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Earlier market used to be “a physical place where buyers and sellers gathered to buy and sell
goods.” Modern market is a physical or virtual platform facilitating transaction.
Philip Kotler defines marketing as: Marketing is the social process by which
individuals and groups obtain what they need and want through creating and
exchanging products and value with others.
• Palmer’s marketing definition is as: Marketing is essentially about
marshalling the resources of an organization so that they meet the
changing needs of the customer on whom the organization depends.
• Dennis Adcock defines marketing as: The right product, in the right
place, at the right time, at the right price.
The Concepts of Marketing:
• After World War II, there was a variety of products available in the market
and customers having discretionary income could make choices and
purchase what really fulfill their needs. In that situation, firms were forced to
think about what their customers need, when they need it and how to keep
them satisfied which is the Marketing Concept.
• The fundamental premise of this concept has been that
“People hate to be sold to. However, they love to buy”
• The main focus of all the firms turned from hard selling towards
Identification of customer needs, making decision to fulfill those need and
maintaining long-term relation with customers by satisfying their changing
needs. The Marketing concept resulted in a separate marketing department
in organization and today we can see many organization have structured
themselves as marketing organization where every employee is contributing
towards customer satisfaction whether or not he’s a marketing person.
• So, The marketing concept totally relies upon marketing research that helps
in identification of segments, their sizes, needs, target market and then by
using the right marketing mix.
Holistic Marketing
Holistic Marketing is a marketing strategy that is developed by thinking about the
business as a whole, its place in the broader economy and society, and in the lives
of its customers. It attempts to develop and maintain multiple perspectives on the
company’s commercial activities.
1. Relationship Marketing
2. Integrated Marketing
3. Internal Marketing
4. Socially responsible Marketing
• Holistic marketing concept is a part of the series on concepts of marketing and it can be defined as a marketing strategy which considers the
business as a whole and not as an entity with various different parts. According to holistic marketing concept, even if a business is made of
various departments, the departments have to come together to project a positive & united business image in the minds of the customer.
Holistic marketing concept involves interconnected marketing activities to ensure that the customer is likely to purchase their product rather
than competition.
• Example of Holistic marketing concept – An organization will have different departments like sales and marketing, accounting and finance,
R&D and product development and finally HR and operations. Thus, if you want to implement a holistic marketing concept in your organization,
you need to ensure that R&D and product development take the feedback from marketing and sales to launch the product which is most likely
to attract customers. On the other hand they need to work closely with accounting and finance to find out the exact budget for the project.
Sales and marketing need to communicate to the HR the right kind of people that they need, and finally, admin and operations need to devise a
plan to retain these people.
• Thus, in the above manner, you get the right product at a right price with the right profits. Along with this you get the right people who will
market your product in the right manner. If you do all these things, you are sure to get the right customer to your doorstep. This is the
complete essence of holistic marketing concept. By doing the right things together as an organization, your product and brand stands a far
better chance in being successful than compared to these elements working individually without any holistic vision.
• Today, customer mindset is changing. Wealth is becoming lesser and debt is high. Thus customer purchases are being made after lots of
thinking. Customers search offline as well as online for the right product and have good knowledge of the product before they purchase. It is
likely that the customer has already made a purchase decision even before he enters the showroom. Thus holistic marketing concept is needed
at this hour to ensure that the customer chooses your product over everyone else.
• A key driver of Holistic marketing is marketing communications. The job of marketing communications is to send the right message to the
target group. By approaching various customer contact points, a uniform message can be sent to the customer. This consistency is likely to
raise confidence in the customer for your company thereby raising the brand image.
• Samsung is an example of Holistic marketing where the products are developed keeping the customer in mind, The showrooms are branded in
the proper manner, the customer service is polite and the service is fast. Thus Samsung is an excellent example of Holistic marketing.
• Some key concepts which are important in Holistic marketing are
• Internal marketing – Marketing between all the departments in an organization
Relationship marketing – Building a better relationship with your customers, internal as well as end customers is beneficial for holistic
marketing.
Performance marketing – Driving the sales and revenue growth of an organization holistically by reducing costs and increasing sales.
Integrated marketing – Products, services and marketing should work hand in hand towards to growth of the organization.
• Thus Holistic marketing is a concept which is organization wide and helps the growth of the organization with the right marketing of the
product. With the rise in competition and the limits placed on customers with finite financial resources, decisions will be scarce and as an
organization we have to implement holistic marketing so that decisions are made by customers in our favour.
• Socially responsible marketing is a marketing philosophy that a company should take into consideration; "What is in the best interest of
society in the present and long term?"
