INTRODUCTION TO MARKETING MANAGEMENT

Marketing Management

Module:1

Chapter:1 – Nature & Scope of Marketing

Introduction to Marketing

MM/M1/SS

From the time you wake up..

MM/M1/SS

• Turn off that alarm – brush your teeth – take a shower – have breakfast – get dressed – travel to work – use the copier – go out for dinner at ____ - fall asleep

• We use more than 250 brands by the time our day ends !!

MM/M1/SS

Marketing is omnipresent ..!

“The average person in a metro-city is exposed to over 3,000 advertising messages a day…!!”

...consciously or otherwise.

Source: http://www.superprofile.com

MM/M1/SS

• We are constantly being targeted !!

MM/M1/SS

Marketing is natural…

• Analogy of marketing with the nature’s law of “survival of the fittest”

MM/M1/SS

What is sold What is marketed

A grocery shop sells ‘Channa’ Commodity

A restaurant sells ‘Channa-Bhatura’

Product

MDH , a food company sells ready to eat channa masala

Brand

Tata Consultancy Service sells TCS Certainity

Solution

MM/M1/SS

MM/M1/SS

What is Marketed?

GoodsGoods

ServicesServices

Events & ExperiencesEvents & Experiences

PersonsPersons

Places & PropertiesPlaces & Properties

OrganizationsOrganizations

InformationInformation

IdeasIdeas

Good Marketing is No Accident

The roaring success of four-wheeler Tata

Ace, in a market earlier dominated by three-wheeler load

carriers, was due to a deep understanding of the market needs

and customer requirements.

MM/M1/SS

Let’s define…

MM/M1/SS

What is Marketing?

Marketing is an organizational function and a set of processes for creating,

communicating, and delivering value to customers and for managing

customer relationships in ways that benefit the

organization and its stakeholders.

MM/M1/SS

What is Marketing Management?

Marketing management is theart and science

of choosing target markets and getting, keeping, and growing

customers throughcreating, delivering, and communicating

superior customer value.

MM/M1/SS

‘Marketing is the management process that identifies, anticipates and satisfies customer

requirements profitably’

The Chartered Institute of Marketing

MM/M1/SS

‘The right product, in the right place, at the right time, and at

the right price’

Adcock et al

‘Marketing is the human activity directed at satisfying

human needs and wants through an exchange process’

Philip Kotler

MM/M1/SS

• The AMA definition: “Marketing is the process of planning and executing

the conception, pricing, promotion, and distribution of ideas, goods, and services to create

exchanges that satisfy individual and organizational objectives.”

MM/M1/SS

No single definition or approach• But the common subject matters:

– The ability to satisfy customers,– The identification of favorable marketing

opportunities– The need to create an edge over competitors– The aim to increase market share mainly in

target markets

MM/M1/SS

Some marketing Gurus..

MM/M1/SS

Selling is only the tip of the iceberg

“There will always be a need for some selling. But the aim of marketing is to make selling superfluous. The aim of marketing is to know and understand the customer so well that the product or service fits him and sells itself. Ideally, marketing should result in a customer who is ready to buy. All that should be

needed is to make the product or service available.”

Peter Drucker

MM/M1/SS

Key Customer MarketsConsumer Markets

Business Markets

Global Markets

Nonprofit/ Government Markets

MM/M1/SS

• Consumer : A consumer is one who consumes goods and services.

• Customer : Customer are those who buy goods and services.

Consumer , Buyer & Customer

MM/M1/SS

Evolution of the marketing

concept

MM/M1/SS

Production ConceptProduction Concept

Product ConceptProduct Concept

Selling ConceptSelling Concept

Marketing ConceptMarketing Concept

Consumers prefer products that are widely available and inexpensive

Consumers favor products that offer the most quality, performance,

or innovative features

Consumers will buy products only ifthe company aggressively

promotes/sells these products

Focuses on needs/ wants of target markets & delivering value

better than competitors

Company Orientations Towards the Marketplace

MM/M1/SS

Societal Marketing

Concept

Company(Profits)

Consumers(Want Satisfaction)

Society(Human Welfare)

MM/M1/SS

Societal Marketing Concept

Holistic Marketing • The Holistic Marketing concept is bases on the

development, design and implementation of marketing programs, processes and activities that recognizes their breadth and interdependencies.

