BBA107_Marketinng Management(Draft 2)(Modified)-converted

9. Marketing of product and service in which the offer itself is not intended to make any monetary profit is called a. Profit marketing b. Virtual marketing c. Digital marketing d. Nonprofit marketing 10. USP is defined as a. Unique selling price b. Unique sales preposition c. Unique selling proposition d. Unique strategy promotion Answers 1.a 2.a 3.a 4.a 5.a 6. a 7. d 8. a 9. d 10. c REFERENCES • Kotler, P., Keller, K.L. Koshy, A. and Jha, M. (2012). Marketing Management: A South Asian Perspective. New Delhi: Pearson Education. • Ramaswamy, V.S and Namakumari, S. (2009). Marketing Management: Global Perspective Indian Context. New Delhi: Macmillan Publishers India Ltd. • Kumar, Nirmalya. (2004). Marketing as Strategy: Understanding the CEO's Agenda for Driving Growth and Innovation. Harvard Business Review Press. • Peter F.Drucker, The Practice of Management, Harper and Row, 1954 • Joseph P.Guiltinan and Gordan W.Paul, Marketing Management, McGraw-Hill, 1996 • Theodre Levitt, Marketing Myopia, Harvard Business Review, Sep-Oct, 1975 • Al Ries and Jack Trout, Positioning: The Battle for Your Mind, McGraw-Hill, 1981 • Al Ries and Jack Trout, Marketing warfare, McGraw-Hill, 1986 • Jack Trout with Steve Rivkin, Differentiate or Die, John Wiley and Sons, 2000 • Ian C.MacMillan and Rita Gunther McGrath, ‘Discovering new points of differentiation’, Harvard Business Review, July-August 1997 • V.K.Rangan, B.P.Shapiro and R.T.Moriarty, Business Marketing Strategy, Irwin, 1995 50 CU IDOL SELF LEARNING MATERIAL (SLM)

• L.W.Stern, A.I.El-Answry and A.T.Coughlan, Marketing Channels, Prentice-Hall, 1996 51 CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT 3: MARKET SEGMENTATION 52 Structure Learning Objectives Introduction Demand forecasting Steps in demand forecasting Techniques of forecasting Quantitative Techniques Qualitative Techniques Concept of Market segmentation Definition of Market segmentation Importance of Segmentation Requirement or criteria of segmentation Bases for market segmentation Segmentation of Consumer Markets Segmentation of Organisational Markets Market Targeting Evaluating Market segmentation Market positioning Summary Keywords Learning activity Unit end questions References LEARNING OBJECTIVES After studying this unit, you will be able to: • Explain the concept of market segmentation • Describe the importance of market segmentation CU IDOL SELF LEARNING MATERIAL (SLM)

• Narrate the requirements of market segmentation • Recognize the bases of market segmentation • Describe the meaning of market targeting • Explain market positioning INTRODUCTION To be successful in marketing, it is essential to understand the features of the products and services. A marketer, should select those groups of buyers or market segment/segments which have bright prospects. This is essential as a single marketer cannot satisfy all the different market segments in a competitive market. That is why, the marketers concentrate on marketing where they have some advantages against their competitors. In this unit you will study market segmentation, market targeting and market positioning. DEMAND FORECASTING Demand forecasting is an assumption of demand in future. By using demand forecasting, a company makes suitable plans for upcoming challenges or demands and takes suitable action to tackle that them. Demand forecasting can be divided into the following two major types − • Short run forecasting − is made to fulfill short-term targets, like preparation of suitable sales policies to increase the sales or proper planning for inventory as per the required demand. • Long run forecasting − is assumption made for long-term targets like planning of capital or assets. Short run and long run demand forecasting is used as per the requirement of the enterprise. These forecasting types are explained in further section. STEPS IN DEMAND FORECASTING Following factors should be considered for assumption and fulfillment of short and long term demand forecasting. • Identifying the most relevant method for forecasting. • Predicting factors involved, which affect the demand of the product. 53 CU IDOL SELF LEARNING MATERIAL (SLM)

• Acquiring the data about the factors that affect demand. • Finding the most suitable relation among independent variables and dependent variables. • Preparing the demand forecast and analyzing the results. Demand forecasting can be accomplished by following the above steps. TECHNIQUES OF FORECASTING The tools or methods used to forecast demand are of the following two types: • Quantitative techniques • Qualitative techniques Quantitative Techniques These techniques are used for both short run and long run forecasting; however, for short and long run forecasting, this method can further be sub divided as per forecasting type. The following are the tools for short-run forecasting − Moving Average Method This method is used to plot a trend in the demand. In this, average demand of different time frame is taken (for example, 2 years, 3years, etc.) for getting an assumption of future demand. Exponential Smoothing Method This method is mostly used for short-term forecasting. It is derived from moving average and modified. It is based on weighted averaged of observed value. It smoothens the trend where weighted value remains between 0 and 1. St = W.Yt + (1-W). St-I [St= Current smoothened value (predicted)] Yt = Current observed value. W = weighted value or rate of trend. Time Series Analysis Time series analysis is commonly used for long term demand forecasting. The following are some of its components − • Seasonal variation 54 CU IDOL SELF LEARNING MATERIAL (SLM)

• Cyclical variation • Random variation • Irregular variation To measure the components of time series, the following three methods are used − • Semi Average Method • Moving Average Method • Method of Least Square These methods can be used for time series analysis as per demand forecasting requirement of an enterprise. Econometrics Method This method for demand forecasting is an analytical method. In this method, different methods of economics and mathematics are used to forecast the demand. This method provides the liberty to assume multiple variables so it is more accurate in real business situations. This method is based on the following criteria − • Demand for a product is based on several factors. • The determinants are independent variables but the demand is the dependent variable. • There is a constant interaction between demand and its determinants. • There is a constant interaction between the independent variables. The independent variables are divided into two types − Exogenous (non-economics) and Endogenous (economics). • This type of interaction can be estimated by statistical method. The forecast is divided into the set of linear or non-linear equations. These principles should be taken into consideration while using the econometrics method for demand forecasting. Qualitative Techniques 55 Let us now discuss some of the qualitative techniques of Demand Forecasting − Buying Intention Survey Method CU IDOL SELF LEARNING MATERIAL (SLM)

In buying intention survey method, the survey is conducted on the product; several questions regarding the product are formulated. The participants are asked for reviewing/rating the product based on different criteria like taste, preference, cost, expectation, etc. These reviews are summarized and a report is prepared for consumer demand of the product. Sales Force Opinion Method In sales force opinion method, different territorial sales demands are collected to forecast the demand of a product. Then individual territory demand is combined to produce a final report of the market demand. This method is difficult to execute due to improper skill of salesmen. However, with appropriate skills, accurate predictions can be forecasted. CONCEPT OF MARKET SEGMENTATION In earlier years many businessmen saw the key to profits in producing a single brand in large quantity, and its mass distribution. This kept the cost of production and price at lowest possible level. The businessmen did not recognize variations and would try to get everyone in the market to want what they produce. As competition increased, prices declined and the profit also started declining. This forced the producers to recognize the potential value of product differentiation; that is, the introduction of differential features, quality style, or image in their brands as a basis for commanding demand in the market. Market segmentation helps marketers in the preparation of marketing strategy by differentiating consumers on the basis of their specific needs, income, age, qualification, sex etc. Market consists of customers and customers differ in one or more respects. They may differ in size, resources, geographical location, requirements, buying attitudes or buying practices. On the basis of these variables, a market can be divided in different segments. Market segmentation is the subdividing of a market into distinct subsets of customers, where any subset may conceivably be selected as a market target market to be reached within a distinct marketing mix. The basic idea of market segmentation is that in high competition, individual sellers may prosper through developing offers for specific market segments whose needs are not satisfied. Market segment is grouping of buyers according to some common characteristics such as income, age, sex, qualification, geographical location etc, so that their needs are better served. DEFINITION OF MARKET SEGMENTATION The term ‘Market Segmentation’ has been defined by various authors in various ways. Some of the definitions are given below: 56 CU IDOL SELF LEARNING MATERIAL (SLM)

(a) Market segmentation is the act of dividing a market into distinct groups of buyers who might merit separate products and/or marketing strategy. – Philip Kotler. (b) Grouping of buyers or segmenting the market is described as market segmentation. – R. S. Davar. (c) Market segmentation consists of taking the total, heterogeneous market for a product and dividing it into several sub markets or segments each of which tends to be homogeneous in all significant aspects. – W. J. Stanton. (d) Market segmentation is the strategy of dividing markets in order to conquer them. – Alan. A. Robert. From the above definitions, you can understand that market segments are grouping of buyers who have common characteristics as buyers of a product or service, so that their needs and desires can be met better way. It guides to develop separate marketing mix and strategy for each market segment. IMPORTANCE OF MARKET SEGMENTATION Market segmentation helps to identify the various segments in a market for marketers to decide in which segment or segments they can serve effectively. This leads to efficient use of marketing resources, better understanding of customer needs, better understanding of the competitive situation and accurate measurement of goals and performance. Marketing segmentation helps matching of marketing opportunities to the resources of the marketers and enable them to the competition. It enhances marketing efficiency by offering specific price, promotion and distribution in tune with the changes in segment. It ensures higher customer satisfaction and brings quantitative improvement in the effectiveness of the marketing programmes. Some of the importance or benefits of market segmentation may be discussed as below: (a) It helps is satisfying consumers in a better way (b) It provides various types of information that are useful in product development, marketing research, evaluation of marketing activities, etc. (c) It channelizes money and effort to the most potentially profitable segments. (d) It produces goods and provides services as per the demand of the customers. (e) It helps in preparation of effective and efficient marketing policy. (f) It helps to determine effective promotional activities for the concerned segment. (g) It helps the producers to determine and compare the marketing potentialities of the products and services. (h) It provides marketers to understand the demographic information and to apply it in design of marketing strategies and programmes. (i) Each of the elements of marketing-mix can be developed as per the requirement of 57 CU IDOL SELF LEARNING MATERIAL (SLM)

