Marketing Concepts

NMIMS, 2007-08

(Concepts & Environment)

Marketing Concepts Needs, Wants, Demands Needs What Deprivation of basic, satisfaction Existing, few Influencer Natural, not s created Instances

Marketers

Wants Demands Specific satisfiers of deeper Specific Wants for needs products Wants + Wants are many purchasing power Ability & willingness Shaped by Social-family, Shaped by status, friends, Aspirations Peers or InstitutionalPromotion Food, clothing, Needs food-Wants Mcdonalds Needs Car/TV, Wants belonging Needs clothes-Wants Allen Luxury Sedan/flat, As Solly willing + able, Demand Benz/Plasma TV Existing, Influence wants, Influence demand by minimum Affordable&available Bank making product influence, loan, EMls attractive/aspirational, House 3 Bed Room Status Duplex / Bungalow

Product-Offered to satisfy needs / wants Product-tangible eg Books ; Service-Intangible eg Banking, Finance, Hospitality Products also deliver services eg car-product & transportation-service, Mobile Focus on products sans service risky eg TV, Fridge, AC without back-up Service Team-Risky Brand-An identifying symbol/words/mark distinguishing a product/company from its competitors. Branding is an essential part marketing. Brand = (Functional + Economic + Emotonal) Value Propositions. Nokia-Functional, Amul- Economic, Saffola- Emotional Value Proposition- Bundle of benefits the product provides to fulfill customer needs and wants Market (mercor-to buy Latin) Potential + Existing customers sharing a common need/want, able & willing to engange/enter in exchange to satisfy their needs/wants Eg Pharma Market=Doctors + Hospital + Trade Economics-Buyers+ Sellers= Market, Marketers – Sellers is industry, Buyers is Market Value (valere – latin – worth)Consumer’s estimate of the utility/capacity of a product/brand to satisfy their needs. Fair return. Price is what you pay, value is what you get- Warren Buffet Mobilesconvergence Customer-One who buys goods or services- Mother Consumer-One who consumes, but may or may not have purchased- Kid Client-A customer/consumer/ party who pays for professional services- Lawyer, Hotel, Consultancy

NMIMS, 2007-08

(Concepts & Environment)

Prosumer: Producing consumers, active, regular and influencing consumers who also initiate feedback Customer satisfaction: Core- Quality, service, value; Desire (Within an arms length of desire- coke), customer delight (kingfisher airline), delivery (blue dart), service (icici bank, taj) Marketing Marketer  Mix + Strategy  Brand  Value  Customer • Mission: Create a difference between company’s & competitors offering on a/an attribute/s important to customers, to provide value, Scope. • Identifying, creating, managing demand to provide value to a customer for a profit – Kotler • Mgmt process that identifies, anticipates, satisfies customer requirements profitability – CIM • The right product, in the right place, at the right time, at the right price – Adcock • Marshalling organizational resources to meet changing needs of the customer – Palmer • Marketing is far too important to leave to the marketing department”, David Packard (HP) 1950 • Concept- Satisfaction of the Customer & their needs, focus of business activities. IBM • Philosophy- Owned by everyone from within the organization • Marketing is not only much broader than selling, but not a specialized activity at all. Marketing encompasses the entire business. The whole business seen from the point of view of the customer. Concern & responsibility for marketing must therefore permeate all areas of the enterprise. A business has only 2 basic functions that produce result, marketing and innovation, the rest are all costs – Peter Drucker • “if marketing is seminally about anything, it is about .. differentiating what you do and how you operate. All else id=s derivative of that and only that. “Theodore Levitt 1986” • Holistic marketing: From product to customer focus, from selling products to satisfying customers, visualizing broader ways to serve customers and assess how all departments affect customers satisfactiondelivery, service, performance • Reserve marketing: Customer initiatives help design products marketing mix – PCs, Travel • Experiential marketing: Customer experience/ simulate product before buying foods, CDs Planning Process of anticipating future events & conditions to determine the best way to achieve organizational objectives • Marketing planning- Implementing planning activities to achieve marketing objectives • Strategic planning- Adopting courses of action to achieve organizational objectives • Tactical planning- Planning that guides the implementation of activities in the strategic plan

NMIMS, 2007-08

(Concepts & Environment)

Management (Manus – Hand Latin) – Optimal utilization of resources to achieve objectives eg Electricity • Management is doing things right, leadership is doing right things – Peter Drucker • Manager-Responsible for application & performance of knowledge- Peter Drucker • Marketing Management- Demand management Dimensional Differentiation of Selling VS Marketing Dimensio Selling Marketing n 1 Concept Integral part of Broader concept, Includes Selling, Marketing Brand, MR, Distribution, Promotion, Strategy, etc 2 Objective Transaction Exchange, Customer & Demand management 3 Target Buyer Needs/wants of the Customer 4 Focus Product Brand/Service 5 USP Price Value 6 Strategy Sales force & Marketing Mix Promotion 7 Period Short term Long term 8 Controls Sales, delivery, Customer Satisfaction, Market Share collection 9 Skills Selling, Analytical Communication 10 Orientati People Team on 11 Begins When you have a Much before and long after a produst product