Holistic Marketing Orientation
22
• Geise and Cote (2000) identified three general components of
satisfaction. They opined that
23
Customer Satisfaction: Meaning and Definition
24
Customer Satisfaction . . . Contd.
feedback
Perceived
Customer Repeat Purchase
Performance(PP)
Satisfaction Lower marketing efforts
Product
Cross selling and upselliing
Price Charge Premium
Place
Company’s When PP>CE
Promotion
Marketing Customer
Cognitive
Program Physical evidence
Ability
People When PP<CE
Process
Customer
Customer Customer Negative Publicity
Expectation(CE) Dissatisfaction Loss in Sale
Customer Dissonance
feedback
Customer Evaluation Process
Input
Rai Alok Kumar (2013), Customer Relationship Management: Concepts and Cases, PHI
27
Rationale of Customer Satisfaction
Application of concept of Customer Satisfaction provides numerous
benefits to the organizations viz Customer Retention, Customer Loyalty,
Repurchase Intentions, and Business Performance.
28
Project Assignment:
29
CUSTOMER VALUE
• Customer Value refers to the difference between the benefits he derives
from the goods and services against the cost of acquiring the product.
The wider the gap derived between the benefit and the cost, the happier
is the customer.
• The cost includes economic as well as non economic costs.
Illustration: Godrej encouraged its customers to give feedback on adding
value to its products. One such addition done by the company was addition
introduction of an inbuilt curd maker in 400 ltr refrigerator.
• Tools like buyer analysis, market research and market planning are
helpful in identifying and measuring the value customers expect.
• Companies have been attempting every possible bit to make the
customer feel that they are valued more by the company and the same
product offers greater value than the rivals.
– Courier companies provide the option of tracking the courier status
and also know who has actually take the delivery.
– Indian Railways is introducing the facility of offering food even
diabetic food free of cost if the train gets delayed by over 2 hours.
– Samsung is offering one time screen replacement free with its latest
high end smart phones.
• These additional facilities are offered at no extra costs. This value
addition is largely aimed at creating “CUSTOMER LOYALTY”,
because customers compare the value- cost gaps of the competing
offers and select the products that deliver the maximum value to
them.
Generic Value Chain: The chain of activities from raw
material procurement to after sales service is called the value chain.
FIRM INFRASTRUCTURE
SUPPORT ACTIVITIES
TECHNOLOGY DEVELOPMENT
PROCUREMENT
PRIMARY ACTIVITIES
Adapted with the permission of the Free Press, an imprint of Simon & Schuster Inc.. from
COMPETITIVE ADVANTAGE: Creating and Sustaining Superior Performance by Michael Porter. Copyright
© 1985 by Michael E. Porter.
• Porters Value Chain model identifies nine strategic activities classified
in two parts:
1. Primary Activities: Consists of Inbound logistics, Operations,
Outbound logistics, Marketing and Sales and Service. These
activities are involved in creating, distributing, selling and providing
after sales assistance.
2. Support Activities: Support activities assist primary activities by
providing infrastructure that allows them to take place on an ongoing
basis. Support activities include procurement, hiring, R&Dand
infrastructure.
The value chain includes a profit margin, creating value that exceeds
costs so as to generate a return for the effort.
• Primary Activities
• Inbound logistics : Refers to goods being obtained from the organisation's suppliers and to be used for producing the end
product.
• Operations : Raw materials and goods are manufactured into the final product. Value is added to the product at this stage
as it moves through the production line.
• Outbound logistics : Once the products have been manufactured they are ready to be distributed to distribution centres,
wholesalers, retailers or customers. Distribution of finished goods is known as outbound logistics.
• Marketing and Sales: Marketing must make sure that the product is targeted towards the correct customer group. The
marketing mix is used to establish an effective strategy, any competitive advantage is clearly communicated to the target
group through the promotional mix.
• Services: After the product/service has been sold what support services does the organisation offer customers?. This may
come in the form of after sales training, guarantees and warranties.
• With the above activities, any or a combination of them are essential if the firm are to develop the "competitive
advantage" which Porter talks about in his book.
• Support Activities
• Support activities assist the primary activities in helping the organisation achieve its competitive advantage. They include:
• Procurement: This department must source raw materials for the business and obtain the best price for doing so. The
challenge for procurement is to obtain the best possible quality available (on the market) for their budget.
• Technology development: The use of technology to obtain a competitive advantage is very important in today’s
technological driven environment. Technology can be used in many ways including production to reduce cost thus add
value, research and development to develop new products and the internet so customers have 24/7 access to the firm.
