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Name

G M Firoz Khan

Roll No.

520931217

Program MBA Subject

Marketing Management [Set 2]

Code

MB 0030

Learning Systems Domain –Indira Nagar, Centre Bangalore [2779]

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1. Write a short note on “Product Life Cycle” Sales & Profits

Sales

Profits

The product which is introduced into the market will undergo some Time modifications over the period. Its sales also fluctuate. Therefore marketer Growth is interested in finding out how sales also fluctuate over a period and Decline what strategies are best suited atMaturity that point. A product life cycle can be Product Dev. Introduction Stage graphed by plotting aggregate sales volume for a product category over Product Dev. Losses StageGenerally the curve resembles bell shaped curve but it is not the time. Investments only one type of curve. We can obtain style, fashion or fad style of product life cycles also. 0

Sales

Style Fashion

Fad

Product life Cycle (Bell shaped curve) According to this type of cycle, a product passes through 5 stages: i.

Product development stage: In this stage company identifies the viable idea and develops it. Sales in this stage are zero but huge research Time Time Time and development budget is required. Therefore company incurs losses at this stage.

ii. Introduction Stage: Company introduces the product into the market.

As the product is new to the market, awareness is usually very low. Here company adopts heavy sales promotion and product awareness programs. The cost of product is very high and sales are very low. At this junction the company charges high price to the customer.

iii. Growth Stage: Company gets experience over the period and now tries

to get the maximum market share; sales will grow rapidly resulting in lesser cost and better profit. Company reduces the price of the product Set 2

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and offers varieties and values in it. It focuses on building better distribution network and pushes the product through it. Number of competitors will grow and it forces company to keep a tab on them. iv. Maturity Stage: a. Peak sales b. Low cost per customer c. High profits d. Competition based pricing e. Communicating the product differentiation to customer f. Improving supply chain efficiency g. Defend the market share h. Industry experience the consolidation v. Decline Stage: In this stage, product sales and profit decline. Company

should phase out weak items from their product advertisement budget of the company also comes down.

mix.

The

Other Product Life cycles: i. Style: A style is a basic and distinctive mode of expression that appears in the field of human behaviour. For example, style appears in homes, art and clothing, once the style invented, it will be there for longer period. ii. Fashion: Currently accepted or popular style in a given field for example, cargo jeans are now fashion with the college going students. iii. Fad: A fashion that enters quickly is adopted with great zeal, peaks early, and declines very fast. For example, when the pager was introduced, everybody wanted to have the product. But when people find mobile as alternatives, the demand for the product when down drastically. 1. Explain various categories of brand sponsorship with example.

Brand managers have four points of sponsoring the brand. They are a. b. c. d.

Manufacturer brand Private brand Licensing Co-branding

a. Manufacturer brand: The brand owned by manufacturer and promoted either directly or indirectly. This type of strategy has been followed for many years.

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Pilsbury atta is a manufacturer brand. In the image below you can see that pilsbury is launching the Punjabi atta in the market. b. Private brand: These are also called store brands. These brands bear the store name or store selected vendor name. Basic ingredients of private labels are: • It must be a unit package: It is difficult to assign a private label character to say, rice sold loose from a 100 kg bag. Even though it may enhance consumer loyalty for whatever reason, it does not qualify as a private label product. • Relabeling: The unit pack must bear only the brand name of the particular store or any there party the store may choose for its label programme. Private labels will enhance the category profitability, increase the negotiation power oof the retailer and better value creates better consumer loyalty. Private labels can be introduced if and only if, • •

The consumer is not getting the tangible value. The retailer is not making enough returns from the sale of the branded goods.

Emerging issues in private labelling: • • • •

• • •

The private label strategy is effective, profitable and realistic. The retailer must understand the price, quality and willingness to pay. The retailer must have a sufficient large base of loyal customers in the store before introducing the private label. The focus must be on consumer needs and not any private agenda of the retailer. There must be a stringent system for the private label production. Quality control is a must since there is no one else to blame. Private label must work to fill in gaps in the category and not target the brand leader. Smart manufacturers may take a private label initiative of the retailer seriously and avoid value gaps in the categories as an impediment to growing private labels.

a. Brand licensing:

It is the legal authorization by the trademarked brand owner to allow another company to use its brand for a fee. For example, Hugo Boss, Tommy Hilfiger, Lacoste, and Nike are some of the textile brands those licensed their brands in the Indian market. The major benefits of brand licensing are low cost, free publicity and revenue from royalty fees.

