MCM605_Marketing Management

MASTER OF COMMERCE/ MASTER OF BUSINESS ADMINISTRATION MARKETING MANAGEMENT MCM605/MBA609 Dr. K. Karunakaran

CHANDIGARH UNIVERSITY Institute of Distance and Online Learning Course Development Committee Chairman Prof. (Dr.) R.S. Bawa Vice Chancellor, Chandigarh University, Punjab Advisors Prof. (Dr.) Bharat Bhushan, Director, IGNOU Prof. (Dr.) Majulika Srivastava, Director, CIQA, IGNOU Programme Coordinators & Editing Team Master of Business Administration (MBA) Bachelor of Business Administration (BBA) Co-ordinator - Prof. Pragya Sharma Co-ordinator - Dr. Rupali Arora Master of Computer Applications (MCA) Bachelor of Computer Applications (BCA) Co-ordinator - Dr. Deepti Rani Sindhu Co-ordinator - Dr. Raju Kumar Master of Commerce (M.Com.) Bachelor of Commerce (B.Com.) Co-ordinator - Dr. Shashi Singhal Co-ordinator - Dr. Minakshi Garg Master of Arts (Psychology) Bachelor of Science (Travel & TourismManagement) Co-ordinator - Dr. Samerjeet Kaur Co-ordinator - Dr. Shikha Sharma Master of Arts (English) Bachelor of Arts (General) Co-ordinator - Dr. Ashita Chadha Co-ordinator - Ms. Neeraj Gohlan Master of Arts (Mass Communication and Bachelor of Arts (Mass Communication and Journalism) Journalism) Co-ordinator - Dr. Chanchal Sachdeva Suri Co-ordinator - Dr. Kamaljit Kaur Academic and Administrative Management Prof. (Dr.) Pranveer Singh Satvat Prof. (Dr.) S.S. Sehgal Pro VC (Academic) Registrar Prof. (Dr.) H. Nagaraja Udupa Prof. (Dr.) Shiv Kumar Tripathi Director – (IDOL) Executive Director – USB © No part of this publication should be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording and/or otherwise without the prior written permission of the author and the publisher. SLM SPECIALLY PREPARED FOR CU IDOL STUDENTS Printed and Published by: Himalaya Publishing House Pvt. Ltd., E-mail: [email protected], Website: www.himpub.com For: CHANDIGARH UNIVERSITY Institute of Distance and Online Learning CU IDOL SELF LEARNING MATERIAL (SLM)

Marketing Management Course Code: MCM605/MBA609 Credits: 3 Course Objectives:  The objective is to develop an understanding of the basic concepts of Marketing, its functions and relevance for managers.  To understand the scope of Marketing Mix, Marketing Environment, Market Segmentation, Targeting and Positioning.  To understand the Product and Pricing Decisions, New Product Development Process, Pricing Process, Policies and Strategies.  To understand the Promotion and Distribution Decisions, Channel Design, Selection and Management of Intermediaries.. Syllabus Unit 1 - Introduction to Marketing Management: Introduction, Market and Marketing, Core Concepts of Marketing, Functions of Marketing, Importance of Marketing. Unit 2 - The Marketing Process: Introduction, Marketing Mix-The Traditional 4Ps, Developing an Effective Marketing Mix, Difference between marketing and selling. Unit 3 - Marketing Environment: Introduction, Environmental Scanning, Analyzing the Organization’s Micro Environment, Company’s Macro Environment. Unit 4 - Demand Forecasting, Market Segmentation, Targeting and Positioning: Meaning and techniques of Demand Forecasting, Bases for Segmenting Consumer Markets, Targeting (T), Market Positioning (P). Unit 5 - Product Management, Decisions and Development: Introduction, Levels of Products, Classification of Products, Product Mix Strategies, Packaging and Labeling. Unit 6 - Brand and Branding Strategy: Introduction, Brand and Branding, Advantages and disadvantages of branding, Brand Equity, Brand Positioning, Brand Name Selection. Unit 7 - Product development and life cycle strategies: New Product Development process, Product Life Cycle (PLC). CU IDOL SELF LEARNING MATERIAL (SLM)

Unit 8 - Pricing Decisions: Determinants of Price; Pricing Process, Policies and Strategies. Unit 9 - Promotion Management: Introduction to Advertising, Fundamentals of Sales Promotion, Basics of Public Relations and Publicity. Unit 10 - Managing Non-Personal Communication Channels: Introduction, Communication Development Process. Unit 11 - Distribution Management: Introduction, Need for Marketing Channels. Unit 12 - Distribution Channel Decisions: Types and Functions of Intermediaries. Text Books: 1. Kotler, P., Keller, K.L. Koshy, A. and Jha, M. (2009). Marketing Management: A South Asian Perspective. New Delhi: Pearson Education. 2. Etzel, M., Walker, B., Stanton, W. and Pandit, A.(2007). Marketing Management. New Delhi: Tata McGrawHill. Reference Books: 1. Ramaswamy, V.S., Namakumari, S. (2009). Marketing Management: Global Perspective Indian Context. New Delhi: Macmillan Publishers India Ltd. 2. Saxena, Rajan. (2010). Marketing Management. New Delhi: Tata McGraw Hill Education Pvt. Ltd. CU IDOL SELF LEARNING MATERIAL (SLM)

CONTENTS Unit 1: Introduction to Marketing Management 1 - 22 Unit 2: The Marketing Process 23 - 34 Unit 3: Marketing Environment 35 - 48 Unit 4: Demand Forecasting, Market Segmentation, Targeting and Positioning 49 - 65 Unit 5: Product Management, Decisions and Development 66 - 82 Unit 6: Brand and Branding Strategy 83 - 102 Unit 7: Product development and life cycle strategies 103 - 119 Unit 8: Pricing Decisions 120 - 134 Unit 9: Promotion Management 135 - 155 Unit 10: Managing Non-Personal Communication Channels 156 - 175 Unit 11: Distribution Management 176 - 185 Unit 12: Distribution Channel Decisions 186 - 202 CU IDOL SELF LEARNING MATERIAL (SLM)



UNIT 1 INTRODUCTION TO MARKETING MANAGEMENT Structure: 1.0 Learning Objectives 1.1 Introduction 1.2 Nature and Scope of Marketing 1.3 Definition of Marketing 1.4 Core Marketing Concepts 1.5 Markets and Marketing 1.6 Marketing Management 1.7 Functions of Marketing 1.8 Marketing Orientations or Concepts 1.9 Importance of Marketing 1.10 Summary 1.11 Key Words/Abbreviations 1.12 Learning Activity 1.13 Unit End Questions (MCQ and Descriptive) 1.14 References 1.0 Learning Objectives After studying this chapter, you will be able to: Learn the core concepts of marketing Differentiate types of markets

2 Marketing Management Familiarise with the orientations or concepts Understand the functions of marketing Know the importance of marketing 1.1 Introduction This unit will help you to learn the basic concepts, nature, scope and importance of marketing, the meaning and types of markets, and functions of marketing. It will also explain the different orientations and concepts of marketing. 1.2 Nature and Scope of Marketing Marketing is managing profitable customer relationships. The basic objective of marketing is to attract new customers by promising and offering superior value and to retain and grow current customers by delivering satisfaction. Marketing deals with customers more than any other business function, and deals mainly with customers. Building customer relationships based on customer value and satisfaction is at the very core of modern marketing. Highly successful marketing companies know that if they take care of their customers, market share and profits will follow. Sound marketing is essential for the success of every company, whether large or small, global or national. Marketing is practised by large profit making companies like Microsoft, IBM, Reliance, HUL, Godrej, etc. It is also used by non-profit organizations like churches, colleges, hospitals and charitable trusts like CRY, Help Age, etc. Marketing is something which is going on all around us. Marketing people are busy calling for our attention always, to try a product or service. We see the results of marketing in the abundance of consumer products in our nearby supermarkets like MORE or BIGBAAZAR. We see marketing in the advertisements that flash very frequently on our TV, spice up our magazines and newspapers, decorate the sides of highways, and nowadays reach you even through cell phones and e-mails. Marketing has become all-pervading and we see it in everything we do. But there is much more to marketing than meets the consumer’s casual eye. Behind it all is a massive network of people and activities competing for our attention and purchases. 1.3 Definition of Marketing “Marketing is defined as a social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others.” (Philip Kotler) CU IDOL SELF LEARNING MATERIAL (SLM)

Introduction to Marketing Management 3 The American Marketing Association defines marketing as follows: “Marketing is the performance of business activities that directs the flow of goods and services from producer to customer or user.” These traditional definitions have undergone some changes and the new versions are as below: “Marketing is a societal process by which individuals and groups obtain what they need and want through creating, offering, and freely exchanging products and services of value with others.” (Philip Kotler). The American Marketing Association now defines marketing as follows: “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 organisation and its stakeholders.” 1.4 Core Marketing Concepts The important or core marketing concepts are shown in figure 1.1. They consist of needs, wants, and demands; marketing offers (products, services, and experiences); value and satisfaction; exchanges, transactions, and relationships; and markets. All these core marketing concepts are linked to one another, with each concept building on the one before it. Markets Needs, Marketing wents and offers (Products, demands services and CORE experiences) MARKETING CONCEPTS Exchanges, Value transactions and satisfaction and relationships Fig. 1.1: Core Marketing Concepts CU IDOL SELF LEARNING MATERIAL (SLM)

