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Unit 1

Definition of marketing:
According to American marketing Association, Marketing is an organizational function and a
set of processes for creating, communicating and delivering value to customers and foe
managing customer relationships in ways that benefit the organization and its stakeholders.

Nature of Marketing Management:


The nature of marketing is as follows:
I.

II.

III.

IV.
V.

VI.

Specialized Business Function: In early days, the selling function did not call for any
specialized skills as the sales could have been affected on production basis. But now the
business environment has undergone tremendous changes in social, economic, political,
and cultural aspects. Therefore the management of a firm has to develop a specialized
department with a view to absorbing new ideas, new approaches and new market
demands with the occurring and expected changes.
Socially desirable function: It requires constant interaction with various strata of
society. It is instrumental in manipulating the factors of production, distribution,
promotion and price.
Integrative function: It integrates and combines the other business functions like
production, finance, personnel, R&D etc with a view to accomplishing the organizational
goals.
Reflects the business mission: Marketing reflects the business goals and aims of a firm
before the public and society.
Universal Function: It has a universality in the sense that it can be applied to both profitmotive and non-profit motive organizations. A profit seeking business is essentially
dependent on marketing and institutions like hospital, schools, university also practice
marketing in popularizing the services offered by them
Management Function: The business policies, strategies and programs related to
marketing are mostly of managerial functions. These are needed to be planned, organized,
directed, coordinated and controlled so as to achieve the marketing objectives of the firm.

Scope of Marketing
The scope of marketing is as follows:
I.

Goods: Physical good constitute the bulk of most countries production and marketing
effort. In developing nations, goods particularly food, commodities, clothing and housing
are the mainstay of the economy.

II.

III.
IV.

V.

VI.

VII.

VIII.

IX.

X.

Services: Services include the work of airlines, hotel, car rentals, hospitals, schools, as
well as professional working within or for companies, such as accountants, lawyers,
engineers, doctors, software programmers and management consultants.
Experiences: By orchestrating several services and goods, one can create and stage
different market experience.
Events: Marketers promote time-based events such as the Olympics, company
anniversaries, major trade shows, and sports events. There is a whole profession of event
planners who work out the details of an occasion and stage it come off perfectly.
Persons: Celebrity marketing has become a major business. Today every film star has an
agent, a personal manager and ties to a public relations agency. Cricketers, artists,
musicians, CEOs, Physicians, and other professionals are drawing help from celebrity
marketers.
Places: Places- cities, states, regions, and whole nations- compete actively to attract
tourists, factories, company headquarters and new residents. Place marketers include
economic development specialists, real estate agents, commercial banks, local business
associations, and advertising and public relation agencies.
Properties: Properties are tangible rights of ownership of either real property or financial
property. Properties are bought and sold, and this occasions a marketing effort. Real
estate agents work for property owners or seekers to sell or buy residential or commercial
real estate and arrange rental properties off-shore.
Organisations: Organisations are actively work to build a strong, favorable image in the
mind of their publics. We see corporate identity ads by companies seeking more public
recognition and acceptance.
Information: Information can be produced and marketed as a product. This is essentially
what schools and universities produce and distribute at a price to parents, students and
communities.
Ideas: Every market offering includes a basic idea at its core. Products and services are
platforms for delivering some idea or benefit. Marketers search hard for the core need
they are trying to satisfy.

Importance of Marketing
The importance of marketing management is as discussed below:
Importance of Marketing to society: marketing can play a vital role for well being to society.
The importance of marketing to society may be summarized under following heads:
i.

Delivery of standard of living to the society: Chief obligation of marketing is to


produce goods and services for the society according their needs and tastes at reasonable
price. Firms produce the goods and services according to the customers needs, create
demand for these goods and services, encourages customers to use them and thus
improves the standard of living of the society.

ii.

Decrease in distribution cost: Marketing aims at reducing the cost of distribution as far
as possible so that the commodities might be within the reach of maximum number of
consumers.
Increase in employment opportunities: Employment opportunities are directly affected
by the development of marketing. According to an estimate, about 40% of the labour
force in developed countries like U.S.A., Japan, Canada, Germany, France etc is engaged
in different activities of marketing such as marketing research, transport, communication,
storage, warehousing, publicity, wholesale and retail trade.
Protection against business recession: Business slowdown causes unemployment,
slackness in productivity and great loss to the economy. Marketing helps in protecting
society against all the re-occurring problems.
Increase in National Income: Successful operation of marketing activities creates,
maintains and increases the demand for goods and services in the society. It results in the
increased level of production and utilization of services which in turn enhance the scope
of marketing.

iii.

iv.

v.