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Brand licensing also suffers from serious limitations like lack of manufacturing control, and failure of licensing arrangements. b. Co-Branding:

According to Kotler, co-branding is the practice of using the established brand names of two different companies on the same product. For example, ICICI and HPCL came together to sell ICICIHPCL petro cards to the customer. Here card is the co-branding between the two companies. Co- branding helps ICICI to utilize their financial resources well. It adds another banking facility to the bank while HPCL can lock the customer from buying the petroleum products from competitors. HPCL also gets the benefit of financial power which it doesn’t have. Both companies promote these products. Hence they can leverage brand image and can reduce the cost. All companies will not get benefit from co-branding. Some times company may lose the brand image if the product fails.

1. Explain the product mix pricing strategies with examples. a. Product line pricing: Strategy of setting the price for entire product line. Marketer differentiates the price according to the range of products. i.e., suppose the company is having 3 products in low, middle and high end segment and prices the three products say Rs. 10, 20 and 30 respectively. For example of Nokia mobile phones Nokia 1110 is priced at Rs 1349, Nokia 7610 is priced @Rs 6249 and Nokia E90 is priced @ 35499. All the three products cater to the different segments- low, medium and high income group respectively. The three levels of differentiation create three price points in the mind of consumer. The task of marketer is to establish the perceived quality among the three segments. If the consumers do not find much difference between the three brands, he/she may opt for low end products. b. Optional product pricing strategy is used to set the price of optional

accessory products along with a main product. Maruti Suzuki will not add the accessories like body cover, slide molding, rear under body etc., to its product swift but all these are optional. Customer has to pay different prices as for different accessories as add-ons. Organisations separate these products from main products so that customer should not perceive products are costly. Once the customer comes to the show room, organisation explains the advantages of buying these additional accessories.

c. Captive product pricing is setting a price for a product that must be

used along with a main product. For example, Gillette sells low priced razors but makes money with replacement cartridges. Set 2

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d. By-product pricing is determining the price for by-products in order to

make the main product’s price more attractive. For example, LT overseas manufactures of Dawaat basmati rice, found that processing of rice results in two by-products (rice husk and rice bran oil). If the company sells husk and bran oil to the other consumers, then company is adopting by-product pricing.

e. Product bundle pricing is offering companies several products together

at the reduced price. His strategy helps companies to generate more volume, get rid of unused products and attract the price conscious consumer. This also helps in locking the customer from purchasing the competitors’ products. For example, Anchor tooth paste and brush are offered together at lower prices. 1. What are the various logistics functions? Describe in brief. Providing the right product at a right place in a right time is a challenging task. Therefore in the modern marketing management the study of movement of goods become predominant. The following are various logistics functions: a. Warehousing: Goods produced at the factor may not be consumed

simultaneously. Therefore companies need to store the goods. Companies able to use proper warehousing facilities enhance their operation efficiency. Ware housing can also be used as a hub where goods come to the facility and cross docked. Below is an example of how Barista, a coffee chain supply used the services of Safe Express (Logistics Company) to improve their competitiveness. Safe express is right on time with front, the mocha and crackers. It’s Just In Time Management ensures minimal inventory for the Barista chain of coffee bars. Both parties are involved in a win-win situation. Barista, one of the favoured outlets for coffee and snacks in the Indian sub-continent, is a good example of transparency in supply chain management operations. For newly established Barista outlets in India; it was very difficult to maintain he supply across all the cities. Hence it has taken Safe Express as third party logistics partner to supply each Barista outlet in Indian cities with different ingredients for that just right coffee cup. Just In Time [JIT], this will leave Barista absolutely free of any investment and recurring costs for the logistics and warehouse management. The JIT operations aided by weather forecasting are fully carried out by third party logistics providers. Safe express looks after the distribution and inventory requirement of Barista outlets operating

