Unit 1: INTRODUCTION TO MARKETING

Marketing is the science of meeting the needs of a customer by providing valuable

products to customers by utilizing the expertise of the organization, at same time,
to achieve organizational goals. According to The American Marketing
Association [1]:
Marketing is the activity, set of institutions, and processes for creating,
communicating, delivering, and exchanging offerings that have value for
customers, clients, partners, and society at large.
With this definition, it is important to realize that the customer can be an
individual user, a company, or several people who contribute to the purchasing
decision. The product can be a hard good, a service, or even an idea – anything that
would provide some value to the person who provides an exchange. An exchange
is most often thought of as money, but could also be a donation of time or effort, or
even a specific action. A producer is often a company, but could be an individual
or non-profit organization.
Classical marketing is often described in terms of the four “P’s, which are:

 Product – what goods or services are offered to customers

 Promotion – how the producer communicates the value of its products
 Price – the value of the exchange between the customer and producer
 Placement – how the product is delivered to the customer.
A complete analysis of these categories is often called the Marketing Mix. More
detail on these categories can be found in the later entry on the Marketing Plan.
Marketing has both inbound and outbound activities. Inbound activities largely
center on discovering the needs and wants of the potential customers. The
collective group of all potential customers is called a market. Categorizing these
needs into groups is called segmentation. Organizing markets into segments allows
a producer to more logically decide how to best provide value to that group of
potential customers. The analysis of market segment needs; analysis of existing
sales and profitability; the descriptions, design and introduction of new products;
and the analysis of competitor offerings are also inbound activities that are
important but not often seen by the public.
Definition
The management process through which goods and services move from concept to
the customer. It includes the coordination of four elements called the 4 P's of
marketing:
(1) identification, selection and development of a product,
(2) determination of its price,
(3) selection of a distribution channel to reach the customer's place, and
(4) development and implementation of a promotional

– Goals – Concepts of Marketing

The Five Concepts Described

The Production Concept. This concept is the oldest of the concepts in

business. It holds that consumers will prefer products that are widely available and
inexpensive. Managers focusing on this concept concentrate on achieving high
production efficiency, low costs, and mass distribution. They assume that
consumers are primarily interested in product availability and low prices. This
orientation makes sense in developing countries, where consumers are more
interested in obtaining the product than in its features.

The Product Concept. This orientation holds that consumers will favor
those products that offer the most quality, performance, or innovative
features. Managers focusing on this concept concentrate on making superior
products and improving them over time. They assume that buyers admire well-
made products and can appraise quality and performance. However, these
managers are sometimes caught up in a love affair with their product and do not
realize what the market needs. Management might commit the “better-mousetrap”
fallacy, believing that a better mousetrap will lead people to beat a path to its door.

The Selling Concept. This is another common business orientation. It

holds that consumers and businesses, if left alone, will ordinarily not buy enough
of the selling company’s products. The organization must, therefore, undertake an
aggressive selling and promotion effort. This concept assumes that consumers
typically sho9w buyi8ng inertia or resistance and must be coaxed into buying. It
also assumes that the company has a whole battery of effective selling and
promotional tools to stimulate more buying. Most firms practice the selling
concept when they have overcapacity. Their aim is to sellwhat they make rather
than make what the market wants.
The Marketing Concept. This is a business philosophy that challenges
the above three business orientations. Its central tenets crystallized in the 1950s. It
holds that the key to achieving its organizational goals (goals of the selling
company) consists of the company being more effective than competitors in
creating, delivering, and communicating customer value to its selected target
customers. The marketing concept rests on four pillars: target market, customer
needs, integrated marketing and profitability.

Distinctions between the Sales Concept and the Marketing Concept:

1. The Sales Concept focuses on the needs of the seller. The Marketing
Concept focuses on the needs of the buyer.

2. The Sales Concept is preoccupied with the seller’s need to convert his/her
product into cash. The Marketing Concept is preoccupied with the idea of
satisfying the needs of the customer by means of the product as a solution to the
customer’s problem (needs).

The Societal Marketing Concept. This concept holds that the

organization’s task is to determine the needs, wants, and interests of target markets
and to deliver the desired satisfactions more effectively and efficiently than
competitors (this is the original Marketing Concept). Additionally, it holds that
this all must be done in a way that preserves or enhances the consumer’s and the
society’s well-being.

Goals of marketing

BUILDING BRAND AWARENESS

2. GENERATING HIGH LEAD VOLUME

3. ESTABLISHING THOUGHT LEADERSHIP

4. CONTRIBUTING TO REVENUE GENERATION

5. INCREASING BRAND ENGAGEMENT

Approaches to Marketing

There are four different approaches to the study of marketing. These approaches
explain clearly the mechanism and concept of marketing. These approaches are
Commodity Approach, Institutional Approach, Functional Approach and Decision
Making Approach.

(1) Commodity Approach or Product Approach:

This approach refers to the study of a product in detail. The marketing situation of
each product chosen for study is examined from such viewpoints as sources and
conditions of supply, producer marketing organisations, policies, different
middlemen (wholesaler’s 6f retailers etc.) who take part in distributing the product.

Problems with regard to a particular product are studied in detail under this
approach. Products of any nature e.g. agricultural products wheat, rice, maize, etc.,
industrial products like machine tools, lathe-machines, generators, oil engines, etc.,
and any other products can be covered under this study. In practice, this approach
tends to be repetitive and time consuming.

(2) Institutional Approach:

This approach relates to various marketing institutions viz., wholesalers, retailers
etc., engaged in marketing. In applying this approach, a thorough study with regard
to a particular middleman is undertaken. For example, in retailing, nature and
significance of retailing in terms of functions and services performed and rendered
by retail institutions like departmental stores, multiple shops, mail order houses
etc.
Besides wholesalers and retailers, other marketing institutions can be stock
exchanges, produce exchanges, banks, regulated markets, etc. In short, it can be
said that this approach is applicable on various types of marketing intermediaries.

(3) Functional Approach:

As the very name suggests this approach comprises of the study of various
activities or functions performed in the process of marketing of goods and services.
It analyses each function in relation to the importance of its performance.

Various marketing functions are buying, selling, financing, transportation, banking,

risk bearing, market information etc. By analysing and studying every function in
detail and problems confronted in the performance of each function, it is possible
to understand marketing properly.

(4) The Decision Making Approach:

This approach is of vital importance from the viewpoint of marketing management.
Various decisions are taken at every level of management. In successful marketing,
decision making occupies an important place. The marketing manager should be
very expert and competent in his job so that he takes proper decisions for
marketing the goods and services.

The decision is based on two variables which can be classified as ‘uncontrollable’

and ‘controllable’. Uncontrollable’ variables relate to economic, sociological,
psychological and political forces which are the basic causes of market changes.
On the other hand, ‘controllable’ variables are within the control of the
organisation.

12 Important Functions of Marketing (ver imp for Exam)

1. Gathering and Analysing Market Information:

Gathering and analyzing market information is an important function of marketing.
Under it, an effort is made to understand the consumer thoroughly in the following
ways:

(a) What do the consumers want?

(b) In what quantity?

(c) At what price?

(d) When do they want (it)?

(e) What kind of advertisement do they like?

(f) Where do they want (it)?

What kind of distribution system do they like? All the relevant information about
the consumer is collected and analysed. On the basis of this analysis an effort is
made to find out as to which product has the best opportunities in the market.

2. Marketing Planning:
In order to achieve the objectives of an organisation with regard to its marketing,
the marketeer chalks out his marketing plan. For example, a company has a 25%
market share of a particular product.

The company wants to raise it to 40%. In order to achieve this objective the
marketer has to prepare a plan in respect of the level of production and promotion
efforts. It will also be decided as to who will do what, when and how. To do this is
known as marketing planning.

3. Product Designing and Development:

Product designing plays an important role in product selling. The company whose
product is better and attractively designed sells more than the product of a
company whose design happens to be weak and unattractive.

In this way, it can be said that the possession of a special design affords a company
to a competitive advantage. It is important to remember that it is not sufficient to
prepare a design in respect of a product, but it is more important to develop it
continuously.

4. Standardisation and Grading:

Standardisation refers to determining of standard regarding size, quality, design,
weight, colour, raw material to be used, etc., in respect of a particular product. By
doing so, it is ascertained that the given product will have some peculiarities.

This way, sale is made possible on the basis of samples. Mostly, it is the practice
that the traders look at the samples and place purchase order for a large quantity of
the product concerned. The basis of it is that goods supplied conform to the same
standard as shown in the sample.

Products having the same characteristics (or standard) are placed in a given
category or grade. This placing is called grading. For example, a company
produces commodity – X, having three grades, namely A’. ‘B’ and ‘C’,
representing three levels of quality; best, medium and ordinary respectively.

Customers who want best quality will be shown ‘A’ grade product. This way, the
customer will have no doubt in his mind that a low grade product has been palmed
off to him. Grading, therefore, makes sale-purchase easy. Grading process is
mostly used in case of agricultural products like food grains, cotton, tobacco,
apples, mangoes, etc.
5. Packaging and Labelling:
Packaging aims at avoiding breakage, damage, destruction, etc., of the goods
during transit and storage. Packaging facilitates handling, lifting, conveying of the
goods. Many a time, customers demand goods in different quantities. It
necessitates special packaging. Packing material includes bottles, canister, plastic
bags, tin or wooden boxes, jute bags etc.

Label is a slip which is found on the product itself or on the package providing all
the information regarding the product and its producer. This can either be in the
form of a cover or a seal.

For example, the name of the medicine on its bottle along with the manufacturer’s
name, the formula used for making the medicine, date of manufacturing, expiry
date, batch no., price etc., are printed on the slip thereby giving all the information
regarding the medicine to the consumer. The slip carrying all these is details called
Label and the process of preparing it as Labelling.

6. Branding:
Every producer/seller wants that his product should have special identity in the
market. In order to realise his wish he has to give a name to his product which has
to be distinct from other competitors.

Giving of distinct name to one’s product is called branding. Thus, the objective of
branding is to show that the products of a given company are different from that of
the competitors, so that it has its own identity.

For instance, if a company wants to popularise its commodity – X under the name
of “777” (triple seven) then its brand will be called “777”. It is possible that
another company is selling a similar commodity under AAA (Triple ‘A’) brand
name.

Under these circumstances, both the companies will succeed in establishing a

distinct identity of their products in the market. When a brand is not registered
under the trade Mark Act, 1999, it becomes a Trade Mark.

7. Customer Support Service:

Customer is the king of market. Therefore, it is one of the chief functions of
marketer to offer every possible help to the customers. A marketer offers primarily
the following services to the customers:

(i) After-sales-services

(ii) Handling customers’ complaints

(iii) Technical services

(iv) Credit facilities

(v) Maintenance services

Helping the customer in this way offers him satisfaction and in today’s competitive
age customer’s satisfaction happens to be the top-most priority. This encourages a
customer’s attachment to a particular product and he starts buying that product
time and again.

8. Pricing of Products:
It is the most important function of a marketing manager to fix price of a product.
The price of a product is affected by its cost, rate of profit, price of competing
product, policy of the government, etc. The price of a product should be fixed in a
manner that it should not appear to be too high and at the same time it should earn
enough profit for the organisation.

