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MARKETING.
MEANING OF MARKETING
Customer is the most important person in the whole marketing process. He is
the cause and purpose of all marketing activities. According to Prof. Drucker,
the first function of marketing is to create a customer. All marketing activities
are basically for meeting the needs of customers and also for raising social
welfare. Marketing itself is a “need-satisfying process”. It facilitates physical
distribution and creates four types of utilities, viz., Form, Place, Time and
Possession.

Many people think of marketing only as selling and advertising. And no wonder
every day we are bombarded with television commercials, newspaper ads, direct
mail-offers, sales calls, and internet pitches. However, selling and advertising is
only the tip of the Marketing iceberg. They are only two of many marketing
functions and are often not the most important one.
There are two concepts of marketing which gives us clear meaning of marketing.
They are:
 Traditional concept of marketing.
 Modern concept of marketing
As per traditional concept of marketing, marketing means those efforts, which
effects in transfer ownership of goods and care for their physical distribution. It
consists of all those activities which are meant to ensure the flow of goods and
services from the producers to the consumers and relate to the creation of time,
place and possession utilities.
But as per modern concept of marketing, it is more than mere physical process
or set of activities. It represents a distinct philosophy of business that has
emerged over the recent years that is creation of customer. Here the customer is
cause and purpose of all marketing activities. Marketing deals with identifying
and meeting human and social needs. It is described as ―meeting needs
profitably‖ creation of customer means identification of consumer needs and
organizing, the business to meet these needs. In the another words a firm makes
a conscious and organized efforts to find out what the members of the
community needs and how it can be provide maximum measures to satisfactory
them.
It produces that what the consumer needs, in the quantity that the consumer
requires, at a price the consumer will pay for the satisfaction offered to him in
the form of goods and services, through channels that suit the consumer needs
goods and services. Thus the modern concept of marketing focuses on the
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consumer and the satisfaction of his needs. That is why it is said to be consumer
oriented concept.

DEFINITION OF MARKETING
 According to E. F. L. Breach, “Marketing is the process of determining
consumer demand for a product or service, motivating its sales and
distributing it into ultimate consumption at a profit”.
 According to Philip Kotler, “Marketing is human activity directed at
satisfying needs and wants through exchange process”.
 According to the American Marketing Association (AMA), “Marketing
includes all activities having to do with effecting changes in the ownership
and possession of goods and services. It is that part of economics which
deals with the creation of time, place possession of utilities and that phase
of business activity through which human wants are satisfied by the
exchange of goods and services for some valuable consideration.”
FEATURES OF MARKETING
1. Regular and Continuous Process/Activity: Marketing is a
continuous process/activity in which goods and services are
manufactured and distributed to consumers. Assembling, grading,
packaging, transportation, warehousing, etc., are the activities which are
supplementary to marketing and are useful for smooth and orderly
conduct of marketing operations.

2. Facilitates satisfaction of human wants: Marketing activities are

basically for satisfying the needs of consumers and also for raising social
welfare. Identification of consumer needs should be the starting point of
marketing activity

3. Relates to goods and services: Marketing mainly relates to goods

and services. It is concerned with the exchange of goods and services
with the medium of money.

4. Brings transfer of ownership: Marketing activity brings transfer of

ownership of goods and services and facilitates physical distribution.

5. Creates utility: Marketing activity creates utilities (time, form, place

and possession) through which human wants are satisfied.

6. Wider socio-economic significance: Marketing activity has wider socio-

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economic significance as it facilitates large-scale production, creates massive
employment opportunities and promotes social welfare

7. Importance of 4Ps: Marketing is the sum total of 4Ps. These are:

product, price, place and promotion. Large-scale marketing is possible
through appropriate combination of 4Ps called marketing mix.

8. Precedes and follows production: Production and marketing are

closely related activities. Goods are produced for marketing. Here,
marketing follows production. In addition, marketing indicates what
consumer wants and production is adjusted accordingly. In modem
marketing, production is as per the needs and expectation of consumers.
Such products get consumer support.

9. Wide in scope: The concept of marketing is wide/comprehensive. It

is not concerned merely with selling of goods. It is connected with other
functional areas of business such as production, fmance and personnel.
Marketing will be effective when it is closely linked with other functional
departments of the organization.

IMPORTANCE/BENEFITS OF MARKETING

1. Satisfaction of human wants: Marketing plays an important role

in the satisfaction of human wants by maintaining regular supply of
goods to consumers. It provides better life and welfare
to people by satisfying their wants and also by providing useful goods
and services.

2. Profit and market reputation to marketing enterprises: Marketing

is important to business as it earns profit by conducting marketing activities.
Marketing enables a firm to expand business activities to earn market
reputation and goodwill.

3. Widens markets: Marketing widens markets through large-scale

movements of goods throughout the county. Even advertising and sales
promotion techniques are useful for widening markets. Such markets
provide convenience to consumers and profit to manufacturers and
traders

4. Improves the standard of living: Continuous production and

marketing improve the skill of the workers. In addition, marketing process
provides new varieties of quality goods to customers.
Marketing facilitates production as per the needs of consumers. This raises the
standard of living of the people. It is the marketing which has converted
“Yesterday’s luxuries into today’s necessaries.”
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5. Brings economic growth: Marketing brings industrial and
economic growth. It also facilitates full utilization of available natural
resources. It creates new demand for goods and thereby, encourages
production activities. This also leads to the creation of massive
employment opportunities.
6. Facilitates price control: Marketing facilitates price control by
the manufacturers. It brings proper balance between demand and supply
and provides price stability.
7. Creates utility: Marketing is important as it creates form, time,
place and possession utilities. Such utility creation gives satisfaction and
pleasure to consumers. In addition, it is useful for large-scale marketing.
8. Facilitates introduction of new items: A firm marketing one or
more lines of products can add a new item easily. This is because successful
marketing increases the prestige and reputation of the organization

WHAT DO WE MARKET
 Goods
 Services
 Events
 Experiences
 Personalities
 Place
 Organizations
 Properties
 Information
 Ideas and Concepts
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CORE CONCEPTS OF MARKETING
 NEEDS
Needs are what we require to live a normal, healthy life. There are some needs
that are in-built in us. These are called basic needs e.g good food to eat, we
need fresh air to breathe, and clean water to drink. As we grow up, we
develop a number of needs as our requirements grow with maturity. These
needs are called acquired needs. E.g we need love from our family,
friendship, etc
 WANTS
Wants are our expression of satisfaction of needs. The situations that we
encounter in our day to day lives are different. Our family background,
literacy level, attitude, thinking pattern, social status, etc. are different.
Hence even though our needs may be the same, the way we satisfy our
needs are different.
 DEMAND
Demand is willingness to satisfy the need supported by the ability. The term
demand signifies the ability or the willingness to buy a particular
commodity at a given point of time.
 PRODUCT
Product is anything that can be offered to the market for attention,
acquisition, use or consumption and that which might satisfy the need or
wants. Products belonging to the following categories:
 VALUE
Value to a customer refers to the difference between the benefit he derives from
the product or service and the cost of acquiring the product.
 COST
Cost refers to the combination of economic and non-economic investment the
customer makes in order to acquire, consume, maintain or to disperse of the
product. The following are the various costs that that the customers have to
consider before purchase.
▪ Total cost
▪ Monetary cost
▪ Time cost
▪ Energy cost
▪ Psychic cost
▪ Energy cost
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 SATISFACTION
It is the gratification or fulfillment of need, desire or appetite. It is a measure of
how products and services supplied by a company meet or surpass customer
expectation. It is seen as a key performance indicator within business.
▪ EXCHANGE
It is the process of obtaining a desired product from someone by offering
something in return. For exchange to exist, following conditions must be
satisfied.
There are at least two parties
Each party has something that can be of value to the other party

▪ TRANSACTION
It is the trade of values between two or more parties. Transaction takes
place as soon as the agreement is reached. Transactions finally end up
with exchange.
 MARKET
A market is a physical place where buyers and sellers gather to buy and sell
goods. Markets are also defines as a collection of buyers and sellers who
transact over a particular product or product class.eg. money markets
4Ps OF MARKETING
The term “Marketing Mix” was introduced by Prof. Neil H. Borden of the
Harvard Business School. Marketing Mix is one of the most fundamental
concepts in marketing management. For attracting consumers and for
sales promotion every manufacturer has to concentrate on four basic
elements/ components. These are: Product, pricing, distributive channels
(place) and sales promotion techniques. A fair combination of these
marketing el
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Product Price Decisions Place Decisions Promotion
Decision  Pricing  Channels Decisions
strategy  Personal
 Brand  Discounts of selling
 Quality  Price distribution  Advertisin
 Styling discriminati  g
 Functionali on Warehousin  Publicity
ty  Wholesale g  Public
 Safety and retail  Transportati relations
 Packaging price on  Sales
 Warranty  Term of  Storing promotion
 Repairs credit  Market  Promotion
 After sale  Period of coverage al budget
service payment  Inventory

PEOPLE
People are one of the elements of service marketing mix. People define a service.
If you have an IT company, your software engineers define you. If you have a
restaurant, your chef and service staff defines you. If you are into banking,
employees in your branch and their behavior towards customers define you. In
case of service marketing, people can make or break an organization.
PROCESS
Service process is the way in which a service is delivered to the end customer.
Let’s take the example of two very good companies – McDonalds and FedEx.
Both the companies thrive on their quick service and the reason they can do
that is their confidence on their processes. On top of it, the demand of these
services is such that they have to deliver optimally without a loss in quality.
Thus the process of a service company in delivering its product is of utmost
importance.
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PHYSICAL EVIDENCE
As said before, services are intangible in nature. However, to create a better
customer experience tangible elements are also delivered with the service. Take
an example of a restaurant which has only chairs and tables and good food, or
a restaurant which has ambient lighting, nice music along with good seating
arrangement and this also serves good food. Which one will you prefer? The one
with the nice ambience. That’s physical evidence.

