iem 5

ECE/UNIT - V/INDUSTRIAL ECONOMICS MANAGEMENT/MIT

DEFINITION OF MARKETING

According to Philip Kotler, “Marketing is a social process by which individuals and groups obtain obtain what they need and want through creating creating and exchanging exchanging products and values with others”.

THE IMPORTANCE OF MARKETING

A financial gain of any company is only because of marketing ability. Finance, operations, accounting, and other business functions will not really matter if there is not sufficient demand for products and services so the company can make a profit. Now days many companies have created a Chief Marketing Officer (CMO), position to put marketing on a more equal footing with other C-level executives such as the chief Executive Officer (CEO) and Chief Financial Officer (CFO). Market Marketing ing is trick tricky, y, however however,, and it has been been the Achilles Achilles’’ heel of many many former formerly ly prosperous companies. Large, well-known businesses such as Levis, General Motors, Kodak, and Xerox have confronted newly empowered customers and new competitors, and have had to rethink their business models. Even market leaders like Microsoft, Wal-Mart, Intel, and Nike recognize that they cannot afford to relax. GE’s brilliant former CEO Jack Welch, repeatedly warning his company: “change or Die” But making the right decisions is not always easy. Marketing managers must make major decisions such as what features to design into a new product, what prices to offer customers, where to sell products, and how much to spend on advertising or sales. They must also make more detailed decisions such as the exact wording or color for new packaging. Companies without a marketing mindset are at a disadvantage in today's business world. Those who are still centered on their products, rather than their customers, are doomed to fail. Knowing what your clients' expectations are, exceeding them, and building a reputation based on that is the key to success. Pay attention to your customers, and they will come back time and time again. Ignore them, and they will disappear faster than you can spend your marketing budget to try to bring them back. Many people do not know much about marketing and they always feel that the marketing staff in the company is a burden on the company and they do not justify the dollars spent on them. But the fact is that sincere marketing efforts never go waste. When you invest in marketing related activities, you are sure to reap benefits. Well run marketing campaigns can help you earn good profits. Some people have a misconception about the term marketing, they feel that it is an easy task and anyone can do it. But as a business person you have to get rid of this view point and employ a professional marketing agency that will device your marketing strategy and help you execute it as well. Or you can also have the assistance of an independent marketing consultant who can oversee the marketing efforts that is being put in by the marketing department. The outside marketing agency or the professional marketing consultant will be able to focus on all the company's marketing requirements without being bothered by the aspects like internal company politics or employee relationships etc. These professionals are very aware of the


strategie strategiess that work for various various products and the strategies strategies that will not work. For devising your marketing strategies you definitely should take assistance from these marketing professionals. THE SCOPE OF MARKETING The scope of marketing: What is marketing?

● Marketing: meeting needs profitably ● Marketing: 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 ● Marketing management: the art and science of choosing target markets and getting, keeping, and growing customers through creating, delivering, and communicating superior customer value. Marketing is not only selling. Marketing makes product/service fits customer & sells itself, customer ready to buy. In the end, Marketing makes selling unnecessary. Example: iPhone by Apple. Exchanges and Transactions Exchanges are a key concept in marketing ie where one obtains a desired product from someone by offering something in return. 5 conditions must be satisfied satisfied in this scenario: scenario:

1.

There must be at least 2 parties

2.

Each Each part party y has has somet omethi hing ng of of val value ue to the the othe otherr par partty

3.

Each Each part party y is capa capabl blee of of comm commun unic icat atio ion n and and deli delive very ry

4.

Each Each par party ty beli believ eves es it it is is appr approp opri riat atee and and desi desira rabl blee to deal deal wit with h the the othe otherr part party y

Transactions are a trade of value value between 2 or more parties. parties. Transactions need: at least 2 things of value, agreed-upon conditions, a time time and a place of agreement. This differs from a transfer where A gives to B without anything tangible in return.

To be successful in marketing, marketers need to understand what each party expects from the transaction. The scope of marketing: What is marketed? 1.

Goods – physical goods eg cars, fridges, TVs

2.

Services – eg airlines, hotels, car rental firms

3.

Events – time-based events such as trade shows, Olympics

4.

Experiences – Walt Disney’s Magic Kingdom is experiential marketing

5.

Persons – celebrity marketing

6.

Places – Cities, states & regions are marketed to tourists, business and new residents

7.

Properties – eg real estate, stocks and bonds

8.

Organisations – Corporate identity ads and unique images in the market


9.

Information – eg schools and universities market their information

10.