9. Promotion:
Promotion means informing the consumers about the products of the company and
encouraging them to buy these products. There are four methods of promotion: (i)
Advertising, (ii) Personal selling, (iii) Sales promotion and (iv) Publicity. Every
decision taken by the marketer in this respect affects the sales. These decisions are
taken keeping in view the budget of the company.

10. Physical Distribution:

Under this function of marketing the decision about carrying things from the place
of production to the place of consumption is taken into account. To accomplish this
task, decision about four factors are taken. They are: (i) Transportation, (ii)
Inventory, (iii) Warehousing and (iv) Order Processing. Physical distribution, by
taking things, at the right place and at the right time creates time and place utility.

11. Transportation:
Production, sale and consumption-all the three activities need not be at one place.
Had it been so, transportation of goods for physical distribution would have
become irrelevant. But generally it is not possible. Production is carried out at one
place, sale at another place and consumption at yet another place.

Transport facility is needed for the produced goods to reach the hands of
consumers. So the enterprise must have an easy access to means of transportation.

Mostly we see on the road side’s private vehicles belonging to Pepsi, Coca Cola,
LML, Britannia, etc. These private carriers are the living examples of
transportation function of marketing. Place utility is thus created by transportation
activity.

12. Storage or Warehousing:

There is a time-lag between the purchase or production of goods and their sale. It is
very essential to store the goods at a safe place during this time-interval. Godowns
are used for this purpose. Keeping of goods in godowns till the same are sold is
called storage.

Recent Trends in Modern Marketing (Imp for Exam)

1. More Emphasis on Quality, Value, and Customer Satisfaction:
Today’s customers place a greater weight to direct motivations (convenience,
status, style, features, services and qualities) to buy product. Today’s marketers
give more emphasis on the notion, “offer more for less.”

2. More Emphasis on Relationship Building and Customer Retention:

Today’s marketers are focusing on lifelong customers. They are shifting from
transaction thinking to relationship building. Large companies create, maintain and
update large customer database containing demographic, life-style, past
experience, buying habits, degree of responsiveness to different stimuli, etc., and
design their offerings to create, please, or delight customers who remain loyal to
them. Similarly more emphasis is given to retain them throughout life. Marketers
strongly believe: “Customer retention is easier than customer creation.”

3. More Emphasis on Managing Business Processes and Integrated Business

Functions:
Today’s companies are shifting their thinking from managing a set of semi
independent departments, each with its own logic, to managing a set of
fundamental business processes, each of which impact customer service and
satisfaction. Companies are assigning cross-disciplinary personnel to manage each
process.

Marketing personnel are increasingly working on cross- disciplinary terms rather

than only in the marketing department. This is the positive development, which
broadens marketers’ perspectives on business and also leads to broaden perspective
of employees from other department.

4. More Emphasis on Global Thinking and Local Market Planning:

As stated earlier, today’s customers are global, or cosmopolitan. They exhibit
international characteristics. This is due to information technology, rapid means of
transportation, liberalization, and mobility of people across the world. Companies
are pursuing markets beyond their borders. They have to drop their traditions,
customs, and assumptions regarding customers.

They have to adapt to their offering as per the cultural prerequisites. Decisions are
taken by local representatives, who are much aware of the global economic,
political, legal, and social realities. Companies must think globally, but act locally.
Today’s marketers believe: “Act locally, but think globally.”

5. More Emphasis on Strategic Alliances and Networks:

A company cannot satisfy customers without help of others. It lacks adequate
resources and requirements to succeed. Company needs to involve in partnering
with other organisations, local as well as global partners who supply different
requirements for success.

Senior manager at top-level management spends an increasing amount of time for

designing strategic alliance and network that create competitive advantages for the
partnering firms. Merger, acquisition, and partnering are result of a strong thirst for
strategic alliance and networks.

6. More Emphasis on Direct and Online Marketing:

Information technology and communication revolution promise to change the
nature of buying and selling. Companies follow direct channel in term hiring
salesmen, setting own distribution network, designing network marketing, applying
online marketing, and contracting with giant shopping/retailing malls.

People anywhere in the world can access the Internet and companies’ home pages
to scan offers and order goods. Via online service, they can give and get advice on
products and services by chatting with other users, determine the best values, place
orders, and get next-day delivery.

As a result of advances in database technology, companies can do more direct

marketing and rely less on wholesale and retail intermediaries. Beyond this, much
company buying is now done automatically through electronic data interchange
link among companies. All these trends portend a greater buying and selling
efficiency.

7. More Emphasis on Services Marketing:

As per general survey, about 70% people are, either directly or indirectly, involved
in service marketing. Because services are intangible and perishable, variable and
inseparable, they pose additional challenges compared to tangible good marketing.
Marketers are increasingly developing strategies for service firms that sell
insurance, software, consulting services, banking, insurance, and other services.
8. More Emphasis on High-tech Industries:
Due to rapid economic growth, high-tech firms emerged, which differ from
traditional firms. High-tech firms face higher risk, slower product acceptance,
shorter product life cycles, and faster technological obsolescence. High-tech firms
must master the art of marketing their venture to the financial community and
convincing enough customers to adopt their new products.

9. More Emphasis on Ethical Marketing Behaviour:

The market place is highly susceptible to abuse by those who lack scruples and are
willing to prosper at the expense of others. Marketers must practice their craft with
high standards. Even, governments have imposed a number of restrictions to
refrain them from malpractices. Marketers are trying to sell their products by
obeying and observing moral standards or business ethics.

10. Other issues:

i. Craze for international standards and emphasis on quality, value and customer
satisfaction. Application of TQM (even, Six Sigma) in every aspect of marketing
management.

ii. Changed attitude toward competition. They compete not for maximum gains but
for maximum offers to customers.

iii. Relationship marketing at both levels at internal functions of organisation and

at outside with service providers, to satisfy customers.

iv. Concept of global and complex customers.

v. Marketing department is placed in the center of management. It enjoys unique

and dominant status in organisation.
Telemarketing

Telemarketing (sometimes known as inside sales,[1] or telesales in the UK and

Ireland) is a method of direct marketing in which a salesperson solicits
prospective customers to buy products or services, either over the phone or through
a subsequent face to face or Web conferencing appointment scheduled during the
call. Telemarketing can also include recorded sales pitches programmed to be
played over the phone via automatic dialing.

Advantages
Telemarketing involves lower overhead costs than employing an outside sales
force, saving small businesses money. Another advantage of outbound
telemarketing is that you can expand your business by selling to customers in other
sales territories, whether locally or nationally. Telemarketing also offers a way to
follow up with existing customers. Staying in contact with your customers gives
you an opportunity to find out more about the client’s needs and build a better
relationship. In the end, improved customer satisfaction can have a significant
impact on the profitability of your business.
Disadvantages
Despite the sales value that telemarketing offers, many consumers associate it with
a negative image. Customer reactions are not always friendly, as bad experiences
with telemarketers contribute to the negative stereotype. Some customers find the
unwanted calls annoying or are wary of scams. Another major disadvantage of
telemarketing is that the customer lists are expensive to purchase and may not be
up to date. Often, they do not result in a high number of actual sales. In many
cases, the lists include the names of people who do not want unsolicited sales calls.
Worthwhile telemarketing lists have the names of customers who have
demographic characteristics that closely match those of your target market or who
have previously purchased products similar to what your business offers.
E-Business

(e-Business), or Electronic Business, is the administration of

conducting business via the Internet. This would include the buying and selling of
goods and services, along with providing technical or customer support through the
Internet.
Internet marketing, or online marketing, refers to advertising
andmarketing efforts that use the Web and email to drive direct sales
viaelectronic commerce, in addition to sales leads from Web sites or emails.

Advantages of e-Marketing
Following are some of the advantages of e-Marketing:
 Extremely low risk
 Reduction in costs through automation and use of electronic media
 Faster response to both marketers and the end user
 Increased ability to measure and collect data
 Opens the possibility to a market of one through personalisation
 Increased interactivity
 Increased exposure of products and services
 Boundless universal accessibility
Disadvantages of e-Marketing
Following are some disadvantages of e-Marketing:
 Dependability on technology
 Security, privacy issues
 Maintenance costs due to a constantly evolving environment
 Higher transparency of pricing and increased price competition
 Worldwide competition through globalisation

M-business

The mobile support of business transactions regarding the search, negotiation,

production and the delivery of products or services. The main focuses are the
enabling of mobile business process and the automation of technical processes.

Advantages of Mobile Commerce:

This mCommerce is beneficial for both type of businesses large scale and small
scale. The mobile users increase day by day, so through mCommerce your
business gets large and growing market place for wild range of goods and services.
1. Cover wild distance : Mobile is the only technology which is now become
necessary for any person in social and business life than computers. So, it is easy to
reach users through mCommerce.
2. Consumer deals : As more users use mCommerce, there are lots of companies
use mCommerce site to reach them by giving different and better deals in
comparison of their competitor.
3. Savings : Companies try to reach to the consumer directly through mCommerce,
so users have no need to go far to the store physically and at the end it saves user’s
time and money.
4. Easy to use : There is no need of skilled consumer. Buyers can have look
thousands of items on their cell phones and there is no need of online checkout
process.

Disadvantages of Mobile Commerce :

Every invention has its own merits and demerits. It is applicable in this
mCommerce business also.

1. Smart phone limitation : Mobile has no big screen like desktop or laptops, so
sometimes users tired to navigate more and more to choose just one item from
thousands. It affects shopping rates.
2. Habituate : Every new technology has some problem at the starting phase. Here
mCommerce is new application, so sometimes people avoid to change which are
rapidly change. As they are habituate to buy products from eCommerce.
3. Risk factor : Each business has its own risk. Same Moblie commerce is the
growing field and a lot of investment in this field is become risky. Because
technology change day by day. Moreover, there less security in wireless network,
so in data transfer hacking chances are more.
4. Connectivity : Moblie commerce needs high speed connectivity of 3G.
Otherwise it is become hectic for user to go through entire product purchase
process.

Green marketing

Green marketing is the marketing of products that are presumed to be

environmentally preferable to others. Thus green marketing incorporates a broad
range of activities, including product modification, changes to the production
process, sustainable packaging, as well as modifying advertising

Relationship marketing

Relationship marketing is a facet of customer relationshipmanagement (CRM)

that focuses on customer loyalty and long-term customer engagement rather than
shorter-term goals like customer acquisition and individual sales.

Relationship marketing aims to create customer loyalty and secure life time
custom. Customer reward programmes provide insights about each customer's
spending habits and build relationships with them. Some of the benefits
of relationship marketing include:

Advantages

 Loyal customers will help expand your business by recommending your

business to friends and family.
 Loyal customers are more willing to try your new products, because they
trust you.
 Loyal customers are more likely to accept price increases because they are
loyal to you and trust your products and services.
 Loyal customers are more likely to provide feedback which enables you to
improve your product and services. They can even support innovation by
identifying gaps in the market and suggesting ideas for your business.
 Loyal customers will usually continue to provide you with custom after there
is a lapse in the customer service (as long as you resolve the situation swiftly
and to the customer's satisfaction).