• Holistic marketing recognizes that “everything matters” in marketing and that a broad, integrated perspective is often necessary.

MM/M1/SS

MM/M1/SS

Figure 1.4 Holistic Marketing Dimensions

Customers

Front-line people

Middle Management

TopManagement

Modern Marketing Concept Traditional Organization Chart

MM/M1/SS

Modern Marketing Concept Customer-Oriented Organization Chart

Customers

Front-line people

Middle management

Topmanage-

ment

Customers Cus

tom

ers

MM/M1/SS

Figure 1.2 A Simple Marketing System

MM/M1/SS

The Marketing Mix

Developed to achieve the company’s objectives.

Also called:

4 P’s of Marketing

MM/M1/SS

Product

MM/M1/SS

What is a Product?

A product is anything that can be offered to a market to satisfy a want or need, including

physical goods, services, experiences, events, persons, places, properties, organizations,

information, and ideas.

MM/M1/SS

Product Mix• Total sum of all products and variants offered

by an organization (Hindustan Unilever Limited)

MM/M1/SS

Product Differentiation

• Product form• Features• Customization• Performance• Conformance• Durability• Reliability• Repairability• Style

MM/M1/SS

Service Differentiation

• Ordering ease• Delivery• Installation• Customer training• Customer consulting• Maintenance and repair

MM/M1/SS

Product Life Cycle

MM/M1/SS

PRICE

MM/M1/SS

Definition:

• In ordinary usage, price is the quantity of payment or compensation given by one party to another in return for goods or services.

MM/M1/SS

Objectives of Pricing

• Short-term profit maximization • Short-term revenue maximization • Maximize quantity • Maximize profit margin • Differentiation • Survival

Source: http://entrepreneurs.about.com/od/salesmarketing/a/pricingstrategy.htmMM/M1/SS

Place

MM/M1/SS

Marketing Channels and Supply Chain Management

The fourth ‘P’ of marketing(place)

Consumer Marketing ChannelsConsumer Marketing Channels

Wholesaler Distributor Retailer Consumer

Consumer

RetailerRetailer ConsumerConsumer

ManufacturerManufacturer

0-level channel

Wholesaler Retailer Consumer MfgMfg

2-level channel

MfgMfg

3-level channel

1-level channel

ManufacturerManufacturer

MM/M1/SS

Promotion

MM/M1/SS

Concept of ‘Promotion’

• Promotion is all personal and impersonal efforts by a seller to – Inform– Persuade or– Remind a target audience.

MM/M1/SS

MM/M1/SS

Personal Selling

• Direct presentation of a product to a prospective customer by a representative of the organization selling it.

– Face to face– Over the phone

MM/M1/SS

Advertising

• The non-personal communication of information usually paid for & usually persuasive in nature, about products (goods & services) or ideas by identified sponsor through various media.

– Broadcast media (TV, Radio)– Print media (newspapers, magazines)– Outdoor media (billboards)– Internet– Mobile phones– Other media

MM/M1/SS

Sales Promotion

• Incentives given to encourage sales and help personal selling.– Premiums – Event sponsorships– Contests– Trade shows– In-store displays, samples, rebates– Discounts and coupons

If given to channel partners: Trade Promotion

MM/M1/SS

Public Relations

• Efforts to develop favorable attitudes and opinions about products/organizations– Newsletters– Annual reports– Lobbying, charitable events etc.

• Publicity– News stories about organization & products

MM/M1/SS

Marketing Concept - The 4 P’s && The 4 Cs

MarketingMix

Product

PricePromotion

Place

CustomerSolution

CustomerCost Communication

Convenience

MM/M1/SS

Acoording to customer point of view-SIVA

Product Solution

Promotion Information

Price Value

Place Access

MM/M1/SS

Marketing Concept - The 4 P’s

MM/M1/SS

The extended marketing mix

Also called the service marketing mix

• People• Process• Physical Evidence• Productivity (8th P)

MM/M1/SS

*Problem & Challenges in Marketing• Network information Technology• Globalization• Deregulation• Privatization• Heightened competition• Industry Convergence• Consumer Resistance• Retail Transformation• Disintermediation *In Marketing Elective

New Consumer Capabilities• A substantial increase in buying power• A greater variety of available goods and services• A great amount of information about practically

anything• Greater ease in interacting and placing and

receiving orders• An ability to compare notes on products and

services• An amplified voice to influence public opinion

MM/M1/SS

*Role of Marketing Manager

• Developing marketing Strategies & Plans• Capturing Marketing Insights• Connecting with Customer• Building Strong brands• Shaping the Market Offering• Delivering Value• Communicating Value• Creating Long Term Growth *In Marketing Elective

Identifying & Selecting Markets

• Segmentation • Targeting • Positioning

( chapter – 3 in detail)

MM/M1/SS

Consumer Behavior

The behavior that consumer display in buying, using and disposing of products & services.

