companies,
logging firms, and so on. The company's Web site offers a listing of its various vehicles by
segment types.

Bases for Segmentation

The first step in developing a segmentation strategy is to select the most

appropriate base(s) on which to segment the market. Nine major categories of consumer
characteristics provide the most popular bases for market segmentation. They include
geographic factors, demographic factors, psychological factors, psychographic (lifestyle)
characteristics, socio-cultural variables, use-related characteristics, use-situation factors,
benefits sought, and forms of hybrid segmentation -such as demographic-psychographic
profiles, geo-demographic factors, and values and lifestyles. Hybrid segmentation formats
each use a combination of several segmentation bases to create rich and comprehensive
profiles of particular consumer segments (e.g., a combination of a specific age range, income
range, lifestyle, and profession). For example, the Bump Fighter Shaving System,
manufactured by the American Safety Razor Company (www.asrco.com), is a replaceable-
blade razor designed specifically for African American males. The product line has been
expanded to now include shaving gel, skin conditioner, a disposable version of the razor, and
a treatment mask (to be applied prior to sleeping). Table 3.1 lists the nine segmentation bases,
divided into specific variables with examples of each. The following section discusses each of
the nine segmentation bases.

44
Geographic Segmentation

In geographic segmentation, the market is divided by location. The theory behind

this strategy is that people who live in the same area share some similar needs and wants and
that these needs and wants differ from those of people living in other areas. To illustrate,
certain supermarket and specialty related products sell better in one market, or a particular
region, than in others. For example, whereas coffee-bean grinders are a "must have" in
kitchens of people living in the Northwest, they are much less common anywhere else in the
United States; and, similarly, Starbucks Coffee (www.starbucks.com) sells plenty of full-
body coffees on the West Coast, but needed to introduce a line of Milder Dimensions®
coffees to better satisfy its East Coast consumers (who tend to prefer a milder coffee than
their West Coast counterparts)

Some marketing scholars have argued that direct-mail merchandise catalogs, national
toll-free telephone numbers, satellite television transmission, global communication networks,
and especially the Internet have erased all regional boundaries and that geographic
segmentation should be replaced by a single global marketing strategy. Clearly, any company
that decides to put its catalog on the Internet makes it easy for individuals all over the world
to browse and become customers. For example, vintage wristwatch dealers in New York,
Boston, or Dallas (primarily selling 1940s-1970s high end wristwatches to collectors) have
posted their catalogs on the Web, advertise their Web addresses in International Wristwatch
and other similar magazines, and gladly accept orders from both U.S. and overseas customers.
For the consumers who shop on the Internet, it often makes little difference if online retailers
are around the corner or halfway around the world-the only factor that differs is the shipping
charge.

Other marketers have, for a number of years, been moving in the opposite direction
and developing highly regionalized marketing strategies. For example, Campbell's Soup
(www.campbellsoup.com) segments its domestic market into more than 20 regions, each
with its own advertising and promotion budget. Within each region, Campbell's sales
managers have the authority to develop specific advertising and promotional campaigns
geared to local market needs and conditions, using local media ranging from newspapers

45
to church bulletins. They work closely with local retailers on displays and promotions
and report that their micromarketing strategies have won strong consumer support.

Marketers have observed divergent consumer purchasing patterns among urban,

suburban, and rural areas. Throughout the United States, more furs and expensive
jewelry are sold in cities than in small towns. Even within a large metropolitan area,
different types of household furnishings and leisure products are sold in the central city
than in the suburbs. Convertible sofas and small appliances are more likely to be bought
by city apartment dwellers; suburban homeowners are better prospects for lawn mowers
and barbecue grills. Probably the best example of successful segmentation based on
geographic density is the giant Wal-Mart operation (www.walmart.com). Historically,
Wal-Mart's basic marketing strategy was to locate discount stores in small towns (often
in rural areas) that other major retail chain operations were ignoring at the time. Now that
Wal-Mart has become the largest retailer in the world with 3,600 stores in the United States
and 1,500 stores outside the United States, the firm has opened new stores in more populated
locales, such as San Diego, California, and the Long Island, New York suburban towns of
Westbury and East Meadow (both suburbs of New York City).

In summary, geographic segmentation is a useful strategy for many marketers. It is

relatively easy to find geographically based differences for many products. In addition,
geographic segments can be easily reached through the local media, including newspapers,
TV and radio, and regional editions of magazines.

Demographic Segmentation

Demography refers to the vital and measurable statistics of a population.

Demographic characteristics, such as age, sex, marital status, income, occupation,

and education, are most often used as the basis for market segmentation. Demographics help
to locate a target market, whereas psychological and socio-cultural characteristics help to
describe how its members think and how they feel. Demographic information is often the
most accessible and cost-effective way to identify a target market. Indeed, most secondary
data including census data are expressed in demographic terms. Demographics are easier to

46
measure than other segmentation variables; they are invariably included in psychographic
and socio-cultural studies because they add meaning to the findings.

Demographic variables reveal ongoing trends that signal business opportunities

such as shifts in age, gender, and income distribution. For example, demographic studies
consistently show that the "mature-adult market" (the 50+ market) has a much great
proportion of disposable income than its younger counterparts. This factor alone makes
consumers over age 50 a critical market segment for products and services that they buy
for themselves, for their adult children, and for their grandchildren.

Age

Product needs and interests often vary with consumers' age. For instance, young
investors (those in their 30s to late 40s) as might be expected, tend to seek long-term
gains when they invest, whereas those over 55 years of age tend to be more cautious
place more importance on the intermediate gain and current income of a potential
investment. Because of such age-motivated differences, marketers have found age to be
a particularly useful demographic variable for market segmentation.

The largest demographic segment-in the U.S. population consists of baby boomers,
78 million consumers born between 1946 and 1964. They spend over $1 trillion annually, and
control 70 percent of the nation's wealth. While sometimes thought of as being "old" and
"sickly," the reality is that 40 percent of all boomers believe that they are currently living the
best years of their lives, and another 40 percent feel that the best years of their lives are still
ahead of them. They are wealthy, optimistic, and have moved from a materialistic to a more
experiential phase of their lives. Findings from a recent study, presented in Table 3.2 has
segmented baby boomers into four sub segments-those "looking for balance," those
"confident and living well," those "at ease," and those "overwhelmed."

Many marketers have carved themselves a niche in the marketplace by concentrating

on a specific age segment. For example, Heinz introduced EZ Squirt ketchup (which includes
one version that is green in color) to better appeal to tweens and Aqua Velva, a 50-year-old
brand of men's aftershave, is now targeting younger adult males with a new product, Ice
Balm, which it advertises on both network and cable TV stations like Spike, ESPN, and the

47
Speed Channel. Indeed, the men's grooming products category, which generates over $1
billion annually in sales, is experiencing a rapid expansion in terms of the number of new
products being introduced each year. For instance, one firm, Sharps, positions itself as an
outcast and tells users to "contemplate the goat" that appears on the product's package as part
of the product usage instructions. It targets its products to young men who do not fit into a
Hugo Boss or Calvin Klein category, and who view themselves as risk takers and marginally
countercultural. Still further, while four years ago McDonald's (www.mcdonalds.com) spent
80 percent of its advertising budget on prime-time television, today it spends less than half its
budget on prime-time TV and has increased its spending on Internet portals in an effort to
reach young customers online. Similarly, Coke is spending more than $3 million on
interactive media in an attempt to better connect with 12- to 24-year-old consumers.

Age, especially chronological age, implies a number of underlying forces. In

particular, demographers have drawn an important distinction between age effects
(occurrences due to chronological age) and cohort effects (occurrences due to growing up
during a specific time period). Examples of the age effect are the heightened interest 'in
leisure travel that often occurs for people (single and married) during middle age (particularly
in their late fifties or early sixties) and the interest in learning to play golf. Although people of
all ages learn to play golf, it is particularly prevalent among people in their fifties. These two
trends are examples of age effects because they especially seem to happen as people reach a
particular age category.

In contrast, the nature of cohort effects is captured by the idea that people hold onto
the interests they grew up to appreciate. If 10 years from today it is determined that many
rock-and-roll fans are over 55, it would not be because older people have suddenly altered
their musical tastes but because the baby boomers who grew up with rock and roll have
become older. As Bill Whitehead, CEO of the advertising agency Bates North America,
noted: "When baby boomers are 70, they'll still eat pizza and still listen to the [Rolling]
Stones."? It is important for marketers to be aware of the distinction between age effects and
cohort effects: One stresses the impact of aging, whereas the second stresses the influence of
the period when a person is born and the shared experiences with others of the same age.
Table 3.3 presents a sample of "defining moments" that shaped particular age cohorts' in

48
specific countries or regions. We must remember that cohort effects are ongoing and lifelong.
To illustrate this point, Table 3.4 identifies and distinguishes among seven different American
age cohort groupings.

Sex

Like age, gender is quite frequently a distinguishing segmentation variable. Some

products and services' are quite naturally associated more or less with males or females. For
instance, women have traditionally been the main users, of such products as hair coloring and
cosmetics, and men have been the main users of tools and shaving preparations, However, sex
roles have blurred, and gender is no longer an accurate way to distinguish consumers in some
product categories. For example, women are buying household repair tools, and men have
become significant users of skin care and hair products. It is becoming increasingly common
to see magazine ads and TV commercials that depict men and women in roles traditionally
occupied by the opposite sex. For example, many ads reflect the expanded child-nurturing
roles of young fathers in today's society.

Much of the change in sex roles has occurred because of the continued impact of dual-
income households. One consequence for marketers is that women are not as readily
accessible through traditional media as they once were. Because working women do not have
much time to watch TV or listen to the radio, many advertisers now emphasize magazines in
their media schedules, especially those specifically aimed at working women (e.g., Working
Mother). Direct marketers also have been targeting time pressured working women who use
merchandise catalogs, convenient 800 numbers, and Internet sites as ways of shopping for
personal clothing and accessories, as well as many household and family needs. Recent
research has shown that men and women differ in terms of the way they look at their Internet
usage. Specifically, men tend to "click on" a Web site because they are "information hungry,"
whereas women click because "they expect communications media to entertain and educate."?
Interestingly, analysis under- taken by Wal-Mart has revealed that more women than men
shop their Web site, and that their typical online customer is a working mom who uses the
Internet to satisfy a portion of her shopping needs. Still further, the research indicates that 92
percent of Wal-Mart's online shoppers visit a Wal-Mart store at least once a month, and these
online customers have higher income and education levels than their only in-store shop- per

49
counterparts. Table 3.5 presents additional male and female differences when it comes to
using the Internet and compares some key usage situations and favorite Internet materials for
men versus women.

Furthermore, when it comes to being "hungry," research shows that young men are
"more likely than average to go to a quick service restaurant for breakfast." Burger King,
which controls only 10 percent of this breakfast market (compared to McDonald's 40 percent),
has come to the conclusion that young men want tasty food, and are unconcerned about
calories and fat content. Consequently, Burger King is now offering the Enormous Omelet,
complete with 730 calories, 47 grams of fat, 415 mg of cholesterol and 1,860 mg of sodium.
In contrast to both McDonalds and Burger King, Wendy's has tended to feature menu options
like its Fresh Fruit/Bowl that appeal to women.

Marital Status

Traditionally, the family has been the focus of most marketing efforts, and for many
products and services, the household continues to be the relevant consuming unit, Marketers
are interested in the number and kinds of households that buy and/or own certain products.
They also are interested in determining the demographic and media profiles of household
decision makers (the persons involved in the actual selection of the product) to develop
appropriate marketing strategies.

Marketers have discovered the benefits of targeting specific marital status groupings,
such as singles, divorced individuals, single parents, and dual-income married couples. For
instance, singles, especially one-person households with incomes greater than $50,000,
comprise a market segment that tends to be above average in the usage of products not
traditionally associated with supermarkets (e.g., cognac, books, loose tea) and below average
in their consumption of traditional supermarket products (e.g., catsup, peanut butter,
mayonnaise). Such insights can be particularly useful to a supermarket manager operating in a
neighborhood of one-person households when deciding on the merchandise mix for the store.
Some marketers target one-person households with single serving foods (e.g., Bumble Bee
tuna's 3 oz. easy-open cans, Pringles single serving-size cans, Orville Redenbacher's popcorn

50
mini-bags, Campbell's Soup to Go!) and others with mini-appliances such as small microwave
ovens and two-cup coffee makers.

Income, Education & Occupation

Income has long been an important variable for distinguishing between market
segments. Marketers commonly segment markets on the basis of income because they feel
that it is a strong indicator of the ability (or inability) to pay for a product or a specific model
of the product. For instance, consider Panache, the lifestyle magazine of the Fort Worth (TX)
Star- Telegram. It struggled for six years at 16 pages per issue, and was basically going
nowhere. But then, using the PRIZM geo-demographic segmentation scheme from Claritas,
Panache's distribution was changed so that it was only delivered to the homes of subscribers
with $100,000+ annual incomes. Advertisers become enthusiastic about the magazine, and
within a few months it grew to a 40 page per issue publication.

Income is often combined with other demographic variables to more accurately

define target markets. To illustrate, high income has been combined with age to identify
the important affluent elderly segment. It also has been combined with both age and
occupational status to produce the so-called yuppie segment, a sought-after subgroup of
the baby boomer market.

Education, occupation, and income tend to be closely correlated in almost a cause-

and-effect relationship. High-level occupations that produce high incomes usually require
advanced educational training. Individuals with little education rarely qualify for high-level
jobs. Insights on Internet usage preferences tend to support the close relationship among
income, occupation, and education. Research reveals that consumers with lower incomes,
lower education, as well as those with blue-collar occupations, tend to spend more time online
at home than those with higher income, higher education, and white-collar occupations. One
possible reason for this difference is that those in blue-collar jobs often do not have access to
the Internet during the course of the workday.

51
Psychological Segmentation

Psychological characteristics refer to the inner or intrinsic qualities of the individual

consumer. Consumer segmentation strategies are often based on specific psychological
variables. For instance, consumers may be segmented in terms of their motivations,
personality, perceptions, learning, and attitudes.

Marketing practitioners have heartily embraced psychographic research, which is

closely aligned with psychological research, especially personality and attitude measurement.
This form of applied consumer research (commonly referred to as lifestyle analysis) has
proven to be a valuable marketing tool that helps identify promising consumer segments
that are likely to be responsive to specific marketing messages.

The psychographic profile of a consumer segment can be thought of as a composite of

consumers' measured activities, interests, and opinions (AIOs). As an approach to
constructing consumer psychographic profiles, AIO research seeks consumers'
responses to a large number of statements that measure activities (how the consumer or
family spends time, e.g., camping, volunteering at a local hospital, going to baseball
games), interests (the consumer's or family's preferences and priorities, e.g., home, fashion,
food), and opinions (how the consumer feels about a wide variety of events and
political issues, social issues, the state of the economy, ecology). In their most common
form, AIO-psychographic studies use a battery of statements (a psychographic inventory)
designed to identify relevant aspects of a consumer's personality, buying motives, interests,
attitudes, beliefs, and values.

AlO research has even been employed to explore pet ownership as a segmentation
base. One study has found that people who do not have pets are more conservative in nature,
more brand loyal, and more likely to agree with statements such as "I am very good at
managing money" and "It is important for me to look well dressed." Such findings can be
used by marketers when developing promotional messages for their products and services.

52
 The results of psychographic segmentation efforts are frequently reflected in firms'
marketing messages.

Socio Cultural Segmentation

Sociological (group) and anthropological (cultural) variables-that is, socio-cultural

variables-provide further bases for market segmentation. For example, consumer markets
have been successfully subdivided into segments on the basis of stage in the family life cycle,
social class, core cultural values, sub-cultural memberships, and cross-cultural affiliation

Family Life Cycle

Family life-cycle segmentation is based on the premise that many families pass
through similar phases in their formation, growth, and final dissolution. At each phase, the
family unit needs different products and services. Young single people, for example, need
bask furniture for their first apartment, whereas their parents, finally free of child rearing,
often refurnish their homes with more elaborate pieces. Family life cycle is a composite
variable based explicitly on marital and family status but implicitly reflects relative age,
income, and employment status. Each of the stages in the traditional family life cycle
(bachelorhood, honeymooners, parenthood, post-parenthood, and dissolution) represents an
important target segment to a variety of marketers. For example, the financial services
industry frequently segments customers in terms of family life-cycle stages because families'
financial needs tend to shift as they progress through the various stages of life.

Social Class

Social class (or relative status in the community) can be used as a base for market
segmentation and is usually measured by a weighted index of several demographic variables,
such as education, occupation, and income. The concept of social class implies a hierarchy in
which individuals in the same class generally have the same degree of status, whereas
members of other classes have either higher or lower status. Studies have shown that
consumers in different social classes vary in terms of values, product preferences, and buying
habits. Many major banks and investment companies, for example, offer a variety of different
levels of service to people of different social classes (e.g., private banking services to the

53
upper classes). For example, some investment companies appeal to upper- class customers
with offering them options that correspond to their wealthy status.

Culture and Cub – Culture

Some marketers have found it useful to segment their markets on the basis of cultural
heritage because members of the same culture tend to share the same values, beliefs, and
customs. Marketers who use cultural segmentation stress specific, widely held cultural values
with which they hope consumers will identify (e.g., for American consumers, youthfulness
and fitness and health). Cultural segmentation is particularly successful in international
marketing, but it is important for the marketer to understand fully the target country's beliefs,
values, and customs (the cross-cultural context). Within the larger culture, distinct subgroups
(subcultures) often are united by certain experiences, values, or beliefs that make effective
market segments. These groupings could be based on a specific demographic characteristic
(such as race, religion, ethnicity, or age) or lifestyle characteristic (teachers, joggers). In the
United States, African Americans, Hispanic Americans, Asian Americans, and the elderly are
important sub-cultural market segments.