Ideas – eg “Friends don’t let friends drive drunk”

The scope of marketing: Who markets?

● Marketers market to Prospects ● Marketers do Demand management: seek to influence the level, timing & composition of demand. The scope of marketing: Who markets? Marketers – somebody who seeks a response from another party, called the prospect. Marketers are responsible for demand management and there are 8 possible demands states: 

Negative demand – consumers dislike a product

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Nonexistent demand – consumers are unaware or uninterested in a product

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Latent demand – consumers may have a strong need for a product but cannot be satisfied by existing products

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Declining demand – consumers buy less frequently

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Irregular demand – consumers purchase seasonally, monthly etc

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Full demand – consumers are adequately buying the product

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Overfull demand – more consumers want the product than supply can meet

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Unwholesome demand – consumers are attracted to products that have undesirable social consequences

In each case, the marketer needs to understand the demand state and the underlying cause and determine a plan of action to shift demand to a more desired state.

Marketing Management Tasks: ● Developing marketing strategies & plans ● Capturing marketing insights ● Connecting with customers ● Building strong brands ● Shaping the market offerings


● Delivering value MARKETS

In marketing terms, a market is used to describe the various groupings of customers. Categories of markets include: Product market, demographic market, needs market etc. Sellers and buyers are connected by 4 flows:

Communication Industry

Goods / services

Market (A collection of buyers)

(A collection of sellers)

Money Information

KEY CUSTOMER MARKETS:

Consider the following key consumer markets: consumer, business, global and non-profit. Consumer Markets: Companies selling mass consumer goods and services such as soft drinks, cosmetics, air travel, and athletic shoes and equipment spend a great deal of time trying to establish a superior brand image. Business Markets: Companies selling business goods and services often face well-trained and well-informed professional buyers who are skilled in evaluating competitive offerings. Business buyers buy goods in order to make or resell a product to others at a profit. Global Markets: Companies selling goods and services in the global market-place face additional decisions and challenges. They must decide which countries to enter; how to enter each country (as an exporter, licensor, joint venture partner, contract manufacturer, or solo manufacturer). Non-profit and Government Markets: Companies selling their goods to nonprofit organizations such as churches, universities, charitable organizations, or government agencies need to price carefully because these organizations have limited purchasing power.

companies, insurance companies, mechanics, spare parts dealers, service shops, auto magazines, etc.


CONCEPTS OF MARKETING

The competing concepts under which organizations have conducted marketing activities include: the production concept, product concept, selling concept, marketing concept, and holistic marketing concept. The Production Concept:

This concept is one of the oldest, and suggests that the consumers will like to buy the products which are available easily, cheaply & widely. So the marketers must have a mass production facility (efficient production) with low price (cost efficiency) and make it available very near to the customers (mass distribution). This concept is normally adopted when the Company wants to expand. Product Concept:

This is the next step of evolution of marketing concepts. It depicts that customers will go for those products which offer quality, utility, features, performance, value, benefits, etc. So the marketers must improve the products in an innovative way & continuously. This is more often accompanied by a suitable pricing, distribution, promotion (all the 4Ps of marketing) program. Selling Concept:

This concept involves aggressive selling and promotional effort. “The purpose of marketing is to sell more stuff to more people more often for more money in order to make more profit”. This kind of marketing is practiced for goods & services which buyers normally don’t like to buy, like insurance, dictionaries, encyclopedia, etc. The aim of the marketers is to sell what they produce, rather than make what the market wants. Marketing Concept:

This concept was evolved in the 1950s, and for the first time the attention was shifted to Customers. Instead of concentrating on the Products / Production / Selling, the business became "Customer Oriented". The "Make & Sell" philosophy gave way to the "Sense & Respond" philosophy. Instead of finding the right customer for the product, the marketer now has to find the right product for the customer.This concept holds the secret of the company being more effective than its competitors in creating, delivering & communicating superior value to the targeted customers. 4P’S OF MARKETING

McCarthy classified these tools into four broad groups, which is called the four Ps of marketing: product, price, place, and promotion.

