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Marketing process, Mktg mix, NPD,PLC, STP, Distribution

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shrinivas kulkarni

This document provides an overview of marketing concepts including: - Definitions of marketing from 1985 and 2015 that emphasize creating value for customers. - The marketing environment and how companies must understand trends. - Different orientations companies can take such as production, selling, and marketing concepts. - The marketing mix of product, price, place, and promotion and how companies use these tools. - Segmentation, targeting, and positioning to develop marketing strategies.

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Marketing Management Unit 1 – UNDERSTANDING MKTG PROCESS & ENVIRONMENT
 Co-branding Boots Piramal and Saregama produced a music album “Strepsils Pure Voices” Airtel Money in assn with ICICI and Visa  Co-opetition – Cooperation and Competition HT advertised in ToI when it entered Mumbai HT made its printing facilities available to ToI Wockhardt & Ranbaxy came together to take on American market  Teaser Advertisements
Marketing - Definition (Then and Now) Marketing is the process of planning and executing conception, pricing, promotion and distribution of goods, ideas and services to create exchanges that satisfy individual and organizational goals - 1985 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 - 2015
Company Orientation  Production concept : Demand > Supply – High production efficiency, low cost & mass distribution  Product concept – concentrates on quality and performance of the products – feature oriented Marketing Myopia – Theodore Levitt  Selling concept – aggressive selling & promotion – sell what they make rather make what they can sell – bad word of mouth reaches 11 persons  Marketing concept – determine the need/want and deliver the desired satisfaction Surf/Ariel’s effort to understand the needs Henkel SPIC’s Pril dishwash bar Dream Machine 2020 by Electrolux Kelvinator
 Customer concept – Customerisation – booming  Societal marketing concept–preserving/enhancing the consumers’ & society’s well being MTR soups – “NO MSG” (Monosodium Glutamate – flavour enhancer) Cause Related Marketing results in (provided handled properly !)  Corporate reputation  Brand awareness  Customer loyalty  Increase in sales  Increase press coverage
 Product – Product line range, design, color, package, brand name, service function, warranty  Price – Price structure, payment terms, cost  Place - Distribution mix – Physical distribution, supplies, inventory, storage, transportation, warehousing, channels, retailers, distributors, wholesalers, export & import  Promotion - Communications mix – Advertising, PoPs, field sales force, telemarketing, PR, direct mail, SP, research, Electronic interaction “Customers don’t buy products ; they seek to acquire benefits” Marketing mix
The complexity of Marketing  Multiple decision makers in a family  Multiple factors involved in buying decision Consumer behavior – BLACKBOX??  Interaction modes  Time frame – Past experiences with the orgn, Exposure to advertising, experience with product usage  Global factors
Marketing Environment - to know where the environment is heading - what trends are emerging therein - to understand the opportunities & threats hidden - what should be the Co’s response to the changes - monitoring the present & forecasting the future Macro environment factors  Demographic environment - Population size, growth rate, age distribution, religious composition, literacy level, life expectancy, composition of workforce, household patterns, regional characteristics...
 Socio-cultural environment - Culture, traditions, beliefs, values and lifestyle - Social class – determined by income, occupation and location of residence E.g : Changing position of women in India Housewife  Home maker  working professional  CEO of the organization Emergence of HNIs in India  Economic environment - current income, savings, debt and credit availability – eg. Effect of cut in CRR on liquidity  Political environment - form of the govt, stability of the govt, political consensus on reforms...
 Natural environment - Natural resources – raw materials, energy etc.. - Ecology – environmental regulations, activists.. - Climate  Technological environment - options available, Govt’s approach and technology selection  Legal environment - Corporate affairs–regulations for MLM companies - Consumer protection, employee protection, sectoral protection(reserved for SSIs, anti-dumping duty), corporate protection(MRTP Act), regulations on products, price, protecting national firms
Levels of Product  Core benefit – Cleansing the body  Basic Product – Toilet soap  Expected product – a set of attributes the buyers normally expect – rich lather, fragrance, life...  Augmented product – meeting customers’ desires beyond expectations - lasting fragrance, VFM...  Potential product – possible evolution- liquid, drops, sanitizers... Product hierarchy  Need family – core need – to look better, Mobility  Product family – all prod classes that can satisfy a core need with reasonable effectiveness – toiletries, surface/air transport
 Product class – group of product within the product family recognized as having a certain functional coherence – cosmetics, vehicles  Product line – products within a prod class that are closely related bec – they perform similar function targeted at the same customer groups and marketed through same marketing channels within the same price range Lipstick, 2 wheelers/4 wheelers  Product type – several possible forms of the product tube lipstick, 150cc bikes  Brand – Revlon, Yamaha  Item – SKU – distinguishable by size, price and appearance
Product classification Durability & Tangibility-non durables/durables & services Consumer goods – based on the shopping habits Convenience – frequent, immediate & min efforts staples – purchased on a regular basis Impulse goods – due to external stimulus Emergency goods – umbrellas, raincoats, vaseline Shopping goods-comparing suitability, price, quality and style – furniture, clothing, home appliances homogeneous goods-similar in quality, diff in price heterogeneous – differ in prodt features & services Specialty goods – unique characteristics or brand identification, no comparison – Benz, CD shirts
Unsought goods – unaware/don’t think of buying-life insurance, books & journals... Industrial goods – Refer Philip Kotler Product Mix – set of product lines and items Det Powders Det bar paste brush soap Surf Rin Close-up Pepsodent Lux Rin Wheel Pepsodent Hamam Wheel Sunlight Mentodent G Rexona Sunlight 501 Lifebuoy Width – how many prod lines the Co. carries – 5 lines Length – total no. of items in the mix – 16 Average length – 16/5 = 3 Depth - how many variants are offered – eg., 2 formulations * 3 sizes = 6 (SKU)
Product Line Length  Line stretching – upward, downward & both ways  Line filling – adding more items with present range JND– just noticeable difference Fill the gaps approach  Line modernization – advanced version of the product  Line pruning
Brand decisions Brand can convey – attributes, benefits, values, culture, personality and the kind of user Brand awareness, brand acceptability, brand preference and brand loyalty  High brand equity provides competitive advantage - reduced marketing cost bcoz of awareness, loyalty - Trade leverage with dealers and retailers - Premium price because of perceived quality - Brand extensions because of credibility - Defense against fierce price competition “Well managed brands are not subjected to BLC”
Branding Decision – to brand or not to brand Sellers advantages Brand sponsor decision Manufacturers’ brands Distributors’ brands – private labeling Licensed brand name Brand name decision Individual brand name – Co’s reputation not at stake
Blanket family name or company trade name combined with product names – TATA, J&J, Dabur, Godrej, Britannia... Separate family name for all products Name of the person/place British Airways, Amex, KFC, McDonalds, Indian Airlines... Quality – Duracell, Aquaguard, Kwality, Compaq, Hommade, Homelite, Pureit, Persona, Nature’s Basket... Lifestyle – Royal Challenge, Aristocrat, Esteem, Safari, VIP... Artificial name – Kodak, Konica...