target market. REQUIREMENTS OR CRITERIA FOR MARKET SEGMENTATION For the market segmentation to be effective, useful and meaningful, the following requirements or criteria must be satisfied. (a) Identity: There must be some means of identifying people of the segments on some standard basis for classifying people in different segments. People of such segments can be readily identified by common characteristics which show similar buying behavior. (b) Substantiality: It refers to the size of various market segments. To be an effective and successful segmentation, the various segments should be substantial i.e. it should be sufficiently large for the marketers to earn profit. (c) Accessibility: The marketer must be able to focus its marketing efforts such as promotion and distribution to the selected or target segments. Accessibility of segments means the marketers must be able to provide information and knowledge to potential customers regarding their products and services and at the same time they should be able to distribute the products or services to them at reasonable price. (d) Measurability: Measuring the size of the market and the changes in the consumer behavior of the various segments should be possible. The segments should be capable of providing accurate measurements of changes taking place among the consumers. For example, the segment of a market for a car is determined by a number of considerations such as economy, status, quality, safety, comfort etc. (e) Nature of demand: It refers to variations in demand among various market segments. Segmentation is needed only if there are marked differences in nature of demand. (f) Formulation of Effective Programmes: The market segmentation should be made in such a way that an effective programme can be formulated for attracting and serving various segments. BASES FOR MARKET SEGMENTATION Market segmentation means dividing the market into several homogeneous submarkets or segments. Market can be broadly classified into two types– consumer markets and organizational markets. Consumer market covers the ultimate users who normally buy in smaller quantities. Organizational market covers–Industrial Market, Reseller Market and Government Market. These markets are segmented further. Segmentation of Consumer Markets It can be segmented on the basis of four variable namely geographic variables, demographic 58 CU IDOL SELF LEARNING MATERIAL (SLM)

variables, psychographic variables and buyer behavior variables. The detailed characteristics of various variables are shown in the chart. Market Segmentation A. Demographic B. Geographic C. Psychographic D. Behavioral (a) Regions (a) Social class (a) Occasions (a) Age (b) Villages (b) User status (b) Gender (c) Cities (b) Life Style (c) Usage rate (c) Income (d) Climate (c) Personality (d) Loyalty (d) Occupation (e) Geographic Status (e) Education Terrain (e) Attitude (f) Religion A. Demographic Variables: Demography is the study of population. It is the popular base for segmentating consumer markets. In case of frequently bought consumer goods such as tea, toothpaste, soap, detergents etc, this base is used for market segmentation. Now let us brief discuss some of the demographic variables. (a) Age: Buyer’s needs, wants and ability to purchase differ with the age factor. The marketer should analyses to which age groups, his product or service would be most suitable and he has to plan various marketing policies meant for that group of people. For example, books for kids is a separate segment. (b) Gender: Many products are purchased by one sex or the other. Females generally purchase cosmetics, jewellery, bangles, lipsticks etc. On the other hand, shaving blades, cream, razor etc. are purchased by males. Market segmentation on the basis of sex exists only for certain products. However, in respect of many other consumer products, the preferences of male and female customers may vary. (c) Income: People must have money to spend then only they can make a market. Income provides purchasing ability to customers. Therefore, a detailed study of income (more importantly, the disposable income i.e. income left after spending on the essential items) is very useful to the marketer. (d) Occupation: Occupation is the source of income for any individual. People have various occupation. They may be lawyers, doctors, engineers, teachers etc. Their buying behavior and life-style depend on their occupation. Therefore the marketers should keep in mind all these factors while undertaking marketing programmes. (e) Education: On the basis of educational qualification and subject of specialization, consumers can be classified into different groups such as uneducated, educated; up to graduate, up to Master degree, or consumers having professional qualification. For instance, publishers of magazines and journals, drama troops, film producers 59 CU IDOL SELF LEARNING MATERIAL (SLM)

have to keep the educational level of their customers in mind and should segment the market on the basis of their level of education. (f) Religion: In India, a large number of religious beliefs are held by various communities. It is quite useful to analyses the population based on religion for certain products such as Christian ladies may use long skirts, Muslim ladies might prefer pajama’s and kurtas and Hindu ladies may prefer sari and blouse on certain occasion. Therefore for successful marketing of their products, marketer should understand the buying behaviours and motivation of various communities. However, after globalization the impact of religion on many products and services has dwindled. B. Geographic Variables: The first form of segmentation was geographic in which sellers distinguished carefully among the regions in which they might operate and close to those in which they could have a comparative advantage. A small retailer may distinguish between neighborhood customers and distant customers. A local fertilizer salesman may distinguish between city customers and rural customers. A regional manufacturer in the west may distinguish between Northern and Southern customers. In all the above examples, the geographical units become the basis of differentiated marketing efforts. Again on the basis of climate the market may be segmented as high altitude and low altitude market or hill area market and plain area market. The nature of demand varies with the variation of climatic conditions. C. Psychographic Variables: It includes social class of people, life style of people, personality factors such as gregarious, authoritarian, compulsive etc. Individuals differ in their personality, thought etc. Hence based on psychographic variable, buyers can be divided into various groups and accordingly goods are to be produced and distributed. For instance, based on life style of consumers, cigarette company develop brands for casual smoker, health conscious smoker etc. Let us explain some of the psychographic factors of segmentation. (a) Social Class: A marketer requires close attention on the different social classes. The social class may be conceptualized on the basis of the occupation of customers such as service holders, business people, farmers, education qualification, income class etc. In each social class, we find similar living style, habits and requirements and a marketer has to divert his attention on all. (b) Life Style: Life style effects the overall manner in which persons live and spend time and money. Consumers’ liking and disliking for various goods and services is influenced by their life style. The marketers of recent time prefer segmenting market by consumer life styles. For example, a manufacturer of car may design a heavy and spacious car for specific company executives working in non-urban industrial areas. 60 CU IDOL SELF LEARNING MATERIAL (SLM)

Life style is a behavioral concept enabling us to grasp and predict buyer behavior. (c) Personality: It covers the characteristics such as dominance, aggressiveness, objectivity, achievement, motivation etc. of a person which influence buyer behavior. The personality of an individual is determined by a good number of factors like education, trends in industrialization and the job opportunities available. The marketers should design their products and services and other elements of marketing keeping in mind the personality of potential consumers. D. Behavioral Variables: A large number of marketers are of the opinion that behavioral variables are the best starting point for constructing market segments. In behavioral segmentation, consumers can be divided into groups on the basis of their attitude, use, knowledge, expectation from the product, usage rate, usage habit etc. Generally, the following basis are adopted to segment the markets. (i) Occasion: Regular occasion, for example having fruit juice after breakfast. Special occasion, for example, new dresses during puja and Bihu. (ii) User status: Non-user, ex-user, potential user, regular user etc. are different categories of buyers as users. (iii) Usage rate: Light user, medium user, heavy user are categories based on usage rate. (iv) Loyalty status: Soft loyal, hard loyal, shifting loyal, switchers etc. are categories of buyers based on loyalty shows towards purchase and usage of a product. (v) Attitude towards : Positive, indifferent, negative, hostile etc. are some of the attributes towards products & services Segmentation of Organizational Markets The bases of segmentation of consumer goods can also be applied for the segmentation of organizational markets. Usually, there are three common bases which are frequently used in such market. – (a) Type of customer (b) Size of customer and(c) Type of buying situations. (a) Type of customer or Type of Business Activity : Based on the type of activity, it can be classified into so many segments. According to the standard industrial classification system which is practically used by the Government agencies, the business activities can be classified into ten divisions. They are: (i) Agriculture, Forestry and Fisheries, (ii) Construction (iii) Finance, Insurance and Real estate. (iv) Mining (v) Manufacturing (vi) Distribution channel-whole sale and Retail trade. 61 CU IDOL SELF LEARNING MATERIAL (SLM)

(vii) Transportation and communication. (viii) Services (ix) Government and (x) All others. Each of the divisions may be further divided into several major groups. For example manufacturing division may be further divided into various groups like Textile, printing, publishing, automobile etc. (b) Size of customers or size of users : The size of an industry or trading house may be small, medium and large and accordingly their purchase-order or size may also vary. The marketer may have separate marketing policy to sell their products or services to bulk purchasers and small buyers. (c) Type of buying situations : On the basis of buying situations the marketer can classify the market or customers as – (i) New buyer (ii) Modified buyer (iii) Straight re-buyer. The marketer can develop different marketing strategy for these three types of buyers. Again on the basis of situations the buyer may be divided as urgent buyer, specific buyer and general buyer. Market segmentation is essential for successful marketing strategy, many companies are adopting different strategies for different market segments. Depending on degree of competition of the products and services, the sellers usually determine the number and type of segments. Analyzing the attractiveness of different segments is essential for determining the type and number of segments. MARKET TARGETING Market Targeting is a process of taking decision regarding the market segments to be served. The marketer distinguishes the major market segments, targets one or more of these segments and develops products and marketing programmes tailored to each selected segments. However, the term ‘Target Market’ means a group of customers at whom the organization specially intends to aim its market effort. In market targeting process, firms have to evaluate the segments and decide how many segments can be served effectively with its available resources and capacity. For example, a firm selling text books may form segments of the market as school books, college books, general books, G. K. books etc. In each segment, there may be further sub- division’s university wise or board wise such as books for Gulati University, Dibrugarh University and Secondary Education Board of Assam and Central Board of Secondary Education. The firm may select one segment or two segments or all segments depending on its resources. The selected segment/segments are the target markets. 62 CU IDOL SELF LEARNING MATERIAL (SLM)