Marketing Mix

Product Product variety

Place Channels


Quality Design Features Brand name Packaging Sizes Services Warranties Returns

Assortments Locations Inventory Transport Coverage

Target Market

Prices List Prices Discounts Allowances Payment period Credit terms

Promotion Sales promotion Advertising Sales force Public relations Direct marketing

Fundamental Marketing Concepts Core Concepts:

A core set of concepts creates a foundation for marketing management and a holistic marketing orientation. Needs, Wants, and Demands: A human need is a state of felt deprivation of some basic satisfaction. (Food, clothing, shelter, safety, belonging, esteem etc.) People also needs for recreation, education, and entertainment. These needs become wants when they are directed to specific objects that might satisfy the need. An American needs food but may want Hot-dog, French-fries etc. A person in India needs food but may want Rice, Banana, etc. Wants are shaped by one’s society. Demands are wants for specific products that are backed by an ability and willingness to buy them. Many people want a Mercedes or BMW but only few are willing and able to buy one. Companies should measure not only how many people want their product but also how many would actually be willing and able to buy it. These distinctions (characteristics) shed light on the frequent criticism that “marketers create needs” or “marketers get people to buy things they don’t want.” Marketers do not create needs: Needs pre-exist marketers. Marketers, along with other societal factors, influence wants. Marketers might promote the idea that a BMW would satisfy a person’s need for social status. They do not, however, create the need for social status. Understanding customer needs and wants is not always simple. Some customers have needs of which they are not fully conscious, or they cannot articulate these needs, or they use words that require some interpretation. Consider the customer who says he wants an "inexpensive car." The marketer must probe further. We can distinguish among five types of needs: •

Stated needs (the customer wants an inexpensive car).

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Real needs (the customer wants a car who operating cost, not its initial price, is low).

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Unstated needs (the customer expects good service from the dealer).

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Delight needs (the customer would like the dealer to include an onboard navigation system).


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Secret needs (the customer wants to be seen by friends as a savvy consumer).

MARKETING VS SELLING Character start Emphasis

Marketing It focus on customer needs It emphasizes on identification of market opportunity

Orientation Innovation

Motives.

“Cost” determine selling.Importance Motives

Convenience

price

Selling It focus on seller’s needs It seeks to quickly convert “products “into cost.

Customer –satisfaction process Goods producing process. It emphasizes on innovation in It tries to stay with the existing every sphere and by adopting technology, thereby reducing innovative technology the cost of the product. Consumer determines price and Consumer determines price and price determine “cost”. price determine “cost”. in Marketing vies the customer as Selling views the customers as the very important factor. the last link in the business. “ marketing “ communication is looked up as the tool for communicating the benefits satisfaction provided by the product The buyer determines the shape of the marketing mix

Seller’s motives dominate marketing communication in “ selling ”

Seller’s convenience dominate the formulation of the marketing mix.

Definition of Product: Product is anything that can be offered to a market for attention, acquisition, use or consumption that might satisfy a want or need.

Classifications of products or services : Goods may also be called as product. They are tangible. They are : A. Consumer‘s Goods: These types of goods are purchased by ultimate users or consumers for their

personal use. For example: food, biscuits, toys, clothes etc. are purchased by consumers to satisfy their non-business wants. These goods may be further classifies as: Convenience goods: Consumers or purchasers get commodities such as bread, drug, soap, sugar, toothpaste, newspapers, petrol, cool drinks, at minimum effort and at low cost. They are often required by the consumers. These types of goods are available at places, where consumers need. The purchase of such goods cannot be postponed because they are daily necessities of life. Shopping goods: Before marking final selection, the consumers make an enquiry as to the products .comparative prices, durability, style etc. from different shops. Goods like jewellery, furniture, readymade garments etc. are mostly costly than convenience goods.


Specialty goods: Certain products possess special attention to the customers. As such the consumer may wait or suffer inconveniences to get the desired needs. These types of goods are of high value and manufactured by reputed firms. For example: cars, electrical appliances.

B. Industrial Goods: Goods are those which are used for further production of goods and services. Raw Materials: These are goods that enter physically into the final products. For example: building stones, raw cotton. raw jute etc. Fabricated materials: Materials of this category will enter into the final products but some type of processing is already undergone .for example: bricks, copper sheets, leather, yarn etc. Installation: Machines, buildings equipments etc. do not enter into final products and are durable for a long period. They are essential for production .for example: gas, power installation etc. they need heavy expenses for installation and sometimes decide the nature, scope and efficiency of an organization. Accessories: They are light machines or tolls which are used for the operation of a business. This is not used for manufacturing a product. For example: typewriters, calculators, accounting machine etc

C.Services: Services are intangible activities which are offered for sale as such or in connection with sale of goods. For example: banking, consultation etc. Services may be of two types: • •

Personal: It comprises of education, communication, medical, legal services etc. Business services: It comprises of advertising, mercantile credits, collection agencies etc.

