MARKETING MANAGEMENT Module I Meaning and definition of different marketing concepts functions of marketing - environmental factors market segmentation

n - buying motive and process consumer and customer - factors affecting consumer behavior - marketing plan . Businessman produces goods and services for our use. These are not necessarily produced at the places where they are consumed or used. Even in villages, now-a-days we can find the products manufactured from all over India and in other countries. This implies that the manufacturers must be making efforts to ensure that their products are in demand and reach the ultimate consumers all over the globe. Not only that; the manufactures also assess the needs of the consumers, their tastes and preferences and plan the products accordingly. They also ensure that people are aware about the product and its features. All these activities are said to be part of marketing function of any organisation. Thus, marketing refers to the process of ascertaining consumers needs and supplying various goods and services to the final consumers or users to satisfy those needs. Basically, marketing is the performance of business activities that direct the flow of goods and services from producers to consumers or users. Marketing is a key function of management. A business organisation performs two key functions producing goods and services and making them available to potential customers for use. When organizations perform these two basic functions (i.e. production and marketing) they create a benefit that economists call utility which is the want-satisfying power of a good or service. There are four basic kinds of utility form, time, place and ownership utility. Form utility is created when the firm converts raw materials and component inputs into finished goods and services. Although marketing provides important inputs that specify consumer preference, the organizations production function is responsible for the actual creation of form utility. Marketing function creates time, place and ownership utilities. Time and place utility occur when consumers find goods and services available when and where they want to purchase them. The transfer of title

to goods or services at the time of purchase creates ownership utility. To survive, all organizations must create utility. Designing and marketing want satisfying goods, services and ideas is the foundation for the creation of utility. Market The term market- originates from the Latin word Marcatus- which means a place where business is conducted. A layman regards market as a place where buyers and sellers personally interact and finalise deals. According to Perreault and McCarthy, market is defined as a group of potential customers with similar needs or wants who are willing to exchange something of value with sellers offering various goods and/or services to satisfy those needs or wants. Depending upon what is involved, there are different types of markets which deals with products and/or services such as: (1) Consumer Market: In this market the consumers obtain what they need or want for their personal or family consumption. This market can be subdivided into two parts. a) Fast-moving consumer goods (FMCGs)Fast-moving consumer goods are those that sell in high volumes, with low unit value, and have fast consumer repurchases. Good examples include ready meals, baked beans, newspapers etc toothpaste, biscuits, facial cream etc. b) Consumer durables: These have low volume but high unit value. Consumer durables are often further divided into: White goods (e.g. fridgefreezers; cookers; dishwashers; microwaves) Brown goods (e.g. DVD players; games consoles; personal computers) Soft goods: Soft goods are similar to consumer durables, except that they wear out more quickly and therefore have a shorter replacement cycle Examples include clothes, shoes etc (2) Industrial/Business Market: In this market, the industrial or business buyers purchase products like raw materials (iron ore, coke, crude oil etc.), components (tyres, picture tubes, micro-processors etc), finished products (packaging machine, generators etc.), office supplies (computers, pens, paper etc.) and maintenance and repair items (grease, lubricating oil, broom etc.). (3) Government Market: In most of the countries central/federal, state or local governing bodies are the nsscollegerajakumari 16

largest buyers requiring and number of products and services. (4) Global Market: The world is rapidly moving towards borderless society because of the information revolution and the efforts of WTO to lower the tariff and nontariff barriers. Although the global companies from the developed countries are more in number (Ford Motors, IBM, Sony, Citi Bank etc.); the companies from developing countries are also making their presence felt in foreign countries (Aditya Birla Group, Maruti-Suzuki, Infosys, etc.). TRADITIONAL CONCEPT OF MARKETING According to the traditional concept, marketing means selling goods and services that have been produced. Thus, all those activities which are concerned with persuasion and sale of goods and services, are called marketing. This concept of marketing emphasizes on promotion and sale of goods and services and little attention is paid to consumer satisfaction. This concept has the following implications: (a) The main focus of this concept is on product, i.e., we have a product and it has to be sold. So, we have to persuade the consumers to buy our product. (b) All efforts of the marketing people are concentrated on selling the product. They adopt all means like personal selling and sales promotion to boost the sales. (c) The ultimate goal of all marketing activity is to earn profit through maximisation of sales. MODERN CONCEPT OF MARKETING The modern concept of marketing considers the consumers wants and needs as the guiding spirit and focuses on the delivery of such goods and services that can satisfy those needs most effectively. Thus, marketing starts with identifying consumer needs, then plan the production of goods and services accordingly to provide him the maximum satisfaction. In other words, the products and services are planned according to the needs of the customers rather than according to the availability of materials and machinery. Not only that, all activities (manufacturing, research and development, quality control, distribution, selling etc.) are directed to satisfy the consumers. The American Marketing Association, the official organization for academic and professional marketers, defines marketing as: Marketing is the process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services to create exchanges that satisfy individual and organizational objectives.

The Chartered Institute of Marketing defines Marketing as - Marketing is the management process for identifying, anticipating & satisfying customer requirements profitably. According to Philip Kotler, Marketing is a societal process by which individuals and groups obtain what they need and want through creating, offering and freely exchanging products and services of value with others Marketing is the performance of activities that seek to accomplish an organizations objectives by anticipating customer or client needs and directing the flow of need satisfying goods and services from producer to customer or client. .William D. Perreault and E. Jerome McCarthy MARKETING CONCEPT. Since the later part of the 19th century, marketing has gradually evolved through various marketing orientations. 1. The Production Concept. The production concept holds that consumers will prefer products that are widely available and inexpensive. This concept, aimed at achieving as high an output as possible. This philosophy assumed that customers would be more interested in acquiring conveniently available, reasonably priced, and wellmade products. They assume that consumers are primarily interested in product availability and low prices. The focus of managers, generally having backgrounds in manufacturing and engineering, was to concentrate on achieving increasingly higher efficiency in production, lower production costs, and more intensive distribution.