• Human resource management: The organisation will have to recruit, train and develop the correct people for the
organisation to be successful. Staff will have to be motivated and paid the ‘market rate’ if they are to stay with the
organisation and add value. Within the service sector such as the airline industry, employees are the competitive
advantage as customers are purchasing a service, which is provided by employees; there isn't a product for the customer
to take away with them.
• Firm infrastructure: Every organisations needs to ensure that their finances, legal structure and management structure
work efficiently and helps drive the organisation forward. Inefficient infrastructures waste resources, could affect the
firm's reputation and even leave it open to fines and sanctions.
• To identify and understand your company's value chain, follow these steps.
• Step 1 – Identify subactivities for each primary activity
• For each primary activity, determine which specific subactivities create value. There are three different types of
subactivities:
• Direct activities create value by themselves. For example, in a book publisher's marketing and sales activity, direct
subactivities include making sales calls to bookstores, advertising, and selling online.
• Indirect activities allow direct activities to run smoothly. For the book publisher's sales and marketing activity,
indirect subactivities include managing the sales force and keeping customer records.
• Quality assurance activities ensure that direct and indirect activities meet the necessary standards. For the book
publisher's sales and marketing activity, this might include proofreading and editing advertisements.
• Step 2 – Identify subactivities for each support activity.
• For each of the Human Resource Management, Technology Development and Procurement support activities,
determine the subactivities that create value within each primary activity. For example, consider how human
resource management adds value to inbound logistics, operations, outbound logistics, and so on. As in Step 1,
look for direct, indirect, and quality assurance subactivities.
• Then identify the various value-creating subactivities in your company's infrastructure. These will generally be
cross-functional in nature, rather than specific to each primary activity. Again, look for direct, indirect, and quality
assurance activities.
• Step 3 – Identify links
• Find the connections between all of the value activities you've identified. This will take time, but the links are key
to increasing competitive advantage from the value chain framework. For example, there's a link between
developing the sales force (an HR investment) and sales volumes. There's another link between order turnaround
times, and service phone calls from frustrated customers waiting for deliveries.
• Step 4 – Look for opportunities to increase value
• Review each of the subactivities and links that you've identified, and think about how you can change or enhance
it to maximize the value you offer to customers (customers of support activities can internal as well as external).
Value Delivery System
• Every firm has its unique value creating and value delivering network.
A firm tries to influence the value chain of its suppliers, distributors
etc. because if the value chain of suppliers and distributors is
optimized, its own cost structure will also be optimized.
The Marketing Environment
Marke Internal Environment
ting
Enviro
nment
External Environment
There are two classification of Marketing
environment:
I. Internal Environment: This consists of
i) Human Resources
ii) Production facility
iii) R & D
iv) Financial Capability
v) Company Image
II. External Environment: This has following
components
i) Micro Environment: This consists of
a) Suppliers
b) Marketing Intermediaries
c) Customers
ii) Macro Environment:
Important Principles:
• SWOT analysis
• PEST analysis
• Strengths (internal)
• Weaknesses (internal)
• Opportunities (external)
• Threats (external)
PEST analysis
• Political factors:
– Monopolies legislation
– Environmental protection laws
– Taxation policy
– Employment laws
– Government policy
– Legislation
• Economic factors:
– Inflation
– Employment
– Disposable income
– Business cycles
– Energy availability and cost
Contd.......
• Socio-cultural factors:
– Demographics
– Distribution of income
– Social mobility
– Lifestyle changes
– Consumerism
– Levels of education
• Technological factors:
– New discoveries and innovations
– Speed of technology transfer
– Rates of obsolescence
– Information technology
Five forces analysis
Potential
entrants
Threat of
entrants
Threat of
substitutes
Substitutes
Source: Adapted from M. E. Porter,
Competitive Strategy, Free Press,
1980, p. 4.
Five Forces Analysis: Key
Questions and Implications
• What are the key forces at work in the competitive environment?
• Are there underlying forces driving competitive forces?
• Will competitive forces change?
• What are the strengths and weaknesses of competitors in relation to
the competitive forces?
• Can competitive strategy influence competitive forces (eg by building
barriers to entry or reducing competitive rivalry)?
• MARKET CHARACTERISTICS
– CONSUMER MARKET
– ORGANISATIONAL MARKET
Consumer Market Characteristics
• Demographic Characteristics: include differences in gender, age,
ethnic background, income, occupation, education, household size,
religion, generation, nationality and even social class. Most of these
demographic categories are further defined by a certain range. For
example, companies may identify the age of their consumers in the 18
to 24, 25 to 34, 35 to 54, 55 to 65, and 65+ age groups. Companies
often identify these demographic characteristics through market
research surveys used to discover which demographic groups
comprise the majority of their customer base. Companies can then
target their advertising towards these demographic groups. For
example, a new cell phone may be targeted toward 18 to 24-year-olds
with incomes between Rs 10,000 and Rs 15,000.