4 Marketing Management Needs: The concept of human needs is the fundamental concept underlying all marketing activities. Human needs are states of felt deprivation. They are biogenic in origin and include physiological needs for food, clothing, warmth, shelter and safety. Social needs are craving for belonging and affection. Knowledge and self-expression are the other individual needs of human beings. All these needs are basic requirements of any individual, and are not a creation by marketing people. Wants: Wants are the forms human needs take as they are shaped by culture and individual personality characteristics. When an American needs food, he may want a McDonald burger, or steak, French fries, and a Coke; whereas, if an Indian needs food, he may want a dosa, chapattis or rice, and coffee or tea. Wants are shaped by the society in which one lives and are described in terms of products that will satisfy needs. The only other difference between needs and wants is that while human needs are limited, wants are unlimited. Demand: When human wants are backed by purchasing power and willingness to buy, they become demands. Based on their needs, wants and buying capacity, consumers ask for or demand products which they feel will give them maximum value and satisfaction. Most of the marketing companies take pains to study and understand their customers’ needs, wants and demands, based on which they plan their strategies for products and promotions. Consumer behaviour studies and consumer research are primarily for identifying and analyzing consumer needs, wants and the related buying behaviour. Example: Need, Want and Demand of a College Student. Need: Transportation – The student has to reach college in time. Buses are not dependable. Want: The student wants a motorcycle, which looks grand, has many latest features and is dependable. E.g. Bajaj or Honda. Demand: Purchasing power is provided by the boy’s father, who also has the willingness to buy the bike, which his son wants. Maslow’s Hierarchy of Needs Abraham Maslow, a leading psychologist, sought to explain why people are driven by particular needs at particular times. Why does a scientist spend long hours at work in the laboratory, forgoing all other activities and pleasures? CU IDOL SELF LEARNING MATERIAL (SLM)

Introduction to Marketing Management 5 Fig. 1.2: Maslow’s Hierarchy of needs Source: Abraham Maslow, Motivation and Personality, Harper & Row, N. Y. 1954. Why does an athlete endure months of painful training in preparation for the Olympics? Why does one person devote all efforts toward amassing a fortune? Obviously, biological needs cannot account for the diversity and complexity of human behaviour. Maslow proposed an interesting way of classifying human motives. He assumed a hierarchy of motives ascending from the basic biological needs to more complex psychological motives that become important only after the more basic needs have been satisfied. (See Fig 1.2) Physiological Needs: These are the first and foremost basic level of human needs. These needs, which are required to sustain biological life, include food, water, air, shelter, clothing, sex – all biogenic needs or primary needs. For the man who is extremely hungry, no other interest exists but food. Safety Needs: After the first level of need is satisfied, safety and security needs become the driving force behind an individual’s behaviour. Health, healthcare, savings accounts, insurance policies, education and professional or vocational training satisfy the need for security. Social Needs: The third level of Maslow’s hierarchy includes such needs as love, affection, belonging, and acceptance. People seek warm and satisfying human relationships with other people in the society and are motivated by love for their families. Esteem Needs: When social needs are more or less satisfied, the fourth level becomes operative. This level is concerned with esteem or egoistic needs. Need for selfacceptance, self- esteem, success, independence, and personal satisfaction with a job well done reflect esteem needs. In addition, status, reputation, and recognition from others (show off one’s success) reflect egoistic needs. CU IDOL SELF LEARNING MATERIAL (SLM)

6 Marketing Management Need for Self-Actualisation: This need refers to the individual’s desire to fulfil his or her potential (selffulfilment) – to become everything he or she is capable of becoming. Desire to become an Olympic star, or leading singer or artist, a research scientist, a Chief Executive Officer in an MNC, etc., are examples of self-actualisation. In the marketing context, buyer’s needs are normally biogenic or physiological, and psychogenic or psychological. When they are aroused to a sufficient level of intensity, they become motives, urging the buyer to seek satisfaction through buying and using a product or service. Maslow’s hierarchy of needs included physiological needs, safety needs, social needs, esteem needs and self-actualisation needs. According to Maslow, needs are satisfied according to their hierarchical priority. The needs at one level must be at least partially satisfied before those at the next level become important motives for action. When food and safety are difficult to obtain, the satisfaction of these needs will dominate a person’s actions and the motives will have little significance. Only when the satisfaction of the basic needs is easy will the individual have the time and energy for aesthetic and intellectual interests. Artistic and scientific endeavours do not flourish in societies where people must struggle for food, shelter and safety. Some buyer behaviour will be influenced by all the above-mentioned motives. Maslow’s theory will help marketing people to understand how various products fit into the needs, wants, goals and lives of consumers. The hierarchy model offers a highly useful framework for marketers trying to develop appropriate advertising appeals for their products. It enables marketers to focus their advertising appeals on a need level that is likely to be shared by a large segment of the target audience. It also facilitates need-based product positioning or repositioning. The need hierarchy is often used as the basis for market segmentation with specific advertising appeals directed to one or more need segment level. A market is the set of actual and potential buyers of a product. Such buyers or customers share a particular need or want that can be satisfied through exchange relationships. The size of the market will depend on the number of people who exhibit the need, have buying power, and are willing to exchange their resources for what they want. In common parlance, a market is a place where buyers and sellers meet to buy or sell products, as in the case of a fish market, vegetable market or grain market. But in marketing, a market refers to the different groups of consumers for a product or service. Market need not be a place as in the traditional sense. Here, the sellers or marketers are treated as the industry and the buyers are the market. Examples are the general consumer market, business market, global market and specific markets like teenagers' market, children's market, working women's market, insurance market, healthcare market and education market. CU IDOL SELF LEARNING MATERIAL (SLM)

Introduction to Marketing Management 7 Marketers work to understand the needs and wants of specific markets and to select the markets that they can serve best. In turn, they develop products and services that create value and satisfaction for customers in these markets. The result is profitable long-term customer relationships. 1.5 Markets and Marketing A market is the set of actual and potential buyers of a product. Such buyers or customers share a particular need or want that can be satisfied through exchange relationships. The size of the market will depend on the number of people who exhibit the need, have buying power, and are willing to exchange their resources for what they want. In common parlance, a market is a place where buyers and sellers meet to buy or sell products, as in the case of a fish market, vegetable market or grain market. But in marketing, a market refers to the different groups of consumers for a product or service. Market need not be a place as in the traditional sense. Here, the sellers or marketers are treated as the industry and the buyers are the market. Examples are the general consumer market, business market, global market and specific markets like teenagers' market, children's market, working women's market, insurance market, healthcare market and education market. Marketers work to understand the needs and wants of specific markets and to select the markets that they can serve best. In turn, they develop products and services that create value and satisfaction for customers in these markets. The result is profitable long-term customer relationships. Customer and Consumer It is necessary to understand the subtle difference between a customer and a consumer, though often, both nomenclatures are used to connote a buyer. Customers can be of many types - individual, company, even the government, or resellers who buy products and services mainly for other users. But the consumer is the ultimate end user of the product or service. For example, a student buys a book to be given as a gift to his/her friend. Here, the student is the customer and the friend is the user, or consumer. Nevertheless, both are part and parcel of the market for books. Different Types of Markets Markets can be of different types: 1. Consumer Markets: This consists of individuals who buy products and services for own use or for the use of family members of their households. A person buying fast moving CU IDOL SELF LEARNING MATERIAL (SLM)

8 Marketing Management consumer goods (FMCG) or durables for the household use is an example. Most of the companies selling goods and services like packaged food, soft drinks, cosmetics, apparel and dress materials, TVs, DVD players, mobile phones, travel and tours, etc. cater to such consumers. The companies spend a lot of money to promote these category of goods and services to create brand awareness, brand image and brand loyalty among consumers. 2. Business Markets: Also known as industrial markets or organisational markets, these consist of business houses, organisations or factories buying goods and services for further production. Mostly these buyers buy raw materials, machinery and parts and other related items for manufacturing products meant for consumers. Some business buyers may be resellers, who buy goods to resell to others at a profit. 3. Institutional (non-profit) Markets: These are institutions which are non-profit entities like schools, colleges, universities, churches and other religious organisations, or charitable organisations. They buy mostly for the benefit of students, patrons or dependent individuals. 4. Government Markets: The Central as well as State governments form a big market in many countries, as in India. Government departments like PWD, defence, industry, irrigation, etc., purchase many goods and services. Usually the government purchases are based on competitive tenders invited from suppliers. 5. Global markets: Many companies develop global products and offer them to customers in many foreign countries. Global marketers use different means of entry into international markets like direct or indirect exporting, licensing, franchising, contract manufacture, and also by setting up a production facility abroad. There are many challenges in global markets due to differences in language, culture, monetary systems, trade barriers, etc., which make it a complex marketing situation. PepsiCo, Coca-Cola, HP, Parker, P&G, HUL, are all global marketers. 6. Meta Markets: A meta market is a cluster of complementary products and services which are closely related in the minds of the consumers, but are available normally through many companies or industries. The meta market facilitates making available all these through a single source. e-Bay is an ideal example of an automobile meta market. e-Bay links car manufacturers, new car and used car dealers, financing companies, insurance companies, mechanics, service centres, spare parts dealers, auto magazines, classified auto ads in media, and auto sites on the Internet. Instead of a car buyer having CU IDOL SELF LEARNING MATERIAL (SLM)