Retail marketing

Retail marketing is the process by which retailers promote awareness and interest
of their goods and services in an effort to generate sales from their consumers.
There are many different approaches and strategies retailers can use
to market their goods and services

Viral marketing, viral advertising, or marketing buzz are buzzwords referring

to marketing techniques that use pre-existing social networking services and other
technologies to try to produce increases in brand awareness or to achieve other
marketing objectives (such as product sales) through self-
replicating viral processes, analogous to the spread of viruses or computer
viruses (cf. Internet memes and memetics). It can be delivered by word of
mouth or enhanced by the network effects of the Internet and mobile networks

Or

Viral marketing, viral advertising, or marketing buzz are buzzwords referring

to marketing techniques that use pre-existing social networking services and other
technologies to try to produce increases in brand awareness or to achieve
other marketing objectives
Unit 2: MARKETING ENVIRONMENT (MACRO) (very imp for Exam)

Environment means all of the outside forces, events and things that act on a
thing.[1] A person's environment is made up of everything that surrounds him or
her, including houses, buildings, people, animals, land, temperature, water, light,
and other living and non-living things

The market environment is a marketing term and refers to factors and forces that
affect a firm’s ability to build and maintain successful relationships with
customers.Three levels of the environmment are: Micro (internal) environment -
small forces within the company that affect its ability to serve its customers. Meso
environment – the industry in which a company operates and the industry’s
market(s). Macro (national) environment - larger societal forces that affect the
microenvironment.[1]

Marketing environment is the cumulative form of the factors that encapsulate

within themselves the ability of a firm to connect with the consumers and also the
potency of the product as a growth driver to the firm.
The marketing environment consists of the following three major factors-

 Micro-factors within the firm

 Meso- factors within the same industry
 Macro-factors related to economy, social, cultural aspects etc

Marketing intermediaries help to sell, promote, and distribute goods.

Intermediaries take many forms:

 Resellers
 Physical distribution firms
 Marketing services agencies
 Financial intermediaries
 Customer markets must be studied.
 Market types
 Consumer
 Business
 Government
 International
Customer markets must be studied:

 Market types
 Consumer
 Business
 Government
 Reseller
 International

Various publics must also be considered:

 Government
 Media
 Financial
 Local
 General
 Internal
 Citizen Action Groups

Micro

The micro environment refers to the forces that are close to the company and affect
its ability to serve its customers. It includes the company itself, its suppliers,
marketing intermediaries, customer markets and publics.
The company aspect of microenvironment refers to the internal environment of the
company. This includes all departments, such as management, finance, research
and development, purchasing,operations and accounting. Each of these
departments has an impact on marketing decisions. For example, research and
development have input as to the features a product can perform and accounting
approves the financial side of marketing plans and budgets.
Macroenvironment is all factors that influence an organization and are out of
it's direct control. The environments are always changing so the companies
must be able to adapt

Macro-Environment (external environment)[edit source | editbeta]

The macroenvironment refers to all forces that are part of the larger society and
affect the microenvironment. It includes concepts such as demography, economy,
natural forces, technology, politics, and culture.
Factors affecting organisation in Macro environment are known as PESTEL, that
is: Political, Economical, Social, Technological, Environmental and Legal.
Macro environment
There are a number of common approaches how the external factors, which are
mentioned in the definition of Kroon and which describe the macro environment,
can be identified and examined. These factors indirectly affect the organization but
cannot be controlled by it. One approach could be the PEST analysis. PEST stands
for political, economic, social and technological. Two more factors, the
environmental and legal factor, are defined within the PESTEL
analysis (or PESTLE analysis).
The segmentation of the macro environment according to the six presented factors
of the PESTEL analysis is the starting point of the global environmental analysis.
PESTEL analysis (very imp for Exam)
The six environmental factors of the PESTEL analysis are the following:
Political factors[]

 Taxation Policy
 Trade regulations
 Governmental stability
 Unemployment Policy, etc.
Economical factors[

 Inflation rate
 Growth in spending power
 Rate of people in a pensionable age
 Recession or Boom
 Customer liquidations
Socio-cultural[

 Age distribution
 Education levels
 Income level
 Consumerism
 Population growth
 Life expectancies
 Expectation of society from the business
Technological factors

 Internet
 E-commerce
 Social Media
 Electronic Media
Environmental factors

 Competitive advantage
 Waste disposal
 Energy consumption
 Pollution monitoring, etc.
Legal factors

 Unemployment law
 Health and safety
 Product safety
 Advertising regulations
 Product labeling
 labor laws etc.

Analysis of Needs of macro environment

The Macro Environment Analysis is traditionally the first step of a strategic
analysis; it is sometimes referred to as an external analysis, a pest analysis or a
pestle analysis.

The purpose of the Macro Environment Analysis is to identify possible

opportunities and threats to your industry as a whole that are outside the control of
your industry. (Note: You will often be forecasting trends – like “interest rates will
remain static” which may or may not be the case)

When completing a macro environment analyses you will be seeking to answer the
questions “what will affect the growth of our industry as a whole” and “What is the
likely impact of all of the things that affect the growth of your industry”

PESTLE
The PESTLE Analysis is a framework used to scan the organization’s external
macro environment. The letters stand forPolitical, Economic Socio-cultural,
Technological, Legal and Environmental.

Some approaches will add in extra factors, such as International, or remove some
to reduce it to PEST.
However, these are all merely variations on a theme. The important principle is
identifying the key factors from the wider, uncontrollable external environment
that might affect the organization.
The PESTLE Factors
We start with the Political forces. First of all, political factors refer to the stability
of the political environment and the attitudes of political parties or movements.
This may manifest in government influence on tax policies, or government
involvement in trading agreements. Political factors are inevitably entwined
with Legal factors such as national employment laws, international
trade regulations and restrictions, monopolies and mergers’ rules, and consumer
protection. The difference between Political and Legal factors is that Political
refers to attitudes and approaches, whereas Legal factors are those which have
become law and regulations. Legal needs to be complied with whereas Political
may represent influences, restrictions or opportunities, but they are not mandatory.

Economic factors represent the wider economy so may include economic growth
rates, levels of employment and unemployment, costs of raw materials such as
energy, petrol and steel, interest rates and monetary policies, exchange rates and
inflation rates. These may also vary from one country to another.

Socio-cultural factors represent the culture of the society that an organization

operates within. They may include demographics, age distribution, population
growth rates, level of education, distribution of wealth and social classes, living
conditions and lifestyle.

Technological factors refer to the rate of new inventions and development,

changes in information and mobile technology, changes in internet and e-
commerce or even mobile commerce, and government spending on research. There
is often a tendency to focus Technological developments on digital
and internet-related areas, but it should also include materials development and
new methods of manufacture, distribution and logistics.

A PESTLE analysis should feed into a SWOT analysis as it helps to determine the
threats and opportunities represented by macro-environment forces that the
organization usually cannot control.
On an international basis, it is best to perform the analysis on a country-by-country
basis because factors can differ greatly between countries (or even regions).

Macro environment factors are uncontrollable external forces that affect how a
business operates. They are largely out of the control of the business, and often
require changes in operating, management, production, and marketing. Analysts
often categorize them using the acronyms PEST or PESTEL. Broken down, PEST
stands for political, economic, social, and technological concerns. PESTEL also
includes environmental and legal factors.
Political

Political macro environment factors include things like tax policies, government-
issued safety regulations, the availability of government contracts, and even shifts
in the controlling political party. International laws, such as trade agreements and
tariffs, may affect the supply and demand chains and available markets for many
different companies as well.

Economic

A market boom, recession, or growing inflation problem can all change the way an
organization plans for the future and operates in the present. Economic factors are
often difficult to assess, since economic forecasts and analyses vary widely
between experts. Unemployment levels, comparative foreign exchange rates, and
the state of the global economy can all help or hurt a business' ability to get needed
components and maintain a stable profit.

Social

The mood and demographics of the population make up the social area of macro
environment factors. For example, a society that places an emphasis on self-guided
jobs with room for creativity may cause organizations to redefine job descriptions
and adapt the model of the workplace to attract workers. Social trends, such as a
preference for on-demand mobile media devices, can also influence which
products a company manufacturers and where it chooses to spend advertising
dollars.

Technological

Technological macro environment factors can influence how an organization does

business. A new type of machinery, computer chip, or product created through
research and development can help a company stay modernized and ahead of the
market curve. Owners must be able to accurately identify which new developments
will be truly useful, and which are just fads.
Unit 3: MARKETING MIX (very imp for Exam)

Definition: The marketing mix refers to the set of actions, or tactics, that a
company uses to promote its brand or product in the market. The 4Ps make up a
typical marketing mix - Price, Product, Promotion and Place

Product

Definitions

1.A good, idea, method, information, object or service created as a result of

a process and serves a need or satisfies a want. It has
a combination of tangible and intangible attributes (benefits, features, functions, us
es) that a seller offers a buyer for purchase.

A product mix is the set of all products offered for sale by a company. Product line
is a broad group of products for similar uses and with similar characteristics. An
organization’s product mix has four dimensions:

Width: The product mix width is the number of product lines in the product mix.

Length: The product line length shows the number of different products in a
product line.

Depth: Some of the product types may be split into subgroups which is shown by
the product line depth.

Consistency: Describes how closely related the various product lines are in end
use, production requirements, distribution channels, etc.

Hindustan Unilever has a wide width offering personal care, home care, food and
beverages, etc. Skin care, oral care, hair care, fabric care, beverages, food, etc are
the product lines that Unilever as a parent company carries.The food line of HUL
contains beverages like tea, coffee ,ice cream, food, etc.

Product line

A product line is a group of related productsmanufactured by a single company.

For example, a cosmetic company's makeupproduct line might include
foundation, concealer, powder, blush, eyeliner, eyeshadow, mascara and
lipstick products that are all closely related.

Product Life Cycle (Go through my notes what I given in class) (very imp for
Exam)
A new product progresses through a sequence of stages from introduction to
growth, maturity, and decline. This sequence is known as theproduct life
cycle and is associated with changes in the marketing situation, thus impacting the
marketing strategy and the marketing mix.
1. Introduction stage

Product is introduced in the market with intention to build a clear identity and
heavy promotion is done for maximum awareness. Before actual offering of the
product to customers, product passes through product development, involves
prototype and market tests. Companies incur more costs in this phase and also bear
additional cost for distribution. On the other hand, there are a few customers at this
stage, means low sales volume. So, duringintroductory stage company’s profits
shows a negative figure because of huge cost but low sales volume.

At introduction stage, the company core focus is on establishing a market and

arising demand for the product. So, the impact on marketing mix is as follows:

Product
Branding, Quality level and intellectual property and protections are obtained to
stimulate consumers for the entire product category. Product is under more
consideration, as first impression is the last impression.

Price
High(skim) pricing is used for making high profits with intention to cover initial
cost in a short period and low pricing is used to penetrate and gain the market
share. company choice of pricing strategy depends on their goals.

Place
Distribution at this stage is usually selective and scattered.

Promotion
At introductory stage, promotion is done with intention to build brand awareness.
Samples/trials are provided that is fruitful in attracting early adopters and
potential customers. Promotional programs are more essential in this phase. It is
as much important as to produce the product because it positions the product.

2. Growth Stage

In this stage, company’s sales and profits starts increasing and competition also
begin to increase. The product becomes well recognized at this stage and some of
the buyers repeat the purchase patterns. During this stage, firms focus on brand
preference and gaining market share. It is market acceptance stage. But due to
competition, company invest more in advertisement to convince customers
so profits may decline near the end of growth stage.

Affect on 4 P’s of marketing is as under:

Product
Along with maintaining the existing quality, new features and improvements in
product quality may be done. All this is done to compete and maintain the market
share.