Organizational Orientation Production- PSUs Product- Infosys Selling- Sansui Marketing- Hutch Finance- SBI Service- ICICI Marketing Environment M8 +C5 + PESTND (Case – Mobile Industry) Surrounds & impacts the organization, 3 key perspectives- Macro, Micro and Internal environments. Environment Internal Envt-M88 M’s Men change

Micro

Macro

6C’s Components

PESTND Political

•

Internal

Important for managing

NMIMS, 2007-08 Material Corporate Money Channel Influences organization Minutes Communication directly, Relationship Markets Customer firms & driving Machines Competition Methods Direct impact Envt-PESTND Mind but Change management control,

(Concepts & Environment) Economic • Internal Envt-C5Socio-cultural Technological Natural

between

Demographic forces Out of direct control • Macro Influencing factors, out of direct environmental change

PEST ND Political Factors • Huge, influence policy & regulations and spending power of customers • Government- VAT, WTO-GATT, Taxation, Reservations Economic Factors • Economy – Sensex, Forex, Interest rates, Inflation, Employment level, Per Capita, GDP, Sociocultural Factors • Ethnicity, local factors and issues, environmental issues- Bandra- Worli Sealink • Attitudes to foreign products and services- KFC Bangalore, Language impact • Cultural and religious factors- Mcdonalds French fries controversy, Nivea in Latin America Technological Factors • Technology- New, accessible, better, cheaper, innovation, investment intensive- ATM, Net Natural Factors • Raw material availability, Pollution, Environment, Monsoon Pharmaceuticals Demographics • Age profile, Geriatrics, Life expectancy, Mortality, Geography, Consumption, Psychographics

Analyzing the Environment 5 Forces Analysis 5 Forces Analysis (Porter) • Analyses forces driving industry competition, intensity of competition- Indian Hotels not Tatas

NMIMS, 2007-08 • •

(Concepts & Environment)

Collective strength determines profit potential, identifies areas where company can defend 5 Key areas- threat of entry & substitutes, power of buyers & suppliers, competitive rivalry

The threat of entry • Economies of scale- Production, coverage, distribution- Reliance Polyester • Entry/Exit Barriers- FDI, Retail • Access to distribution channels- Shelf space • Cost advantages- Bazee- Ebay • Product Differentiation- Baby products- J&J • Government policy- Insurance Sector NB: Gambar lihat di situs aslinya Will competitors retaliate? Price cuts, promotional onslaught, technology – Mobiles The power of buyers Monopoly, Oligopoly, Cartelling- Tyre, Vitamin manufacturers The power of suppliers • Switching costs high – technology, distribution – Tata GSM • Power Brand- Amul, Integration- Tata Tea- Barista • Fragmentation, consolidation, integration The threat of substitutes • Disruptive innovations- Mobiles- convergence affects 32 industries • Need substitution- Better toothpaste reduces need for dentist, Diagnostics can avoid diseases • Generic substitution- Stop smoking cigarettes, Gutka ban • Technology- Blue tooth, Java Competitive Rivalry • High, where entry is likely/threat of substitute products/suppliers/buyers control the market FMCG, Pharma, IT • Pre-emptive eg leader drops price/intensifies promotion to scuttle new competitor entry Effective 5-Force Analysis • Structural analysis and competitive strategy for defending/increasing market share • Strategic moves to influence balance of force • Anticipating and exploiting change to emerge stronger

PEST Analysis (Porter) • Environmental analysis preceding the marketing process • Should be continuous & feed all aspect of planning

NMIMS, 2007-08

(Concepts & Environment)