Desirable qualities for a brand name • Suggest something about product benefits • Suggest product qualities • Easy to pronounce/recognize/remember • Should be distinctive • Shouldn't carry poor meanings in other countries and languages
Marketing Management MARKETING MIX, STP and DISTRIBUTION
Environmental factors specific to the business  Demand - nature, size (present & potential), changes, invasion of substitutes, changes in buying behavior.  The consumer - tastes and preferences – fluctuating  Industry and competition - specific to a firm – to develop marketing strategy  Government policies - specific to the industry and business – e.g : LPG  Supplier related factors - make or buy decision (integrating or outsourcing) Environmental analysis has to be a continuous affair
CORPORATE NEW BUSINESS PLAN  Intensive Growth – achieving growth within the Company’s current businesses Ansoff’s product market expansion grid Current market New market Current product New product Market penetration Product development Market development Diversification
1. Market penetration Increasing the market share of its current products in their current markets - increasing the frequency of purchase - targeting the competitors’ customers - targeting the non-users 2. Market development Identifying the potential user groups – LPG in rural markets, HP’s entry into white box market - mass merchandising / increasing distribution channel 3. Product development New product development with additional features
Vertical Integration – both forward & backward  Backward Integration – moving towards suppliers - LG has set up its compressor facility - Amazon book publishing - E-comm giants having their own warehouses/mfg facilities  Forward Integration – moving towards end users - TATA Steel into branded steel furniture business - Godrej into processed chicken – Real Good - Nilkamal - @ Home - HUL’s Tea Parlour - Lipton T Place - Linc Pens’ retail outlets – Just Linc - Amaron Raja Batteries’ Amaron Pit Shops
 Horizontal Integration – acquiring competitors HUL-Kwality, Software companies and mobile apps 4. Diversification growth - Concentric diversification – tech and/or mktg synergy with existing product line - storewel & furniture, detergent powder/cake - Horizontal diversification – appealing to current customers though technologically unrelated - toothpaste & brush, shaving cream & brush - Conglomerate diversification – no relationship to current tech/product/market
Product Life Cycle (PLC) - Products have limited life - Pass thru distinct stages - challenges & opportunities - Profits rise and fall - Require different strategies at different level Introduction (Embryonic) - Slow sales growth – newly introduced - Profit non existent – heavy expenditure on intro Growth - Rapid market acceptance, substantial profit improvement Maturity - Slowdown in sales growth because acceptance by most - Profits stabilize or decline because of competition
Decline - Downward sales - Erosion of profits  Product categories have longest life cycle  Brands have either short or long PLC  PLCs can also take - Growth-slump-maturity pattern - Cycle-recycle pattern - Scalloped pattern, style, fashion and fad
Strategies throughout the PLC Introduction Promotional expenditure higher as to - inform potential buyers - induce product trial - secure distribution in retail outlets Pioneer (First-mover) Vs Late entrants Growth - rapid climb in sales, new competitors enter with new product features, distribution expanded - prices remain or fall, promo same level or increases, profits increase (promo-sales ratio declines, learning effect) - improve features, style
- new models and flanker prodts (diff size, flavors) - enter new market segments - increase distribution coverage/new distn channels - shift from product awareness to preference ads - lower price to attract the next level buyers Maturity - overcapacity in the industry, shakeout begins, weak players withdraw, well established players vying for competitive advantage thru high volume/lower cost. - Market nichers find place – premium price - Market penetration strategy, Product Improvement, marketing mix modification - abandon weaker products, concentrate on new/most profitable products
Decline - Sales decline due to technological advances, shift in preferences, domestic/foreign competition - withdraw from the smaller market segments, cut promo expenditure, reduce the price - Leave the industry if exit barriers are low - Sell it to another firm – sentiments ?