2. The Product Concept. The product concept proposes that consumers favor products that offer the most quality, performance, or innovative features. They assume that buyers admire well-made products and can appraise quality and performance. The managers focus on developing superior products and improving the existing product lines over a period of time. Product-oriented companies often design their products with little or no customer input. They trust that their engineers can design exceptional products. Managers in these organizations focus on making superior products and improving them over time. 3. The Selling Concept. The Selling Concept proposes that customers, be individual or organizations will not buy enough of the organizations nsscollegerajakumari 17

products unless they are persuaded to do so through selling effort. So organizations should undertake selling and promotion of their products for marketing success. Companies believed that the most important marketing activities were personal selling, advertising, and distribution. This approach is applicable in the cases of unsought goods like life insurance, vacuum cleaner, fire fighting equipments including fire extinguishers.

and terms of new products, 5. Stresses needs of tomorrows markets and future seller growth 6. Views business as 5. Stresses needs and wants of a good producing buyers process 6. Views business as consumer producing process satisfying 7. Emphasis on Process staying with existing technology and 7. Emphasis on innovation on reducing costs every existing technology and reducing every sphere, on providing better costs value to 8. Different the customer by adopting a departments work as superior in a highly separate technology water tight compartments 8. All departments of the business integrated manner, the 9. Cost determines sole purpose being generation Price of consumer satisfaction 9. Consumer determine price, 10. Selling views price determines cost. customer as a last link in business 10. Marketing views the customer last link in business as the very purpose of the business.

4. The Marketing Concept. After World War II, the variety of products increased, people had more discretionary income, and could afford to be selective and buy only those products that more precisely met their changing needs and wants. With the passage of time, more knowledge, and experience, customers increasingly seemed unwilling to be persuaded. More and more companies found that determining what customers wanted was a must before making a product, rather than producing products first and then persuading them to buy. Marketing concept proposes that an organization should focus on customer needs and wants, and coordinate its efforts, and to accomplish organisational goals. A marketing oriented firm is one that allows the wants and needs of customers and potential customers to drive all the firms strategic decisions. The firms corporate culture is systematically committed to creating customer value. The major marketing. differences between selling and

Core Concepts of Marketing. To understand the marketing function, we need to understand the following core set of concepts. Needs, Wants, and Demands . Needs are the basic human requirements. A need is a state of felt deprivation. People need food, air, water, clothing & shelter to survive. People also have needs for recreation, education and entertainment. Eg: Hunger food. These needs become wants when they are directed to specific object that might satisfy the need. They are desires for specific satisfiers of needs. An Indian needs food but wants rice , but a person in US needs food but wants hamburger. Wants are shaped by both the internal and external factors. Demands are wants for specific products that are bagged by an ability and willingness to buy them.

The terms marketing and selling are related but not synonymous. Marketing as stated earlier, emphasises on earning profits through customer satisfaction. Marketing Selling 1. Emphasis is on the 1. Emphasis on consumer product needs wants 2. Company 2. Company first determines Manufactures the customers needs and wants and product first then decides out how to deliver a product to satisfy these wants. 3. Management is sales volume oriented 3. Management is profit oriented 4. Planning is shortrun-oriented in terms of todays products 4. Planning is long-runand markets oriented in todays products

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Need Wants and Demand

Product / Service

Exchange and Transaction

Core Concepts of Marketing

Whether the exchange will take place or not will depend on whether the parties can agree on the terms of exchange. If they agree then a transaction takes place i.e. trade of value between the two parties. So transactions are the basic units of exchange. A transaction can either be a monetary transaction or a barter transaction. Smart marketers try to build long-term trusting, win-win relationships with customers, distributors, dealers and suppliers. This way a company builds a marketing network of solid dependable relationships between itself and other actors in the market place.
5. Relationship Marketing

Value and Satisfaction

Products. People satisfy their needs and wants with products. Product can be defined as anything that can be offered to someone to satisfy a need or want.

Value Cost and Satisfaction: A consumer chooses among many products to satisfy a need on the basis of value and cost of the article. Value: Itis the consumers estimate about the overall capacity of the product to satisfy his need, and Cost includes thevalue he have to pay for the product and includes the opportunity cost (The cost of leaving the other productswhich he have not purchased.)

Relationship marketing is based on the principle that current customers are the key to longterm business success. Companies in developed countries and many businesses in developing countries aim to satisfy customer needs and build lasting relationships. The issue focuses on reliability and trust between customer and organisation. According to Jagdish N. Sheth and Rajendra Sisodia, the term relationship marketing refers to long-term and mutually beneficial arrangements wherein both buyer and seller focus on value enhancement through the creation of more satisfying exchanges. The emphasis is on developing long-term bonds with customers by making them feel good about how the firm interacts or does business with them by giving them some kind of personal connection to the company. Companies are trying to develop long-term relationships with current customers because it is easier and costs less to make an additional sale to an existing customer than to make a new sale to a new customer. 6. The Societal Marketing Concept With the growing aware ness of the social relevance of business, there is an attempt to make marketing also relevant to the society. In a sense, marketing is not a business activity alone but must take into account the social needs. Excessive exploitation of resources, environmental deterioration and the customer movements in particular has necessitated the recognition of the relevance of marketing to the society. Marketing must be a socially responsible or accountable activity. The societal concept holds that the business organization must take into account the needs and wants of the consumers and deliver the goods and nsscollegerajakumari 19

Customer satisfaction depends on a products perceived performance in Delivering value relative to a buyers expectations. If performance exceeds expectations, the buyer is delighted (certainly a worthy goal of the marketing company). Exchange, Transactions and Relationships: Marketing emerges when people decide to satisfy needs and wants through exchange. Exchange is the act of obtaining a desired product from someone by offering something in return. For exchange to take place the following must exist: (a) two parties (b) each party has something that might be of value to the other

services efficiently so as to enhance consumers satisfaction as well as the societys well being. The societal concept is an extension of the marketing concept to cover the society in addition to the consumers. It was good enough to produce what customers needed or wanted, but in certain cases the concept could be in conflict with customers and societys best long-run interests. Societal marketing concept is a management philosophy that takes into account the welfare of society, the organisation, and its customers.

marketing company can use to influence consumer perceptions favourably towards its products or services. Prof. E. Jerome McCarthy classified the Marketing Mix Variables in terms of 4 Ps: Product, Price, Place (distribution) and Promotion. These 4 Ps represent the tactical controllable factors and vary in case of different products and target markets. 8. Product.