Introduction to Marketing Management 9 to go to different sources for all these varied areas, e-Bay, as a meta market, provides ease of approach to these related groups. 1.6 Marketing Management According to Philip Kotler, “Marketing management is the art and science of choosing target markets and building profitable relationship with them. This involves getting, keeping and growing customers through creating, delivering, and communicating superior value.” Thus, marketing management involves managing demand, which in turn, involves managing customer relationships. Any company will have a desired level of demand for its products. At any point of time, there may be a situation of no demand, adequate demand, irregular demand, or too much demand. The marketing managers have to identify ways and means to handle different demand situations. They will have to not only be concerned with finding and increasing demand, but also with changing or even reducing it. Where there is no demand, the marketer has to create demand using market development programmes, publicity, sales promotion, aggressive personal selling and other appropriate tactics. Reducing the demand is done through demarketing. Demarketing is resorted to by a company or a government when faced with a very high demand which it cannot meet in the short run. It is a process of discouraging overall demand using measures like increasing the price, controlling the supply and reducing promotion. For example, during 1971-72, there was acute shortage of chemical fertilizers in India as against heavy demand, and the Government resorted to demarketing policies for two years. Controls were introduced on retail distribution, prices were raised by nearly 100%, marketing freedom of dealers and manufacturers was brought under governmental control, and fertilizer promotion programmes were brought down to low key. Demand management and customer management are the fundamental activities in marketing management in all companies. Marketing Offers Marketing offers are combinations of products, services, information, or experiences offered to a market to satisfy a need or want. It is also called ‘a value proposition’, which is a set of benefits that marketing people promise to the consumers to satisfy their needs. The largest share of marketing offers consists of physical (tangible) products which include non-durable goods (Fast Moving Consumer Goods or FMCG) and consumer durables. Some examples are given below: (a) Non-durables: Cosmetics (face cream, lipstick, hair dye, nail polish, etc.) Toiletries (toothpaste, soap, powder, shampoo, etc.) Packaged food (biscuits, chocolates, coffee, tea, CU IDOL SELF LEARNING MATERIAL (SLM)

10 Marketing Management Horlicks, atta, ketchup, soft drinks, etc.) Others (books, petrol, gas, shoes, textiles, vegetables, fruits, fish, etc.) (b) Durables: Automobiles (cars, vans, jeeps, etc.) Two-wheelers (scooters, bikes, mopeds, etc.) Household appliances (fridge, TV, washing machine, microwave ovens, steel almirah, furniture, etc.) Marketing offers are not limited to physical products only. In addition to tangible products, marketing offers include services, activities or benefits offered for sale that are essentially intangible and do not result in the ownership of anything. Banking, airline, hotel, transportation, tourism and travel, consultancy, etc., are examples of such services. In addition, marketing offers also include other entities, such as persons, places, organizations, information and ideas. Examples: 1. Persons: Celebrities, film stars, fashion models, cricketers and even leading businessmen market themselves. Politicians (MPs, MLAs) market themselves at the time of elections. 2. Places: Countries and states market themselves to attract tourists. E.g.: Singapore, Switzerland, Malaysia, Goa. 3. Organizations: Just before a public issue of shares, most organizations market themselves. Even as a routine public image building process, companies indulge in organization marketing. E.g.: Reliance Industries, Wipro, Infosys, etc. 4. Information: The TV news channels like CNN, CNBC, BBC and NDTV, research firms like ORG-MARG, encyclopedias like Encarta, etc., are involved in information marketing. 5. Ideas: Ideas could be seen embedded in any marketing offer. If could be enhancing sociability after using Colgate toothpaste or Cinthol soap, or becoming beautiful after using Fair & Lovely cream. There are also special ideas that are marketed like awareness about family planning, AIDS/HIV, drug and alcohol abuse and religious beliefs. 6. Experiences and Events: Marketing offers can also be in the form of experiences and events. A visit to a theme park like Silver Storm, Black Thunder, Veegaland, Wonder la, etc. is an experience for the consumer. People need and want recreation and enjoyment, which they get in the form of experience when they visit the parks with their family or friends. Examples of events are rock shows, exhibitions, trade shows and fashion shows. Customer Value Consumers have a wide choice of products and services which promise satisfaction of a particular need. They normally decide on their choices based on their perceptions of the value and CU IDOL SELF LEARNING MATERIAL (SLM)

Introduction to Marketing Management 11 satisfaction that different products and services deliver, or offer. Customer value is the difference between the value the customer gains from buying and using a product and the cost of buying the product. They normally form expectations about the value of different marketing offers and buy accordingly. This involves the customers’ mental process of judging the value of the product and is called customer perceived value. Customer expectations are based on past buying experiences, and the opinions of friends and family members. The promises offered by marketers and the information about similar product offers of competitors also influence expectations. The main task of marketing, therefore, becomes value-creation and value delivery. Marketing offers are value propositions promising benefits and value. Customer Satisfaction Customer satisfaction with a purchase depends on how well the product’s performance lives up to the customer’s expectations. Customer satisfaction is a key influence on the future buying behaviour of the people. Satisfied customers will buy the product again and tell the others about their good buying experiences. Dissatisfied customers, on the other hand, switch to a competitor’s products and also discourage others from buying the product. Marketers must be careful to set the right level of expectations. If they set expectations too low, they may satisfy those who buy but fail to attract enough customers. If they raise expectations too high, customers will be disappointed. Customer value and customer satisfaction are key building blocks for developing and managing customer relationships. Exchanges: Exchange is another core concept of marketing. It is the act of obtaining an object which one needs from another by offering some other thing in return. In the exchange process, two or more individuals are involved, each side possessing something that is considered to be of value to the other. Both will have the ability to discuss and agree or disagree on the terms of exchange and deliver the object after an agreement is reached. This stage of offering something and discussing the mutually beneficial and acceptable terms is the exchange process. Marketing occurs when individuals decide to satisfy needs and wants through exchange. Transactions: As a consequence of the exchange process, when the two parties reach an agreement on the terms of exchange, it becomes transaction. A transaction will consist of an exchange of values between the two or more parties involved, and ownership also changes hands between the seller and the buyer. For example, a customer pays ` 4 lakhs to a Hyundai dealer and buys a Santro. Similarly, a physician treats a patient and the patient pays him ` 100 as his fees. Transactions can be monetary as in the above examples or can also be non-monetary. In the barter system, transactions take place without the involvement of money as only the goods or services are exchanged. For example, the butcher offers meat to the baker in exchange for a loaf of bread. CU IDOL SELF LEARNING MATERIAL (SLM)

12 Marketing Management Relationships: Marketing does not stop with a single transaction between the marketer and the customer. The marketer wants the customer to be fully satisfied with the transaction so that a long-term relationship can be built up in the form of customer loyalty. Marketing consists of actions taken to build and maintain desirable exchange relationships with target audiences involving a product, service, idea or other object. Beyond simply attracting new customers and creating transactions, the goal is to retain customers and grow their business with the company. 1.7 Functions of Marketing Why do we actually do marketing? What is the purpose of all marketing efforts taken? At first thought, the answer is simple: sell more. However, marketing is much more than that. We have to consider a spectrum of seven functions of marketing to find an answer for the question of the purpose of marketing. These functions define all the aspects that are part of the practice of marketing. Here we will take a closer look at the seven functions of marketing. Seven Functions of Marketing 1. Distribution: Distribution is the process of deciding how to get goods in customers’ hands. Although you would not directly relate it to marketing, it is an essential function CU IDOL SELF LEARNING MATERIAL (SLM)