Culturally distinct segments can be prospects for the same product but often are
targeted more efficiently with different promotional appeals. For example, a bicycle might be
promoted as an efficient means of transportation in parts of Asia and as a health-and- fitness
product in the United States. Moreover, a recent study that divided China's urban consumers
into four segments ("working poor," "salary class," "little rich," and "yuppies") found that for
all four groups, television was the most popular medium of entertainment and information.
However, the working poor spend the most time listening to radio, while yuppies and the little
rich spend the most time reading newspapers and magazines.

Cross – Cultural and Global Marketing Segmentation

As the world has gotten smaller and smaller, a true global marketplace has developed.
For example, as you read this you may be sitting on an IKEA chair or sofa (Sweden), drinking
Earl Grey tea (England), wearing a Swatch watch (Switzerland), Nike sneakers (China), a
Polo golf shirt (Mexico), and Dockers pants (Dominican Republic). Some global market
segments, such as teenagers, appear to want the same types of products, regardless of which
54
nation they call home-products that are trendy, entertaining, and image oriented. This global
"sameness" allowed Reebok, for example, to launch its Insta pump line of sneakers using the
same global advertising campaign in approximately 140 countries.

Use – Related Segmentation

An extremely popular and effective form of segmentation categorizes consumers in

terms of product, service, or brand usage characteristics, such as level of usage, level of
awareness, and degree of brand loyalty.

Rate of usage segmentation differentiates among heavy users, medium users, light
users, and nonusers of a specific product, service, or brand. For example, research has
consistently indicated that between 25 and 35 percent of beer drinkers account for more than
70 percent of all beer consumed. For this reason, most marketers prefer to target their
advertising campaigns to heavy users rather than spend considerably more money trying to
attract light users. This also explains the successful targeting of light beer to heavy drinkers
on the basis that it is less filling (and, thus, can be consumed in greater quantities) than regular
beer. Recent studies have found that heavy soup users were more socially active, creative,
optimistic, witty, and less stubborn than light users and nonusers, and they were also less
likely to read entertainment and sports magazines and more likely to read family and home
magazines. Likewise, heavy users of travel agents in Singapore were more involved with and
more enthusiastic about vacation travel, more innovative with regard to their selection of
vacation travel products, more likely to travel for pleasure, and more widely exposed to travel
information from the mass media.

Marketers of a host of other products have also found that a relatively small group of
heavy users accounts for a disproportionately large percentage of product usage; targeting
these heavy users has become the basis of their marketing strategies. Other marketers take
note of the gaps in market coverage for light and medium users and profitably target those
segments. The framework proposes a way to identify a firm's best customers by dividing the
database into the following segments: 1) LoLows (low current share, low-consumption
customers), (2) HiLows (high current share, low-consumption customers), (3) LowHighs (low
current share, high-consumption customers), and (4) Hi Highs (high current share, high-

55
consumption customers). Moreover, the framework suggests the following specific strategies
for each of the four segments: "starve" the LoLows, "tickle" the HiLows, "chase" the
Lowllighs, and "stroke" the HiHighs.

In addition to segmenting customers in terms of rate of usage or other usage patterns,

consumers can also be segmented in terms of their awareness status. In particular, the notion
of consumer awareness of the product, interest level in the product, readiness to buy the
product, or whether consumers need to be informed about the product are all aspects of
awareness.

Sometimes brand loyalty is used as the basis for segmentation. Marketers often try to
identify the characteristics of their brand-loyal consumers so that they can direct their
promotional efforts to people with similar characteristics in the larger population. Other
marketers target consumers who show no brand loyalty ("brand switchers") in the belief that
such people represent greater market potential than consumers who are loyal to competing
brands. Also, almost by definition, consumer innovators-often a prime target for new products
– tend not to be brand loyal.

Increasingly, marketers stimulate and reward brand loyalty by offering special

benefits to consistent or frequent customers. Such frequent usage or relationship programs
often take the form of a membership club (e.g., Continental Airline’s One Pass Platinum Elite
Status, Hilton Honors Diamond VIP Membership, and Avis’ Wizard Preferred Service
Program). Relationship programs, such as The Hertz #1 Club, tend to provide special
accommodations and services, as well as free extras, to keep these frequent customers loyal
and happy.

Usage – Situation Segmentation

Marketers recognize that the occasion or situation often determines what consumers
will purchase or consume. For this reason, they sometimes focus on the usage situation as a
segmentation variable. The following three statements reveal the potential of situation
segmentation:

56
 "Whenever our son Eric gets a raise or a promotion, we always take him out to
dinner"; "When I'm away on business for a week or more, I try to stay at a Suites hotel"; "I
always buy my wife candy on Valentine's Day." Under other circumstances, in other
situations, and on other occasions, the same consumer might make other choices. Some
situational factors that might influence a purchase or consumption choice includes whether it
is a weekday or weekend (e.g., going to a movie); whether there is sufficient time (e.g., use of
regular mail or express mail); whether it is a gift for a girlfriend, a parent, or a self-gift
(a reward to one's self).

Many products are promoted for special usage occasions. The greeting card industry,
for example, stresses special cards for a variety of occasions that seem to be increasing almost
daily (Grandparents' Day, Secretaries' Day, etc.). The florist and candy industries promote
their products for Valentine's Day and Mother's Day, the diamond industry promotes diamond
rings as an engagement symbol, and the wrist watch industry promotes its products as
graduation gifts. The Russell Stover ad (www.russellstover.com) is an example of
situational, special usage segmentation. It appeared in magazines several weeks prior to
holidays such as Christmas and Valentine's Day. The particular ad is making the point that
they have been around for the holiday-since 1923.

A recent study found that individuals who purchase their magazines at newsstands are
more active consumers and are more receptive to advertising than consumers who subscribe
to the very same magazines. As the research noted, "this is the holy grail for advertisers.

Situational factors as a base for segmentation have also been studied in relation to
retailing. For example, in situations where the shopper has ample time, shopping atmosphere,
stocking the right brands and general familiarity with the retailer are important. Conversely, a
shopper with less time wants to shop where a large selection of merchandise is immediately
available, with no transaction hassles (i.e., for clothing, the ability to touch and try on
merchandise).

Benefit Segmentation

Marketing and advertising executives constantly attempt to identify the one most
important benefit of their product or service that will be most meaningful to consumers.

57
Examples of benefits that are commonly used include cleaner teeth (Oral-B), financial
security (Transamerica), protection of data (Norton Antivirus), soft skin (Olay), allergy relief
(Allegra), and peace of mind (Liberty Mutual Insurance Company).

In targeting Indian consumers in terms of benefits sought, research revealed that an

important segment of Indian consumers of Dettol soap were hygiene-conscious and seeking
protection from germs and contamination, rather than more common benefits of beauty,
fragrance, freshness, or economy. Still further, a segmentation study examining what drives
consumer preferences for micro or craft beer, identified the following five strategic brand
benefits: (1) functional (i.e., quality), (2) value for· the money, (3) social benefit, (4) positive
emotional benefits, and 5) negative emotional benefits.

Changing lifestyles also play a major role in determining the product benefits that
are important to consumers and provide marketers with opportunities for new products
and services, For example, the microwave oven was the perfect solution to the needs of
dual-income households, where neither the husband nor the wife has the time for
lengthy meal preparation. Food marketers offer busy families the benefit of breakfast
products that require only seconds to prepare.

Benefit segmentation can be used to position various brands within the same
product category. The classic case of successful benefit segmentation is the market for
toothpaste, and a recent article suggested that if consumers are socially active, they want
a toothpaste that can deliver white teeth and fresh breath; if they smoke, they want a
toothpaste to fight stains; if disease prevention is their major focus, then they want a
toothpaste that will fight germs; and if they have children, they want to lower their dental
bills.

Hybrid Segmentation Approaches

Marketers commonly segment markets by combining several segmentation variables

rather than relying on a single segmentation base. This section examines three hybrid
segmentation approaches that provide marketers with richer and more accurately defined
consumer segments than can be derived from using a single segmentation variable. These

58
include psychographic-demographic profiles, geo-demographics, VALS, and Yankelovich's
Mind base Segmentation.

Psychographic, Lifestyle and Demographic Profiles

Psychographic (including lifestyles) and demographic profiles are highly

complementary approaches that work best when used together. By combining the knowledge
gained from including both demographic and psychographic factors, marketers are provided
with powerful information about their target markets.

Demographic-psychographic profiling has been widely used in the development of

advertising campaigns to answer three questions: "Whom should we target?" "What should
we say?" "Where should we say it?" To help advertisers answer the third question, many
advertising media vehicles sponsor demographic-lifestyle research on which they base very
detailed audience profiles. Tables 3.10 and 3.11 present a portion of the demographic and
psychographic-lifestyle profiles of USA Today (i.e., its newspaper, its Web site, and both) that
is independently prepared by MMI (i.e., an audience research firm that prepares profiles of
many magazine and newspaper readers). In the case of USA Today, such information is made
available in the form of advertising information kits or alternatively is available on their Web
sites (www.usatoday.com). USA Today as well as many other newspapers and magazines,
provide potential and current advertisers with such profiles to assist advertisers in making
decisions as to where they are going to spend their advertising budgets. By offering media
advertisers such carefully defined profiles of their audiences, mass media publishers and
broadcasters make it possible for advertisers to select media whose audiences most closely
resemble their target markets. Finally, advertisers are increasingly designing ads that depict in
words and/or picture the essence of a particular target-market lifestyle or segment that they
want to reach.

Geo –Demographic Segmentation

This type of hybrid segmentation scheme is based on the notion that people who live
close to one another are likely to have similar financial means, tastes, preferences, lifestyles,
and consumption habits (similar to the old adage, "Birds of a feather flock together"). This
segmentation approach uses computers to generate geo-demographic market clusters of like
59
consumers. Specifically, computer software clusters the nation's 250,000+ neighbourhoods
into lifestyle groupings based on postal zip codes. Clusters are created based on consumer
lifestyles, and a specific cluster includes zip codes that are composed of people with similar
lifestyles widely scattered throughout the country. Marketers use the cluster data for direct-
mail campaigns, to select retail sites and appropriate merchandise mixes, to locate banks and
restaurants, and to design marketing strategies for specific market segments. For example,
Eddie Bauer (www.eddiebauer.com) has employed Claritas demographics
(www.cIaritas.com) to evaluate new retail store locations and is PRIZM coding current
customers, and Duke Energy Corporation (www.duke-energy.com) has profiled its
residential and small business customers with Clarita’s databases as part of its customer
retention pro- gram.

Over the past 25 years, as the firm that started the clustering phenomenon, Claritas
has increased the number of segments in American society from the 40 segments used in
the 1970s and 1980s to the 66 segments it uses today. The Claritas search engine will pick
the top five lifestyle clusters for each zip code; you can find out about your zip code by
visiting www.yawyl.cIaritas.com.

Geo-demographic segmentation is most useful when an advertiser's or marketer's best

prospects (in terms of consumer personalities, goals, and interests) can be isolated in terms of
where they live. However, for products and services used by a broad cross section of the
American public, other segmentation schemes may be more productive.

Mind Base Segmentation

Starting with their Monitor Survey of American Values and Attitudes, Yankelovich
researchers have over the years created a number of different market segmentation
methodologies that focus on household consumers (see www.yankelovich.com). A relatively
recent effort has been the revision of the Yankelovich Mind base, which consists of eight
consumer segments and additional three smaller sub segments for each of the eight segments
A particularly attractive direct marketing feature of this segmentation framework is that it has
been employed to categories the members of selected consumer databases (which contain the

60
names and addresses of consumers who have been categories in terms of their Mind base
segmentation membership).

Criteria for Effective Targeting Of Market Segments

The previous sections have described various bases on which consumers can be
clustered into homogeneous market segments. The next challenge for the marketer is to select
one or more segments to target with an appropriate marketing mix. To be an effective target, a
market segment should be (1) identifiable, (2) sufficient (in terms of size), (3) stable or
growing, and (4) accessible (reachable) in terms of both media and cost.

Identification

To divide the market into separate segments on the basis of a series of common or
shared needs or characteristics that are relevant to the product or service, a marketer must be
able to identify these relevant characteristics. Some segmentation variables; such as
geography (location) or demographics (age, gender, occupation, race), are relatively easy to
identify or are even observable. Others, such as education, income, or marital status, can be
determined through questionnaires. However, other characteristics, such as benefits sought or
lifestyle, are more difficult to identify. A knowledge of consumer behavior is especially useful
to marketers who use such intangible consumer characteristics as the basis for market
segmentation.

Sufficiency

For a market segment to be a worthwhile target, it must consist of a sufficient number

of people to warrant tailoring a product or promotional campaign to its specific needs or
interests. To estimate the size of each segment under consideration, marketers often use
secondary demographic data, such as that provided by the United States Census Bureau
(available at many libraries and online via the Internet), or they undertake a probability survey
whose findings can be projected to the total market.

61
Stability

Most marketers prefer to target consumer segments that are relatively stable in terms
of demographic and psychological factors and are likely to grow larger over time. They prefer
to avoid "fickle" segments that are unpredictable in embracing fads. For example, teens are a
sizable and easily identifiable market segment, eager to buy, able to spend, and easily
reached. Yet, by the time a marketer produces merchandise for a popular teenage fad, interest
in it may have waned.

Accessibility

A fourth requirement for effective targeting is accessibility, which means that

marketers must be able to reach the market segments they want to target in an economical
way. Despite the wide availability of special-interest magazines and cable TV programs,
marketers are constantly looking for new media that will enable them to reach their target
markets with minimum waste of circulation and' competition. One way this can be
accomplished is via the Internet. Upon the request of the consumer, a growing number of Web
sites periodically send e-mail messages concerning a subject of special interest to the
computer user. For example, a resident of Houston, Texas, who likes to take short vacation
trips, might have Continental Airlines email her the coming weekend's special airfare, hotel,
and rent-a-car deals.

Implementing Segmentation Strategies

Firms that use market segmentation can pursue a concentrated marketing strategy or a
differentiated marketing strategy. In certain instances, they might use a counter
Segmentation strategy.

Concentrated versus differentiated marketing

Once an organization has identified its most promising market segments, it must
decide whether to target one segment or several segments. The premise behind market
segmentation is that each targeted segment receives a specially designed marketing mix, that
is, a specially tailored product, price, distribution network, and/or promotional campaign.

62
Targeting several segments using individual marketing mixes is called differentiated
marketing; targeting just one segment with a unique marketing mix is called concentrated
marketing.

Differentiated marketing is a highly appropriate segmentation strategy for financially

strong companies that are well established in a product category and competitive firms that
also are strong in the category (e.g., soft drinks, automobiles, or detergents. However, if a
company is small or new to the field, concentrated marketing is probably a better bet. A
company can survive and prosper by filling a niche not occupied by stronger companies. For
example, Viadent toothpaste has become a leader in the in the small but increasingly
important submarket of the overall tooth care market that focuses on products that fight
gingivitis and other gum diseases.

Counter Segmentation

Sometimes companies find that they must reconsider the extent to which they are
segmenting their markets. They might find that some segments have contracted over time to
the point that they do not warrant an individually designed marketing program. In such cases,
the company seeks to discover a more generic need or consumer characteristic that would
apply to the members of two or more segments and recombine those segments into a larger
single segment that could be targeted with an individually tailored product or promotional
campaign. This is called a counter segmentation strategy. Some business schools with wide
course offerings in each department were forced to adopt a counter segmentation strategy
when they discovered that students simply did not have enough available credits to take a full
spectrum of in-depth courses in their major area of study. As a result, some courses had to be
canceled each semester because of inadequate registration. For some schools, a counter
segmentation strategy effectively solved the problem (e.g., by combining advertising,
publicity, sales promotion, and personal selling into a single course called Promotion).

63
Lesson 3: Consumer Buying Behavior

Factors Influencing Buyer Behaviour

The ultimate, aim of all .marketing communication is to get consumers to act in a

manner that marketers desire; i.e. to get them to visit a store, try a product, purchase it
regularly, recommend it to a friend, etc. In order to communicate in a manner that can
persuade consumers to act, marketers need to understand how consumers behave and how
they make their purchase decisions. However, this is never an easy task as often consumers
say something and do something else: Sometimes they themselves are not aware of the
deepest motivations that guide their behavior, and at times they behave totally on whim.
However, the study of consumer behavior attempts to get a breakthrough into understanding
the reasons and implications of the actions of consumers-how people buy, what they buy,
when they buy, and why they buy. Consumer behavior is thus the study of individuals,
groups, or organizations and the processes they use to select, buy, use and dispose of goods,
services, experiences, or ideas to satisfy needs. It is also concerned with the-impact-that these
processes have on the marketer, and his products. Consumer behavior further studies the
characteristics of individual consumers in an attempt to understand people's wants. For these,
it borrows insights from research and studies undertaken in the fields of psychology,
sociology, anthropology and economics.