In the marketing mix, the product or service is the most important element. Product is directly related to satisfying the customer needs and wants in the target market. Customers acquire products for the singular reason that they are perceived as the means to satisfying their needs and wants. According to Philip Kotler, A products anything that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a need or want. In effect, products include physical products, services, persons, places, organisations and ideas. 9. Promotion (Marketing Communications)

The societal marketing concept calls upon marketers to build social and ethical considerations into their marketing practices. Adoption of this concept requires that marketing decisions be made in an ethical and socially responsible manner. Companies must pay attention not only to the short-term needs of customers but also to their long-term well being. This includes, for instance, excess fat content in readyto-eat foods, toxic wastes, and environmental issues. 7. Holistic Marketing Approach.

Promotion is a key element of marketing programme and is concerned with effectively and efficiently communicating with the customer. The major elements of promotion mix include advertising, personal selling, sales promotion, direct marketing, and publicity. A companys promotion efforts are the only controllable means to create awareness among publics about itself, the products and services it offers, their features, and influence their attitudes favourably. 10. Distribution

There have been major changes in almost every sphere of human activity over the last decade, like implication being that this requires fresh marketing thinking, a fresh approach to business, and this calls for a holistic marketing approach. This new thinking relies upon marketing research to define market segments, their size, and their needs. To more completely satisfy those needs, marketers need to have a more complete and cohesive approach to internal marketing, targeted marketing, relationship marketing, be visibly socially responsible, and make decisions about the controllable elements of the marketing mix. Holistic marketing recognizes that "everything matters" in marketing-and that a broad, integrated perspective is often necessary. 7. Marketing Mix Marketing mix is a major concept in modern marketing and involves practically everything that a

Decisions with respect to distribution channel focus on making the product available in adequate quantities at places where customers are normally expected to shop for them to satisfy their needs. The aim of the management is also to keep the physical distribution costs (that would include inventory, transportation, and storage) as low as possible. 11. Price Pricing decisions are almost always made in consultation with marketing management. Price is the only marketing mix variable that can be altered quickly. Price variable such as dealer price, retail price, discounts, allowances, credit terms, etc., directly influence the development of marketing strategy, as price is a major factor that influences the assessment of value obtained by customers. Price can be kept as high or low, or at any level in between these two extremes. nsscollegerajakumari 20

Importance of Marketing (A) To the Society 1. Marketing increases standard of living of the customers. 2. Marketing generates gainful employment opportunities both directly and indirectly. Marketing provides employment to the people in various areas like in advertising agency, in the company sales force, in the distributors sales force, in public relation firms etc. 3. Marketing helps in stabilising economic condition in the sense that marketing helps in selling the products or services, which keeps the various organizations functioning and gainful employment is available to the people. With the earnings from the employment, the people will purchase the products and/or services, thus sustaining the demand. (B) To the firms/companies 1. Marketing sustains the company by bringing in profits. Marketing is the only activity that brings revenue to the firm, whereas other activities incur expenditure. 2. Marketing is the source of new ideas. New product or service ideas usually comes from the research laboratories, employees or from marketplace. 3. Marketing provides direction for the future course. The marketing oriented company continuously brings out new product and service ideas which provide the direction for corporate strategic planning for longer time horizon. (C) To the Consumers 1. Meeting the unmet needs or wants. Marketing identifies those needs or wants which were not satisfied and helps in developing the product or service which can satisfy those unmet needs or wants of the people. 2. Reducing the price of products or services. Marketing helps in popularising the product or service which attracts the customers as well as competitors towards that product or service categories. Due to increase in demand, the manufacturing capacity increase which brings down per unit fixed costs of the product or service. Furthermore increase in competition led to decrease in the prices charged by the firm. Thus the growing demand and increasing competition both help in bringing down the price of the product or service. FUNCTIONS PERFORMED IN MARKETING. 1. Marketing Research. Marketing research involves collection and analysis of facts relevant to various aspects of

marketing. It is a process of collecting and analysing information regarding customer needs and buying habits, the nature of competition in the market, prevailing prices, distribution network, effectiveness of advertising media, etc. Marketing research gathers, records and analyses facts for arriving at rational decisions and developing suitable marketing strategies. 2. Product Planning and Development As you know marketing starts much before the actual production. The marketers gather information regarding what are the needs of the consumers and then decide upon what to produce. So, the task of marketing begins with planning and designing a product for the consumers. It can also be done while modifying and improving an already existing product. For example, now-a-days we find much better soaps and detergent powders than we used to get earlier. Similarly, we have many new products introduced almost on a regular basis. 3. Buying and Assembling Buying and assembling activities as a part of marketing refer to buying and collection of required goods for resale. This function of marketing is primarily relevant to those business organisations that are engaged in trading activities. In the context of manufacturing organisations, buying and assembling involves buying raw materials and components required for production of finished goods. 4. Packaging Packaging involves putting the goods in attractive packets according to the convenience of consumers. Important considerations to be kept in view in this connection are the size of the package and the type of packaging material used. Goods may be packaged in bottles (plastic or glass), boxes (made of tin, glass, paper, plastic), cans or bags. Packaging is also used as a promotional tool as suitable and attractive packages influences the demand of the products. It may be noted that packaging is different from packing, which refers to putting goods in suitable containers for transportation purposes. 5. Standardisation and Grading Standardisation refers to development of standards for production of goods with respect to shape, design, colour and other characteristics. If products are standardised, customers are able to identify a product and its characteristics very well. So goods can be sold by sample or description. Standardisation helps in promoting the sale of the product by increasing consumers confidence in the product quality. Grading involves separating products into different classes on the basis of certain predetermined standards relating to nsscollegerajakumari 21