MM/M1/SS

MM/M2/SS

What Influences Consumer Behavior?

Cultural FactorsCultural Factors

Social FactorsSocial Factors

Personal FactorsPersonal Factors

MM/M2/SS

What is Culture?

Culture is the fundamental determinant of a person’s wants and behaviors acquired

through socialization processes with family and other key institutions.

MM/M2/SS

Subcultures

Nationalities Nationalities

ReligionsReligions

Racial groupsRacial groups

Geographic regionsGeographic regions

MM/M2/SS

Social Classes

Upper uppersLower uppersUpper middlesMiddle class

Working classUpper lowersLower lowers

MM/M2/SS

Social Factors

Referencegroups

Social roles

Statuses

Family

MM/M2/SS

Personal Factors

Age

Values

Life cyclestage

Occupation

Personality

Self-concept

Wealth

Lifestyle

MM/M2/SS

Figure 6.1 Model of Consumer Behavior

MM/M2/SS

Key Psychological Processes

Motivation

MemoryLearning

Perception

MM/M2/SS

Motivation

Freud’sTheory

Behavioris guided by subconsciousmotivations

Maslow’sHierarchyof Needs

Behavioris driven by the lowest, unmet need

Herzberg’sTwo-Factor

Theory

Behavior isguided by motivating

and hygienefactors

MM/M2/SS

Maslow’s Hierarchy of Needs

MM/M2/SS

Herzberg’s Two-Factor Theory

MM/M2/SS

Perception

Selective Attention

Subliminal Perception

Selective Retention

Selective Distortion

MM/M2/SS

Figure 6.3 State Farm Mental Map

MM/M2/SS

Figure 6.4 Consumer Buying Process

Problem Recognition

Information Search

Evaluation

Purchase Decision

PostpurchaseBehavior

Glimpse of Marketing Specializations

– Consumer Behavior– Marketing Research– Sales and distribution– Integrated Marketing Communications– Services Marketing– International Marketing– Brand Management

MM/M1/SS

Market Demand

Chapter :2

Desire + Willingness + Purchasing Power

Need, Want, Demand

MM/M1/SS

Management-II

Chapter:2Market Demand

MM/M1/SS

Demand States

Nonexistent Latent

Declining Irregular

Full UnwholesomeOverfull

Negative

Demand

• Negative Demand : * consumers dislike the product and may even pay a price to avoid it.* Eg. : vaccinations* Marketing Task : Market Analysis, Positive promotion, change belief & attitude of people, product redesign, lower price

MM/M1/SS

Demand

• Nonexistent Demand : * consumers may be unaware of or uninterested in the product.* foreign language courses* Marketing Task : connect the benefits of the product with people’s needs and interests

MM/M1/SS

Demand

• Latent Demand : * consumers may share a strong need that cannot be satisfied by an existing product* Harmless Cigarettes, More fuel efficient car* Measure the size of potential market, analyze strength of the company, develop goods and services to satify the demand

MM/M1/SS

Demand• Declining Demand :

* consumers begin to buy the product less frequently or not at all.* Typewriter, Desktop pc

* analyze the causes of the decline and determine whether demand can be resituated by new target markets, by changing product features or by more effective communication.* reverse declining demand through creative remarketing

MM/M1/SS

Demand

• Irregular Demand : * consumer purchases vary on a seasonal, monthly, weekly, daily or even hourly basis.* tours and travels… peak in weekends…* Marketing Task : Synchromarketing

Flexible pricing, promotion and other incentives

MM/M1/SS

Copyright © 2009 Dorling Kindersley (India) Pvt. Ltd.

4-85

Vocabulary for Demand Measurement

• Market demand• Market forecast• Market potential• Company demand• Company sales forecast• Company sales potential

Demand Forecasting

• A forecast is a prediction or estimation of a future situation, under given conditions.