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from its mother warehouse further supports three regional warehouses in Bangalore, Mumbai and Kolkata. With new outlet opening in every 10 days, Barista expects to have 175 coffee bars by 2003. A typical Barista outlet world is 1000 sq.ft store with seats around a table. The inventory space is zero percent and a set amount of supplies ranging from paper cups to coffee beans are replenished on daily basis. The efficiency of supply chain, in such a case becomes a critical issue and hence requires the best of logistics management. The four warehouses cater to the supplies for the outlets in the respective cities as well as the whole of the regions outlets. The safe express strategy focuses on reducing the product response time thereby ensuring that the customers’ demand is met at right place at the right cost. Any supply chain strategy has to dovetail with the business strategy. As globalisation catches up, outsourcing is getting more and more popular as a business strategy. 3PL is a proven practice worldwide and is gaining acceptance in India as well. At the same time, 3PL partner must prove credentials by way of ensuring cost rationalisation as a measure of his performance. Further safe express has the capability to suggest business models, packing parameters, reduction of logistics costs, as a value to its customers. Safe express is streamlining its warehouse management too by developing innovative software and web tracking facility. The end result is the completely web compatible solution for cargo and warehouse management. Safe express has also offered Barista a completely web based waybill tracking system for online delivery tracking of consignments. Sae express has also pioneered in ‘Radio Trunking’ technology along with V Sat links for monitoring route vehicles and intra-city runs through a global positioning system. b. Inventory Management: Organisations need to store the goods

required for day to day operation. They cannot store high inventory as stock piles up and cost also increase. They are not sure of demand fluctuation and its impact on the inventory, so they do not want take the risk by carrying little inventory. For example, Safe Express which provides inventory solution to Barista replenishes the goods on daily basis so that Barista maintain zero inventory space in their outlets.

c. Transportation: The goods need to be carried from one place to

another. Transporters ship the goods from supplier location to factory and from factory till customer. The different modes of transportation are: – Air transportation: This mode of transportation is used to transport perishable goods. The dominant characteristics of this mode are quick delivery, premium pricing and limited quantity transportation.

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Water transport: This is the slowest but most cost effective mode of transportation. It can carry wide varieties of goods but it can reach only limited places. The mode is usually suited for bulky, low value non perishable goods.

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Surface transportation: This mode is again divided into high way transportation and rail transportation. It can carry wide variety of assortments. In case of rail transportation it can carry bulky products while in highway transportation it is of high value goods.

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Pipelines: This mode is excellent in meeting delivery schedules as it is having fewer obstacles. The drawback of this type of transportation mode is, it carries very limited variety of products and covers limited geographic space. The cost of this transportation is very low. The most suitable products for this mode are oil and gas and slurries.

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Internet carriers: This mode is used to carry digital products from producer to customer via satellite enabled modem and telephone wires. Software companies, education institutions etc, are very few to name, who uses this mode of transport.

1. What is IMC? Describe the communication development process in brief. Integrated Marketing Communication [IMC]: According to the American Marketing Association, Integrated Marketing Communication is “a planning process designated to assure that all brand contacts received by a customer or prospect for a product, service, or organisation are relevant to that person and consistent over time.” Objectives: To plan, develop, execute and evaluate coordinated communications with organisations’ stakeholders. Reasons for growth of IMC: – The growth of innovative promotional tools and need to integrate them. – Specialised media vehicles for niche target customers. – Growth of retailer dominated market and passing of control from manufacturer to consumer. – Growth of database marketing. – Wider geographical coverage through internet. – Higher accountability and performance linked compensation schemes. Set 2

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Communication Development Process: Preparing Target Customer Profile: Effective marketing communication starts with identifying the target customer to whom the communication is to be developed. In this stage company prepares target consumer profile. Example: Company Exide Industries Company: Exide industries. Copy: Help, whenever wherever your car battery is in trouble we will be there, just dial the bat mobile number of your city and we will be right their to bring your car back to life because we love cars. Target customer profile: Customer characteristics

Description

Type of customer

Individual

Income

Upper middle class and upper class.