size and quality. Grading is required in case of agricultural, forest and mineral products such as cotton, sugar cane, iron ore, coal, timber, etc. 6. Branding Branding means giving an attractive name, symbol or identity mark to the product to make a product different from others so that it is known by that name or symbol or mark. For example, Surf is the brand name of a detergent powder produced by Hindustan Unilever Limited (HUL). Similarly, you must be familiar with brands like Colgate for toothpaste, Lux for soap and so on. 7. Pricing the Product Pricing involves decisions regarding fixation of product prices, keeping in view the product costs, the capacity of customers to pay, and the prices of the competitive products. It is an important decision as it influences the sales and so also the profits. So pricing has to be done very carefully. 8. Promotion of the Product Promotional activities include advertising, personal selling, sales promotion and publicity. All promotional activities involve communication with the existing and prospective customers whereby they are made aware of the product, its distinctive features, price, availability etc. The objective of promotional activities is to motivate the customers to buy the product. 9. Distribution Distribution refers to those activities that are undertaken for sale of products to the customers and the physical transfer thereof. The first aspect i.e., sale of product involves use of middlemen such as wholesalers and retailers whose services are used for making the products available at convenient points and helping in their sale to the ultimate consumers. The second aspect i.e., physical transfer involves warehousing and transportation of goods from the point of production to the point of sale or the consumer. The objective of distribution activities is to ensure that consumers get the goods and services at the place and time most convenient to them and in the desired quantity. 10. Selling Selling is an important function of marketing whereby the ownership of goods and services is transferred from the seller to the buyer for a consideration known as price. To initiate and complete the process of selling, the seller has to inform the prospective buyer about availability of goods, the nature and uses of products, their prices and the needs of the customers that may be effectively satisfied by the

product. In the process, he arouses customers interest in the product and persuades them to buy it. 11. Storage and Warehousing Storage refers to holding and preserving goods from the time of their procurement or production till the time of their sale. In other words storage involves making suitable arrangements for preserving the goods till they are bought by the consumers and delivered to them. Warehousing is synonymous to storage but is normally used for large-scale storage facility for goods and commodities. In marketing it is essential to store raw material and finished goods to be used later by the company for production or for resale. 12. Transportation Transportation refers to the physical movement of goods from one place to another. In marketing, transport as an activity refers to physical movement of raw materials as well as finished goods from the place of production to place of consumption. Goods are transported through various means like railways, roadways, waterways and airways.

MARKETING ENVIRONMENT Environment plays a critical role in business, especially in marketing. The marketing environment is constantly changing and thus presenting new opportunities and threats. A marketer's task is to correctly analyse the environment and design a marketing mix, which will fit the environment. Marketing environment includes all the forces that directly or indirectly influence marketing operations by affecting an organisation acquisition of inputs/creation of outputs such as human, financial and natural resources and raw material, information, goods, services or ideas. Sometimes a distinction is more between macro and micro factors of environment. The Micro and Macro Environment There are two types of environmental forces, which influence an organization's marketing activities. Some of these forces are external to the firm and the organization has little control over them. The other type of forces comes from within the organization and can be controlled by it. Hence, the marketing environment can be divided into two major components:

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possibilities. The important point to consider is to find out the effect of economic prospects and inflation on the operations of the firms. 3 Government Environment Business is highly guided and controlled by government policies. Hence the type of government running a country is a powerful influence on business and marketing gets affected. - What changes and regulations are possible and what will be their impact? - What are the political risks of operating in a governmental jurisdiction? - What are the incentives the government may offer that might affect business? - What are the taxes and duties that may be levied and might affect business? 4 Legal Environment Firms prefer to operate in a country where there is a sound legal system such as in US. Marketers must have a good working knowledge of the major laws protecting consumers, competitions and organizations. Laws like MRTP, Consumer Protection Act, Intellectual Property Right, FEMA, Labour Laws etc., can considerably affect business operations. 5 Political Environment Political pressure groups influence and limit organizations e.g., the case of Enron in Maharastra and KFC in Karnataka. Special interest groups and political action committees put pressure on business organizations to pay more attention to consumer's rights, minority rights, and womens rights. MACRO ENVIRONMENTAL ANALYSIS 1. Demographic Environment Factors relating to population, such as size, growth rate, age distribution, religious composition and literacy levels and aspects like composition of workforce, household patterns, regional characteristics, population shifts etc., need to be studied as they are all part of the demographic environment. The points to be considered here are: - What demographic trends will affect the market size of the industry? - What demographic trends represent opportunities or threats? 2 Economic Environment Economic environment determines the strength and size of the market. The purchasing power in an economy depends on current income, prices, savings, circulation of money, debt and credit availability. Income distribution pattern determines the marketing 6 Cultural Environment The beliefs, values and norms of a society determine how individuals and organizations relate to each other. The core beliefs of a particular society tend to be persistent, as the American value system of work, charity and honesty. It is difficult for marketers to change these core values, which have a major bearing on marketing operations in as much as they set the stage for marketing activity and consumer response. 7 Technological Environment The most important factor, which is controlling and changing the human society and even impacting the future, is technology. Technology has changed the way people communicate with the advent of Internet and telecommunication system, and with the revolution in communications have come new ways of doing business. This is opening up new business opportunities while consumers reap the rewards of cutthroat competition among manufacturers. nsscollegerajakumari 23

Macro Environment: consists of demographics and economic conditions, sociocultural factors, political and legal systems, technological developments, etc. These constitute the general environment, which affects the working of all the firms. Micro environment : consist of suppliers, consumers, marketing intermediaries, etc. These are specific to the said business or firm and affect its working on short term basis.

The following factors are to be considered for the technological environment: - The pull of technological change - Opportunities arising out of technological innovation - Risk and uncertainty of technological development - Role of R&D in a country and government's R&D budget 8. Global Environment The global environment is also rapidly changing. The new concept of global village has changed how individuals and organizations relate to each other.The new migratory habits of the workforce as well as increased offshore operation are changing the dynamics of business operation, while in the background, the WTO initiatives have changed the way nations do business with each other, and opening up markets. MICRO ENVIRONMENTAL ANALYSIS This is also known as the task environment and affects business and marketing at the daily operating level. While the changes in the macro environment affect business in the long run, the effect of micro environmental changes are noticed almost immediately. 1 Consumer According to Peter Drucker, the aim of business is to create and retain the customer. Hence consumer occupies the central position in the marketing environment. The marketer has to closely monitor and analyse changes in consumer tastes and preferences and cater to (if not try and anticipate) their buying habits. - What constitutes the consumer value system? - What benefits is the consumer looking for? - Who are the consumers? - What are their buying patterns? 2 Competitors Competition shapes business. A study of the competitive scenario is essential for the marketer, particularly threats from competition. - Who are the competitors? - What are their present strategies and business objectives? - Who are the most aggressive and powerful competitors? 3 Company Nothing can be as important as self-analysis by the organization itself. Understanding its own strengths and capabilities in a particular business, that is, understanding a business in depth should be the goal of a firm's internal analysis. The objectives, goals and resource availabilities of a

firm occupy a critical position in the microenvironment of marketing. The company with its resources and capabilities surrounds the consumer in the microenvironment. 4 Market The market is to be studied in terms of its actual and potential size, its growth prospect and also its attractiveness. The marketer should study the trends and development and the key success factors of the market he is operating. Important issues are : - Cost structure of the market - The price sensitivity of the market - Technological structure of the market - The existing distribution system of the market - Is the market matured? 5 Suppliers Suppliers form an important component of the microenvironment. With their own bargaining power they affect the cost structure of the industry. They constitute a major force, which shapes competition in the industry.