STP – Segmenting, Targeting and Positioning Segment – a large identifiable group within a market – consumers are assumed to be having quite similar need and wants in a segment Niche – more narrowly defined group – a small market whose needs are not being served Patterns of market segmentation Homogeneous preferences Diffused preferences Clustered preferences Bases of Segmentation  Geographic segmentation – nation, state, region, cities  Demographic segmentation – age, family size, FLC, gender, income, occupation, education, religion, social class – DINK, DINT, SOHO, OOH, MICE…
Market Targeting Evaluating market segments – overall attractiveness of the segment Vs Co’s objectives and resources Selecting the market segments – which & how many Single segment concentration P2M1 Selective specialization P1M3, P2M1, P3M2 Product specialization P2M1, P2M2, P2M3 Market specialization P1M1, P2M1, P3M1 Full market coverage Differentiating market offering from competitors Product differentiation Features, Performance, Conformance, Durability, Reliability, Reparability, Style and Design
Services differentiation Ordering ease, delivery, installation, customer training, repairs & maintenance, miscellaneous services Personnel differentiation Competence, courtesy, credibility, reliability, responsiveness, communication Channel differentiation Coverage, expertise and performance Image differentiation – company/brand image Positioning should be important to sufficient no. of buyers, distinctive, superior, communicable & visible, preemptive, affordable and profitable ad line, tag line, punch line, projection of the brand/product Perceptual Mapping in positioning
BOSTON CONSULTING GROUP (BCG)  Matrix is developed by Bruce Henderson of the Boston Consulting Group in the early 1970’s  According to this technique, business or products are classified as low or high performance depending upon their market growth rate & relative market share.
THE BCG GROWTH-SHARE MATRIX
Marketing process, Mktg mix, NPD,PLC, STP, Distribution
It is portfolio planning model which is based on the observation that company’s business unit can be classified in to four categories . Question Marks Stars Cash cows Dogs It is based on the combination of market growth & market share relative to the next based competitor.
Marketing process, Mktg mix, NPD,PLC, STP, Distribution
( QUESTION MARKS/PROBLEM CHILDREN HIGH GROWTH, LOW MARKET SHARE)  Most business start of as question marks  They will absorb great amount of cash if the market share remains unchanged (low)  Question marks have potential to become star & evenly cash cow but can also become dog.  Investment should be high for question marks.
STARS (HIGH GROWTH, HIGH MARKET SHARE)  Stars are leader in business  They also require heavy investment to maintain it’s large market share.  It leads to large amount of cash consumption & cash generation.  Attempts should be made to hold the market share otherwise the star will became a cash cow.
CASH COWS ( LOW GROWTH, HIGH MARKET SHARE)  They are foundation of the company & often the stars of yesterday.  They generate more cash than required  They generate more cash than required.  They extract the profits by investing as little cash as possible  They are located in an industry that is mature not growing or declining
DOGS (LOW GROWTH, LOW MARKET SHARE)  Dogs are the cash traps  Dogs do not have potential to bring  High cost – Low quality  Business is situated at a declining stage
WHY BCG MATRIX To asses Profile of product /business Cash demands of products The development cycle of product Resource allocation & divestment decisions
MAIN STEPS OF BCG MATRIX  Identifying & dividing a company into SBU Assessing & comparing the prospects of each SBU according to two criteria 1) SBU’s relative market share 2) Growth rate of SBU’s industry Classifying the SBU’s on the basis of BCG matrix Developing strategic objective for each SBU
PRICING  Selecting the pricing objective Survival – over capacity, competition, changing consumer wants Max. current profit Max. current revenue Max. sales growth – penetration pricing Max. market reach Product-quality relationship  Determining demand Statistical analysis on the past data Conducting price experiments (controlled environment) Consumer survey - reaction to different price level
Price elasticity of demand – elastic, inelastic Demand is less elastic if - there r few or no substitutes/competitors - buyers don’t notice the higher price - buyers are slow to change buying habits - buyers think higher prices are justified  Estimating costs  Analysing competitors’ costs, price and offers  Selecting pricing methods Mark-up pricing – Cost plus strategy Target return pricing – Fixed ROI Perceived value pricing – through MR Value pricing - VFM
Going rate pricing – based on competitors’ price Penetration pricing Skimming pricing  Selecting the final price Influence of other mktg mix elements on price Impact of price on stakeholders like employees, distributors/dealers, suppliers, Govt. regulation...  Adapting the price Geographical pricing-barter, buyback arrangement Price discounts and allowances – cash, quantity, trade discount, seasonal discount, exchange... Promotional pricing-cash rebate, low interest fin, longer payment terms, psychological discounting.. Discriminatory pricing – railways, STD...
MARKETING CHANNELS – trade/distribution channel Intermediaries/channel members Producers lack financial resources to market directly Product nature demands intermediaries – FMCGs Rate of return in retailing is low Zero level channel Door to door sales – Eureka Forbes, Oriflame... Home parties – Tupperware Online – E commerce Telemarketing ~ today it can be seen as mobile ads Teleshopping Network - TSN Manufacturer owned retail outlets – Bata, Raymond One level channel – ManufacturerRetailerCustomer
Two level channel – MfrWholesalersRetailersEU Multilevel channel – MfrWholesalersDistributors DealersSub dealersRetailersConsumers Functions of the channel members Transfer of ownership thru selling Transfer of possession thru transportation Order processing, Inventory carrying Storage, sorting, negotiation and promotion Wholesalers  Merchant wholesalers – take title of the goods  Manufacturer’s agents – on behalf of mfrs visit : tradeindia.com, indiamart.com Retailers – Department stores, supermarkets, hypermalls
Criteria for selecting the channel members  Market – size and location Buyers concentration – scattered/dense  Product – Nature – perishability Value of the product – high unit cost Technicality Substitutability – loyalty – traders’ push Customer service Availability  Company’s characteristics – size, financial capability  Competitive characteristics  Environmental characteristics–boost/decline in economy