Introduction to Marketing Management 13 of marketing: without distribution, the value does not end where you intend it to be. Physically moving and storing goods is part of distribution planning. The main methods of transportation are by truck, rail, ship, or air. Some large retail chains store products in central warehouses for later distribution. Distribution also involves the systems that track products so that they can be located at any time. 2. Financing: Financing is getting the money that is necessary to pay for setting up and running a business. Why is it one of the seven functions of marketing? Indeed, there is a close relationship between marketing and finance. None can stand without the other: Without marketing, the company does not deliver value to customers and does not sell its products. As a consequence, there are no profits and no need for finance. Business owners often obtain bank loans to start a new business. Some also form corporations and may sell shares (or stock) of the business. Financing also involves decisions such as whether to offer credit to customers. Most retailers offer customers payment options such as MasterCard or Visa, while other stores offer their own credit services. 3. Marketing Information Management: Sound business and marketing decisions rely on rich information about customers, trends, and competing products. Gathering this information, storing it, and analyzing it are part of marketing information management. Collecting information is done on a continual basis and through special marketing research studies. This is what marketers do to find out about customers, their habits and attitudes, where they live, and what trends there are in the marketplace. Companies conduct research so they can be successful at marketing and selling their products. 4. Pricing: Pricing is one of the seven functions of marketing that you also find in the marketing mix. Pricing decisions dictate how much to charge for goods and services in order to make a profit. Pricing decisions can be based on costs, competitors‘ prices, and value delivered to customers. To determine a price, marketers nowadays for most products need to determine how much customers are willing to pay. 5. Product Management: Product management is obtaining, developing, and improving a product or a product mix in response to market opportunities. An important part of it is New Product Development. Why is it related to marketing? Well, first of all, a product is the core means of delivering value to customers. In addition, marketing research guides product management towards what the consumer needs and wants. 6. Promotion: Promotion is the effort to inform, persuade, or remind potential customers about a business’s products or services. As such, it plays a key role in communicating CU IDOL SELF LEARNING MATERIAL (SLM)

14 Marketing Management value to customers, which makes it part of the seven functions of marketing. Online ads, television and radio commercials are forms of promotion. This type of promotion is called advertising. Promotion is also used to improve a company’s public image. In this case, it is referred to as PR (Public Relations). A company can show that it is socially responsible by recycling materials or cleaning up the environment. Promotion concepts and strategies are used to achieve success in the marketplace. 7. Selling: Selling provides a key link between creation of value and delivery of value to the customer. It reflects the change of ownership of value and provides customers with the goods and services they want. This includes selling in the retail market to you, the customer, and selling in the business-to-business market to wholesalers, retailers, or manufacturers. Selling techniques and activities include determining client needs and wants and responding through planned, personalized communication. The selling process influences purchasing decisions and enhances future business opportunities. 1.8 Marketing Orientations or Concepts The marketing function or activities are conducted by various companies based on six alternative concepts or orientations. They are: 1. The Production Concept 2. The Product Concept 3. The Selling Concept 4. The Marketing Concept 5. The Customer Concept 6. The Societal Marketing Concept 1. The Production Concept: The production concept believes that consumers will favour products that are readily available at reasonable prices. Improvement in production and distribution efficiency will be the focus for managements under this concept. When the demand for a product exceeds the supply, manufacturers have to increase production. When the product’s cost is too high, the management has to bring it down to affordable levels. In the example of Ford car model T, Henry Ford believed that if cost is reduced, more people would buy it. Ford did not have any concern about customers’ preferences and joked that the customer can have any colour for the car, provided it was black. The production concept, though useful in some situations, could result in ‘marketing myopia’, according to Theodore Levitt. Companies following this concept focus too narrowly on CU IDOL SELF LEARNING MATERIAL (SLM)

Introduction to Marketing Management 15 their own activities and lose sight of the real objective of customer’s need satisfaction. In India, for example, the Indian Telephone Industry (ITI) earlier had a monopoly, and was producing only black coloured telephone instruments. At present, due to competitors entering the market, we can have any colour for our instruments. Similarly, household electrical appliances like fridge, washing machine, geyser, microwave oven, etc., were available only in white colour (and were, therefore, called ‘white goods’). Now we have a choice of different colours. 2. The Product Concept: The product concept believes that consumers will favour products that offer the most in quality, performance, and innovative features. Continuous improvements in product and quality are essential for companies that follow this concept. They believe that if they build a better mouse trap, the world will beat a path to their door. Actually, the consumers may be wanting a better solution to the mouse problem and not a better mousetrap. So, product concept may also lead to marketing myopia. 3. The Selling Concept: The selling concept believes that consumers will not buy enough of the company’s products unless it undertakes pressure selling tactics and heavy promotion efforts. Buyers are believed to have a buying inertia. This concept is especially used for unsought goods which buyers normally do not think of buying, like life insurance, cemetery plots, etc. When companies face excess production, they follow this concept to sell what they make, without caring for customer’s needs or satisfaction. 4. The Marketing Concept: The marketing concept believes that achieving the company’s objectives depends on understanding the needs and wants of target markets and delivering the desired satisfaction in a better way than what the competitors are doing. Focus on customer and value is considered the path to successful sales and company profits in this concept. The customer is considered THE KING, and the company produces and markets what the customer wants. The selling concept takes an inside-out perspective. It starts with the factory, focuses on the company’s existing products, and calls for heavy selling and promotion to generate profitable sales. The focus is mainly on conquering the customer, for short-term sales, with no concern for consumers. Professor Theodore Levitt of Harvard University has drawn a contrast between selling and marketing concepts as follows: “Selling focuses on the needs of the seller; marketing on the needs of the buyer. Selling is preoccupied with the seller’s need to convert his product into cash; marketing with the idea of satisfying the needs of the customer by means of the product and the whole cluster of things associated with creating, delivering and finally consuming it.” The marketing concept takes an outside-in perspective. It starts with a well defined target market, focuses on customer needs, and integrates all the CU IDOL SELF LEARNING MATERIAL (SLM)

16 Marketing Management marketing activities that affect the customers. Profits come from creating long-term customer relationships based on customer value and satisfaction. Most of the successful companies follow the marketing concept, and are fully customer-driven in their activities. 5. The Customer Concept: Many companies are today moving beyond the marketing concept to the customer concept. These companies shape separate offers, services, and messages to individual customers, based on their individual preferences. They hope to achieve profitable growth through capturing a larger share of each customer’s expenditures by building high customer loyalty and focusing on customer lifetime value. One-to-one marketing has become possible through advances in factory customization, computers, the Internet and database marketing software. Examples: Barbie Dolls, Levi Strauss Jeans, Dell Computers. Example of the Height of Customization – The Maybach car (Mercedes) Costing ` 5.25 crores! 6. The Societal Marketing Concept: This concept believes that organizations should determine the needs, wants and interests of target markets. It should then deliver superior value to the customers in a way that maintains or improves the consumer’s and the society’s well-being. The societal marketing concept calls on marketers to balance three considerations in setting their marketing policies: company profits, consumer wants, and society’s interests or human welfare. (Fig. 1.3) Originally, most companies based their marketing decisions largely on short-run company profit. Eventually, they recognized the long-run importance of satisfying consumer wants, and the marketing concept emerged. Now many companies are beginning to think of the society’s interests when making their marketing decisions. Society (Human welfare, environment) Societal Marketing Concept Consumers Company (Needs, wants, satisfaction) (Sales volume, profits, growth) Fig. 1.3: Societal Marketing Concept CU IDOL SELF LEARNING MATERIAL (SLM)

Introduction to Marketing Management 17 Customer Relationship Management Whatever the concept or orientation followed, the primary concern of marketing management is to create profitable relationships with customers. Customer Relationship Management (CRM) is the overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction. Thus, today’s companies are going beyond designing strategies to attract new customers and create transactions with them. They are using CRM to retain current customers and build profitable, long-term relationships with them. The modern view is that marketing is the science and art of finding, retaining, and growing profitable customers. Companies find that it costs 5-10 times as much to attract a new customer as it does to keep a current customer satisfied. Also, losing a customer means losing the entire stream of purchases that the customer would make over a lifetime of patronage, which is the customer lifetime value. Direct mail used to build customer relationship. The key to building lasting customer relationships is to create customer value and satisfaction. Satisfied customers are more likely to be loyal customers, and they are likely to give the company a larger share of their business. A customer buys from the firm that offers the highest customer perceived value — the customer’s evaluation of the difference between all the benefits and all the costs of a marketing offer relative to those of the competitor’s offer. Customers act on perceived value and not on actual product values and costs. Customer satisfaction depends on the perceived performance relative to a buyer’s expectations. If the product’s performance falls short of expectations, the customer is dissatisfied. If performance matches expectations, the customer is satisfied. If performance exceeds expectations, the customer is highly satisfied or delighted. 1.9 Importance of Marketing 1. Marketing Helps in Transfer, Exchange and Movement of Goods: Marketing is very helpful in transfer, exchange and movement of goods. Goods and services are made available to customers through various intermediaries’ viz., wholesalers and retailers etc. Marketing is helpful to both producers and consumers. To the former, it tells about the specific needs and preferences of consumers and to the latter about the products that manufacturers can offer. According to Prof. Haney Hansen “Marketing involves the design of the products acceptable to the consumers and the conduct of those activities which facilitate the transfer of ownership between seller and buyer.” CU IDOL SELF LEARNING MATERIAL (SLM)