6 Intermediaries Intermediaries exert a considerable influence in the marketing environment. They can also be considered as the major determining force in the business. In many cases the consumers are not aware of the manufacturer and buy the product from the renowned intermediaries as for example Wal-Mart in US, Pantaloons in India. 7 Public These are various groups of individuals who have actual or potential interest in the working of the organisation and some how effect its working. The various publics include Financial public, which influences the companies ability to obtain funds, media public and general public. MARKET SEGMENTATION. The concept of market segmentation is based on the fact that all consumers are not alike. They differ in their needs, wants, desires, income, education, lifestyles and so on. Market segmentation is the process of dividing the heterogeneous market into relatively homogenous sub-groups of consumers with somewhat similar characteristics.

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Bases for Segmenting Consumer Markets.

In segmenting consumer markets, marketers can apply geographic, demographic, psychographic and behavioral variables related to consumer characteristics as well as behavioral variables related to consumer responses . 1: Geographic Segmentation (region, climate, population density). Geographic segmentation calls for dividing the market into different geographical units such as nations, states, regions, counties, cities, or neighborhoods. The company can operate in one or a few geographic areas or operate in all but pay attention to local variations. Some marketers even segment down to a specific postal code.. Geographic segmentation is an important process - particularly for multi-national and global businesses and brands. Many such companies have regional and national marketing programmes that alter their products, advertising and promotion to meet the individual needs of geographic units. The basic reason of using geographic base for segmentation is that people who live in the same area share some similar needs and wants that these needs and wants differ from those people living in other areas. For example, certain food and beverages sell better in one region than in others. Take the example of coffee which is consumed in India, but it is more consumed in South India than any other region. 2. Demographic segmentation consists of dividing the market into groups based on variables such as age; gender family size, income, occupation, education, religion, race and nationality. Demographic segmentation variables are amongst the most popular bases for segmenting customer groups. Age: Consumer needs and wants change with age although they may still wish to consumer the same types of product. So Marketers design, package and promote products differently to meet the wants of different age groups. Life-cycle stage A consumer stage in the life cycle is also an important variable. We can talk of the following products to talk of the life-cycle concept: Infants: Baby foods, Adolescent: Trendy products and services like

Jeans, T-shirts, Old people: Investment instruments, health packages for old etc. Gender: Gender segmentation is widely used in consumer marketing. The best examples include clothing, hairdressing, magazines and toiletries and cosmetics. Income: Income is another popular basis for segmentation. Many companies target affluent consumers with luxury goods and convenience services. Good examples include Mercedes, Pizza Hut Pizzas, Ebony and Parker pen. By contrast, many companies focus on marketing products that appeal directly to consumers with relatively low incomes. For eg Nirma, Lifeboy soap etc. Many marketers are of the view that education, occupation, and income tend to be closely correlated in almost a cause-and-effect relationship. High level occupations that produce high incomes usually require advanced educational training. Individuals with little education rarely qualify for higher level jobs. Because of the interrelationship among these three variables, education, occupation and income are combined into a composite index of social class. Income is another basis of segmenting the markets for automobiles, clothing, cosmetics and travel. 3) Psychographic Segmentation: In Psychographic segmentation, buyers are classified into different groups on the basis of lifestyle or personality and values. People within the same demographic group can exhibit very different psychographic profiles. a) Lifestyle: People exhibit different lifestyles and goods they consume express their lifestyles. Many companies seek opportunities in lifestyle segmentation. b) Personality Segmentation: Marketers also use personality variables to segment markets. An individual's personality characteristics are described in terms of traits that influence behaviour. 4. Behavioral Segmentation or Consumer Response Segmentation: In behavioral segmentation, buyers are divided into groups on the basis of their knowledge or attitude towards the use of, or response to a product. Some marketers believe that behavioral variables are the best starting points for constructing market segments. a) Occasions: According to the occasions, buyers develop a need, purchase a product or use a product. It can help firms expand product usage. A company can consider critical life events to see whether they are accompanied by certain needs. For example, Tanishq a TATA enterprise offers schemes and promotions for Akshaya Thrutiya ( auspicious day to purchase jewellary) nsscollegerajakumari 25

b) Benefits: Buyers can be classified according to the benefits they seek. For example, Peter England, a madhura garment brand positioned its wrinkle free trousers on the basis of benefits. c) User Status: Markets can be segmented into nonusers, potential users, first time users and regular users of a product. Each market segment requires a different marketing strategy. The companys market position will also influence its focus. Market leaders will focus on attracting potential users, whereas smaller firms will try to attract current users away from the market leader. d) Usage Rate: Markets can be segmented into light, medium and heavy product users. Heavy users are often a small percentage of the market but account for a high percentage of total consumption. Marketers prefer to attract one heavy user rather than several light users and they vary their promotional efforts accordingly. 5. Culture Segmentation: Some marketers have found it useful to segment their markets on the basis of culture, because members of the same culture tend to share the same values, beliefs, and customs. Marketers who use cultural segmentation stress specific, widely held cultural values which they hope consumers will identify. Cultural segmentation is particularly successful in international marketing. Within the larger culture, there exist subcultures. These subcultures sometime exhibit distinct purchase preferences. 6. Benefit Segmentation: Marketing people constantly attempt to isolate the one particular benefit char they should communicate to consumers. Segmenting the market on the basis of benefit sought by various consumers has been a popular segmenting base for many products and services. For example, motorcycle manufacturers tried to segment the market on the basis of benefits sought by various consumers. Hero Honda emphasized mileage, Yamaha emphasised on power and style etc. 7. Hybrid Segmentation: Marketers commonly segment markets by combining several segmentation variables rather than relying on a single segmentation base. For eg: psychographic and demographic etc.