Media exposure

Print ( English magazines, dailies and journals)

occupation

Salaried or business class.

Need of the product

OEM of a car

Identifying promotion objectives: Target customer profile provides inputs about his/her readiness to purchase the product. Customer may be in any of the six stages of hierarchy of effects. The six stages are awareness, knowledge, liking, preference, conviction and purchase. Every company likes to bring their customer to purchase stage from other five stages. Therefore it create different promotion program at different stage. To make it clearer, Company first creates awareness about the product, educate them about the advantages, induce them to choose the brand, stimulates and monitor that customer purchases the product. a. Awareness: Marketer creates the new range of products. Awareness level for these products is very low. Intention of the advertisement is to create awareness about these new products. In the following example of Reebok play dry technology garments, it focuses to create awareness among the target audience. Look at the message copy of print advertisement. Copy: Dravid does this simply by sporting his Reebok Play Dry apparel. These fabrics have been designed with a special moisture

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ventilation system that dries away perspiration in action. Working effectively by pushing moisture away from the skin to the outer layer of the fabric for evaporation. So if you want to stay cool all summer, just do what the hottest players do. Walk into the nearest Reebok Store. b. Knowledge: In this stage target audience don’t have complete knowledge of the product. Marketer explains the product in detail and its advantages to the target customers. Following advertisement of Parry Neutraceuticals explains the advantages of beta carotenes.

Company: Parry Neutraceuticals Copy: You know these are good for you, Natural beta carotene and other carotenoids like it, are the natural pigments found in orange, yellow, red and some green fruits and vegetables. They’re some of the biggest reasons why fruits and veggies are good for you. They help prevent the worst things that can happen to you – cancer, heart disease, diabetes, arthritis, cataract and even ageing. The age-related or ‘degenerative’ diseases begin with repeated damage to cells, which adds up over time. The biggest cause of damage to cells is a common process called oxidation. Carotenoids help prevent oxidation damage because they’re some of nature’s best anti-oxidants. But to get enough natural beta carotene and other carotenoids, you need to eat 5 servings of fruits and 5 servings of vegetables every day. Or just one soft gel of Parry’s Natural Beta Carotene. It is a mixture of natural carotenoids that comes from Dunaliella salina, one of nature’s best sources of carotenoids c. Liking: Promotion is used to convert knowledgeable audience into likeable category. Marketer uses celebrities to create interest in the product. For example, Reid and Taylor highlight their product quality in the advertisement by using Amitabh Bachhan a film actor. d. Preference: Creating differentiation in the market place so that customer identifies it over the rival brands. Big bazaar advertisement with tag line ‘ is se sasta aur achcha kahin nahi’ or nobody sells cheaper and

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better is alluring the customer by telling them what differentiation they can bring. e. Conviction: customer may have preference over the product but he/she still not able to decide. In this situation, marketer develops the messages in such a way that it provides platform for him to decide. For example, Tata indigo, requests its customer to go for test drive and experience the truth. Customer may be convinced about indigo but not developed the conviction. Look at the words used in the copy. Copy: Business class travel. Now with power dressing. Presenting the stylish new Tata Indigo. Make a powerful style statement on the roads with the new Tata Indigo. The fascia is accentuated by dual chamber headlamps and more pronounced chrome-lined grille, while sill valance covers, chrome insert door rub rails and dual tone ORVMs add a sporty touch to the overall elegance of the car. The rear sports a chiseled bodyhugging bumper, new tail lamps and chrome surround registration plate garnish. The interiors turn beige for the full range, and the new cockpit topped off by the 3-spoke steering wheel carries forward the classic modernity of the exteriors. The best-selling sedan just got better. Take a test drive today. And discover power dressing on. wheels Spoil yourself.

f. Purchase: Sometimes customers are having strong desire to buy the product but due to affordability or any other environmental character, they are not able to purchase. In this situation, marketer uses promotional schemes particularly reduced price schemes to attract the customer. Company also comes out with communication programs for repeat purchasers and loyal customers. Designing a message