Price
Price is maintained or may increase as company gets high demand at low
competition or it may be reduced to grasp more customers.

Distribution
Distribution becomes more significant with the increase demand and acceptability
of product. More channels are added for intensive distribution in order to meet
increasing demand. On the other hand resellers start getting interested in the
product, so trade discounts are also minimal.

Promotion
At growth stage, promotion is increased. When acceptability of product increases,
more efforts are made for brand preference and loyalty.

3. Maturity stage

At maturity stage, brand awareness is strong so sale continues to grow but at a

declining rate as compared to past. At this stage, there are more competitors with
the same products. So, companies defend the market share and extending product
life cycle, rather than making the profits, By offering sales promotions to
encourage retailer to give more shelf space to the product than that of competitors.
At this stage usually loyal customers make purchases.

Marketing mix decisions include:

product
At maturity stage, companies add features and modify the product in order to
compete in market and differentiate the product from competition. At this stage, it
is best way to get dominance over competitors and increase market share.

Price
Because of intense competition, at maturity stage, price is reduced in order to
compete. It attracts the price conscious segment and retain the customers.

Distribution
New channels are added to face intense competition and incentives are offered to
retailers to get shelf preference over competitors.

Promotion
Promotion is done in order to create product differentiation and loyalty. Incentives
are also offered to attract more customers.

4. Decline stage

Decline in sales, change in trends and unfavorable economic conditions explains

decline stage. At this stage market becomes saturated so sales declines. It may also
be due technical obsolescence or customer taste has been changed.

At decline stage company has three options:

1. Maintain the product, Reduce cost and finding new uses of product.
2. Harvest the product by reducing marketing cost and continue offering the product
to loyal niche until zero profit.
3. Discontinue the product when there’s no profit or a successor is available. Selling
out to competitors who want to keep the product.

At declining stage, marketing mix decisions depends on company’s strategy. For

example, if company want to harvest, the product will remain same and price will
be reduced. In case of liquidation, supply will be reduced dramatically.
Product Planning

Product Planning is the ongoing process of identifying and articulating market

requirements that define a product's feature set. Product planning serves as the
basis for decisions about price, distribution and promotion.

Planning (also called forethought) is the process of thinking about and organizing
the activities required to achieve a desired goal

What is Product Planning?

In order to maximise his sales revenue and profits, a business firm must
continuously adjust and adapt its products and services to the changing
requirements of customers. From time-to- time, it may have to design and develop
new products.

Product planning is the process of searching ideas for new products, screening
them systematically, converting them into tangible products and introducing the
new product in the market. It also involves the formation of product policies and
strategies.

Product planning includes improvements in existing products as well as deletion of

unprofitable or marginal products.

Product development or New Product development

Product development is the process of designing, creating and marketing

new products or services to benefit customers. Sometimes referred to as new
product development, the discipline is focused on developing systematic methods
for guiding all the processes involved in getting a new product to market.

Stage 1: Idea Generation

New product ideas have to come from somewhere. But where do organisations get
their ideas for NPD? Sources include:

Market Research
Employees
Consultants
Competitors
Customers
Distributors and Suppliers

Stage 2: Idea Screening

This process involves shifting through the ideas generated above and selecting
ones which are feasible and practical to develop. Pursing impractical ideas is
expensive and a waste of resources.

Stage 3: Concept Development and Testing

The organisation may have come across what they believe to be a feasible idea,
however, the idea needs to be taken to the target audience. What do they think
about the idea? Will it offer the benefit that the organisation hopes it will? or have
they overlooked certain issues? Will there be a demand for the product? Note the
idea taken to the target audience is not a working prototype at this stage, it is just a
concept.

Stage 4: Marketing Strategy and Development

How will the product/service idea be launched within the market? A proposed
marketing strategy will be written laying out the marketing mix strategy of the
product, the segmentation, targeting and positioning strategy and expected sales
and profits.

Stage 5: Business Analysis

The company has a great idea, the marketing strategy seems feasible, but will the
product be financially worth while in the long run? The business analysis stage
looks more deeply into the Cashflow the product could generate, what the cost will
be, how much market shares the product may achieve and the expected life of the
product.

Stage 6: Product Development

At this stage the prototype is produced. The prototype will undergo a serious tests,
and will be presented to a selection of people made up of the the target
market segment to see if changes need to be made.

Stage 7: Test Marketing

Test marketing means testing the product within a specific geographic area. The
product will be launched within a particular region so the marketing mix strategy
can be monitored and if needed modified before national launch.

Stage 8: Commercialisation

If test marketing is successful the product is ready for national launch. The
following decisions regarding the national launch need to be made

 timing of the launch

 how the product will be launched
 where the product will be launched
 will there be a national roll out or will it be region by region?

Conclusion

The eight stages of product development may seem like a long process but they are
designed to save wasted time and resources. New product development ideas and
prototypes are tested to ensure that the new product will meet target market needs
and wants. There is a test launch during the test marketing stage as a full market
launch is expensive. Finally the commercialisation stage is carefully planned to
maximise product success, a poor launch will affect product sales and could even
affect the reputation and image of the new product.

Reasons behind new product failure

Here’s our top 10 list of reasons new products and services fail:

1. Marketers assess the marketing climate inadequately.

2. The wrong group was targeted.
3. A weak positioning strategy was used.
4. A less-than-optimal "configuration" of attributes and benefits was selected.
5. A questionable pricing strategy was implemented.
6. The ad campaign generated an insufficient level of awareness.
7. Cannibalization depressed corporate profits.
8. Over-optimism about the marketing plan led to a unrealistic forecast.
9. Poor implementation of the marketing plan in the real world.
10.The new product was pronounced dead and buried too soon
Branding

Barand - A brand is a product, service, or concept that is publicly distinguished

from other products, services, or concepts so that it can be easily communicated
and usually marketed. A brand name is the name of the distinctive product, service,
or concept. Branding is the process of creating and disseminating the brand name.
Branding can be applied to the entire corporate identity as well as to individual
product and service names.

Branding is the process involved in creating a unique name and image for

a product in the consumers' mind, mainly through advertising

campaigns with a consistent theme.

Branding aims to establish a significant and differentiated presence in

the market that attracts and retains loyal customers.

What is Packing
Packing is the preparation of a product for storage or transportation. Packing
can be simply defined as the process of wrapping or binding the product in a
manner appropriate for transporting, handling or storing. In packing, we can use
different processes like wrapping, cushioning, weatherproofing, sealing, etc. The
process of packing depends on the nature of the product. For example, if the
product is very fragile, we use multiple layers of bubble wraps. The noun packing
refers to the material used to protect or cover the product and prevent it from
moving around.

What is Packaging
Packaging is the technique of enclosing or protecting products for sale or
transport. Packaging includes the process of packing, but it does not stop there. It
contains many more steps including sales promotion and marketing. Packaging is
concerned with the manner in which a product is placed in a container in a safe,
comfortable and attractive. It also deals with the appearance, design, colors that
would attract consumers since it plays a major role in attracting the consumers.
In the past, packaging consisted of natural materials such as reed baskets, woven
bags, clay jars, wooden barrels, etc. But in the contemporary society various
synthetic items such as plastic and polythene are used for packaging.

Pricing (very imp for Exam)

Pricing is the process whereby a business sets the price at which it will sell its
products and services, and may be part of the business's marketing plan.

Pricing is the process whereby a business sets the price at which it will sell its
products and services, and may be part of the business's marketing plan. Lemuel In
setting prices, the business will take into account the price at which it could acquire
the goods, the manufacturing cost, the market place, competition, market
condition,brand, and quality of product.

Some of the more common pricing objectives are:

 maximize long-run profit.
 maximize short-run profit.
 increase sales volume (quantity)
 increase monetary sales.
 increase market share.
 obtain a target rate of return on investment (ROI)
 obtain a target rate of return on sales.
OR

Objectives of pricing can be classified in five groups

Profits-related Objectives:
 .Maximum Current Profit:
One of the objectives of pricing is to maximize current profits. This objective is
aimed at making as much money as possible. Company tries to set its price in a
way that more current profits can be earned. However, company cannot set its
price beyond the limit. But, it concentrates on maximum profits.

 Target Return on Investment:

Most companies want to earn reasonable rate of return on investment.

2. Sales-related Objectives:
Sales Growth:
Company’s objective is to increase sales volume. It sets its price in such a way that
more and more sales can be achieved. It is assumed that sales growth has direct
positive impact on the profits. So, pricing decisions are taken in way that sales
volume can be raised. Setting price, altering in price, and modifying pricing
policies are targeted to improve sales.

ii. Target Market Share:

A company aims its pricing policies at achieving or maintaining the target market
share. Pricing decisions are taken in such a manner that enables the company to
achieve targeted market share. Market share is a specific volume of sales
determined in light of total sales in an industry. For example, company may try to
achieve 25% market shares in the relevant industry.

iii. Increase in Market Share:

Sometimes, price and pricing are taken as the tool to increase its market share.
When company assumes that its market share is below than expected, it can raise it
by appropriate pricing; pricing is aimed at improving market share.

Competition-related Objectives:
Competition is a powerful factor affecting marketing performance. Every company
tries to react to the competitors by appropriate business strategies.
With reference to price, following competition-related objectives may be
priorized:
i. To Face Competition:
Pricing is primarily concerns with facing competition. Today’s market is
characterized by the severe competition. Company sets and modifies its pricing
policies so as to respond the competitors strongly. Many companies use price as a
powerful means to react to level and intensity of competition.

ii. To Keep Competitors Away:

To prevent the entry of competitors can be one of the main objectives of pricing.
The phase ‘prevention is better than cure’ is equally applicable here. If competitors
are kept away, no need to fight with them. To achieve the objective, a company
keeps its price as low as possible to minimize profit attractiveness of products. In
some cases, a company reacts offensively to prevent entry of competitors by
selling product even at a loss.

iii. To Remove Competitors from the Market:

The pricing policies and practices are directed to remove the competitors away
from the market. This can be done by forgoing the current profits – by keeping
price as low as possible – in order to maximize the future profits by charging a
high price after removing competitors from the market. Price competition can
remove weak competitors.

4. Customer-related Objectives:

i. To Win Confidence of Customers:

Customers are the target to serve. Company sets and practices its pricing policies
to win the confidence of the target market. Company, by appropriate pricing
policies, can establish, maintain or even strengthen the confidence of customers
that price charged for the product is reasonable one. Customers are made feel that
they are not being cheated.

ii. To Satisfy Customers:

To satisfy customers is the prime objective of the entire range of marketing efforts.
And, pricing is no exception. Company sets, adjusts, and readjusts its pricing to
satisfy its target customers. In short, a company should design pricing in such a
way that results into maximum consumer satisfaction.

5. Other Objectives:

i. Market Penetration:
This objective concerns with entering the deep into the market to attract maximum
number of customers. This objective calls for charging the lowest possible price to
win price-sensitive buyers.

ii. To Skim the Cream from the Market:

This objective concerns with skimming maximum profit in initial stage of product
life cycle. Because a product is new, offering new and superior advantages, the
company can charge relatively high price. Some segments will buy product even at
a premium price

iii. Survival and Growth:

Finally, pricing is aimed at survival and growth of company’s business activities
and operations. It is a fundamental pricing objective. Pricing policies are set in a
way that company’s existence is not threatened.
Factors Affecting Pricing Product: Internal Factors and External Factors
(very imp for Exam)

The pricing decisions for a product are affected by internal and external factors.