Importance of marketing to the firm: Marketing plays an important role for the well being
of a firm. The importance of marketing to a business firm may be summarized under
following heads:
i.

ii.

Helpful in business planning and decision making: Marketing is helpful in the


overall business planning and taking various decisions regarding production and other
activities in the business. A firm will produce what it can sell or as much quantity as it
can sell and not what and how much it can produce.
Helpful in increasing profits: Every business is carried on with the profit motive.
Marketing helps in increasing the business profits by reducing the selling cost on the
one hand and by increasing the demand of the product through advertising and sales
promotion activities on the other hand
Helpful in communication between firm and society: Business collects information
regarding consumers behavior and changes therein from time to time through
marketing. Marketing also provides information to the firm of the competitors, price
policies, production policies, advertising and sales promotion policies and distribution
policies. It helps the firm in framing its own policies or making necessary adjustments
therein accordingly.

iii.

Classification of Market
Markets have been classified on the basis of different approaches, in various ways as are
given below:

(1) On the basis of geographical area: There are four types of markets which are:

i.
ii.
iii.

iv.

i.
ii.

National Market: For certain types of commodities, a country may be


regarded as a market with the rapid speed of industrialization; it is called a
national market.
International Market: world or international market comes up when buyers
and sellers of goods evolve trans-globally, i.e. involvement of buyers and
sellers beyond the boundaries of a nation
Regional Market: A regional market covers a particular region of a country.
Such regional classification is found in a large country. For example India is
divided into four regions, east, west, north, and south for all practical
purposes.
Local Market: A local market has a very limited area and exists generally for
daily necessary good perishable in nature like fish, vegetable etc.

(2) On the basis of Nature of Transaction: There are two types of markets:
Spot Market: In such a market, goods are exchanged and the physical delivery of goods
takes place immediately for all practical purposes.
Future market: In such a market, contracts are made over the price for future delivery. The
dealing and settlement take place on different dates.
(3) Classification according to position of sellers: There are three types of
markets which are:
i. Primary Market: The agricultural or industrial goods are sold by the
producers to some middlemen like wholesalers. This is the primary market.
ii. Secondary market: In the secondary market, the middlemen like the
wholesalers sell the goods to another group of middlemen called the retailers.
iii.
Terminal Market: Ultimately the goods are sold in the terminal market to the
actual consumers.
(4) On the basis of commodities/Goods : There are four types of market:
i. Produce Exchange Market: This type of market is found only in developed
industrial centres or cities. One market deals in one commodity only. For
Example: Wheat exchange market of Hapur and Cotton exchange market of
Mumbai.
ii. Manufactured Goods Market: Such type of market deals with manufactured
goods. For example: Leather goods, machinery etc.
iii. Bullion Market: This type of market deals with the purchase or sale of gold,
silver etc. Bullion markets of Mumbai, Kolkata, Kanpur etc are the example
of bullion market.
iv. Stock Market: It deals with the sale and purchase of equity shares,
debentures, bonds, mutual funds etc. This market is regulated through the
stock exchange such as NSE and BSE.

(5) On the basis of competition: There are two types of markets:


i. Perfect Market: A market is perfect market if there are large number of

iii.

sellers and buyers, the products of the sellers is identical, each buyer and
seller has perfect knowledge of the market etc.
ii. Imperfect market: When one or more of the above conditions are absent the
market is imperfect. Market can be further classified according to the degree
of imperfection. The worst situation is when there is a monopoly
(6) On the basis of volume of business transacted: There are three types of
markets:
i. Retail Market: In retail market goods are sold in small quantities directly to
the users or consumers in consumer market. The Consumer gets the goods for
consumption and not for profit-making.
ii. Wholesale market: In wholesale market, goods are supplied in bulk quantity
to dealers.
Industrial Market: Here goods are bought in bulk quantity either for
Consuming or for reproducing process.

Marketing Functions
The functional approach of marketing consists of a number of activities called marketing
functions. These functions are:
i.

ii.

iii.
iv.

v.
vi.

