MB0046 – Marketing Management

Q.1 What is Marketing Information System? Explain its characteristics, benefits and
information types.

Ans. A Marketing Information System can be defined as ‘a system in which marketing

information is formally gathered, stored, analysed and distributed to managers in accord with
their informational needs on a regular basis’.

Set of procedures and practices employed in analyzing and assessing marketing information,
gathered continuously from sources inside and outside of a firm. Timely marketing information
provides basis for decisions such as product development or improvement, pricing, packaging,
distribution, media selection, and promotion.

Characteristics of MIS

Philip Kotler defines MIS as “a system that consists of people, equipment and procedures to
gather,

sort, analyze, evaluate and distribute needed, timely and accurate information to marketing
decision

makers.

Its characteristics are as follows:

1. It is a planned system developed to facilitate smooth and continuous flow of information.

2. It provides pertinent information, collected from sources both internal and external to the
company, for use as the basis of marketing decision making.

3. It provides right information at the right time to the right person.

A well designed MIS serves as a company’s nerve centre, continuously monitoring the market

environment both inside and outside the organization. In the process, it collects lot of data and
stores

in the form of a database which is maintained in an organized manner. Marketers classify and

analyze this data from the database as needed.

Benefits of MIS(Marketing Information System)

Various benefits of having a MIS and resultant flow of marketing information are given below:
1. It allows marketing managers to carry out their analysis, planning implementation and control

responsibilities more effectively.

2. It ensures effective tapping of marketing opportunities and enables the company to develop

effective safeguard against emerging marketing threats.

3. It provides marketing intelligence to the firm and helps in early spotting of changing trends.

4. It helps the firm adapt its products and services to the needs and tastes of the customers.

5. By providing quality marketing information to the decision maker, MIS helps in improving the

quality of decision making.

Types of Marketing Information

A Marketing Information System supplies three types of information.

1. Recurrent Information is the data that MIS supplies periodically at a weekly, monthly,
quarterly,

or annual interval. This includes data such as sales, Market Share, sales call reports, inventory
levels, payables, and receivables etc. which are made available regularly. Information on
customer awareness of company’s brands, advertising campaigns and similar data on close
competitors can also be provided.

2. Monitoring Information is the data obtained from regular scanning of certain sources such as
trade journals and other publications. Here relevant data from external environment is captured
to monitor changes and trends related to marketing situation. Data about competitors can also be
part of this category. Some of these data can be purchased at a price from commercial sources
such as Market Research agencies or from Government sources.

3. Problem related or customized information is developed in response to some specific

requirement related to a marketing problem or any particular data requested by a manager.
Primary Data or Secondary Data (or both) are collected through survey Research in response to
specific need. For example, if the company has developed a new product, the marketing manager
may want to find out the opinion of the target customers before launching the product in the
market. Such data is generated by conducting a market research study with adequate sample size,
and the findings obtained are used to help decide whether the product is accepted and can be
launched.

Q.2 a. Examine how a firm’s macro environment operates.

b. Mention the key points in Psychoanalytic model of consumer behaviour.

Ans. The term micro-environment denotes those elements over which the marketing firm has
control or which it can use in order to gain information that will better help it in its marketing
operations. In other words, these are elements that can be manipulated, or used to glean
information, in order to provide fuller satisfaction to the company’s customers. The objective of
marketing philosophy is to make profits through satisfying customers. This is accomplished
through the manipulation of the variables over which a company has control in such a way as to
optimise this objective. The variables are what Neil Borden has termed ‘the marketing mix’
which is a combination of all the ‘ingredients’ in a ‘recipe’ that is designed to prove most
attractive to customers. In this case the ingredients are individual elements that marketing can
manipulate into the most appropriate mix. E Jerome McCarthy further dubbed the variables that
the company can control in order to reach its target market the ‘four Ps’. Each of these is
discussed in detail in later chapters, but a brief discussion now follows upon each of these
elements of the marketing mix together with an explanation of how they fit into the overall
notion of marketing.

A scan of the external macro-environment in which the firm operates can be expressed in terms
of the following factors:

• Political
• Economic
• Social
• Technological

The acronym PEST (or sometimes rearranged as “STEP”) is used to describe a framework for
the analysis of these macroenvironmental factors. A PEST analysis fits into an overall
environmental scan as shown in the following diagram:

Environmental Scan
/ \
External Analysis Internal Analysis
/\
Macroenvironment Microenvironment
|

P.E.S.T.