Any company that sells to this industry could use geographic segmentation. In particular, there are three commonly used bases: 1) type of customer 2) size of customer; and 3) type of buying situation. a) Type of Customer Segmentation: A common way lo segment industrial markets is by end users. For example, a company that sells small electric motors would have broad potential market among many different industries such as automobiles, electrical appliances, government departments etc, However, this company will do better by segmenting its potential market by type of customer and then specializing to meet the needs of businesses in limited number of these segments. b) Customer Size Segmentation: Customer size is another variable used for segmenting organizational markets. Many companies set up separate systems for dealing with major and minor customers. c) Type of Buying Situations Segmentation: While discussing organizational markets we have identified three types of buying situations: new buy, modified rebuy, and straight rebuy. hence buying situations, as you know, are different from each other in a significant way. An industrial seller can segment his market on this basis of buying situations and adopt marketing strategies accordingly. Benefits of market segmentation. 1. Facilitates Proper Choice of Target Market In the first place, segmentation helps the marketer to distinguish one customer group from another within a given market and thereby enables him to decide which segment should form his target market. 2. Facilitates Tapping of the Market, Adapting the Offer to the Target Segmentation also enables the marketer to crystallize the needs of the target buyers. It also helps him to generate an accurate prediction of the likely responses from each segment of the target buyers. Moreover, when buyers are handled after careful segmentation, the responses from each segment will be homogeneous. This, in turn, will help the marketer develop marketing offers/programmes that are most suited to each group.

Bases for Segmenting Organizational Markets Organizational markets can be segmented with many of the same variables used in segmenting the consumer markets. For example, we can segment organizational markets on a geographic basis. Some industries are geographically concentrated. For example, in India most of the companies belonging to textile industry are located in Maharashtra and Gujrat.

3. Helps Divide the Markets and Conquer Them. Through segmentation, the marketer can look at the differences among the customer groups and decide on nsscollegerajakumari 26

appropriate strategic offers for each group. This is precisely why some marketing experts have described segmentation as a strategy of dividing the markets for conquering them. 4. Makes the Marketing Effort more Efficient and Economic Segmentation also makes the marketing effort more efficient and economic. It ensures that the marketing effort is concentrated on well defined and carefully chosen segments. 5. Benefits the Customer as well Segmentation brings benefits not only to the marketer, but to the customer as well. The firm can anticipate the wants of the customers and the customers can anticipate the capabilities of the firm. BUYING MOTIVES. A sale is usually made in the minds of the buyers, but not in the minds of the salesmen; or not at the shop. When the customer wants to buy, he is motivated or induced by some reason. There fore it is essential for the sales men to know what induces the buyer to buy and how he can be induced to buy by making an appeal to his buying motives. The urge or motive to satisfy a desire makes people buy goods or articles. Behind every purchase, there is a buying motive. Buying motive is the thoughts, feelings, emotions and instincts which arouse in the buyer, a desire to buy an article. The buyer purchases certain products induced by certain mental and economic factors. So buying motives are the considerations which provide the impulse to buy and induce action or determine choice in purchase of goods or services. According to Prof D.J.Duncan, buying motives are those influences or considerations which provide the impulse to buy, induce action or determine choice in purchase of goods or services. It is necessary for the salesmen to study the buying motives of his customers. This would help him to arouse favorable attention of the consumers and finally a sale. Sufficient knowledge of buying motives helps the salesmen to guide the customer in the right way. CLASSIFICATION OF BUYING MOTIVES. Buying motives are numerous and so also their classification.

Buying Motives.

Primary Secondary ( includes hunger, thirst etc) (includes security, comfort attention etc) Buying motives may be primary and secondary. Primary motives are those which are the basic needs of human beings like hunger, thirst, sleep etc. Secondary motives indicate the secondary or social needs like security, comfort, affection etc. Some other authors classify motives in to product and patronage. Product motives are those motives which are attach to the public like durability, economy, and fashion; comfort etc. on the other hand patronage motives are those which more or less depends on the buyers. There are certain factors like price, credit facilities, treatment, and appearance of the shop which attracts the consumers to buy from a specific dealer. BUYING MOTIVES.

Product

Patronage

Emotional

Rational Emotional Rational

PRODUCT BUYING MOTIVES. In product buying motives, customer is attracted to the product due to some physical or psychological attraction of the product. The product may be cheap, attractively designed , durable, fashionable etc. for these reasons, a customer is inclined to buy the product. EMOTIONAL PRODUCT BUYING MOTIVES. The consumer at times, is driven by emotions, while buying certain products. In such cases the consumer does not bother to make intelligent or right decision. He is generally carried away by emotions. The following are certain examples. 1. Pride:People always want to be admired and appreciated in the society. They want to be respected by others and feel proud of their social status, activities and achievements. There fore people purchase expensive luxury goods in order maintain there status. nsscollegerajakumari 27

In fact this is one of the strongest buying motives. For example, People buy imported Cars, Music systems etc to show the pride of its possession. 2. Fashion and Imitation. Fashion an imitation is closely related to the motive of pride. People generally try to copy or imitate others, particularly movie stars, sportsmen, etc. there fore new Cos, generally advertise their products with the help of popular film stars or athletes to appeal to this motive of buyers. 3. Sex and Romance. This is one of the strongest of all human motives. Men and women want to attract and this motive very important in case of articles like Dress, Cosmetics, etc. Appeal to this motive is there fore made to sell a number of products like shampoo, sun glass etc. 4. Comfort. The desire to live in comfort is very strong in some persons. Thus comfort is a very important motive in connection with luxury goods. These include washing machines, TV, etc. They save labor and time an provide pleasure at the same time. 5. Love and Affection. Most human beings have an in born desire to care for their family. Affection and love for family, society and country often drives consumers to buy certain products. Affection for children may be responsible for buying things like baby food, toys etc. attachment to ones country may lead to buying goods made within the country. 6. Habits. Habits ones made become the need for people. Habits like smoking, consuming tea, coffee etc using particular brand products only etc very often provides the stimulus for the consumer to buy certain articles or service. RATIONAL PRODUCT BUYING MOTIVES.