18 Marketing Management 2. Marketing Is Helpful In Raising And Maintaining The Standard Of Living Of The Community: Marketing is above all the giving of a standard of living to the community. Paul Mazur states, “Marketing is the delivery of standard of living”. Professor Malcolm McNair has further added that “Marketing is the creation and delivery of standard of living to the society”. By making available the uninterrupted supply of goods and services to consumers at a reasonable price, marketing has played an important role in raising and maintaining living standards of the community. Community comprises of three classes of people i.e., rich, middle and poor. Everything which is used by these different classes of people is supplied by marketing. In the modern times, with the emergence of latest marketing techniques even the poorer sections of society have attained a reasonable level of living standard. This is basically due to large scale production and lesser prices of commodities and services. Marketing has infact, revolutionised and modernised the living standard of people in modern times. 3. Marketing Creates Employment: Marketing is complex mechanism involving many people in one form or the other. The major marketing functions are buying, selling, financing, transport, warehousing, risk bearing and standardisation, etc. In each such function different activities are performed by a large number of individuals and bodies. Thus, marketing gives employment to many people. It is estimated that about 40% of total population is directly or indirectly dependent upon marketing. In the modern era of large scale production and industrialisation, role of marketing has widened. This enlarged role of marketing has created many employment opportunities for people. Converse, Huegy and Mitchell have rightly pointed out that “In order to have continuous production, there must be continuous marketing, only then employment can be sustained and high level of business activity can be continued”. 4. Marketing as a Source of Income and Revenue: The performance of marketing function is all important, because it is the only way through which the concern could generate revenue or income and bring in profits. Buskirk has pointed out that, “Any activity connected with obtaining income is a marketing action. It is all too easy for the accountant, engineer, etc., to operate under the broad assumption that the Company will realise many dollars in total sales volume. However, someone must actually go into the market place and obtain dollars from society in order to sustain the activities of the company, because without these funds the organisation will perish.” CU IDOL SELF LEARNING MATERIAL (SLM)

Introduction to Marketing Management 19 Marketing does provide many opportunities to earn profits in the process of buying and selling the goods, by creating time, place and possession utilities. This income and profit are reinvested in the concern, thereby earning more profits in future. Marketing should be given the greatest importance, since the very survival of the firm depends on the effectiveness of the marketing function. 5. Marketing Acts as a Basis for Making Decisions: A businessman is confronted with many problems in the form of what, how, when, how much and for whom to produce? In the past problems was less on account of local markets. There was a direct link between producer and consumer. In modern times marketing has become a very complex and tedious task. Marketing has emerged as new specialised activity along with production. As a result, producers are depending largely on the mechanism of marketing, to decide what to produce and sell. With the help of marketing techniques a producer can regulate his production accordingly. 6. Marketing Acts as a Source of New Ideas: The concept of marketing is a dynamic concept. It has changed altogether with the passage of time. Such changes have far reaching effects on production and distribution. With the rapid change in tastes and preference of people, marketing has to come up with the same. Marketing as an instrument of measurement, gives scope for understanding this new demand pattern and thereby produce and make available the goods accordingly. 7. Marketing is Helpful in Development of an Economy: Adam Smith has remarked that “nothing happens in our country until somebody sells something”. Marketing is the kingpin that sets the economy revolving. The marketing organisation, more scientifically organised, makes the economy strong and stable, the lesser the stress on the marketing function, the weaker will be the economy. 1.10 Summary “Marketing is a societal process by which individuals and groups obtain what they need and want through creating, offering, and freely exchanging products and services of value with others.” The basic objective of marketing is to attract new customers by promising and offering superior value and to retain and grow current customers by delivering satisfaction. Marketing deals with customers more than any other business function, and deals mainly with customers. Building customer relationships based on customer value and satisfaction is at the very core of CU IDOL SELF LEARNING MATERIAL (SLM)

20 Marketing Management modern marketing. Core marketing concepts consist of needs, wants and demand. Needs have a hierarchy and only after the lower level needs are satisfied people will be interested in the higher level needs. There are various approaches or orientations to marketing like production, product, selling, marketing and societal marketing. The marketing functions cover seven main areas – product management, pricing, distribution, promotion, financing, marketing information management, selling. The importance of marketing can be understood from seven different angles. 1.11 Key Words/Abbreviations Needs: State of felt deprivation Wants: Product form taken by needs Demand: Wants backed by purchasing power and willingness to buy Marketing myopia: Focusing too much on present and neglecting future Societal Marketing: Concern for well being of society CRM: Customer relationship management Customer value: Difference between customers benefits and cost Customer satisfaction: When perceived value exceeds expectations Exchange: Act of giving money for a product Transactions: The sales action Relationships: Building a relation between company and customer for long time Marketing offers: Anything offered to consumers to satisfy a demand Biogenic: Pysiological Hierarchy: Step by step progression Self actualisation: Reaching the highest level of achievement Motives: What motivates? Motivation: Encouraging Target audience: Intended customers Advertising appeals: Themes which attract attention and persuade Customer and consumer: Those who buy – final user FMCG: Fast moving consumer goods Demarketing: Discouraging purchase and usage Customization: Offering custom made products CU IDOL SELF LEARNING MATERIAL (SLM)

Introduction to Marketing Management 21 1.12 Learning Activity 1. List out the names of 2 companies which follow different marketing orientations like Production, Product, Selling, Marketing, Customer, and Societal marketing. Give justifications as to why you consider them in each case. ----------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------- 2. Prepare a list of consumer non-durables and durables that are used regularly in your house. ----------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------- 3. Identify 3 examples of marketing Persons, Places, Organizations and Ideas. ----------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------- 4. Using the example of any consumer product marketing company, briefly describe the functions of marketing carried out by them. ----------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------- 1.13 Unit End Questions (MCQ and Descriptive) A. Descriptive Types Questions 1. Customer relationship management is the focus of all marketing activities. Do you agree? 2. Marketing offers are built based on needs, wants and demand – Explain with suitable examples. 3. Explain Maslow’s hierarchy of needs theory and its relevance in marketing. 4. Marketing consists of several important functions which are inter-related – Discuss. 5. Marketers follow different orientations or concepts in their marketing activities – Give a detailed description of the orientations with examples. 6. The importance of marketing could be seen in different areas – Justify with examples. CU IDOL SELF LEARNING MATERIAL (SLM)

22 Marketing Management 7. Illustrate in detail on the concept of Marketing? Discuss its nature and scope. 8. Differentiate between need and want with the help of examples? 9. Define market. How the online concept of marketing is different from marketing? B. Multiple Choice/Objective Type Questions 1. Core marketing concepts include: (a) Needs (b) Wants (c) Demand (d) All of above 2. Production concept and product concept will lead to the: (a) Customer orientation (b) Marketing myopia (c) Marketing management (d) None of above 3. Societal marketing involves: (a) Society (b) Consumers (c) Company (d) All of above 4. Customer relationship involves: (a) Creating new customer (b) Satisfying new customers (c) Creating profitable relationship with customers (d) All of above Ans.: 1. (d), 2. (b), 3. (d), 4. (c). 1.14 References Text Books 1. Dr. K. Karunakaran, Marketing Management, 3rd ed, HPH, 2012. 2. Philip Kotler, Marketing Management, Pearson? PHI, 12th ed, 2010. Reference Books 1. Ramaswamy and Namakumari, Marketing Management, Macmillian, 2006. Web Resources https//www.managementstudyguide.com. CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT 2 THE MARKETING PROCESS Structure: 2.0 Learning Objectives 2.1 Introduction 2.2 Marketing process 2.3 Marketing Mix 2.4 The Role of Marketing Mix 2.5 Developing an effective Marketing Mix 2.6 Difference between Marketing and Selling 2.7 Summary 2.8 Key Words/Abbreviations 2.9 Learning Activity 2.10 Unit End Questions (MCQ and Descriptive) 2.11 References 2.0 Learning Objectives After studying this chapter you will be able to: Learn the marketing process Familiarise with the marketing mix concept Understand the differences between marketing and selling 2.1 Introduction In this unit you will study about the different activities involved in the marketing process. You will also learn the components of the marketing mix and their importance, and also the

24 Marketing Management development of an effective marketing mix. Next, you will understand the differences between marketing and selling. 2.2 The Marketing Process The marketing process consists of the following activities: 1. Analysing market opportunities 2. Selecting target markets 3. Developing the marketing mix 4. Managing the marketing effort A summary of the entire marketing process is shown in Fig. 2.1. At the centre of the process stand the consumers. The objective is to build a strong and profitable customer relationship. Fig. 2.1 The Marketing Process The first step is market segmentation, targeting and positioning, to decide which customers the company should serve and how. This process identifies the total market, then divides it into smaller segments, selects the most promising segments, and focuses on serving and satisfying these selected segments. The next step is to design a marketing mix consisting of factors under its control like product, price, place and promotion. For identifying the best marketing mix CU IDOL SELF LEARNING MATERIAL (SLM)