Buying: it is the first step in the process of marketing. A manufacturer has to buy raw
materials for production. Buying involves transfer of ownership of goods from seller to
buyer.
Assembling: Assembling means creation and maintenance of the stock of good,
purchased from different sources. In such a case the goods have to be collected and
assembled at one place.
Selling: The primary objective of marketing is to sell the products at a profit. By selling,
the ownership is transferred to buyer.
Transportation: products must be physically relocated to the locations where consumers
can buy them. This is a very important function. Transportation includes rail road, ship,
airplane, truck, and telecommunications for non-tangible products such as market
information.
Storage: products must be stored and protect ed until they are needed. This function is
especially important for perishable products such as fruits and vegetables.
Distribution function: the function of distribution is to ensure that your product is easily
and effectively moved from the point of production to the target market, the kind of
transportation system to employ e.g. Road, rail, water or air, and ensures that the product
can be easily accessed by customers. You as a Marketer should also design the kind of
middlemen to engage in the channel of distribution, their incentives and motivations etc.

vii.
viii.

Risk-Taking: insurance companies provide coverage to protect producers and marketers


from loss due to fire, theft, or natural disasters.
Pricing function: you perform the function of pricing on your product offerings by
designing effective pricing systems base on your product stage and performance in the
product life cycle. Price is the actual value consumers perceive on your product, so you
as a marketer should ensure that your value of your product is not too high or too low to
that of your costumers.
Market Information: information from around the world about market conditions,
weather, price movements, and political changes, can affect the marketing process.
Market information is provided by all forms of telecommunication, such as television, the
internet, and phone.
After sales-service: in a more complex and technical product, you as a marketer should
make provision in order to assist your customers after they have purchased your product.
In terms of machines or heavy equipment product that requires installation or
maintenance, most marketing organization renders such services like installing the
machine or maintaining it for stipulated periods on time for free or by a little service
charge.

ix.

x.

Relevance of Marketing in Developing Economy


There are following major importance of marketing in developing countries given below?
1. Marketing Impact on people: There is no doubt all over the world that marketing
activities are affected by peoples beliefs, attitudes, lifestyles, consumption pattern,
purchase behavior, income etc.
2. Improved Quality of Life: The activities performed by marketers and others in the
economy of most countries, especially developed countries, help to identify and
satisfy consumers needs. Marketing improves the quality of life of people.
3. Improved Quality of Product: Firms and multinationals have now seen the need to
produce quality products. This is because they have really capitalized on quality
improvement in products to enhance the dynamic consumers quest for goods and
services.
4. Decrease in distribution cost: Second important liability of marketing is control the
cost of distribution. Through effective marketing the companies can reduce their
distribution costs to a great extent. Decrease in cost of distribution directly affects the
prices of products because the cost of distribution is an important part of the total
price of the product.
5. Contribution to Gross national product: Marketing is the pivot and life-wire of any
economy, because all other activities of an organization generates costs, and only

marketing activities bring in the much needed revenues. In this way marketing helps
in contribution of Gross national Product.
6. Acceleration of Economic Growth: Marketing encourages consumption by
motivating people in a country to patronize goods produced to meet their identified
needs. When people buy goods that are produced in a country, there is the tendency
that producers will equally increase production to meet-up with future demand.
7. Increasing employment opportunities: Marketing comprises of advertising,
sales, distribution, branding and many more activities. So the
development of marketing automatically gives rise to a need for people to
work in several areas of marketing. Thus the employment opportunities
are born. Also successful operation marketing activities requires the
services of different enterprises and organization such as wholesalers,
retailers, transportation, storage, finance, insurance and advertising.
These services provide employment to a number of people.
8. Industrial and Entrepreneurial Growth: Many developing nations in their
quest for industrial growth have imported sophisticated intensive
technology from the West. This has put an enormous burden on the
nation's scarce foreign exchange. In this process the technological and
capital needs of small industries have been largely neglected. In this
respect developing nations may take lesson from both Japan and the
United States where small businesses constitute a large part of their
industry.

Marketing vs. Selling

Basis of
difference
Emphasis
Approach

Selling
Emphasis on product.
Company manufactures the product first
and then decide to sell it

Orientation
planning

Management is sales-volume oriented


Planning is shot term oriented, in terms of
todays products and markets

Need priority
Philosophy

Stresses needs of a seller


Views business as a goods producing
process
Emphasis on staying with existing
technology and reducing costs.

Technology

Work
delegation

Different departments work as highly


separate watertight compartments.

Price
determinatio
n
Customers

Cost determines price.

Selling views customers as the last link in


business.