 Product differentiation – dual distribution Mfrs directly sell to outlets - HUL to Big Bazaar Thru wholesalers to reach small markets  Geographic differentiation Densely populated – Direct Marketing Less populated – wholesalers/retailers Establishing objectives for intermediaries Distribution objectives Vs Overall objectives with other M.Mix of the firm  Location of selling space – where & how much space  Investment in Inventory – capacity  Use of personal selling
Providing motivation to intermediaries  Co-operative approach Promotional assistance Training of intermediaries’ salespersons Free display materials Part payment for store improvement Commission on extra sales  Partnership approach  Through the use of power – reward, coercion, legitimate and expertise leadership
Channel Conflict may occur between the Manufacturer and the channel member Channel members - Carrying competitors’ products - Encroaching another member’s territory - Not adhering to the price laid down by the firm Case : Maruti’s stringent stand on its dealers, Visi-coolers by soft drink manufacturers Control Tools  Contract – agreement enforceable by law Elements of contract Products handled Classes or types of customers
Geog Territory to be covered Inventory – buy back arrangements Installation, repairs, replacements, AMC, guarantee, warranty… Prices and margins Advt & SP obligations – local ads, interiors... Sales quota Terms – duration of contract, terms of renewal / cancellation Payment – terms and conditions  Power Coercive power – rewards withheld, punishment Reward power Legitimate power, Expert power
Manufacturer also derives his power from Product specialization - demand > supply Size – captive outlets Brand image/Corporate image Horizontal Marketing system Two or more unrelated companies put together resources to exploit an emerging mktg opportunity Multichannel marketing system – 2 or more channels Physical Distribution Physical handling and movement of products through and among the channel members Actual movement and storage of goods
Elements of physical distribution Transportation, Inventory maintenance, order processing, acquisition, protective packaging, warehousing, materials handling, info maintenance Warehousing How many? Location of warehouse? Ownership (Private/public) Fewer no. of warehouses ? Cost – Service trade off Factors affecting warehouse choice Product type, transportation cost, markets, rent, labour supply, taxes, geography and competition
Elements of total cost in physical distribution system  Transportation cost – labour, fuel, tax  Inventory carrying cost – Insurance, pilferage, deterioration loss  Fixed warehouse cost – land, building, light, heat, maintenance, admin, materials handling equipments..  Material handling cost – picking, packing, (un)loading  Cost of information – order processing, data storage and retrieval, forecasting and production planning Transportation – Road/Rail/Air/Sea – Cost-Benefit
Packaging – Self study topic Opportunity for innovation Blister pack, pillow pack (Halls), tetra pack, combi pack (Prestige), sachet/pouch, brick pack (Dhara), spout pack (Surf Excel Power), nitrogenous pack (Lays), bionic man pack (Boost), bubble pack (Clinic Plus), peek-a-boo plastic pack (Allenz Polo), summer & winter pack (Parachute), flow wrap pack (Aim), MTR’s idli, ... Labeling – Statutory regulations MRP, Mfrg/Exp date, Ingredients (Veg/Non-veg) with colour code – red & green Cigarettes – warning on the package Requirements from the retailers - barcode, RFID Dictum for the soft drink manufacturers - caffeine
Marketing Management New Product Development
NEW PRODUCT DEVELOPMENT  New to the world products  New product lines – to a company  Additions to existing product lines(flavour, pack size)  Improvements/Revisions of existing products  Repositioning – targeting new markets/segments  Cost reductions – similar performance with lower cost and lesser frills(optional) Incremental Innovation Vs Disruptive Technology
Challenges in NPD  Shortage of ideas – Steel, Commodities.. TATA, Saint Gobain… in branding commodities  Cost of Development  Capital shortage  Shorter development time  Shorter PLC  Maximizing the reach of products  Identifying and addressing consumer dynamics  Managing customization
Managing NPD - Steps  Idea generation customers, scientists, competitors, employees, channel members and top management  Idea screening Drop error – dropping good ideas Go error – Permitting poor ideas  Concept development and testing Product idea – possible prod the Co. might offer to mkt Product concept – elaborated version of the idea Concept development – Product positioning, Brand positioning Concept testing – testing product concepts with the appropriate target consumers
Testing on the following parameters Communicability & believability Need level Gap level – Need-Gap score Perceived value Purchase intention User targets, purchase occasion, purchasing frequency  Market strategy development Target mkt size, structure, behavior, positioning, sales, mkt share and profit goals in the first few years Planned price, distribution strategy and mktg budget Long run sales and profit goals, mktg mix strategy
 Business Analysis – Estimating business attractiveness Estimating the total sales Estimating costs and profits – breakeven analysis  Product Development Moving to R&D, prototype testing (Alpha & Beta)  Market testing Test marketing with different marketing mixes in different markets/segments  Commercialization when, where, to whom & how
The consumer adoption process Individual’s decision to become a regular user Innovation Diffusion process The spread of new idea from its source of invention or creation to its ultimate users or adopters – focuses on the mental process thru which an individual passes Stages  Awareness – aware of innovation but lacks info.  Interest – stimulated to seek info about the innovation  Evaluation – considers whether to try  Trial – tries the innovation  Adoption – decides to make regular use
Factors influencing adoption process  Readiness to try new products – 5 adopter groups Innovators – venturesome, trying out new ideas Early adopters – opinion leaders, adopt new ideas early but carefully Early majority – deliberate, adopt new ideas before the average person Late majority – skeptical, adopt only after majority have tried Laggards – tradition bound, suspicious  Personal/societal Influence
Adopter Categories Innovators 2.5% Early Adopters 13.5% Laggards 16% Percentage of Adopters by Category Sequence Early Majority 34% Late Majority 34% “Diffusion of Innovation” by Rogers
Why products fail ??  Marketers assess the marketing climate inadequately.  The wrong group was targeted.  A weak positioning strategy was used.  A less-than-optimal "configuration" of attributes and benefits was selected.  A questionable pricing strategy was implemented.  The ad campaign generated an insufficient level of awareness.  Cannibalization depressed corporate profits.  Over-optimism about the marketing plan led to a unrealistic forecast.  Poor implementation of the marketing plan in the real world.