Introducing the 4C Marketing Model

When it comes to marketing models, the 4P marketing model is the most

traditional, business-oriented one — and the one you’re most likely familiar with.
The 4Ps represent product, price, promotion, and place. For a more customer-
oriented model, you may want to follow the 4C marketing model. The 4C
marketing model was first proposed by Bob Lauterborn in an article published
in Advertising Age in 1990. He saw it as a possible effective alternative. The
following is a brief breakdown of the 4C marketing model, which consists of
consumer, cost, convenience, and communication.

CONSUMER

First, you have to know who your target customers are and what their needs
and wants are. The consumer should drive all of your marketing efforts from
here on out. Having knowledge about your target audience makes it easier to
create a product that fulfills a need in the market. This is where your buyer
personas come in. Buyer personas represent your ideal customer and once you
understand them, you better understand your target audience. This leads to
improved communication with your consumers and gives them the sense that
you understand them as well, leading to improved sales. Of course, the product
is an important focus in any marketing model, but always remember the value
of the

COST

In the 4C marketing model, the cost evaluates the cost considerations from the
buyer’s perspective. Determining the cost involves performing detailed research
into what customers are able and willing to pay. Additionally, do research into
the cost of competing products. The research will aid you in figuring out whether
selling your product at a cost that customers are willing to pay will be profitable
or not. You will also need to take into account the added costs of purchasing
your product outside its sticker price. For example, how much customers will
need to pay in taxes, shipping costs or transportation costs.
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One thing that’s important to keep in mind is that the price point of your
product isn’t what necessarily convinces consumers to purchase your product.
A low price point won’t always drive sales, after all. In the end, it’s the benefit of
your product that will help support its costs.

COMMUNICATION

Communication refers to how you will engage with your customers. You will want
to find ways to engage with your target customers to build confidence in your
brand and your product. Customers want to know how buying your product
will benefit them and that’s what you need to focus on communicating. You
should focus on providing relevant information to customers in order to help them
figure out what their problems, needs, or challenges are. This will then
allow you to position your product as a potential solution. This requires that
you ask your customers questions and listen to what they have to say.
Communication is a two-way street after all.

Promoting products is all about saying what you have to say and hoping the
customer buys it. Communication is about strengthening your understanding of
your customers and building trust in your brand. One of the best ways to do
this is through social media.

CONVENIENCE

Convenience focuses on how easy it is for customers to purchase your product.

You’ll want to identify potential barriers and figure out ways to remove those
barriers in order to improve customer convenience. For example, maybe a poor
user interface is preventing potential customers from using your e-commerce
site. Providing quality customer support to help make the purchasing process
easier is also an important facet of improving convenience.

In today’s world, the consumer has more power than ever. As such, your
marketing efforts will be more successful if you take a more customer-oriented
approach. By understanding the importance and using the 4C marketing model,
you’ll have more success targeting customers who are actually interested in what
you have to offer. Not to mention that such an approach will help you build
long- lasting relationships with your customers.
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The 4 C's of Marketing The 4 P's of Marketing Mix

Consumer wants and needs Product
Cost to satisfy Price
Convenience to buy Place
Communication Promotion

TOPIC TWO
Marketing Concepts
The marketing concept revolves around a company's strategy to maximize profit
by boosting sales, meeting customer needs, and outperforming competitors. The
objective is to create a situation that benefits both parties: the customer and the
company. These marketing concepts trace their roots back to Adam Smith's
book, Wealth of Nations, and have evolved over time. Here are the six core
marketing concepts:

PRODUCTION CONCEPT

The production concept is based on the assumption that consumers prefer

inexpensive and widely available products. This viewpoint aligns with Says Law,
which suggests that "supply creates its own demand." Companies following this
concept focus on increasing production volume to achieve economies of scale,
lowering production costs, and offering affordable products. However, this
philosophy may neglect product quality and may not always align with customer
preferences.

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PRODUCT CONCEPT

The product concept operates under the assumption that customers prioritize
product quality over price and availability when making purchase decisions.
Companies adhering to this concept invest significant effort in developing high-
quality products, often at a higher cost. While this approach appeals to quality-
conscious consumers, it may not address other factors influencing purchasing
decisions, such as price and availability.

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SELLING CONCEPT

The selling concept centers on making immediate sales of a product, regardless

of product quality or customer needs. The primary focus is profit generation,
often without building long-term customer relationships. Companies following
this philosophy may resort to deceptive tactics to drive sales. This short-term
approach may not be sustainable and can lead to marketing myopia.

MARKETING CONCEPT

The marketing concept recognizes that to thrive in the 21st century, businesses
must create products that meet customer needs. It assumes that consumers
buy products that fulfill their needs better than competitors' offerings.
Companies embracing the marketing concept conduct research to understand
customer needs and develop products that outperform competitors. Building
customer relationships and generating long-term profits are key goals.
However, this concept is not one-size-fits-all and depends on market dynamics.

SOCIETAL MARKETING CONCEPT

Expanding on the marketing concept, the societal marketing concept emphasizes

a business's role in promoting societal well-being. It involves meeting customer
needs while considering environmental impact, conserving natural resources,
and contributing to social causes like poverty alleviation and education. Many
major companies include corporate social responsibility in their marketing
activities as part of this concept.

HOLISTIC MARKETING CONCEPT

The holistic marketing concept is a modern addition that views a business as a

single entity with interconnected parts. It assigns a shared purpose to every
activity and individual associated with the business. Just as the various parts of
the human body work together for optimal functioning, this concept encourages
all facets of a business to collaborate toward a common objective. A holistic
perspective aims to achieve the best results by recognizing interdependencies
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Marketing Environments: Definition, Types and Components

A company's marketing environment includes every element that may affect its
ability to connect with its customers. This can include internal elements such as
resources, equipment and a company's corporate structure. It can also include
external components like existing customers, delivery platforms and top
competitors. Both internal and external conditions can affect how a customer
responds to a business and determine how a business might grow.
Benefits of understanding your marketing environment include:

 Assisting you in understanding the company's competitors and the

market
 Supporting you in identifying your current and potential customers
 Helping you determine future marketing plans
 Aiding you in assessing current trends

Types of Marketing Environment

There are primarily two types of marketing environments: external and internal.

 External Environment: This includes factors outside the company that

can impact its performance. It's further divided into the micro-
environment and the macro-environment. The micro-environment
includes close factors such as suppliers, competitors, and customers. In
contrast, the macro-environment encompasses broader societal forces like
social, technological, economic, environmental, and political trends that
can affect the entire industry.
 Internal Environment: It comprises elements within the company, such
as the organizational culture, employees, company policies, and available
technologies. Unlike many aspects of the external environment, these are
often under the firm's control.

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MICRO ENVIRONMENT
Micro environment refers to the environment, which is closely linked to the
organization, and directly affects organizational activities. It can be divided into
supply side and demand side environment. Supply side environment includes
the suppliers, marketing intermediaries, and competitors who offer raw
materials or supply products. On the other hand, demand side environment
includes customers who consume products.
I. Suppliers
It provides raw material to produce goods and services. Suppliers can influence
the profit of an organization because the price of raw material determines the
final price of the product. Organizations need to monitor suppliers on a regular
basis to know the supply shortages and change in the price of inputs.
II. Marketing Intermediaries
It helps organizations in establishing a link with customers. They help in
promoting, selling, and distributing products.
Marketing intermediaries include the following:
i. Resellers:
It purchases the products from the organizations and sell to the customers.
Examples of resellers are wholesalers and retailers.
ii. Distribution Centers
It helps organizations to store the goods. A warehouse is an example of
distribution center.
III. Marketing Agencies:
It promotes the organization’s products by making the customers aware about
benefits of products. An advertising agency is an example of marketing agency.
IV. Financial Intermediaries:
It provides finance for the business transactions. Examples of financial
intermediaries are banks, credit organizations, and insurance organizations.