The better marketers are at understanding consumer behavior, the more successful
they will be at influencing consumers' purchase behavior. For instance, the understanding of
consumers’ psychology, i.e. how consumers think, feel, reason, and select between different
alternatives helps marketers in planning and adapting their marketing mix strategies,
including communication strategies. Marketers need to understand which consumer needs
require to be satisfied. They need to learn how consumers gather information regarding
product alternatives for satisfying their needs and how they use this knowledge in evaluating
competing brands. They need to know how consumers make purchasing decisions-how they
choose the product, location of purchase, time of purchase, etc. For example, knowing that
consumers are more receptive to food advertising when they are hungry, guides food
marketers in scheduling their radio commercials when consumers are driving back home in

64
the evening after work. Marketers also need to understand what internal stimuli and external
factors motivate consumers to behave in a certain way. Why do their decision strategies vary
between products that differ in their level of importance or interest? Why are they sometimes
persuaded more by logical arguments, but at other times more by emotional appeals? Why do
people from diverse cultural background is behave in different ways?

Thus it becomes important to include a discussion on consumer behavior in our

study of marketing communication. A basic model of buyer behavior is illustrated in
Figure 3.1

Buyer's
Decision
Buyer's
Process
Decision
Marketing Other Stimuli Buyer's Problem
Stimuli Characteristics Product Choice
Recognition
Economic Brand Choice
Product Cultural Evaluatio nof
technological alternatives Dealer Choice
Price Social
political Purchase Purchase
Place Personal
cultural Decision Timing
Promotion Psychological
Post-Purchase Purchase
Behavior amount

Fig. 3.1 Model of a Buyer Behavior

As indicated in the model, a buyer does not make decisions in a vacuum. She gets
exposed to marketing and other environmental stimuli. The buyer's personal characteristics
combined with the decision process followed by her, influence her purchase decisions.
Through consumer behavior study, marketers can learn about the influences that a buyer's
characteristics and decision process have on her purchase decisions. Although these factors
mostly cannot be controlled by marketers, their study guides them in planning their marketing
and communication strategies.

65
Cultural Factors

In a diverse country like India, culture is one of the biggest determinants of consumer
behavior. Culture refers to the set of values, ideas, attitudes, beliefs, norms, customs, rituals
and symbols that are learned and transmitted from "generation to generation over time.
Culture is shaped and shared by homogeneous groups of people-families, religions,
institutions and members of the society in general It sets the norms, mores and conventions
that designate forms of acceptable and unacceptable behavior and guides individuals in their
conduct, including their consumption behavior.

The study of culture becomes important in consumer behavior because consumers

worldwide are not the same. These differences are not merely due to environmental factors
but owing to cultural variances as well. A child growing up in a particular society learns the
basic set of cognitive, affective and conative responses through a process of socialization
involving the family and other key institutions of that society. Thus, Indians are more attached
to family values whereas Americans to individualism and freedom. It is also important to
remember that culture is not static but subject to change over time. Thus, Indian values of
abstinence are giving way to hedonism and materialism, and there is a convergence of global
teen values like consumerism, independence and openness to new culture. Since the new
generation is at the cusp of value reorientation, a lot of duality can be observed in the Indian
culture. For instance, the new generation is outwardly seeking, but inwardly connected due to
familial bonding and responsibility; personal growth is as important as family priorities; the
consumer is savvy but not tightfisted; youth are more accepting of outward trends and
fashions, but more resilient to inward attitudinal changes; etc. This has implications for
international marketing since promotional programmes and strategies need to be sensitive to
the time and place of a society.

Each culture also consists of smaller subcultures those exhibit values, beliefs, customs
and behaviors that are different from the larger cultural set that they belong to. Subcultures
are primarily formed on the lines of race, religion or region. For example, in India, although
each state is a part of the Indian cultural mainstream, it has a unique subculture. Gujaratis for
instance, are more entrepreneurial, South Indians more traditional, Marwaris more thrifty,
Punjabis more easygoing, etc. In recent times, marketers have also identified subcultures such

66
as those of the community, gays, retired environmentalists, naturopaths, aesthetics, urbanites,
etc. Large subcultures often have distinct purchasing patterns, and do not fit in the
generalization of mass marketing, which is when marketers develop specialized marketing
programmes to serve them.

Communities also exhibit stratification on the basis of social classes-relatively

homogeneous and hierarchical divisions of society in which individuals are assigned to a
particular category on the basis of criteria important to the society. The now defunct ancient
Indian classification of the four purnas; Brahmins, Ksbatriyas, Vaishyas and Kshudras was
primarily based on an individual or family's occupation. Modern social classes usually emerge
on' the basis of occupation, income; education or lifestyle. Often an individual's social class is
also indicative of her status and prestige relative to that of individuals belonging to other
classes. The four broad levels of social classes in India referred to by marketers are: upper
class, upper middle class, middleclass and lower class. Based on the survey done by National
Election Study of India, the eight-fold class schema based on occupation is as given in Figure
3.3. The study indicates that the Indian society is facing a substantial upward mobility with
people moving from lower classes to higher classes. For Instance, Class I is poised to grow to
about 31% ill the next 5 years given the present trends. There is also a movement away from
the agricultural sector, to the business and skilled workers' classes.

The Eight – fold Class Schema

1. Higher salaried (executives/professionals and white-collar employees)

2. Lower salaried (class IV employees)
3. Business (large and small businessmen).
4. Petty business (small store owners and road-side businesses)
5. Skilled and semi – skilled manual labor'(mechanics, electricians, tailors, weavers, carpenters,
craftsmen and rickshaw-pullers)
6. Unskilled manual labor (manual laborers excluding those, in the agricultural sector)
7. Farmers (owner-cultivators and tenant-Cultivators with more than5 acres of land)
8. Agriculturists (owner-Cultivators and tenant-cultivators with less than 5 acres of land, dairy and
poultry farmers, sharecroppers, fishermen and shepherds)

Table 3.1

67
 Business
High Salaried

Lower
Salaried

Skilled & Semi

Skilled Manual Petty Business Farmers
Labor

Unskilled Manual Lower

Labor Agriculturalis

Fig. 3.3 Hierarchy of Classes

A social class serves as an aggregate of several measures that can describe a person or
a household. This is because people who are similar on social class indicators are often
similar in their values, hobbies, lifestyles and consumer behaviors. They exhibit similarity in
their leisurely pursuits, clothing and shopping habits, entertainment, media consumption, etc.
This is of interest to promotional managers since their communication strategies differ
according to the classes they target. For example, upper classes are targeted by marketers of
financial investments, gourmet chocolates, expensive perfumes, etc., and lower classes are
often the target of tabloid newspapers.

Social Factors

In addition to culture, which is based on past learning, people are also influenced in
their behavior by the social groups they live and interact with everyday. For instance, why do
kids whose friends smoke face peer pressure to smoke? And why have Pokémon’s become such
a rage overnight with all kids? This is because social acceptance is a strong motivating force
that drives purchase behavior. In other words, consumers are often influenced in their
purchasing decisions by whether or not they believe that a particular purchase will or will not
lead to social acceptance.

Individuals who live in groups are directly or indirectly influenced by the values,
beliefs, behaviors, etc. of other members in such groups. Such groups are known as

68
reference groups - groups whose perceived outlooks, attitudes or values are used as a
yardstick or point of reference by an individual in forming his own thinking, feelings, values,
judgments and behaviors. Individuals tend to conform to the expectations of the groups they
wish to join (aspirational groups) and stay away from groups whose values or behaviors they do
not wish to emulate (dissociative groups). Families, friends, professional circles, etc. form
various levels of reference groups that a person may be part of. Reference groups often have
greater influence in certain product choices (such as automobiles, lifestyle products, etc.),
than in others (such as household appliances or electrical fittings). Marketers often find
reference groups a powerful way to spread their marketing messages, as illustrated through the
examples of Cafe Coffee Day and Tupperware below. They also need to ensure that the image or
communication they create is in sync with the targeted reference groups' expectations. Opinion
leader, who are seen as experts in particular product categories, offering advice, opinion and
information about them, are often targeted by marketers to spread their word around as
unbiased third-party sources.

A unit of the society that is more directly involved in an individual's buying behavior
than any reference group is the family. Families wield strong influence on an individual's
purchase behavior.

For instance, the brand of salt, detergent or rice that you buy is often the same as that
purchased by your mother. It is a decision that is already made by her at some point of time,
and consciously or unconsciously, accepted by you. A family often also acts as a single
consumer-buying organization with family members performing one or more roles in the
decision-making process, as depicted in Table 3.1 below, For instance, in male-dominant
societies, purchase decisions for products like financial services, insurance, etc. are usually
taken by the male head of a family; decisions pertaining to food and household supplies by
the female head; and those pertaining to vacations, consumer durables, etc. are taken Jointly.
Marketing communicators must understand who makes which decisions in a family, who buys
what, how to reach each individual, and how to portray each relation's role correctly. For
instance, in the following Maruti ad Maruti Esteem targets the father and the kid
simultaneously. While the father is the prime decision-maker, the kid’s approval is also a
must in buying a car for the family.

69
 Sitting in her dad's car a little girl checks out the power windows and
asks, “Dadda, you got first rank in office?” Getting a "no" from her
father she comes with the next question, “then you got birthday
present gift?" as she takes a look at the air conditioner. The repeated
“no” does not stop the little girl from questioning her father again. This
time inspecting the backseat central armrest, she buzzes, "Haan, you
promoting?" At this the father first corrects her, "promotion" and then
answers, "nahin baba". Tired of her guesses now she innocently asks,
"then whose big car is this"? Listening to this the father breaks into a
laughter. Voice Over: "Maruti Suzuki Esteem. The easy-to-own big car.
"Super: "Big on mileage. Big on savings:" As the car stops at her school,
the little girl grabs the car keys from her "dadda" and announces, "My
daddy's big car!" leaving her father smiling on the other side of the car.

Initiator: The person who first suggests the idea of buying the product or
service
Influencer: The person whose view or advice influences the decision
Decider: The person who decides on any component of a buying decision:
whether to buy, what to buy, how to buy, or where to buy.
Buyer: The person who makes the actual purchase
User: The person who consumes or uses the product or service

Table 3.1 Buying Roles

Often, roles in buying and consuming a product change within a family and marketers
must take into account these shifts as well. For example, advertisements of instant food mixes
that show husbands cooking, dish washer ads that show husbands doing dishes, detergent
powder commercials that show husbands doing laundry, all appeal to the urban male's new
role of lending a helping hand to his working wife. In an ad, a LG refrigerator and Videocon
washing machine are clearly targeted to the urban male, evident through the former's focus on
ease of operation and the latter's portrayal of male models. In one television commercial of a
washing machine, the husband is shown returning home to find his wife doing Kathak. A
discussion that happens regarding buying a washing machine. By the time the husband talks
about his intention of buying a washing machine, the daughter declares that the purchase is

70
already done. Although in real life, in the Indian scenario, few housewives actually purchase
washing machines worth a few thousand rupees without asking their portrayal of male
models. In one television commercial of a washing machine, the husband is shown husbands
into confidence; the commercial is a portrayal of the economic independence and self –
assertion of the middle class woman. The influence of children in family decision – making is
also on the rise, which is why they are the target of many marketers. In addition to the groups
that an individual belongs to, her role and status in a group also affects her purchase
decisions, i.e. individuals choose products that communicate their roles and status in a group
or society.

Lesson 4: Consumer Purchasing Process

Marketers are ultimately interested in learning how consumers actually make their
purchase decisions. Many companies conduct their independent research to know the stages in
the buying process for their product, as done by Dorcas in the example below. Often
marketers speculate on the buying process by asking themselves about the steps they would
normally undergo in buying their own product, interview consumers on their buying patterns,
observe consumers making their purchases, etc. Sometimes, a combination of various
methods might be required to get the complete picture.

71
 In August 2012, as a result of a slowdown in the toilet soaps market, Dorcas Market
Makers Ltd, marketer of Medimix and other brands, launched operation
Marketstorm to get first hand idea of consumer psyche. Interesting perspectives
emerged as a result of the study. The most surprising result was that soaps were not
consumed less, but stocked less by retailers, who were stocking fewer stock-keeping
units (SKUs) of one brand while trying to spread the risk on a wider basket of brands,
The study also revealed a shift in the consumption pattern of sea with many
consumers switching to brands in the economy segment such as Breeze, Godrej No.1,
Nima etc. It was also speculated that consumers were directing these savings, at the
cost of cosmetics and FMCG products, to the consumer durables segment, which was
offering many zero interest schemes. Thus, most consumers from middle-income
groups had increased their expenditure on consumer utility items by cutting on non-
essential items and by opting for cheaper substitutes. Another reason for soap
purchases corning down was the offering of soaps by marketers as freebies with
other products, or as bonus packs with soaps themselves, in order to avoid
consumers switching to other economy brands. With consumers, not having to pay
for soaps and with companies accounting for only actual sales made, the market
consistently reflected poor off-take for more than a year.

Experts have developed a five-stage model of the consumer buying-process (Figure

3.19-a.) A consumer normally passes through the stages of problem recognition, information
search evaluation of alternatives, purchase decision and post-purchase evaluation, in her
buying process. It is also possible that sometimes she may skip or reverse certain stages. For
instance, while purchasing candies, she may purchase first and evaluate later; or a consumer
may not go for information search and evaluation of alternatives before buying salt. However,
the model in Figure 3. 19-a serves as a useful guide to marketers since it considers the entire
array of steps that a consumer might go through while purchasing complex, new or high-
involvement products.

Figure 3. 19-b matches the relevant psychological processes, that have the, most influence on a
particular purchase decision stage.

72
a. Stages in the Consumer Decision – Making Process

Post -
Problem Information Alternative Purchase
Purchase
Recognition Search Evaluation decision
Evaluation

b. Relevant Internal Psychological Processes

Attitude
Motivation Perception Integration Learning
Formation

Figure 3.19 (a-b. A Basic Model of Consumer Decision Making

Problem Recognition

The consumer buying process begins much before the actual purchase. It starts when
the consumer experiences an unsatisfied need that creates a drive to act. In other words, the
consumer recognizes but there is a problem caused by a difference in his ideal state and actual
state and becomes motivated to solve the problem. This is known as problem recognition.

A problem can arise because of internal or external stimuli. For instance, a person may
require and because he is hungry or may long for pizza because he passes by a billboard
temptingly displaying a slice of pizza with hot, melted cheese and jalapenos. Whether the
person recognizes his having for pizza as a problem or not depends, among other things, on its
severity. On motivation that there are various types and levels of needs and depending on the
magnitude and priority of the need, a consumer decides whether it requires to be satisfied or
not. For instance, a mother may forego buying an expensive saree to wear at a weeding in the
family in order to pay tuition fees for her son's education. At this stage, it is important to

73
distinguish between needs and wants because often, even when needs are satisfied, consumers
may be motivated to act on the basis of wants. A want is a felt need that is, directed to a
specific object. Unlike a need, it is not basic human requirement. For example, a consumer
may need shelter but may want a bungalow by the beach. Needs are limited, but wants may be
in profusion.

Advertising and communication play an important role in the problem recognition

stage by influencing needs and wants and helping consumers recognize that they have a
problem. For instance, the passerby may not have felt they want for pizza until he saw the
tempting billboard. Thus, as we discussed earlier, communication-can provide the much-
needed cues that propel people with a drive into action. Further, sometimes people may be
able to recognize a problem but may not be able to define it. For instance, a person may
know-that he wants to gift his love ‘something’ on Valentine's Day. However, he may not be
able to define that 'something' till he sees a beautiful ad of De Beers diamond that encourages
him to propose it in style with a diamond ring; People do not move ahead in the purchase
decision 'process till they are able to define the problem well. By suggesting to the people
how their products may be a good fit in their lives, communication managers can help
consumers to recognize a need as well as define it in a way that their product purchase
becomes likely. For instance, the Internet banner of Jeevansathi.com, activates problem
recognition among singles with its headline, 'The journey of life is incomplete without a life
partner.' The page view on clicking the banner gives more reasons why the website should be
considered for matrimonial searches. Similarly, the Milton ad suggests that its products can
also be used as corporate gifts. Marketers follow a number of tactics to aid problem
recognition among consumers. For instance, they can create dissatisfaction regarding existing
brand that consumers use and propose their own brand as an alternative, create new needs and
wants, stir dormant needs, appeal to consumers’ novelty-seeking behavior, etc. For instance,
The Euro clean vacuum cleaner ad brings to light a possible reason for persisting cough and
cold. To successfully aid problem recognition, it is important that marketers help consumers
see a problem and their product solving it, even if the problem is as vague as 'need to stay in
tune with apparel fashion' with the solution being a designer suit sporting the latest fashion.

74
Hierarchy of Needs

Social Factors

In addition to cultural factors, social factors such as reference groups, family and
social roles and statuses affect our buying behavior

Reference Groups

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

Reference groups influence members in at least three ways. They expose an individual
to new behaviors and lifestyles, they influence attitudes and self-concept, and they create
pressures for conformity that may affect product and brand choices. People are also
influenced by groups to which they do not belong. Aspirational groups are those a person
hopes to join; dissociative groups are those whose values or behavior an individual rejects.

Where reference group influence is strong, marketers must determine how to reach
and influence the group’s opinion leaders. An opinion leader is the person who offers
informal advice or information about a specific product or product category, such as which of
brands is best or how a particular product may be used. Opinion leaders are often highly
confident, socially active, and involved with the category, Marketers try to reach opinion
leaders by identifying their demographic and psychographic characteristics, identifying the
media they read and directing messages at them.

In the United States, the hottest trends in teenage music, language and fashion often
start in the inner cities. Clothing companies such as hot topic, which hope to appeal to the
fickle and fashion-conscious youth market, have made a concerted effort to monitor urban
opinion leaders’ styles and behavior.

75
Family

The family is the most important consumer buying organization in society and family
members constitute the most influential primary reference groups. There are two families in
the buyer’s life. The family of orientation consists of parents and siblings. From parents a
person acquires an orientation toward religion, politics, economics and a sense of personal
ambition, self—worth and love. Even if the buyer no longer interacts very much with their
parents, their influence on behavior can be significant. Almost 40% of families have auto
insurance with the same company as the husband’s parents.