Product Life Cycle

The marketing manager should manage the life cycle of a product towards better progress and for a healthy growth of the firm. Hence it is essential to discuss the various stages of product life cycle: Introduction stage: • •

•

•

•

The information on product acceptance, product image and distribution system are needed. The new product means “a product that opens up an entirely new market, replaces an existing product or significantly broadens the market for an existing product. Product is new one, awareness in market is low, cost of marketing is high, and profits are low. In this stage, the product is introduced into market and made available to the customers with a slow rise in sales The profit may be low, because of heavy advertising and sales promotion in order to stimulate the demand.

Growth stage: •

During the growth stage the products start yielding very good profits but there is a threat from the competitors who try to enter the market and take the market share


•

• •

The product given first satisfaction to the first buyers. Others follow: sales increases rapidly and product start generates profits. This is the stage where competitors appear along with substitute products in large numbers. The success of firms depends upon the efficient manufacturing and distributing system of the product.

Maturity stage:

In this stage, the product’s sales reach the highest point but the profits starts declining slowly thereafter. The product reaching its maturity and sales are good. But battle for market share is about • begin. At this stage, keen competition increases. Market expenses increase, even after mark-down • price, which enable to face competition. Profit is thinned. Additional expenses are involved in product modification and improvement • in the marketing mix to attract the customer and retain the m arket. Saturation stage: •

• • •

The sales are at peak and further increase is not possible. The demand for the product is stable. But battle for market share is about to begin. At this stage, a replacement of product is needed, because the sale of the existing product cannot be increased.

Decline stage: • •

• •

When sales start declining buyers go for newer and better product. This is because of many reasons technological advances, consumers shifts in taste, increased competition etc. It exhibits a sharp decline in sales of the product. The firm has to decide whether to drop the product or continue with it.

PRICING:

It may be defined as the exchange of goods or services in terms of money. Objectives of pricing: • • • • • •

Return on investments Stability in prices Maintenance or increase in the share of the market Meeting or preventing competition Customer’s ability to pay Resource mobilization.

Procedure for Price Determination:

There is no specific procedure applicable to all firms for price determination. However, the following steps may be followed to determine the price:


Determine demand for the product: 

The marketer has to make out estimation for his product.  In normal case, demand and price are inverse related i.e. higher the price lower the demand and vice versa.  There are two practical steps in demand estimation: To determine whether there is price which the market expects. • To estimate the sales volume at different price. •  If demand is elastic rather then inelastic, seller will consider in lowering the price. Anticipate and analysis the competitive reaction: The competitors can influence the price. Competition may arise from: Similar products Close substitute products • Unrelated products, seeking consumer’s disposable income. • To anticipate the reaction of the competitors, it is necessary to collect information about the product, cost structure, market share etc. •

Establish Expected Share Market: 

Low priced products may capture large share of market and a higher priced product may capture a small share of the market.  Large share of the market can also be captured by advertisements and non-priced competition.  Share of the market is also decided by the actors such as present production capacity, cost of plant extensions etc. Selecting pricing strategy: A good and proper pricing policy may be employed to achieve a predetermined share of the market, there are two methods, Skimming pricing (high): 

This price strategy is characterized by high initial price of the product, at the time of introduction of the product in the market.  Manufacturers aim at high profit maximization at the shortest period, where market conditions are also favorable.  Under this the price fixed is high, because the product is characteristic for its superiority Penetration:  

Penetration pricing strategy adopts a low introductory price to speed up or capture the widespread market acceptance. The aim is to catch the major portion of the market. The policy is satisfactory when

The cost of production comes down because of large scale operations. There is fear of stiff competitions • The public accepts the new product as a part of its daily life. • Consider company marketing policies: •


 

The price of product is influenced by the nature of products durability- perish ability or non perish ability. Channels of distribution select the types of middlemen, and the gross marginal requirements of these middlemen will influence a manufacturer price.

Setting the price:

There is no specific method for setting the price. Producers used for setting price may vary under different competitive conditions: Cost based: The price determination of a product, under cost based method is made on the basis of cost of production plus an additional margin of cost Cost based= cost of production+% of margin. Demand based: when the demand for the product is high then the cost will automatically be raised. When demand is less than the price of the product also gets reduced Cost demand based: it is also known as break even pricing. The interrelationship of costs and sales volume determines the amount of profit or loss; break even analysis helps in estimating the effects of different prices on profits. Competition based: before pricing a product, every firm takes into account the conditions of competition .policies are to determined to fix the selling price at above , below or in line with competition: Meeting the competition: marketers competing on a non –price simply meet competitors price. An important point of meeting the competition is that sellers have a means of non pricing competition. Pricing above the competition: this policy is less common. Under this, the price is fixed above the market price, just to impress the buyers that the product is superior. Pricing under the competition: Many firms set lower prices because of low production cost or low quality or to promote sales. There will be less profit.