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V. Customers:
Customers buy the product of the organization for final consumption. The main
goal of an organization is customer satisfaction. The organization undertakes
the research and development activities to analyze the needs of customers and
manufacture products according to those needs.
VI. Competitors:
It helps an organization to differentiate its product to maintain position in the
market. Competition refers to a situation where various organizations offer
similar products and try to gain market share by adopting different marketing
strategies.
MACRO ENVIRONMENT
Macro environment involves a set of environmental factors that is beyond the
control of an organization. These factors influence the organizational activities
to a significant extent. Macro environment is subject to constant change. The
changes in macro environment bring opportunities and threats in an
organization.
VII. Demographic Environment
Demographic environment is the scientific study of human population in terms
of elements, such as age, gender, education, occupation, income, and location.
It also includes the increasing role of women and technology. These elements are
also called as demographic variables. Before marketing a product, a marketer
collects the information to find the suitable market for the product.
Demographic environment is responsible for the variation in the tastes and
preferences and buying patterns of individuals. The changes in demographic
environment persuade an organization to modify marketing strategies to address
the altering needs of customers.
VIII. Economic Environment:
Economic environment affects the organization’s costs structure and customers’
purchasing power. The purchasing power of a customer depends on the current
income, prices of the product, savings, and credit availability.

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The factors economic environment is as follows:
I. Inflation:
It influences the customers’ demand for different products. For example, higher
petrol prices lead to a fall in demand for cars.
II. Interest Rates:
It determines the borrowing activities of the organization. For example, increase
in interest rates for loan may lead organizations to cut their important
activities.
iii. Unemployment:
It leads to a no income state, which affects the purchasing power of an
individual.
IX. Customer Income:
It regulates the buying behavior of a customer. The change in the customer’s
income leads to changed spending patterns for the products, such as food and
clothing.
X. Monetary and Fiscal Policy
It affects all the organizations. The monetary policy stabilizes the economy by
controlling the interest rates and money supply in an economy; whereas, fiscal
policy regulates the government spending in various areas by collecting the
revenue from the citizens by taxing their income.
 Natural Environment
Natural environment consists of natural resources, which are needed as raw
materials to manufacture products by the organization. The marketing
activities affect these natural resources, such as depletion of ozone layer due to
the use of chemicals. The corrosion of the natural environment is increasing
day-by-day and is becoming a global problem.
I Natural Resources
It serves as raw material for manufacturing various products. Every organization
consumes natural resources for the production of its products. Organizations
are realizing the problem of depletion of resources and trying best to use these
resources judiciously. Thus, some organizations have indulged in de-marketing
their products. For example, Indian Oil Corporation (IOC) tries to reduce the
demand for its products by promoting advertisements, such as Save Oil, Save
India.

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II Weather
It leads to opportunities or threats for the organizations. For example, in
summer, demand for water coolers, air conditioners, cotton clothes, and water
increases while in winter, the demand for woolen clothes and room heaters
rises. The marketing environment is greatly influenced by the weather
conditions of a country.
III Pollution:
It includes air, water, and noise pollution, which lead to environmental
degradation. Now-a-days, organizations tend to promote environment friendly
products through its marketing activities. For example, the organizations
promote the usage of jute and paper bags instead of plastic bags.
 Socio-Cultural Environment:
Socio-cultural environment comprises forces, such as society’s basic values,
attitudes, perception, and behavior. These forces help in determining that
what type of products customers prefer, what influences the purchase
attitude or decision, which brand they prefer, and at what time they buy the
products. The socio-cultural environment explains the characteristics of the
society in which the organization exists. The analysis of socio-cultural
environment helps an organization in identifying the threats and
opportunities in an organization. For example, the lifestyles of people are
changing day-by-day. Now, the women are perceived as an active earning
member of the family. If all the members of a family are working, then the
family has less time to spend for shopping. This has led to the development
of shopping malls and super markets, where individuals could get

TOPIC THREE
UNDERSTANDING CONSUMER BUYING BEHAVIOUR

Understanding how different types of consumers think, feel, and act can
significantly influence a company's marketing strategies and overall
performance. It provides critical insights into the motivations that drive
purchasing decisions, enabling companies to tailor their business operations.

By analyzing consumer behavior, organizations can identify emerging trends

and shifts in market dynamics, allowing them to adapt swiftly and maintain a
competitive edge. This knowledge fosters innovation, enhances customer
satisfaction, and cultivates brand loyalty, ultimately driving growth in an
ever- evolving business landscape.

Consumer buying behaviour is the process and actions individuals undertake

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when making purchasing decisions.

Reasons why organizations invest in understanding consumer behavior

 Enhanced marketing strategies
Businesses develop targeted, custom messaging and promotions that capture
attention and drive sales, significantly increasing the likelihood of conversion.
 Product development and innovation
Consumer behaviour insights help companies listen to feedback, observe
purchasing patterns, and innovate and improve their products.
 Customer retention and loyalty
Understanding consumer behaviour assists in creating personalized
experiences and addressing pain points, which in turn become the key to
building strong relationships with customers.
 Competitive advantage
Companies anticipate market shifts and understand customer points of view
to position themselves effectively against competitors, ensuring they capture a
large market share.

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 Informed decision-making
Investing in consumer behaviour analysis equips companies with data-driven
insights that inform strategic decisions. This knowledge helps businesses
allocate resources efficiently, optimize pricing strategies, and manage
inventory effectively.

The Consumer buying process.

What are the 4 Types of Consumer Behavior?

A consumer’s buying decision depends on the type of products that they

need to buy. The behavior of a consumer while buying a coffee is a lot
different from while buying a car.
There are four types of consumer buying behavior:
 Complex buying behavior
 Dissonance-reducing buying behavior
 Habitual buying behavior
 Variety seeking behavior

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Complex Buying Behavior

Complex buying behavior is encountered, particularly when consumers are

buying an expensive product. In this infrequent transaction, consumers are highly
involved in the purchase decision. Consumers will research thoroughly before
committing to invest.

Consumer behaves very attentively when buying an expensive product or a

product that is unfamiliar to them. When the risk of buying a product is very
high, a consumer consults friends, family, and experts before making the
decision.

Dissonance-Reducing Buying Behavior

In dissonance-reducing buying behavior, consumer involvement is very high. This

might be due to high prices and infrequent purchases. In addition, there is a
low availability of choices with fewer significant differences among brands. In
this type, a consumer buys an easily available product.

Consumers will be forced to buy goods with few choices, and therefore, they
will be left with limited decision-making. Based on the products available,
time limitations, or budget limitations, consumers buy certain products without
doing much research.

Habitual Buying Behavior

Habitual buying behavior is depicted when a consumer has low involvement

in a purchase decision. In this case, the consumer is perceiving only a few
significant differences between brands.

When consumers are buying products that they use for their daily routine, they
do not put a lot of thought. They either buy their favorite brand or the one that
they use regularly – or the one available in the store or the one that costs the
least.

Variety-Seeking Buying Behavior

In variety-seeking consumer behavior, consumer involvement is low. There

are significant differences between brands. Here consumers often do a lot of
brand switching. The cost of switching products is low, and hence consumers
might want to try out new products just out of curiosity or boredom. Consumers
here, generally buy different products not because of dissatisfaction but mainly
with an urge to seek variety.

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Factors Influencing Consumer Behaviour
The marketers try to understand the actions of the consumers in the
marketplace and the underlying motives for such actions. These motives are
the factors that influence the consumer behaviour. These are:

 Psychological (motivation, perception, learning, beliefs and attitudes)

 Personal (age and life-cycle stage, occupation,
economic circumstances, lifestyle, personality and self-
concept)
 Social (reference groups, family, roles and status)
 Cultural (culture, subculture, social class system)

SALES FORECASTING AND MARKETING RESEARCH

A sales forecast predicts the value of sales over a period of time. It becomes the
basis of marketing mix and sales planning.

A short-term sales forecast (say for a period of one year) when linked to the sales

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budget helps in the preparation of an overall budget for the firm as a whole. The
short-term sales forecast in effect also provides the essential financial dimension
to sales in terms of expected sales revenue and expenses required. Also, it helps
in assessing the cash inflow and outflow needs and their sources.

A long-term sales forecast (say for a period of 5 years or so) on the other hand,
focuses on capital budgeting needs and process of the firm. It provides for
changing the marketing strategy of the firm, if needed, and includes reference to
emerging product market needs, new market segments to be catered, review of
distribution network and promotional programmes, organization of Salesforce,
and marketing set up. The long-term sales forecast triggers the task of aligning
the production, procurement, financial and other functional needs of the firm
with the finalized sales forecast.

Information Needs for a Sales Forecast

Use of reliable, up-to-date and relevant information is most critical aspect of

sales forecasting. The information required for a sales forecast should cover:

 An assessment of the total market size

 An appreciation of the market trends
 Innovations which may have an impact on the market
 Market trends in foreign countries where the market pattern is in advance
of the
Domestic market
 An evaluation of the market share obtained
 An evaluation of competitive strengths
 The criteria on which purchase decisions are likely to be made
 Assessment of elements at work in the market which will influence sales
 The influence in the market of competitors

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 The level of sales needed by the company to obtain optimum use of
resources
 The image of the Company in the market
 The marketing strategy of the company to capitalize on its strengths and
overcome its weaknesses
 An evaluation of the market share which can be obtained
 Assessment of factors within the company which will influence sales levels
 Planned distribution and sales promotion activities by the company

What are the different types of sales forecasting?

