Markating Mamagement Set 2

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SET – 2

Q.1 Write a short note on product life cycle. Answer to question 1: Product life cycle management is the succession of strategies used by management as a product goes through its product life cycle.The conditions in which a product is sold changes over time and must be managed as it moves through its succession of stages. Product life cycle The product life cycle goes through many phases, involves many professional disciplines, and requires many skills, tools and processes. Product life cycle (PLC) has to do with the life of a product in the market with respect to business/commercial costs and sales measures; whereas product life cycle management (PLM) has more to do with managing descriptions and properties of a product through its development and useful life, mainly from a business/engineering point of view. To say that a product has a life cycle is to assert four things: 1) that products have a limited life, 2) product sales pass through distinct stages, each posing different challenges, opportunities, and problems to the seller, 3) profits rise and fall at different stages of product life cycle, and 4) products require different marketing, financial, manufacturing, purchasing, and human resource strategies in each life cycle stage. The different stages in a product life cycle are: 1.Market introduction stage I:* costs are high II:* slow sales volumes to start III:* little or no competition - competitive manufacturers watch for acceptance/segment growth losses IV:* demand has to be created V:* customers have to be prompted to try the product VI: makes no money at this stage 2.Growth stage I:* costs reduced due to economies of scale II:* sales volume increases significantly III:* profitability begins to rise IV:* public awareness increases V:* competition begins to increase with a few new players in establishing market VI:* increased competition leads to price decreases 3.Mature stage I:* Costs are lowered as a result of production volumes increasing and experience curve effects II:* sales volume peaks and market saturation is reached III:* increase in competitors entering the market IV:* prices tend to drop due to the proliferation of competing products V:* brand differentiation and feature diversification is emphasized to maintain or increase market share VI:* Industrial profits go down 4.Saturation and decline stage I:* costs become counter-optimal II:* sales volume decline or stabilize III:* prices, profitability diminish IV:* profit becomes more a challenge of production/distribution efficiency than increased sales A new product progresses through a sequence of stages from introduction to growth, maturity, and decline. This sequence is known as the product life cycle and is associated with changes in the marketing situation, thus impacting the marketing strategy and the marketing mix. The product revenue and profits can be plotted as a function of the life-cycle stages as shown in the graph below: Product Life Cycle Diagram

Marketing Management -MB0030 BIDYUT ROY

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3 Explain the product mix pricing strategies with example.

Answer to Question3: Price • • •

The money charged for a product or a service Cost is incurred to the supplier/producer in supplying/producing the product Price is paid by the buyer to acquire the product

Pricing Products • The amount of money charged for a product or service, or the sum of the values that consumers exchange for the benefits of having or using the product or service • Price is the only element in the marketing mix that produces revenue; all other elements represent cost. • Price is also one of the most flexible elements of the marketing mix. Pricing Products • The most common mistakes in setting prices are;  pricing that is too cost oriented  prices that are not revised often enough to reflect market changes  pricing that does not take rest of marketing-mix into account

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 prices that are not varied enough for different products, market segments & purchase occasions Four views of price • Economist’s view: Price is set by the forces of supply & demand • Accountant’s view: Price should cover costs so that profit can be earned • Customer’s view: Price has to represent good value • Marketer’s view: Pricing is an opportunity to gain competitive advantage Factors influencing pricing decisions • Costs of production • Competitive prices • Customer’s perception of value • Customer demand • Target market • Marketing mix • Stage in the product lifecycle • State of the economy • Expectations of distributors • State of competition in the market Product Mix • Total composite of products offered by a particular organization • Consists of both product lines and individual products • Product line is a group of products within the product mix that are closely related, either because they function in a similar manner, are sold to the same customer groups, are marketed through the same types of outlets, or fall within given price ranges. Product Mix Pricing Strategies Product line pricing : • Setting price steps between various products in a product line • Is based on the cost differences between the products, customer evaluations of different features & competitor’s prices e.g. Sony Trinitron & Sony WEGA TVs Product lining is the marketing strategy of offering for sale several related products. Unlike product bundling, where several products are combined into one, lining involves offering several related products individually. A line can comprise related products of various sizes, types, colors, qualities, or prices. Line depth refers to the number of product variants in a line. Line consistency refers to how closely related the products that make up the line are. Line vulnerability refers to the percentage of sales or profits that are derived from only a few products in the line. The number of different product lines sold by a company is referred to as width of product mix. The total number of products sold in all lines is referred to as length of product mix. If a line of products is sold with the same brand name, this is referred to as family branding. When you add a new product to a line, it is referred to as a line extension. When you add a line extension that is of better quality than the other products in the line, this is referred to as trading up or brand leveraging. When you add a line extension that is of lower quality than the other products of the line, this is referred to as trading down. When you trade down, you will likely reduce your brand equity. You are gaining short-term sales at the expense of long term sales. Image anchors are highly promoted products within a line that define the image of the whole line. Image anchors are usually from the higher end of the line's range. When you add a new product within the current range of an incomplete line, this is referred to as line filling. Price lining is the use of a limited number of prices for all your product offerings. This is a tradition started in the old five and dime stores in which everything cost either 5 or 10 cents. Its underlying rationale is that