EVALUATING MARKET SEGMENTS AND TARGET MARKET SELECTION In evaluating market segments, the firm must examine these two factors: (A) Relative attractiveness of the market segments (B) Company’s capability to serve and compete in various segments. Let us discuss the above in detail: (A) Relative attractiveness of the market segments: It is important to determine the potential profit to enter a market segment. The potential profit may be determined by analyzing the size and growth rate of customers and industry. (i) Segment size: Large size segment is more favorable if large scale production and sales provide economies of scale. Smaller companies may find it difficult to compete in large segments and so they may prefer small segments. (i) Segment Growth rate: Growing segments are always preferable but analysis of growth rate should be accompanied with an examination of degree of competition and additional amount of investment needed. (ii) Price sensitivity: In low price sensitive segments competition may be based more on quality and service. Hence the effort should be more on non-price factors. (iv) Nature of competition: Strong aggressive competition is not that less favorable. The quality of competition is more important than the number of competitors in the segments. (v) Social trends: Changes in society provide new opportunity to enter into new segments, for example, increasing number of working women have increased the demand for processed food and fast-food items. (vi) Political Issues: Political forces can open up new market segments by encouraging and providing various incentives to start new enterprises in new geographical areas particularly in backward regions and hilly areas. (B) Company’s capability to serve and compete in various segments : A market segment may be profitable but it may be difficult to serve effectively due to lack of resources and competencies. A company should be very sure that it has the required resources such as exploitable marketing assets, cost advantage, technological edge and managerial capabilities and commitment. Companies consider the following factors while deciding on segmentation. After evaluation of various market segments, the company should decide the number of segments to serve effectively and efficiently to earn good amount of profit and reputation. There are usually five different methods of selecting target market. 63 CU IDOL SELF LEARNING MATERIAL (SLM)

(i) Single segment concentration: Here, the company selects only one of the various segments and concentrates there on. The main advantages of this system are (a) through concentrated marketing, the company can achieve a good market position on account of its greater knowledge of the segment and (b) it can enjoy operating economies through specializing its products, distribution and promotion. (ii) Selective specialization: Here, the company selects a number of appropriate segments. This is known as multi segment strategy. The main advantage of this system is even if one segment becomes unprofitable, the company can earn profit in other segments. (iii) Product specialization: Here, the company concentrates on the production of a certain product and sells it to several segments. This type of strategy enables the firm to build up a good reputation in the specific product area. (iv) Market specialization: Here, the marketer concentrates on satisfying the needs of a particular group of customers. For example baby products. (v) Full Market Coverage: Here, the marketer tries to serve all customer groups with all the products that they may need. This is applicable only in case of large business houses. MARKET POSITIONING Once the decision, as to ‘which segments’ of the market, a company will enter, has been made, then it must decide as to what ‘positions’ it would like to occupy in those segments. A product’s position is the way the product is defined by consumers on important attributes, the place the product occupies in consumer’s minds relative to competing products. For example, Lux is positioned as beauty soap of cine stars. Life boy is positioned as an anti- septic soap, Vicks as an ointment for cold etc. There are large numbers of information sources for buyers about any product and services. On the basis of information, during buying decision making process, the buyers arrange the products and services into various groups as per their mental position. The marketers should not leave their products’ and services’ positions to be decided on the basis of chance. The marketers, therefore, put their best efforts to position their products and services to get competitive advantage in selected target markets and they develop their marketing mix accordingly. In short positioning is the process of distinguishing a brand from its competitors so that it becomes the preferred brand in the selected target market. Ries and Trout, who developed the concept of positioning, defined it as follows: “Positioning starts with a product, a piece of merchandise, a service, a company, an institution or even a person; but positioning is not what you do to a product. Positioning is 64 CU IDOL SELF LEARNING MATERIAL (SLM)

what you do to the mind of the prospect. That is, position of the product in the mind of the prospect.” Definitions 1. “Positioning is the act of designing the company’s offer and image so that it occupies a distinct and valued place in the target customers’ mind”. – Philip Kotler 2. “Positioning is the art of selecting out of a number of unique selling propositions, the one that will get you maximum sales”. – Rosser Reeves. 3. “The most important decision you will ever make about your product is, ‘How should I position my product”. – David Ogilvy. Positioning Strategies There are large number of strategies, some of those strategies are discussed below: 1. Positioning on Product Attributes: The marketer can position its product on specific product attributes, for example Sony features technical and performance attributes. 2. Positioning on Benefits: The marketer can also position its product on the basis of benefits it offers for example-Colgate reduces cavities, clinic shampoo-an all clear shampoo. 3. Positioning according to usage occasions: The marketers can also position, their products on the basis of specific usage occasions, for example casual dresser, formal dresser or ornaments for specific occasion. 4. Positioning the product for certain classes of users: There are certain movie or films for children and for adult only. Similarly, certain publishers are concentrating only on comic series publications to suit the needs of children. 5. Positioning directly against a competitor: In its “dare to compare campaign”, Texas Instruments asked its consumers to make side by-side comparisons of its personal computers with that of IBM’s. It attempted to position the product as easier to use and more versatile. 6. Positioning away from competitions: A product may also be positioned away from competitors. 7-up became the number three cold drink when it was positioned as the “Un- Cola”, the fresh and thirst alternative to Coke and Pepsi. 7. Positioning as to different product classes: The product can also be positioned with respect to different product classes, for example Mediker shampoo is positioned with “lice clear” means better performance compared to other brands of general shampoo. Positioning strategies generally apply one of the two approaches– one focusing on consumers and the other on the competitors. Both the approaches focus on the association of product benefits with consumer needs, the first one does so by linking the products with the benefits and the needs of consumers and the second approach positions the products by comparing its 65 CU IDOL SELF LEARNING MATERIAL (SLM)

products features with the competitors’ products. From the above discussion you can determine that there are basically four elements or variables that affect the position of a product– (a) The Product (b) The Company (c) The Competition and (c) The Consumer. SUMMARY • In this unit, we have discussed about market segmentation. Market segmentation is the sub-division of a market into homogeneous groups of customers. The marketer is in a better position to spot and compare marketing opportunities. He can make fine adjustments of his product and marketing appeals. Instead of applying one marketing programme for total market, he can create separate marketing programmes to meet the needs of different buyers effectively. • The ultimate basis for meaningful segmentation is differences in customer response to different marketing elements. • Organizations adopt the policy of market segmentation for two main reasons: (a) In order to match their own limited resources to market opportunities. (b) To provide guide lines for the development of an appropriate marketing mix. • Target Marketing is a strategy in which the marketer distinguishes the major market segments, targets one or more of these segments and develops products and marketing programs tailored to each selected segment. It is about evaluating the different segments and finding out the segment which can be served effectively with limited resources to earn profit. • Positioning is the process of creating a distinct offer and communicating it to the customer. Positioning is created by designing a marketing mix which is suitable for the target market but is different from marketing mixes for other products. The selected marketing mix has to be communicated to the customers. The process of positioning is continuous in nature and it should always be proactive because new needs and competitors keep cropping up. KEYWORDS • Positioning is the act of designing the company’s offer and image so that it occupies a distinct and valued place in the target customers’ mind”. • Market Targeting is a process of taking decision regarding the market segments to be served. • Market segmentation means dividing the market into several homogeneous submarkets or segments. 66 CU IDOL SELF LEARNING MATERIAL (SLM)

• Inbound marketing is a technique for drawing customers to products and services via content marketing, social media marketing, search engine optimization and branding • Price Analysis refers to the analysis of consumer response to theoretical prices in survey research. LEARNING ACTIVITY 1. Make a group of 4 and take two companies and Discuss their Positioning in the market 2. Take 4 different companies and differentiate them on the basis of Market segmentation UNIT END QUESTIONS A. Descriptive Type Questions 1. Explain the importance of market segmentation. 2. Understanding the behavior of the consumer in marketing is a platform of marketers before formulating the product development plan. Considering the above statement, how can you illustrate the meaning and features of consumer's behavior in brief? 3. Evaluate the bases for organizational market segmentation? 4. Illustrate the process of evaluating market segments and selection of target market. 5. Elaborate the various positioning strategies? B. Multiple Choice Questions 1. As competition increased, .................. declined and the profit also started declining. a. Price b. Promotion c. Product d. Place. 2. Market segmentation helps to identify the various segments in a market for marketers to decide in which segment or segments they can serve ………… a. effectively 67 CU IDOL SELF LEARNING MATERIAL (SLM)

b. Costly c. efficiently d. differently 3. There must be some means of identifying people of the segments on some standard basis for classifying people in different segments a. Identity b. Cost-effective c. Efficiently d. none of these 4. It includes social class of people, life style of people, personality factors such as gregarious, authoritarian, compulsive etc. Individuals differ in their personality, thought etc a. Geographic variables b. Demographic c. Psychographic d. Behavioral 5. ……………. is a process of taking decision regarding the market segments to be served. a. Marketing forecasting b. Market Targeting c. Segmentation d. Positioning 6. All of the following would be among the chief factors to consider when choosing a market-coverage strategy EXCEPT: a.organizational culture. b.product variability. 68 CU IDOL SELF LEARNING MATERIAL (SLM)

c.product’s life-cycle. d.market variability. 7. The way the product is defined by consumers on important attributes is called . a.market segmentation b.image psychology c.product position d.market targeting 8. The positioning task consists of three steps. Which of the following does not belong? a.Identifying a set of possible competitive advantages upon which to build a position. b.Choosing the right competitive advantages. c.Comparing the position with ethical and legal guidelines established by the trade. d.Selecting an overall positioning strategy. 9. The key to winning and keeping customers is to understand their needs and buying processes better than competitors do and: a.advertise constantly to let customers know about changes in products and services. b.hire the best sales people. c.have an updated Web presence. d.to deliver more value. 10. Product differentiation can be along all of the following lines EXCEPT: 69 a.consistency. b.durability. CU IDOL SELF LEARNING MATERIAL (SLM)