Political Factors

Political factors include government regulations and legal issues and define both formal and
informal rules under which the firm must operate. Some examples include:

• tax policy
• employment laws
• environmental regulations
• trade restrictions and tariffs
• political stability
Economic Factors

Economic factors affect the purchasing power of potential customers and the firm’s cost of
capital. The following are examples of factors in the macroeconomy:

• economic growth
• interest rates
• exchange rates
• inflation rate

Social Factors

Social factors include the demographic and cultural aspects of the external macro environment.
These factors affect customer needs and the size of potential markets. Some social factors
include:

• health consciousness
• population growth rate
• age distribution
• career attitudes
• emphasis on safety

Technological Factors

Technological factors can lower barriers to entry, reduce minimum efficient production levels,
and influence outsourcing decisions. Some technological factors include:

• R&D activity
• automation
• technology incentives
• rate of technological change

External Opportunities and Threats

The PEST factors combined with external micro environmental factors can be classified as
opportunities and threats in a SWOT analysis.

The Psychoanalytical Model: The psychoanalytical model draws from Freudian Psychology.

According to this model, the individual consumer has a complex set of deep-seated motives
which drive him towards certain buying decisions. The buyer has a private world with all his
hidden fears, suppressed desires and totally subjective longings. His buying action can be
influenced by appealing to these desires and longings. The psychoanalytical theory is attributed
to the work of eminent psychologist Sigmund Freud. Freud introduced personality as a
motivating force in human behavior.
According to this theory, the mental framework of a human being is composed of three elements,
namely,

1. The id or the instinctive, pleasure seeking element. It is the reservoir of the instinctive
impulses that a man is born with and whose processes are entirely subconscious. It includes the
aggressive, destructive and sexual impulses of man.

2. The superego or the internal filter that presents to the individual the behavioral expectations of
society. It develops out of the id, dominates the ego and represents the inhibitions of instinct
which is characteristic of man. It represents the moral and ethical elements, the conscience.

3. The ego or the control device that maintains a balance between the id and the superego. It is
the most superficial portion of the id. It is modified by the influence of the outside world. Its
processes are entirely conscious because it is concerned with the perception of the outside world.

The basic theme of the theory is the belief that a person is unable to satisfy all his needs within
the bounds of society. Consequently, such unsatisfied needs create tension within an individual
which have to be repressed. Such repressed tension is always said to exist in the subconscious
and continues to influence consumer behavior.

4. The Sociological Model: According to the sociological model, the individual buyer is
influenced by society or intimate groups as well as social classes. His buying decisions are not
totally governed by utility; He has a desire to emulate, follow and fit in with his immediate
environment.

5. The Nicosia Model: In recent years, some efforts have been made by marketing scholars to
build buyer behavior models totally from the marketing man’s standpoint. The Nicosia model
and the Howard and Sheth model are two important models in this category. Both of them
belong to the category called the systems model, where the human being is analyzed as a system
with stimuli as the input to the system and behavior as the output of the system. Francesco
Nicosia, an expert in consumer motivation and behavior put forward his model of buyer behavior
in 1966.

The model tries to establish the linkages between a firm and its consumer – how the activities of
the firm influence the consumer and result in his decision to buy. The messages from the firm
first influence the predisposition of the consumer towards the product. Depending on the
situation, he develops a certain attitude towards the product. It may lead to a search for the
product or an evaluation of the product. If these steps have a positive impact on him, it may
result in a decision to buy. This is the sum and substance of the ‘activity explanations’ in the
Nicosia Model. The

Nicosia Model groups these activities into four basic fields. Field one has two subfields the
firm’s attributes and the consumer’s attributes. An advertising message from the firm reaches the
consumer’s attributes. Depending on the way the message is received by the consumer, a certain
attribute may develop, and this becomes the input for Field Two. Field Two is the area of search
and evaluation of the advertised product and other alternatives. If this process results in a
motivation to buy, it becomes the input for Field Three. Field Three consists of the act of
purchase. And Field Four consists of the use of the purchased item.

Q.3 Explain the key roles played and various steps involved in organizational buying.

Ans.

Point 1 – Introduction.

The need for an understanding of the organizational buying process has grown in recent years
due to the many competitive challenges presented in business-to-business markets. Since 1980
there have been a number ofkey changes in this area, including the growth of outsourcing, the
increasing power enjoyed by purchasing departments and the importance given to developing
partnerships with suppliers.