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Marketing process, Mktg mix, NPD,PLC, STP, Distribution

  • 1. Marketing Management Unit 1 – UNDERSTANDING MKTG PROCESS & ENVIRONMENT
  • 2.  Co-branding Boots Piramal and Saregama produced a music album “Strepsils Pure Voices” Airtel Money in assn with ICICI and Visa  Co-opetition – Cooperation and Competition HT advertised in ToI when it entered Mumbai HT made its printing facilities available to ToI Wockhardt & Ranbaxy came together to take on American market  Teaser Advertisements
  • 3. Marketing - Definition (Then and Now) Marketing is the process of planning and executing conception, pricing, promotion and distribution of goods, ideas and services to create exchanges that satisfy individual and organizational goals - 1985 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 - 2015
  • 4. Company Orientation  Production concept : Demand > Supply – High production efficiency, low cost & mass distribution  Product concept – concentrates on quality and performance of the products – feature oriented Marketing Myopia – Theodore Levitt  Selling concept – aggressive selling & promotion – sell what they make rather make what they can sell – bad word of mouth reaches 11 persons  Marketing concept – determine the need/want and deliver the desired satisfaction Surf/Ariel’s effort to understand the needs Henkel SPIC’s Pril dishwash bar Dream Machine 2020 by Electrolux Kelvinator
  • 5.  Customer concept – Customerisation – booming  Societal marketing concept–preserving/enhancing the consumers’ & society’s well being MTR soups – “NO MSG” (Monosodium Glutamate – flavour enhancer) Cause Related Marketing results in (provided handled properly !)  Corporate reputation  Brand awareness  Customer loyalty  Increase in sales  Increase press coverage
  • 6.  Product – Product line range, design, color, package, brand name, service function, warranty  Price – Price structure, payment terms, cost  Place - Distribution mix – Physical distribution, supplies, inventory, storage, transportation, warehousing, channels, retailers, distributors, wholesalers, export & import  Promotion - Communications mix – Advertising, PoPs, field sales force, telemarketing, PR, direct mail, SP, research, Electronic interaction “Customers don’t buy products ; they seek to acquire benefits” Marketing mix
  • 7. The complexity of Marketing  Multiple decision makers in a family  Multiple factors involved in buying decision Consumer behavior – BLACKBOX??  Interaction modes  Time frame – Past experiences with the orgn, Exposure to advertising, experience with product usage  Global factors
  • 8. Marketing Environment - to know where the environment is heading - what trends are emerging therein - to understand the opportunities & threats hidden - what should be the Co’s response to the changes - monitoring the present & forecasting the future Macro environment factors  Demographic environment - Population size, growth rate, age distribution, religious composition, literacy level, life expectancy, composition of workforce, household patterns, regional characteristics...
  • 9.  Socio-cultural environment - Culture, traditions, beliefs, values and lifestyle - Social class – determined by income, occupation and location of residence E.g : Changing position of women in India Housewife  Home maker  working professional  CEO of the organization Emergence of HNIs in India  Economic environment - current income, savings, debt and credit availability – eg. Effect of cut in CRR on liquidity  Political environment - form of the govt, stability of the govt, political consensus on reforms...
  • 10.  Natural environment - Natural resources – raw materials, energy etc.. - Ecology – environmental regulations, activists.. - Climate  Technological environment - options available, Govt’s approach and technology selection  Legal environment - Corporate affairs–regulations for MLM companies - Consumer protection, employee protection, sectoral protection(reserved for SSIs, anti-dumping duty), corporate protection(MRTP Act), regulations on products, price, protecting national firms
  • 11. Levels of Product  Core benefit – Cleansing the body  Basic Product – Toilet soap  Expected product – a set of attributes the buyers normally expect – rich lather, fragrance, life...  Augmented product – meeting customers’ desires beyond expectations - lasting fragrance, VFM...  Potential product – possible evolution- liquid, drops, sanitizers... Product hierarchy  Need family – core need – to look better, Mobility  Product family – all prod classes that can satisfy a core need with reasonable effectiveness – toiletries, surface/air transport
  • 12.  Product class – group of product within the product family recognized as having a certain functional coherence – cosmetics, vehicles  Product line – products within a prod class that are closely related bec – they perform similar function targeted at the same customer groups and marketed through same marketing channels within the same price range Lipstick, 2 wheelers/4 wheelers  Product type – several possible forms of the product tube lipstick, 150cc bikes  Brand – Revlon, Yamaha  Item – SKU – distinguishable by size, price and appearance
  • 13. Product classification Durability & Tangibility-non durables/durables & services Consumer goods – based on the shopping habits Convenience – frequent, immediate & min efforts staples – purchased on a regular basis Impulse goods – due to external stimulus Emergency goods – umbrellas, raincoats, vaseline Shopping goods-comparing suitability, price, quality and style – furniture, clothing, home appliances homogeneous goods-similar in quality, diff in price heterogeneous – differ in prodt features & services Specialty goods – unique characteristics or brand identification, no comparison – Benz, CD shirts
  • 14. Unsought goods – unaware/don’t think of buying-life insurance, books & journals... Industrial goods – Refer Philip Kotler Product Mix – set of product lines and items Det Powders Det bar paste brush soap Surf Rin Close-up Pepsodent Lux Rin Wheel Pepsodent Hamam Wheel Sunlight Mentodent G Rexona Sunlight 501 Lifebuoy Width – how many prod lines the Co. carries – 5 lines Length – total no. of items in the mix – 16 Average length – 16/5 = 3 Depth - how many variants are offered – eg., 2 formulations * 3 sizes = 6 (SKU)
  • 15. Product Line Length  Line stretching – upward, downward & both ways  Line filling – adding more items with present range JND– just noticeable difference Fill the gaps approach  Line modernization – advanced version of the product  Line pruning
  • 16. Brand decisions Brand can convey – attributes, benefits, values, culture, personality and the kind of user Brand awareness, brand acceptability, brand preference and brand loyalty  High brand equity provides competitive advantage - reduced marketing cost bcoz of awareness, loyalty - Trade leverage with dealers and retailers - Premium price because of perceived quality - Brand extensions because of credibility - Defense against fierce price competition “Well managed brands are not subjected to BLC”
  • 17. Branding Decision – to brand or not to brand Sellers advantages Brand sponsor decision Manufacturers’ brands Distributors’ brands – private labeling Licensed brand name Brand name decision Individual brand name – Co’s reputation not at stake
  • 18. Blanket family name or company trade name combined with product names – TATA, J&J, Dabur, Godrej, Britannia... Separate family name for all products Name of the person/place British Airways, Amex, KFC, McDonalds, Indian Airlines... Quality – Duracell, Aquaguard, Kwality, Compaq, Hommade, Homelite, Pureit, Persona, Nature’s Basket... Lifestyle – Royal Challenge, Aristocrat, Esteem, Safari, VIP... Artificial name – Kodak, Konica...