A. Internal Factors:
1. Cost:
While fixing the prices of a product, the firm should consider the cost involved in
producing the product. This cost includes both the variable and fixed costs. Thus,
while fixing the prices, the firm must be able to recover both the variable and fixed
costs.

2. The predetermined objectives:

While fixing the prices of the product, the marketer should consider the objectives
of the firm. For instance, if the objective of a firm is to increase return on
investment, then it may charge a higher price, and if the objective is to capture a
large market share, then it may charge a lower price.

3. Image of the firm:

The price of the product may also be determined on the basis of the image of the
firm in the market. For instance, HUL and Procter & Gamble can demand a higher
price for their brands, as they enjoy goodwill in the market.

4. Product life cycle:

The stage at which the product is in its product life cycle also affects its price. For
instance, during the introductory stage the firm may charge lower price to attract
the customers, and during the growth stage, a firm may increase the price.
5. Credit period offered:
The pricing of the product is also affected by the credit period offered by the
company. Longer the credit period, higher may be the price, and shorter the credit
period, lower may be the price of the product.

6. Promotional activity:
The promotional activity undertaken by the firm also determines the price. If the
firm incurs heavy advertising and sales promotion costs, then the pricing of the
product shall be kept high in order to recover the cost.

B. External Factors:
1. Competition:
While fixing the price of the product, the firm needs to study the degree of
competition in the market. If there is high competition, the prices may be kept low
to effectively face the competition, and if competition is low, the prices may be
kept high.

2. Consumers:
The marketer should consider various consumer factors while fixing the prices.
The consumer factors that must be considered includes the price sensitivity of the
buyer, purchasing power, and so on.

3. Government control:
Government rules and regulation must be considered while fixing the prices. In
certain products, government may announce administered prices, and therefore the
marketer has to consider such regulation while fixing the prices.

4. Economic conditions:
The marketer may also have to consider the economic condition prevailing in the
market while fixing the prices. At the time of recession, the consumer may have
less money to spend, so the marketer may reduce the prices in order to influence
the buying decision of the consumers.

5. Channel intermediaries:
The marketer must consider a number of channel intermediaries and their
expectations. The longer the chain of intermediaries, the higher would be the prices
of the goods.

Physical distribution

Handling, movement, and storage of goods from the point of origin to the point
of consumption or use, via various channels of distribution. See also business
logistics
(very imp for Exam) Channels of Distribution- A distribution channel is the
chain of businesses or intermediaries through which a good or service passes until
it reaches the end consumer. A distribution channel can include wholesalers,
retailers, distributors and even the internet.
Elements are explained below:
1. Materials Handling:
It involves moving products in and out of a stock. It consists of routine tasks that
can be performed through mechanisation and standardisation. Efficiency is
increased through use of electronic data processing to control conveyor systems,
order picking and other traffic flaws.

The modern mechanised handling services and protective packaging have

improved the level of customer service and at the same time lowered physical
distribution costs. Material handling and packaging services have also speeded up
the order processing and movement of consignments.
2. Inventory Planning And Control:
Inventory refers to the stock of products a firm has on hand and ready for sale to
customers. Inventories are kept to meet market demands promptly. Inventory is the
link interconnecting the customer’s orders and the company’s production activity.

Infact the entire physical distribution management rotates around the inventory
management. Inventory management is the heart of the game of physical
distribution.

Marketing managers undertake an inventory planning to develop adequate

assortments of products for the target market and also try to control the costs
involved in obtaining and maintaining inventory.

Marketing managers generally take three decisions while conducting inventory

management, viz, (i) how can the track be kept, on a day-to- day basis of location,
amount and the condition of the inventory? (ii) How can inventory information
best be channelled to production managers or buyers for resale to help them
schedule their activities? (iii) What inventory information can other departments in
the organisation use to help them perform their functions efficiently?

3. Order Processing:
Order-processing and inventory control are related to each other. Order processing
is considered as the key to customer service and satisfaction. It includes receiving,
recording, filling, and assembling of products for dispatch. The amount of time
required from the dates of receipt of an order up to the date of dispatch of goods
must be reasonable and as short as possible.

It comprises in undertaking the processes that are needed to make certain orders
processed quickly, accurately, and efficiently. The marketing manager has to
decide about these along with such issues as what is the most efficient way to bill
customers; how cans the paper work may be minimized? And how can the physical
function of assembling orders more efficiently?

4. Transportation:
It is an essential element of physical distribution. It involves integrating the
advantages of each transportation method by adopting containers and physical
handling producers to permit transfers among different types of carriers.

5 Important Factors Affecting the Choice of Channels of Distribution by the

Manufacturer (very imp for Exam)

Important factors affecting the choice of channels of distribution by the

manufacturer are:

(A) Considerations Related to Product

When a manufacturer selects some channel of distribution he/she should take care
of such factors which are related to the quality and nature of the product. They are
as follows:

1. Unit Value of the Product:

When the product is very costly it is best to use small distribution channel. For
example, Industrial Machinery or Gold Ornaments are very costly products that are
why for their distribution small distribution channel is used. On the other hand, for
less costly products long distribution channel is used.

2. Standardised or Customised Product:

Standardised products are those for which are pre-determined and there has no
scope for alteration. For example: utensils of MILTON. To sell this long
distribution channel is used.
On the other hand, customised products are those which are made according to the
discretion of the consumer and also there is a scope for alteration, for example;
furniture. For such products face-to-face interaction between the manufacturer and
the consumer is essential. So for these Direct Sales is a good option.

3. Perishability:
A manufacturer should choose minimum or no middlemen as channel of
distribution for such an item or product which is of highly perishable nature. On
the contrary, a long distribution channel can be selected for durable goods.

4. Technical Nature:
If a product is of a technical nature, then it is better to supply it directly to the
consumer. This will help the user to know the necessary technicalities of the
product.

(B) Considerations Related to Market

Market considerations are given below:
1. Number of Buyers:
If the number of buyer is large then it is better to take the services of middlemen
for the distribution of the goods. On the contrary, the distribution should be done
by the manufacturer directly if the number of buyers is less.

2. Types of Buyers:
Buyers can be of two types: General Buyers and Industrial Buyers. If the more
buyers of the product belong to general category then there can be more
middlemen. But in case of industrial buyers there can be less middlemen.

3. Buying Habits:
A manufacturer should take the services of middlemen if his financial position
does not permit him to sell goods on credit to those consumers who are in the habit
of purchasing goods on credit.

4. Buying Quantity:
It is useful for the manufacturer to rely on the services of middlemen if the goods
are bought in smaller quantity.

5. Size of Market:
If the market area of the product is scattered fairly, then the producer must take the
help of middlemen.

(C) Considerations Related to Manufacturer/Company

Considerations related to manufacturer are given below:
1. Goodwill:
Manufacturer’s goodwill also affects the selection of channel of distribution. A
manufacturer enjoying good reputation need not depend on the middlemen as he
can open his own branches easily.

2. Desire to control the channel of Distribution:

A manufacturer’s ambition to control the channel of distribution affects its
selection. Consumers should be approached directly by such type of manufacturer.
For example, electronic goods sector with a motive to control the service levels
provided to the customers at the point of sale are resorting to company owned
retail counters.

3. Financial Strength:
A company which has a strong financial base can evolve its own channels. On the
other hand, financially weak companies would have to depend upon middlemen.
(D) Considerations Related to Government
Considerations related to the government also affect the selection of channel of
distribution. For example, only a license holder can sell medicines in the market
according to the law of the government.

In this situation, the manufacturer of medicines should take care that the
distribution of his product takes place only through such middlemen who have the
relevant license.

(E) Others
1. Cost:
A manufacturer should select such a channel of distribution which is less costly
and also useful from other angles.

2. Availability:
Sometimes some other channel of distribution can be selected if the desired one is
not available.

3. Possibilities of Sales:
Such a channel which has a possibility of large sale should be given weight age.

Types of Channels of Distribution (very imp for Exam)

Selling through direct channels

This is the oldest, shorter and the simple channel of distribution. The producer sells
the product directly without involvement of any middle man. The sale can be made
door to door through salesman, retail stores and direct mail. Certain industrial and
consumer goods such as clothes, shoes, books, hosiery goods, cosmetics,
household appliances, electronic goods etc., may be sold through direct contact.
Perishable goods such as vegetable and fruits can also be sold directly.

Advantage of selling through direct channels

 It is simple and fast.
 It is economical.
 The producer has full control over distribution.
 Satisfies the desire to reduce dependence on middle men.
 Cash sales.
Disadvantages of selling through direct channels
 Non-availability of expert services of middle man.
 Large investment is required.
 Unsuitable for small producers.
Methods of selling through direct channels
 Selling goods through own retail outlets.
 Selling goods through postal services.
 Selling goods through courier services.
 Selling goods against orders received, by telephone, email and fax is know as
telemarketing. This method is being used by Asian Sky Shop. The product is
delivered to the customer through producer’s own vehicles, V.P.P. or courier.
Suitability of selling through direct channels
 Costly industrial goods such as computer, aircraft, heavy machinery etc.
 Perishable gods like fruits, vegetables, eggs, butter, milk etc.
 Household appliances.
 If customers purchase large quantities.
 In case the number of suppliers is small.
Selling through indirect channel
According to this method of indirect selling, product is passed on to the customers
through intermediaries, known as wholesalers, retailers and agents. These channels
may be as under:

Producers -> Wholesalers -> Retailers -> Customer Two level Channel: It is
commonly used channel of distribution. It is also known as traditional or normal
channel of distribution. This channel is useful for small producers for small means.
The channel is used for consumer goods. The common practice is that the
manufacturer sells goods in large quantity to wholesalers, who sell goods to
retailers in small quantity. Finally goods are sold to customers in pieces.
Producer -> Agent -> Retailer -> Consumer or Two level Channel: The
common practice in this two level channel is that the goods are sold to the agent in
bulk. The agent sells goods to retailer, who sells goods to customers in pieces. This
channel is suitable where the retailers are few and geographically centered. This
channel is commonly used in textile, machinery, equipment and agricultural
products.
Producer -> Agent -> Wholesaler -> Retailer -> Customer or Three level
Channel: The common practice in this three level channel is that goods are sold by
the producer to the agent, who sells it to the wholesaler, who sells to the retailers
who finally sells goods to customers. This is the longest channel of distribution.
This practice is useful, when the producer wants to the relieved of the problem of
distribution. This channel is popularly used in textile.
Producer -> Retailer -> Customer or one level Channel:Under this channel the
producer sells goods to retailers, who sell the goods to customers. This channel is
popular with the departmental stores, chain stores and supermarkets etc., because
these are large scale retailers. Generally readymade garments, shoes home
appliances and automobiles are sold through this channel.
Product promotion

An action taken by a company's marketing staff with the intention of encouraging

the sale of a good or service to their target market. For example, product promotion
performed by a typical business might take the form of advertising the product in
question via print or Internet ads, direct mail or e-mail letters, trade
shows, telephone and personal sales calls, TV and radio ads, billboards, posters
and flyers.

There are several reasons explaining this phenomena:

Increased brand parity and price sensitivity of consumer:

With more brand choices available to the consumer and with the fact that product
differences are becoming less and less apparent, consumers are becoming more
and more reliant to the price and price incentives.