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After deciding the communication objectives, Marketer turns to develop right message which should create attention, interest, desire or action (AIDA) by the customer. Before deciding what should be there in the message, we will understand AIDA model in detail. 1. AIDA model: • Attention: The marketing communication should generate attention towards the product. In this stage customer is having the need; organization should provide solution from their communication. • Interest: Once the customer provides enough attention towards the communication, organization should stimulate it to create interest. • Desire: The interest created should be forced in the customer mind so that he will develop desire towards the product. • Action: Strong desires should be turned into action. Hence company should provide the advantages of purchasing of the product in their communication messages. Deciding the message content:

Message content must have any one of the following appeals •

Emotional appeal: Positive emotional appeal or negative emotional appeals are strong tools used to intensify the purchasing activity of the customer. Positive emotions like love, pride, joy and humor are used in the message. Following are the advertisement where such attributes of positive emotions used.

www.makemytrip.com- Joy

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BMW fastest saloon car in the worldpride

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Fevicol – humor

Wheel- love.

The negative emotions like fear guilt and shame are also used in the advertisement to attract the customer.

ICICI prudential- fear.

NIIT- if you are not studying at NIIT you are missing something- guilt

Rexona deodorant – shame. Rational appeals highlight on the desired benefits about the products. They highlight quality, economy value or performance of the product.

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Dabur Amla – value appeal ( long Hair)

Reliance India mobile- performance( works even in flood situations)

•

Lakme brilliance- Quality products.

Reliance Infocom- Like the first three, the mobile phone must come to me as a necessity and not as a luxury- economy

Moral appeal: These are concerned towards public health or environment or social responsibility. For example, Shell lubricants show its commitment towards environment in their advertisements. Message format: In this section we will discuss how message should look and stimulate the interest.

Constituents of message format: Characteristics Headline

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Suitable media. Print, Outdoor, Online

1. Copy

Print, TV, outdoor, online

2. Illustration

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3. Color

Print, TV, outdoor, online

4. Pictures

Print, Outdoor, online

5. Message size

Print, TV, Outdoor

6. Shape

Print, Outdoor, Online

7. Words

Print, TV, Product, Outdoor

8. Sounds

Radio, TV, Online, Outdoor

9. Voice

Radio, TV, Online

10.Body language

TV, Online

11.Texture

Product, Print, Online

12.Scent

Product

13.Distinctive formats

Print, Online, Outdoor

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Print advertisement Message format:

Colors used: Saffron, Yellow, Red, Watermark brown, Black, Brown. Size: 3.5inch breadth* 4.2 inch length Shape: Rectangle Words: Straight out of the pack and into your mouth, that’s the usual style of eating Haldiram’s Namkeen. But now, there’s a whole new way of doing it! A blend of our delicious namkeen with a dash of imagination, presented in a list of yummy recipes, just for you. But where do you get these Recipe Remixes? So, get your own booklet and start whipping up your remixes in your kitchen itself or simply visit us at our outlets. But wait, there’s more! You can even create your own recipes and send it to us. Who knows your recipe could win you a gift voucher of up to Rs. 2500/-*. Not only that, your winning recipe could also feature in our next Haldiram’s Recipe Remix booklet. So, get those recipes started and let the good times begin! Selecting the channels of communications The communicator may use company sales people, reference groups, blogs, RSS, webinar, online communities and social networking sites to