Sales managers can apply different techniques when forecasting sales based on
the information they need and value most. While there are several sales
forecasting methods one could employ, these can be categorized into these two
primary forecasting types:

 Qualitative sales forecasting: Based on non-tangible characteristics,

qualitative forecasting relies on expert opinion, judgment, and insight to
predict potential future sales and revenue.
 Quantitative sales forecasting: This sales forecasting method focuses
purely on the data, using historical revenue, sales figures, and trends to
predict upcoming revenue outcomes.

What are the core sales forecasting models?

Just like there is more than one way to win a sale, there is more than one way
to create a sales forecast. There are five primary sales forecasting models, each
with its own definition, purpose, and process:

 Trend analysis
 Regression analysis
 Time series analysis
 Causal analysis
 Judgmental analysis

Trend analysis

Trend analysis is a type of sales prediction model that analyzes past sales data
to find patterns. Patterns can exist in many different categories, including
seasonality, geographic location, target audience, and more. The findings from a
sales trend analysis are used to make revenue projections and track potential
changes in performance.

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The trend analysis model is essential because it gives companies insight into
short- and long-term performance. Companies can focus on different segments
of their business to come up with an educated guess about what they need to
continue or stop doing to alter future results.

For example, a high-grossing candle and home fragrance company may use
trend analysis to understand which popular scents have been in the most
demand over winter holidays for the past five years.

This information can then be used to more accurately plan for upcoming
production needs, create marketing campaigns, and determine how they can
either recreate or build on past revenue achievements.

Regression analysis

Regression analysis is the sales forecasting model that inspects how individual
sales strategies (the independent variable) affect performance (the dependent
variable) over time.

The model uses past performance data to predict what could potentially happen
if the strategy continued or if another was used in its place. This sales forecasting
method is more heavily rooted in math than others.

Regression analysis is essential for companies that need to gain a deeper

understanding of their sales performance and how they can change it on a
detailed, granular level.

To conduct this analysis, sales teams will need to have a clear understanding of
what is affecting their sales both internally and externally. They’ll also need to
have collected enough data regarding these variables over time to come up
with an accurate forecast.

That also means the variables they assess will have to be measurable, which is
why this method typically examines sales strategies over time since companies
have access to all the information needed.

Time series analysis

Time series analysis in sales forecasting uses data collected at various time
intervals to track changes over time. This can be used to create new sales
strategies, determine the likelihood of a particular outcome, or understand the
underlying cause of a predicted outcome.

One of the biggest benefits of using the time series analysis model over other
sales forecasting methods is the ability to predict patterns over seasons, cycles,

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and trends. It’s also helpful in uncovering irregular past data points that don’t
create patterns.

To properly use time series analysis to make predictions for the future, you’ll
need to record your sales data consistently. Some real-world applications for this
sales forecasting method include pricing out physical goods affected by supply
chain shortages and revenue anomaly detection, which should be considered
when planning next quarter’s sales strategy.

Causal analysis

Causal analysis is a type of sales forecasting technique that assesses and

predicts how market fluctuations will affect a company’s profits. This type of
forecasting makes it possible for sales teams to develop strategies and plans for
the foreseeable future. It can also help them develop sales and advertising
models that make goals as future-proof as humanly possible.

A causal sales forecasting model starts with assessing the market’s current state
and identifying the factors that will influence its direction over a certain period.
These include the company’s current position, the independent variables, and
the dependent factors.

For sales teams, causal analysis ensures your department is ready for
anticipated demand. This means you can stay on top of potential slow periods,
such as a recession or industry shakeup, as well as periods of high growth
where a boom in the market is soon expected.

As we mentioned earlier, this sales forecasting method isn’t guaranteed to be

completely accurate. But it does help leaders avoid unexpectedly getting caught
in the rain.

Judgmental analysis

Businesses typically employ the judgmental analysis sales forecasting model

when they have little to no historical data to work with. But it’s also often used
in situations where leaders are unsure about the market or feel it’s time for a
more innovative sales and marketing approach.

There are a few advantages to choosing a judgmental analysis approach. One is

the ability to include qualitative elements like experience and related insights
in forecasting. Another is that it opens the door to new ideas, tactics, and
strategies regardless of data gathered over the years.

Learning how to forecast sales in this way also makes it easy to pivot when faced
with changes in the market or your business. It eliminates the need to wade

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through data reports for an adjusted approach, allowing companies and teams
to adapt and recover quickly.

That said, a sales forecasting model that’s almost entirely reliant on cognitive
input invites the potential for human error. There’s also the issue of diversity,
as the judgmental analysis technique relies heavily on the individuals available
to contribute to the forecast. Teams that lack diversity may not offer as much in
terms of idea and input quality.

Test-Market Analysis Forecasting

The forecasting method of Test-Market Analysis allows you to roll out your
product or service to a specific set of people depending on their demands. You
can use the rollout findings to produce a more accurate future market projection.

Historical Forecasting

Historical forecasting relies on past sales data to predict future performance but
does not account for dynamic market developments. For example, if your
competitors executed a promotional campaign, it could result in a drop in sales.
Using this strategy, you anticipate the MRR based on historical trends, such as
assuming a 10% annual growth rate.

MARKETING RESEARCH
Marketing research is a systematic and objective study of problems pertaining
to the marketing of goods and services. It is applicable to any area of marketing.
Research is the only tool an organization has to keep in contact with its external
operating environment.

What Is Market Research?

Market research examines consumer behavior and trends in the economy to

help a business develop and fine-tune its business idea and strategy. It helps a
business understand its target market by gathering and analyzing data

It’s crucial to understand your consumer base from the outset. Market research
lets you reduce risks even while your business is still just a gleam in your eye.

Gather demographic information to better understand opportunities and

limitations for gaining customers. This could include population data on age,
wealth, family, interests, or anything else that’s relevant for your business.

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Then answer the following questions to get a good sense of your market:

 Demand: Is there a desire for your product or service?

 Market size: How many people would be interested in your offering?
 Economic indicators: What is the income range and employment rate?
 Location: Where do your customers live and where can your business
reach?
 Market saturation: How many similar options are already available to
consumers?
 Pricing: What do potential customers pay for these alternatives?

Six steps in the market research process

Six main steps that occur in a typical market research study process - from
initial problem identification to acting on the final results are:

1. Identify the problem or objective

2. Develop your research plan
3. Gather data and information
4. Analyze data and information
5. Present findings
6. Act on your findings

Step 1. Identify the problem or objective

To better understand an area of your business, the first task is to define the
business objective and the research objective. For some projects, these objectives
might be broad while for others, they might be very narrow. Whichever type of
project you’re undertaking, it’s worth asking yourself: what do I want to know by
the end of this project? This will help you to identify your objectives.

For example, a large strategic study around a business’s social media activity
might have an overall business objective of creating a framework to refer to
whenever a post is made on social media. Its research objective might be to
‘identify social media usage and preferences amongst our audience.’ Within this
will be other objectives, such as ‘segment consumers into user groups to optimize
messaging’, ‘understand social media usage patterns’, and so on, all of which
will feed into the overall business objective of better aligning social media
posts through an identified framework.

Step 2. Develop your research plan

Once you know what your research goals and objectives are, it’s time to decide
how you’re going to get your answers.

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Research design is a crucial part of the research process; quality data collection
right means reliable results. The way you collect your data will depend on the
type of information you’re looking for and the research methods available to you.

There are two broad types of research: primary research and secondary
research. Primary research is research that you design yourself - or with the
help of research experts - and is customized to your unique research objectives.
Secondary research means using data that already exists, either in the public
realm (e.g. published government statistics) or sold by commercial intelligence
agencies. Keep in mind that secondary data (e.g. sales data) is unlikely to be
entirely focused on your business problem, nor may it be up-to-date, but it can
help set a good foundation.

Within primary research, quantitative research and qualitative research are the
main methodologies.

Quantitative research includes questionnaire-based surveys that ask for the

views of a relatively large sample of people. For example, you might want to know
what percentage of people eat fruit every day, or which price point will
maximize sales of your product. Questions are usually closed, using rating
scales or yes/no answers, although open-ended questions can also be included.
This produces numerical data that describes what an audience thinks and does.
Statistics can be applied to these numerical insights for significance and
confidence levels, indicating which insights might be best to focus decisions
around. There are a variety of advanced methodologies to include in
quantitative research, all dependent on your desired outcome from your
dataset.