c.reliability. d.competitive parity. Answers 1.a 2.c 3.a 4.c 5.b 6.a 7.c 8.c 9.d 10.d REFERENCES • Kotler, P., Keller, K.L. Koshy, A. and Jha, M. (2012). Marketing Management: A South Asian Perspective. New Delhi: Pearson Education. • Ramaswamy, V.S and Namakumari, S. (2009). Marketing Management: Global Perspective Indian Context. New Delhi: Macmillan Publishers India Ltd. • Kumar, Nirmalya. (2004). Marketing as Strategy: Understanding the CEO's Agenda for Driving Growth and Innovation. Harvard Business Review Press. • Philip Kotler, Kevin Lane Keller, Abraham Koshy, and Mithileshwar Jha (2007), “Marketing Management: A South Asian Perspective”, Pearson Education, Delhi. • V. S. Ramaswami and S Namakumari (2003), “Marketing Management : Planning, Implementation and Control”, Macmillan India Limited • Porter, Michael (1998). Competitive Advantage (revised ed.). The Free Press. ISBN 0-684-84146-0. • Joshi, Rakesh Mohan, (2005) International Marketing, Oxford University Press, New Delhi and New York ISBN 0-19-567123-6 70 CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT: 4 MARKETING ENVIRONMENT Structure Learning objective Introduction Meaning of Marketing Environment Definition of Marketing Environment Features of Marketing Environment Types of Marketing Environment Micro Environment: Macro Environment: Need for analysis the marketing environment Importance of marketing environment Components of Environment Marketing Environmental Scanning Importance of Environmental scanning Summary Keywords Learning activity Unit end questions References LEARNING OBJECTIVES After studying this unit, you will be able to: • State the meaning of marketing environment, both in term of micro environment and macro environment • Explain the marketing environment in India e narrate how the environment affects marketing decisions • Describe the government regulations in India which have implications for marketing decisions. • About environment scanning of market, importance and examples 71 CU IDOL SELF LEARNING MATERIAL (SLM)

INTRODUCTION Marketing functions are to be carried out in a given environment. Even the marketing opportunity has to be scanned and identified by carefully observing the environment. The marketing mix is also decided in the context of a given marketing environment. Though marketing managers cannot control the forces in a marketing environment, they must consider them when making marketing decisions. While formulating the marketing strategies, the marketers must closely observe the environment in which they are functioning. In this unit you will study the factors that constitute the marketing environment, and the marketing environment in India. You will also study how various Acts and Statutes influence the marketing decisions in India. MEANING OF MARKETING ENVIRONMENT The marketing environment refers to all internal and external factors, which directly alternatively, indirectly influence the organization’s decisions related to marketing activities. Internal factors are within the control of an organization; whereas, external factors do not fall within its control. The external factors include government, technological, economic, social, and competitive forces; whereas, organization’s strengths, weaknesses, and competencies form the part of internal factors. Marketers try to predict the changes, which might take place in future, by monitoring the marketing environment. These changes may create threats and opportunities for the business. With these changes, marketers continue to modify their strategies and plans. DEFINITION OF MARKETING ENVIRONMENT: According to Philip Kotler :“A company’s marketing environment consists of the internal factors & forces, which affect the company’s ability to develop & maintain successful transactions & relationships with the company’s target customers.” FEATURES OF MARKETING ENVIRONMENT: Today’s marketing environment is characterized by numerous features, which are mentioned as follows: 1. Specific and General Forces: It refers to different forces that affect the marketing environment. Specific forces include those forces, which directly affect the activities ofthe organization. Examples of specific forces are customers and investors. General forces are those forces, which indirectly affect the organization. Examples of general forces are social, political, legal, and technological factors. 2. Complexity: It implies that a marketing environment include number of factors, 72 CU IDOL SELF LEARNING MATERIAL (SLM)

conditions, and influences. The interaction among all these elements makes the marketing environment complex in nature. 3. Vibrancy: Vibrancy implies the dynamic nature of the marketing environment. A large number of forces outline the marketing environment, which does not remain stable and changes over time. Marketers may have the ability to control some of the forces; however, they fail to control all the forces. However, understanding the vibrant nature of marketing environment may give an opportunity to marketers to gain edge over competitors. 4. Uncertainty: It implies that market forces are unpredictable in nature. Every marketer tries to predict market forces to make strategies and update their plans. It may be difficult to predict some of the changes, which occurs frequently. For example, customer tastes for clothes change frequently. Thus, fashion industry suffers a great uncertainty. The fashion may live for few days or may be years. 5. Relativity: It explains the reasons for differences in demand in different countries. The product demand of any particular industry, organization, or product may vary depending upon the country, region, or culture. TYPES OF MARKETING ENVIRONMENT: The sale of an organization depends on its marketing activities, which in turn depends on the marketing environment. The marketing environment consists of forces that are beyond the control of an organization but influences its marketing activities. The marketing environment is dynamic in nature. Therefore, an organization needs to keep itself updated to modify its marketing activities as per the requirement of the marketing environment. Any change in marketing environment brings threats and opportunities for the organization. An analysis of these changes is essential for the survival of the organization in the long run. A marketing environment mostly comprises of the following types of environment: 1. Micro Environment 2. Macro Environment The discussions of these environments are given below: Micro Environment: Micro environment refers to the environment, which is closely linked to the organization, and directly affects organizational activities. It can be divided into supply side and demand side environment. Supply side environment includes the suppliers, marketing intermediaries, and competitors who offer raw materials or supply products. On the other hand, demand side 73 CU IDOL SELF LEARNING MATERIAL (SLM)

environment includes customers who consume products. Following are the forces of Micro Environment: i. Suppliers: It provides raw material to produce goods and services. Suppliers can influence the profit of an organization because the price of raw material determines the final price of the product. Organizations need to monitor suppliers on a regular basis to know the supply shortages and change in the price of inputs. ii. Marketing Intermediaries: It helps organizations in establishing a link with customers. They help in promoting, selling, and distributing products. Marketing intermediaries include the following: a. Resellers: It purchases the products from the organizations and sell to the customers. Examples of resellers are wholesalers and retailers b. Distribution Centers: It helps organizations to store the goods. A warehouse is an example of distribution center. c. Marketing Agencies: It promotes the organization’s products by making the customers aware about benefits of products. An advertising agency is an example of marketing agency. d. Financial Intermediaries: It provides finance for the business transactions. Examples of financial intermediaries are banks, credit organizations, and insurance organizations. Customers: Customers buy the product of the organization for final consumption. The main goal of an organization is customer satisfaction. The organization undertakes the research and development activities to analyze the needs of customers and manufacture products according to those needs. Competitors: It helps an organization to differentiate its product to maintain position in the market. Competition refers to a situation where various organizations offer similar products and try to gain market share by adopting different marketing strategies. Macro Environment: Macro environment involves a set of environmental factors that is beyond the control of an organization. These factors influence the organizational activities to a significant extent. Macro environment is subject to constant change. The changes in macro environment bring opportunities and threats in an organization. 74 CU IDOL SELF LEARNING MATERIAL (SLM)

Following are the factors of Macro Environment: i. Demographic Environment: Demographic environment is the scientific study of human population in terms of elements, such as age, gender, education, occupation, income, and location. It also includes the increasing role of women and technology. These elements are also called as demographic variables. Before marketing a product, a marketer collects the information to find the suitable market for the product. Demographic environment is responsible for the variation in the tastes and preferences and buying patterns of individuals. The changes in demographic environment persuade an organization to modify marketing strategies to address the altering needs ofcustomers. ii. Economic Environment: Economic environment affects the organization’s costs structure and customers’ purchasing power. The purchasing power of a customer depends on the current income, prices of the product, savings, and credit availability. The factors economic environment is as follows: a. Inflation: It influences the customers’ demand for different products. For example, higher petrol prices lead to a fall in demand for cars. b. Interest Rates: It determines the borrowing activities of the organization. For example, increase in interest rates for loan may lead organizations to cut their important activities. c. Unemployment: It leads to a no income state, which affects the purchasing power of an individual. d. Customer Income: It regulates the buying behavior of a customer. The change in the customer’s income leads to changed spending patterns for the products, such as food and clothing. e. Monetary and Fiscal Policy: It affects all the organizations. The monetary policy stabilizes the economy by controlling the interest rates and money supply in an economy; whereas, fiscal policy regulates the government spending in various areas by collecting the revenue from the citizens by taxing their income. iii. Natural Environment: Natural environment consists of natural resources, which are needed as raw materials to manufacture products by the organization. The marketing activities affect these natural resources, such as depletion of ozone layer due to the use of chemicals. The corrosion of the natural environment is increasing day-by- day and is becoming a global problem. Following natural factors affect the marketing activities of an organization: a. Natural Resources: It serves as raw material for manufacturing various products. Every organization consumes natural resources for the production of its products. 75 CU IDOL SELF LEARNING MATERIAL (SLM)