Decreased brand loyalty:

Another reason which goes hand in hand in increasing sales promotions budget is
decreased brand loyalty. Consumers are getting used to the fact that almost always
at least one brand category is on sale or on a sales promotional offer.

Rewards for meeting targets:

Another reason is coming from the roots of corporate culture and the reward and
promotion strategy within corporations. In the conditions of severe competition,
there is increasing pressure on brand managers to show fast results in terms of
increased sales and nothing is as effective in short run as sales promotions to
achieve this goal.

Consumer responsiveness to money saving options:

Another explanation the change in reactions and responsiveness of customers
towards these promotions. For example, the results of NCH Consumer Survey
indicate that on average 80.5 percent of consumers in US used coupons over the
period of 1996- 1999. (Shimp 1993).

Increase in product variant:

One more reason for increasing sales promotion importance is that many product
categories on the market are in the mature stage and according to the product life
cycle theory, sales promotions are extremely effective in maturity stage of the
product helping to boost sales. (Blattberg, Neslin 1990).

Fight for every inch of market share:

Finally the reason that is very relevant to highly competitive markets where
companies find themselves constantly fighting for the smallest piece of market
share – “prisoner’s dilemma” spiral – which is very similar to a price war situation.
Manufacturers are locked into defensive reactive escalation of sale promotional
expenditures. If one company cuts its sales promotions, it will suffer short-term
loss, chances are that competitors will take advantage of that, the company
increases its sales promotional expenditures short term increase of sales might be
very small because competitor reacts. (Blattberg, Neslin 1990).

Immediate positive impact on sales:

Normally a sales promotion leads to a sense of urgency among the customers to
make the purchases immediately as the promotional offers are for a s о duration of
time. So unlike advertisement, where purchase after seeing the advertisement is a
prolonge process, sales promotion aids in getting an immediate positive impact on
the sales of any organisation. So if the promotion is well planned, measuring the
impact is also very easy.
Shoppers want to be Smart-Shoppers:
Shoppers have learnt pretty well that they are supposed to be smart and make their
purchases exactly as and when they have the best offers being given by the
retailers and manufacturers. They have learnt overtime that brands with promo
offers need not necessarily be of bad quality.

Advertisements getting more costly:

Today advertising in any media has become very expensive. Among the most
costlier are the audio visual ones which are considered to be the most effective
ones. There are many firms who are not been able to afford the high pieces and
hence are resorting to sales promotions which otherwise they are finding more
effective. Also the customers are also not very happy with the advertisement clutter
which hampers their normal viewing of any program. And as discussed earlier, the
zipping and zapping cause a major loss of communication through advertisement.

The increase in power of trade:

Today with the retail boom, distributors and retailers are more powerful and they
are actually dictating certain terms with the manufacturers. The shelf space since
limited in the retail outlets, is creating a lot of competition among the
manufacturers for that space. Everybody wants prime space, especially during new
product introduction. This gives a chance to the retailers to play around with the
manufacturers.

Impulse purchase is on an increase:

Consumer behaviour has changed drastically. Purchases are more impulsive today
than ever. This facilitates the success of the sales promotion.

Create interest and excitement:

Some promotions like scratch card, games, contests, free premiums etc create a lot
of excitement and interest among the customers. They enjoy these offers very
much and respond very positively to these.

Increasing Inventory:
Presently there are many brands which are selling in the market and because of this
increasing competition and presence of so many brands, the retailers and
distributors are finding it very difficult to anticipate future sales. So inventory is
piling up and they need sales promotion from time to time to clear these stocks

Personal selling

Personal selling is where businesses use people (the "sales force") to sell the
product after meeting face-to-face with the customer. The sellers promote the
product through their attitude, appearance and specialist product knowledge. They
aim to inform and encourage the customer to buy, or at least trial the product

Advertising

Definition: Advertising is a means of communication with the users of a product

or service. Advertisements are messages paid for by those who send them and are
intended to inform or influence people who receive them, as defined by the
Advertising Association of the UK.

Description: Advertising is always present, though people may not be aware of it.
In today's world, advertising uses every possible media to get its message through.
It does this via television, print (newspapers, magazines, journals etc), radio, press,
internet, direct selling, hoardings, mailers, contests, sponsorships, posters, clothes,
events, colours, sounds, visuals and even people (endorsements).
Unit 4: MARKET SEGMENTATION AND CONSUMER BEHAVIOUR

Market segmentation (very imp for Exam)

Market segmentation is a marketing strategy which involves dividing a broad

target market into subsets of consumers, businesses, or countries that have, or are
perceived to have, common needs, interests, and priorities, and then designing and
implementing strategies to target them

7 Bases for Market Segmentation | Marketing Management(very imp for

Exam)

Some of the major bases for market segmentation are as follows: 1. Geographic
Segmentation 2. Demographic Segmentation 3. Psychographic Segmentation 4.
Behavioristic Segmentation 5. Volume Segmentation 6. Product-space
Segmentation 7. Benefit Segmentation.

A large number of variables are used to segment a consumer market.

The most common bases for segmenting markets are as follows:

Traditional:
Geographic, Demographic

Modern:
Psychographic, Behaviouristic

1. Geographic Segmentation:
Geographic location is one of the simplest methods of segmenting the market.
People living in one region of the country have purchasing and consuming habit
which differs from those living in other regions. For example, life style products
sell very well in metro cities, e.g., Mumbai, Delhi, Kolkata and Chennai but do not
sell in small towns. Banking needs of people in rural areas differ from those of
urban areas. Even within a city, a bank branch located in the northern part of the
city may attract more clients than a branch located in eastern part of the city.

2. Demographic Segmentation:
Demographic variables such as age, occupation, education, sex and income are
commonly used for segmenting markets.

(a) Age:
Teenagers, adults, retired.

(b) Sex:
Male and female.

(c) Occupation:
Agriculture, industry, trade, students, service sector, house-holds, institutions.

(i) Industrial sector:

Large, small, tiny.

(ii) Trade:
Wholesale, retail, exporters.

(iii) Services:
Professionals and non-professionals.

(iv) Institutions:
Educational, religions, clubs.

(v) Agriculture and cottage industries.

(d) Income Level:

Above Rs. 1 lakh per annum, Rs. 50,000 to Rs. 1 lakh, Rs. 25,000 to Rs. 50,000
per annum, i.e., higher, middle and lower.

(e) Family Life-cycle:

Young single, young married no children, young married youngest child under six,
young married youngest child over six, older married with children, older married
no children under eighteen, older single, etc.

3. Psychographic Segmentation:
Under this method consumers are classified into market segments on the basis of
their psychological make-up, i.e., personality, attitude and lifestyle. According to
attitude towards life, people may be classified as traditionalists, achievers, etc.

Rogers has identified five groups of consumer personalities according to the

way they adopt new products:
(а) Innovators:
These are cosmopolitan people who are eager to try new ideas. They are highly
venturesome and willing to assume the risk of an occasional bad experience with a
new product.

(b) Early Adopters:

These are influential people with whom the average person checks out an
innovation.

(c) Early Majority:

This group tends to deliberate before adopting a new product. Its members are
important in legitimising an innovation but they are seldom leaders.

(d) Late Majority:

This group is cautious and adopts new ideas after an innovation has received public
confidence.

(e) Laggards:
These are past-oriented people. They are suspicious of change and innovations. By
the time they adopt a product, it may already have been replaced by a new one.
Understanding of psychographic of consumers enables marketers to better select
potential markets and match the product image with the type of consumer using it.
For example, women making heavy use of bank credit cards are said to lead an
active lifestyle and are concerned with their appearance. They tend to be liberated
and are willing to try new things.

Psychographic classification may, however, be an oversimplification of consumer

personalities and purchase behaviour. So many factors influence consumers that an
early adopter of one product might well be a laggard for some other product and
vice versa.

4. Behavioristic Segmentation:
In this method consumers are classified into market segments not the basis of their
knowledge, attitude and use of actual products or product attributes.

Any of the following variables might be used for this purpose:

(а) Purchase Occasion:
Buyers may be differentiated on the basis of when they use a product or service.
For example, air travellers might fly for business or vacation. Therefore, one
airline might promote itself as a business flyer while another might target the
tourists.

(b) Benefits Sought:

The major benefit sought in a product is used as the basis of classify consumers.
High quality, low price, good taste, speed, sex appeal are examples of benefits. For
example, some air travellers prefer economy class (low price), while others seek
executive class (status and comfort).

(c) User Status:

Potential buyers may be classified as regular users, occasional users and non-users.
Marketers can develop new products or new uses of old products by targeting one
or another of these groups.

5. Volume Segmentation:
Consumers are classified light, medium and heavy users of a product. In some
cases, 80 per cent of the product may be sold to only 20 per cent of the group.
Marketers can decide product features and advertising strategies by finding
common characteristics among heavy users. For example, airlines having
‘Frequent Flyer’ are using user rate as the basis of market segmentation. Generally,
marketers are interested in the heavy user group.

But marketers should pay attention to all the user groups because they represent
different opportunities. The non-users may consist of two types of people— those
who do not use the product and those who might use it. Some may change over
time from a non-user to a user.

Those who do not use due to ignorance may be provided extensive information.
Repetitive advertising may be used to overcome inertia or psychological resistance.
In this way non-users can gradually be converted into users.
6. Product-space Segmentation:
Here the buyers are asked to compare the existing brands according to their
perceived similarity and in relation to their ideal brands. First, the analyst infers the
latent attributes that consumers are using to perceive the brand. Then buyers are
classified into groups each having a distinct ideal brand in mind. The distinctive
characteristics of each group are ascertained.

7. Benefit Segmentation:
Consumer behaviour depends more on the benefit sought in product/service than
on demographic factors. Each market segment is identified by the major benefits it
is seeking. Most buyers seek as many benefits as possible. However, the relative
importance attached to individual benefits differs from one group to another. For
example, some consumers of toothpaste give greater importance to freshness while
other prefer taste or brightness of teeth.

Research studies on benefit segmentation reveal that it is easier to take advantage

of existing segment, then to create new segments. As no brand can appeal to all
consumers, a marketer who wants to cover the market fully must offer multiple
brands.

The following benefit segments have been identified:

(а) The Status Seeker:
This group comprises buyers who are very much concerned with the prestige of the
brand.

(b) The Swinger:

This group tries to be modern and up-to-date in all of its activities.

(c) The Conservative:

This group prefers popular brands and large successful companies.

(d) The Rational Man:

This group looks for benefits such as economy, value, durability and other logical
factors.

(e) The Inner Directed Man:

This group is concerned with self-concept, e.g., sense of homour, independence,
honesty, etc.

(f) The Hedonist:

This group is concerned mainly with sensory benefits.

Marketing experts suggest that benefit segmentation has the greatest number of
practical implications than any other method of segmentation.

Consumer behaviour is the study of individuals, groups, or organizations and the

processes they use to select, secure, use, and dispose of products, services,
experiences, or ideas to satisfy needs and the impacts that these processes have on
the consumer and society

5 Common Factors Influencing Consumer Behavior (very imp for Exam)

Consumer behavior can be broadly classified as the decisions and actions that
influence the purchasing behavior of a consumer. What drives consumers to
choose a particular product with respect to others is a question which is often
analyzed and studied by marketers. Most of the selection process involved in
purchasing is based on emotions and reasoning.