  • 19. Desirable qualities for a brand name • Suggest something about product benefits • Suggest product qualities • Easy to pronounce/recognize/remember • Should be distinctive • Shouldn't carry poor meanings in other countries and languages
  • 20. Marketing Management MARKETING MIX, STP and DISTRIBUTION
  • 21. Environmental factors specific to the business  Demand - nature, size (present & potential), changes, invasion of substitutes, changes in buying behavior.  The consumer - tastes and preferences – fluctuating  Industry and competition - specific to a firm – to develop marketing strategy  Government policies - specific to the industry and business – e.g : LPG  Supplier related factors - make or buy decision (integrating or outsourcing) Environmental analysis has to be a continuous affair
  • 22. CORPORATE NEW BUSINESS PLAN  Intensive Growth – achieving growth within the Company’s current businesses Ansoff’s product market expansion grid Current market New market Current product New product Market penetration Product development Market development Diversification
  • 23. 1. Market penetration Increasing the market share of its current products in their current markets - increasing the frequency of purchase - targeting the competitors’ customers - targeting the non-users 2. Market development Identifying the potential user groups – LPG in rural markets, HP’s entry into white box market - mass merchandising / increasing distribution channel 3. Product development New product development with additional features
  • 24. Vertical Integration – both forward & backward  Backward Integration – moving towards suppliers - LG has set up its compressor facility - Amazon book publishing - E-comm giants having their own warehouses/mfg facilities  Forward Integration – moving towards end users - TATA Steel into branded steel furniture business - Godrej into processed chicken – Real Good - Nilkamal - @ Home - HUL’s Tea Parlour - Lipton T Place - Linc Pens’ retail outlets – Just Linc - Amaron Raja Batteries’ Amaron Pit Shops
  • 25.  Horizontal Integration – acquiring competitors HUL-Kwality, Software companies and mobile apps 4. Diversification growth - Concentric diversification – tech and/or mktg synergy with existing product line - storewel & furniture, detergent powder/cake - Horizontal diversification – appealing to current customers though technologically unrelated - toothpaste & brush, shaving cream & brush - Conglomerate diversification – no relationship to current tech/product/market
  • 26. Product Life Cycle (PLC) - Products have limited life - Pass thru distinct stages - challenges & opportunities - Profits rise and fall - Require different strategies at different level Introduction (Embryonic) - Slow sales growth – newly introduced - Profit non existent – heavy expenditure on intro Growth - Rapid market acceptance, substantial profit improvement Maturity - Slowdown in sales growth because acceptance by most - Profits stabilize or decline because of competition
  • 27. Decline - Downward sales - Erosion of profits  Product categories have longest life cycle  Brands have either short or long PLC  PLCs can also take - Growth-slump-maturity pattern - Cycle-recycle pattern - Scalloped pattern, style, fashion and fad
  • 28. Strategies throughout the PLC Introduction Promotional expenditure higher as to - inform potential buyers - induce product trial - secure distribution in retail outlets Pioneer (First-mover) Vs Late entrants Growth - rapid climb in sales, new competitors enter with new product features, distribution expanded - prices remain or fall, promo same level or increases, profits increase (promo-sales ratio declines, learning effect) - improve features, style
  • 29. - new models and flanker prodts (diff size, flavors) - enter new market segments - increase distribution coverage/new distn channels - shift from product awareness to preference ads - lower price to attract the next level buyers Maturity - overcapacity in the industry, shakeout begins, weak players withdraw, well established players vying for competitive advantage thru high volume/lower cost. - Market nichers find place – premium price - Market penetration strategy, Product Improvement, marketing mix modification - abandon weaker products, concentrate on new/most profitable products
  • 30. Decline - Sales decline due to technological advances, shift in preferences, domestic/foreign competition - withdraw from the smaller market segments, cut promo expenditure, reduce the price - Leave the industry if exit barriers are low - Sell it to another firm – sentiments ?
  • 31. STP – Segmenting, Targeting and Positioning Segment – a large identifiable group within a market – consumers are assumed to be having quite similar need and wants in a segment Niche – more narrowly defined group – a small market whose needs are not being served Patterns of market segmentation Homogeneous preferences Diffused preferences Clustered preferences Bases of Segmentation  Geographic segmentation – nation, state, region, cities  Demographic segmentation – age, family size, FLC, gender, income, occupation, education, religion, social class – DINK, DINT, SOHO, OOH, MICE…
  • 32. Market Targeting Evaluating market segments – overall attractiveness of the segment Vs Co’s objectives and resources Selecting the market segments – which & how many Single segment concentration P2M1 Selective specialization P1M3, P2M1, P3M2 Product specialization P2M1, P2M2, P2M3 Market specialization P1M1, P2M1, P3M1 Full market coverage Differentiating market offering from competitors Product differentiation Features, Performance, Conformance, Durability, Reliability, Reparability, Style and Design
  • 33. Services differentiation Ordering ease, delivery, installation, customer training, repairs & maintenance, miscellaneous services Personnel differentiation Competence, courtesy, credibility, reliability, responsiveness, communication Channel differentiation Coverage, expertise and performance Image differentiation – company/brand image Positioning should be important to sufficient no. of buyers, distinctive, superior, communicable & visible, preemptive, affordable and profitable ad line, tag line, punch line, projection of the brand/product Perceptual Mapping in positioning
  • 34. BOSTON CONSULTING GROUP (BCG)  Matrix is developed by Bruce Henderson of the Boston Consulting Group in the early 1970’s  According to this technique, business or products are classified as low or high performance depending upon their market growth rate & relative market share.