Qualitative research is more exploratory in nature. It takes a smaller sample of

people and gains spontaneous opinions that can be probed to answer research
objectives. For instance, if you’d like to know what people’s skincare routines
are, it makes sense to conduct qualitative research to build a picture of
individuals’ habits and preferences. These qual findings can then be taken into
a larger-scale quantitative research project for a number-based picture of
consumer segments. That being said, qualitative research on its own can also
address similar questions as quantitative research (e.g. what do people think of
our new advertising concept?) but through a qual format, you can get a more
emotional read on a consumer and uncover the deeper why beyond simply what
people think.

Step 3: Gather data and information

Once you have an objective and a research plan in place, it’s time to conduct
your study through data collection - or, fieldwork. Quantitative research is
largely online these days - either via email, text, social media, or on websites.
Postal and face-to-face interviews, though far less common, also exist - and

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might be preferable for certain respondent groups you‘re trying to reach: like

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those without access to the internet or smartphones. Companies can gather
quantitative data through their own supplied list of contacts, through social
media/website traffic, or through the use of a panel provider who has the ability
to target and contact the appropriate respondents for your study’s desired
sample group.

As for qualitative research, data collection is typically left to focus groups, depth
interviews, or ethnographic research, though online qualitative fieldwork is also
rising in popularity through things like video surveys. So what do each of these
qualitative formats look like?

Focus groups generally involve 5-8 respondents coming together for a

discussion led by a moderator. A discussion guide is drawn up prior to the
discussion to outline the main subjects to cover, but respondents are free to
talk spontaneously within those parameters, gently steered by the moderator.
This ensures that as many pertinent issues as possible are raised by
respondents.

Depth interviews follow a similar structure, except only one or two respondents
are interviewed. The number of focus groups and interviews within a research
project will depend on the diversity of the target market and geographical
locations that the research needs to cover.

Ethnographic research allows researchers to really live a consumers’ experience

by accompanying them on a decision-making process or witnessing the usage
of a product - perhaps going on a shopping trip, or being with the respondent
as they cook a meal. Observation coupled with interviewing brings even further
depth to an understanding of the research issues.

Lastly, online qual research comes in the form of real-time interviews or

recorded video feedback from respondents. Video clips posted by participants are
particularly useful as they allow respondents to answer in their own time, and
can include an ethnographic element (e.g. video diaries documenting an
activity of interest - such as doing the laundry or washing dishes with certain
products).

Step 4. Analyze data and information

Data analysis for quantitative research has improved incredibly over the years
and is now generally done using highly sophisticated machine-learning
computer software and automated analysis tools. You will have decided at the
research design phase which research tools and data analyses are most
relevant to your needs, so running the data through that software should be
relatively simple at this step in your research process. Some of the quantitative
analysis techniques you might want to use are:

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 Market Segmentation: to define and separate the various groups of
consumers in your market

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 Conjoint Analysis: to compare the appeal of different product or service
concepts, and understand how different elements of the concepts affect
overall appeal (e.g. price, color, or product features)
 A/B Tests: to compare reactions to product concepts, communications,
or advertising routes using equally structured groups of participants
 TURF Analysis: to understand the optimal portfolio of products in order to
reach the greatest number of consumers
 Price Sensitivity: to explore how changes in price affect the intended take-
up of a product or service
 Qualitative research is analyzed using transcripts to pull out trends in
opinion, either manually or using an AI-drive software program that can
identify the frequency and use of words, sentiments, and respondent
emotions.

Step 5. Present findings

At this step, you’ve conducted fieldwork and analyzed the findings. Now it’s
time to present them to your stakeholders and internal audience.

The key goal here is to make your findings come alive so that those who have not
been part of the research can quickly understand what the objectives were and
the insights you have uncovered. While analysis can be complex, the final
presentation of insights shouldn’t be - they should point to the concrete actions
that need to be taken as a result of the research.

Visual representations are always a good way to illustrate findings and to tell a
story - think customized graphs, charts, maps, photos, and videos within a live
dashboard. A good presentation should include a few key elements: some context
about the business problem, a tension/disconnect found within the data set
that is pushing you to investigate further, and the resolution with a logical
explanation for the disconnect using the data in a meaningful way. This is the
blueprint for good storytelling to keep the audience engaged. Keeping your
presentation of findings simple, clear, and in a live format such as a dashboard
is a great way to share findings across the organization without version control
issues.

Step 6: Act on your findings

You did your research for a reason - to improve your business - so now it’s time
to take that action. This might be setting up that social media framework, or
pressing ‘go’ on the production of the ideal fruit juice package design. It could
also be putting in place long-term strategies: monitoring ongoing customer

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satisfaction, taking actions to foster customer loyalty, or developing product
ranges that meet the needs of all your consumers. Acting on your findings also
means staying alert to changes in consumer demand or category trends. This
means the data you have obtained from your research might need to be revisited,
or new research launched, at some point down the line.

MARKET SEGMENTATION
In marketing, market segmentation or customer segmentation is the process of
dividing a consumer or business market into meaningful sub-groups of current
or potential customers (or consumers) known as segments. Its purpose is to
identify profitable and growing segments that a company can target with
distinct marketing strategies
Market segmentation is a powerful strategy that enables businesses to design
and market their products and services more effectively by dividing the
broader market into smaller segments based on shared characteristics such as
age, gender, or values. They can then target these smaller markets directly with
products and advertising tailored to their needs and tastes.

TYPES OF MARKET SEGMENTATION

There are five primary types of market segmentation, which include the following:

1. Geographic

Geographic segmentation works by grouping potential customers by the areas in

which they live or reside. Example geographic market segments include the
following:

 North America.
 Europe, Middle East, Africa.
 Midwest United States.
 Northeast United States.
 New York, New Jersey and Connecticut.
 Northern California and Southern California.
 Cuyahoga County, Ohio.

For geographic market segments, a brand might choose to offer products and
services tailored to the following:

 Local or regional preferences, such as seasonal offerings like beach and

ski season.
 Regional tastes like barbecue in the Southern or Midwestern U.S.

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 Local laws and regulations.

Geographic segmentation is relatively simple to manage, assuming the brand

has the location and address information of potential customers.

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2. Demographic

Demographic segmentation works by grouping potential customers by their

individual attributes, such as age, ethnicity, education, job title, industry,
marital status and income. A brand might define a demographic market segment
based on a single attribute or a combination of several. Examples of demographic
market segments include the following:

 Single men.
 Married couples with two or more children.
 Women with an annual income above $65,000.
 Women with a master's degree or related graduate degree.
 Men with senior-level job titles in the automobile industry.

Demographic segmentation is relatively simple to manage, assuming the brand

has the necessary demographic information of potential customers.

3. Behavioral

Behavioral segmentation works by grouping potential customers based on

observed actions or behaviors. Actions can include past purchases, lifestyle
choices, travel destinations and daily routines. Behavioral data can be observed
or queried via online interactions, such as social media posts, forum posts and
published reviews.

Examples of behavioral market segments include the following:

 People who purchased a new home in the past 12 months.

 People who take more than 10 flights per year.
 People who drive their kids to sports practices multiple times per week.
 People who had more than $1,000 in online purchases in the past year.

Behavioral segmentation is more complex to manage because it requires brands

to have access to behavioral data. It also requires the necessary tools to manage
that data and create market segments based on it.

4. Psychographic

Psychographic segmentation works by grouping potential customers based on

their beliefs, values, lifestyles, opinions and interests. Brands use surveys,
interviews and focus groups to determine psychographic attributes of potential
customers.

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Examples of psychographic market segments include the following:

 People interested in healthy eating and physical fitness.

 People who voted for a particular candidate for office.
 People who practice a particular religion.
 People who believe sustainability is important.

Psychographic segmentation is more complex to manage because it requires

that brands acquire the necessary psychographic data from potential
customers. In addition, tools are needed to manage that data and create market
segments based on it.

5. Firmographic

Firmographic segmentation works by grouping potential business customers

based on characteristics of the companies they represent. It's similar to
demographic segmentation but focuses on organizations instead and is often
used in business-to-business marketing.

Examples of firmographic segments include the following:

 Company industry, such as technology, healthcare or finance.

 Company size, such as small, medium or large businesses.
 Company revenue.
 Company location.

Firmographic segmentation enables brands to tailor their marketing strategies

to specific types of businesses. This segmentation type can be more complex,
though, as it requires access to a company's relevant data.