• Sales Forecast is an task of projecting the future sales of the firm

-Two types of Forecasting1.Short Term Forecasting2.Long Term Forecasting

Objective of Long Term forecasting

• Deciding Plant Capacity• Manpower Planning• Estimating Cash flow• Determining Dividend Policy• Planning of long Term Production• Long run Financial Requirmenet

Objective of Short term Forcasting

• Formulation of suitable product policy• Regulate supply of Raw material• Best utilization of Machines• Regular availability of labor• Price policy formulation• Forecasting of Short term Finance

Requirement• Setting the sales Target

• Levels of forecast

(i) Macro-economic forecasting: Censes survey. Young India survey by CNN

(ii) Industry demand forecasting: Tata’s Westside had conducted a survey in 1997 about retail market before starting the Westside retail outlet on Dec 15th 1998.

(iii) Firm demand forecasting: Godrej (iv) Product-line forecasting: helps the firm to

decide which of the product or products should have priority in the allocation of firm’s limited resources. P&G whether to produce more of hair shampoo( either head and shoulders or Pantene) or to produce Tide or Camay soap. Premium End segment

Qualities of Good Forecasting

• 1) Simple• 2) Economy of time• 3) Economy of money• 4) Accuracy• 5) Reliability

Methods of Demand Forcasting

• Jury Method/ Executive Method• Survey of Expert’s Opinion• Sales Force Composite Method• Survey of Buyers intention• Market Share Method• Analytical & Statistical Method

1. Single Projection 2. Extrapolation Method3. Moving Average Method 4. Time Series Analysis

Sales Force Composite Method• Forecasting Done by the sales force of the

company• The men who are closest to the market are

questioned and their responses aggregated. • Each salesman develops the forecast for his

respective territory, the territory-wise forecast for his respective territory, the level and the aggregate of all these forecast is taken as the corporate forecast.

• It is a grass root method

• Advantages:• cheap and easy • Information will be more correct• Greater stability & Reliablity• Forecast could be easily broken in to categories.• Disadvantages: • Congenital optimism and congenital pessimism.• near-future forecasting is only possible, • various socio-economic factors are not considered.

Survey of Expert’s Opinion

• Simple Method: Researchers identifies the ‘experts’ on the commodity whose demand forecast is being attempted and probes with them on the likely demand for the product in the forecast period.

• Expert’s including dealers, distributors, suppliers, marketing consultants, and trade association.

• This method leads to Delphi Method:

• Delphi Method: : Opinions are first collected from experts and then instead of mathematical averaging efforts are made to match them. – To narrow down the gap experts are brought

together, arranging one or more meetings and arriving at some narrow range for the forecast under attempt.

• Advantages• Forecast can be made easily and speedily.• Different expert’s ideas and opinions are

taken into consideration for forecasting.• Suitable when past record of sales is not

available or a new product is to be introduced.• Expenses are very less than actual survey.Disadvantage:• The reliability of forecasting is always doubtful

because forecasting is based on opinions and suggestions and not actual facts.

Survey of buyer intention • Actual user of the product are directly

contacted by the investigator and their preference and attitude towards the product as well as future requirement are ascertained.

• Method is suited for forecasting of sales of Industrial Products.

• Complete Enumeration Survey:DF = (ID1 + ID2 + ID3+ ….IDn)

Where DF = demand forecast for all households, ID = individual demand of household. Ex. Census survey

Advantages: • Forecast comes direct from horse's mouth.• first-hand unbiased informationDisadvantages: • costly, unwillingness of consumers to answer• uncertainty, time consuming, • respondents might himself not clear about his

consumption pattern

Market Share Method

• The firm first work out the industry forecast, apply the market share factor to estimate the company’s sales forecast.

• The market share factor is developed based on the past trend, companies present position, brand preference.

• The firm must correctly appraise market standing, brand image, market share and strength and weakness as compared with the competitors in the industry

Analytical & Statistical Method

(i) Sales Trend Analysis (Extrapolation Method)• The firm uses its own record of past several

years’ sales to estimate the future sales. • It involves plotting of the sales figure for the

past several years and stretching of the line or the curve as the case may be.

• The extrapolation will give the forcast figure.

• It basically assumes that the variable will follow its previously established pattern if the pattern of sales repeats itself fairly accurately in a given period of time.

• In graphical Sales Trend Analysis Method the period is taken on X- axis and the corresponding sales values are on Y-axis.