The Marketing Process 25 combination and to put it into action, the company engages in marketing analysis, planning, implementation, and control activities. With the help of these, the company watches and adapts to the actors and forces in the marketing environment around it. Customer Relationships In order to succeed in today’s highly competitive market, companies must be customer- centred, winning customers from competitors, then keeping and growing them by delivering greater value. To be able to satisfy the customers, a company must first analyse the consumers and understand their needs and wants. Companies know very well that they cannot profitably serve all customers in the same way. Most companies are in a position to serve some segments better than others. Each company must divide the total market, choose the best segments, and design strategies for profitably serving chosen market segments. This calls for a three-step process: market segmentation, target marketing and market positioning. Market Segmentation Any market will consist of various types of customers, products and needs. The marketer has to determine which market segments offer the best opportunity for achieving company objectives. Consumers can be grouped and served in various ways based on geographic, demographic, psychographic and behavioural factors. The process of dividing a heterogeneous market into distinct groups of buyers who have different needs, characteristics or behaviour, and who might require separate products or marketing programmes, is called market segmentation. A market segment will consist of homogeneous consumers who might respond in a similar manner to a given set of marketing efforts. The car market, for example, can be segmented into budget or compact car segment, family car segment, premium car segment and luxury car segment. In segmentation, it is the consumers who are classified, and not products. Marketing companies always focus their marketing efforts on meeting the distinct needs and wants of individual market segments. Target Marketing After defining the market segments, a company decides to enter one or many segments in a given market. Target marketing is the process of evaluating each market segment’s attractiveness and selecting one or more segments to enter. A company should target segments in which it can generate the greatest customer value profitably and sustain it over time. A company with limited resources might decide to serve only one or a few special segments or ‘market niches’. On the other hand, a big company may decide to offer a complete range of products to serve all market segments. As a normal practice, many companies strategically enter a new market by serving a CU IDOL SELF LEARNING MATERIAL (SLM)

26 Marketing Management single segment, and if they succeed, spread the marketing activity to other segments. Eventually, large companies cover the full market. An increasing number of corporates are setting up retail outlets in small towns and rural markets to reach out to a huge untapped large consumer base. The Godrej group has set up Aadhaar, a rural retail format to sell products like FMCG, durables, agriproducts and also services. Similarly, oil companies like Indian Oil are setting up a huge number of retail outlets to sell non- fuel products like soaps and fertilizers, apart from petrol and diesel. Companies like LG, Sansui and others have already tied up with ITC’s Choupal Sagar, the country’s first rural mall in Madhya Pradesh which signalled the arrival of organized retailing in India. Manufacturers of products such as soaps, biscuits, detergents, toothpastes, televisions, DVDs, sewing machines and grinders expect these smaller markets to throw up higher sales volumes this year. Market Positioning Once the decision on which market segments to enter is made, a company has to decide what position it wants to occupy in those selected target segments. The position of a product is the place occupied by it in the consumer’s mind relative to the competitor’s products. Marketing people’s objective is to create unique market positions for their products which make them stand out among other similar products. If such differentiated position is not developed, consumers may not have any justification to produce the product. “Market positioning is arranging for a product to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target consumers”. (Philip Kotler). While positioning a product, the company has to first identify possible competitive advantages upon which to build the position. To gain competitive advantage, the company must offer greater value to target customers. Positioning becomes a reality with actual differentiation of a company’s marketing offer so that it gives more value compared to the competitor’s offer. After developing a desired position, the company should take necessary action to deliver and communicate that position to target consumers. The chosen positioning strategy should be fully supported by the company’s entire marketing activities and programmes. Competitive Advantage In order to create competitive advantage and succeed, a company should perform a better job than the competitors, of satisfying target consumers. All the marketing strategies must be geared to the needs of the consumers as well as the strategies of the competitors in the market. A thorough competitor analysis will have to be done first, before designing the competitive marketing strategies for a company. Regular comparison and evaluation of the value and CU IDOL SELF LEARNING MATERIAL (SLM)

The Marketing Process 27 satisfaction delivered by the company to the customers through its products, prices, channels and promotion against those of the competitors with similar products should be made. A company’s industry position will dictate the competitive marketing strategy to be adopted by it. Market leader strategies are followed by companies which have market dominance like IBM, Coca-Cola, Microsoft, etc. Market challengers are companies that keep on attacking the dominant companies to get a better slice of the market share. Example: Pepsi, P&G (Ariel) challenging Coca Cola and HLL (Surf) respectively. Market followers are not aggressive, but want a sustainable, stable market share and profits. They follow the product offers, pricing and marketing programmes of the leaders and challengers. Smaller firms and even bigger firms without market dominance often adopt market nicher strategies. They concentrate on small gaps or niches in the market, which are normally neglected by big players. They avoid direct fight or challenge with big competitors. 2.3 The Marketing Mix The marketing manager is a mixer of ingredients, according to James Culliton, a noted marketing expert, who coined the expression, ‘marketing mix’. “The marketing mix is the set of controllable, tactical, marketing tools that the firm blends to produce the response it wants in the target market.” (Philip Kotler). The marketing mix consists of the variables, product, price, place and promotion, well- known as the four P’s of marketing, as classified by McCarthy7. Figure 2.2 gives a complete picture of the different tools under marketing mix variables. Fig. 2.2: The Marketing Mix Variables CU IDOL SELF LEARNING MATERIAL (SLM)

28 Marketing Management Product stands for the goods and services offered by a company to the target market, to satisfy needs and wants. Price refers to the money value that the consumers have to pay to buy the product or service. Promotion refers to activities of personal selling, advertising, and communicating product benefits and attributes to target consumers to persuade them to purchase. Place stands for physical distribution activities through which the product moves from the factory to the customer. Channels of distribution, logistics, warehousing, transport, etc., come under the place variable. To be successful, the marketing programmes have to blend the four variables into an ideal integrated action plan aimed at achieving the corporate objectives. While the four P’s concept relates to the seller’s perspective of the market, there are four C’s in the consumer’s view. They are: Four P’s Four C’s Product Customer solution Price Customer cost Place Convenience Promotion Communication To be effective, marketing people have to consider the four Cs first and then build the four P’s based on the requirements. Box 2.1: Nirma Washing Powder — Successful Blend of Marketing Mix ‘Nirma’, as a product, created a marketing miracle, when it was introduced in the domestic market. In 1969, when the detergents were priced so exorbitantly that for most of the Indians it was a luxury item, Nirma envisioned the vast fabric wash market segment and sensed a tremendous potential therein. The product was launched blending the four P’s in the most appropriate way. Nirma was priced at almost one third of that of the competitor brands, especially Surf, and placed widely at all retail points, resulting into instant trial by the customers. The promotion on TV and other media helped to create awareness about the product, among the public. Owing to the success of the marketing mix combination used, and the quality and utility of the product, the consumers became loyal to the Nirma brand, helping it to overtake the decades-old brands like Surf, in terms of volumes. Nirma brand has been ranked as the “most widely distributed detergent powder brand in India” as per All India Census of Retail Outlets (1997). As per ORG-MARG Rural Consumer Panel (1998) survey, Nirma brand has been ranked as highest in terms of penetration in washing powder category. Nirma has, over the years, introduced products in toiletries and personal care with soaps, shampoos and toothpaste, thus, offering the consumer a complete product portfolio. (Source: www.nirma.com) CU IDOL SELF LEARNING MATERIAL (SLM)

The Marketing Process 29 2.4 The Role of Marketing Mix Marketing mix has an important role to play in Marketing Planning and Marketing Strategy. Planning is an important managerial activity, which is a basic requirement for all organizations. Any organization will need general and specific plans to fulfil its objectives. The primary concern of marketing planning is marketing strategy formulation. Marketing planning involves preparing action plans to shape the future growth of an organization. Achieving profitability, meeting competition, protecting and improving market share, and promoting brand image are its concerns. The task involved is to identify the consumers’ needs in various segments, develop suitable products or services to meet those needs and generate profits. This is achieved through marketing planning and marketing strategy. Marketing planning and strategy formulation is to be done reckoning the environmental variables of marketing like competition, the consumer, the government, and legal, political and natural forces. While the organization can choose, alter and control its marketing mix variables, it cannot choose or alter the environmental variables against which the products are marketed. Using the marketing mix variables, the organization tackles the environment variables. It skilfully selects and adjusts the marketing mix variables and brings them in alignment with the environmental variables. This is the process involved in formulating the organization’s marketing strategy – assembling the marketing appropriately. The four P’s of marketing have to be assembled in the best possible combination. This process involves choosing the appropriate marketing activities and the allocation of the appropriate marketing effort and resources to each one of them. The organization has to consider how to generate targeted sales and profitability. Different combinations of marketing mixes are considered with varying levels of expenditure on each marketing activity to identify the most effective combination. It then chooses the best combination of mix of product, price, place and promotion to ensure success. It is necessary to work out marketing mix for every brand because the competition in the market is ultimately at the brand level. And it is the marketing mix that decides how much strength the brand has at its disposal to fight competition. 2.5 Developing an Effective Marketing Mix In theory as well as in practice the marketing mix elements can be combined in any number of ways. Optimization is to be achieved by trying out several alternative combinations. The marketing mix elements are substitutable by one another to a certain extent. Resources can be taken away from one element and assigned to another, to achieve balance as per the marketing objective of the firm. The organization can achieve its marketing objective using different combinations of the marketing mix. This is done by assigning relevant weightage to each of the CU IDOL SELF LEARNING MATERIAL (SLM)