A more direct influence on everyday buying behavior is the family of procreation-

namely, one’s spouse and children. In the United States, husband- wife involvement in
purchases has traditionally varied widely by product category. The wife has usually acted as
the family’s main purchasing agent, especially for food, sundries and staple clothing items.
Now traditional purchasing roles are changing, and marketers would be wise to see both men
and women as possible targets.

For expensive products and services such as cars, vacations or housing, the vast
majority of husbands and wives engage in joint decision making. And marketers are realizing
that women actually buy more technology than men do, but consumer electronics stores have
been slow to catch on to this fact. Some savvy electronics stores are starting to heed women’s
complaints of being ignored, patronized or offended by salespeople. RadioShack Corp., a
7,000-store chain, began actively recruiting female store managers so that now a woman
manages about one of every seven stores.

Nevertheless, men as women may respond differently to marketing messages. One

study showed that women valued connections and relationships with family and friends and
placed a high priority on people. Men, on the other hand, related more to competition and
placed a high priority on action. Marketers are taking more direct aim at women with new
products such as Quaker’s Nutrition for Women cereals and Crest Rejuvenating Effects
toothpaste. Sherwin-Williams recently designed a Dutch Boy easy- to-use “Twist and Pour”
paint can targeted specifically at women.

76
 Another shift in buying patterns is an increase in the amount of dollars spent and the
direct and indirect influence wielded by children and teens. Direct influence describes
children’s hints, requests and demands-“I want to go to McDonald’s.” Indirect influence
means that parents know the brands, produce choices and preferences of their children
without hints or outright requests (“I think Tommy would want to go to McDonald’s”). One
researcher estimates that children under 14 influenced as much as 47% of American
household spending in 2005, amounting to more than $700 billion, without roughly an equal
split between direct and indirect influence.

Research has shown that teenagers are playing a more active role that before in
helping parents choose a car, audio/video equipment, or a vacation spot. In fact, a J.D. Power
study revealed that 62% of parents say their child “actively participated in the car-buying
decision.” That’s why automakers are upping their marketing programs for children as young
as five.

Recognizing the power of kids, marketers are pouring money into programs targeting
them. Advertising directed at children is estimated at over $15 billion annually – about 2.5
times more than in 1992.

Television can be powerful in reaching the children, and marketers are using television
to target children at younger ages than ever before. By the time children are around 2 years
old, they can often recognize characters, logos and specific brands. They can distinguish
between advertising and programming by about ages 6 or 7. A year or so later, they can
understand the concept of persuasive intent on the part of advertisers. By 9 or 10, they can
understand the discrepancies between message and product. Marketers are tapping into that
audience with product tie-ins, placed at a child’s eye level, on just about everything – from
Scooby Doo vitamins to Elmo Juice and cookies.

Millions of kids under the age of 17 are also online. Marketers have jumped online
with them, offering freebies in exchange for personal information. Many have come under fire
for this practice and for not clearly differentiating ads from games or entertainment.
Establishing ethical and legal boundaries in marketing to children online and off-line

77
continues to be a hot topic as consumer advocates decry the commercialism they believe such
marketing engenders.

Roles and Status

A person participates in many groups – family, clubs, and organizations. Groups are
often are an important source of information and help to define norms for behavior. We can
define a person’s position in each group to which he belongs in terms of role and status. A
role consists of the activities a person is expected to perform. Each role carries a status. A
senior vice president of marketing has more status than a sales manager, and a sales manager
has more status than an office clerk. People choose products that reflect and communicate
their role and actual or desired status in society. Marketers must be aware of the status-symbol
potential of products and brands.

Maslow’s Theory

5
Self
Actualization
Needs
(Self-development
and realization)

4
Esteem Needs
(Self-esteem,recognition,status)
3
Social needs
(sense of belonging, love)
2
Safety needs
(Security, protection)
1
Physiological Needs
(food,water , shelter)

Abraham Maslow sought to explain why people are driven by particular needs at
particular times. His answer is that human needs are arranged in a hierarchy from most to
least pressing – physiological needs, safety needs, social needs, esteem needs and self-
actualization needs. People will try to satisfy their most important needs first. When a person

78
succeeds in satisfying an important need, he will then try to satisfy the next-most-important
need. For example, a starving man (need 1) will not take an interest in the latest happenings in
the art world (need 5), nor in how he is viewed by others (need 3 or 4), nor even in whether he
is breathing clean air (need 2); but when he has enough food and water, the next most
important need will become salient.

Lesson 5: The Buying Decision Process: The Five_Stage Model

Three basic psychological processes play an important role in understanding how

consumers actually make their buying decision.

Smart companies try to fully understand the customer’s buying-decision process- all
their experiences in learning, choosing, using and even disposing of a product. Bissel
developed its Steam n’ Clean vacuum cleaner based on the product trial experiences of a local
PTA group near corporate headquarters in Grand rapids, Michigan. The result was a name
change, color-coded attachments and an infomercial highlighting its special features.

Marketing scholars have developed a “stage model” of the buying-decision process.

The consumer passes through five stages: problem recognition, information search, evaluation
of alternatives, purchase decision and post purchase behavior. Clearly, the buying process
starts long before the actual purchase and has consequences long afterward.

Consumers don’t always pass through all five stages in buying a product. They may
skip or reverse some. When you buy your regular brand of toothpaste, you go directly from
the need for toothpaste to the purchase decision, skipping information search and evaluation.

Problem Recognition

The buying process starts when the buyer recognizes a problem or need triggered by
internal or external stimuli. With an internal stimulus, one of the person’s normal needs –
hunger, thirst, sex, - rises to a threshold level and become a drive; or a need can be aroused by
an external stimulus. A person may admire a neighbor’s new car or see a television ad for a
Hawaiian vacation, which triggers thoughts about the possibility of making a purchase.

79
 Marketers need to identify the circumstances that trigger a particular need by
gathering information from a number of consumers. They can then develop marketing
strategies that trigger consumer interest. Particularly for discretionary purchases such as
luxury goods, vacation packages and entertainment options, marketers need to increase
consumer motivation so a potential purchase gets serious consideration.

Information Search

Surprisingly, consumers often search for limited amounts of information. Surveys

have shown that for durables, half of all consumers look at only one store, and only 30% look
at more than one brand of appliances. We can distinguish between two levels of involvement
with search. The milder search state is called heightened attention. At this level a person
simply becomes more receptive to information about a product. At the next level, the person
may enter an active information search: looking for reading material, phoning friends, going
online and visiting stores to learn about the product.

INFORMATION SOURCES Major information sources to which consumers will turn fall
into four groups:

 Personal - Family, friends, neighbors, acquaintances

 Commercial – Advertising, Web sites, salespersons, dealers, packaging, displays

 Public – Mass media, consumer – rating organizations.

 Experimental – Handling, examining, using the product

The relative amount and influence of these sources vary with the product category and
the buyer’s characteristics. Generally speaking, the consumer receives the most information
about a product from commercial – that is, marketer-dominated – sources. However the most
effective information often comes from personal sources or public sources that are
independent authorities.

Each independent source performs a different function in influencing the buying

decision. Commercial sources normally perform an information function, whereas personal

80
sources perform a legitimizing or evaluation function. For example, physicians often learn of
new drugs from commercial sources but turn to other doctors for evaluation.

Search Dynamics

Through gathering information, the consumer learns about competing brands and their
features. The individual consumer will come to know only a subset of these brands, the
awareness set. Some brands, the consideration set, will meet initial buying criteria. As the
consumer gathers more information, only a few, the choice set, will remain strong contenders.
The consumer makes a final choice from this set.

Information Search

When a consumer has recognized and defined a problem, she begins searching for
information on products that can help solve that problem. The search process involves mental
and physical activities ranging from the simple to the complex, such as relying on the
information gathered through past experience, making a visit to a store to get information on
products that can solve a problem, etc. How many physical, mental and monetary resources a
person spends on the search process depends on the benefits of the search process vis-a-vis its
costs. For instance, a mother might decide if it is worth the hassle of going to an employment
counselor to find out what employment option might be the best for her daughter.

There are two types of information searches that a consumer may engage in-internal
and external. Internal search refers to the process where a consumer searches information
stored in memory through past experiences and/or knowledge regarding various purchase
alternatives. When the product is a routine purchase item, or when consumers have already
acquired information about product choices through past experience, they may simply rely on
internal search. For instance, if a mother has already explored employment options for her
older son a year ago, she may simply rely on internal search for her daughter who has also
chosen the same career path as her son.

Which sources of information, a consumer may recourse to for decision-making

depends on the importance and consequences of the purchase decision, the consumer's trust in

81
particular sources, time and other resources at hand, and even his psychological framework.
Thus, a consumer may visit a new restaurant based on a friend's recommendation alone,
whereas before investing in a real estate property, he may consult real estate agents, market
guides, friends and acquaintances, and even make personal visits to the site of the property.

It is important to note that an individual's perception also plays an important role in

the information search process. Through selective attention consumers select the promotional
messages they pay attention to; through selective comprehension consumers interpret
messages in sync with their beliefs, attitudes, motives and experiences; and through selective
retention consumers remember messages that are meaningful or important to them. Thus,
communication managers should consider the consequences of perception in order to design
an effective promotional strategy. Communication managers should find out the sources of
information that a consumer is likely to rely on while searching for information for their
products, and then through the right media, give a message that will increase the chances of
its exposure.

Attitudes

Attitudes are a person's favorable or unfavorable dispositions towards an idea, a

person, a thing, or a situation. Attitudes are based on evaluations of and judgments regarding
an attitude object, which result in the individual's like or dislike for that object. Thus, attitudes
may be positive, negative or neutral. Psychologists state that attitudes have three components-
cognitive, affective and behavioral. during attitudes, result when all the three components are
consistent.

The cognitive component of attitude' comprises of the beliefs and knowledge a person
has about the attitude object. For instance, an individual may believe that Maruti 800 is an
economical car, gives more mileage, and is easy to maneuver on narrow streets. These beliefs
may be backed by knowledge about various characteristics of the car. A composite of all these
beliefs forms the cognitive component of the attitude towards Maruti 800. The affective
component of attitude comprises of the feelings, or degree and direction of preference that a
person has towards the attitude object. For instance, people may 'like' khadi because it is made
indigenously based on Gandhian principles. Their liking for the product is the affective part of

82
the attitude towards khadi. A person's intentions, regarding actions to be taken, or the actual
actions taken towards a product, constitute the behavioral component of the attitude towards that
product. For instance, a person’s attitude towards blood transfusion could be of being a
regular donor who donates every four months. Behavioral attitudes may include actions like
trying or buying a product, recommending it to others, giving feedback, etc.

Marketers are interested in gauging people's attitude towards their products because
attitudes indicate a consumer's disposition towards the product, as well as his behavioral
tendencies. However, how accurately attitudes can predict behavior depends on
environmental factors as well. For instance, a person may love khadi but he may not buy it
because the only store selling it in the city could be staffed with conceited people. Or a person
may believe in blood donation but he may not become a donor because of low hemoglobin
levels. Thus, even positive attitudes to-wards a product may not lead to favorable consumption
behavior towards it. In the same way, sometimes, in spite of holding negative attitudes
towards a product, a person may be compelled to purchase it.

Although attitudes are long lasting and difficult to change, communication can play an
important role in shaping people's attitudes. Through advertising and pre-notion, information
can be given to influence beliefs and knowledge, emotions can be used to influence feelings,
and incentives can be given to influence behavior, thus impacting the overall attitude towards
a product. For instance, a Dove ad offers people a compelling reason such as 'beautiful,
damage-free hair' to act and purchase the brand. Similarly, a Surf Excel ad tries to influence
people's attitudes towards stains (daag) by pointing out the positive experiences that occur in
the process. This, in turn, leads to the implicit message that people can be worry-free
regarding stains and leave stain removal to Surf Excel. Academicians such as the Yale
psychologist, Carl Hovland has suggested that attitude can be changed as a response to
communication. Factors, such as the characteristics of the target audience and message
source, message characteristics, cognitive route adopted for persuasion, etc. have an impact
on attitude.

83
Strategies To Change Consumer Attitudes.

The Following Strategies have been suggested by experts to change the attitude of the
consumers in a favorable way

Changing consumers' perceptions on the importance of an attribute:

Marketers try to increase the weight of an attribute that is either unique to their brand
or dominant in their brand by getting consumers to consider it important in forming an
attitude towards the brand. For example, a JK Tyre ad tries to focus consumers' attention on the
eco-friendly characteristics of its tyre and hopes it would be considered an important attribute
in forming attitudes towards tyres. Similarly, a Dove ad tries to get consumers to consider the
mildness of its soap in forming an attitude towards the brand.

Adding a new attribute to the attitude formation process:

Marketers can add or highlight a new attribute for consumers to consider in the
attitude formation process. This strategy is usually used when marketers have added a new
feature or benefit in their products and they want consumers to view it favorably. For
instance, in a print ad Samsung flaunts the color feature of its mobile phones hoping
consumers will consider color screens as an attribute in forming attitudes towards a mobile
phone. The ad reads, "Color is life. Think bright not white. Take your pick, stand out and be
noticed. With the new range of TFT color phones from Samsung, the pioneer in 65,000 TFT-
LCD color screens. That makes your mobile experience more real and lively than even before.
So go ahead and add color to your life."

Changing or increasing the rating of a belief regarding an important attribute:

Marketers identify an attribute that is important in the attitude formation process and
work to generate a favorable belief rating regarding the brand's performance on that attribute.
For instance, the Dettol brand has always been known as the ultimate antiseptic brand. Dettol
continuously works' towards' guarding this' 'image by keeping' its, communication current. In
a television commercial it explained how even apparently clean-looking .people may be in
need of its 'anti-bacterial- protection by showing visuals of a clean looking woman dusting;
carrying a waste bin, and accepting currency notes from the dirty hands of a vegetable vendor.

84
Thus Dettol cleverly extended 'the need for protection' from ditty-looking to clean-looking
people.

Changing or decreasing the rating of a belief regarding an attribute for a competing

brand:

Marketers show the Superiority of their brands by comparing them with other brands.
Comparison can be as outright as naming the competitor as done by Pepsi whose ad copy
clearly states its Superior performance over Coca-cola. Or it can be slightly subtle and witty as
done by thumbs up with Pepsi. Thumbs up does not name Pepsi but the blurred Pepsi logo
and the “grow up” comment allude to it. It can be a brad comparison with ‘all other brands”

Values

Customer Value

Since its emergence in the 1950s, many companies have very successfully adopted the
marketing concept. The result has been more products, in more sizes, models, versions, and
packages, offered to more precisely targeted (and often smaller) target markets. This has
resulted in an increasingly competitive marketplace. And, during the last decade, the digital
revolution enabled many marketers to offer even more products and services and distribute
them more widely, while reducing the costs and barriers of entering many industries. It has
accelerated the rate at which new competitors enter markets and also speeded up the rate at
which successful segmentation, targeting, and positioning approaches must be updated or
changed, as they are imitated or made obsolete by the offerings of new business rivals.

Savvy marketers today realize that in order to outperform competitors they must
achieve the full profit potential from each and every customer. They must make the customer
the core of the company's organizational culture, across all departments and functions, and
ensure that each and every employee views any exchange with a customer as part of a
customer relationship, not as a transaction. The three drivers of successful relationships
between marketers and customers are customer value, high levels of customer satisfaction,
and building a structure that ensures customer retention

85
Providing Customer Value

Customer value is defined as the ratio between the customer's perceived benefits
(economic, functional and psychological) and the resources (monetary, time, effort,
psychological) used to obtain those benefits. Perceived value is relative and subjective. For
example, diners at an exclusive French restaurant in Washington, D'C; where a meal with
beverages may cost up to $300 per person, may expect unique and delicious food, immaculate
service, and beautiful decor. Some diners may receive even more than they had expected and
will leave the restaurant feeling that the experience was worth the money and other resources
expended (such as a month-long wait for a reservation). Other diners may go with
expectations so high that they leave the restaurant disappointed. On the other hand, many
millions of customers each year visit thousands of McDonald's restaurants, in scores of
countries around the globe, where they purchase standard, inexpensive meals from franchise
owners and employees systematically trained by the McDonald's, Corporation to deliver the
company's four core standards: quality, service, cleanliness, and value. Customers flock to
McDonald's outlets repeatedly because the restaurants are uniform, customers know what to
expect, and they feel that they are getting value for the resources they expend.

Developing a value proposition (a term rapidly replacing the popular business phrase
"unique selling proposition") is the core of successful positioning. For example, Lexus claims
to deliver to its buyer’s quality, zero defects in manufacturing, and superior, personal post
purchase service. Dell's value proposition for personal computer users consists of customized
PC systems assembled speedily and sold at economical prices. Apple's iPod is the 'best digital
jukebox, and it provides users with many options to purchase, share, personalize, and listen to
their favorite music. The value propositions stated above create customer expectations that
these companies must continuously fulfill and even exceed as competitors try to win over
their markets.

Lesson 6: Purchase Decision

Once a consumer has evaluated various choice alternatives, he arrives at his most
prefers brand and decides whether he wants to purchase the brand or not. However, there can
be many a slip between the cup and the lip, and the purchase intention or decision may not

86
always translate into actual purchase. For instance, a consumer could be deterred by the
negative attitude or contradictory opinions of others in the family who may have also have a
role to play in the purchase process. There can also be unexpected situational factors such as
financial loss, rude attitude of a salesperson, urgent need for another important purchase,
brand going out – of – stock etc. that can change the purchase decision and intention.