purchase products that have the longest possible life span and need the least maintenance. The salesman while appealing to this motive should emphasize the durability, quality and reliability of the product. 2. Suitability: - Suitability means which fits well and enhances the beauty. Some customers pay much attention to the factor of suitability. If the product in question likes painting, Fan etc suit their needs as well as give maximum utility; they are inclined to purchase it. 3. Variety of uses: - It is common to find that some customers prefer goods when it can be used for a variety of purpose. In fact a rational buyer always takes in to account what additional benefits he will derive out of the article. He always wants to get maximum benefit out of minimum spending. 4. Economy: - Most customers prefer products that give more economy in every respect. This is particularly true in case of durables, and routinely used goods. Some people visit several stores and shops to purchase the best at minimum cost. 5. Safety: - People are generally afraid of losing their wealth, health, and life. Man cant get rid of the fear, unless and until certain precautionary measures are taken. The motive of safety plays an important role in buying articles like iron safes, Locks, and services like insurance policies etc. 6. Convenience:- Some customers prefer convenience attached to a product, though it may be a bit costly. This motive is important for selling pressure cookers, room heaters etc. PATRONAGE BUYING MOTIVES. Some times customers patronize a store or shop, driven either by their emotional or rational choice. There are certain factors which are responsible for such concentration of buyers choice. EMOTIONAL PATRONAGE MOTIVES.

Generally people are rational in buying. i.e. elective with the consideration to the price, quality, durability etc. The rational buying motives are based on thought and judgment. Consumers usually purchase products by testing, comparing and observing the product keenly. There are certain rational product buying motives which depends on the product. They are; 1. Durability: - In the days of arising prices and limited income, majority of consumers are influenced by the durability of the product. Almost all people like to

They depend upon the mentality of the customers. The emotion or will is usually attached to a particular dealer or store. Emotionally the buyer develops a sort of weakness towards that particular shop. Following are those kinds. 1. Appearance:- Some times customers are attached to a particular shop by its appearance. A well decorated, clean and well furnished store with all modern amenities tends to attract the attention of customers. nsscollegerajakumari 28

2. Recommendation :- Customers also visit a shop on the recommendations of friends and relatives. Usually these friends and relatives are satisfied customers of a particular shop. As a result, they recommend the store to others. 3. Imitation :- Some customers are motivated to follow others, since it often seems easier to imitate others. How ever this motive is short lived. 4. Prestige :- For wealthy people, the sole buying motive is the prestige and superiority. Some times this motive leads them to purchase an article, which they may not need at all. In order to maintain the dignity, they purchase goods even at a higher price. RATIONAL PATRONAGE MOTIVES. A large number of buyers, by their rational choice, prefer to buy from a particular shop or store. They apply their intelligence and judgment before patronizing a shop. They always calculate the benefits. 1. Credit facility:- Some buyers patronize a particular shop because of credit facilities offered by them. Some times Luxury goods are offered at installments. 2. Close Location :- Some customers prefer certain sellers, who are located near by. They also prefer these shops which give them good treatment 3. Services offered. :- A majority of customers prefer buying articles from the dealer who offers maximum number of services. Many provide services like cash discount, guarantee, home delivery, free service etc. 4. Wide Choice:- Now a days people want to buy their requirements at a quality shop offering large varieties of style, size and prices. Varieties of goods enables the customers to pick up the suitable goods as per their requirement. The above discussion indicates that there are a number of motives, which affects the customers. Some times two or three motives may work simultaneously in the minds of the consumers. BUYING PROCESS. Consumer decision making varies with the type of buying decision. The decisions to buy toothpaste, a tennis racket, a personal computer, and a new car are all very different. Marketers have to go beyond the various influences on buyers and develop an in-depth understanding of how consumers actually make their buying decisions. Specifically, marketers must identify who makes the buying decision, the types of buying decisions, and the stages in the buying process.

The Stages of the Buying Decision Process We have five stage model of buying process

Stage 1: Problem Recognition The buying process starts when the buyer recognizes a problem or need. This need can be triggered by internal stimuli (such as feeling hunger or thirst) or external stimuli (such as seeing an ad) that then becomes a drive. Stage 2: Information Search An aroused consumer who recognizes a problem will be inclined to search for more information. Consumer information sources fall into four groups : =Personal sources: Family, friends, neighbors, acquaintances =Commercial sources: Advertising, salespersons, dealers, packaging, displays =Public sources: Mass media, consumer-rating organizations =Experiential sources: Handling, examining, using the product. The consumer usually receives the most information from commercial (marketer-dominated) sources, although the most influential information comes from personal sources. CONSUMER BEHAVIOUR

The central focus of marketing is the consumer. To devise good marketing plans, it is necessary to examine consumer attributes and needs, lifestyles, and purchase processes and then make proper marketingmix decisions. The study of Consumer behavior includes the study of what they buy, why they buy, how they buy, when they buy, from where they buy, and how often they buy.

Factors affecting consumer behavior.

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The Upper-middle Class: This class comprises moderately successful businessmen, professionals and owners of medium to small size companies. People belonging to this class are well educated, and they crave for success in life. The Lower-middle Class: This class comprises office employees-both government and private, junior executives, teachers, technicians, and small business owne1.s. People from this class crave for respectability by engaging in those activities, which are approved by the society as "right things". They are future oriented, strive to move up in the next higher social class, exhibit self confidence, and are risk takers. The Lower Upper-Class: People in this class are blue-collar workers, semi skilled workers, and lower grade service personnel such as clerks etc. They live in smaller houses. They patronize products keeping an eye on economy aspect of purchase. The Lower-lower Class: They belong to the lowest strata of the society. 'This class includes unskilled workers, the unemployed, uneducated and low-income earners. They live in substandard houses. Their priority is to purchase only essential things.