30 Marketing Management elements depending on the objective and the context. Even within an element, weightage may have to be given to various sub elements. For example, within promotion, advertising and brand- building activities may get a higher weightage, if the objective is higher market share in the long run. Personal selling and sales promotion may get a higher weightage, if the objective is higher sales in the short run. The firm can consider different combinations of sales target levels also and marketing mix expenditure, and select the optimum one from the profit and other relevant angles. The marketing mix is the most visible part of the marketing strategy of an organization. The strategy manifests through the marketing mix of the organization – through what the organization does with product, price, promotion and distribution. 2.6 Difference between Marketing and Selling The difference between the selling concept and the marketing concept is shown in the figure below. The selling concept takes an inside-out perspective. It starts with the factory, focuses on the company’s existing products, and calls for heavy selling and promotion to generate profitable sales. The focus is mainly on conquering the customer, for short-term sales, with no concern for consumers. Professor Theodore Levitt of Harvard University has drawn a contrast between selling and marketing concepts as follows: “Selling focuses on the needs of the seller; marketing on the needs of the buyer. Selling is preoccupied with the seller’s need to convert his product into cash; CU IDOL SELF LEARNING MATERIAL (SLM)

The Marketing Process 31 marketing with the idea of satisfying the needs of the customer by means of the product and the whole cluster of things associated with creating, delivering and finally consuming it.” The marketing concept takes an outside-in perspective. It starts with a well-defined target market, focuses on customer needs, and integrates all the marketing activities that affect the customers. Profits come from creating long-term customer relationships based on customer value and satisfaction. Most of the successful companies follow the marketing concept, and are fully customer-driven in their activities. A detailed differentiation of selling and marketing is given below: 2.7 Summary The marketing process consists of many activities - Analysing market opportunities , Selecting target markets, Developing the marketing mix, Managing the marketing effort. Marketing mix consists of tools or ingredients which have to be blended properly to achieve marketing objectives of a company. The marketing mix consists of the four P’s – Product, Price, Promotion and Place. Product is the marketing offer, and can be tangible or intangible. Promotion mix consists of advertising, sales promotion, public relations, personal selling and publicity. Price is the amount of money charged for a product or service. Pricing decisions are affected by internal and external factors. There are several pricing methods. Place includes channels of distribution which plays an important role in marketing. Channels have many functions. The marketer has to CU IDOL SELF LEARNING MATERIAL (SLM)

32 Marketing Management select the best channels out of the different alternatives and control them. Marketing and selling are different in many ways and it is necessary to understand them. Marketing planning involves preparing action plans to shape the future growth of an organization. Achieving profitability, meeting competition, protecting and improving market share, and promoting brand image are its concerns. The task involved is to identify the consumers’ needs in various segments, develop suitable products or services to meet those needs and generate profits. This is achieved through marketing planning and marketing strategy. 2.8 Key Words/Abbreviations Marketing mix: The 4 P’s or tools including Product, Price, Promotion and Place Market segmentation: Dividing total market into homogeneous groups Target marketing: Action of segmenting , targeting and positioning Positioning: Placing product/brand in the minds of consumers against competitor’s Competition: Several marketing players in market Marketing control: Planning and coordinating marketing activities Marketing intermediaries: Dealers Market niches: Small gaps in market Competitive advantage: Something a company has or does better than competitors Marketing strategies: Specific action plans for future growth Market leaders: Those strong and aggressive in market Market challengers: Those who try to gain market share Market followers: Those who are not aggressive Logistics: Action of storage and distribution Channels of distribution: Dealers 2.9 Learning Activity 1. Take the example of any 4 companies marketing consumer non-durables/durables and list out each of their four P’s. ----------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------- CU IDOL SELF LEARNING MATERIAL (SLM)

The Marketing Process 33 2. Using the example of any company that you know, describe their marketing process. ----------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------- 3. Take an example of a consumer product of any company and explain how they have blended the marketing mix successfully. ----------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------- 2.10 Unit End Questions (MCQ and Descriptive) A. Descriptive Types Questions 1. The marketing process consists of various strategic steps – Elaborate. 2. Successful marketers blend the marketing mix successfully – Discuss. 3. All the elements of the marketing mix have important roles to play – Do you agree? 4. Development of an effective marketing mix is a challenging activity – Discuss. 5. Marketing and selling have several differences – Discuss the major differences. 6. Differentiate between selling and marketing concept in detail? 7. Elaborate in detail the concept of marketing mix? Give examples. 8. Every organization needs marketing. Do you agree with this statement? Why? Give answers along with relevant examples. B. Multiple Choice/Objective Type Questions 1. Marketing mix consists of: (a) Products (b) Channels (c) Services (d) The four P’s 2. Marketing process includes: (a) Analysing market opportunities (b) Selecting target markets (c) Developing the marketing mix (d) Managing the marketing effort CU IDOL SELF LEARNING MATERIAL (SLM)

34 Marketing Management (e) All of above 3. Selling is different from marketing because (a) It emphasises customer satisfaction (b) It focuses only on hard selling of existing products (c) It identifies products needed by customers (d) All the above Ans.: 1. (d), 2. (e), 3. (b). 2.11 References Text Books 1. Dr. K.Karunakaran, Marketing Management, 3rd ed., HPH, 2012. 2. Philip Kotler, Marketing Management, Pearson/PHL. Reference Books Ramaswamy and Namakumari, Marketing Management, Macmillian, 2006. Web Resources 1. https/www. journals.elsevier.com. 2. https//www.managementstudyguide.com. CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT 3 MARKETING ENVIRONMENT Structure: 3.0 Learning Objectives 3.1 Introduction 3.2 Scanning the Environment 3.3 Meaning and Concepts 3.4 Microenvironment 3.5 Macro environment 3.6 PESTEL analysis techniques 3.7 Responding to the Environment 3.8 Summary 3.9 Key Words/Abbreviations 3.10 Learning Activity 3.11 Unit End Questions (MCQ and Descriptive) 3.12 References 3.0 Learning Objectives After studying this unit you will be able to: Understand the importance of environmental scanning Learn the components of micro environment Identify the factors of macro environment Familiarise with the environment scanning techniques

36 Marketing Management 3.1 Introduction In this unit you will understand the need for marketing environment scanning by companies. You will become familiar with the forces of micro environment and macro environment. This unit will also make you understand the techniques of environment scanning and how companies respond to the environmental changes. 3.2 Scanning the Environment Marketing activities do not take place in a vacuum, isolated from all external forces. In fact, all marketing operations are conducted in a highly complex, dynamic and changing environment. According to Philip Kotler, “A company’s marketing environment consists of the actors and forces outside marketing that affect management’s ability to build and maintain successful relationships with target customers.” Environment scanning is a constant, important activity of successful companies. This process includes gathering, filtering and analyzing information related to the marketing environment. It also includes monitoring the changes taking place in the environment and forecasting the future status of each factor. Such analysis helps to spot opportunities and threats in the environment, and pinpoints the ones that are specifically relevant to the company. The company’s marketing people have the responsibility for scanning and identifying significant changes or trends in the marketing environment. Marketing Research and Marketing Intelligence System are the methods used by companies for environment scanning and gathering vital information about changes. Customers’ behaviour and competitors’ activities are also important factors to be watched in the environment. The marketing environment provides both opportunities and threats. Successful companies know the vital importance of constantly scanning and adapting to the changing environment. The environment continues to change at a rapid pace. Marketers have to study the environment, and adapt marketing strategies to meet new market challenges and opportunities. 3.3 Meaning and Concepts The marketing environment is composed of a microenvironment and a macro environment. The microenvironment consists of the following actors close to the company that affect its ability to serve its customers: (1) The company (2) The suppliers (3) The marketing intermediaries (4) The customer markets (5) The competitors (6) The public. CU IDOL SELF LEARNING MATERIAL (SLM)

Marketing Environment 37 The macro environment consists of the following larger societal forces that affect the microenvironment: (1) Demographic (2) Economic (3) Natural (4) Technological (5) Political (6) Legal (7) Cultural. 3.4 Microenvironment Marketing management’s job is to build relationships with customers by creating customer value and satisfaction. Marketing success will require working closely with other departments of the company, suppliers, marketing intermediaries, customers, competitors, and various publics, which combine to make up the company’s value delivery network. Marketing Fig. 3.1 Micro Environment 1. The Company: In the company, marketing managers, in formulating plans, must take into account the other groups such as top management, finance, R & D, purchasing, manufacturing and accounting. All these groups constitute a company’s micro - environment for the planners. They should think about the consumer and work in harmony to provide customer value and satisfaction. 2. The Suppliers: Suppliers form an important link in the company’s overall customer value delivering system. They provide the resources needed by the company to produce its goods and services. Developments in the supplier environment can have a substantial effect on the company’s marketing operations. Price changes, supply shortages, labour strikes, and other events can interfere with the fulfillment of delivery promises to customers and lose sales in the short run and damage customer relationship in the long run. CU IDOL SELF LEARNING MATERIAL (SLM)