Psychographic Characteristics: Consumer market
characteristics can also be psychographic in nature. Psychographic
characteristics of consumers include interests, activities, opinions,
values and attitudes. Obviously, many magazines are geared toward a
consumer's interest.
For example, prenatal magazines target expectant mothers who are
interested in learning more about caring for a baby. Additionally,
consumer activities can include participation in martial arts or basket
weaving. Opinions and attitudes can be both specific or general. A
company may better understand consumer opinions and attitudes after
conducting a focus group, and can use that information to tailor
advertising or marketing campaigns. Consumer values can pertain to
how a group of individuals feels about certain social issues, which can
be of interest to non-profit or charitable organizations.
Behavioralistic Characteristics: Behavioralistic
characteristics can also be garnered through marketing research.
Behavioralistic characteristics of consumer markets include product
usage rates, brand loyalty, user status or how long they have been a
customer, and even benefits that consumers seek. Companies like to
know how often their consumers visit their restaurants, stores or use
their products. Company marketing departments usually try to
distinguish between heavy, medium and light users, whom they can
then target with advertising. Marketers like to know which customers
are brand loyalists, as those consumers usually only buy the
company's brand.
Geographic Characteristics: Consumer markets also have
different geographic characteristics. These geographic characteristics
are often based on market size, region, population density and even
climate, according to the article "Market Segmentation" at
netmba.com, a online business reference site. A small retailer may
find opportunities in a small market in which larger competitors have
no interest. Companies that sell beachwear will likely sell more
products in warmer climates. Consumers in different regions of the
country also have different tastes in food and style.
• Organizational Markets: Organizations that buy products
and services for
– either their own use or
– to resell to individuals, or
– other organizations; or
• Market Characteristics
• Product Characteristics
Bases for Market segmentation can broadly be divided into three major groups:
i) Product Use Situations: Same product may be used differently by different consumers.
Example: Bicycle, Mobile Phone, Rasna
ii) Benefit segmentation: Here, the marketer identifies benefits that a customer looks for when buying the product.
Example: Watches whether bought for office use, sports use, gift use, status use, accessory use
iii) Consumption: Frequency of consumption is another factor used
for segmentation as Heavy, moderate or light user
Example: Cigarette, Mobile calls, Air travel
There are certain other factors that act as basis for segmentation:
i) Income
ii) Occupation
iii) Gender
iv) Age and life cycle
v) Life stage
vi) Education
vii) Social Class
Stages of Market Segmentation:
Segment Marketing
Different products to one or more segments
(some segmentation)
Niche Marketing
Different products to subgroups within segments
(more segmentation)
Micromarketing
Products to suit the tastes of individuals and locations
(complete segmentation)
Targeting involves the process of evaluating each segment’s attractiveness and selecting one or
more segments to enter
• Target Marketing refers to a concept in marketing which helps the marketers to divide
the market into small units comprising of like minded people. Such segmentation helps
the marketers to design specific strategies and techniques to promote a product
amongst its target market. A target market refers to a group of individuals who are
inclined towards similar products and respond to similar marketing techniques and
promotional schemes.
• Kellogg’s K Special mainly targets individuals who want to cut down on their calorie
intake. The target market in such a case would be individuals who are obese. The
strategies designed to promote K Special would not be the same in case of any other
brand say Complan or Boost which majorly cater to teenagers and kids to help them in
their overall development. The target market for Kellogg’s K Special would absolutely be
different from Boost or Complan.
Target Market
• A market is a set of all actual and potential buyers
Segment 1
Company
Marketing Segment 2
Mix
Segment 3
Company
Resources
Product
Variability
Product’s Life-Cycle
Stage
Market
Variability
Competitors’
Marketing Strategies
Evaluating and Selecting the Market Segments
1. Single Segment Concentration: In this case, the marketer prefers to go for single
segment. In our hypothetical example, the company X uses this strategy
when it produces a typical product for a single type of market like
plasma TV. In real life, companies like Allahabad Law Agency (only law
books) and BPB publications (only Computer books) are good examples.
The company may adopt this strategy if it has strong market position,
greater knowledge about segment-specific-needs, specified reputation
and probable leadership position.