SWOT Analysis (Case) • Tool for auditing organization and environment • 1st Stage of planning, helps marketers focus on key issues • Identify key issues & objectives, use with other audit & analysis tools, like PEST / 5-Forces • Strength & weaknesses- internal factors, Opportunities & threats-external • Strengths- Specialty, economies, reputation, innovation, service, tech, location, quality • Weaknesses- lack of strengths • Opportunities- Competition, innovation, technology, regulatory Successful SWOT analysis guidelines • Short, simple and fair analyses especially about strengths & weaknesses of your organization • Anticipation of PEST factors in the industry, Avoid grey areas • Competitive analysis through benchmarking, popular tool, quick & easy to learn Disadvantages • Can be very subjective, Not very reliable, Bias steps in • Two people rarely come-up with the same final version of SWOT • Use only as a guide Marketing Mix (Neil H. Borden) • Marketing ‘tactics’ or tools or ‘4Ps’ (McCarthy) • Other Ps- Pace, People, Policy, Process, Packaging, etc • Car-Mix of Engine, Mileage, Looks, Price, Features, Quality, EMI options • Mix element vary leading to different strategies, perception & value proporsitions Product Price Brand, features, design, quality, range Strategies, Warranty, AMC, service, size, Credit, packing, performance Costs Promotion Place Sales promotion, Personal Selling, Channels, location, coverage, Advertising, Transportation, inventory, width, Sponsorship, Multi-level Marketing, Spread, reach, shippers Direct Marketing, Trade fair & Expositions Promotion • Marketing communication • Objectives- Sales, attract/retain/covert, trial, awareness, remind, reassure • Retention Levels- reading 10%, listening 20%, Audio-visual 70%; Sight, Sound, Motion effective. Integrate individuals promotion mix components for effective communication Promo Tools / Mix (SPPASM DT) Sales Personal Public Adverti Promot Selling Relati sing

Sponsor ship

MLM

Direct

Trade Fair

NMIMS, 2007-08 ion Contests Coupons Low finance

(Concepts & Environment)

ons Expo Presentati Inserts Advts Events Residual Databa Demos ons Press Hoarding Period Income se Brochur Samples kit s Theme Network Mailers es Demo Semina Banners Commissi CRM Teachrs on info Personal Selling- (Car, Insurance) • Effective but expensive way to manage personal customer relationships (Medical Representative) Sales Promotion- (Akai/Aiwa/Sansui) • Incentive to buy, ensure trial, D2C through trade BOGOF, Coupons, Discounts, Contests, Trial Public Relation (PR)- (Political parties/top companies/IPO) • Subtle inserts used in image building, firefighting- impact if managed well, economical, if long-term Direct (Credit card/insurance company mailers) • Targeted communication- update database, response monitoring, multiple use 2% response • Mailers of contests, EMI options, transfer of credit, mail order catalogues, CRM Trade Fairs and Exhibitions (Print/Auto/Pharma/IT Expo) • Trade, product display / demonstration/awareness/trial, recent decline due to internet Advertising • ‘Paid for’ communication, difficult to measure Ad impact (Amul bylines excellent, sales impact). Helps develop attitudes/create awareness/communicate message, elicit response • Type of Ads- FRESHEN- Fear, Rational, Emotional, Social, Humour, Ethical, Negative • Media- Print- Newspaper/magazine/journals (local, national, trade, specialty)/ pamphlets Electronic- TV/ radio Virtual- Internet, Mobiles Outdoor- Hoarding/Banners/kiosks/transport ( bus, train, taxi, vans) Captive- Theatres, train compartments, Cable TV Sponsorship (Femina-Miss India) • Organization pays to associate with an event/cause- Sahara- Indian Cricket/Hokey/Olympics • Event attributes then associate with sponsor- Pepsi- Youth, SaharaPatriotism Multi-Level Marketing (HerbalLife, Amway) • Networking, Residual Income, Flexi-timings, Initiators earn maximum, financial schemes- suspect Promotional Spend Methods- (Half my Ad- spend is wasted, but which hall? John Wanamaker) • Affordable- Amount decided on supposed affordability, ignores promo needs • % of sales- Anticipated sales, not guided by opportunities, promo- spend varies, % basis arbitrary • Competitive parity- Share of voice, Assumes competitive spendcollective industry wisdomdebatable, Own opportunities/strength/reputation not considered- IIPM highest print spender

NMIMS, 2007-08 •

(Concepts & Environment)

Objective & Task Method- Define objective/tasks, allocate promo-spend, difficult to implement

Full VS Push: Push – Sales Force + Trade Promotion, Pull – Advertising + Customer Promotion Strategies differ across industry players, traditionally HLL – Push and P&G – Pull strategy worldwide Promotion Mix Strategy – ICICI Place (distribution/channel/intermediary) • Set of institutions performing activities to move product from production to consumption- Bucklin • Functions- Order Processing, Warehousing, Inventory, Transportation, Collections • Ensures- Availability, Visibility (Dikhta hai voh bikhta hai), Movement, CRM, Feedback • Width- Trade coverage, Reach- Customer coverage, Depth- Brand coverage • Growing impact of convergence- internet, mobile, retail, revolution 1-Level Manufacturer