In implementing purchase intentions, customers are required to make up to four sub –

decisions, when to buy, where to buy, how to buy and how to pay for it (payment method).
Marketers can sometimes make these decisions easy for the consumers by suggesting the right
quantity to buy, giving information regarding locations where the product would be available,
providing information regarding its shell – life, giving incentives for a particular payment
option (e.g. 2% cash discount), etc. Regular purchase items may not require so much
deliberation as consumers may already have made certain decision in advance. The time
between the purchase decision and actual purchase is known to increase considerably with an
increase in perceived risk. Risk depends on the reversibility of a decision, money at stake,
extent of uncertainty regarding product attributes, etc. Thus, for high – involvement items or
complex purchases such as real estate, consumer durables, cars, etc. consumers have the
tendency of postponing decisions, gathering information from reliable sources, going for
popular brand names, seeking guarantees and warrantees, etc. Communication manages must
provide adequate information regarding their products and gain consumer trust by displaying
awards, quoting favorable research, getting certified through industry associations, training
sales persons to convince consumers of their selection, etc. They can also let consumers
experience their products before purchase by providing opportunities to touch, feel, test, try
and buy.

In the case of low – involvement items, the time between purchase decision and actual
purchase could be as short as making a shopping list and stepping out to purchase the items.
marketers need to stay on top – of – the – mind of their consumers through reminder
advertising, prominent product displays, etc.; ensure they are adequately stocked and
conveniently located; run periodic promotions to prevent consumer from switching to other
brands; etc. For new consumers, sales promotion devices such as product sampling, coupons,
discounts, etc. are useful in encouraging purchases. In the case of impulse purchase items

87
such as candies, novelties, etc. marketers need to ensure in – store visibility through
prominent displays, attractive packaging, and occasional promotional offers.

Consumer behavior was a relatively new field of study in the mid- to late-1960s.
Because it had no history or body of research of its own, marketing theorists borrowed
heavily from concepts developed in other scientific disciplines, such as psychology (the study
of the individual), sociology (the study of groups), social psychology (the study of how an
individual operates in groups), anthropology (the influence of society on the individual),
and economics to form the basis of this new marketing discipline. Many early theories
concerning consumer behavior were based on economic theory, on the notion that individuals
act rationally to maximize their benefits (satisfactions) in.rhe purchase of goods
and services. Later research discovered that consumers are just as likely to purchase
impulsively and to be influenced not only by family and friends, by advertisers and role
models, but also by mood, situation, and emotion. All of these factors combine to form a
comprehensive model of consumer behavior that reflects both the cognitive and emotional
aspects of consumer decision making.

A simplified model of consumer decision making

The process of consumer decision making can be viewed as three distinct but
interlocking stages: the input stage, the process stage, and the output stage.

The input stage influences the consumer's recognition of a product need and consists
of two major sources of information: the firm's marketing efforts (the product itself,
its price, its promotion, and where it is sold) and the external sociological influences on
the consumer (family, friends, neighbors, other informal and noncommercial sources,
social class, and cultural and sub cultural memberships). The cumulative impact of each
firm's marketing efforts, the influence of family, friends, and neighbors, and society's
existing code of behavior are all inputs that are likely to affect what consumers purchase
and how they use what they buy.

The process stage of the model focuses on how consumers make decisions. The
psychological factors inherent in each individual (motivation, perception, learning,
personality, and attitudes) affect how the external inputs from the input stage influence the

88
consumer's recognition of a need, pre purchase search for information, and evaluation of
alternatives. The experience gained through evaluation of alternatives, in turn, affects the
consumer's existing psychological attributes.

The output stage of the consumer decision-making model consists of two closely
related post decision activities: purchase behavior and post purchase evaluation. Purchase
behavior for a low-cost, nondurable product (e.g., a new shampoo) may be influenced by a
manufacturer's coupon and may actually be a trial purchase; if the consumer is satisfied, he
or she may repeat the purchase. The trial is the exploratory phase of purchase behavior in
which the consumer evaluates the product through direct use. A repeat purchase usually
signifies product adoption. For a relatively durable product such as a laptop ("relatively"
durable because of the rapid rate of obsolescence), the purchase is more likely to signify
adoption.

Post – Purchase Behavior

A Marketer’s work does not end when the product is purchased. It is his job to find out
how satisfied customers are, whether they will recommend or repurchase the product and how
they will dispose it off. A buyer’s satisfaction depends on his expectations from the product
and the product’s perceived performance. If the performance meets expectations, buyers are
satisfied; if it exceeds expectations, buyers are delighted; and if it fails below expectation
levels, buyers are disappointed. Because satisfaction depends not only on product
performance but also on customer expectations, marketers should manage buyer expectations
as well. Expectations are largely formed on the basis of the communication consumers receive
regarding a product. Marketers should make product claims that match with product
performance and ensure that buyers get adequate information before they make the purchase
decision. Some marketers even underplay product performance to surprise and delight
consumers.

It is important to manage satisfaction because it decides the probability of repurchase.

Satisfied consumer not only like to become brand loyal but also likely to recommend it to
others. Knowing satisfaction levels of consumer is a key to consumer retention and

89
management. Many industry associations and research firms conduct customer satisfaction
studies.

JK Tyre has achieved the top slot in the J.D. Power Asia Pacific 2005 India Original
Tire Customer Satisfaction index (TCSI) Study. More than 2,700 new – vehicle
owners of 26 different models in India were surveyed between June and August
2004 after 12 to 18 months of ownership. The overall tire performance, on the basis
of importance, was based on five factors: appearance, durability, ride, traction and
handling. On a 1,000 – point scale, JK Tyre received the highest ranking in India with
an overall satisfaction score of 781 index points with it getting the highest ratings in
all five determining factors. The study found that among customer not reporting a
problem, more than half say they would definitely consider repurchasing the same
brand and nearly two – thirds said they would recommend their tire brand to
others.

Often when consumers make a complex purchase decision, such as when the
difference between two alternatives is negligible or information is inadequate, they are likely
to question the validity of their purchase decision and, experience a doubt or dissonance
regarding its soundness. This doubt creates a feeling of uncomfortable tension that is called
cognitive dissonance or post-purchase dissonance. In other words, cognitive dissonance arises
when a consumer engages in behavior that conflicts with one's beliefs or cognitions. It is
common in the case of high involvement products with low differentiation, such as home
appliances, electrical equipment, etc. Consumers facing cognitive dissonance are likely to
take opinions of others or be attentive to cues such as ads of the chosen product to validate the
soundness of their decisions. They selectively seek out information that supports their product
choice and filter out or distort information that does not support the choice. Thus
communication managers should use reassuring ads, personalized reinforcement through
salespeople, or other means of communication to reinforce consumer decision of purchasing
their brand. They can even provide liberal guarantees and return policies, solicit customer
feedback through toll-free numbers or other mechanisms, and provide systems for promptly
addressing consumer grievances. It is important to deal with any dissatisfaction at the earliest
because dissatisfied consumers are likely to not only discontinue purchase, but also to
badmouth the brand. Studies have shown that dissatisfied customers will tell 5-10 people
about their problems; that's twice as many people satisfied customers would talk to. In the
most adverse of all cases, where a brand has failed them completely or they have been

90
deceived, consumers may even recourse to public act ion such as a lawsuit. In the days of
increasing environmental and social awareness, marketers should also take up the
responsibility of monitoring the use and disposal of their products. For instance, Wrigley’s
chewing gums have instructions on the wrapper to dispose off the chewing' gums in trashcans
only.

Post Purchase Evaluation

As consumer use a product, particularly during a trial purchase, they evaluate its
performance in light of their own expectations. There are three possible outcomes of these
evaluations: (1) actual performance matches expectations, leading to a neutral feeling;
(2) performance exceeds expectations, causing what is known as positive disconfirmation of
expectations (which leads to satisfaction); and (3) performance is below expectations,
causing negative disconfirmation of expectations and dissatisfaction. For each of these three
outcomes, consumers' expectations and satisfaction are closely linked; that is, consumers
tend to judge their experience against their expectations when performing a
post purchase evaluation.

An important component of post purchase evaluation is the reduction of any

uncertainty or doubt that the consumer might have had about the selection. As part of their
post purchase analyses, consumers try to reassure themselves that their choice was a wise one;
that is; they attempt to reduce post purchase cognitive dissonance. They do this by adopting
one of the following strategies: They may rationalize the decision as being wise; they may
seek advertisements that support their choice and avoid Those of competitive brands; they
may attempt to persuade friends or neighbors to buy the same brand (and, thus, confirm their
own choice); or they may turn to other satisfied owners for reassurance.

The degree of post purchase analysis that consumers 'undertake depends on the
importance of the product decision and the experience acquired in using the product. When
the product lives up to expectations, they probably will buy it again. When the product’s
performance is disappointing or does not meet expectations, however, they will search for
more suitable alternatives. Thus, the consumer's post purchase evaluation “feeds back" as
experience to the consumer's psychological field and serves to influence future related

91
decisions. Although it would be logical to assume that customer satisfaction is related to
customer retention (i.e., if a consumer is satisfied with his Nautica jacket, he will buy other
Nautica products), a recent study found no direct relationship between satisfaction and
retention. The findings show that customer retention may be more a matter of the brand's
reputation - especially for-products consumers find difficult or evaluate.

What was Eric's post purchase evaluation of his new digital camera? He absolutely
loves it! First of all, because it is so small in size, he can carry it in his pants pocket any-
where he goes, and therefore is always ready to take pictures, which is something he very
much enjoys doing. His 256MB secure digital card allows him to take about 200 photos
before filling up, even using the camera's "best picture" setting. After coming back from
a friend’s party, where he took about 25 pictures, he quickly transferred the photos from
his camera to his laptop (using the software and cord supplied with the camera), easily
cropped a few of the photos and eliminated "red eye" in others, and then uploaded the
15 photos he really liked to the CVS Drugstore Web site. The next day, after work, he
Stopped by his local CVS store (located less than a block from his apartment) and picked
up 4x6 inch reprints of his digital photos. He was absolutely thrilled with how sharp
and colorful his pictures were, and couldn't wait to share these photos with his friends.

92
UNIT III

Lesson 1: Integrated Marketing Communications

Integrated Marketing Communications (IMC) has become a very popular trend

in the recent times. It is a management concept that brings together all tools of marketing
communication to send consistent' messages to target audiences. Instead of dividing
communications into several overlapping areas, IMC unifies each communication element to
deliver consistent messages with one voice, one theme and one strategy. A task force from the
American Association of Advertising Agencies defines integrated marketing communications
as, "a concept of marketing communications planning that recognizes the added value of a
comprehensive plan that evaluates the strategic roles of a variety of communication
disciplines - for example, general advertising, direct response, sales promotion, and public
relations - and combines these disciplines to provide clarity, consistency, and maximum
impact., Pioneered by Don E. Schultz of Northwestern University's Medill School of
Journalism, integrated marketing communications has been implemented in Fortune 500
companies and other businesses worldwide. Called new advertising, one-to-one marketing, whole
egg, orchestration, 360 branding, total branding, etc., IMC goes by many names.

As a concept, integration is not revolutionarily new, for it can be amply observed in

the world around us. A Bharatnatyam dancer who synchronizes each body movement and
mudra to depict a central idea is demonstrating integration. An orchestra performance where
each instrument is playing to the same notes to create harmony exemplifies integration. A
jigsaw puzzle where each individual part fits together to reveal the complete picture is
integration. A detective trying to put together separate clues to solve a murder mystery is also
practicing integration. Similarly, integrated marketing communication is a common-sense
approach of looking at communication tools - not as isolated elements that communicate
different things to a consumer but as inter-related parts that jointly go to solving
communications problems. That is because consumers perceive various communication
messages as information about a single brand from different sources. In effect, the principle of
integration holds that all communications originating from a single strategic platform, where

93
all the tools cooperate with one another, will create greater impact and synergy than when the
tools work individually by themselves. The Case in Point above illustrates how the kids'
toothpaste Pepsodent addressed a problem by making different promotional tools work with an
integrated theme.

The seeds of the IMC concept first germinated in 1980 when many companies came to
realize the need for a strategic integration of their promotional tools, instead of keeping them
in separate silos. Communications specialists Michael Hammer and James Champy note,
"Companies today consist of functional silos, or stovepipes-vertical structures built on narrow
pieces of processes.” Communication originating from these watertight compartments
overlapped, managers compete; internally for resources and the common goal' of the
organization was sidelined in a bid to secure maximum resources for individual activities:
However, when this fragmented communication approach did not meet with required results;
the concept of IMC was born. Integration realigned various communication departments to
emerge from their wells and look at the common organizational goal, to cooperate rather than
compete with each other and hence be more agile in dealing with external challenges.

Organizations started coordinating various promotional activities within the company.

To match this organizational change, gradually agencies too started shifting towards being
'communications' or 'brand-marketing' outfits than traditional advertising agencies. They
either planned for non- advertising related tools themselves or through their network of
affiliate partners. This network was built by either acquiring or partnering with direct
marketing, sales promotion and PR agencies. Soon, traditional advertising agencies were
transformed into a one-stop shop for all communications needs. For Example, O&M which
was initially founded as an advertising agency in India in 1928, has several business units
today that offer 360 degree communication options to clients – Ogilvy Activation for out – of
– home communication, Ogilvy Interactive for online marketing, Ogilvy Live for events and
promotions, Ogilvy PR for public relations, Ogilvy One for one – to – one marketing, Ogilvy
Signscapes for retail design solutions, and so on. Thus, IMC established a permanent foothold
in the industry. The integrated lead-generation programme at Wipro Technologies is a Case in
Point.

94
 Promotion managers practicing integration understand the functions, strengths and
weaknesses of each tool and use them to strengthen or add to the work done by other tools.
For example, if advertising is used to build brand preferences and inform large audiences for a
new product, sales promotion is used to generate trials, build excitement and encourage
stocking at the retail level. Public relations are used in a way to get maximum publicity for the
new product, build credibility and reach audiences other than consumers. POP merchandising
can be used to convey ad messages in-store and remind consumers at the point of purchase.
Thus, each tool serves a different purpose, but achieves a common goal of promoting the new
product. Instead of making the tools compete with one another, if they are planned and used
jointly, they can achieve maximum communications impact.

The advocates of IMC take an even broader perspective of IMC and argue that an
organization should integrate all marketing activities so that its entire mix of product, price,
distribution-and communication strategies sends consistent messages. That is because a
consumer experiences a brand through various "contact points". A contact point could be a
friendly product salesmen calling on the consumer, a price-tag which announces the price, the
brand website that consumers surf for information or the brand's ad hoarding that consumers
chance upon at a crossroad. Each of these touch points will deliver some message to the
consumer. And each consumer will come in contact' with the brand through a unique mix of
contact points. If each of these contact points delivers a consistent message, the message will
be reinforced in the consumer's mind, as illustrated by Titan's 'Case in Point' above. But if each
contact point sings a different song, the consumer will be left with discordant messages.

Tom Duncan and Sandra Moriarty identify 10 drivers to measure the extent of marketing
integration in an organization. Factors like focusing on stakeholders rather than just
customers, two-way interactivity with various stakeholders, zero-based planning approach,
and building and managing of databases to retain customers, focusing on customer
relationships rather than transactions, etc. can bring about integrated marketing.

Experts opine that the IMC concept can be broadened even further to consider not just the
impact of marketing messages, but also of corporate messages, since everything that a
company does eventually affects its image. In other words, integration is important not just in

95
communication or marketing, but also in overall business management. "Recent surveys
reveal that customers are far more likely to buy products from financially successful and
socially responsible companies.'' In India, ACNielsen and ORG-MARG jointly conduct a
Corporate Image Monitor study that measures various stakeholders' opinions on important
issues regarding companies. The survey presents an overview of stakeholders' perceptions
about "the quality of products and services, company vision and strategy, management style,
human resource and investment worthiness." In 2005, Infosys emerged at the top of the
Corporation Reputation Index, largely due to its efficient ways in managing its corporate
communications. The company was also perceived to be the most focused in its corporate
social responsibility, thanks to its work in the social sector and lucid communication
regarding the same. Consistency at the corporate level is essential because stakeholders do not
distinguish between messages intended for them and those intended for other audiences. An
organization's employee may also be its investor, and its media reporter also its customer.
Imagine the confusion and distrust that would result if a single individual received
inconsistent messages about 'the brand or company in various capacities.'

Hence today, an increasing number of companies are adopting the concept of IMC. But not
everyone is likely to be as successful. In a research conducted of 1000 Australian companies,
Mike Reid establishes that "organizations that have a customer-centric notion; systems for
linking the organization to the market and customer; and processes, systems, and mental
models that link various functional areas of the organization; are better equipped to adopt
IMG." The vision and commitment of top management is also an important factor driving the
IMC process. Instead of separately planning and managing independent communications
activities, organizations today use IMC to coordinate and manage the entire marketing
communications, .marketing and corporate programs to deliver consistent messages not only
to their customers, but also to other stakeholders in the company. This proves that IMC is an
enduring concept that adds substantial value to marketers' activities and also negates any
doubts about IMC being just a passing management fad.

96
 The IMC Model

A company begins by first planning an integrated marketing plan that sends out
consistent marketing messages to its audiences: The four marketing mix components play a
joint role in sending out marketing messages, which is not the responsibility of
communications alone, as can be seen in the first part of the figure. Next, on the basis-of the
marketing plan, a communications plan is prepared. Specific communication tools are
selected according to an integrated communications strategy framed on the basis of the
integrated marketing strategy. IMC coordinates the high-control messages to bring
consistency and synergy, and tries to increase control over low control messages.