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promote their products. The word of mouth campaigns buzz marketing and viral marketing are some examples of personal communication channels. Word of mouth communication: the personal communication between customers and their reference groups about the product Buzz marketing: The marketing technique in which organizations create opinion leaders (people whose opinion are sought by others) and spread the product information to others. For example, Gmail – Google did no marketing, they spent no money. They created scarcity by giving out Gmail accounts only to a handful of “power users.” Other users who aspired to be like these power users “lusted” for a Gmail account and this manifested itself in their bidding for Gmail invites on eBay. Demand was created by limited supply; the cachet of having a Gmail account caused the word of mouth, rather than any marketing activities by Google. Viral marketing: The marketing technique of using social networks on the internet to create the brand image. Viral marketing is a phenomenon that facilitates and encourages people to send messages to others voluntarily Viral promotions may take the form of video clips, interactive Flash games, images, or even text messages. For example, Cadbury’s Dairy Milk 2007 Gorilla advert was heavily popularized on YouTube and Face book. Selecting the message source Messages communicated by the celebrities and proper sources have high credibility among the target consumers. Many companies use well known actors and actresses, cricket players, and even cartoon characters to promote their advertisements. Colgate- Palmolive well known FMCG company used Indian Dental Association’s (IDA) recommendation to promote their toothpaste. If the product character does not match with sources, then product will fail in the market. Recently Pepsi dropped its sources Rahul Dravid and Sourav Ganguly and selected Rohit Sharma for the promotion campaigns. Target Customer Feedback The communicator collects the feedback on the promotion campaign to assess how many of target customer able to see, hear or read the message. This stage helps communicator to understand how many of target customers actually able to recall the message? And among them how many of them really purchased it. Some companies go further and ask the customer to provide suggestion to improve the promotion campaign. 1. What are alternative approaches to marketing while going international? Study Pepsi’s international marketing strategy. Alternative approaches to International Marketing:

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The orientation towards the market varies from company to company. Each one adopts different approaches on the basis of their expertise or strength of the company. Some companies adapt same product for all the markets while others differentiate for each country. The three alternate approaches used in international marketing are. a. Domestic

market extension approach: Companies adopt this strategy thinks international markets are secondary to its domestic markets. b. Multi domestic market orientation: In the international market each company has its uniqueness. Their preference varies. The consumer profile is different from domestic market. Companies develop different market plans for such markets. For example, in France, men use more cosmetics than women, whereas in India women use more cosmetics than me. A company should change the product positioning differently. c. Global Market orientation: Company thinks that product needs are universal in nature irrespective of country where they work. Company tries to standardise their product and services. For example, Walkman is same across the world. The product information brochure contains explanation in different languages of different countries. The final product is same in all the countries. Pepsi’s International Marketing strategy:

In 1965, PepsiCo, Inc. was founded by Donald M. Kendall, president and chief executive officer of Pepsi-Cola and Herman W. Lay, chairman and chief executive officer of Frito-Lay, through the merger of the two companies. Caleb Bradham, a New Bern, N.C. pharmacist, created PepsiCola in the late 1890s. At the international level, PepsiCo International has been focusing more on India where the consumption of soft drinks is expected to increase many-fold which is only three ounces per person now as compared to 200 ounces in Europe and over 300 ounces in North America. But, at the same time it is not realized that there is a vast difference between the purchasing power of an average Indian and North American as it takes an Indian 1.5 hours of work to be able to buy a bottle of Pepsi whereas for an North American, it takes less than 5 minutes.

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No single foreign investment project has been the center of much attention and controversy in the late 1980s and early 1990s as the Pepsi Co project in India. International Marketing Strategies: Ω For a business to be successful with its marketing activities, it will need to: undertake a "situational analysis", including a SWOT analysis. A business must continually identify and take advantage of opportunities if it is to retain a competitive advantage over its rivals or competitors. This will also involve continual improvement in the organization and operations of the business and the development of a marketing plan. Ω Identify the target markets that the business wants to pursue. This is where a business distinguishes between the different groups that make up the market. This can be done on demographic (e.g. age and sex), geographic location or psychographics (consumer behavior) variables. Ω Develop a marketing mix appropriate to the target markets. Ω Put a marketing management system in place to collect data on items such as the marketing strategies or product sales so that informed decisions can be made about future marketing activities.