2-Level Manufacturer

3-Level Manufacturer

4-Level Manufacturer C&F

Retailer Consumer Retail/Malls

Retailer Consumer Garments

Stockiest Consumer Industrial, IT

Consumer IT Hardware

5-Level Manufacturer C&F Stockiest Retailer Consumer Pharma/FMC G

Channel Intermediaries • Distributor (C&F)- Bulk to smaller packs, handle major area, supply to stockists • Wholesalers (Stockists)- Resell to retailers, storage, coverage essential • Others- Commission agents, co-operative (farmers), Indentors (Imports), agents (magazine) • Retailers- Strong customer influence, consumption/purchase pattern insight, service • Specialty (Sport), Supermarket (Big Bazar) Convenience (Kirana), Factory Outlets, Warehouse, Direct sellers (Encyclopedia)- D2D, Vending Machine (Tea, Coffee), co-operative (Apna Bazar, Grahak Peths, Societies), Chain stores (Monginis) • Internet (Service)- Channel margins and inventory costs major saving- can be passed, hence economical, death of distance, geographically disperse market, niche products reach wider audience, low entry barriers, display variety & functionality, interactive, Payment Risky, gaining popularity, delivery costly- Books, CDs, medicine, travel, tourism • 3rd Party Logistic (AirFreight, GATI)- tremendous scope Channel Decisions • Direct or indirect channels/single or multiple channels • Length of channel • Types of intermediaries/Number of intermediaries at each level

NMIMS, 2007-08 •

(Concepts & Environment)

Which intermediaries? Avoid intrachannel conflict- Nike

The Retail Revolution Case Price • Fit between crucial financial component-cost & marketing componentvalue • Center-stage in marketing wars, inter-firm rivalry-Mobile Industry • Product differentiation blunted- Surf-Ariel, Mature product/Markets- TVs • Economic Value Proposition- Titan- High priced brands inspite of local & grey market competition • Objective- Profits/ROI, competitive position, demand, costs, survival, product, Portfolio, Entry Pricing Methods • By cost- Cost Plus and Break Even • By competition- Going rate, competitive pricing, cartelling- Tyre industry, sealed bids (tenders) • Customer Oriented- Perceived Value (Lifestyles), Auctions (Bazee), ValueBuffett, McDonalds Pricing Strategies • Penetration- HQLP- NPL, Entry, Attract, Ensure trial- Amul • Premium- HQHP- Sustainable advantage- Bose Speakers, Benz • Economy- Functionally & Value-, Nirma, Supermarket- own brand • Skimming- LQHP- Significant advantage, unsustainable- Reliance Mobile • Rip-Off- Medium quality, very high price- Pricey Hotels/ Restaurant • 1,5,9- coexist in same market till buyers insist on quality, price, value • 2,3,6- ways to attack 1,5,9 as 2 = HQMP, 3 = HQLP, 6 = MQLP • 4,7,8 overpricing wrt quality- customers feel ‘taken’, bad oral publicity, avoid Exercise- Gives Price examples of each pricing High Medium Low strategy Quality High 1- Premium 2- High Value 3- Penetratio (Quality is n only Mediu 4- Over-charging 5- Medium 6- Good indicative) m Value Value Low 7- RipOff/Skimmi 8- False 9- Economy ng Economy Other Pricing Strategies • Psychological- Bata, Mobile Airtime Tariffs • Geographical- Medicine/Electronics across countries or Urban/RuralElectronics • Promotional- Extensive usage, if successful-copied, if unsuccessfulfinancial drain • Loss leader- Factory outlets • Special Discount/Rebates- BOGOF, % Off, Sale • Financing- EMIs, Low interest rates • Warranties/AMCs- Extended warranties, TVs-Onida 4 year warranty, Free AMC • Psychological Discounting- Prices slashed 399 to 199, Baazee • Old for New- New for Old discounts- Exchange offers- Van Heusen, TVs

NMIMS, 2007-08 • •

(Concepts & Environment)

Price Point- Cadburys- Re1- Éclair, Rs2-Chocky, Rs5-5star, Rs50-Heroes, RS100-(Heroes) Value- Superstores- Big Bazaar

Discriminatory- Same brand/ service, 2 price • Customer segment- Student discount • Product form- Ketchup- 100gm-20, 250gm-45, 500gm-75 • Image- Hotels- Taj Palaces (Premium), Resorts (Lifestyle), Hotels (Business), Indione (Budget) • Location- Theatres- Stall-50, Balcony-75, Dress Circle-100, StadiumPavilion, Stands • Time- Seasonal- Cheaper/costlier during season, Happy Hours, Bakeries25% off after 8pm Product Mix- Profitable brands take care of others in the portfolio • Product line- full range in all segments- Maruti Cars 2 Lacs at every 25000 intervals • Optional feature pricing- Ford Ikon-Insurance+Deck+Central Lock+Auto Cop Free • Captive product- Cameras/Razors cheaper but consumables – Film / Blades costly • 2-Part- Esselworld-admision + rides, Airtime + SMS/VMS/STD • By-Product- Lubricants with petrol • Product bundling- Season tickets, Time share