  • 37. It is portfolio planning model which is based on the observation that company’s business unit can be classified in to four categories . Question Marks Stars Cash cows Dogs It is based on the combination of market growth & market share relative to the next based competitor.
  • 39. ( QUESTION MARKS/PROBLEM CHILDREN HIGH GROWTH, LOW MARKET SHARE)  Most business start of as question marks  They will absorb great amount of cash if the market share remains unchanged (low)  Question marks have potential to become star & evenly cash cow but can also become dog.  Investment should be high for question marks.
  • 40. STARS (HIGH GROWTH, HIGH MARKET SHARE)  Stars are leader in business  They also require heavy investment to maintain it’s large market share.  It leads to large amount of cash consumption & cash generation.  Attempts should be made to hold the market share otherwise the star will became a cash cow.
  • 41. CASH COWS ( LOW GROWTH, HIGH MARKET SHARE)  They are foundation of the company & often the stars of yesterday.  They generate more cash than required  They generate more cash than required.  They extract the profits by investing as little cash as possible  They are located in an industry that is mature not growing or declining
  • 42. DOGS (LOW GROWTH, LOW MARKET SHARE)  Dogs are the cash traps  Dogs do not have potential to bring  High cost – Low quality  Business is situated at a declining stage
  • 43. WHY BCG MATRIX To asses Profile of product /business Cash demands of products The development cycle of product Resource allocation & divestment decisions
  • 44. MAIN STEPS OF BCG MATRIX  Identifying & dividing a company into SBU Assessing & comparing the prospects of each SBU according to two criteria 1) SBU’s relative market share 2) Growth rate of SBU’s industry Classifying the SBU’s on the basis of BCG matrix Developing strategic objective for each SBU
  • 45. PRICING  Selecting the pricing objective Survival – over capacity, competition, changing consumer wants Max. current profit Max. current revenue Max. sales growth – penetration pricing Max. market reach Product-quality relationship  Determining demand Statistical analysis on the past data Conducting price experiments (controlled environment) Consumer survey - reaction to different price level
  • 46. Price elasticity of demand – elastic, inelastic Demand is less elastic if - there r few or no substitutes/competitors - buyers don’t notice the higher price - buyers are slow to change buying habits - buyers think higher prices are justified  Estimating costs  Analysing competitors’ costs, price and offers  Selecting pricing methods Mark-up pricing – Cost plus strategy Target return pricing – Fixed ROI Perceived value pricing – through MR Value pricing - VFM
  • 47. Going rate pricing – based on competitors’ price Penetration pricing Skimming pricing  Selecting the final price Influence of other mktg mix elements on price Impact of price on stakeholders like employees, distributors/dealers, suppliers, Govt. regulation...  Adapting the price Geographical pricing-barter, buyback arrangement Price discounts and allowances – cash, quantity, trade discount, seasonal discount, exchange... Promotional pricing-cash rebate, low interest fin, longer payment terms, psychological discounting.. Discriminatory pricing – railways, STD...
  • 48. MARKETING CHANNELS – trade/distribution channel Intermediaries/channel members Producers lack financial resources to market directly Product nature demands intermediaries – FMCGs Rate of return in retailing is low Zero level channel Door to door sales – Eureka Forbes, Oriflame... Home parties – Tupperware Online – E commerce Telemarketing ~ today it can be seen as mobile ads Teleshopping Network - TSN Manufacturer owned retail outlets – Bata, Raymond One level channel – ManufacturerRetailerCustomer
  • 49. Two level channel – MfrWholesalersRetailersEU Multilevel channel – MfrWholesalersDistributors DealersSub dealersRetailersConsumers Functions of the channel members Transfer of ownership thru selling Transfer of possession thru transportation Order processing, Inventory carrying Storage, sorting, negotiation and promotion Wholesalers  Merchant wholesalers – take title of the goods  Manufacturer’s agents – on behalf of mfrs visit : tradeindia.com, indiamart.com Retailers – Department stores, supermarkets, hypermalls
  • 50. Criteria for selecting the channel members  Market – size and location Buyers concentration – scattered/dense  Product – Nature – perishability Value of the product – high unit cost Technicality Substitutability – loyalty – traders’ push Customer service Availability  Company’s characteristics – size, financial capability  Competitive characteristics  Environmental characteristics–boost/decline in economy
  • 51.  Product differentiation – dual distribution Mfrs directly sell to outlets - HUL to Big Bazaar Thru wholesalers to reach small markets  Geographic differentiation Densely populated – Direct Marketing Less populated – wholesalers/retailers Establishing objectives for intermediaries Distribution objectives Vs Overall objectives with other M.Mix of the firm  Location of selling space – where & how much space  Investment in Inventory – capacity  Use of personal selling
  • 52. Providing motivation to intermediaries  Co-operative approach Promotional assistance Training of intermediaries’ salespersons Free display materials Part payment for store improvement Commission on extra sales  Partnership approach  Through the use of power – reward, coercion, legitimate and expertise leadership
  • 53. Channel Conflict may occur between the Manufacturer and the channel member Channel members - Carrying competitors’ products - Encroaching another member’s territory - Not adhering to the price laid down by the firm Case : Maruti’s stringent stand on its dealers, Visi-coolers by soft drink manufacturers Control Tools  Contract – agreement enforceable by law Elements of contract Products handled Classes or types of customers