Classification of Markets Markets have been classified, on the basis of different approaches, in various ways. They are given below. A. On the Basis of Geographical Area:

1. Family Market: When exchanges are confined within a family or close members of the family, such a market can be called as family members. 2. Local market: When people –buyers and sellers, belong to a local area or areas, say a town or village, participate in market it is called local market. The demands are limited. For example, perishable goods like fruits, fish, vegetables etc… 3. National Market: For a certain type of commodities, a country may be regarded as a market, through the fast development of industrialization; it is called as national market. At the present stage, in India, the goods of one corner can reach another corner because of the efficient systems of communications and transportation facilities.


4. World Market: international market comes up when the buyers and sellers of goods evolve on world level. That is involvement of buyers and sellers beyond the boundaries of a nation. B. On the Basis of Commodities /Goods:

Commodity markets are subdivided into: Produce Exchange Market: One market deals in one commodity only. Generally sellers and buyers of a particular commodity set up such markets and run them regulated and controlled by certain rules. Ex: the cotton exchange market of Bombay. Manufactured Goods Market: such type of markets deals with manufactured goods. Ex: leather goods, machinery etc. Bullion market: This type of market deals with the purchase or sale of gold, silveretc. Bullion markets of Bombay, Calcutta, Kanpur etc, are examples of such markets. b. Capital Markets:

New are going concerns need finance at every stage. As such financial needs of concerns are met by capital markets. They are three types: Money Market:

It is a type of market where money is borrowed or lent. This type of market helps or guides the public to invest their surplus fund in industrial concerns. Foreign Exchange Market:

It is an international market. This type of markets helps exporters and importers, in converting their currencies into foreign currencies. Stock Exchange Market:

This is a market where shares, debenture, bonds etc, of companies are dealt with purchased or sold. It is also known as security market. D. On the Basis of Economics: Perfect market: A market is said to be perfect if it satisfies the following conditions: • • • •

Large number of buyers and sellers Prices should be uniform throughout the market Buyers and sellers have a perfect knowledge of market Goods can be moved from one place to another without restrictions.

Imperfect market: A Market is said to be imperfect when • • • •

Products are similar but not identical Prices are not uniform There is alack of communications There are restrictions on the movement of goods.


D. On the Basis of Transaction: Spot Market: In such a market goods are exchanged and the physical delivery of goods takes place immediately. Future Market: In such a market contracts are made over the price for future delivery. The dealing and settlement takes place on different dates.

E .On the basis of regulation: Regulated market: These are types of markets which are organized, controlled and regulated by statutory measures. Example: stock exchange of Mumbai, Chennai, Kolkata etc… Unregulated market: This is free market. There is no control with regard to price, quality; commission etc. demand and supply determine the price of goods.

F. On the Basis of Time: Very short period market: Markets which deal in perishable goods like, fruits, milk, vegetables etc., are for a very short period. There is no change in the supply of goods. Price is determined on the basis of demand. Short period market: In certain goods, supply is adjusted to meet the demand. The demand is greater than supply. Such markets are known as short period. Long period market: This type of market deals in durable goods . G. On the Basis of Volume of Business: Wholesale Market: In wholesale market goods are supplied in bulky quantity to dealers . Retail Market: in retail market goods are sold in small quantities directly to the users or consumers. The consumer gets the goods for consumption and not for profit making. H. On the basis of importance: Primary market: The primary producers of farm produce sell their output or products through this type of markets to wholesalers. Secondary markets: The commodities arrive from other markets. The dealings are commonly between wholesalers and retailers. Terminal markets: The ultimate consumer gets the goods from such markets. Here the final disposal of goods takes place.

Distribution Channels and Physical Distribution Managing Marketing Channels What work is performed by Marketing Channels?

Producers delegate some of the selling job to intermediaries; means relinquish some control over how and to whom the products are sold, due to following reasons: 

Many producers lack the resources to carry out direct marketing


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In some cases direct marketing is not feasible. An example is given of the gum business which is completely impractical for a gum producer to establish small retail gum shops throughout the world or to sell gum by mail order.