2. Selective Segment Specialization:
• This is known as multistage coverage because different segments are sought to be captured by the
company. The company selects a number of segments each of which is attractive, potential and
appropriate. There may be little or no synergy among the segments, but this strategy has the advantage
of diversifying the firm’s risk.
• In our example, if the company X produces plasma TV as well as Walkman, the two different types of
products obviously for two different types of markets, then it can be cited as an example of Selective
Segment Specialisation strategy
3. Market Specialization:
the company takes up a particular market segment for supplying all relevant products to the target group. In
our example, the company X can implement Market Specialisation strategy by producing all sorts of home
appliances like TV, washing machine, refrigerator and micro oven for middle class people.
4. Product Specialization:
Product specialisation occurs when a company sells certain products to several different types of potential
customers. In our example, if the company X produces only a particular type of gizmo like toaster that is
consumed by all type of people, they we can say that the company uses Product Specialisation strategy.
Product specialisation promises strong recognition of customer within the product areas. Super Precision
Components supply small nuts and screws for use in military, industry and daily use.
5. Full Coverage:
The firm attempts to serve all customer groups with all the products they might need. In undifferentiated
marketing , the firm ignores segment differences and goes after the whole market with one offer. In
differentiated marketing , the firm operates in several market segments and designs different products for
each segment. In carbonated soft drink market, Coca-Cola follows Full Market Coverage approach to their
product-market matrix. They have Thums-Up, Coca-Cola, Limca, Sprite, Fanta that are different tastes and
are consumed by different types of people. The company even made its entry into other drinks segments
like mineral water (Kinley) and tea (Georgia).
Market Positioning
Positioning
• Positioning is arranging for a product to occupy a clear, distinctive and desirable place
relative to competing products in the mind of the consumer
• The process of creating an image of a product in the minds of the consumers is called as
positioning. Positioning helps to create first impression of brands in the minds of target
audience. In simpler words positioning helps in creating a perception of a product or service
amongst the consumers.
Example
• The brand “Bisleri” stands for purity.
• The brand “Ceat Tyre” stands for better grip.
Market Positioning
6. Develop Marketing
Mix for Each Target Segment Market
5. Develop Positioning Positioning
for Each Target Segment
4. Select Target
Segment(s) Market
3. Develop Selection Criteria
Targeting
2. Develop Profiles
of Resulting Segments
Market Segmentation
1. Identify Bases
for Segmenting the Market
Positioning for Competitive Advantage
Marketers must:
- Plan positions to give their products the greatest advantage in
selected target markets,
- Design marketing mixes to create these planned positions.
Positioning Strategies for Competitive Advantage:
Product Product
Class Attributes
D
Against a E
B
Usage
Competitor F
Occasions
User Class
Choosing and Implementing
a Positioning Strategy
Product Service
Image People
Step 2: Selecting the Right Competitive Advantages
Important
Profitable Distinctive
Criteria
for
Determining
Which
Differences
Affordable to Superior
Promote
Preemptive Communicable
Step 4 – Supporting the positioning strategy
The last category of products mentioned as the industrial goods classification involves
the materials ( raw materials such as wood, cooper, aluminium) and parts (tiers,
computer chips) , capital items such as installations and equipment (cranes, bulldozers),
accessory equipment ( hand tools, computers, calculators), process materials (food
preservatives), operating supplies ( papers, pencils, oil).
Product Mix
• Product Width: refers to how many different product lines the
company carries
• Product Length: The depth of a product mix refers to the total no. of
items in the mix. This is also called as the average length of a line.
• Product Depth: The depth refers to how many variants are offered of
each product in the line.
Few:
Growing adopters: Growing selectivity Saturation of Drop-off
trial of
trial of of purchase users in usage
early
product/service Repeat purchase
adopters
reliance
Entry of May be many Fight to maintain Exit of some
competitors share competitors
Stages of PLC
Branding is “a seller’s promise to deliver a specific set of features, benefits and services consistent to the buyers.”
• Elements of Branding
• Brand includes various elements like - brand names, trade names, brand marks, trade marks, and trade characters. The combination of these elements
form a firm's corporate symbol or name.
• Brand Name - It is also called Product Brand. It can be a word, a group of words, letters, or numbers to represent a product or service. For example -
Pepsi, iPhone 5, and etc.
• Trade Name - It is also called Corporate Brand. It identifies and promotes a company or a division of a particular corporation. For example - Dell, Nike,
Google, and etc.
• Brand Mark - It is a unique symbol, colouring, lettering, or other design element. It is visually recognisable, not necessary to be pronounced. For
example - Apple's apple, or Coca-cola's cursive typeface.