  • 54. Geog Territory to be covered Inventory – buy back arrangements Installation, repairs, replacements, AMC, guarantee, warranty… Prices and margins Advt & SP obligations – local ads, interiors... Sales quota Terms – duration of contract, terms of renewal / cancellation Payment – terms and conditions  Power Coercive power – rewards withheld, punishment Reward power Legitimate power, Expert power
  • 55. Manufacturer also derives his power from Product specialization - demand > supply Size – captive outlets Brand image/Corporate image Horizontal Marketing system Two or more unrelated companies put together resources to exploit an emerging mktg opportunity Multichannel marketing system – 2 or more channels Physical Distribution Physical handling and movement of products through and among the channel members Actual movement and storage of goods
  • 56. Elements of physical distribution Transportation, Inventory maintenance, order processing, acquisition, protective packaging, warehousing, materials handling, info maintenance Warehousing How many? Location of warehouse? Ownership (Private/public) Fewer no. of warehouses ? Cost – Service trade off Factors affecting warehouse choice Product type, transportation cost, markets, rent, labour supply, taxes, geography and competition
  • 57. Elements of total cost in physical distribution system  Transportation cost – labour, fuel, tax  Inventory carrying cost – Insurance, pilferage, deterioration loss  Fixed warehouse cost – land, building, light, heat, maintenance, admin, materials handling equipments..  Material handling cost – picking, packing, (un)loading  Cost of information – order processing, data storage and retrieval, forecasting and production planning Transportation – Road/Rail/Air/Sea – Cost-Benefit
  • 58. Packaging – Self study topic Opportunity for innovation Blister pack, pillow pack (Halls), tetra pack, combi pack (Prestige), sachet/pouch, brick pack (Dhara), spout pack (Surf Excel Power), nitrogenous pack (Lays), bionic man pack (Boost), bubble pack (Clinic Plus), peek-a-boo plastic pack (Allenz Polo), summer & winter pack (Parachute), flow wrap pack (Aim), MTR’s idli, ... Labeling – Statutory regulations MRP, Mfrg/Exp date, Ingredients (Veg/Non-veg) with colour code – red & green Cigarettes – warning on the package Requirements from the retailers - barcode, RFID Dictum for the soft drink manufacturers - caffeine
  • 60. NEW PRODUCT DEVELOPMENT  New to the world products  New product lines – to a company  Additions to existing product lines(flavour, pack size)  Improvements/Revisions of existing products  Repositioning – targeting new markets/segments  Cost reductions – similar performance with lower cost and lesser frills(optional) Incremental Innovation Vs Disruptive Technology
  • 61. Challenges in NPD  Shortage of ideas – Steel, Commodities.. TATA, Saint Gobain… in branding commodities  Cost of Development  Capital shortage  Shorter development time  Shorter PLC  Maximizing the reach of products  Identifying and addressing consumer dynamics  Managing customization
  • 62. Managing NPD - Steps  Idea generation customers, scientists, competitors, employees, channel members and top management  Idea screening Drop error – dropping good ideas Go error – Permitting poor ideas  Concept development and testing Product idea – possible prod the Co. might offer to mkt Product concept – elaborated version of the idea Concept development – Product positioning, Brand positioning Concept testing – testing product concepts with the appropriate target consumers
  • 63. Testing on the following parameters Communicability & believability Need level Gap level – Need-Gap score Perceived value Purchase intention User targets, purchase occasion, purchasing frequency  Market strategy development Target mkt size, structure, behavior, positioning, sales, mkt share and profit goals in the first few years Planned price, distribution strategy and mktg budget Long run sales and profit goals, mktg mix strategy
  • 64.  Business Analysis – Estimating business attractiveness Estimating the total sales Estimating costs and profits – breakeven analysis  Product Development Moving to R&D, prototype testing (Alpha & Beta)  Market testing Test marketing with different marketing mixes in different markets/segments  Commercialization when, where, to whom & how
  • 65. The consumer adoption process Individual’s decision to become a regular user Innovation Diffusion process The spread of new idea from its source of invention or creation to its ultimate users or adopters – focuses on the mental process thru which an individual passes Stages  Awareness – aware of innovation but lacks info.  Interest – stimulated to seek info about the innovation  Evaluation – considers whether to try  Trial – tries the innovation  Adoption – decides to make regular use
  • 66. Factors influencing adoption process  Readiness to try new products – 5 adopter groups Innovators – venturesome, trying out new ideas Early adopters – opinion leaders, adopt new ideas early but carefully Early majority – deliberate, adopt new ideas before the average person Late majority – skeptical, adopt only after majority have tried Laggards – tradition bound, suspicious  Personal/societal Influence
  • 67. Adopter Categories Innovators 2.5% Early Adopters 13.5% Laggards 16% Percentage of Adopters by Category Sequence Early Majority 34% Late Majority 34% “Diffusion of Innovation” by Rogers
  • 68. Why products fail ??  Marketers assess the marketing climate inadequately.  The wrong group was targeted.  A weak positioning strategy was used.  A less-than-optimal "configuration" of attributes and benefits was selected.  A questionable pricing strategy was implemented.  The ad campaign generated an insufficient level of awareness.  Cannibalization depressed corporate profits.  Over-optimism about the marketing plan led to a unrealistic forecast.  Poor implementation of the marketing plan in the real world.

Editor's Notes

  1. TAM- television audience measurment/INTAM
  2. OOH – OUT OF HOUSE,