Lesson 2: The IMC planning process

As discussed earlier, marketing communication is one of the four tools of the

marketing mix. Hence, it is based on the strategies laid down in the marketing plan, which in
turn is derived from the overall business plan. Hence, an organization begins first by strategic
planning of its business, next of its marketing functions and then of its marketing
communications functions. Strategic planning is the process of devising a plan of action for
meeting an organization’s goals with its limited resources, and in the wake of varying market
conditions. Strategies allow an organization to focus its limited resources on the best available
opportunities, .thereby achieving sales, profits and growth, and a sustainable competitive
advantage. There are three primary components of a strategic plan:

 Objectives: ‘What the company wants to achieve -. Objectives dictate the course of action to
be taken. E.g.: penetrate 20% of the company's rural target audience .
 Strategy: A long-term plan of action designed to achieve the objectives. E.g. launch smaller
pack sizes with reduced prices, intensify rural distribution, etc.
 Tactics: Immediate actions with resources at hand; short-term isolated events to take
advantage of opportunities at hand. E.g. pack products in plastic pouches of 25 gm, priced at
Rs.5, appoint three new distributors to handle target audience territories. Etc.

97
 The Marketing Plan

The IMC planning process begins with a review of the marketing plan. A marketing
plan is a written document that details the marketing objectives, strategies and tactics for an
organization, product or brand, and guides the marketing efforts. It is based on a hi-depth
understanding of the firm's internal and external environment-the industry, the competition,
the product's current positioning, its customers, etc. Following are the primary contents of the
plan:

 Situational analysis: All marketing plans begin with a situational analysis, an assessment
of the internal and external environmental factors affecting a product, brand or organization.
A well-known practice for analyzing and summarizing the situation is called SWOT analysis
(Strengths, Weakness, Opportunities and Threats). In strengths and weaknesses sections,
marketers list down the strong and weak points of the product' whereas' in opportunities and
threats sections, they discuss external market opportunities and risks. In general, the
situational analysis contains the following types of information:
 The industry situation: Information regarding industry practices, user base, growth rates,
favorable and unfavorable factors, etc.
 The product situation: Information regarding the product's strengths and weaknesses, sales
and profit margins, market share and growth rate, etc.
 The competitive situation: Information regarding major competitors, their strengths and
weaknesses, some .strategies adopted, market shares and growth rates, etc.
 The socio-cultural. "situation: Information regarding consumer;' tastes and preferences,
cultural norms, target market, etc.
 The distribution situation: Information regarding channels of distribution and modes of
transportation used
 The promotion situation: Information regarding current campaigns, their objectives, media
chosen, messages conveyed, budgets and expenses, results, etc.
 Other macro-environmental factors: Any other relevant macro environment factors like
technological, political, economic, legal, etc. that may impact the product in question.
 Marketing objectives: Given a particular environmental situation, what is it that the

98
 company wants to do or achieve? Clearly stating objectives provides a sense of direction to
the company. Whatever the objectives be, they should follow the SMART criteria-Specific,
Measurable, Achievable, Realistic and Time-bound. Keeping in view the current competitive
scenario, market conditions, product situation and such, SMART marketing objectives can
be set. These marketing objectives in turn have implications for any or all of the product,
pricing, distribution and communication objectives. They also serve as a guideline in
measuring performance.
 Marketing strategies: A strategy evaluates the various ways and options for achieving
marketing objectives and selects the right line of attack. There may be multiple ways of
achieving an objective, and not just a single solution. For example, a company that wants to
expand its market by 30% can do so by introducing more product variants, reducing the
price, promoting new uses, intensifying distribution, increasing advertising and promotions,
etc. While finalizing the marketing strategy, a company needs to select its target market – an
aggregate of individuals or organizations whose needs the company decides to fulfill. Next,
the company needs to plan strategies for all the four elements of the marketing mix.
 Implementation tactics: In the implementation phase, the company has to take various
decisions regarding the specific product, pricing, distribution, and communications tasks and
execute them. For example, if the distribution strategy is to intensify reach in rural villages
with. population more than 10,000, the implementation tactics would be to arrange for 5 new
stockists and 10 transport vehicles, work the costing for the new distribution system, prepare
a merchandising plan, and so on. Implementation of plans is one of the most crucial and
difficult steps. Strategies charted in boardrooms may look good on paper but at .the time of
execution unanticipated difficulties can crop up and call for a reworking of the plan.

Implementation also includes the task of assigning the outlined activities to the right
people. Moreover, activities need to' be scheduled and timelines need to be set, since many
activities run across several marketing and non-marketing departments. Their timely
completion is a key to the successful implementation of the plan. Along with scheduling, the
marketing budget needs to be arrived at and funds need to be distributed among various
functional areas of marketing.

99
 Monitoring and evaluating performance: Evaluation is comparison of actual performance
with set standards and a check to see if objectives are realized. Since environmental changes
often require an adjustment of forecasts, plans need to be evaluated throughout their
implementation, preferably on a rolling basis, and not just on completion. Tracking studies
that follow the group of same subjects over time to monitor aspects like a brand’s
performance can be undertaken for this purpose. Important marketing areas included in the
evaluation are sales, profit, market share, expenditure and finance, among other indicators
specified in the objectives. Necessary changes in the strategy or tactics can be made based on
the feedback received-as a result of the evaluation process.

The IMC Plan

The marketing communication plan originates from the marketing plan and is an
integral part of the latter. Marketing communication managers utilize details from the
marketing plan that are relevant for developing the promotional strategy. Then IMC
objectives are laid down so as to fulfill marketing goals. The IMC plan selects the right
communication tools, integrates them, plans accompanying media and messages, and also
allocates the communication budget to various tools. In addition, IMC is also responsible for
managing how other tools of marketing, viz. product, price and distribution, communicate to
audiences.

Following are the steps involved in the IMC planning process:

1. Situational analysis: Like the marketing plan, the promotional plan also begins with an
analysis of factors that are relevant to the promotions situation. Following are some common
areas of analysis:

 Past promotional situation: Review of previous campaigns including their objectives, audiences,
strategies, tools, media and budget

 Product-situation: Assessment of product's benefits, quality, packaging, price, image,

availability, features, unique selling points, etc.

100
 Audience situation: An analysis of the audiences of promotion - buyers, influencers, decision
makers, etc.; their demographic and psychographic profiles, behavioral patterns and lifestyle,
factors influencing their purchase decision, buying patterns, etc.

 Competitive situation: Promotional strategies adopted by direct and indirect competitors, their
positioning, strengths and weaknesses, budget spends, etc.

 Regulatory situation: Regulatory authorities governing the product category and media, and
rules and - regulations prescribed.

In addition, a SWOT analysis from the communications perspective can also be done.
The organization can review the structure of its promotional organization and its
communication capabilities, list down resources at hand, note down promotional strengths and
weaknesses vis-a-vis competition et al. SWOT and situational analyses are done by
experienced communications managers based on their past experiences and research inputs.
For example based on a research, Marico learnt that consumers who buy Amla – based hair
oils specifically look for the prime benefit of long and black hair. Hence, through its
communication it positioned Shanti Amla as the recipe for 'Kaale Zindadil Baal.’

2. Determine a problem or opportunity: The situational analysis done in step 1 helps a

company identify problems or opportunities concerning communications. IMC plans can
solve problems like lack of awareness or knowledge, negative attitudes, misconception about
the product, poor image, lack of motivation to act, inadequate coverage of audience through
communication, etc. It can also aid other, tools of marketing, viz product, price and
distribution, by focusing attention on or away from them, or by justifying them. For
example, communication can highlight the reduced price of the product or cake attention
away from the high price by focusing on the superior features of the product.

101
3. Determine the communication objectives: Communication objectives .low from marketing
objectives. Whereas marketing objectives refer to the overall marketing program and are
outlined in terms of sales, profitability or market share goals, communication objectives talk
about the specific communication tasks that are to be achieved and are outlined in terms of
awareness to be created, knowledge to be given, attitude and behavior to be changed, image
to be built etc. as indicated by the example below.

4. Determine the budget: After setting the communication objectives, a company has to
estimate how much it is willing to spend on the promotional programme. The company has
to consider various issues like how much the program will cost, how much it can afford, how
much competitors are spending, etc. There are several methods to estimate and arrive at
the budget, which we shall discuss in later chapters. The allocation of budget amongst various
communication tools and amongst various media vehicles within those tools is done at a later
stage in plan development. Although an ideal situation would be where the budget does not as
a constraint' in the planning process, this is rarely the case and strategies have to be worked
around it.

5. Develop IMC strategies: This is the most thorough and demanding step of the entire
planning process .that requires a number of key decisions to be taken. One fundamental
decision is regarding the selection of the target audience-who is it that the company wants to
communicate to? We discussed earlier that in the marketing plan, target markets - the
groups of people to whom a particular product is marketed-are identified. In the marketing
communication plan, target audiences are identified based on the target markets for specific
communication efforts. Although both terms sound confusingly similar, there is a notable
difference between the two. For example, the target market for pet foods is that of pets like
dogs and cats. However, the target audience for the purpose of communication comprises of
pet owners, animal welfare agencies, veterinarians and the like. Similarly, the target market
for Saffola oil is primarily busy working men over 30 years of age, but the target audience in
communication is their wives who take responsibility for the health of their husbands.

Arriving at the right target audience is no mean task. For example, for a television

102
set, whom should the communication manager target-the father who is the final decision
maker, the retailer who is the influencer, or the mother and teenage kid who are the prime
users? Unless the manager has detailed information about the product and market, appropriate
target audiences cannot be identified. Additionally, in an IMC organization,
target audiences are not limited to consumer audiences alone. When a new product or
promotion is launched, regulatory authorities have to be notified about compliances followed,
financial community has to be informed about the financial planning and expected
returns, media has to be briefed to get good coverage; retailers have to be communicated with
to get sufficient shelf-space and so on. In general, a consistent common message should
be delivered to various audiences.

Another key strategic decision is regarding the marketing communications mix. The
mix has to be decided keeping in view various factors like objectives of the program, target
audiences to be reached, promotional budget, type of product, etc. In addition, as discussed
earlier, each tool has some general strengths and weaknesses. E.g., advertising is
good for building the brand, public relations for building credibility, sales promotion for
spurring sales-instantly, personal selling for maintaining a more personalized touch, and so
on. Also, more than one tool can serve the same function. While the 'communications mix
works to achieve IMC objectives, each individual tool also has its own set of objectives,
budget and 'strategies. Once the mix of tools is selected, communication managers start
working on the individual tools.

Next, message strategies need to be worked-out. This is an important decision because

the messages should effectively address the problem or opportunity, identified through the
situational analysis: The messages delivered by each tool should be consistent with the overall
IMC message being sent.

Media strategy, another crucial strategic decision, involves determining the

communication channels that would be used to deliver the messages. Each promotional tool
has a set of media vehicles or message delivery options to choose from. For example, one can
advertise on television, on radio, in print, etc. Similarly, direct marketing can be done through

103
 direct mails, emails, Internet websites, etc. Media options are selected after, careful evaluation
of their costs, advantages and limitations, target audience reach and appeal, message strategy,
and the like. For example, if teenagers are to be reached, special events at teenage joints is a
better alternative than newspaper advertising, whereas if cost is the concern, personal selling
might be an expensive alternative.

6. Implement the strategies and monitor activities: Successful implementation calls for
breaking up the plan into micro-level activities, timing and scheduling them, assigning them
to people-in-charge, coordinating their efforts and monitoring the execution process. For
example, to execute a bonus-pack sales promotion programme, communications department
will have to get the offer-announcing sales materials printed, sales representatives will have
to convince retailers to display promotional posters and danglers, logistics department will
have to oversee that bonus-packs reach the stores on time and that there is enough stock to
last the offer period, and so on. It is possible that at the implementation stage the company
realizes that many retailers are unwilling to stock the bonus-packs because they don't have
enough shelf-space for the larger packs. Marketing communicators should anticipate as many
implementation-time hurdles as they can and provide ample lead time for all the activities to
be executed as per schedule, finally, the manager must monitor the execution to ensure that all
activities are implemented appropriately.

7. Evaluate the planning process: Evaluation of an IMC plan is not easy because often
communications effects are difficult to measure. At times they may not even have a direct
impact on sales or profitability; effects may be delayed, etc. Therefore, it is important to set
the objectives or 'standards for measuring performance' in specific, measurable terms to
make the evaluation possible. These standards are communication objectives in terms of
image creation among percentage of people, attitude formation, information dissipation, or
sometimes, sales enhancement. Next, the managers have to measure actual performance,
either through consumer surveys, sales figures or the like. Finally, the managers have to
compare actual performance with set standards and evaluate if they met, failed or exceeded
the standards. Evaluation also includes finding out the reasons for a particular level of
performance. This step helps the planner in later promotional plans.

104
Lesson 3: Promotion and Advertising tools

Sales Promotion
Promotion is an incentive tool used to drive up short term sales. Promotion can be
launched directed at consumer or trade. The focus of advertising to create reason for purchase
the focus of promotion is to create an incentive to buy. Consumer incentives could be
samples, coupons, free trial and demonstration. Trade incentive could be price off, free goods
and allowances. Sales force incentive could be convention, trade shows, competition among
sales people.

Sales promotion activity can have many objectives, for example, to grab attention of
new customer, reward the existing customer, increase consumption of occasional users. Sales
promotion is usually targeted at the fence sitters and brand switchers.

Sales promotional activity for the product is selected looking at the overall marketing
objective of the company. The final selection of the consumer promotional tools needs to
consider target audience, budget, competitive response and each tool’s purpose.

Sales promotion activity should under-go pretest before implementation. Once the
activity is launched it should be controlled as to remain within the budget. Evaluation
program is a must after implementation of the promotional scheme.

Public Relations
Companies cannot survive in isolation they need to have a constant interaction with
customers, employees and different stakeholders. This servicing of relation is done by the
public relation office. The major function of the public relation office is to handle press
releases, support product publicity, create and maintain the corporate image, handle matters
with lawmakers, guide management with respect to public issues.

Companies are looking at ways to converge with functions of marketing and public
relation in marketing public relation. The direct responsibility of marketing public relation
(MPR) is to support corporate and product branding activities.

105
 MPR is an efficient tool in building awareness by generating stories in media. Once
the story is in circulation MPR can establish credibility and create a sense of enigma among
sales people as well as dealers to boost enthusiasm. MPR is much more cost effective tool
than other promotional activities.

Direct Marketing
The communication establishes through a direct channel without using any
intermediaries is referred to as direct marketing. Direct marketing can be used to deliver
message or service. Direct marketing has shown tremendous growth in recent years. The
internet has played major part in this growth story. Direct marketing saves time, makes an
experience personal and pleasant. Direct marketing reduces cost for companies. Face to face
selling, direct mail, catalog marketing, telemarketing, TV and kiosks are media for direct
marketing.

Advertisement, Promotional activity, Public relation and direct marketing play an

essential role in helping companies reaches their marketing goals.

Advertising as a tool of marketing

Advertising is a tool of marketing that disseminates information about a brand which
is aimed at a large number of people at the same time using purchased space or time in
various mediums. While earlier, advertising was often seen as separate or an alternative to
marketing, it has eventually been subsumed under the latter.
In the context of marketing, advertising is possibly the most important element. It
draws from the other braches such as market research, positioning etc to create successful
persuasive communication. Advertising is also the most visible aspect of marketing as it
culminates into the most noticeable projection of everything that the product/service wishes to
appear as to its public, especially in the context of brand building.
A brand by definition is a sign of identity, the mark or label which differentiates one
product from the other. A product acquires a certain identity or a feel and a specific brand
value because of the kind of advertising that it creates for itself. It is this brand value which
then becomes crucial for companies to build their marketing strategies upon. Subroto
Sengupta in his book Brand positioning: Strategies for Competitive Advantage talks about
how advertising must position the brand. He recognizes the difficulties of creating distinct

106
brand identities in a fiercely competitive marketplace. “Advertising is the discovery and
communication for a brand to the target prospect.”
Therefore, advertising thus not only intends to sell but also create an aspiration
towards a certain product, and create that vital and persuasive distinction that makes it a
brand. How does advertising go about achieving it’s objectives?

Brand Differentiation: Communicating the difference- An advertisement needs to

communicate a difference for the brand i.e. something which sets it apart from it’s
competitors. The difference may be as simple as a special or new feature or color, function, a
perception of exclusivity or ‘for the masses’, a business ethic ( eco-friendly, recyclable,
preservative free) or simply a different perspective ( A cosmetic range that promises healthy,
problem free skin instead of changing the way one appears). Differentiation can be of two
kinds.
Generic differentiation: It’s the most basic form of brand differentiation where, emphasis on
the USP of the product built upon its features such as function, reliability, durability, design
or style. The unique selling point of a product must somehow figure into the ad campaign
otherwise it remains, creative but pointless communication. Of course once a product/ service
has managed to claim a take in the market, the USP of the product could be delegated to the
background. But this can only happen when the brand in itself communicates it’s value
without external support. International sporting goods such as Adidas, Reebok, Nike for
example have successfully created an idea of what they stand for and may not need to harp on
the quality or comfort of their shoes or gear to sell their range. Instead they can choose to
bring out huge energetic, campaigns with international sports stars that convey vague notions
of sport, competition, winning etc but are still capable of generating demand for the said
products. A newer product with a more utilitarian nature would have to enlist its salient
features. Cell phone services, have to constantly keep informing their customers on the latest
schemes etc because brand value in itself matters little when compared to quality of coverage,
cost benefits etc.
Pre emptive differentiation: When products have similar features an attributes, certain
products can gain advantage by branding themselves on the basis of those features. It chooses

107
to talk about that particular feature while no else has and manages to create the illusion of an
innovation.
Brand/Product Positioning: Positioning is yet another key component of building brand
identity. The position of a product is the perception it brings about in the mind of a target
consumer. It reflects the essence of the brand and helps the consumer make a judgment based
on its functional and non functional benefits. This positioning is also relative in respect of the
other competing products in the market.
Marketing Guru Philip Kotler explains positioning, ‘Once the core product is chosen, it
defines the characters of the product space in which the new product has to be
positioned..’The nature of the product can dictate how it is to be positioned. Brand building is
not always about seeking elitism. The world’s largest brands such as McDonald’s, Burger
King, Pepsi, Coke etc are built upon the idea of ‘everybody goes there or everybody drinks
that.’