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Producers who do establish their own channels can often earn greater returns by increasing their investment in their main business. If a company earns a 20 percent rate of return on manufacturing and only a 10 percent return on retailing, then it doesn’t make sense to undertake its own selling.

Channel functions and flows

Members of marketing channel perform a number of key functions: 

Gather information about potential and current customers, competitors and other factors.

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Develop and disseminate persuasive communications to stimulate purchasing.

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Reach agreement on price and other terms so that ownership can be effected.

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Place orders with manufacturers.

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Acquire funds to finance inventories.

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Assume risks connected with carrying out channel work.

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Provide for the successive storage and movement of physical products.

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Provide for buyer’s payment of their bills through banks and other financial institutions.

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Oversees actual transfer of ownership from one organization or person to another.

Some functions like: 

Physical, title & promotion etc.: Forward flow of activity

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Ordering & payment etc: Backward flow from customers to the company

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Information, negotiation, finance and risk taking etc.: occur in both directions.

Consumers marketing channel levels

1. Zero – level channel: door to door sales, home parties, mail order, tele marketing, TV selling, Internet selling, and manufacturer owned stores. 2.

One – level channel: one intermediary, such as retailer.

3.

Two – level channel: wholesalers and retailers.

4.

Three – level channel: wholesalers, jobbers and retailers.

An example of backward channel: Recycling of solid wastes: Several intermediaries play a role in backward channels, including manufacturers’ redemption centres, community groups, and traditional intermediaries such as soft drink intermediaries, trash collection specialists, recycling centers, trash-recycling brokers and central processing warehousing. Service Sector Channels


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Schools develop “educational – dissemination systems” and hospitals develop “health delivery systems”. These institutions figure out agencies and locations for reaching out a population spread over an area.

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Fire stations must be located to give rapid access to potential conflagrations; voting booths must be placed so that people can cast their ballots without expending unreasonable amount of time, effort, or money to reach the polling stations.

Vertical Marketing Systems •

Vertical marketing systems (VMS) provide channel leadership and consist of producers, wholesalers, and retailers acting as a unified system and consist of:

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Corporate vertical marketing system integrates successive stages of production and distribution under single ownership.

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Contractual vertical marketing system consists of independent firms at different levels of production and distribution who joins together through contracts to obtain more economies or sales impact than each could achieve alone. Most common form is the franchise organization

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Administered vertical marketing system has a few dominant channel members without common ownership. Leadership comes from size and power.

A multichannel distribution system

Hybrid Marketing Channels

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Advantages •

Increased sales and market coverage

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New opportunities to tailor products and services to specific needs of diverse customer segments


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Challenges •

Hard to control

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Create channel conflict

Channel Design decisions

Designing a channel system calls for -

Analyzing customer needs

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Establishing channel objectives

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Evaluating the major channel alternatives

Analyzing customer needs

In designing the marketing channel, the marketer must understand the service output level desired by the target customer. •

Lot size – The no of units the channel permits a typical customer to purchase on a occasion

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Waiting time – The average time customers of that channel wait for receipt of goods

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Spatial convenience – The degree to which the marketing channels makes it easy for customers to purchase the product

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Product variety – The assortment breadth provided by the marketing channel

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Service backup – The add-on services provided by the channel.

Establishing channel objectives & constraints •

Channel institutions should arrange their functional tasks to minimize total channel costs with respect to desired level of service outputs.

•

Channel objective vary with product characteristics. Perishable goods require more direct mktg.

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Channel design must take into account the strengths and weaknesses of different types of intermediaries.

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Competitor’s channels also influence channel design.

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Channel design must adapt to the larger environment.

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Legal restrictions and regulations also affect channel design.

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Identifying / Evaluating the Major Alternatives

Responsibilities of Channel Members - Producers and intermediaries need to agree on 

Price policies

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Conditions of sale


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Territorial rights

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Services provided by each party

Each alternative should be evaluated against •

Economic criteria compare the likely sales costs and profitability of different channel members.

•

Control criteria refer to channel members’ control over the marketing of the product.

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Adaptive criteria refer to the ability to remain flexible to adapt to environmental changes.