Marketing
Emphasis on consumer needs and wants.
Company first determines customers needs and
wants and then decides on how to deliver a
product to satisfy these wants.
Management is profit- oriented
Planning is long-term oriented, in terms of new
products, tomorrows markets, and future
growth
Stresses needs and wants of buyers.
Views business as a consumer satisfying
process
Emphasis on innovation in every sphere, on
providing better value to the customers by
adopting a superior technology.
All departments of a business operate in an
integrated manner, the sole purpose being
generation of consumer satisfaction.
Consumers determine price, price determines
cost.
Marketing views the customers as the very
beginning of a business.

Marketing management
According to Philip Kotler: Marketing management is the process of planning and executing the
conception, pricing and promotion and distribution of goods, services and ideas to create
exchanges with target groups that satisfy customer and organizational objectives.

Objectives of marketing management


1. Creating New customers: The marketing manager should take all necessary steps such
as advertisement, sales promotion activities etc. to attract new customers for buying the
firms product.
2. Satisfying the needs of customers: The marketing manager should study the customers
demand before offering them any product or service as the modern marketing begins and
end with the customers.

3. Enhancing the profitability of the business: Since the marketing department is the only
department which generates the revenue for the firm. Thus marketing management aims
at enhancing the profitability of the firm through the sale of products.
4. Raising the standard of living of the people: Marketing facilitates the production of a
wide variety of goods and services for satisfying customers differentiated needs.
Therefore, it helps to raise the standard of living of people.
5. Determining the marketing mix: Here marketing management aims at proper planning
of marketing mix to meet the requirements of different kinds of customers. Marketing
mix refers to the combination of various elements such as product, price, place and
promotion.

Marketing management Process


Steps in marketing management process are as follows:
1. Setting Marketing Objectives: The process of marketing management starts
with the activity of setting objectives. The organsational mission provides the
priorities for scanning the environment and finding out the opportunities.
2. Analyzing marketing opportunities: This involves analysis of opportunities in
the light of companys strength and weakness both internal and external. The
task may be to analyze long-run opportunities or short-run or even medium term.
3. Researching and Selecting target market: Now the firm is ready to research
the selected markets. It needs to know how to measure attractiveness of any given
market. Marketing people must understand the major technique for measuring
market potential and forecasting future demand.
4. Designing marketing Strategies: The marketing strategy spells out the game
plan for attaining the businesss objectives or products/markets objectives. The
company has also to decide how to divide the total marketing budget among the
various tools of the marketing mix.
5. Planning Marketing Programs: It is not enough to formulate only the broad
strategies by which the business expects to achieve its marketing objectives but
also plan the supporting marketing mix programs. Without such programs even
the best conceived marketing strategies may fail.
6. Organizing, implementing and controlling marketing effort: The final stage in
the marketing management process is organizing the marketing resources and
implanting and controlling the marketing plan. The company is required to design
a marketing organization that will be able to degenerate the marketing plan upto
work i.e. implementing its effort.

Marketing Concepts/Philosophies/Orientations

There are five competing concepts in marketing management which are:


1. Production Concept: Production concept is a concept where goods are produced without
taking into consideration the choices or tastes of the consumers. It is one of the earliest
marketing concepts where goods were just produced on the belief that they will be sold
because consumers need them.
The Salient Features of production concept are:
i.
This concept is based on the belief that consumers needs can be satisfied with
reasonable quality and reasonably priced product.
ii.
There is fair amount of competition and competing products are sold with
complete knowledge of the products available in the market.
iii.
The manufacturer should maintain availability of sufficient quantity of products
and consistency in quality.
2. Product Concept: The product concept is management philosophy that consumers
generally prefer those products in the market which offer the best in terms of quality and
price and essentially all organizations in marketing business try to produce and provide
sustainable improved quality products.
The Salient features of product concept are:
i.
ii.
iii.

Consumers generally look and prefer quality of the product.


Consumers compare quality of products to competing product or brand on offer.
Consumers generally buy products to meet their overall needs and not specific
needs.
iv. Consumers are aware of the product quality differences between competing
brands and they choose the quality which comes closest to their preferences and
their affordable price.
3. Selling Concept: Many organisations follow the selling concept, which holds that
consumers will not buy enough of the organizations products unless it undertakes a large
scale selling and promotion effort. The concept is typically practiced with unsought
goods- those that buyers do not normally think of buying, such as Encyclopedias or
Insurance.
The Selling concept is based on the following premises:
i.
Consumers do not waste money in buying things which are not essential or
buying excess quantities then required.
ii.
Consumers prefer to be motivated to buy things by use of selling efforts by
organisations.
iii.
Consumers appreciate good selling techniques, efforts and good salesmanship.
Aggressive ill behaved salesmanship is not useful.
4. Modern Marketing Concept: Modern concept of marketing is a customer oriented
concept. This concept is based on the assumption that a business and industrial
enterprises can achieve its object of maximizing the profits only when it considers the
needs and wants of its consumers and make efforts for the satisfaction of these needs and