(ii). Moving Average Method• Defined as an average of some fixed or

predetermined number of observations in a time series which moves through the series by dropping the top item of the previous averaged group and the next item below in each successive average.

• Time period may be even or odd i.e. 3,5,7,9 years• The calculated values of the moving average

become the basis for determining the expected future sales.

(iii)Time series predicts• This method uses historical and cross –

sectional data for estimating demand• Finding a Trend value for a specific year

• Finding seasonal fluctuations in the variable• Predicting turning points in future movements

of the variable

Management - II

Chapter:3

Market Segmentation

MM/M2/SS

Effective Targeting Requires…

• Identify and profile distinct groups of buyers who differ in their needs and preferences

• Select one or more market segments to enter• Establish and communicate the distinctive

benefits of the market offering

MM/M2/SS

Ford’s Model T Followed a Mass Market Approach

MM/M2/SS

Four levels of Micromarketing

Segments

Local areas Individuals

Niches

MM/M2/SS

What is a Market Segment?

A market segment consists of a group of customers who share a similar set of

needs ad wants.

MM/M2/SS

The Himalaya Drug Company serves a

growing niche market by

focusing on ayurvedic

medicines and health

supplements

MM/M2/SS

Segmenting Consumer Markets

GeographicGeographic

DemographicDemographic

PsychographicPsychographic

BehavioralBehavioral

MM/M2/SS

Geographic Segmentation

Local marketLocal market

Urban MarketUrban Market

Rural MarketRural Market

Regional MarketRegional Market

National MarketNational Market

International MarketInternational Market

MM/M2/SS

Demographic Segmentation

Age and Life CycleAge and Life Cycle

Life StageLife Stage

GenderGender

Income & EducationIncome & Education

GenerationGeneration

Social ClassSocial Class

Religious CustomsReligious Customs

MM/M2/SS

Bank Al Habib targets

senior citizens

MM/M2/SS

Dove Targets Women

MM/M2/SS

Figure 8.1 The VALS Segmentation System

MM/M2/SS

Behavioral Segmentation

Decision Roles• Initiator• Influencer• Decider• Buyer• User

Behavioral Variables• Occasions• Benefits• User Status• Usage Rate• Buyer-Readiness• Loyalty Status• Attitude

MM/M2/SS

The Brand Funnel Illustrates Variations in the Buyer-Readiness Stage

• Aware• Ever tried• Recent trial• Occasional user• Regular user• Most often used

MM/M2/SS

Loyalty Status

Switchers

Shifting loyals

Split loyals

Hard-core

MM/M2/SS

Figure 8.3 Behavioral Segmentation Breakdown

MM/M2/SS

Segmenting for Business Markets

DemographicDemographic

Operating VariableOperating Variable

Purchasing ApproachesPurchasing Approaches

Situational FactorsSituational Factors

PersonalCharacteristics

PersonalCharacteristics

• Demographic• Which industry we serve• Company Size• Location of company

• Operating Variable• Technology• User or Nonuser status• Customer Capabilities

• Purchasing Approach• Purchasing- function organization

(Centralized v/s Decentralized)• Power structure

(Engineering v/s Finance dominated)• Nature of Existing Relationship

(String v/s one time)• General Purchasing policies• Purchasing Criteria

MM/M2/SS

• Situational Factor• Urgency• Specific Application• Size or order

• Personal Characteristics• Buyer –seller similarity• Attitude toward risk• Loyalty

MM/M2/SS

MM/M2/SS

Effective Segmentation Criteria

MeasurableMeasurable

SubstantialSubstantial

AccessibleAccessible

DifferentiableDifferentiable

ActionableActionable

Targeting Market

• After dividing the market into different divisions when the market planning and marketing strategy are arranged keeping one of these divisions in view, it is known as Target Market.

• 1. Single product-Single Market• 2. Single Product- Many Market• 3. Many Product-Many Market

MM/M2/SS

MM/M2/SS

The Revolution brand of ready-made women’s

apparel successfully

focuses on the niche segment of plus-size clothes.

MM/M2/SS

Pepsi used Megamarketing in India

Positioning

• Positioning means occupying a distinctive place into the mind of target customer

• Stages of Product Positioning– Identification of implies comp0etitive benefit– Selection of competitive benefit– To give information competitive benefit

MM/M2/SS