Sometimes products may wish to connect with the younger demographics by

positioning themselves as product for the young and upwardly mobile. I Pods, Jeans,
Sunglasses, Gaming consoles etc are always advertised in yuppy, zingy ways to reign in
young people, though other age groups also purchase them.
Luxury and couture brands alternatively choose to appear exclusive, upscale and
impart a sense of elegance, luxury or style. Ad campaigns for such products and brands are
carefully measured in the intensity of their dissemination and appear mostly in life style/in-
flight magazines even though they are big budget. Advertisements of designer jewelry,
watches, perfume, apparel etc are examples of this kind of positioning.
Their pricing and availability ensures they are only affordable to the upper strata of
society; however they may enjoy a universal brand consciousness. It is thus possible that
people who may never be able to afford them would also know about Armani, Gucci, Prada
etc and desire them solely based on the fact that they have an elevated status. Such ads are
understated in their communication and don’t over sell the product

108
UNIT IV

Lesson 1: Internet Marketing

During the past decade, the popularity of the Internet has been growing explosively. This
trend is manifested in several ways. First, according to Cyberatlas.com (2002), the Internet in
the United States is growing at a rate of 2 million new Internet users each month; 143 million
Americans (54 percent of the population) used the Internet in September 2001, a 26 percent
increase over August 2000. Second, the number of companies that create web presence to
communicate with customers as well as other firms has been dramatically increasing. Third,
the Internet has been accepted by broad consumer segments for various purposes, such as
information search and online purchasing. Also, as reported in Cyberatlas.com (2002), 36
percent of Americans use the Internet to search for products and service information, a 10
percent increase over 2000. Among Internet users, 39 percent are making online purchases
and 35 percent are searching for health information.

Along with the increasing popularity of the Internet, marketing researchers have given
qualitative and empirical attention to this phenomenon. Some academic journals have released
special issues related to the Internet marketing (e.g., Marketing Science, Journal of the
Academy of Marketing Science, and Journal of Retailing). Years of research have yielded
many important findings. Among those studies, the Internet has been viewed as a marketing
channel, a new advertising medium, and a communication platform.

Products on the Internet

Research on the topic of Internet products attempts to answer the following questions:
· What kind of products may be suitable for online selling?
· What kind of marketing strategies can be used to facilitate online selling?
Any product is perceived by a buyer to be a combination of utilities (e.g., qualities, values,
and/or capabilities) that is expected to provide customer satisfaction assessed
in terms of expected benefits minus costs incurred. By gathering information prior to
purchase, consumers can predict whether the purchased product may satisfy their needs and/or
expectations. The value of this information to consumers depends on its nature and its

109
reliability. The nature of the information will likely be altered if one views such information
based on search, experience, and credence goods classification. From an economic standpoint,
goods are often classified into search, experience, and credence goods in terms of the
consumers’ ability to assess quality and value before and after purchase. The quality and
value of search goods can be easily assessed by consumers prior to purchase; the quality of
experience goods is difficult and/or costly to assess prior to purchase and usage; the quality of
credence goods cannot be verified even after repeated purchase and usage.

Marketing function on Internet

Just as any innovation, the success of the Internet as a marketing channel depends on
the advantage the system can offer compared to other alternative systems or technologies – as
by providing new valuable features that better match the consumer needs or exceed the utility
provided by other channel formats. Researchers have been comparing the Internet with other
marketing channels from different perspectives. Alba et al. (1997) distinguish different retail
formats in terms of costs and benefits to consumers, including providing alternatives for
consideration, screening alternatives to form a consideration set, providing information for
selecting from a consideration set, transaction costs, and other benefits such as entertainment,
social interaction and personal security.
· Storing larger amounts of information at relatively low costs and providing information
interactively and customizably, thus diminishing information asymmetry between buyers and
sellers; · Providing powerful and inexpensive ways (e.g., search engine) to search,organize,
and distribute such information;
· Providing perceptual experiences (e.g., 3D image and video preview);
· Serving as a transaction medium as well as a physical distribution medium for certain
goods (e.g., software);
· Establishing presence at relatively low costs;

One feature that the Internet does not have is the social interactivity; that is, the
interaction between a customer and sales associate. On the one hand, a salesperson can

110
provide information about the specific product attributes capabilities that greatly reduce
consumers’ information processing costs.
Five social motives that drive consumers to purchase, namely, social experiences
outside the home, communication with others have a similar interest, peer group attraction,
status and authority, and pleasure of bargaining. For consumers who value the social
interaction, “the success of a store, as well as customer satisfaction with the store, depends on
the store’s location and the manager’s ability to employ the retailing mix in a manner that is
consistent with the unique socioeconomic and psychographic characteristics of the customer
base. Factors that may affect voluntary time include “consumers’ intrinsic interest in
shopping, the in-store retailing mix, and consumer’s sense of time shortage.
In contrast, consumers cannot avoid and reduce involuntary time (e.g., gathering and
carrying products, and/or waiting in line) if they make the purchase. Applying this notion to
the Internet, it is clear that the irritating involuntary time can be eliminated when consumers
purchase online. The Internet shopping can also shorten voluntary time because consumers do
not need to visit the physical store. Two issues should be noted here. First, consumers cannot
acquire the product immediately after they make the purchase online. Second, only limited
social interaction is available on the Internet.

Lesson 2: E-commerce

E-commerce, in the popular sense, can be defined as: the use of the Internet and the
Web to conduct business transactions. A more technical definition would be: e-commerce
involves digitally enabled commercial transactions between and among organizations and
individuals. Ecommerce differs from e-business in that no commercial transaction, an
exchange of value across organizational or individual boundaries, takes place in e-business.
E-business is the digital enablement of transactions and processes within a firm and therefore
does not include any exchange in value. E-commerce and e-business intersect at the business
firm boundary at the point where internal business systems link up with suppliers. For
instance, e-business turns into e-commerce when an exchange of value occurs across firm
boundaries.

111
e-commerce initiatives

Global e-commerce initiatives to advance transactions

The United Nations and a coalition of mobile phone companies are working on
separate initiatives that together will move e-commerce forward.

Later this month, the United Nations will hear arguments for adopting a model law on
electronic signatures that, if passed, could then be adopted by countries and states around the
world by mid-2001. Also, Ericsson, Nokia, Motorola and Siemens are working on a protocol
that will let users conduct secure transactions from their mobile phones. Both announcements
were made at the World E-commerce Forum here in London, a conference that brings
together international government officials and large corporations to work on e-commerce
efforts.

The U.N. draft for electronic signatures sets out guidelines for what is considered an
electronic signature and how it can be given the same weight as a handwritten signature,
according to Gerold Herrmann, secretary of the U.N. Committee for International Trade Law.
The draft claims that an electronic signature "may be used to identify the signatory in relation
to the data message and indicate the signatory's approval of the information contained in the
message”, Herrmann says the United Nations was careful not to limit the law to merely digital
signatures so that cryptographic and biometric methods could be included, such as private key
encryption and fingerprinting. "Germany moved too fast in the adoption of digital signatures
and has limited the effect of their laws," he says.

The model law is meant to complement the U.N. Model Law on Electronic
Commerce, which has helped 14 countries adopt laws surrounding e-commerce, he says. The
previous model law did not address electronic signatures so countries have been hamstrung by
historical statutes requiring handwritten signatures.

Simultaneously, Ericsson, Nokia, Motorola and Siemens are pushing forward with
their Mobile Electronic Transactions (MeT) effort. The group hopes that it will be able to
deliver a method for securing commerce over mobile devices. MeT builds on the Wireless
Application Protocol (WAP) and Bluetooth protocols to provide the security framework for

112
transactions. However, it separates the user experience into three distinct levels: remote, local
and personal.

Lesson 3: Buying Behavior on the Net

India has the world’s 4th largest Internet user base, which crossed the 100 million
mark recently. Better connectivity, booming economy and higher spending power helped the
Indian e - commerce market revenues to cross $500 million with a CAGR of 103% over last 4
years. This may not be a significant number, averaging to only around $5 per user per year.
With the above background in mind, this research has been conducted to gain an insight into
the online buying behaviour of consumers. The objective is to explore the factors
which influence online purchase, the psychographic profile of the consumer groups and
understanding the buying decision process. Our findings should help an Internet Marketer to
determine the product/service categories to be introduced or to be used for marketing
for a specific segment of consumers. This would also allow them to add or
remove services/features which are important in the buying decision process. This
study however does not aim to identify newer areas to introduce new services, nor should it be
used to predict the success or failure of internet ventures. Internet is changing the way
consumers shop and buy goods and services, and has rapidly evolved into a global
phenomenon. Many companies have started using the Internet with the aim of cutting
marketing costs, thereby reducing the price of their products and services in order to stay
ahead in highly competitive markets. Companies also use the Internet to
convey, communicate and disseminate information, to sell
the product, to take feedback and also to conduct satisfaction surveys with
customers. Customers use the Internet not only to buy the product online, but
also to compare prices, product features and after sales services facilities they
will receive if they purchase the product from a particular store.
Many experts are optimistic about the prospect of online business.In addition to the
tremendous potential of the E-commerce market, the Internet provides a unique opportunity
for companies to more efficiently reach existing and potential customers. Although most

113
of the revenue of online transactions comes from business- to- business commerce, the
practitioners of business-to- consumer commerce should not lose confidence .It has been more
than a decade since business-to-consumer E-commerce first evolved. Along with the
development of E-retailing, researchers continue to explain E-consumers’ behavior
from different perspectives. Many of their studies have posited new emergent factors or
assumptions which are based on the traditional models of consumer behavior, and then
examine their validity in the Internet context.

114
 Lesson 4: Integrated Marketing Communications and the Internet

Integrated marketing communication (IMC) is an approach

to brand communications where the different modes work together to create a seamless
experience for the customer and are presented with a similar tone and style that reinforces the
brand’s core message. Its goal is to make all aspects of marketing communication such as
advertising, sales promotion, public relations, direct marketing, personal selling, online
communications and social media work together as a unified force, rather than permitting
each to work in isolation, which in turn maximizes their cost effectiveness.

Components of IMC:

 The Foundation - is based on a strategic understanding of the product and market. This
includes changes in technology, buyer attitudes and behaviour and anticipated moves by
competitors.
 The Corporate Culture - increasingly brands are seen as indivisible from the vision,
capabilities, personality and culture of the corporation.
 The Brand Focus - is the logo, corporate identity, tagline, style and core message of the brand.
 Consumer Experience - includes the design of the product and its packaging, the product
experience (for instance in a retail store) and service.
 Communications Tools - includes all modes of advertising, direct marketing and online
communications including social media.
 Promotional Tools - trade promotions; consumer promotions; personal selling, database
marketing, and customer relations management; public relations and sponsorship programs.
 Integration Tools - software that enables the tracking of customer behaviour and campaign
effectiveness. This includes customer relationship management (CRM) software, web
analytics, marketing automation and inbound marketing software.

115
Direct Marketing and the Internet

It is a common misconception that directs mail, one of direct marketing’s oldest and
most effective channels, is becoming obsolete. In fact, direct mail and direct marketing are
alive and well. However, with the emergence of digital marketing, direct marketing has
become a more interactive, Internet-driven channel. Shifting direct marketing tacticsonline
can foster easier customer data acquisition (i.e., demographic, psychographic, and
behavioral), which can assist in building a reliable customer database for targeted messages.

Successful direct marketing campaigns need to incorporate both online and offline
tactics. Direct marketing on the Internet can present marketers with the opportunity to gather
customer data as well as deliver targeted messages that will ultimately lead to success.

Converting Your Offline Customers Online

In today’s marketplace, customers still have their preferences between offline and
online. Generational gaps have created segmentation challenges across channels for
marketers; many customers may not want to interact with brands in an Internet-exclusive
sense, and others may not want to receive direct mailings.

However, some of the most powerful customer engagement tools can be found online,
illustrating the importance of converting offline customers to online. There are a number of
ways to do this, but the most effective involves integrating digital with traditional marketing
tactics. QR codes present an opportunity for marketers to drive traffic to their site, ultimately
exposing them to a range of tools to stay connected with the brand.

From a Chief Marketer post, Grant Johnson, founder of Johnson Direct LLC, says,
“Mail is still the best way to drive prospects to a call to action to websites, microsites,
YouTube, and social media outlets. We have seen a huge increase in demand from firms
trying to use direct mail more effectively to drive results.” Converting offline customers
online can be the key to increasing brand awareness and targeted messages.

116
Engaging Online Customers through Online Channels

Sixty-two percent of all adults worldwide now use social media. For marketers to
ignore this channel, or fail to drive prospects to branded social accounts, could result in
serious missed opportunities. Social networks allow marketers to be connected with
consumers 24/7 with the advent of mobile devices; they also allow marketers to listen, share,
and engage with potential customers from the moment they arrive online.

Social should not be a place to force sales pitches; rather, it should constitute a forum
for marketers to create and grow relationships with customers and prospects. Following users’
posts, tweets, likes, hashtags, etc. could lead to information that could be used to deliver
direct, personalized messages in the future.

Leveraging Customer Data and Creating Targeted Messages

After a relationship has been created with the prospect, marketers can pursue a more
aggressive path. Mobile push notifications triggered by location or purchases or personalized,
targeted emails can make customers feel unique, increasing the chances of conversion.

For direct marketing to be effective online, marketers need to make sure they are
delivering personalized results. Batch and blast techniques could land your messages into the
spam folder, or cause social users to un-follow, resulting in a loss of communication and
potential business.

By integrating each of these marketing tactics into an effective campaign, marketers can
get one step closer to the holy grail of one-to-one marketing.

Regulation and Policy Issues

The rapid spread of Internet as a marketing and communication tool has made it
necessary to regulate this new medium, although currently the regulation is in a nascent stage
and there is no internalization jurisdiction for any of the laws. One of the main problems
resulting from Internet marketing is the violation of an individual’s privacy, as in direct
marketing. In India, a citizen’s right to privacy was recognized by the Supreme Court in the

117
year 1991 as a part of right to life. In 2000, the Government passed the Information
Technology Act intended to provide a comprehensive regulatory framework for e-commerce.
The act governs electronic transactions and communications and prescribes penalties for the
breach of confidentiality of privacy if any person, who has access to the records of a second
person, discloses these records to a third person without the consent of the second person.

Yet, while the law does protect privacy of individuals, it does not adequately govern
the processing of personal data and the free movement of data. In Internet – based service
industries, the service provider is likely to have access to the personal and confidential data of
its customers and clients. Thus the service provider should be under a legal obligation to
protect the privacy of its customers and clients. The European Union (EU) has passed a strict
data processing directive which lists several rules that companies in the EU have to abide by
while collecting and using someone’s personal information. Member companies are allowed
to use the data collected for only those purposes that the business previously indentified. The
directive provides that data must be processed fairly and lawfully and that it should be
collected for specified, explicit and legitimate purposes without any further processing or
transfer to third parties that would be incompatible with those purposes. Of late, the India
government is also contemplating a dedicated data protection law for the country. Some
incidents of theft of data by employees of a service provider have also added to the urgency.
The law would also cover issues like hacking and unauthorized access to personal
information, as well as privacy in telemarketing wherein customer data moves freely, thanks
to direct selling companies.

Another area where industry and consumer groups have requested for stricter
enforcement of privacy laws is that of unsolicited or spam email. In countries like the US
there is an exclusive law to govern spam emails called the CAN – SPAM Act of 2003
(Controlling the Assault of Non – Solicited Pornography and Marketing Act), which
establishes requirements for those who send commercial email, spells out penalties for
spammers and companies whose products are advertised in spam if they violate the law and
gives consumer the right to ask e – marketers to stop spamming them. Among other things,
the law bans false or misleading header information and deceptive subject lines, required
marketers to provide and ‘opt – out’ option in emails and requires that commercial email be

118
identified as an advertisement and include the sender’s valid physical postal address. Penalties
up to $11,000 are prescribed for violation of these offences as well as for other offences like
harvesting email addresses from websites, registering for multiple email accounts, etc.

A reason why the privacy of individuals can be so easily violated on the Net is that it
is relatively easy to collect people’s personal information. Through undisclosed profiling, web
marketers can profile Net users on the basis of name, interests, age, Internet usage, location,
etc. This data is then used to bombard them with unsolicited advertising and spam email
messages. In the US, profiling companies are members of Network Advertising Initiative
(NAI) and follow a self – regulatory code of conduct.

In addition to addressing the issue of privacy, in India, the Information Technology

Act, 2000 also states penalties for publishers or transmitters of obscene or lascivious
information if it is deemed to deprave or corrupt its consumers. This regulation is particularly
useful in light of the fact that even minors are in the receiving end of Internet marketing. In
the US,, the Children’s Online Privacy Protection Act, 1998 (COPPA), places strict controls
on collecting information from children via the Internet and requires that websites directed at
children post a privacy policy notification on their homepage and on pages used for collecting
information.