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these amounts are seen as suitable price points for a whole range of products by prospective customers. It has the advantage of ease of administering, but the disadvantage of inflexibility, particularly in times of inflation or unstable prices. There are many important decisions about product and service development and marketing. In the process of product development and marketing we should focus on strategic decisions about product attributes, product branding, product packaging, product labeling and product support services. But product strategy also calls for building a product line. Optional product pricing: Pricing of optional or accessory products along with the main product. Companies will attempt to increase the amount customer spend once they start to buy. Optional 'extras' increase the overall price of the product or service. For example airlines will charge for optional extras such as guaranteeing a window seat or reserving a row of seats next to each other. Captive procduct pricing: Setting price for products that must be used with the main product. e.g. HP printer and cartridges. Where products have complements, companies will charge a premium price where the consumer is captured. For example a razor manufacturer will charge a low price and recoup its margin (and more) from the sale of the only design of blades which fit the razor. Item made specifically for use with another item, usually from the same manufacturer. For example, shaving blades for a razor, parts for a machine, software for a computer or operating system. Pricing of captive product is often based on a product-mix pricing strategy where a low mark-up is set for the companion main product (such as a razor or operating system) with a high mark-up for the supplies (such as blades or application software). By product pricing: • Setting a price for by products in order to make the main products price competitive • Product bundle pricing: - Combining several products & offering the bundle at a reduced price - e.g. Combo deals

Q.4 What are various logistics functions? Describe in brief.

Logistics can be classified as an enterprise planning framework for material management, information, service and capital flows. Logistics when seen in the context of the modern day prevalent work environment also includes information that is complex in nature besides giving importance to all the communication and control system that are essential for efficient working of the organization. In the words of a layman, logistics can be defined as having the right type of product or service at the right place, at the right time, for a right price and in the right condition. Logistics has evolved as a common and well-known business concept because of the ever increasing complexities of modern day business. The primary goal of logistics is to effectively manage the project life cycles and resultant efficiency. This has greatly evolved with a logistics manager's role in efficiently designing the products of the company keeping in view the principle of efficient system of supply chain management. In business terms, it can be summarized as a competitive strategy adapted by the enterprise to meet and exceed the expectations of its existing and prospective customers. It refers to a complete process of total supply chain management that is established to achieve a state of perfection through efficiency and integration. Logistics does not mean a single work activity but refers to a group of activities performed to attain the goal of a business enterprise that is maximizing the Profits. This may involve steps like purchasing, planning, coordination, transportation, warehousing, distribution and customer service. A business can run without profits, but it needs money to fund its services, pay its employees and grow its customer base. Logistics play an important part in the present business world; it cannot be neglected by an enterprise focused on growth and profitability.