THE BENEFITS OF MARKET SEGMENTATION

1. Stronger marketing messages: You no longer have to be generic and

vague – you can speak directly to a specific group of people in ways they
can relate to, because you understand their characteristics, wants, and
needs.
2. Targeted digital advertising: Market segmentation helps you understand
and define your audience’s characteristics, so you can direct your online
marketing efforts to specific ages, locations, buying habits, interests etc.
3. Developing effective marketing strategies: Knowing your target
audience gives you a head start about what methods, tactics and solutions
they will be most responsive to.
4. Better response rates and lower acquisition costs: will result from
creating your marketing communications both in ad messaging and

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advanced targeting on digital platforms like Facebook and Google using your
segmentation.
5. Attracting the right customers: targeted, clear, and direct messaging
attracts the people you want to buy from you.
6. Increasing brand loyalty: when customers feel understood, uniquely well
served, and trusting, they are more likely to stick with your brand.
7. Differentiating your brand from the competition: More specific,
personal messaging makes your brand stand out.
8. Identifying niche markets: segmentation can uncover not only
underserved markets, but also new ways of serving existing markets –
opportunities which can be used to grow your brand.
9. Staying on message: As segmentation is so linear, it’s easy to stay on
track with your marketing strategies, and not get distracted into less
effective areas.
10. Driving growth: You can encourage customers to buy from you again, or
trade up from a lower-priced product or service.
11. Enhanced profits: Different customers have different disposable incomes;
prices can be set according to how much they are willing to spend.
Knowing this can ensure you don’t oversell (or undersell) yourself.
12. Product development: You’ll be able to design new products and services
with the needs of your customers top of mind, and develop different
products that cater to your different customer base areas.

Steps When Implementing Market Segmentation

There are five basic stages of market segmentation

1. Define your target market. Before segmenting, businesses must first

understand their broader target market. This is done by looking at
industry trends, customer needs, and pain points and determining how
well their product or service meets the market's needs.
2. Understand your market. Data-driven research is crucial for effective
segmentation. Businesses should run surveys and focus groups, track
online behavior and engagement, and, if possible, track customer
purchase history to identify buying trends.
3. Segment your market. Once the broader target market is defined and
well understood, it can be divided into clear, meaningful segments. The
emphasis here is on "meaningful." Just because two people are the same
age or gender, for example, doesn't mean they should be in the same
market segment for every product or service.
4. Create customer personas. Businesses should use the data collected to
create detailed customer personas to represent each segment, including
a name and description, motivations and pain points, and buying
behaviors.
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5. Test your marketing strategy. Once the segments are created,
companies must develop, test, and optimize new marketing strategies with
those segments in mind. That includes A/B testing of marketing messages
and visuals, analyzing the campaign performance through metrics like
engagement and conversion rates, and refining as needed.

Challenges and Considerations in Market Segmentation

While market segmentation can be a powerful tool, it involves facing plenty of

challenges.

1. Cost. Segmentation is more expensive and time-consuming than ad

campaigns aimed at one generic market.
2. Defining segments too broadly. Segments need to be clearly defined and
distinct from each other.
3. Making segments too small. While it's great to make customers feel like
they're getting a personalized experience, segments need to be large
enough to justify the cost of targeting them.
4. Choosing the right segments to focus on. It's not just about choosing a
big segment, though. Businesses need to identify segments that are the
right fit for their product or service. Research and data are crucial to
making this determination.
5. Not having enough data. Segmenting effectively and marketing to specific
segments requires obtaining both plentiful and accurate data to provide
the necessary insights—first, in determining the right segment to focus on
and then marketing to it.

PRODUCT PLANNING AND DEVELOPMENT

Bringing a product to market requires a well-structured product planning
process to ensure it meets customer expectations and business goals. Without
the right approach, businesses risk wasting resources, missing market
opportunities, and struggling to keep up with competitors.
What is product planning?
Product planning is the process of developing successful products to offer your
customers. It includes all aspects of the product development cycle, including
market research, strategic planning, product design and development,
manufacturing and pricing.

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THE 7 STAGES OF NEW PRODUCT DEVELOPMENT: A STEP-BY-STEP

PROCESS

Idea generation

Idea generation involves brainstorming for new product ideas or ways to improve
an existing product. During product discovery, companies examine market
trends, conduct product research, and dig deep into users' wants and needs to
identify a problem and propose innovative solutions.

A SWOT Analysis is a framework for evaluating your product’s strengths,

weaknesses, opportunities, and threats. It can be a very effective way to identify
the problematic areas of your product and understand where the greatest
opportunities lie.

Idea screening

This second step of new product development revolves around screening all your
generated ideas and picking only the ones with the highest chance of success.
Deciding which ideas to pursue and discard depends on many factors, including
the expected benefits to your consumers, product improvements most needed,
technical feasibility, or marketing potential.

The idea screening stage is best carried out within the company. Experts from
different teams can help you check aspects such as the technical requirements,
resources needed, and marketability of your idea.

Concept development and testing

All ideas passing the screening stage are developed into concepts. A product
concept is a detailed description or blueprint of your idea. It should indicate the

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target market for your product, the features and benefits of your solution that
may appeal to your customers, and the proposed price for the product. A concept
should also contain the estimated cost of designing, developing, and launching
the product.

Developing alternative product concepts will help you determine how attractive
each concept is to customers and select the one with the highest value.

Marketing strategy and business analysis

Now that you’ve selected the concept, it’s time to put together an initial
marketing strategy to introduce the product to the market and analyze the value
of your solution from a business perspective.

 The marketing strategy serves to guide the positioning, pricing, and

promotion of your new product. Once the marketing strategy is planned,
product management can evaluate the business attractiveness of the
product idea.
 The business analysis comprises a review of the sales forecasts,
expected costs, and profit projections. If they satisfy the company’s
objectives, the product can move to the product development stage.

Product development

The product development stage consists of developing the product concept into
a finished, marketable product. Your product development process and the
stages you’ll go through will depend on your company’s preference for
development, whether it’s agile product development, waterfall, or another viable
alternative.

This stage usually involves creating the prototype and testing it with users to see
how they interact with it and collect feedback. Prototype testing allows product
teams to validate design decisions and uncover any flaws or usability issues
before handing the designs to the development team.

Test marketing

Test marketing involves releasing the finished product to a sample market to

evaluate its performance under the predetermined marketing strategy.

There are two testing methods you can employ:

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 Alpha testing is software testing used to identify bugs before releasing the
product to the public
 Beta testing is an opportunity for actual users to use the product and
give their feedback about it

The goal of the test marketing stage is to validate the entire concept behind the
new product and get ready to launch the product.

7. Product launch

At this point, you’re ready to introduce your new product to the market. Ensure
your Product, Marketing, Sales, and Customer Support teams are in place to
guarantee a successful launch and monitor its performance.

Remember, product launch is a critical part of the broader commercialization

stage.

TYPES OF PRODUCTS

Consumer Products and Industrial or Business Products

Consumer and industrial products are the two broad categories that all products
fall under. The main differentiating factor between these two types of capital
goods is their end-use.

Consumer Products

As the term suggests, consumer products are goods and services purchased by
the final consumer for personal consumption. These include food, clothing,
electronics, and other goods that meet every day needs and wants. As discussed
above, consumer products are further divided into convenience goods, shopping,
specialty goods, and unsought products, depending on the buying and
purchasing behavior they induce in consumers.

Business or Industrial Products

On the other hand, business or industrial products are goods and services
bought by individuals or organizations for further processing, business use, or
to facilitate an organization's operations. These are not intended for personal
consumption. Instead, they are used to produce other goods or services, resold

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at a profit, or assist in the buyer's operations. Industrial goods and products
include raw materials, machinery, office supplies, and business services.

CONSUMER PRODUCTS

Consumer products can be broadly classified into four categories:

 Convenience Products

Convenience products are those items that are regularly consumed and where
convenience goods are readily available. They are typically low in cost and are
purchased frequently by consumers. Such convenience products may include
everyday items such as bread, milk, toiletries, and other household goods.

 Shopping Products

Shopping products are those goods and services consumers buy less frequently
and typically spend more time and effort deciding. These shopping products
are generally more expensive than convenience products and are expected to
last longer. Examples of shopping products include clothing, appliances,
furniture, and electronics.

 Specialty Products

Specialty products are those goods or services that exhibit unique

characteristics and hold particular significance for the buyer. Often associated
with a brand name or a specific feature of a consumer product, these product
repair services also tend to have a high perceived value, prompting buyers to
make a special effort to purchase them. Examples of such products include
luxury items like high-end cars (e.g., Tesla, Ferrari), designer handbags (e.g.,
Gucci, Louis Vuitton), expensive watches (e.g., Rolex, Patek Philippe), and high-
end electronics (e.g., Apple's MacBook Pro).

 Unsought Products

Unsought products are those goods or services that consumers typically need to
think of buying, are unaware of, or do not usually plan to purchase. The category
includes products and other brands that consumers still need to learn about or
know about but are not interested in buying. Examples of unsought products
include life insurance, funeral services, or even innovative new technologies that
the market is not aware of yet

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INDUSTRIAL OR BUSINESS PRODUCTS

The three types of products that fall under the classification of industrial
products are the following:

 Entering Products

Entering products are industrial products or business outputs utilized as inputs

or components in manufacturing other goods. They play a critical role in the
production as they are transformed or incorporated into the final product.
These products are further divided into two types: raw materials and
fabricating materials.

 Raw Materials

Raw materials are typically in their natural, unprocessed state and are used
directly in producing goods. These form the essential elements that are converted
into finished products. Examples of raw materials include cotton, used in the
textile industry; crude oil, used in petroleum refining; and wheat, used in the
bakery industry.