Types Of Products: Non-alcoholic soft drink beverage market can be divided into fruit drinks and soft drinks. Soft drinks can be further divided into carbonated and non-carbonated drinks. Cola, lemon and oranges are carbonated drinks while mango drinks come under non-carbonated category. The soft drinks market till early 1990s was in hands of domestic players like campa, thumps up, Limca etc but with opening up of Set 2

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economy and coming of MNC players Pepsi and Coke the market has come totally under their control. While worldwide Coke is the leader in carbonated drinks market in India it is Pepsi which scores over Coke but this difference is fast decreasing (courtesy huge ad-spending by both the players). Pepsi entered Indian market in 1991 coke re-entered (After they were thrown out in 1977, by the then central government) in 1993.Carbonated soft drinks major Pepsi India is now putting together a ‘cocktail’ to take a bigger ‘slice’ of the fruit juice market. Close on the heels of the launch of its global lemon drink Twist in an Indian avatar as Pepsi Aha, Pepsi, once again, is all set to roll out another global product— in a localized version. Come June 2002, and Pepsi will roll out the blends of its international fruit drink Twister in the country, albeit, with a difference. In India, Twister blends will be launched as mixed fruit cocktails under Pepsi’s existing juice brand Slice. Pepsi spokesperson, when contacted, confirmed the launch but said the products will be launched on an ‘experimental basis’ for three to four months beginning June 2002. However, confirmed sources said that the product has been test-launched and is ready for a formal launch in June. Globally, the proposed Slice fruit blends exist under Twister brand and are available in over 10 flavors and in various packaging options. The company had at one time contemplated bringing Twister in its original self to India but the plan was later shelved. “Internally we have been debating whether to go ahead with Twister or keep Slice as a mother brand for juices,” the Pepsi spokesperson said. Market Segmentation: The soft drink markets can be segmented on the basis of place of consumption or on the basis of type of products. The segmentation on the basis of place of consumption divides the market into two parts: • On-premise-80% of the consumption of soft drinks is on premise i.e. restaurants, railways stations, cinema etc. • At-home- the rest 20% of the market compromises of the soft drink purchased for consumption at home. The market can also be segmented on the basis of types of products into cola products and non-cola products. • Cola products account for nearly 61-62% of the total soft drinks market. The brands that fall in this category are Pepsi, Coca-Cola, Thumps Up, and diet coke, Diet Pepsi etc. • Non-cola segment which constitutes 36% can be divided into 4 categories based on the types of flavors available, namely: ○ Orange ○ Cloudy Lime ○ Clear Lime ○ Mango

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Orange flavor based soft drinks constitute around 17% of the market. The segment is largely dominated by national brands like Fanta of Coca Cola and Mirinda Orange of PepsiCo, which collectively form15% of the market rest of the market is in hands of smaller brands like Crush (earlier of Cadbury Schweppes and now of coca Cola), Gold Spot etc. ii. Cloudy Lime flavor constitutes 14% of the market and is largely dominated by Limca of coca cola and Mirinda Lemon of PepsiCo. Limca is the market leader with around 70-75% of the market followed by Mirinda Lemon. i.

iii. Clear Lime: this segment of the market witnessed good growth

initially with all the players launching their brands in the segment. But now the growth in the segment has slowed down. The brands available in this segment are 7 Up of Pepsi, Sprite of Coca Cola and Canada Dry (earlier of Cadbury Schweppes and now of Coca cola). The segment constitutes 3% of the total soft drinks market. iv. Mango: this flavor segment constitutes 2% of the total soft drinks market and it directly competes with mango based fruit drinks like Frooti. The leading brands in this segment are: Maaza of Coca Cola, Mangola (Earlier of Dukes now of PepsiCo) and Slice of PepsiCo. Market Characteristics: The soft drink market is highly skewed in terms of place of consumption, in terms of regional distribution & soft drink flavors as well as in terms of SKUs.While 80% of the consumption is impulse based outside home 20% comes from consumption at home. This trend is slowly changing with increase in occasion led sales.. Another peculiar feature of the market is that of positioning and targeting of various brands. While Cola brand of Coke is targeted at teen-agers nd is positioned as refreshment for mind and body. Its Thumps Up brand is targeted at people in age group of 2029year positioned as thing for adventure-loving, successful and macho person. Fanta is targeted at consumer’s in pre-teen age group and is positioned as fun thing. Sprite is targeted towards teenagers positioned to convince them to follow their instincts and not to fall for false pretence. Maaza is positioned as family drink while diet coke is targeted towards health and figures conscious people especially teenage girls. Market Share (in %): Brand Name

Market Share (in %)