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Logistics is a mixture of several professional disciplines, such as: 1. Planning 2. Controlling 3. Directing 4.Coordination 5. Forecasting 6. Warehousing and transportation 7. Facility location 8. Inventory management Logistics refers to various functions associated with the organizational disciplines of planning, managing and controlling the flow of goods and services, people and related information. It includes all the steps that are required to achieve the timely delivery of a product, goods or services from the point of origin to the point of destination. As per the Council of Logistics Management, logistics has been defined as the part of the process of supply chain that plan, control and implement an effective and efficient flow for the purpose of storage of goods and services and other related information from the point of commencement to the point of final consumption with a aim to satisfy the requirements of its existing and prospective customers. All activities that are involved in the movement of goods and services from the point of origin to the point of final consumption are grouped under the term 'logistics'. The art of managing or supervising all these activities when grouped together as a collective unit, are placed under 'logistics management'. People who are authorized or given the task of managing the aspect of logistics management are referred to as 'distribution managers' or 'logistics managers'. Logistics can be referred to as an enterprise planning network used for the purpose of information, material management, capital flows. In the words of a layman, it can be described as delivering at the right time, for the right price and in the right condition. When seen in the modern day competitive business scenario, it includes complex information along with importance to the control and communication systems of the organization. No matter the size and the area of operations of an organization, logistics information plays an important role in the achievement of the goals of the organization. Functions of Logistics: Logistics has evolved in the present very competitive business environment and is primarily concerned with the efficient and effective management of the project life cycles of the organization and its resultant efficiencies. It can be described as a complete process that involves the total supply chain management that is formed for the purpose of achievement of common business objectives of the organization. The role of a logistics manager and executive has changed in a significant manner and they are now entrusted with the task of not only ensuring delivery of products and services, internally or externally in the organization's premises, but also to ensure the development of logistics systems for optimal utilization of the available resources of the organization beside the achievement of business goals. Logistics does not refer to a single activity performed for delivery of goods, it extends to delivery of goods at the right time, at the right place, in the right condition and at the right price. The logistics manager ensures that no fraud is committed during the logistics process and the logistics systems run in accordance with the predefined plans and policies of the organization. An effective and efficient logistics system ensures the smooth functioning of the organization and it is rightly considered as an integral part of the plans of the organization. Logistics business plan The plan must be clearly defined so that there is no confusion in the minds of the logistics team. This clarity will help to accomplish the desired objectives of the organization. It must be drafted in accordance with the objectives of the organization. Its aim must be to provide timely delivery of goods besides rendering normal functions of logistics under strict deadlines and in conformity with business goals.

Q.5 What is IMC? Describe the communication development process in brief.

Integrated Marketing Communications: Definition: A management concept that is designed to make all aspects of marketing communication such as advertising, sales promotion, public relations, and direct marketing work together as a unified force, rather than permitting each to work in isolation. Integrated Marketing Communications is a term used to describe a holistic approach to marketing communication. It aims to ensure consistency of message and the complementary use of media. The concept includes online and offline marketing channels. Online marketing channels include any e-

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marketing campaigns or programs, from search engine optimization (SEO), pay-per-click, affiliate, email, banner to latest web related channels for webinar, blog, micro-blogging, RSS, podcast, and Internet TV. Offline marketing channels are traditional print (newspaper, magazine), mail order, public relations, industry relations, billboard, radio, and television. A company develops its integrated marketing communication program using all the elements of the marketing mix (product, price, place, and promotion). Integrated marketing communication is integration of all marketing tools, approaches, and resources within a company which maximizes impact on consumer mind and which results into maximum profit at minimum cost. Generally marketing starts from "Marketing Mix". Promotion is one element of Marketing Mix. Promotional activities include Advertising(by using different medium), sales promotion (sales and trades promotion), and personal selling activities. It also includes internet marketing, sponsorship marketing, direct marketing, database marketing and public relations. And integration of all these promotional tools along with other components of marketing mix to gain edge over competitor is called Integrated Marketing Communication. Reasons for the Growing Importance of IMC: • Several shifts in the advertising and media industry have caused IMC to develop into a primary strategy for marketers: • From media advertising to multiple forms of communication. • From mass media to more specialized (niche) media, which are centered around specific target audiences. • From a manufacturer-dominated market to a retailer-dominated, consumer-controlled market. • From general-focus advertising and marketing to data-based marketing. • From low agency accountability to greater agency accountability, particularly in advertising. • From traditional compensation to performance-based compensation (increased sales or benefits to the company). • From limited Internet access to 24/7 Internet availability and access to goods and services. The goal of selecting the elements of proposed integrated marketing communications is to create a campaign that is effective and consistent across media platforms. Some marketers may want only ads with the greatest breadth of appeal: the executions that, when combined, provide the greatest number of attention-getting, branded, and motivational moments. Others may only want ads with the greatest depth of appeal: the ads with the greatest number of attention-getting, branded, and motivational points within each. Although integrated marketing communications is more than just an advertising campaign, the bulk of marketing dollars is spent on the creation and distribution of advertisements. Hence, the bulk of the research budget is also spent on these elements of the campaign. Once the key marketing pieces have been tested, the researched elements can then be applied to other contact points: letterhead, packaging, logistics, customer service training, and more, to complete the IMC cycle.