Organizations are realizing the problem of depletion of resources and trying best to use these resources judiciously. Thus, some organizations have indulged in de- marketing their products. For example, Indian Oil Corporation (IOC) tries to reduce the demand for its products by promoting advertisements, such as Save Oil, Save India. b. Weather: It leads to opportunities or threats for the organizations. For example, in summer, demand for water coolers, air conditioners, cotton clothes, and water increases while in winter, the demand for woolen clothes and room heaters rises. The marketing environment is greatly influenced by the weather conditions of a country. c. Pollution: It includes air, water, and noise pollution, which lead to environmental degradation. Now-a-days, organizations tend to promote environment friendly products through its marketing activities. For example, the organizations promote the usage of jute and paper bags instead of plastic bags. Socio-Cultural Environment: Socio-cultural environment comprises forces, such as society’s basic values, attitudes, perception, and behavior. These forces help in determining that what type of products customers prefer, what influences the purchase attitude or decision, which brand they prefer, and at what time they buy the products. The socio-cultural environment explains the characteristics of the society in which the organization exists. The analysis of socio-cultural environment helps an organization in identifying the threats and opportunities in an organization. For example, the lifestyles of people are changing day-by- day. Now, the women are perceived as an active earning member of the family. If all the members of a family are working then the family has less time to spend for shopping. This has led to the development of shopping malls and super markets, where individuals could get everything under one roof to save their time. Technological Environment: Technology contributes to the economic growth of a country. It has become an indispensible part of our lives. Organizations that fail to track ongoing technological changes find it difficult to survive in today’s competitive environment. Technology acts as a rapidly changing force, which creates new opportunities for the marketers to acquire the market share. Marketers with the help of technology can create and deliver products matching the life style of customers. Thus, marketers should observe the changing trends in technology. Following are the technological trends that affect the marketing environment: Pace of Technological Change: It leads to product obsolescence at a rapid pace. If the pace of technological change is very rapid then organizations need to modify their products as and when required. On the other hand, if the technology is not changing at a rapid pace then there is no need for the organization to bring constant changes in the product. 76 CU IDOL SELF LEARNING MATERIAL (SLM)

Research and Development: It helps in increasing growth opportunities for an organization. Many organizations have developed a separate team for R&D to bring innovation in its products. Pharmaceutical organizations, such as Ranbaxy and Cipla, have started putting greater force in R&D and these efforts have led to great opportunities in global market. Increased Regulation: It refers to government guidelines to ban unsafe products. Marketers should be aware of these regulations to prevent their violation. Every pharmaceutical organization takes the approval of the Drugs Controller of India, which lays down the standards for drugs manufacturing. Political and Legal Environment: Political and legal environment consists of legal bodies and government agencies that influence and limit the organizations and individuals. Every organization should take care of the fact that marketing activities should not harm the political and legal environment prevailing in a country. The political and legal environment has a serious impact on the economic environment of a country. Various legislations affecting the marketing activities are as follows: Anti-pollution laws, which affect the production or manufacturing of various products. Customer legislation, which tries to protect the customer’s interest. The important acts set by the Indian government, which effect the marketing environment of an organization: i. Prevention of Food and Adulteration – 1954 ii. Drugs Control Act – 1954 iii. Company Act – 1956 iv. Standard Weights and Measurement Act – 1956 v. MRTP- Monopoly and Restrictive Trade Practices – 1969 vi. Display of Price Order – 1963 vii. Indian Patents Act – 1970 viii. Packaged Commodities Order – 1975 ix. Environment Act – 1986 x. Consumer Protection Act – 1986 NEED FOR ANALYZING THE MARKETING ENVIRONMENT: The business environment is not static. It is continuously changing with fast speed. The marketing environmental analysis will help the marketer to: 77 CU IDOL SELF LEARNING MATERIAL (SLM)

i. Become well acquainted with the changes in the environment. ii. Gain qualitative information about the business environment; which will help him to develop strategies in order to cope with ever changing environment. iii. Conduct marketing analysis in order to understand the markets needs and wants soas to modify its products to satisfy these market requirements. iv. Decide on matters related to Government-legal-regulatory policies in a particular country so as to formulate its strategies successfully amidst these policies. v. Allocate its resources effectively and diversify either into a new market segment or totally into a new business which is outside the scope of its existing business. vi. Identify the threats from the environment in terms of new competitors, price wars, competitor’s new products or services, etc.; and prepare its strategies on the basis ofthat. vii.Identify the opportunities in the environment and exploit these opportunities to firm’s advantage. These opportunities can be in terms of emergence of new markets; mergers, joint ventures, or alliances; market vacuum occurred due to exit of a competitor, etc. viii. Identify its weaknesses such as lower quality of goods or services; lack of marketing expertise; or lack of unique products and services; and prepare strategies to convert its weaknesses into strengths. ix. Identify its strengths and fully exploit them in firm’s advantage. These strengths can be in terms of marketing expertise, superior product quality or services, or giving unique innovative products or services. IMPORTANCE OF MARKETING ENVIRONMENT The study of marketing environment is essential for the success of an organization. The discussion of importance of marketing environment is as follows: 1. Identification of Opportunities: It helps an organization in exploiting the chances or prospects for its own benefit. For example, if an organization finds out that customers appreciate its products as compared to competitors’ products then it might encash this opportunity by giving discounts on its products to boost sale. 2. Identification of Threats: It gives warning signals to organizations to take the required steps before it is too late. For example, if an organization comes to know that a foreign multinational is entering into the industry then it can overcome this threat by adopting strategies, such as reducing the product’s prices or carrying out aggressive promotional strategies. 3. Managing Changes: It helps in coping with the dynamic marketing environment. If an organization wishes to survive in the long run then it has to adapt to the changes occurring in the marketing environment. Difference between Macro and Micro Environment of Marketing 78 CU IDOL SELF LEARNING MATERIAL (SLM)

Figure 4.1 Business Environment Every business organization is a part of the business environment, within which it operates. No entity can function in isolation because there are many factors that closely or distantly surrounds the business, which is known as a business environment. It is broadly classified into two categories, i.e. microenvironment, and macro environment. The former affects the working of a particular business only, to which they relate to, while the latter affects the functioning of all the business entities, operating in theeconomy. The difference between macro environments and micro environments may be relevant to identify in the following table: Point of Macro-environment Microenvironment Difference Meaning Externalenvironment of an Inter environments of an organization. organization. Definition Micro environment is defined as Macro environment refers to the general Nature the nearby environment, under environment, that can affect the working which the firm operates. of all business enterprises. Very complex. Fewer complexes to perceive. Elements COSMIC, i.e. Competitors, PESTLE, i.e. Political, Economic, Organization itself, Suppliers, Socio-cultural, Technological, Legal and Market, Intermediaries and Environmental. Customers. The task of the Marketer interacts with, the The marketer interacts with other marketer elements prevailing outside the functional areas of the organization. organization. Extent of Factors remain beyond the Factors may be controlled to a large control control of marketers. extent by a marketer. Impact It creates a huge impact on Remains comparatively independent are shaping marketing decisions. shaping marketing decisions. 79 CU IDOL SELF LEARNING MATERIAL (SLM)

Function Factors may create an Factors reveal the capabilities of an Influence opportunity or pose a threat to organization to exploit the opportunities the marketing activities of an or to combat the threat through its organization. marketing activities. Directly and Regularly Indirectly and Distantly COMPONENTS OF MARKETING ENVIRONMENT, OR FORCES OR FACTORS AFFECTING MARKETING ENVIRONMENT The components, forces or factors affecting marketing environment can be classified under the following two broad heads: (I) External Components or Forces or Factors External components or forces or factors are those which exist in the environment but are uncontrollable. External environmental factors are uncontrollable by individual firms and marketing management. These forces affect the marketing strategies considerably and hence the marketing manager should adjust and adapt to these forces while preparing its marketing plans, policies and strategies. If possible, efforts should also be made to take advantage of these external forces. The major external forces are as follows: (1) Demographic Factors: Demographic factors include structure of the population, division according to sex, age group, income group, marital status and profession etc. The study of demographic factors is of vital importance for the marketers. It helps to develop an understanding about prospective consumers and market potential of a product and facilitates market segmentation. It provides clues as regards their age, sex, income and capacity to incur expenditure on the satisfaction of their wants. The demographic study provides all the requisite information about consumers which is essential for market segmentation. (2) Economic Environment: By economic environment we mean the purchasing power along with desire to incur expenditure of the consumers. The effective demand depends on economic environment. It also determines the market potential of a product. Speedy economic development leads to a rapid rise in the level of income and employment and consequently there is increase in the marketing opportunities of different products. In this way, the economic environment affects the marketing environment of a company. (3) Social and Cultural Environment: Our society is ever changing. According to time new demands are created and old demands are extinguished. It is essential for the marketing management that it should prepare the marketing plans according to the changing needs of the society and thereby satisfy new growing needs. There are three main aspects of social environment :(1) changes in life style and social values 80 CU IDOL SELF LEARNING MATERIAL (SLM)

;(ii) major social problems, such as anxiety towards growing population, need of safety in different employments, protection to irreplaceable resources, marketing of products it. Low income groups and in rural sectors etc, (iii) growing consumerism which is the symbol of growing consumer dissatisfaction and their increasing desires. The growing consumerism is the result, of two primary factors, i.e., (a) the increasing educational level of consumers, and (b) scientific and technical progress. The spread of education and progress made in the field of science and technology is responsible for a rapid increase in the expectations of consumers with the result that the consumer now is more aware of his rights and satisfaction. Social and cultural environment is also responsible for the growing importance of social responsibility of the industry and the consumer-oriented marketing concept. The social and cultural concept of marketing is coextensive with consumer welfare along with public welfare. (4) Public Policy Environment or Legal and Political Forces: Public policy environment is also an uncontrollable factor and affects the marketing environment. Political and legal intervention in the field of marketing and business activities has now become a common factor. Monetary-and fiscal policies, import and export policies and custom duties etc. affect the marketing system of a country. In case of India, price and supply regulation of products like iron, steel, cement and drugs etc. has often been resorted to by the government. The range of government legislation directed at protecting consumer interest and the organization of the consumer resistance groups has affected the marketing environment considerably, such as Monopoly and Preventive Trade Practices Act. The marketers should keep the public policy in mind while preparing marketing plans, policies and strategies. (5) Scientific and Technological Environment: Scientific and technological environment also affects the marketing environment of a country. For example, there is a considerable change in the living style and the pattern of consumption in India on account of development of scientific and technological environment. There is an absolute change in the living standards of developed and developing countries. The scientific and technological developments have given (6) Competition: The existence of competition in the market is essential for building a strong market particularly in case of a democratic society. In the free market economy, it is not possible to take any marketing decision without evaluating the existence of competition. In such an economy, the marketing management has no control over competitor's activities. However, the marketing manager should study the prevailing competitive conditions in the market. For this purpose, he should take into account bases of competition, competitor's viewpoint towards the consumers, quality and characteristics of competitors' products and their marketing strategies before preparing marketing plan. 81 CU IDOL SELF LEARNING MATERIAL (SLM)