Market Share (in %)

Pepsi

41

49

Coca Cola

57

48

Consumer Habits And Practice: Set 2

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♦ Soft drinks come under the category of products purchased in impulse. Though the market is marred by brand loyalty the purchase decision itself is a low involvement decision. This attitude of impulse buying is slowly changing to occasion-led buying and also to some extent to consumption through home refrigeration particularly in urban areas. ♦ The market is slowly moving from non alcoholic carbonated drinks to fruit based drinks and also to plain bottled water due to lower price and ready availability. ♦ Consumers purchase soft drinks primarily to quench thirst. Therefore people traveling and not having access to hygienic water reach out for soft drink. This accounts for a large part of the sales. ♦ Brand awareness plays a crucial role in purchase decisions. ♦ Consumers prefer convenient and economy products. ♦ Availability in the chilled form affects the purchase decision. This has made both the companies to push its sales and to increase its retail distribution by offering Visi Coolers to retailers. ♦ While there is no aversion to consumption of soft drinks by any age group, the main consumers of this market are people in the age group of 30 and below. ♦ Product differentiation is very low, as all the products taste the same. But brand loyalty is high in the case of kids and people in the age group of 20-30 yrs. ♦ Consumers are sensitive to the outlay where the purchase of beverages is concerned. Hence the market is price sensitive. ♦ Due to the high cost of soft drinks, a lot of times consumers prefer beverages like tea, coffee or other drinks like sherbet and squashes. ♦ Per capita consumption in India is among lowest in the world at 5 bottles per annum compared to 80 bottles in Thailand and 800 bottles in USA. ♦ While 75% of the PET bottle consumption is in urban areas the 200ml bottles sales are higher in rural areas Cola Wars:

Set 2

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Before the first bottle of Pepsi hit the shelves, local soft drink manufacturers increased the size of their bottles by 25% without raising costs. The new battleground for the cola wars is in the developing markets of Eastern Europe (Russia, Romania, The Czech Republic, Hungary, and Poland), Mexico, China, Saudi Arabia, and India. With Coca-Cola's and Pepsi's investments in these countries, not only will they increase their sales worldwide, but they will also help to build up these economies. These long-term commitments by both companies will raise the level of competition and efficiency, and at the same time, bring value to the distribution and production systems of these countries. Many issues need to be overcome before a company can begin to produce its goods in a foreign country. These issues include political, social, economic, operational, and environmental topics, which must be addressed. When companies like Coca-Cola and Pepsi effectively analyze and solve these problems to everyone's liking, new foreign markets can translate into lucrative opportunities in the long run. The ongoing cola war between global rivals Pepsi and Coca-Cola has taken a weird twist in India with the former dragging the latter to court. The charge: Coca-Cola has snatched employees, bottlers, and agents, all of whom are bound to Pepsi by a contract. Pepsi has charged Coke with having entered into a conspiracy to disrupt its business operations by inducing key employees and associates to break existing contracts illegally. Pepsi has sought a permanent injunction and an ex parte order against coke, restraining it from taking away Pepsi's employees and business associates. Pepsi has also reserved the right to seek financial damages from Coke at a later date if necessary. The total market is normally too large and fragmented to be viable target for a firm's marketing efforts. Therefore, a business will select a target market-a group of customers with similar characteristics who currently, or who may in the future, purchase the product. two broad approaches can be adopted when selecting a target market: the total approach or the market segmentation approach Total market approach-applies when a firm targets the total market for a particular product. The firm develops a single marketing mix and directs it at the entire market for the product. This means there is one type of product with little or no variation, one promotional program aimed at everyone, one price, and one distribution system used to reach all the customers. Market segmentation approach: It occurs when the total market is subdivided into groups of people who share one or more common characteristics.

Set 2

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Marketers use for main variables when segmenting the total market:  Demographic- age, gender, ethnicity, income, occupation,

education level, religion, family size and social class  Geographic- urban/suburban/rural location, region, climate, landform  Product related- regular use, first-time use, brand loyalty, price sensitivity, end use  Psycho graphic- personality, motives, lifestyles

Set 2

MB0030