Q.6 What are alternative approaches to marketing while going international? Study Pepsi’s international marketing strategy.

INTERNATIONAL MARKETING Marketing grows even more complex; it is an ever-evolving discipline. It builds on past while taking advantage of new opportunities. Each new challenge demands a firm grasp of what has happened before, a clear picture of the present situation, and an understanding of the n-lost important new options at the moment. In. general, the centre of attention in marketing has to shift away from the instruments and concentrate on information. Creation of personalized customer relationships, calculating the lifetime value of customer and investing in it, and satisfying and retaining existing customers and using predictive modelling to target those customers n-most similar to existing customers will be the ultimate approaches to face the marketing challenges of the 21st century. As an art or science, marketing is undergoing dramatic and exciting changes, and the field promises to be just as dynamic in the years ahead. Marketing has emerged as the most critical function in today's international business climate; even the smallest of the firms are now using innovative marketing techniques due to increasing global competition. As soon as you click on your TV, a commercial for Ariel or Brite washing powder balloons onto the screen, followed by an advertisement of Shaukat Khanum Memorial Hospital or the Edhi Foundation asking for your contributions towards cancer research or zakat. You stroll down the lifestyle store counter and pick out the Citibank/AHZ Grindlays Visa card membership brochure, allowing you to apply directly for credit cards. A representative from Patient's Aid Foundation gives a talk at your university, soliciting new memberships and volunteers for blood donations.. All these situations involve marketing. According to the American Association, marketing is "the process of planning and executing the conception, pricing, promotion, and

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distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational goals." The broad definition takes into account all parties involved in the marketing effort: members of the organization that produces goods and services, resellers of those goods and services and customers or clients. Virtually all businesses realize that marketing plays a crucial role in their success. Marketing texts initially had a strong bias towards packaged consumer goods, which no doubt are important; yet they overlooked consumer services, industrial goods and services, advanced technology products, nonprofit enterprises, and government agencies. Today, marketing has greatly come in play with semiconductors, commercial banking, industrial chemicals, health care, computer integration services, agricultural equipment, government services, and many other products outside the consumer mainstream. Any company is faced with marketing challenges, even the market leaders. Many of these challenges rely upon perception of the market. Thus Marketing is required. In most of these cases advertising helps, but that is the most expensive method. The unknown alternative solution Your solution addresses a common problem differently but nobody knows. What to do: - Create awareness by press releases, industry analysts and bloggers - Start blogging in order to get attention - Improve the SEO of your website in order to be found on the Internet - Create content related to your solution in order to be found on the Internet - Be present on trade shows and on conferences on a tight budget COMPANIES TO EXPAND INTERNATIONALLY BY: 1. Determine how much you can afford to invest in your international expansion efforts. 2. Plan at least a two-year lead time for world market penetration. 3. Pick a product or service to take or source overseas. 4. Conduct market research to identify your prime target markets. 5. Research the data to predict how your product will sell in a specific geographic location. 6. Find cross-border customers. 7. Establish a direct or indirect method of export. 8. Hire a good lawyer, a savvy banker, a knowledgeable accountant and a seasoned transport specialist, each of whom specializes in international transactions. 9. Prepare pricing, and determine landed costs. 10. Set up terms, conditions and other financing options. 11. Brush up on documentation and export licensing procedures. 12. Make personal contact with your new targets. 13. Explore cross-border alliances and partnerships. International Marketing Study – PEPSI Background of Beverage Industry in India • Coca-Cola’s past in India Present from 1958 until 1977 • Industry Shakeup in 1988 • State of the Industry in 1993 45% of market consisted of small manufacturers $3.2 million market share Low Demand for Carbonated Drinks • Average of 3 servings a year/person in 1989 • Average of 1404 servings a year/person in U.S. in 2003 Political Environment in India • Key Issues India seen as unfriendly to foreign investors for many years The “Principle of Indigenous Availability” Policy banning imports being sold in India The Liberalization of India’s Government in 1991 “New Industrial Policy” Trade rules & regulations simplified Foreign investment increased Pepsi enters in 1986 Coca-Cola follows in 1993 Political Environment in India • Indian Laws Unlawful to market under their Western name in India