1. Cultural factors: Culture Cultural factors have a significant impact on customer behavior. Culture is the combination of customs, beliefs and values of consumers in a particular nation. Culture is the most basic cause of a persons wants and behavior. Growing up, children learn basic values, perception and wants from the family and other important groups. For eg. Majority Indians are vegetarians and a company which sells non vegetarian items should analyze these values of the consumer. Therefore , KFC which sells chicken dishes all over the world added vegetarian burgers in their menu to serve vegetarian consumers. Each culture contains sub-cultures groups of people with share values. Sub-cultures can include nationalities, religions, racial groups, or groups of people sharing the same geographical location. Many subcultures make up important market segments, and marketers often design products and marketing programs tailored to their needs. Social Class Social classes are relatively homogeneous and enduring divisions in a society, which are hierarchically ordered and whose members share similar values, interests, and behaviour. Social classes show distinct product and brand preferences in many areas, including clothing, home furnishings, leisure activities, and automobiles. Some marketers focus their efforts on one social class. Social classes include:The Upper Class: People who are in the top strata of the society. This class includes two groups: (1) socially prominent "old families," often with inherited Markets wealth, and (2) newly rich corporate executives, owners of large businesses, and highly-paid professionals.

2. Social Factors. In addition to cultural factors, a consumers behaviour is influenced by such social factors as reference group, family, and social roles and statuses. Reference Groups A persons reference groups consist of all the group that have a direct (face-to face) or indirect influence on the persons attitudes or behaviour. Groups having a direct influence on a person are called membership groups. Some membership groups are primary groups, such as family, friends, neighbors, and co-workers, with whom the person interact continuously and informally. People also belong to secondary groups, such religious, professional, and trade union groups, which tend to be more formal and require less continuous interaction. People are significantly influenced by their reference groups in at least three ways. Reference groups expose an individual to new behaviours and lifestyles. They influence attitudes and self-concept. And they create pressures for conformity that may affect actual product and brand choices. Family The family is the most important consumerbuying organization in society, and it has been researched extensively. Family members constitute the nsscollegerajakumari 30

most influential primary reference group. We can distinguish between two families in the buyers life. The family of orientation consists of ones parents and siblings. From parents a person acquires an orientation toward religion, politics, and economics and sense of personal ambition, self-worth, and love. A more direct influence on everyday buying behaviour is ones family of procreation. namely, ones spouse and children. Roles and Statuses A person participates in many groups, family, clubs, and organizations. The persons position in each group can be defined in terms of role and status. A role consists of the activities that a person is expected to perform. Each role carries a status. People choose products that communicate their role and status in society. Thus company presidents often drive Mercedes, and wear expensive suits. Marketers are aware of the status symbol potential of products and brands. 3. Personal Factors A buyers decisions are also influenced by personal characteristics. These include the buyers age and stage in the life cycle, occupation, economic circumstances, lifestyle, and personality and selfconcept. Age and Stage in the Life Cycle People buy different goods and service over a lifetime. They eat baby food in the early years, most foods in the growing and mature years, and special diets in the later years. Taste in clothes, furniture, and recreation is also age related. Consumption is shaped by the family life cycle. Occupation and Economic Circumstances Occupation also influences a persons consumption pattern. A blue-collar worker will buy work clothes, work shoes, and lunchboxes. A company president will buy expensive suits, air travel, country club membership, and a large sailboat. Product choice is greatly affected by economic circumstances: spendable income (level, stability, and time pattern), savings and assets (including the percentage that is liquid), debts, borrowing power, and attitude toward spending versus saving. Marketers of income-sensitive goods pay constant attention to trends in personal income savings, and interest rates. If economic indicators point to a recession, marketers can take steps to redesign, reposition, and re price their products so they continue to offer value to target customers. Lifestyle People from the same subculture, social class, and occupation may lead quite different lifestyles. A

lifestyle is the persons pattern of living in the world as expressed in activities, interests, and opinions. Lifestyle portrays the whole person interacting with his or her environment. Personality and Self-Concept Each person has a distinct personality that influences behavior. By personality, we mean distinguishing psychological characteristics that lead to relatively consistent and enduring responses to environment. Personality is usually described in terms of such traits as self-confidence, dominance, autonomy, defensiveness, and adaptability. Personality can be a useful variable in analyzing consumer behavior, provided that personality types can be classified accurately and that strong correlations exist between certain personality types and product or brand choices. Related to personality is self-concept (or selfimage). Marketers try to develop brand images that match the target markets self-image. 4. Psychological Factors. A persons buying choices are influenced by four major psychological factors, motivation, perception, learning, and beliefs and attitudes. Motivation A person has many needs at any given time. A need becomes a motive when it is aroused to a sufficient level of intensity. A motive is a need that is sufficiently pressing to drive the person to act. Maslows Theory. According to Abraham Maslow, human needs are arranged in a hierarchy, in their order of importance, they are physiological needs, safety needs, when a person succeeds in satisfying an important need, that need will cease being a current motivator, and the person will try to satisfy the next-most-important need. Perception A motivated person is ready to act. How the motivated person actually acts is influenced by his or her perception of the situation. Perception is the process by which an individual selects, organizes and interprets information inputs to create a meaningful picture of the world. Perception depends not only on the physical stimuli but also on the stimulis relation to the surrounding field and on conditions within the individual. Learning Learning involves changes in an individuals behavior arising from experience. Most human behavior is learned. Learning theory teaches marketers that they can build up demand for a product by nsscollegerajakumari 31

associating it with strong drives, using motivating factors, and providing positive reinforcement. Beliefs and Attitudes Through doing and learning, people acquire beliefs and attitudes. These in turn influence buying behavior. A belief is descriptive thought that a person holds about something. Beliefs may be based on knowledge, opinion, or faith. They may or may not carry an emotional charge. Of course, manufacturers are very interested in the beliefs people carry in their heads about their products and services. These beliefs make up product and brand images, and people act on their images. If some beliefs are wrong and inhibit purchase, the manufacturer will want to launch a campaign to correct these beliefs. An attitude is a persons enduring favorable or unfavorable evaluations, emotional feelings, and action tendencies toward some object or idea. People have attitudes toward almost everything: religion, politics, clothes, music, and food. Attitudes put them into a frame of mind of liking or disliking an object, moving toward or away from it. Attitudes lead people to behave in a fairly consistent way toward similar object. People do not have to interpret and react to every object in a fresh way. Cultural, social, personal and psychological factors affect the way final consumers make choices and can help a firm understand how people use the decision process. By knowing how these factors influence decisions, a firm can fine-tune its marketing strategies to cater to the target market and its purchase behavior.

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