• Trade Mark - It is a word, name, symbol, or combination of these elements. Trade mark is legally protected by government. For example - NBC colourful
peacock, or McDonald's golden arches. No other organisation can use these symbols.
• Trade Characters - Animal, people, animated characters, objects, and the like that are used to advertise a product or service, that come to be associated
with that product or service. For example - Keebler Elves for Keebler cookies
• Branding Strategies
There are various branding strategies on which marketing organisations rely to meet sales and marketing objectives. Some of these strategies are as
following :-
• Brand Extension - According to this strategy, an existing brand name is used to promote a new or an improved product in an organisation's product line.
Marketing organisations uses this strategy to minimise the cost of launching a new product and the risk of failure of new product. There is risk of brand
diluting if a product line is over extended.
• Brand Licensing - According to this strategy, some organisations allow other organisations to use their brand name, trade name, or trade character.
Such authorisation is a legal licensing agreement for which the licensing organisation receives royalty in return for the authorisation. Organisations
follow this strategy to increase revenue sources, enhance organisation image, and sell more of their core products.
• Mixed Branding - This strategy is used by some manufacturers and retailers to sell products. A manufacturer of a national brand can make a product for
sale under another company's brand. Like this a business can maintain brand loyalty through its national brand and increase its product mix through
private brands. It can increase its profits by selling private brands without affecting the reputation and sales of its national brand.
• Co-Branding - According to this strategy one or more brands are combined in the manufacture of a product or in the delivery of a service to capitalise
on other companies' products and services to reach new customers and increase sales for both companies' brands.
Branding performs following important functions:
i) Brand stands for promise
ii) They simplify product handling and tracing.
iii) Offers the firm legal protection for unique features or aspects of the
product.
iv) Assurance of certain level of quality and service.
Packaging
i) Self Service:
Label might carry only the brand name or a great deal of information.
Label performs several functions as:
• Cost: Cost is the ruling factor in attracting the customer to buy the
product.
2. Determining Demand:
Price Sensitivity: Price sensitivity is the degree to which the price of a product affects
consumers' purchasing behaviors.
Estimating Demand Curves:
Price Elasticity of demand:
3. Estimating Costs:
4. Analysing Competitors’ Costs, Prices and Offers:
5. Selecting a Pricing Method: There are following pricing methods:
– Mark up Pricing:
– Target Return Pricing
– Perceived Value Pricing
– Value Pricing
– Going Rate Pricing
– Auction Type Pricing
• English Auction- One seller many buyer. Open bidding is done after
placing the offer and continues till the maximum price is achieved.
• Dutch Auction: Auctioneer announces the prices and gradually lowers
the price till someone agrees to purchase.
• Sealed Bid auction: Would be suppliers can make only one bid and
are not permitted to change.
6. Selecting the final Price:
i) Impact of Other marketing activities
ii) Company’s pricing policy
iii) Gain and Risk Sharing Pricing
iv) Impact of Price on other parties
Price Adaptation
• Geographical Pricing
• Price Discounts and Allowances
• Promotional Pricing
– Loss Leader Pricing
– Special event pricing
– Cash Rebates
– Low interest financing
– Longer Payment terms
– Warranties and service contracts
– Psychological discounts
• Differentiated Pricing: To accommodate different categories of
customers. There are variety of forms of Differentiated Pricing as
• Price Discrimination
• Differential Pricing
• Increase in Price or
• Decrease in Price
• Maintain Price
• Reduce Price
Promotion
Contact
Negotiation
Users
Producers
Financing
Packaging
Money
Goods
Marketing Distribution Channels
• Push Strategy: Is used in case of Low brand equity, brand choice is made in store and product is an impulse purchase item.
• Pull Strategy: For products with high brand equity and high involvement purchase
• Push strategy explained
• The term 'push strategy' describes the work a manufacturer of a product needs to perform to get the product to the customer. This
may involve setting up distribution channels and persuading middle men and retailers to stock your product. The push technique can
work particularly well for lower value items such as fast moving consumer goods (FMCGs), when customers are standing at the shelf
ready to drop an item into their baskets and are ready to make their decision on the spot. This term now broadly encompasses most
direct promotional techniques such as encouraging retailers to stock your product, designing point of sale materials or even selling
face to face. New businesses often adopt a push strategy for their products in order to generate exposure and a retail channel. Once
your brand has been established, this can be integrated with a pull strategy.
• Pull strategy explained
• 'Pull strategy' refers to the customer actively seeking out your product and retailers placing orders for stock due to direct consumer
demand. A pull strategy requires a highly visible brand which can be developed through mass media advertising or similar tactics. If
customers want a product, the retailers will stock it - supply and demand in its purest form, and this is the basis of a pull strategy.