Point 2 – The organizational buying behaviour process.

The organizational buying behaviour process is well documented with many models depicting
the various phases, the members involved, and the decisions made in each phase. The basic five
phase model can be extended to eight; purchase initiation; evaluations criteria formation;
information search; supplier definition for RFQ; evaluation of quotations; negotiations; suppliers
choice; and choice implementation (Matbuy, 1986).

Point 3 – The buying centre. The buying centre consists of those people in the organizational
who are involved directly or indirectly in the buying process, i.e. the user, buyer influencer,
decider and gatekeeper to who the role of ‘initiator’ has also been added. The buyers in the
process are subject to a wide variety and complexity of buying motives and rules of selection.
The Matbuy model encourages marketers to focus their efforts on who is making what decisions
based on which criteria.

Point 4 – Risk and uncertainty –

The driving forces of organizational buying behaviour. This is concerned with the role of risk or
uncertainty on buying behaviour. The level of risk depends upon the characteristics of the buying
situation faced. The supplier can influence the degree of perceived uncertainty by the buyer and
cause certain desired behavioural reactions by the use of information and the implementation of
certain

actions. The risks perceived by the customer can result from a combination of the characteristics
of various factors: the transaction involved, the relationship with the supplier, and his position
vis-a-vis the supply market.

Point 5 – Factors influencing organizational buying behaviour.

Three key factors are shown to influence organizational buying behaviour, these are, types of
buying situations and situational factors, geographical and cultural factors and time factors.
Point 6 – Purchasing Strategy.

The purchasing function is of great importance because its actions will impact directly on the
organization’s profitability. Purchasing strategy aims to evaluate and classify the various items
purchased in order to be able to choose and manage suppliers accordingly. Classification is along
two dimensions: importance of items purchased and characteristics of the supply market. Actions
can be taken to influence the supply market. Based on the type of items purchased and on its
position in the buying matrix, a company will develop different relationships with suppliers
depending upon the number of suppliers, the supplier’s share, characteristics of selected
suppliers, and the nature of customer-supplier relationships. The degree of centralization of
buying activities and the missions and status of the buying function can help support purchasing
strategy. The company will adapt its procedures to the type of items purchased which in turn will
influence relationships with suppliers.

Point 7 – The future.

Two activities which will be crucial to the future development of organizational buying
behaviour will be information technology and production technologies.

Point 8 – Conclusion.

Organizational buying behaviour is a very complex area, however, an understanding of the key
factors are fundamental to marketing strategy and thus an organization’s ability to compete
effectively in the market place.

Q.4 Explain the different marketing philosophies and its approach.

Ans. 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.

According to the American Marketing Association, “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 goods”

There are six competing philosophies under which organizations conduct marketing activities
“the production concept, product concept, selling concept, marketing concept, customer concept;
and societal concept.

1) The Production Concept: The production concept is one of the oldest concepts in business.
The production concept holds that consumers will prefer products that are widely available and
inexpensive. Managers of production-oriented businesses concentrate on achieving high
production efficiency, low costs and mass distribution.

They assume that consumers are primarily interested in products availability and low prices. This
philosophy makes sense in developing countries, where consumers are more interested in
obtaining the product than its features. It is also used when a company wants to expand the
market.

2. The product Concept – Product concept holds that consumer will favour these products that
offer the most quality, performance and innovative features. Managers in these organizations
focus on making superior products and improving them over time. They assume that buyers
admire well-made products and can evaluate quality and performance product oriented
companies often trust that their engineers can design exceptional products. They get little or no
customer input, and very often they will not even examine competitor’s products.

3. The Selling Concept: The selling concept holds that consumers and businesses, if left alone,
will ordinarily not buy enough of the organization’s products. The organization most, therefore,
undertakes an aggressive selling and promotion effort. This concept assumes that consumers
typically show buying inertia or resistance and must be coaxed into buying. It also assumes that
the company has a whole battery of effective selling and promotion tools to stimulate more
buying. The selling concept is epitomized by the thinking that “The purpose of marketing is to
sell more stuff to more people for more money in order to make more profit

Most firms practice the selling concept when they have over capacity. Their aim is to sell what
they make rather then make what market wants.

4. The Marketing Concept: The marketing concepts hold that the key to achieving its
organizational goals consists of the company being more effective then competitors in creating,
delivering and communicating superior customer value to its chosen target markets.