The study of consumer behavior not only helps to understand the past but even
predict the future. The below underlined factors pertaining to the tendencies,
attitude and priorities of people must be given due importance to have a fairly good
understanding of the purchasing patterns of consumers
5. Marketing Campaigns
Advertisement plays a greater role in influencing the purchasing decisions made by
consumers. They are even known to bring about a great shift in market shares of
competitive industries by influencing the purchasing decisions of consumers. The
Marketing campaigns done on regular basis can influence the consumer purchasing
decision to such an extent that they may opt for one brand over another or indulge
in indulgent or frivolous shopping. Marketing campaigns if undertaken at regular
intervals even help to remind consumers to shop for not so exciting products such
as health products or insurance policies.

4. Economic Conditions
Consumer spending decisions are known to be greatly influenced by the economic
situation prevailing in the market. This holds true especially for purchases made of
vehicles, houses and other household appliances. A positive economic environment
is known to make consumers more confident and willing to indulge in purchases
irrespective of their personal financial liabilities.

3. Personal Preferences
At the personal level, consumer behavior is influenced by various shades of likes,
dislikes, priorities, morals and values. In certain dynamic industries such as
fashion, food and personal care, the personal view and opinion of the consumer
pertaining to style and fun can become the dominant influencing factor. Though
advertisement can help in influencing these factors to some extent, the personal
consumer likes and dislikes exert greater influence on the end purchase made by a
consumer.

2. Group Influence
Group influence is also seen to affect the decisions made by a consumer. The
primary influential group consisting of family members, classmates, immediate
relatives and the secondary influential group consisting of neighbors and
acquaintances are seen have greater influence on the purchasing decisions of a
consumer. Say for instance, the mass liking for fast food over home cooked food or
the craze for the SUV’s against small utility vehicle are glaring examples of the
same.

1. Purchasing Power
Purchasing power of a consumer plays an important role in influencing the
consumer behavior. The consumers generally analyze their purchasing capacity
before making a decision to buy and products or services. The product may be
excellent, but if it fails to meet the buyers purchasing ability, it will have high
impact on it its sales. Segmenting consumers based on their buying capacity would
help in determining eligible consumers to achieve better results.

OR

here are 4 main types of factors influencing consumer behavior: cultural factors,
social factors, personal factors and psychological factors. (very imp for Exam)

I. Cultural factors

Cultural factors are coming from the different components related to culture or
cultural environment from which the consumer belongs.

Culture and societal environment:

Culture is crucial when it comes to understanding the needs and behaviors of an

individual.

Throughout his existence, an individual will be influenced by his family, his

friends, his cultural environment or society that will “teach” him values,
preferences as well as common behaviors to their own culture.

For a brand, it is important to understand and take into account the cultural factors
inherent to each market or to each situation in order to adapt its product and its
marketing strategy. As these will play a role in the perception, habits, behavior or
expectations of consumers.

For example, in the West, it is common to invite colleagues or friends at home for
a drink or dinner. In Japan, on the contrary, invite someone home does not usually
fit into the local customs. It is preferable to do that this kind of outing with friends
or colleagues in restaurant.

A significant specificity to take into account for the brands in markets such as
savory snacking or sodas and alcoholic beverages. Usage and consumption
moments are not the same in all regions of the world.

While if a Japanese offer you a gift, the courtesy is to offer him an equivalent gift
in return.

McDonald’s is a brilliant example of adaptation to the specificities of each culture

and each market. Well aware of the importance to have an offer with specific
products to meet the needs and tastes of consumers from different cultures, the
fast-food giant has for example: a McBaguette in France (with french baguette and
Dijon mustard), a Chicken Maharaja Mac and a Masala Grill Chicken in India
(with Indian spices) as well as a Mega Teriyaki Burger (with teriyaki sauce) or
Gurakoro (with macaroni gratin and croquettes) in Japan.

While all the ingredients used by McDonald’s in arabic and muslim countries are
certified halal. The fast food chain not offering, of course, any product with bacon
or pork.

Sub-cultures :

A society is composed of several sub-cultures in which people can identify.

Subcultures are groups of people who share the same values based on a common
experience or a similar lifestyle in general.

Subcultures are the nationalities, religions, ethnic groups, age groups, gender of the
individual, etc..

The subcultures are often considered by the brands for the segmentation of a
market in order to adapt a product or a communication strategy to the values or the
specific needs of this segment.

For example in recent years, the segment of “ethnic” cosmetics has greatly
expanded. These are products more suited to non-Caucasian populations and to
types of skin pigmentation for african, arab or indian populations for example.
It’s a real brand positioning with a well-defined target in a sector that only offered
makeup products to a caucasian target until now (with the exception of niche
brands) and was then receiving critics from consumers of different origin.

Brands often communicate in different ways, sometimes even create specific

products (sometimes without significant intrinsic difference) for the same type of
product in order to specifically target an age group, a gender or a specific sub-
culture.

Consumers are usually more receptive to products and marketing strategies that
specifically target them.

Social classes:

Social classes are defined as groups more or less homogenous and ranked against
each other according to a form of social hierarchy. Even if it’s very large groups,
we usually find similar values, lifestyles, interests and behaviors in individuals
belonging to the same social class.

We often assume three general categories among social classes : lower class,
middle class and upper class.

People from different social classes tend to have different desires and consumption
patterns. Disparities resulting from the difference in their purchasing power, but
not only. According to some researchers, behavior and buying habits would also be
a way of identification and belonging to its social class.

Beyond a common foundation to the whole population and taking into account that
many counterexample naturally exist, they usually do not always buy the same
products, do not choose the same kind of vacation, do not always watch the same
TV shows, do not always read the same magazines, do not have the same hobbies
and do not always go in the same types of retailers and stores.

For example, consumers from the middle class and upper class generally consume
more balanced and healthy food products than those from the lower class.

They don’t go in the same stores either. If some retailers are, of course, patronized
by everyone, some are more specifically targeted to upper classes such as The
Fresh Market, Whole Foods Market, Barneys New York or Nordstrom. While
others, such as discount supermarkets, attract more consumers from the lower
class.
Some studies have also suggested that the social perception of a brand or a retailer
is playing a role in the behavior and purchasing decisions of consumers.

In addition, the consumer buying behavior may also change according to social
class. A consumer from the lower class will be more focused on price. While a
shopper from the upper class will be more attracted to elements such as quality,
innovation, features, or even the “social benefit” that he can obtain from the
product.

Cultural trends:

Cultural trends or “Bandwagon effect” are defined as trends widely followed by

people and which are amplified by their mere popularity and by conformity or
compliance with social pressure. The more people follow a trend, the more others
will want to follow it.

They affect behavior and shopping habits of consumers and may be related to the
release of new products or become a source of innovation for brands.

By social pressure, desire to conformity or belonging to a group, desire to “follow

fashion trends” or simply due to the high visibility provided by media, consumers
will be influenced, consciously or unconsciously, by these trends.

For example, Facebook has become a cultural trend. The social network has widely
grew to the point of becoming a must have, especially among young people.

It is the same with the growth of the tablet market. Tablets such as iPad or Galaxy
Tab have become a global cultural trend leading many consumers to buy one. Even
if they had never specially felt the need before.

For a brand, create a new cultural trend from scratch is not easy. Apple did it with
the tablets with its iPad. But this is an exception. However, brands must remain
attentive to the new trends and “bandwagon effects”. Whether to accompany it
(create a page on Facebook) or to take part in the newly created market (create its
own tablet).

II. Social factors

Social factors are among the factors influencing consumer behavior significantly.
They fall into three categories: reference groups, family and social roles and status.
Reference groups and membership groups :

The membership groups of an individual are social groups to which he belongs

and which will influence him. The membership groups are usually related to its
social origin, age, place of residence, work, hobbies, leisure, etc..

The influence level may vary depending on individuals and groups. But is
generally observed common consumption trends among the members of a same
group.

The understanding of the specific features (mindset, values, lifestyle, etc..) of each
group allows brands to better target their advertising message.

More generally, reference groups are defined as those that provide to the individual
some points of comparison more or less direct about his behavior, lifestyle, desires
or consumer habits. They influence the image that the individual has of himself as
well as his behavior. Whether it is a membership group or a non-membership
group.

Because the individual can also be influenced by a group to which he doesn’t

belong yet but wishes to be part of. This is called an aspirational group. This group
will have a direct influence on the consumer who, wishing to belong to this group
and look like its members, will try to buy the same products.

For example, even if he doesn’t need it yet, a surfing beginner may want to buy
“advanced” brands or products used by experienced surfers (aspirational group) in
order to get closer to this group. While a teen may want the shoe model or
smartphone used by the group of “popular guys” from his high school
(aspirational group) in order to be accepted by this group.

Some brands have understood this very well and communicate, implicitly or not,
on the “social benefit” provided by their products.

Within a reference group that influence the consumer buying behavior, several
roles have been identified:

 The initiator: the person who suggests buying a product or service

 The influencer: the person whose point of view or advice will influence the
buying decision. It may be a person outside the group (singer, athlete, actor,
etc..) but on which group members rely on.
 The decision-maker: the person who will choose which product to buy. In
general, it’s the consumer but in some cases it may be another person. For
example, the “leader” of a soccer supporters’ group (membership group) that
will define, for the whole group, which supporter’s scarf buy and bear
during the next game.
 The buyer: the person who will buy the product. Generally, this will be the
final consumer.

Many brands look to target opinion leaders (initiator or influencer) to spread the
use and purchase of their product in a social group. Either through an internal
person of the group when it comes to a small social group. Or through a
sponsorship or a partnership with a reference leader (celebrity, actor, musician,
athlete, etc..) for larger groups.

Family:

The family is maybe the most influencing factor for an individual. It forms an
environment of socialization in which an individual will evolve, shape his
personality, acquire values. But also develop attitudes and opinions on various
subjects such as politics, society, social relations or himself and his desires.

But also on his consumer habits, his perception of brands and the products he buys.

We all kept, for many of us and for some products and brands, the same buying
habits and consumption patterns that the ones we had known in our family.

Perceptions and family habits generally have a strong influence on the consumer
buying behavior. People will tend to keep the same as those acquired with their
families.

For example, if you have never drunk Coke during your childhood and your
parents have described it as a product “full of sugar and not good for health”.
There is far less chance that you are going to buy it when you will grow up that
someone who drinks Coke since childhood.

For brands – especially for Fast-Moving Consumer Goods (FMCG) or Consumer

Packaged Goods (CPG) – successfully “integrate” the family is both a real
challenge and an opportunity to develop a strong consumer loyalty among all the
family members.
That’s why it’s important for brands to be seen as a family brand in order to
become a consumer habit for parents and children when they will become adults.

Social roles and status:

The position of an individual within his family, his work, his country club, his
group of friends, etc.. – All this can be defined in terms of role and social status.

A social role is a set of attitudes and activities that an individual is supposed to

have and do according to his profession and his position at work, his position in the
family, his gender, etc.. – and expectations of the people around him.

Social status meanwhile reflects the rank and the importance of this role in society
or in social groups. Some are more valued than others.

The social role and status profoundly influences the consumer behavior and his
purchasing decisions. Especially for all the “visible” products from other people.