Types of intermediaries Number of intermediaries

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Exclusive distribution

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Selective distribution

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Intensive distribution

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Exclusive Distribution 

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Intensive distribution 

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Limiting the distribution to only one intermediary in the territory

Distribute from as many outlets as possible to provide location convenience

Selective distribution 

Appoint several but not all retailers

Evaluating Channel members:

Producers must constantly evaluate the channels performance against such standards as sales quota attainment, avg inventory levels, customer delivery time, treatment of damaged and lost goods and cooperation in the promotional and training programs. Modifying Channel Arrangements:

A producer must periodically review and modify its channel arrangements. It becomes necessary when the channel is working as per the plans, the consumers buying patterns changes, the market expands, new competition arises, innovative distribution channels emerge and the product moves into the later stages of the PLC. Marketing Channels in relation to PLC: 

Introductory stage: Specialist channels

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Rapid growth stage: Dedicated stores, department stores that offer services

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Maturity stage: Mass merchandisers


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Decline stage: Lower cost channels like mail order, off price discounters.

The most difficult decision is revising overall channel strategy. It may become outdated and a gap would be created.

Channel Management Decisions: Selecting Channel Members The producers should select the channel members by determining the characteristics like number of years in business, other lines carried, growth and profits record, solvency, cooperativeness and reputation. If the intermediaries are sales agent, producers would look into the number and characteristics of other lines carried and the size and quantity of the sales force. If the intermediaries want exclusive dealership, the producer would like to consider its locations, future growth prospects and type of clientele. Training Channel members

Companies should conduct training programs for their distributors and dealers because the end users would view them as company. Motivating Channel Members

A company needs to view its channel members in the same way as its end users. The company needs to determine the intermediary needs and construct a channel positioning such that its channel offering is tailored to provide superior value to these intermediaries. The company should provide training programs, market research programs and other capability building program to improve intermediary’s performance. The company must constantly communicate its view that the intermediaries are the partners in the joint effort to satisfy endusing consumers. This should start with understanding their needs and wants. Producers vary greatly in managing intermediaries. They can draw on the following types of power to elicit cooperation: 

Coercive Power: When the producer threatens to withdraw a resource or terminate a relationship if intermediaries fail to cooperate. This power is quite effective if the intermediaries are highly dependent upon the manufacturer but it can produce resentment can lead intermediaries to organize countervailing powers.

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Reward Power: When the producer offers intermediaries an extra reward for performing specific acts or functions. Reward power typically produces better results than coercive power but can be overrated. The intermediaries may start expecting reward every time the manufacturer wants certain behavior to occur.

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Legitimate Power: When the manufacturer requests a behavior that is warranted under contract.

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Expert Power: When the manufacturer has special knowledge that the intermediaries value. This is an effective form of power because intermediaries would perform


poorly without this. But it weakens once the expertise is passed on to the intermediaries. So manufacturer must keep on developing new expertise to keep influencing the intermediaries. 

Referent Power: When the manufacturer is so highly respected that the intermediaries are proud to be associated with him.

Meaning of Advertising: Advertising is the promotion of a company's products and services carried out primarily to drive up sales of the products and services. There are several reasons for advertising, some of which are as follows: • • • • •

Increasing the sales of the product/service. Creating and maintaining a brand identity or brand image. Communicating a change in the existing product line. Introduction of a new product or service. Increasing the buzz-value of the brand or the company.

TYPES OF ADVERTISING. Print Advertising - Newspapers, Magazines, Brochures, Fliers Print media has always been a popular advertising option. Advertising products via newspapers or magazines is a common practice. In addition to this, the print media also offers options like promotional brochures and fliers for advertising purposes. Often, newspapers and magazines sell the advertising space according to the area occupied by the advertisement, the position of the advertisement in the publication (front page/middle page, above/below the fold), as well as the readership of the publications. Outdoor Advertising - Billboards, Kiosks, Trade-shows and Events Outdoor advertising is also a very popular form of advertising. It makes use of several tools and techniques to attract the customers outdoors. The most common examples of outdoor advertising are billboards, kiosks, and also events and trade-shows organized by the company. Billboard advertising is very popular. Kiosks not only provide an easy outlet for the company's products but also make for an effective advertising tool to promote the company's products. Organizing special events or sponsoring them makes for an excellent advertising opportunity and strategy. The company can organize trade fairs, or even exhibitions for advertising their products. If not this, the company can organize several events that are closely associated with their field. Broadcast Advertising - Television, Radio and the Internet Broadcast advertising is a very popular advertising medium that constitutes several branches like television, radio or the Internet. Television advertisements have been very popular ever since they were introduced. The cost of television advertising often depends on the duration of the


advertisement, the time of broadcast (prime time/lull time), sometimes the show on which it will be broadcast, and of course, the popularity of the television channel itself. The radio might have lost its charm owing to new age media. However it remains the choice of small-scale advertisers. Radio jingles have been very a popular advertising medium and have a large impact on the audience, which is evident in the fact that many people still remember and enjoy old popular radio jingles.