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Pepsi became “Lehar Pepsi” Coca-Cola merged with Parle and became “Coca-Cola India” • Different Laws for Pepsi and Coke • Coca-Cola agreed to sell off 49% of its stock as a condition of entering and buying out an Indian company • Pepsi entered earlier, and was not subject to this Political Environment in India • India forced Coke to sell 49% of its equity to Indian investors in 2002 • Coke asked for a second extension that would delay it until 2007 India denied this • Pepsi was held to this since they entered India in a different year. • Coke asked the Foreign Investment Promotion Board to block the votes of the Indian shareholders who would control 49% of Coke Timing of Market Entry Pepsi (early entry-1986) • Advantages Entered the market Before Coca-Cola and was able to gain a foothold in the market while it was still developing Gained 26% market share by 1993 • Disadvantages Were forced to change their name to Lehar Pepsi Govt. limited their soft drink sales to less than 25% of total sales Struggled to fight off local competition Timing of Market Entry Coca-Cola (late entry-1993) • Advantages Were able to buy 4 bottling plants from industry leader Parle Also bought Parle’s leading brands: Thums Up, Limca, Citra, Gold Spot and Mazaa Set up 2 new ventures with Parle to bottle and market product • Disadvantages Denied entry until 1993 because Pepsi was already there Harder to establish market share with Pepsi there Were not allowed to buy back 49% of equity Product Policies • Catering to Indian tastes • Entering with products close to those already available in India such as colas, fruit drinks, carbonated waters • Waiting to introduce American type drinks • Coca-Cola introducing Sprite recently Introducing new products • Bottled water • Responses to India’s Enormity • Promotional Activities Both advertise and use promotional material at Navrartri Pepsi gives away premium rice and candy with Pepsi • Use of different campaigns for different areas of India “ India A” campaigns try to appeal to young urbanites “ India B” campaigns try to appeal to rural areas Responses to India’s Enormity Pricing Policies • Pepsi started out with an aggressive pricing policy to try to get immediate market share from Indian competitors • Coca-Cola cut its prices by 15-25% in 2003 • Attempt to encourage consumption to try to compete with Pepsi and gain market share • Responses to India’s Enormity Distribution Arrangements • Production plants and bottling centers placed in large cities all around India • More added as demand grew and as new products were added • Pepsi’s “Glocalization Strategies” What is “Glocalization”? Global + Localization = Glocalization

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By taking a product global, a firm will have more success if they adapt it specifically to the location and culture that they are trying to market it in.

Pepsi’s Glocalization Pepsi forms joint venture when first entering India with two local partners, Voltas and Punjab Agro, forming “Pepsi Foods Ltd”. In 1990, Pepsi Foods Ltd. changed the name of their product to “Lehar Pepsi” to conform with foreign collaboration rules. In keeping with local tastes, Pepsi launched its Lehar 7UP in the clear lemon category. Advertising is done during the cultural festival of Navrartri , a traditional festival held in the town of Gujarat which lasts for nine days. Pepsi’s most effective glocalization strategy has been sponsoring world famous Indian athletes, such as cricket and soccer players. Coke or Pepsi in the Long Run? Pepsi • Better marketing and advertising strategies • More widely accepted • More market share Coke • Government conflicts • Trailing Pepsi in market share • Pepsi will fare better in the long run Pepsi’s Lessons Learned • Beneficial to keep with local tastes • Beneficial to pay attention to market trends • Celebrity appeal makes for exceptional advertising • It pays to keep up with emerging trends in the market Coca-Cola’s Lesson’s Learned • Pay specific attention to deals made with the government • Establish a good business relationship with the government • Investment in quality products • Advertising is crucial