The marketing concept rests on four pillars: target market, customer needs, integrated marketing
and profitability. There is a contrast between selling and marketing concepts:

“Selling focuses on the needs of the seller; marketing on the needs of the buyer”.

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

5. The customer Concept: Under customer concept, companies shape separate offers, services
and messages to individual customers. These companies collect information on each customer’s
past transactions, demographics, psychographics and media and distribution preferences. They
hope to achieve profitable growth through capturing a larger share of each customer’s
expenditures by building high customer loyalty and focusing on customer lifetime value.

The ability of a company to deal with customers are at a time become practical as a result of
advances in factory customization, computers, the internet and database marketing software.

6. The Societal Marketing Concept: The societal marketing concept holds that the
organization’s goal is to determine the needs, wants and interests of target markets and to deliver
the desired satisfactions more effectively and efficiently than competitors in a way that preserves
or enhances the consumer’s and the society’s well being.

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

Companies see cause-related marketing as an opportunity to enhance their corporate reputation,

raise brand awareness, increase customer loyalty, build sales and increase press coverage. They
believe that consumers will increasingly look for signs of good corporate citizenship that go
beyond supplying rational and emotional benefits.

Q. 5 What are the various stages involved in decision process when a consumer is buying
new product? Also, explain the adoption process.

Ans. Stages of the Consumer Buying Process

Six Stages to the Consumer Buying Decision Process (For complex decisions). Actual
purchasing is only one stage of the process. Not all decision processes lead to a purchase. All
consumer decisions do not always include all 6 stages, determined by the degree of
complexity…discussed next.

The 6 stages are:

1. Problem Recognition(awareness of need)–difference between the desired state and the

actual condition. Deficit in assortment of products. Hunger–Food. Hunger stimulates
your need to eat.
Can be stimulated by the marketer through product information–did not know you were
deficient? I.E., see a commercial for a new pair of shoes, stimulates your recognition that
you need a new pair of shoes.
2. Information search–
o Internal search, memory.
o External search if you need more information. Friends and relatives (word of
mouth). Marketer dominated sources; comparison shopping; public sources etc.

A successful information search leaves a buyer with possible alternatives, the evoked set.

Hungry, want to go out and eat, evoked set is

1.
o chinese food
o indian food
o burger king
o klondike kates etc
 2. Evaluation of Alternatives–need to establish criteria for evaluation, features the buyer
wants or does not want. Rank/weight alternatives or resume search. May decide that you
want to eat something spicy, indian gets highest rank etc.

If not satisfied with your choice then return to the search phase. Can you think of another
restaurant? Look in the yellow pages etc. Information from different sources may be treated
differently. Marketers try to influence by “framing” alternatives.

1. Purchase decision–Choose buying alternative, includes product, package, store, method

of purchase etc.
2. Purchase–May differ from decision, time lapse between 4 & 5, product availability.
3. Post-Purchase Evaluation–outcome: Satisfaction or Dissatisfaction. Cognitive
Dissonance, have you made the right decision. This can be reduced by warranties, after
sales communication etc.
After eating an indian meal, may think that really you wanted a chinese meal instead.

Adoption Process

Adoption is an individual’s decision to become a regular user of a product. How do potential

customers learn about new products, try them, and adopt or reject them? The consumer adoption
process is later followed by the consumer loyalty process, which is the concern of the established
producer. Years ago, new product marketers used a mass market approach to launch products.
This approach had two main drawbacks: It called for heavy marketing expenditures, and it
involved many wasted exposures. These drawbacks led to a second approach, heavy user target
marketing. This approach makes sense, provided that heavy users are identifiable and are early
adopters. However, even within the heavy user group, many heavy users are loyal to existing
brands. New product marketers now aim at consumers who are early adopters.

The theory of innovation diffusion and consumer adoption helps marketers identify early
adopters.

An innovation is any good, service, or idea that is perceived by someone as new. The idea may
have a long History, but it is an innovation to the person who sees it as new. Innovations take
time to spread through the social system. The Innovation diffusion process is defined as “the
spread of a new idea from its source of invention or creation to its ultimate users or adopters. The
consumer adoption process is the mental process through which an individual passes from first
hearing about an innovation to final adoption.

Adopters of new products have been observed to move through five stages:

1. Awareness : The consumer becomes aware of the innovation but lacks information about it.
2. Interest : The consumer is stimulated to seek information about the innovation.
3. Evaluation: The consumer considers whether to try the innovation
4. Trial: The consumer tries the innovation to improve his or her estimate of its value.
5. Adoption : The consumer decides to make full and regular use of the innovation.
Q. 6 Explain briefly the marketing mix elements for an automobile company giving
sufficient examples.