As Internet marketing catches speed, the need for comprehensive India and
International legislation will become stronger.

119
 UNIT V

Lesson 1: Evaluating Marketing Communication programme

The Advertising Testing Process

In this section we shall examine the specific techniques that can be used at different
stages in the development and execution of an advertising campaign. Testing of an ad
campaign can occur (a) in its development phase (pretesting), (b) during its execution
(concurrent testing), and/or (c) after its market-run (post testing).

Pretesting Tools and Techniques

Concept Testing

Pretesting may be done for the ad concept, rough art, or finished ad. Concept testing
research evaluates ad theme concepts and appeals, positioning concepts, copy or script
concepts, visual and art concepts and the broad structure of advertisements. Concepts may be
expressed in words, pictures or symbols. Ripomatics/ stealomatics, which are very rough
renditions of a commercial, and are composed of images, film clips, and sounds ripped off
from other broadcast material, may be prepared to represent the feel of the tested commercial.
Alternative concepts are presented to test audiences through method such as focus groups,
interviews, observation techniques, etc., and consumer responses are evaluated.

Some of these methods are used for semi-finished ads, some for finished ads, and
some for both. Data collected can be qualitative or quantitative depending on the method
used. The PubliTestsm method developed by Research International and discussed later, is
one such method that is adapted to test quantitatively a series of different unfinished formats,
such as animated storyboards, ripomatics/ stealomatics/ animatics/videomatics, and
storyboards with a narrative tape.

120
How Should We Measure?

The 'how’ part of measurement deals with the specific tools and techniques used to
evaluate communication. These measuring devices can be broadly placed into three
categories: experimental devices, survey devices and observational devices.

Copy Testing

Experiments involve giving controlled exposures to sample groups

of consumers by controlling unrelated factors in the best possible manner, and checking for
group responses. For instance, an agency can expose two similar groups to two different sales
promotion programmes (10% off coupon to one and 15% rebate to another) and check for
difference in responses. In surveys, information is gathered by asking people questions, as in
personal interviews or focus groups. Observation comprises of gathering information through
human or mechanical surveillance. Physiological devices are the most common type of
mechanical techniques that we will discuss later.

While applying the testing techniques and approaches, certain criteria for evaluating
ads and commercials should also be established. In the US, large agencies have endorsed a set
of principles known as PACT (Positioning Advertising Copy Testing), which are aimed at
improving the research process through well-defined criteria, and controlling the cost of
television commercials. Copy testing is research undertaken to decide if advertising should
run in the marketplace, and to judge Specific advertising executions. It is different from media
testing, and is in fact pretesting by another name and is particularly used for testing television
commercials. Adherence to its principles can make the research process more scientific.

Researchers have arrived at four types of Copy Testing Scores. Report card measures are
used to arrive at a valid, single-number statistic to capture the overall performance of the
advertising creative. Single measures such as an ad's ability to 'break through' into the minds

121
 of consumers and register a brand message in their long-term memory, create persuasion,
generate attention, and develop branding, were used to measure an ad's effectiveness.
Diagnostic measures are used to understand why attention, branding, motivation, etc. are high or
low, and to help advertisers identify creative opportunities to improve executions- Non-verbal
measures were developed to measure those elements of advertising, which could not be
expressed in words or scaled through verbal rating statements. Researchers believe that many
times an ad's effects (such as emotions) may not even be perceived consciously. Moment-by-
moment measures sprung from the belief that a commercial need not be rated in its entirety but
as a flow of varying experiences because consumer responses can vary from scene to scene
while viewing a commercial. The, most popular of these was the dial-a-meter response, which
required respondents to turn a meter toward one end of a scale or another to reflect their
opinion of what was on screen at that moment.

Recall Test
Like recognition tests, recall tests also test audience's memory in remembering
advertisements. However, they give little or no aid in recalling. While in recognition tests,
researchers show particular ads to participants, in unaided recall the audience is asked to
recollect elements of ads without prompting, whereas in aided recall there is some prompting.
Recall tests can be conducted for both print ads and broadcast commercials.

In recall tests of print ads, participants are asked to read test publications in their
homes. The day they are screened to determine if they have read the publication or not.
Qualifying participants are questioned regarding ad elements, sales points, purchase interest
and intention, etc. Various research firms and ad agencies have their own versions of the
recall test. For instance, in one version, participants receive cards in which all the products
advertised in the test publication are listed. Participants mark the ads they have noticed, after
which they are interviewed. Most researchers test recall on the following three factors:

 Proven name recall: the percentage of respondents who can accurately recall the ad with the
publication closed;

 Idea penetration: the number of sales points or content elements that respondents can recall;

122
 Purchase convict-ion: the percentage of people who want to see, try or buy the product.

For testing recall of broadcast commercials, the Burke Day-After Recall test, developed by
the
Burke Research Corporation is the most popular in most countries. Day-after recall tests test
consumers' recall of specific commercials, one day after they are exposed to the ads. A day
after the commercials are aired, participants are screened to qualify those who have seen the
commercials. As in print recall tests, they are tested regarding brand name recall, sales points,
etc. Research shows that people who have a high degree of involvement with the programmes
watch ads and remember them too. More than 49% of such people watch television
commercials without walking away during breaks; more than 30% of these people remember
or recall the ads. What is therefore needed is a quality assessment of programmes, known as
purple GRP, through which it would be possible to find out people's involvement levels.

Recall tests are useful in assessing advertising's impact on memory, i.e. how well
consumers remember various aspects of an advertisement, and also for comparing these
measures with industry benchmarks. They also let advertisers experiment with copy and
media elements in order to aid consumers' retention of ads. For instance, a study conducted by
Harris Interactive, USA of two groups of 800 participants each, found that adding radio to an
Internet-only campaign enhanced unaided recall of advertising from 6% to 27%, while aided
recall increased from 25% to 58%. On the negative side, recall tests have the same limitations
as recognition tests. Studies have also indicated that DAR tests may favor unemotional
appeals because they require respondents to verbally describe the message, and rational
messages are easier to verbalize than emotional messages.

Recognition (Readership) Test

Recognition refers to whether a respondent can recognize advertisement as one that he

or she has seen before. Recognition tests were developed in the early 1920s by Dr. Daniel
Starch to test reader recognition levels of magazine and newspaper advertisements and
editorial content. Hence, his service, which is widely used to measure print advertisement
recognition, is known as the Starch test. The test is used by many advertising agencies and
advertisers to guide their advertising copy techniques. For instance, Starch custom research

123
 services are also available in India through the Gfk Group, a market research organization
serving 90 countries.

The Starch test requires participants, a minimum of 200 men and women, to thumb
through publication(s) that they normally read, looking at the ads as they go along, and
provides specific responses, particularly if they saw certain ads in the issue. Participants are
prescreened through personal interviews and are people who have previously read the
publication, usually within ten days of its issue. Interviewers ask participants to indicate the
ads they read and may question regarding the components they saw, such as headlines,
visuals, logo, body copy, etc. For high- quality results, no single respondent is asked to view
more than 100 ads. Starch Ad Readership Reports generate three measures for each
advertisement in a publication:

 Noted: the percentage that remember having previously seen the ad in the issue being studied;

 Seen – associated: the percentage that saw any part of the ad that identifies the product, brand
or advertiser;

 Read – most: the percentage that read at least half of the copy material in the advertisement.

Recognition tests measure the first objective of any ad - to be noticed. They are useful in
indicating to advertisers how various elements of an ad are remembered by participants. They
also point to the fact that a mere presence of an ad does not tantamountto it being noticed or
read. Recognition depends on various factors such as audience involvement with the product
class; size, color, position, copy and other creative elements of the ad; the editorial content of
the media and competitive ads in it; etc. Thus, the tests also allow advertisers to compare ad
performance across these dimensions - whether ad in publication A was recognized better
than in publication B, whether larger ad got more recognition, etc. Performance can also be
compared with other ads of the same size, product category, etc. Recognition test results are
also used by publishers to provide evidence to their clients that the ads in their publication are
noticed and read. Not only that, Starch tests can also be used to demonstrate the impact of
print advertising on purchase behavior.

124
 Although Starch scores are highly reliable in a test-retest sense, there is a concern
about the results for a single insertion. Results can be affected by factors such as participants'
level
of involvement with the product category, editorial content and reproduction quality of a
publication, etc. Readers can be confused about the publication in which they saw a particular
ad or if they saw it all and can claim readership where none exists. They may also try to
impress the interviewer or may not want to appear unknowledgeable, and may claim false
recognition. False recognition may also arise because of confusion with prior advertising for
the brand or interest in the product category. Further, participants' anticipation of tests can
also affect their recognition scores. In an experiment conducted by Robert J. Kent and Karen
A. Machleit, subjects who expected a recall or recognition test performed better on that test
than subjects who expected a different measure or measures unrelated to retention. Moreover,
ad recognition does not necessarily have a relationship with sales. The tests can also suffer
from variances due to difference in the skill and sophistication of interviewers. Most of all,
biases and variances are difficult to predict or adjust for a particular advertisement.

Attitude Test
Surveys are popularly used to measure consumer attitudes towards the ad and/or the
advertised brand. Attitude tests can be done concurrently or as a posttest. Researchers ask
various questions to individuals regarding the message, tone, comprehension, spokesperson,
wording, etc. of an ad and the results are used to indicate positive or negative attitudes. Tools
like direct questions, rating scales, semantic differential, checklists and partially structured
interviews are used to measure attitudes. If attitudes are heavily negative, the communication
may be pulled off. It is important to survey attitudes because they indicate the audience's
favorable or unfavorable disposition towards the attitude object. However, note that
measuring attitudes and predicting behavior on the basis of "attitude tests does not always
yield reliable results.

Lesson 3: Evaluating an Advertising Campaign

125
 Description of Our Message Testing / Ad Copy Testing
Regardless of the media form of the message, once a concept has been created, ideally,
it should be tested to make sure it works before using it in the market. This can take many
forms, from testing concepts in early, intermediate, or near-final stage. If tested in the early
stages, clients can save the cost of producing ads that will not work. If tested in the later
stages, clients can refine ads and determine which ones work best before spending large sums
of money on media buys. We have tested print ads, radio ads, television ads, speeches, press
releases, logos, signage/billboards, brochures, magazine designs, book cover designs,
websites, product packaging, point-of-purchase displays, television station news formats, and
even art exhibits.

Unique Features of Our Message Testing / Ad Copy Testing

With over 30 years of experience in message/ad copy testing we have tested messages
using one-on-one mall intercept interviews, focus groups, direct mail, and over the telephone
for radio ads. We have tested ads using experimental designs that are monadic (one concept
per respondent), sequential monadic (rotating two per respondent), paired-comparisons (two
concepts side by side) and protomonadic (a combination of the previous three). For television
ads, news shows and speeches, we have used interactive audience response/dialing
systems/people meters. Over the last 10 years, we have increasingly tested print, audio and
video messages through web surveys using some of the most advanced web survey
capabilities available. For visual concepts, these capabilities allows consumers to respond
using advanced techniques like clicking on the point in the ad that they like or dislike,
highlighting important words, using sliding scales for ratings, or traditional rating, ranking
and open-ended questions.

Key Benefit Deliverables from Our Message Testing / Ad Copy Testing

Each message/ad testing project is custom designed for the media form of the
message, the number of concepts to be tested, the time allowed for the testing and the client’s
budget. Regardless of the form, we typically measure the following variables in this type of
study.

 Attention Intrusiveness — How well does the message/ad “cut through the clutter” of other
competing messages?

126
 Diagnostics — How well does it communicate as measured on diagnostic measures of
relevancy, clarity, believability and likeability of the message, as well as what the audience’s
main idea consensus (the main “take away) of the message is.
 Motivating Power — How effectively does the message/ad motivate the audience in terms of
perceptions of brand image, creating interest and favorable predisposition, and ultimately in
persuading people toward behavior (purchase, donate, sign-up, vote, etc.)
 Segmentation — Which of the messages works best with each market segment?
 Winners — Which message(s) are the best (“winners”) among the alternatives tested?

Based on this information we make very specific recommendations, in terms of which

message(s), if any, to not use; which message(s) are the “winners” (most motivating) that
should be used; which message(s), if any, need to be “fine-tuned,” and how to refine those
messages.

Persuasion Analysis
From a practical marketer’s point of view, effective advertising is all about persuasion.
Collins COBUILD dictionary defines it as “the act of persuading someone to do something or
to believe that something is true”. Social scientists define persuasion as “an active attempt to
change beliefs and attitudes”. Therefore, developing persuasive advertising is a big task for
marketers. As a basis of developing this persuasive advertising, research about the nature and
development of persuasion knowledge and how people use it to interpret, evaluate, and
respond to influence attempts from advertisers and salespeople is for academic business
scholars.

Persuasion Knowledge Model

The persuasion knowledge model (PKM) is a target and agent structure that presumes
that within individuals, people’s persuasion knowledge continues developing throughout their
life span. The PKM model presents three sources of persuasion to people. First, personal
experiences in social interactions with friends, family, and coworkers are the most powerful
source, since people trust those people more than others. Conversations about how people’s
thoughts, feelings, and behaviors can be influenced are the second source. Finally, in contrast

127
to the firsthand experiences of active learning, the observations of marketers and other known
agents are a more passive way of persuading others. Persuasion knowledge performs schema
like functions, such as guiding consumer’s attention to aspects of an advertising campaign or
sales presentation, providing inferences about possible background conditions that caused the
agent to construct the attempt in that way (Friestad & Wright, 1994). In sum, the Persuasion
Knowledge Model may offer a basis for gaining added insight about the processes of both
consumer behavior and social influence.

Given the importance of persuasion sources and processes, five persuasion principles
by Robert Cialdini give marketers meaningful foundation in developing effective and
persuasive advertising. Information asymmetry was a major advantage for marketers to
persuade consumers since consumers mainly rely on the information which marketers offer.
However, a new Internet paradigm with technology support allows consumers access to
tremendous amounts of information, and it is becoming another threat for companies,
weakening their traditional strategy. Companies choose their strategy in the matrix of two
dimensions between price and differentiation.
But surprisingly enough, people tend to rely more on one important piece of
information and respond to it, rather than identifying and analyzing each relevant piece of
information when making a decision. Of course, people will make trade-offs between their
personal time and finding a lower price based on their personal value system under different
constraints and situations. Many studies show that even price-sensitive consumers tend to
keep purchasing from one store once they believe that that store offers the cheapest products.
Once consumers trust a sales person or other experts, they tend to believe the information
from that source without further information searching.
This highly reliable single piece of information is used as a “ trigger”, corresponding
with fundamental, powerful principles of sychology and studies of human behavior (Cialdini,
1985). Reciprocation is the first trigger for compliance in the decision making process of
persuading customers. Reciprocation governs the making of concessions in a negotiation
situation. Direct and high involvement forms more favorable attitudes toward subjects. The
second trigger is scarcity, in which people try to seize those items and opportunities that are
scarce or are becoming unavailable. People tend to feel special about rare things, contrasting

128
 to the need of assimilation to others. This is the strategy of high-end premium products, which
are affordable for a small number of privileged people. The willingness of people to follow
the suggestions of someone whom they see as a legitimate authority is the third one. People
tend to listen to their parents, professors or bosses because they consider them trustworthy and
responsible.
Consistency is the fourth trigger, which builds robust belief and attitude over time. If
the messages from one source is not consistent and tends to be changed fundamentally, people
may doubt the truthfulness of it. Consistent messages affect the mindset of people in that the
messages are truth. At last, social validation is when people are more influenced to perform an
action or hold a belief when they see that others are doing so. People don’t want to be an
extreme outlier in terms of social norms that “everybody” agrees to and assumes there are no
exceptions.
Persuasion is a complex topic. In fact, it is so complex that marketers are not
convinced on how to effectively choose from their alternatives. However, marketers should be
able to better harness and direct the influencing process for effective persuasion by
understanding and using persuasion principle.

Lesson 4: Evaluation of a PR Programme

It must be possible to evaluate the success of a program through some measures.

Hence we need to develop some metrics for measuring success, which is dependent on the
objectives set for the programme.

Let us take the same example as the one above. The success of the IPQ will obviously
depend upon whether or not the IPQ was undersubscribed or oversubscribed and up to what
extent. This broad objective is however dependant on several factors.

1. It depends on the size of the issue and the market conditions prevailing at the time of the
issue.
2. It depends on the broad corporate image that the company has in the marketplace.
3. It depends on the nature of the instrument and the price band within which it 1S being offered.

129
4. It depends upon the kind of money that is being put in terms of the overall promotional effort.
And so on.

Obviously the success of the Issue cannot depend solely on the efforts of the PR
department. However it is possible to isolate those areas where PR is solely responsible and
accountable and measure the results against those parameters. Let us assume that the
following were the targets set for the PR department.

1. X number of brokers and Y number of investors to attend the conferences across various
locations.
2. Z Col cms of publicity in total to be got over a certain set of publications, W air time to be
achieved over radio and M TV time over certain selected channels.

Now these are very SMART objectives and given that in the above case the PR
department was solely responsible for the brokers and investors meets and media coverage, it
is indeed fair to measure performance against these parameters.

Of course other subjective parameters could be also added for evaluation such as the
arrangements made, the quality of the meets etc. There are companies such as CIRRUS that
have developed some kind of models for measuring performance of a PR effort. However
suffice it to say, that if the objectives are clearly defined, companies themselves can measure
the result of a PR campaign.

130