38 Marketing Management 3. The Marketing Intermediaries: Marketing intermediaries are firms that aid the company in promoting, selling and distributing its goods to the final buyers. They include middlemen, physical distribution firms, marketing service agencies and financial intermediaries. Middlemen are business firms that help the company find customers and/or close sales with them — agents, brokers, dealers, wholesalers, retailers, and so on. Physical distribution firms assist the company in stocking and moving goods from the factory to their destinations. Warehousing firms store and protect goods; transportation firms move goods. Marketing service agencies — marketing research firms, advertising agencies, media firms, marketing consultancy firms — assist the company in targeting and providing its products to the right markets. Financial intermediaries include banks, credit companies, insurance companies, etc., that help with the buying and selling of goods, and also insure against risks involved. 4. The Customers: Customers of the company belong to consumer markets, industrial markets, reseller markets, government markets, and international markets. The tastes and preferences of customers keep on fluctuating. Customers’ brand loyalty also keeps changing. Only by studying the market demand and customer-related factors on a regular basis can marketers carry out their business activities successfully. Marketers have to keep track of what the customers want, and grab emerging market opportunities. Neglecting to watch customer preferences will be disastrous. 5. The Competitors: The company’s marketing system is surrounded and affected by a host of competitors. These competitors have to be identified, monitored, and outmanoeuvred to gain and maintain customer loyalty. Industry and competition constitute a major component of the micro environment. Development of marketing plans and strategy is based on knowledge about competitors’ activities. Competitive advantage building also depends on understanding the status, strength and weakness of competitors in the market. Competitive advantage is a superior or distinctive competence (in terms of customer value) of the company relative to competition in a specific area. 6. The Publics: The company must also acknowledge a large group of publics that take an interest, whether welcome or not, in its method of doing business. A public can facilitate or impede the ability of an organization to accomplish its goals. Most organizations establish public relations (PR) departments to plan constructive relations with various publics. Every company is surrounded by seven types of publics, as given below: (i) Financial – banks, stock brokers, financial institutions (ii) Media – newspapers, magazines, radio, TV CU IDOL SELF LEARNING MATERIAL (SLM)

Marketing Environment 39 (iii) Government – Government departments (iv) Citizen-action – consumer organizations, environment groups (v) Local – neighbourhood residents, community groups (vi) General – general public – public opinion – public image (vii) Internal – workers, officers, board of directors 3.5 Macro Environment The company and all of the other actors operate in a larger macro environment of forces that shape opportunities and pose threats to the company. These uncontrollables consist of demographic, economic, natural, technological, political, legal, and cultural factors. Fig. 3.2 Macro Environment 1. Demographic Environment: Since people make up markets, marketers are interested in the size of the population, its geographic distribution, density, mobility trends, age distribution, birth, marriage and death rates, and racial, ethnic and religious structure. Marketers have to keep track of changing age and family structures, geographical population shifts, educational characteristics, and population diversity. For example, the teenagers’ market and working women’s market have created marketing opportunities in India, which is a recent development. Examples: Mobile phones, Two wheelers, Cosmetics, Jeans and fast food. CU IDOL SELF LEARNING MATERIAL (SLM)

40 Marketing Management 2. Economic Environment: Markets require buying power as well as people. The economic environment consists of factors that affect consumer purchasing power and spending patterns. Total buying power is a function of current income, prices, savings, and credit availability. The monetary policy changes, prevailing interest rates, business cycles, changes in income levels, etc., are important factors affecting marketing. Marketers should be aware of four main trends in the economic environment. They are: (i) Slowdown in real income growth (ii) Continued inflationary pressure (iii) Low savings (iv) Changing consumer expenditure patterns 3. Natural Environment: The natural environment involves the natural resources that are needed as inputs by marketers or those that are affected by marketing activities. Environmental concerns have grown steadily in recent years. Marketers should be aware of trends like shortages of raw materials, increased pollution, and increased governmental intervention in natural resources management. Companies will have to understand their environmental responsibility and commit themselves to the ‘green movement’. 40 Marketing Management as an offshoot of the above environmental concerns, the Green Marketing trend has started. Marketers have started promoting eco- friendly products to cater to this need. Manufacturers are required to use the Ecomark label (the symbol of a tilted earthen pot) to inform customers that the products are environment-friendly. To become eligible for the Ecomark, the product must be produced using environment-friendly technology. It should also be environment-friendly during transport, use and disposal. Its package must also be environment-friendly. Ecomark products or green products are expected to use only natural material for packages. Organic cultivation is part of the green movement, when vegetables, tea, coffee and fruits are grown without using chemical fertilizers and pesticides. Recycled paper and products are other examples of products in green marketing. ECOMARK SCHEME OF INDIA A SCHEME ON LABELLING OF ENVIRONMENT - FRIENDLY PRODUCTS CU IDOL SELF LEARNING MATERIAL (SLM)

Marketing Environment 41 Every consumer product we buy has an impact on the environment. It is important to know which ones have less impact. An earthern pot has been chosen as the logo for the Ecomark scheme in India. The familiar earthern pot uses a renewable resource like earth, does not produce hazardous waste and consumes little energy in making. Its solid and graceful form represents both strength and fragility, which also characterises the eco- system. As a symbol, it puts across its environmental message. Its image has the ability to reach people and can help to promote a greater awareness of the need to be kind to the environment. The logo for the Ecomark Scheme, signifies that the product which carries it does the least damage to the environment. 4. Technological Environment: The technological environment is the most dramatic force now shaping our destiny. Technological discoveries and developments create opportunities and threats in the market. The marketer should watch the trends in technology. Many of today’s common products were not available 100 years ago or even 30 years ago. E.g.: automobiles, airplanes, TV, Xerox, personal computers, CD players, cell phones, etc. Marketers need to know how new technologies can serve human needs. Even the common man has now changed his lifestyle and product preferences. He has become an ‘innovator’. In Kerala, the boat operators were some of the first to start using mobile phones. Today, cell phones have become so popular and common that even the lower income group of the society like auto-drivers, vegetable vendors, hawkers and domestic servants uses them. 5. Political Environment: Marketing decisions are strongly affected by developments in the political environment. The form of government adopted by the country and political stability are important factors to be reckoned with by marketers. The political environment consists of laws, government agencies, and pressure groups that influence or limit various organizations and individuals in a given society. Substantial number of laws have been enacted to regulate business and marketing — to protect companies from each other, to protect consumers from unfair trade practices, to protect the larger interests of society against unbridled business behaviour. Changing government agency enforcement and growth of public interest groups also bring in threats and challenges. Examples: Liberalisation, Globalization, Decontrol, Delicencing, FDI Policy. 6. Legal Environment: Marketers have to function within the legal framework prevailing in the country. There have been many legislations passed in India to control or guide businesses and industry. There are legal regulations on products, prices, distribution and promotion. For example, liquor and cigarette advertising has been banned. So marketers come up with surrogate ads which indirectly promote brands. There are legal measures to CU IDOL SELF LEARNING MATERIAL (SLM)

42 Marketing Management protect consumers and control trade. Marketers have to understand the legal environment and adapt to its forces. 7. Cultural Environment: The cultural environment is made up of institutions and other forces that affect a society’s basic values, perceptions, preferences, and behaviours. People grow up in a particular society that shapes their basic beliefs and values. They absorb a world view that defines their relationships with others. Culture is the unified result of factors like religion, language, education and upbringing. The following cultural characteristics can affect marketing decision-making: Persistence of core cultural values — These are deep-rooted and do not change easily. For example, ethnocentrism, i.e., affinity to local-made products and aversion to foreign goods. Shifts in secondary cultural values — These are more amenable to change and can be moulded and manipulated easily. E.g., The influence of film stars, models and celebrities on our young people’s trend in hair styles, fashion of dresses and even lifestyles. Marketers have a keen interest in anticipating cultural shifts in order to spot new marketing opportunities or threats. 3.6 Pestel Analysis Technique A PESTEL analysis is an acronym for a tool used to identify the macro (external) forces facing an organization. The letters stand for Political, Economic, Social, Technological, Environmental and Legal. Depending on the organization, it can be reduced to PEST or some areas can be added, i.e., International. In marketing, before any kind of strategy or tactical plan can be implemented, it is fundamental to conduct a situational analysis. And the PESTEL forms part of that and should be repeated at regular stages (6 monthly minimum) to identify changes in the macro environment. Organizations that successfully monitor and respond to changes in the macro-environment are able to differentiate from the competition and create a competitive advantage. Economic Political Social Technological Legal Environmental CU IDOL SELF LEARNING MATERIAL (SLM)