For example, a consumer may buy a Ferrari or a Porsche for the quality of the car
but also for the external signs of social success that this kind of cars represents.
Moreover, it is likely that a CEO driving a small car like a Ford Fiesta or a
Volkswagen Golf would be taken less seriously by its customers and business
partners than if he is driving a german luxury car.

And this kind of behaviors and influences can be found at every level and for every
role and social status.

Again, many brands have understood it by creating an image associated with their
products reflecting an important social role or status.

III. Personal factors:

Decisions and buying behavior are obviously also influenced by the characteristics
of each consumer.

Age and way of life:

A consumer does not buy the same products or services at 20 or 70 years. His
lifestyle, values, environment, activities, hobbies and consumer habits evolve
throughout his life.
For example, during his life, a consumer could change his diet from unhealthy
products (fast food, ready meals, etc..) to a healthier diet, during mid-life with
family before needing to follow a little later a low cholesterol diet to avoid health
problems.

The factors influencing the buying decision process may also change. For example,
the “social value” of a brand generally play a more important role in the decision
for a consumer at 25 than at 65 years.

The family life cycle of the individual will also have an influence on his values,
lifestyles and buying behavior depending whether he’s single, in a relationship, in
a relationship with kids, etc.. As well as the region of the country and the kind of
city where he lives (large city, small town, countryside, etc..).

For a brand or a retailer, it may be interesting to identify, understand, measure and

analyze what are the criteria and personal factors that influence the shopping
behavior of their customers in order to adapt.

For example, it is more than possible that consumers living in New York do not
have the same behavior and purchasing habits than the ones in Nebraska. For a
retailer, have a deep understanding and adapt to these differences will be a real
asset to increase sales.

Purchasing power and revenue:

The purchasing power of an individual will have, of course, a decisive influence on

his behavior and purchasing decisions based on his income and his capital.

This obviously affects what he can afford, his perspective on money and the level
of importance of price in his purchasing decisions. But it also plays a role in the
kind of retailers where he goes or the kind of brands he buys.

As for social status, some consumers may also look for the “social value” of
products they buy in order to show “external indications” of their incomes and
their level of purchasing power..

Lifestyle:

The lifestyle of an individual includes all of its activities, interests, values and
opinions.
The lifestyle of a consumer will influence on his behavior and purchasing
decisions. For example, a consumer with a healthy and balanced lifestyle will
prefer to eat organic products and go to specific grocery stores, will do some
jogging regularly (and therefore will buy shoes, clothes and specific products), etc..

Personality and self-concept:

Personality is the set of traits and specific characteristics of each individual. It is

the product of the interaction of psychological and physiological characteristics of
the individual and results in constant behaviors.

It materializes into some traits such as confidence, sociability, autonomy,

charisma, ambition, openness to others, shyness, curiosity, adaptability, etc..

While the self-concept is the image that the individual has – or would like to have
– of him and he conveys to his entourage. These two concepts greatly influence the
individual in his choices and his way of being in everyday life. And therefore also
his shopping behavior and purchasing habits as consumer.

In order to attract more customers, many brands are trying to develop an image and
a personality that conveys the traits and values - real or desired – of consumers
they are targeting.

For example, since its launch, Apple cultivates an image of innovation, creativity,
boldness and singularity which is able to attract consumers who identify to these
values and who feel valued – in their self-concept – by buying a product from
Apple.

Because consumers do not just buy products based on their needs or for their
intrinsic features but they are also looking for products that are consistent and
reinforce the image they have of themselves or they would like to have.

The more a product or brand can convey a positive and favorable self-image to the
consumer, the more it will be appreciated and regularly purchased.

IV. Psychological factors

Among the factors factors influencing consumer behavior, psychological factors

can be divided into 4 categories: motivation, perception, learning as well as beliefs
and attitudes.
Motivation:

Motivation is what will drive consumers to develop a purchasing behavior. It is the

expression of a need is which became pressing enough to lead the consumer to
want to satisfy it. It is usually working at a subconscious level and is often difficult
to measure.

Motivation is directly related to the need and is expressed in the same type of
classification as defined in the stages of the consumer buying decision process.

To increase sales and encourage consumers to purchase, brands should try to

create, make conscious or reinforce a need in the consumer’s mind so that he
develops a purchase motivation. He will be much more interested in considering
and buy their products.

They must also, according to research, the type of product they sell and the
consumers they target, pick out the motivation and the need to which their product
respond in order to make them appear as the solution to the consumers’ need.

Perception:

Perception is the process through which an individual selects, organizes and

interprets the information he receives in order to do something that makes sense.
The perception of a situation at a given time may decide if and how the person will
act.

Depending to his experiences, beliefs and personal characteristics, an individual

will have a different perception from another.

Each person faces every day tens of thousands of sensory stimuli (visual, auditory,
kinesthetic, olfactory and gustatory). It would be impossible for the brain to
process all consciously. That is why it focuses only on some of them.

The perception mechanism of an individual is organized around three processes:

 Selective Attention: The individual focuses only on a few details or

stimulus to which he is subjected. The type of information or stimuli to
which an individual is more sensitive depends on the person.

For brands and advertisers successfully capture and retain the attention of
consumers is increasingly difficult. For example, many users no longer pay any
attention, unconsciously, to banner ads on the Internet. This kind of process is
called Banner Blindness.

The attention level also varies depending on the activity of the individual and the
number of other stimuli in the environment. For example, an individual who is
bored during a subway trip will be much more attentive to a new ad displayed in
the tube. It is a new stimuli that breaks the trip routine for him.

Consumers will also be much more attentive to stimuli related to a need. For
example, a consumer who wishes to buy a new car will pay more attention to car
manufacturers’ ads. While neglecting those for computers.

Lastly, people are more likely to be attentive to stimuli that are new or out of the
ordinary. For example, an innovative advertising or a marketing message (Unique
Value Proposition) widely different from its competitors is more likely to be
remembered by consumers.

 Selective Distortion: In many situations, two people are not going to

interpret an information or a stimulus in the same way. Each individual will
have a different perception based on his experience, state of mind, beliefs
and attitudes. Selective distortion leads people to interpret situations in order
to make them consistent with their beliefs and values.

For brands, it means that the message they communicate will never be perceived
exactly in the same way by consumers. And that everyone may have a different
perception of it. That’s why it’s important to regularly ask consumers in order to
know their actual brand perception.

Selective distortion often benefits to strong and popular brands. Studies have
shown that the perception and brand image plays a key role in the way consumers
perceived and judged the product.

Several experiments have shown that even if we give them the same product,
consumers find that the product is or tastes better when they’ve been told that
it’s from a brand they like than when they’ve been told it’s a generic brand. While
it is exactly the same product!

Similarly, consumers will tend to appreciate even less a product if it comes from a
brand for which they have a negative perception.
 Selective Retention: People do not retain all the information and stimuli
they have been exposed to. Selective retention means what the individual
will store and retain from a given situation or a particular stimulus. As for
selective distortion, individuals tend to memorize information that will fit
with their existing beliefs and perceptions.

For example, consumers will remember especially the benefits of a brand or

product they like and will “forget” the drawbacks or competing products’
advantages.

Selective retention is also what explains why brands and advertisers use so much
repetition in their advertising campaigns and why they are so broadcasted. So that
the selective retention can help the brand to become a “top of mind” brand in the
consumer’s mind.

Learning:

Learning is through action. When we act, we learn. It implies a change in the

behavior resulting from the experience. The learning changes the behavior of an
individual as he acquires information and experience.

For example, if you are sick after drinking milk, you had a negative experience,
you associate the milk with this state of discomfort and you “learn” that you should
not drink milk. Therefore, you don’t buy milk anymore.

Rather, if you had a good experience with the product, you will have much more
desire to buy it again next time.

The learning theories can be used in marketing by brands. As the theory of operant
conditioning which states that you can build a good image and high demand for a
product by associating it with a positive reinforcement (or rather a bad image with
a negative reinforcement).

Beliefs and attitudes:

A belief is a conviction that an individual has on something. Through the

experience he acquires, his learning and his external influences (family, friends,
etc..), he will develop beliefs that will influence his buying behavior.

While an attitude can be defined as a feeling, an assessment of an object or idea

and the predisposition to act in a certain way toward that object. Attitudes allow
the individual to develop a coherent behavior against a class of similar objects or
ideas.

Beliefs as well as attitudes are generally well-anchored in the individual’s mind

and are difficult to change. For many people, their beliefs and attitudes are part of
their personality and of who they are.

However, it is important to understand, identify and analyze the positive attitudes

and beliefs but also the negative ones that consumers can have on a brand or
product. To change the brand’s marketing message or adjust its positioning in
order to get consumers to change their brand perception.
Unit 5: CUSTOMER RELATIONSHIP MANAGEMENT

Customer relationship management (CRM) (go through my cls notes points and first
chapter)
Customer relationship management (CRM) is a term that refers to practices,
strategies and technologies that companies use to manage and analyze customer
interactions and data throughout the customer lifecycle, with the goal of improving
business relationships with customers, assisting in customer retention and driving
sales growth. CRM systems are designed to compile information on customers
across different channels -- or points of contact between the customer and the
company -- which could include the company's website, telephone, live chat, direct
mail, marketing materials and social media. CRM systems can also give customer-
facing staff detailed information on customers' personal information, purchase
history, buying preferences and concerns.

Advantages & Disadvantages of Customer Relationship Marketing

The goal of customer relationship marketing is to develop loyalty between a
particular brand or company and a targeted customer base. This type of marketing
is also called direct marketing, customer relationship management and database
marketing. From a small-business perspective, this strategy may help differentiate
the company's level of service and attention. It might also keep customers aware of
special promotions and inform them of new services or products.

Customer Value
An advantage of customer relationship marketing is that it tends to identify the
customers who are more likely to be of higher value to a company. This saves the
company time and money in terms of its sales and order-fulfillment efforts.
Customer relationship marketing also helps pinpoint customers who are too costly
to maintain relationships with, as well as opportunities for growing
underdeveloped potential. For example, a customer who is unprofitable for the
company might become a long-term account once he is encouraged to buy more of
the same product.
Communication
Communication and customer satisfaction tend to increase when customer
relationship marketing is used, according to Phillip Kotler and Kevin Lane Keller,
authors of the book "Marketing Management." Businesses find it easier and more
efficient to obtain and keep their customers. Databases and customer relationship
management software help companies keep track of who is buying what and how
often. There is more of a two-way interaction between the company and the person
who wishes to make a purchase. Promotional incentives such as loyalty discounts
and perks help foster a sense of appreciation and reward for repeat business.
Disadvantages of Marketing

Costs
Direct marketing is typically more expensive per customer than other forms.
Because there is a higher level of personalization, it might be more time-
consuming for a small business to communicate with its customers on an
individual basis. It might also be difficult to decide what type of customer
information to capture and store, since only some of it may prove useful. A small-
business owner and his staff might need to receive training on how to interpret
customer data and buying behavior.
Security
The security issues associated with maintaining sensitive data are a major
disadvantage of customer relationship marketing. Personal customer information is
often stored on servers and in computerized databases, which puts the business at
risk for liabilities. Some customers will refuse to share some of their information,
making it more difficult to take full advantage of the concepts behind customer
relationship marketing. Protecting personal data is costly for businesses because
electronic security measures must be executed. In addition, companies need to tell
customers how their data is used, when it might be shared and why.