(7) Consumer Demand: Consumer demand is always changing and hence it is not possible to assess it correctly. Thus it is also an uncontrollable marketing environment. It affects the overall market environment, Under the modern consumer-oriented marketing concept, the consumer is the centre of all marketing activities. According to Peter F. Drucker, \"the main object of business is to create customer.\" Hence the marketing manager must study the needs, preferences and tastes of the consumers and also analyses their effects on the demand of the product vis a vis consumer’s needs and thereby produce and market the products accordingly. Every business, in order to survive and grow, must serve the needs of consumers and citizens (8) Ecology or Nature or Physical Environment : In the modern economics, ecology or nature or physical environment also occupy an important place in the field of distribution and marketing under the concept of intensive marketing However, it is also an uncontrollable factor of marketing environment. Pollution has now become the topic of the day in the field of high consumption economic system in developed and developing countries. Today the marketers not only required to satisfy the needs of his customers but also the needs of the society as a whole. Hence his marketing activities should be directed in such a way that it may not harm the interests of the society. In order to maintain balance in the physical environment, it is essential that all types of pollution should be stopped and efficient utilization of the limited available resources should be done. roper attention should be paid to the economic and efficient e:ilisation of the energy and physical resources. II) Internal Components or Forces or Factors of Marketing Environment: Internal components or forces or factors of marketing environment are those which are under the control of the marketing manager. He is in the position of making changes in these forces. It also affects the marketing environment. Hence marketers must get adequate information about internal environment. Internal forces or factors of the marketing environment can be classified under the following two broad heads: (1) Corporate Resources: Corporate resources include man, material, money, management, ideas and information, locating research and development programmes and public image etc. They are the constraints or limitations on the exploitation of marketing opportunities. They affect the marketing environment of a company considerably. Company's marketing opportunities depend on the availability of the corporate resources. There should be happy marriage between the corporate resources and corporate opportunities, so that the company can accomplish the set goals. (2) Marketing-mix: The policies adopted by manufacturers to attain success in the market constitute the marketing-mix. Under marketing-mix we include mainly product- mix, distribution-mix, communication-mix and service-mix. Marketing-mix is an important part of marketing system of the company and thus it is a controllable factor of marketing environment. These controllable factors are the marketing instruments or 82 CU IDOL SELF LEARNING MATERIAL (SLM)

variables. A company can achieve its marketing objectives by selecting and balancing marketing-mix. Marketing-mix acts as a stimulus and resulting variables such as consumer satisfaction, market share, return on investment and company image as responses. A successful marketing strategy must have a marketing-mix. (3) The Market: Organizations closely monitor their customer markets in order to adjust to changing tastes and preferences. A market is people or organizations with wants to satisfy, money to spend, and the willingness to spend it. Each target market has distinct needs, which need to be monitored. It is imperative for an organization to know their customers, how to reach them and when customers' needs change in order to adjust its marketing efforts accordingly. The market is the focal point for all marketing decisions in an organization. Consumer markets are individuals and households that buy goods and services for personal consumption. Business markets buy goods and services for further processing or for use in their production process. Reseller markets buy goods and services in order to resell them at a profit. Government markets are agencies that buy goods and services in order to produce public services or transfer them to those that need them. The federal government is the largest buyer in the United States. International markets consist of buyers in other countries. (4) The Suppliers: Suppliers are organizations and individuals that provide the resources needed to produce goods and services. They are critical to an organization’s marketing success and an important link in its value delivery system. Marketers must watch supply availability and monitor price trends of key inputs. If there is a breakdown in the link between the organization and its suppliers, the result will be delays and shortages that can negatively impact the organization’s marketing plans. On the other hand, positive and cooperative relationships between the organization and its suppliers can lead to enhanced service and customer satisfaction. (5) Marketing Intermediaries: Like suppliers, marketing intermediaries are an important part of the system used to deliver value to customers. Marketing intermediaries are independent organizations that aid in the flow of products from the marketing organization to its markets. The intermediaries between an organization and its markets constitute a channel of distribution. These include middlemen (wholesalers and retailers who buy and resell merchandise). Physical distribution firms help the organization to stock and move products from their points of origin to their destinations. Warehouses store and protect the goods before they move to the next destination. Marketing service agencies help the organization target and promote its products and include marketing research firms, advertising agencies, and media firms. Financial intermediaries help finance transactions and insure against risks and include banks, credit unions, and insurance companies. (6) Marketing Information: External environmental sources provide raw data for 83 CU IDOL SELF LEARNING MATERIAL (SLM)

marketers to develop into actionable, marketing information. Environmental forces create challenges and opportunities for the organization. Marketers must react and adapt to changes in their external environment. Globalization is an example of an opportunity for an organization. Improving technologies, such as transportation and communications, have enabled companies to expand into global or worldwide markets. Marketers must learn to deal effectively with multiple cultures and political systems in the midst of rapidly changing markets and technology. They must be able to anticipate this changing environment and develop the competencies at all levels in their organizations to embrace this dynamic future. Environmental Factors Affecting the Consumer Marketing Decision-making Process 1) Economic Factors: Economic factors play an important role in consumer buying behavior decisions. It also directly affects the purchasing power of consumers. If consumer’ purchasing power is weak, they cannot decide to buy goods or services even if they like very much. But, if they have purchasing power, they can take a prompt decision to buy goods or services they like. Income level, the income of their family members, liquid asset, spending attitude, credit facility, etc. are the economic factors to determine consumers’ buying decision. 2) Technological Factors: Technological factors are perhaps the most dramatic forces which are changing customer habit by introducing a new product for the customer. 3) Cultural Factors: Culture is crucial when it comes to understanding the needs and behaviours of an individual. Throughout his existence, an individual will be influenced by his family, his friends, his cultural environment or society that will “teach” him values, preferences as well as common behaviours to their own culture and buying behavior. 4) Demographic Factors: Demography is the study of human populations in terms of size, destiny, location, age, gender, race, occupation and other statistics. This is very important because these factors directly influence consumer decision making. ENVIRONMENTAL SCANNING Environmental scanning is a constant and careful analysis of the internal and external environment of an organization in order to detect opportunities, threats, trends, important lessons, and weaknesses which can impact the current and future strategies of the organization. Identification of these variables can either be used to build strategies either to expand the business or to minimize their impacts on the growth of the business. Environmental scanning is an important part of the business process as it is the responsibility of an organization to keep a check on things which can put negative impacts on their business and their consumers. 84 CU IDOL SELF LEARNING MATERIAL (SLM)

The members of the organization look for the prominent internal and external threats which adversely affect the organization. Not only the issues which directly impact their consumers and suppliers but also the issues which impact the competitors and overall environment of the industry are scanned and new strategies are developed to deal with these issues. Large organizations have employees specially hired for the research purpose who constantly research and learn about market changes and provide information to the higher management so that company doesn’t lag behind because of the lack of the knowledge about the market place changes. Having knowledge about the issues in the business and market changes, management can take important decision for the future of the organization. Followings are the efforts made by the organization to do an environmental scanning: • Market research is performed and the data collected from the market research process is studied in order to make planning for future actions. • Comparing the performance of the competitor company in order to learn about their strategies and business ideas. • Learning from the executives of the organization. • Analyzing and making decisions on the basis of the demographic data. • Collecting information from articles issued, web pages, journals, magazines, and newspapers, etc. IMPORTANCE OF ENVIRONMENTAL SCANNING Environmental scanning plays an important role in the business process of an organization. There are many advantages of performing environmental analysis that helps the organization to stay safe from the business loss and to stay ahead in the competition. • By performing environmental analysis, you can learn about the strengths, opportunities, opportunities available, and threats lurking around the industry. Having knowledge about all these things you can take a decision regarding your business and can reform your business strategies. • The environmental analysis helps us to determine whether the resources such as human resource, capital resource, etc. are being used properly or not. It helps us to curb down the wastage of these important resources. • Constant environment scanning helps the organization to learn about the opportunities and threats occurring in the industry and on the basis of that information future strategies can be planned and implemented. Hence, it helps the organizations to stay strong in the game. 85 CU IDOL SELF LEARNING MATERIAL (SLM)