Covert Advertising - Advertising in Movies Covert advertising is a unique kind of advertising in which a product or a particular brand is incorporated in some entertainment and media channels like movies, television shows or even sports. There is no commercial advertising as such in the entertainment but the brand or the product is subtly (or sometimes evidently) showcased in the entertainment show. Some of the famous examples for this sort of advertising have to be the appearance of brand Nokia which is displayed on Tom Cruise's phone in the movie Minority Report , or the use of Cadillac cars in the movie Matrix Reloaded . Pay attention next time, you're sure to come across a lot of such examples. Surrogate Advertising - Advertising Indirectly Surrogate advertising is prominently seen in cases where advertising a particular product is banned by law. Advertisements for products like cigarettes or alcohol which are injurious to health are prohibited by law in several countries. Hence these companies come up with several other products that have the same brand name and indirectly remind people of the cigarettes or alcohol of the same brand by advertising the other products. Common examples include Fosters and Kingfisher beer brands, which are often seen to promote their brand with the help of surrogate advertising. Public Service Advertising - Advertising for Social Causes Public service advertising is a technique that makes use of advertising as an effective communication medium to convey socially relevant messages about important matters and social causes like AIDS, energy conservation, political integrity, deforestation, illiteracy, poverty and so on. David Oglivy who is considered to be one of the pioneers of advertising and marketing concepts had reportedly encouraged the use of the advertising field for a social cause. Celebrity Advertising Although the audience is getting smarter and smarter and the modern-day consumer is getting immune to the exaggerated claims made in a majority of advertisements, there exists a section of advertisers that still bank upon celebrities and their popularity for advertising their products. Using celebrities for advertising involves signing up celebrities for advertising campaigns, which consist of all sorts of advertising including, television ads or even print advertisements.

Marketing Research Process The marketing research process consists of important six steps, they are:


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Define the problem and research objectives: Problem should not be defined either too broadly (wastage of resources) or too narrow (inadequate data)

The main objectives are

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What is to be researched?

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Why it is to be researched?

Develop the research plan: Requires efficient plan for gathering the needed information, it involves:

Data Sources: Primary data: data observed and recorded or collected directly

from respondents Secondary data: data complied both inside and outside the organization for some purpose other than the current investigation. 

Research Approaches: Observation: research will be done by just observing the consumers (super market, retail shops, exhibition, trade shows, etc.) Focus groups: six to ten people are invited to spend few hours with skilled moderator. The discussion is recorded through Behavioral data: contrary to their notes, audio tape, and video tape. stated preferences in surveys (high income people may buys low expensive , low income Experiments: scientifically valid people may buys high expensive products. research, eliminate alternative hypothesis, give confidence to the marketing managers because of findings.

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Research instruments: Questionnaire: set of questions presented to respondents. (marketing researcher have to be careful while selecting questions) there are two types of questions 1) open-ended questions which allows respondents to answer on their own words 2) close-ended questions are which the respondents to the answer which are in the Qualitative research: since questionnaire may not provide questionnaire. reliable answer. There are few techniques to understand customer experience. -

Shadowing: observing people directly

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Behavior mapping: photo-graphing, video-graphing people within a space.

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Consumer journey: keeping track of all interactive. -

Camera journals: consumers are asked to see the visual diaries of their products.

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Story telling: prompting people to tell personal stories about them consumer experience.


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Unfocus groups: interviewing a diverse group of people. (For a cosmetic product survey – models, make-up artist, retailer, celebrities can be interviewed.

Mechanical devices:

Occasionally used in marketing research. Galvanometer can be measure the interest or emotions while seeing an advertisement, picture.  Sampling

plan:

After deciding on the research approach and instrument, sampling plan have to be design. Sampling unit: who is to be surveyed? (Target population like husband or wives, 18 to 30 or 30 to 45. Sample size: how many people should have to surveyed? Large sample will give more reliable results than small sample. Everyone is no needed in the target population. Sampling procedures: how should the respondents be chosen? Probability sampling consists of simple random sampling – where every members of the population has the chance of selection. Stratified random sampling – where population is divided into groups (age group) and then sample selected from the group. Cluster sample – population is divided into regional wise (city or district or state) Non-Probability sampling consists of convenience sample – where researchers select most accessible population. Judgment sample – where researchers select population members who are good prospects for accurate information. Quota sample – where researchers find and interview a prescribed number of people in each category.

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