Create the demand, and the supply channels will almost look after themselves.
Channel Flow
• Zero Level
• One Level
• Two Level
• Three Level
1. Zero-level Channel: (Producer......Consumers)
• This channel is also called direct channel. In this, the producers sell their goods or services directly to the consumers. There is
absence of intermediary or middlemen between the producers and consumers. This channel of distribution is called zero-leve
This is the most common, easy and short channel for sales or distribution of goods. Mostly, if the goods are costly or the
consumers' number is low, the producers themselves sell their products directly to the consumers. The small producers of
perishable products also sell their products directly to the local consumers. Big firms, which want to minimize distribution cos
and eliminate middlemen, use direct level distribution channel to sell their products.
2. One Level Channel: (Producer........Retailer......Consumers)
• In one level channel of distribution, only retailers remain as middlemen between producers and consumers. In this channel
producers sell their products to retailers and the retailers sell them to final consumers. The producers do not seek help of
wholesalers or agents to sell their products. Nowadays, this channel has become very popular. The producers themselves
supply their products to the final consumers through retailers. Big retailing shops such as departmental stores, super markets,
discount houses etc. have begun to appear in markets. They have made easy to sell any goods or services without the presenc
of wholesalers in the distribution channel. This channel is suitable to sell perishable goods and other goods that need prompt
sale.
3. Two-level Channel: (Producer.........Wholesaler.........Retailer............Consumers)
• In this channel of distribution, the producers sell their products to final consumers through wholesalers and retailers. In other
words, the producers sell their products to wholesalers, then wholesalers sell them to retailers and the retailers sell to final
consumers. This is also called 'Traditional channel of distribution'. The producers sell their products to wholesalers in large
quantity. Then wholesalers sell them to retailers in small quantity. then the retailers sell them to final consumers.
• This channel is long in distribution system. This channel is used to sell or distribute foodstuffs, medicines, including many othe
consumer goods. This channel is suitable for the products, which need to be supplied to scattered markets and consumers.
4. Third Level Channel: (Producer....Agent....Wholesalers....Retailers....Consumers)
• This is the longest channel of distribution of consumers goods. In this channel three middlemen are used to supply goods to
the final consumers. In other words, the producers sell their products to final consumers through agents, then agents sell them
to wholesalers and wholesalers sell them to retailers and finally the retailers sell the goods to consumers. Generally, this
channel is needed for selling agro-products, clothes, industrial materials etc. The producers can take help of agents to sell thei
goods.
• This channel is useful to those producers who cannot contact many wholesalers, cannot pay attention to international market
and want to avoid several distribution problems. Mostly, this channel is not used for distribution of most of the goods since it
costly, takes long time and invites several problems.
Channel Functions
• Easy selling
• Direct or indirect channels: Direct channel is when the producer is in direct contact with the customer in the
sale of product and indirect channel is that which involves a intermediary between the producer and consumer
• Single or multiple channels: Single channel is the channel involving one channel of distribution. In this the
producer is directly in contact with the consumer.Multi-channel distribution involves a business using
more than one type of distribution channel. Multi-channel distribution is increasingly common. For
example, a high street retailer might now also distribute directly to customer using e-commerce
and perhaps also using catalogues sent via direct mail. A manufacturer might use indirect channels
such as retailers and distributors as well as selling directly to customers using e-commerce. Apple is
a great example of multi-channel distribution in action:
• Length of channel: The channel can be zero, one two or three level . As the level of channel increases,
complexity increases.
• Types of intermediaries: it can be agent, wholesaler, distributor and retailer.
• Number of intermediaries at each level: it depends on the level which the company is adopting to provide
product to its customer. There can be 0,1,2 or 3 intermediaries according to the level.
• Which intermediaries?
CHANNEL DESIGN DECISION
Designing a channel system calls for analysing customer needs, establishing channel objectives, &
identifying & evaluating the major channel alternatives.
ANALYZING CUSTOMERS’ DESIRED SERVICE OUTPUT LEVELS
Channels produce 5 service output levels:
• Lot size: no. of units that the marketing channel permits a typical customer to purchase on a
purchase occasion
• Waiting time: Average time that customers of that channel wait for receipt of the goods.
• Spatial convenience: Degree to which the marketing channel makes it easy for customers to
purchase the product.
• Product variety: assortment breadth.
• Service backup: add-on services provided by the channel (installation, repairs, credit).
ESTABLISHING THE CHANNEL OBJECTIVES & CONSTRAINTS
• Channels objectives vary with product characteristics.