• Environmental scanning helps you to learn about the business strategies of your competitors. You can take ideas from the strategies and can also form your strategies accordingly so that you can give constant competition to them. • The data collected from environmental scanning plays an important role in long-term business planning. Environmental scanning helps you to stay connected with your consumers. You can learn about the changing expectations of your consumers and provide them services accordingly. SUMMARY • Marketing system of every business organization is influenced by a large number of uncontrollable factors that surround ‘the company.' A company's marketing environment consists of the actors and forces outside the marketing that affect marketing management's ability to develop and maintain successful transactions with its target consumers. These environmental factors may be classified as microenvironment and macro environment. Microenvironment refers the companies’ immediate environment, that is those environmental factors that are in its closer circle. • They include the company's own capabilities to produce and serve the consumer needs, the dealers and distributors, the competitors, and the customers. These are also the groups of people who affect the company's prospects directly. The macro environment consists of larger societal forces, which may be placed in an outer circle. These include demographic, economic, natural, technological, political and cultural forces. The influence of these forces is indirect and often takes time to reach the company. • Macro environmental factors are totally uncontrollable by the firm whereas micro environmental factors may be controlled to some extent. It is necessary for the company to scan the (environment continuously, and adopt marketing mix strategies in accordance with the trends and developments in the marketing environment. A number of laws affecting business have become operational over the years in India. Some of the legislations apply to every undertaking, irrespective of the nature of the product sold or the service provided by it like the Contract Act, the Sale of cods Act, the Companies Act, the Trade and Merchandise Marks Act and the Standards bf Weights and Measures Act. The MRTP Act, however, does not apply to public undertakings, government-managed private undertakings, financial institutions and cooperative. • As against this. There are certain legislations, which seek to regulate certain derisions of undertakings engaged in the specific industries. These include the Industries (Development and Regulation) Act 1951; the Drugs and Magic Remedies 86 CU IDOL SELF LEARNING MATERIAL (SLM)

(Objectionable Advertisements) Act 1954; the Prevention of Food Adulteration Act 1954; the Essential Commodities Act 1955, and the Cigarettes (Regulation of Production, Supply and Distribution) Act 1975. KEYWORDS • Macro Environment: Large societal forces, which exert influence on firm's marketing system. It includes demographic, economic, natural, technological. Political and cultural force. • Marketing Environment: The factors and forces outside of marketing that affect marketing management's ability to develop and. maintain successful transaction with its target customers. • Marketing Intermediaries: Firms, which help the company in promoting. Selling and, distributing its goods to ultimate consumers. They include intermediaries, transported. Marketing service agencies and financial intermediaries. • Micro Environment: The environmental factors that are in the closer circles of the firm. It includes organization’s internal environment, suppliers, marketing intermediaries, customers and competitors. • Suppliers: Firms that supply consumables and raw materials to the company. LEARNING ACTIVITY 1. Check out your organization market environment and draw a comparative chart with competitive company. 2. Do the environmental scanning of your own product UNIT END QUESTIONS A. Descriptive Type Questions 1. Discuss the marketing environment? Describe the macro environment and microenvironment of marketing. 2. Illustrate, how environmental factors affect marketing policies and strategies? 3. Describe marketing environment? Briefly explain the marketing environment in 87 CU IDOL SELF LEARNING MATERIAL (SLM)

India. 4. Compare and contrast a Company's micro and macro environments. 5. List the legislations, which affect certain specific industries. B. Multiple Choice Questions 1. It influences the customers' demand for different products. For example, higher petrol prices lead to a fall in demand for cars. a. Inflation b. Unemployment c. Interest rate d. Customer Income 2.environment comprises forces, such as society’s basic values, attitudes, perception, and behavior. a. Socio-cultural b. Natural c. Technological d. Environment 3. The marketing environmental analysis will help the marketer to a. Become not much well acquainted with the changes in the environment. b. Gain qualitative information about the business environment; which will help him to develop strategies in order to cope with ever changing environment. c. Conduct marketing analysis in order to understand the organization needs and wants to modify its products to satisfy these market requirements. d. Never decide on matters related to Government-legal-regulatory policies in a particular country to formulate its strategies successfully amidst these policies. 4. The existence of ........................... in the market is essential for building a strong market particularly in case of a democratic society. 88 CU IDOL SELF LEARNING MATERIAL (SLM)

a. Competition b. Systems c. Failures d. None of these 5. Like suppliers, ………………………. are an important part of the system used to deliver value to customers a. Marketing information b. The supplier c. Marketing Intermediaries d. Globalization 6. Mohan Sawhney has proposed the concept of to describe a cluster of complementary products and services that are closely related in the minds of consumers but are spread across a diverse set of industries. a. metamarket b. vertical integration c. horizontal integration d. beta market 7. The internet offers marketers a fast, versatile and inexpensive a. Communication medium b. Cost of production c. Cost of construction d. All of these 8. Which is the task of salesman? a. Develop product and market knowledge b. Sales Pitch 89 CU IDOL SELF LEARNING MATERIAL (SLM)

c. Prospect for potential clients d. All of these 9. The includes the immediate actors involved in producing, distributing, and promoting the offering. The main actors are the company, suppliers, distributors, dealers, and the target customers. a. operations environment b. management environment c. strategic environment d. task environment 10. Many brick-and-click competitors became stronger contenders in the marketplace than the pure-click firms because they had a larger pool of resources to work with and . a. better prices b. greater value c. well-established brand names d. one-on-one communications Answers 1.a 2.a. 3.c 4.a 5.b 6. a 7. a 8. d 9. d 10. c REFERENCES • Kotler, P., Keller, K.L. Koshy, A. and Jha, M. (2012). Marketing Management: A South Asian Perspective. New Delhi: Pearson Education. • Ramaswamy, V.S and Namakumari, S. (2009). Marketing Management: Global Perspective Indian Context. New Delhi: Macmillan Publishers India Ltd. • Kumar, Nirmalya. (2004). Marketing as Strategy: Understanding the CEO's Agenda for Driving Growth and Innovation. Harvard Business Review Press. • Duncan, R.B., 1972. Characteristics of organizational environments and perceived environmental uncertainty. Administrative science quarterly, pp.313-327. • Kotler, Armstrong, Philip, Gary. Principles of Marketing. ALEBASH. 90 CU IDOL SELF LEARNING MATERIAL (SLM)

• Greg Elliott, Sharyn Rundle-Thiele, David Waller, Sandra Smith, Liz Eades, Ingo Bentrott. Marketing, 4th Edition. ISBN 9780730362999. • \"What is marketing environment? Definition and meaning\". • Holm, M, Kumar, V & Rohde, C 2012, 'Measuring size 0f profitability in complex environments: an interdisciplinary contingency framework', Journal of the Academy of Marketing Science, vol. 40, no. 3, pp. 387-401. • Armstrong, Gary (2012). Principles of Marketing (5th ed.). NSW: Pearson Education Inc. p. 80. ISBN 9781442531109. • https://businessjargons.com/marketing- environment.html#:~:text=Definition%3A%20The%20Marketing%20Environment% 20includes,and%20influence%20its%20marketing%20operations • https://www.feedough.com/marketing-environment/ 91 CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT 5: PRODUCT AND PRICING DECISION Structure Learning Objective Introduction Service Product The Service Package The Augmented Service Offering Market Communication of the Service Offering Developing new service offering Service Branding and Positioning Service Positioning Pricing Summary Keywords Learning Activity Unit end questions Suggested questions LEARNING OBJECTIVES After studying this unit, you will be able to: • Define the service product concept , • Describe the various elements of the total service package and suggest how to go about developing a new service offering. • Understand the concepts of service branding and positioning. • Describe how characteristics of the services influence the pricing decisions. • Discuss the pricing strategies that may be used to sell service INTRODUCTION In practice the core of marketing is considered to be the marketing mix. Neil Borden1, while quoting from an article of James Culliton2, wrote that a marketer is viewed as a \"decider\", or 92 CU IDOL SELF LEARNING MATERIAL (SLM)

an \"artist\" or a \"mixer of ingredients\" who plans various means of competition. \"He may follow a recipe prepared by others, or prepare his own as he goes along, or adopt a recipe to the ingredients immediately available, or experiment with or invent ingredients no one else has tried.\" If a marketer was a “mixer of ingredients”, what he designed was a marketing mix. Borden further wrote, \"it was logical to proceed from a realization of the existence of a variety of marketing mixes to the development of a concept that would comprehend not only this variety, but also the market forces that cause managements to produce a variety of mixes. It is the problems raised by these forces that lead marketing managers to exercise their wits in devising mixes or programmers to fight competition.\" SERVICE PRODUCT Product, in the marketing context is anything, which is offered to the market for exchange or consumption. In goods marketing us always say that there is a tangible component to which some intangibles like style, after sales service, credit, etc., are integrated. In the case of services, on the contrary, the tangible component is nil or minimal. Conventionally, we describe a product as an object, which is developed, produced, delivered and consumed. However, in services there is no or a little tangible element. Therefore, the services are considered to be as benefits which are offered to the target market. There are two important things to note. First, a service is a bundle of features and benefits and secondly, these benefits and features have relevance for a specific target market. Therefore, while developing a service product it is important that the package of benefits in the service offer must have a customer's perspective. Kotler has identified five levels of a product. The example given in the table is that of a hotel. It is the core and the basic which might be the same for most of the competing products and it is the other levels which make themdifferent. FIVE PRODUCT LEVELS 1 CORE BENEFIT The fundamental benefit or service the customer is 2 BASIC PRODUCT buying (Hotel : Rest / Sleep) Basic, Functional Attributes (Room; Bed; Bath…) 3 EXPECTED PRODUCT Set of attributes / Conditions the buyer normally expects (clean room, large towel, quietness) 4 AUGMENTED PRODUCT That meets the customers' desires beyond expectations(Prompt Room Services, and Check in / out, Music, Aroma) 5 POTENTIAL PRODUCT The possible evolution to distinguish the offer (all- suite hotel) 93 CU IDOL SELF LEARNING MATERIAL (SLM)