 Fabrication Materials

On the other hand, fabrication materials are more processed or refined and used
to create other goods. While these are also used as inputs when producing capital
goods, they have usually undergone further processing or some transformation
before use. For example, steel sheets are used in car manufacturing, processed
leather is used in making shoes or bags, and refined sugar is used in
confectionery production.

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WHAT IS THE PRODUCT LIFE CYCLE?

The product life cycle is the length of time that a product is available to
customers. It starts when a product (a good or a service) is introduced into the
market and ends when it's removed from the shelves.

This concept is used by management and marketing professionals to make

marketing and sales decisions, such as whether or not to increase advertising,
reduce prices, expand to new markets, or redesign packaging. The process of
strategizing ways to continuously support and maintain a product is called
product life cycle management.

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Stages in the Product Life Cycle

The four stages in the product life cycle are:

1. Introduction
2. Growth
3. Maturity
4. Decline

1. Introduction Stage

When a product first launches, sales will typically be low and grow slowly. In this
stage, company profit is small (if any) as the product is new and untested. The
introduction stage requires significant marketing efforts, as customers may be
unwilling or unlikely to test the product. There are no benefits from economies
of scale, as production capacity is not maximized.

The underlying goal in the introduction stage is to gain widespread product

recognition and stimulate trials of the product by consumers. Marketing efforts
should be focused on the customer base of innovators – those most likely to buy
a new product. There are two price-setting strategies in the introduction stage:

 Price skimming: Charging an initially high price and gradually reducing

(“skimming”) the price as the market grows.
 Price penetration: Establishing a low price to quickly enter the
marketplace and capture market share, before increasing prices relative
to market growth.

2. Growth Stage

If the product continues to thrive and meet market needs, the product will enter
the growth stage. In the growth stage, sales revenue usually grows exponentially
from the take-off point. Economies of scale are realized as sales revenues
increase faster than costs and production reaches capacity.

Competition in the growth stage is often fierce, as competitors introduce

similar products. In the growth stage, the market grows, competition
intensifies, sales rise, and the number of customers increases. Price
undercutting in the growth stage tends to be rare, as companies in this stage
can increase their sales by attracting new customers to their product offerings.

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3. Maturity Stage

In this stage, price undercutting and increased promotional efforts are common
as companies try to capture customers from competitors. Due to fierce
competition, weaker competitors will eventually exit the marketplace – the
shake-out. The strongest players in the market remain to saturate and dominate
the stable market.

The biggest challenge in the maturity stage is trying to maintain profitability and
prevent sales from declining. Retaining customer brand loyalty is key in the
maturity stage. In addition, to re-innovate itself, companies typically employ
strategies such as market development, product development, or marketing
innovation to ensure that the product remains successful and stays in the
maturity stage.

4. Decline Stage

In the decline stage, sales of the product start to fall and profitability decreases.
This is primarily due to the market entry of other innovative or substitute
products that satisfy customer needs better than the current product. There are
several strategies that can be employed in the decline stage, for example:

 Reduce marketing efforts and attempt to maximize the life of the product
for as long as possible (called milking or harvesting).
 Slowly reducing distribution channels and pulling the product from
underperforming geographic areas. Such a strategy allows the company to
pull the product out and attempt to introduce a replacement product.
 Selling the product to a niche operator or subcontractor. This allows the
company to dispose of a low-profit product while retaining loyal customers.

PRODUCT PRICING

From sales, to profits to market position, the selling price of your product or
service isn’t something to take lightly — and can ultimately make or break your
success. But in a highly competitive market, how do you develop a pricing
strategy that results in a positive profit margin, and doesn’t put you out of reach
of your target customers?

What Is Product Pricing?

Product pricing refers to deciding how much to charge for a product or service
and plays a crucial role in influencing consumer behavior and determining
company profitability. It involves considering costs, competition, and what
customers are willing to pay. Pricing can affect sales and profits, so businesses
must balance setting a price that covers expenses while appealing to customers.
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Understanding Product Pricing Strategy

Your pricing strategy is the baseline you use to determine what to charge for
your products and services. There are several different options to explore, but
before you can decide which pricing strategy to use, you must first understand
your production costs and calculate the lowest price at which you’d at least break
even

 Cost-plus pricing

Also known as markup pricing, the cost-plus pricing strategy is a simple,

straightforward way to determine the price of a product. It’s mainly based on the
cost to produce each unit, without much emphasis on the prices set by
competitors. To set your price using the cost-plus pricing strategy, start by
adding up your production costs. Then determine your desired profit margin (or
markup) and add that to the production cost. That sets your selling price.

 Competitive pricing

Competitive or competition-based pricing uses competitors’ pricing as a

benchmark. Instead of starting with production costs or customer demand,
companies look at competitors’ pricing data and set their own prices at, below,
or above the industry average depending on their unique selling proposition and
their business goals. Those that offer a similar product and want to quickly grow
their market share will likely set a comparatively low price. On the other hand,
a company that’s bringing a premium product with unique features to market
may set a higher price.

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 Price skimming

Price skimming is a strategy in which a company initially charges a high price

for its products or services when it first enters the market. Doing so can signal
superior quality while creating an exclusive experience for early customers
willing to pay a premium. Companies employ this strategy when they want to
quickly recover development costs and have a buzz worthy product with enough
customers clamoring to get it—even at a high price point. Over time, though, the
company gradually lowers its product’s price to attract a larger customer base.

 Brand Positioning

It is the strategy used to set your business apart from the rest. When products
are expensive because of their quality and exclusivity, and the brand highlights
these aspects, customers see the cost as justified.

 Target Market

Your target market is defined by the group of consumers, based on age, gender,
location, socioeconomic status, and other criteria, to whom your products and
marketing are targeted. Understanding who your customers are and what they
desire helps you determine what product price they are ready to pay.

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Product Pricing Methods

 Value-Based Pricing

Value-based price bases prices on the value customers receive from products or
services rather than their production costs. Rather than focusing on competitors,
companies that use value-based pricing largely base their retail price on the
value customers attribute to the product or service (i.e., what they are willing to
pay).

In theory, money can be left on the table when setting prices too low—value-
based pricing seeks to capture that value. When correctly executed, this
approach can drastically improve profitability by allowing for higher prices
without sacrificing sales volumes.

The main drawback to the value-based method is that it requires a lot of market
research to understand the customer’s value perception, which may be too low
to justify the internal costs.

Value-based pricing works best for companies that:

 Sell unique products with a high perceived value.

 Sell lightweight and efficient products that exponentially boost revenue
growth for their clients.
 Have a limited number of competitors in the market.
 Have substantial market research data about customer perceptions.

 Competitor-Based Pricing

Competitor-based pricing is the opposite of value-based pricing. It’s a pricing

method that bases prices on those of competitors in the same market.
Companies should consider their competitors’ pricing strategies when setting
prices for their own products and services.

It’s important to note that competitor-based pricing isn’t about having the lowest
price, but rather finding a balance between charging what customers are willing
to pay and what the company needs in order to make a profit.

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Competitive pricing is well suited to companies that:

 Sell products with similar features across a competitive market.

 Have a limited number of customers and aren’t able to charge higher prices
due to competition.
 Recently entered the market and don’t have much customer data.
 Have the resources needed to track competitor pricing strategies.
 Are comfortable charging the same price as competitors, but offering a
better product or service.

Cost-Plus Pricing

The cost-plus pricing strategy is a product pricing method that uses the
production costs of a product or service as the baseline and adds an additional
percentage (the “plus”) to determine the final price.

In other words, companies figure out their costs for producing a product, then
add a profit margin on top of that cost. This helps them cover overhead
expenses, account for risk, and gain a profit.

Cost-based pricing strategies work best when the product or service has:

 High production costs (e.g., industrial goods).

 Few competitors in the market.
 A large customer base that can absorb price increases.

Market-Oriented Pricing

Market-oriented pricing is a strategy where companies set their prices based on

the current market trends and customer preferences.

This method is closely tied to competitor-based pricing, but it focuses more on

understanding customers’ needs and behaviors than tracking competitors.

Companies that use this approach try to identify what customers are willing to
pay for products or services and set prices accordingly. It’s important to note
that this method isn’t solely about setting prices low or high—it’s also about
understanding how customers respond to different pricing strategies and using
that information to make informed decisions.

Market-oriented pricing works well when businesses:

 Have a large customer base with diverse needs and preferences.

 Have a good understanding of customer needs and behaviors.
 Are able to respond quickly to changes in the market.

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Dynamic Pricing

Dynamic pricing is an approach where companies adjust their prices in real

time based on market demand, customer behavior, and other factors. This type
of pricing strategy relies heavily on analytics and data to make sure prices are
set correctly.

In terms of revenue optimization, dynamic pricing is one of the most effective

strategies. It allows companies to adjust their prices in real time and maximize
profits while still offering customers a good value.