• Channel design must take into account the strengths & weaknesses of different types of
intermediaries.
• Channel design is also influenced by the competitors’ channels.
• Channel design must also adapt to the larger environment.
• Legal regulations & restrictions also affect channel design.
IDENTIFYING THE MAJOR CHANNEL ALTERNATIVES
A channel alternative is described by three elements:
• Types of intermediaries.
Depends on the service outputs desired by the target market & the channel’s transactions costs. The company must search for
the channel alternative that promises the most long-run profitability.
• Number of intermediaries.
Exclusive distribution
Selective distribution
Intensive distribution
• Terms & responsibilities of channel members
The producer must determine the rights & responsibilities of the participating channel members, making sure that each channel
member is treated respectfully & given the opportunity to be profitable.
EVALUATING THE MAJOR CHANNEL ALTERNATIVES
Each alternative needs to be evaluated against three criteria.
• Economic Criteria
– The first step is to determine whether a company sales force or a sales agency will produce more sales.
– The next step is to estimate the costs of selling different volumes through each channel.
– The final step is comparing sales & costs.
Each channel will produce a different level of sales & costs.
• Control Criteria
The agents may concentrate on other customers’ products or they may lack the skills to handle our products.
• Adaptive Criteria
The channel members must make some degree of commitment to each other for a specified period of time.
CHANNEL-MANAGEMENT DECISIONS
• After a company has chosen a channel alternative, individual intermediaries must be selected, motivated & evaluated.
SELECTING CHANNEL MEMBERS
• For some producers this is easy; for others it’s a pain in the ass.
Anyway, in order to select them, producers should determine what characteristics distinguish the better intermediaries
(years in business, other lines carried, solvency, reputation, etc.)
MOTIVATING CHANNEL MEMBERS
• Constant training, supervision & encouragement. Producers can draw on the following types of power
to elicit cooperation:
• Coercive power. Manufacturer threatens to withdraw a resource or terminate a relationship if
intermediaries fail to cooperate. Produces resentment.
• Reward power. Manufacturer offers intermediaries extra benefits for performing specific acts.
• Legitimate power. Manufacturer requests a behavior that is warranted by the contract.
• Expert power. Manufacturer has special knowledge that the intermediaries value.
• Referent power. Intermediaries are proud to be identified with the manufacturer.
EVALUATING CHANNEL MEMBERS
• Underperformers need to be counseled, retrained or re-motivated. If they do no shape up, it might be
best to terminate their services.
MODIFYING CHANNEL ARRANGEMENTS
• Periodic modification to meet new conditions in the marketplace. Modification is necessary when:
• Distribution channel is not working as planned.
• Consumer buying patterns change.
• Market expands.
• New competition arises.
• Innovative channels emerge.
• Product moves into later stages in the product life cycle.
• 3 levels of channel adaptation can be distinguished:
• Adding or dropping individual channel members.
• Adding or dropping particular market channels.
Selection consideration
• Co-optation
• Mediation
• Arbitration
• Diplomacy
• CHANNEL COOPERATION, CONFLICT & COMPETITION
• Types of conflict & competition
• Vertical channel conflict exists when there is conflict between different levels within the same channel.
• Horizontal channel conflict exists when there is conflict between members at the same level within the
channel.
• Multichannel conflict exists when the manufacturer has established two or more channels that compete with
each other in selling to the same market.
• CAUSES OF CHANNEL CONFLICT
• Goal incompatibility
• Unclear roles & rights
• Differences in perception
• Intermediaries’ great dependence on the manufacturer
• MANAGING CHANNEL CONFLICT
• Some channel conflict can be constructive. It can lead to more dynamic adaptation to a changing environment.
But too much is dysfunctional.
• Perhaps the most important mechanism is the adoption of superordinate goals. Working closely together
might help them eliminate or neutralize the threat.
• Exchange of persons between two or more channel levels is useful.
• Cooptation is an effort by one organization to win support of the leaders of another organization by including
them in advisory councils, boards of directors, etc.
• Encouraging joint membership in & between trade associations.
• When conflict is chronic, the parties may have to resort to diplomacy, mediation or arbitration.
• LEGAL & ETHICAL ISSUES IN CHANNEL RELATIONS
• Exclusive dealing
• Exclusive territories
• Tying agreements
• Dealers’ rights
PROMOTION MIX
• Four Components
– Advertising
– Publicity
– Personal Selling
– Sales Promotion
Advertising
Abraham Shuchman
Characteristics of Marketing Audit
• Comprehensive
• Systematic
• Independent
• Periodic
Components of Marketing Audit
• Marketing Environment Audit