Ans. Marketing mix is the combination of elements that you will use to market your product.
There are four elements: Product, Place, Price and Promotion. They are called the four Ps of the
marketing mix.

The objectives of this lesson about marketing mix is to give you:

-The tools you need for establishing your detailed marketing plan and forecasting your sales.

1. Challenge 2. Product 3. Place 4. Price 5. Promotion 6. Sales strategy 7. Do it yourself 8.

Coaching

1-CHALLENGE

You have gotten a rough idea about the market situation and the possible positioning of
your product. Of course, it’s far to be sufficient. Now, you must write your detailed planning. It
means that brainstorming is ended and that you have to go to the specifics in examining and
checking all the hypothesis you had made in the preceding chapters. You will use the marketing
mix.

Some people think that the four Ps are old fashionable and propose a new paradigm: The four
Cs! Product becomes customer needs; Place becomes convenience, price is replaced by cost to
the user, promotion becomes communication. It looks like a joke but the Cs is more customer-
oriented.

2-PRODUCT

A good product makes its marketing by itself because it gives benefits to the customer. We
can expect that you have right now a clear idea about the benefits your product can offer.

Suppose now that the competitors products offer the same benefits, same quality, same price.
You have then to differentiate your product with design, features, packaging, services,
warranties, return and so on. In general, differentiation is mainly related to:

-The design: it can be a decisive advantage but it changes with fads. For example, a fun board
must offer a good and fashionable design adapted to young people.

-The packaging: It must provides a better appearance and a convenient use. In food business,
products often differ only by packaging.

-The safety: It does not concern fun board but it matters very much for products used by kids.

-The “green”: A friendly product to environment gets an advantage among some segments.
In business to business and for expensive items, the best mean of differentiation are
warranties, return policy, maintenance service, time payments and financial and insurance
services linked to the product

3-PLACE-DISTRIBUTION

A crucial decision in any marketing mix is to correctly identify the distribution channels. The
question ” how to reach the customer” must always be in your mind.

-Definition: The place is where you can expect to find your customer and consequently,
where the sale is realized. Knowing this place, you have to look for a distribution channel
in order to reach your customer.

In fact, instead of “place” it would be better to use the word “distribution” but the MBA lingo
uses “place” to memorize the 4 Ps of the marketing mix!

4-PRICE

Price means the pricing strategy you will use. You have already fixed, as an hypothesis a
customer price fitted to your customer profile but you will have now to bargain it with the
wholesalers and retailers. Do not be foolish: They know better the market than you and you
have to listen their advices.

5-PROMOTION

Advertising, public relations and so on are included in promotion and consequently in the 4Ps.
Sometimes, packaging becomes a fifth P. As promotion is closely linked to the sales, I will
mention here the most common features about the sale strategy.

-Definition: The function of promotion is to affect the customer behavior in order to close a
sale.

Of course, it must be consistent with the buying process described in the consumer analysis.

Promotion includes mainly three topics: advertisement, public relations, and sales promotions.

-Advertisement:

It takes many forms: TV, radio, internet, newspapers, yellow pages, and so on. You have to take
notice about three important notions:

Reach is the percentage of the target market which is affected by your advertisement. For
example, if you advertise on radio you must know how many people belonging to your segment
can be affected.
Frequency is the number of time a person is exposed to your message. It is said that a person
must be exposed seven times to the message before to be aware of it. Reach*frequency gives the
gross rating point. You have to evaluate it before any advertisement campaign.

Message: Sometimes, it is called a creative. Anyway, the message must: get attraction, capture
interest, create desire and finally require action that is to say close the sale.

Down-earth-advice:

There are some magical words that you can use in any message:

-Your-You–I-Me-My–Now-Today

-Fast-Easy-Cool-New-Fun-Updated-Free-Exciting-Astonishing

-Success-Love-Money-Comfort-Protection-Freedom-Luck.

-Public relations:

Public relations are more subtle and rely mainly on your own personality. For example, you can
deliver public speeches on subjects such as economics, geo-economics, futurology to several
organizations (civic groups, political groups, fraternal organizations, professional associations)

6-SALES STRATEGY

Sales bring in the money. Salesmen are directly exposed to the pressure of finding prospects,
making deals, beating competition and bringing money.