Airlines, for example, use dynamic pricing to adjust their fares according to
customer demand. By doing this, they can make sure that the prices are in line
with market conditions and maximize profit potential.

Still, it is important to note that airlines can only get away with demand pricing
because they sell a commodity product that customers have few—if any—
lower- cost alternatives.

Dynamic pricing is most suitable for companies that:

 Have access to large amounts of customer data.

 Are able to respond quickly to changes in the market.
 Can create models or algorithms to analyze customer data and adjust
prices accordingly.
 Are comfortable with risk.
 Have enough leverage to guarantee that customers will accept the pricing
changes.

Factors to Consider in Product Pricing

To develop a competitive price that is also profitable, companies need to consider

several factors, including costs, demand, and their target customer.

Costs

For a business to stay alive, it needs to continuously generate revenue. And that
revenue needs to be greater than the cost of making and selling a product or
service.

 Product research and development (R&D)

 Continued maintenance (for software products)
 Production costs (raw materials, labor, utilities)
 Shipping and distribution
 Marketing and advertising
 Sales and customer success

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 Rent and utilities

Market Demand

Figuring out how much to charge is the easy part. Determining how much
customers are willing to pay and whether there is enough demand for the
product is a much more complicated equation.

 Understand the value that the product or service provides to customers.

 Analyze customer demographics, needs, and behaviors.
 Research competitors’ pricing strategies.
 Take into account any seasonal changes in demand.

If the product or service is new, it’s also critical to test different pricing models
with a select group of customers to understand the market better.

Target Audience

An organization’s ideal customer profile (ICP) is a key factor in product pricing.

It is a detailed description of an ideal customer, based on customer data and
market research that helps businesses target the right demographic and provide
more tailored prices to maximize profits.

Once the target audience is identified, companies can tailor their prices
accordingly. They may offer discounts for larger orders or product bundles,
volume-based pricing (i.e., enterprise plans), or recurring revenue models with
different tiers (i.e., SaaS companies).

It is also important to note that customers may have different price points
depending on their location, age, income level, and other demographic details.

Market Prices

Unless a business is the first of its kind (which is almost never the case), there
will always be competitors vying for market share. Once businesses understand
the value they offer to customers, they can set prices that are competitive within
their industry.

Companies should also keep in mind that the price of a product or service doesn’t
have to be fixed. They can experiment with different pricing models and sales
discounts as well as increase or decrease prices as needed.

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Ideal Profit Margin

The profit margin is the amount of profit a business makes after subtracting all
expenses from revenue. A healthy profit margin ensures that the business can
stay in operation, pay its employees, and generate returns for its investors.

There are two profit margins businesses need to consider: gross and net profit
margin.

 Gross Profit Margin: The amount of revenue left after subtracting

production costs from sales revenue.
 Net Profit Margin: The amount of revenue left after subtracting all
expenses (including overhead, marketing, and other operating costs).

Distribution Channels

When it comes to product pricing, businesses need to consider how they will
distribute the product or service. Distribution channels include retail stores,
ecommerce websites, digital retailers, direct-to-consumer (D2C) platforms, and
more. Each channel has different costs associated with it that must be taken
into account when setting prices.

For instance, a business selling on Amazon will need to pay the retail giant’s
commission fee (usually around 15%).

PRODUCT PROMOTION

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Product promotion is the process of creating awareness and interest in a
product or service through marketing and advertising. It is designed to
increase sales and encourage customer loyalty. Product promotion can be done
through various channels, including television, radio, print, online, and word of
mouth. It can also take the form of coupons, discounts, or special offers.

Why is Product Promotion Important?

 Increase Awareness: Effective product promotion helps in increasing

awareness about the existence of a product among the target audience.
By leveraging various marketing channels and strategies, businesses can
reach potential customers and make them aware of the products they
offer.
 Generate Interest: Product promotion generates interest and curiosity
among potential customers by highlighting the unique features, benefits,
and value proposition of the product. Engaging promotional messages
and creative campaigns capture the attention of the audience and pique
their interest.
 Stimulate Demand: Promotional activities such as discounts, limited-
time offers, or exclusive deals can create a sense of urgency and stimulate
demand for the product. By offering incentives and compelling reasons to
purchase, businesses can encourage consumers to take action and make
a purchase decision.
 Build Brand Recognition: Consistent and impactful product promotion
helps in building brand recognition and strengthening brand identity in
the minds of consumers. Through repeated exposure to promotional
messages and branding elements, customers become familiar with the
brand and its products, leading to increased trust and loyalty.

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 Gain Competitive Advantage: In competitive markets, effective product
promotion can give businesses a competitive edge by differentiating their
products from competitors and positioning them as superior options.
Strategic marketing efforts can highlight unique selling points and
convince customers to choose their products over alternatives.
 Drive Sales and Revenue: Ultimately, the primary goal of product
promotion is to drive sales and generate revenue for the business. By
attracting potential customers, converting them into paying customers,
and encouraging repeat purchases, product promotion directly
contributes to the financial success and growth of the company.
 Support Product Launches and Growth: Product promotion plays a
critical role during product launches and expansion into new markets. It
helps in creating buzz and excitement around new products, attracting
early adopters, and gaining momentum for growth initiatives.
 Engage with Customers: Promotional activities provide opportunities for
businesses to engage with customers, gather feedback, and build
relationships. By listening to customer needs and preferences, companies
can tailor their products and marketing efforts to better serve their
audience and foster long-term loyalty.

THE PROMOTIONAL MIX

Social Media Marketing

Social media platforms offer vast opportunities for promoting products to a wide
audience. Create engaging content tailored to each platform (e.g., images, videos,
stories, posts) that highlights your product's features, benefits, and unique
selling points. Utilize targeted advertising on platforms like Facebook, Instagram,
Twitter, LinkedIn, and Pinterest to reach specific demographics and interests.
Encourage user-generated content by running contests, giveaways, or challenges
that encourage customers to share their experiences with your product.

Advantages

1. Wide Reach: Social media platforms have billions of active users

worldwide, providing a vast audience for promoting products.

2. Targeted Advertising: Social media advertising allows precise targeting

based on demographics, interests, behaviors, and more, ensuring ads
reach the most relevant audience.

3. Engagement Opportunities: Social media enables direct interaction

with customers through comments, messages, and shares, fostering
engagement and building relationships.

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4. Visual Content: Visual-centric platforms like Instagram and Pinterest
are ideal for showcasing products through images and videos, enhancing
product visibility and appeal.

5. Analytics and Insights: Social media platforms offer robust analytics

tools to track campaign performance, measure ROI, and gain insights into
audience behavior.

Disadvantages

1. High Competition: With numerous brands vying for attention, standing

out on social media can be challenging, requiring compelling content and
effective targeting.

2. Algorithm Changes: Social media algorithms frequently evolve, affecting

organic reach and requiring adjustments to promotional strategies.

3. Negative Feedback: Negative comments or reviews can quickly spread on

social media, potentially damaging brand reputation if not addressed
promptly.

4. Paid Reach: Achieving significant reach often requires investing in paid

advertising, which can be costly depending on targeting and competition.

Applications

1. Brand awareness campaigns

2. Product launches and announcements

3. Influencer collaborations and partnerships

4. Customer engagement and support

5. Lead generation and sales conversion

Advertising:

This includes buying slots to make commercials on TV, radio, newspapers,

magazines, or on the Internet to promote your product or service. The purpose
is to extend the coverage, ensure as many people as possible know what is
being advertised or sold, and increase the profile.

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Public Relations (PR):

PR is about managing how stakeholders develop an understanding of your

company. This includes communicating with the media, writing press releases,
managing events, and dealing with all the associated problems. Public relations
plays an important role in erecting and enhancing image as well as credibility
within the populace.

Sales Promotions:

These are short-term promotions, for example, a discount price, promotional

coupons, or a product sale that are meant to make someone buy the product.
Sales promotions can make customers rush to purchase products, which is good
for sales within a certain period.

Direct Marketing

Direct marketing refers to strategically marketing directly to a specific audience

with messages delivered through e-mail, mail, or phone. The goal is to secure an
immediate reaction of curiosity or interest from a target audience, such as buying
a product or asking for additional information.

Personal Selling:

Personal selling is a form of selling that involves the salesperson contacting the
buyer in an attempt to make the sale. This is particularly useful for more
complex or expensive products since it enables the sales reps to give advice,
answer questions, or satisfy individual needs

How can product promotion be used effectively?

There are a number of ways to use product promotion effectively.

 First, it is important to identify the target market.

 The message should be clear and concise.
 The product promotion should be timed correctly.
 The product promotion should be integrated into the overall marketing
Strategy.
 The product promotion should be tested and evaluated

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What are some common pitfalls to avoid when promoting products?

There are a number of common pitfalls to avoid when promoting products.

 Avoid overselling the product.
 The product promotion should not be too sales-oriented.
 The product should not be promoted in a way that is misleading or
deceptive.
 The product promotion should not be excessively promotional.
 The product promotion should not be too negative.

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