Greenrooms construed that the services a product offers consist of three levels. the first level is that of the basic service package which includes core service, facilitating services and supporting services. The second level is that of an augmented service offering where accessibility, interaction and customer participations is given equal importance in delivering the service product. The third level is that of the market communication of the service offering as in its absence the augmentation service package does not have any relevance to the customer. The Service Package The 'package' concept of service product suggests that what you offer to the market is a bundle of different services, tangible and intangible but there is a main or substantive or 'core' service and around it are built the auxiliary or peripheral or facilitator services. It is important to note that facilitating services are mandatory, and if they are left out, the entire service would collapse. In the service package there are yet other types of services called supporting services. The basic difference between these services from facilitating services is that these services do not facilitate the consumption of core service, but are used to increase the value, and, thus, differentiate it from competition. For example, in a 500-room hotel the core service is lodging and room service, bell boy service is facilitating service, and health club, car rental are supporting services. However, it may not be always possible to draw a line of distinction between facilitating and supporting services. For example, in a typical city hotel, business center might be the supporting service, but in a business and convention hotel, the same service would be facilitating service. Nevertheless, it is important while developing the service product package to consider all the three levels of service: core, facilitating and supporting. The Augmented Service Offering It has been said that the basic service package is not equivalent to the service product the customer perceives, which is, in fact based on customer’s experience and evaluation. Therefore, there is a need to involve the customer in the production of service offering and thereby reinforcing that the basic service package has to be expanded to a more holistic model of augmented service offering. Here the suggestion is that issues related to the accessibility of the service, interaction with the service organization and consumer participation are also integral elements of the service product. Gronross identified the relevance of these issues in relation to the augmented services offering. 94 CU IDOL SELF LEARNING MATERIAL (SLM)

Accessibility of the – Number and skills of personnel Service – Working hours and time used in performing various tasks – Location of service outlet – Exterior and interior of service outlet – Infrastructure, hardware, documentation – The number and knowledge of consumers simultaneously involved in the process. Interaction with service – Interactive communication between employees and organization customers – Interactions with the physical and technical resources of the organization needed in the service production process – Interaction with other customers involved in the process Customer participation – How well the customer is aware about the process of service delivery and his or her role – How well the customer is prepared to share information – How well the customer is willing to share information or use service equipment Market Communication of the Service Offering It is true that a favorable image enhances the service experience, and a bad image may even destroy it. Therefore, the issue of management of image through communication becomes an integral part of developing the service product. But the important point to note here is that apart from the conventional methods of promotion, corporate image and word of mouth are, if not more, equally important. A negative comment from a fellow customer is more than adequate to neutralize the effect of your efforts of mass media advertising, media blitz and direct promotions. DEVELOPING NEW SERVICE OFFERINGS In order to develop a service product, as a manager you will have to follow the following stages: a. the customer benefit concept; b. the service concept; c. the service offer; 95 CU IDOL SELF LEARNING MATERIAL (SLM)

d. service forms, and e. the service delivery system i) Customer Benefit Concept: The service product which you offer in the market place must have its origin in the benefits which the customers are seeking. But the problem is that customers themselves may not have a clear idea of what they are seeking or they may find it difficult to express or it may be a combination of several benefits and not a single one. Over a period of time, the benefits sought may also change. This change in customers may come about by a satisfactory or unhappy experience in utilizing the service, through increased sophistication in service use and consumption, and changing expectations. All these make the issue of marketing a service product very complex. ii) Service Concept: Using the customer benefits as the starting point, the service concept defines the specific benefits which the service offers. At the generic level the service concept refers to the basic service which is being offered. A centre for the performing arts may offer entertainment and recreation. But within this broad framework, there can be specific choice paths for satisfying the entertainment objective, such as, drama, musical concerts, mime, poetry recitation, dance etc. Defining the service concept helps answer the fundamental question, ‘What business are we in?' iii) Service Offer: Having defined the business in which you are operating, the next step is to give a specific shape and form to the basic service concept. To refer to the example of the centre for the performing arts, the service concept is to provide entertainment. The service offer is concerned with the specific elements that will be used to provide entertainment: drama, music, mime, poetry recitation, and dance. In the category of musical concerts the choice may be vocal or instrumental, with vocal whether light or classical, Hindustani or Western. While these represent the intangible items of the service offer, the physical infrastructure of the centre, in terms of its seating capacity, comfortable seats, quality and acoustics, provision of air-conditioning, snack bar and toilets are the tangible items. The tangible aspects can be controlled by offering the best possible benefit, but the quality and performance of the actors, singers, musicians cannot be controlled. Theoretically, a manager must control both the tangible and intangible components. But in practice, he can control only the tangible components and lay down norms for the intangible components (e.g. maximum duration of recital, brief introduction before each dance item, etc.) iv) Service Forms: In what form should the services be made available to the customers is another area of decision-making. Should all the shows of the centre be available in a package deal against a yearly membership fee or seasonal ticket? Should there be daily tickets with the consumer having the freedom to watch any one or more 96 CU IDOL SELF LEARNING MATERIAL (SLM)

performances being staged on that particular day? Or should each performance have a separate entrance ticket, with a higher priced ticket for a well-known performance? Service form refers to the various options relating to each service element. The manner in which they are combined gives shape to the service form. v) Service Delivery System: When you go to your bank to withdraw money from your account, you either use a cheque or a withdrawal slip in which you fill all the particulars and hand it over to the clerk, who after verifying the details, gives you money. The cheque or withdrawal slip and the clerk constitute the delivery system. In a restaurant, the waiters are the elements of the delivery system. The two main elements in a delivery system are the people and the physical evidence. The competence and public relations ability of a lawyer represents the 'people' component, while his office building, office door, letterhead, etc. are all elements of the 'physical evidence'. The physical evidence components have also been called 'facilitating goods' and 'supporting goods'. These are the tangible elements of the service and they exert an important influence on the quality of the service as perceived by the consumers. Children Mixed Adults Only women or men Business groups Swimming lessons Swimming lessons Beauty parlor/Massage Conference rooms Badminton lessons facility Indoor games Library Badminton, Tennis Yoga/Judo Lessons Secretarial assistance Film shows lessons Card rooms Tournaments Video coverage Billiards Kitty parties Facilities for parties & receptions The service or services which you offer must be targeted at specific market segment. The target market segment must have a definite need for the service. SERVICE BRANDING AND POSITIONING Choosing a brand name for a consumer product or service is one of the most important decisions. A well-chosen brand name can provide a number of specific advantages to the organization. These include suggesting product benefits, evoking feeling of trust, confidence, and security and simplifying shopping. The American Marketing Association defines a brand as follows: 'A brand is a name, term, sign, symbol, or design, or a combination of these, intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors.' Though branding has received considerable attention from 97 CU IDOL SELF LEARNING MATERIAL (SLM)

marketers and academicians, the main focus has been on physical goods rather than services. However, services branding has started to receive considerable attention lately. The intangibility factor associated with services has led to the suggestion that branding and image creation may be even more critical for services. For a service brand to be effective it should possess distinctiveness, relevance and memorability. Keeping in view the transition of Indian economy to one which is dominated by services, The Economic Times in its survey of India's most trusted brands has started including a separate category of service brands. It is important to learn that brand can be a major determining element in the purchase of services and a means of adding differentiation. Service managers should keep their focus on branding and differentiation in order to avoid the shift to commodity status where competition is primarily on price and terms. On the other hand competition in specialty branded services is based on the other elements of the marketing mix including customer service, advertising, brand name etc. SERVICE POSITIONING Positioning is the act of designing the company's offering and image to occupy a distinctive place in the target market's mind. This requires the companies to examine their markets, determine the structure and nature of markets segments. The various steps in determining a positioning plan include: i) Define a market's segments ii) Decide which segment to target iii) Understand what the target consumers expect and value iv) Develop a service which caters to these needs v) Evaluate consumer perceptions of competing services vi) Select an image for the product matching the aspiration of the targeted consumers vii) Communicate with the determined customers and make the product suitable available. You will appreciate that service positioning involves three basic steps i.e. Segmentation, Targeting and Positioning. The market segmentation can be done on the basis of a number of variables like Geographic (region, climate etc.), Demographic (age, family size, gender, income, occupation, education, social class etc.), Psychographic (lifestyle, personality) and Behavioral (benefits, occasions of use, usage rate etc.). PRICING In the case of products, the term 'price' is used for all kinds of goods- fruits, clothes, computers, building etc. but in the case of services, different terms are used for different 98 CU IDOL SELF LEARNING MATERIAL (SLM)

services. Service Terminology Theatre entry Admission Brokerage service Commission Transport Fare Legal service Fee Useof money Interest Insurance Premium Property usage Rent Employee services Salary Utilities Tariff Education Tuition A) Pricing and Service Characteristics In determining the prices of services, the one characteristic which has great impact is their perishability and the fact that fluctuations in demand cannot be met through inventory. Hotels and airlines offering low rates in off-season are examples of how pricing strategy can be used to offset the perishable characteristics of services. Another characteristic of services that creates a problem in price determination is the high content of the intangible component. The higher the intangibility, the more difficult it is to calculate cost and greater the tendency towards non- uniform services, such as fees of doctors, management consultants, lawyers. In such cases, the price may sometimes be settled through negotiation between the buyer and seller. On the other hand, in services such as dry cleaning, the tangible component is higher, and the service provided is homogeneous. It is easier to calculate the cost on a unit basis and have a uniform pricing policy. In general, the more unique a service the greater the freedom to fix the price at any level. Often the price may be fixed according to the customer's ability to pay. In such cases price may be used as an indicator of quality. The third characteristic to be kept in mind while determining prices is that in many services, the prices are subject to regulations, either by the government or by trade associations. Bank charges, electricity and water rates, fare for rail and air transport in India are controlled by the government. In many other cases, the trade or industry association may regulate prices in order to avoid undercutting and to maintain quality standards. International air fares are regulated by international agreement of airlines, sea freight fares may be regulated by shipping conferences. In all such cases, the producer has no freedom to determine his own price. 99 CU IDOL SELF LEARNING MATERIAL (SLM)