wants. Therefore, according to this concept, marketing starts with the discovery of needs
and wants of customers and ends with the satisfaction of these needs and wants.
The main premises on which the modern marketing concept is based are:
i.
The customers needs and wants are varied and many. These must be understood
and suitable products and services offered to match the requirement.
ii.
The market consists of different segments and these segments can be grouped
according to the customers characteristics.
iii.
The Consumers in any market may not buy a product if they feel that it will not
serve the purpose of solving their needs and wants.
iv. The success of marketing concept lies in proper analysis of market research.
Factors influencing Modern Marketing Concept:
i.
ii.
iii.
iv.
v.
vi.
vii.

Population growth
Increasing Households
Disposal income
Surplus income
Technological development
Mass Communication media
Credit Purchases

5. Societal Marketing Concepts: The societal marketing is an enlightened marketing


concept that holds that a company should make good marketing decisions by considering
consumers wants, the companys requirements, and societys long-term interests. It is
closely linked with the principles of corporate social responsibility and of sustainable
development.
The societal marketing concept holds that the organisation should determine the needs,
wants and interests of target markets.

Unit 2
Concept of Marketing Segmentation
The Concept of market segment is based on the fact that the markets of commodities are not
homogenous but they are heterogeneous. Market represents a group of customers having

common characteristics but two customers are never common in their nature, habits, hobbies,
Income and purchasing techniques. They differ in their behavior and buying decisions. On the
basis of these characteristics, customers having similar qualities are grouped in segments.
Market Segmentation means breaking-down the total market into self-contained and relatively
homogeneous sub-groups of customers, each possessing its own special requirements and
characteristics.
According to Philip Kotler, Market segmentation is sub-dividing a market into distinct and
homogeneous subgroups of customers, where any group can conceivably be selected as a target
market to be met with distinct marketing mix.

Need for Segmenting Markets


There are several important reasons why businesses should attempt their markets which are :
1. Better Matching of Customer needs: Customer needs differ. Creating separate offers
for each segment makes sense and provides customers with a better solution.
2. Enhanced Profits for Business: Customers have different disposable income. They are,
therefore, different in how sensitive they are to price. By segmenting markets, businesses
can raise average prices and subsequently enhance profits.
3. Better Opportunities for growth: Market segmentation can build sales.
4. Retain more customers: Customer circumstances change, for example they grow older,
form families, change jobs or get promoted, change their buying patterns. By marketing
products that appeal to customers at different stages of their life, a business can retain
customers who might otherwise switch to competing products and brands.
5. Target marketing Communications: Businesses need to deliver their marketing
message to a relevant customer audience. If the target market is too broad, there is strong
risk that key customers are missed and communication cost is too high.
6. Gain share of the Market Segment: Unless a business has a strong or leading share of a
market, it is likely to be maximizing its profitability. Minor brands suffer from lack of
scale economies in production and marketing, pressures from distributers and limited
space on the shelves.

Basis of Segmentation
Consumer market can be segmented into various segments by using different basis. Basis of
consumer market segmentation can be broadly divided into four broad categories which are as
follows:

1. Geographical Segmentation: Geographical segmentation refers to segmenting market


by region of a country or the world, market size, market density, or climate. Market
density means the number of people within a unit of land, such as a census tract. Climate
is commonly used for geographic segmentation because of its dramatic impact on
residents needs and purchasing behavior. Snow- blowers, water and snow skis clothing
and air conditioning and heating systems are products with varying appeal, depending on
climate.
2. Demographic Segmentation: The next commonly used basis for market segmentation is
the demographic characteristics of the market. In demographic segmentation, the market
is divided into groups on the basis of variable such as age, family size, family life-cycle,
gender, income, occupation. Education, religion, race, generation, nationality, and social
class. Demographic variables are the most popular bases for distinguishing customer
groups. Some of the demographic variables are:
i.
Age and life cycle stage: Consumers wants and liabilities change with age. On
the basis of age, a market can be divided into four parts viz; children, young,
adult, and old.
ii.
Gender: Males and females have distinct survival needs. The gender
segmentation is one of the most common forms of segmentation as around the
globe man and woman have always been vocal about their separate needs.
iii.
Marital Status: Life style of a person depends on whether he is married or not.
An unmarried bachelor prefers to enjoy life and his purchase behavior will show
more of food and entertainment and less of furniture or household products. But a
married person purchase household products more.
iv. Income: Income varies along with the population in any country. In India it is as
diverse as from few hundred rupees a month to millions a month. Customers will
behave differently in terms of wants as per their income.
v. Social class: It has a strong influence on preference in cars, clothing, home
furnishing, reading habits etc. Many companies design products and services for
specific social classes.
vi.
Occupation: Various occupations can influence the buying behavior. People in
sales and people in academic training will have different purchase behavior.
vii.
Educational Level: The academic standard segments people with same income,
i.e. with similar ability to buy into their different likelihood to buy.
viii.
Religion: Religious rituals, traditions and cultures also differentiate and segment
the market.
3. Psychographic Segmentation: Often it has seen that two consumers with the same
demographic characteristics may act in an entirely different manner. Even though the two
may be of the same age, from the same profession, with similar education and income,
each of the customers may have a different attitude towards risk-taking and new product
and stores. This is because of the following psychographic variables:
i.
Life Styles
ii.
Personality

iii.
Values
iv. Beliefs
4. Behavioral Segmentation: In behavioral segmentation, buyers are divided into groups
on the basis of their knowledge, attitude, use, or response to a product. Many marketers
believe those behavioral variables- occasions, benefits, user status, usage rate, loyalty
status, and buyers readiness stages starting points for consulting market segments.
Buyers readiness or preparedness is one of the important variables used for segmenting
the market. There are unaware buyers, people who are aware but not interested, people
who are interested and are desirous to buy and lastly, those who will positively buy the
product.
The major behavioral variables used by marketers to segment the market are:
i.
Occasions- Regular or Special
ii.
Benefits- Quality, Service, Economy and Specially
iii.
User status- Non-user, Potential user, First time user, Regular user, Ex-user
iv. Quantity consumed- Light, Medium, Heavy
v. Buyer readiness stage- Unaware, Aware, Informed, Interested, Desired, Intended
to buy.
vi.
Loyalty Status- Hard core loyals, Soft core loyals, Split loyals, Switchers.
vii.
Attitude- Enthusiastic, Positive, Indifferent, Negative, Hostile.

Factors Influencing Segmentation


The major factors which influence segmentation are as follows:
1. Size, Objectives and resources of the company: The size of the company and the resources
it has available will dictate to a great extent how it segments its market. For Example, the
Ford Motor Co. will want to sell the world and so segment on a global scale whilst the local
hairdresser will service a very small catchment area and segment accordingly.
2. Type of product and market: Some companies have a simple product portfolio that lends
itself to easy segmentation, e.g. bread, potatoes, petrol, industrial cleaning products, while
others have more complex product mix making it much harder.
3. Competitive structure of the industry: In the main, the more competitive the market the
more each organisation will look towards differentiating their product so as to gain
competitive advantage.
4. Nature of the market: nature of the market also influences the segmentation decision.
Segmentation strategies differ according to market such as segmentation strategies differ in
competitive market from non- competitive market.
5. Life cycle stage: Life cycle stage of a product also affects the segmentation decisions.
6. Competitive Strategy of Firm: Competitive strategy of a firm also has an influence on
segmentation. Organisations that choose to segment the consumers and focus on target
markets are more successful in highly competitive environments.

Importance of Market Segmentation

The key importance of market segmentation can be explained in following ways:


1. Adjustment of product and marketing appeals: Market segmentation presents an
opportunity to understand the nature of the market. The seller can adjust his thrust to
attract the maximum number of customers by various publicity media and appeals.
2. Better position to spot marketing opportunities: In the region where response of the
customers is poor, the strategy of approach can be readjusted accordingly to push the
sales on the basis of marketing research.
3. Allocation marketing budget: It is on the basis of market segmentation that marketing
budget is adjusted for a particular region or locality. In the place where the sales
opportunities are limited, it is of no use of allocating a huge budget there.
4. Fighting Competition effectively: The segmentation helps the producers to face the
competition of competitors effectively by making a deep study of the products, policies,
and strategies of competitors in all the segments.
5. Undertaking and meeting the needs of consumers: It helps the marketer to fully
understand the needs, behavior, habits, tastes and expectations of the consumers of
different segments so that precise and clear decisions can be taken to harness marketing
opportunities.
6. Minimizing aggregation risk: By dividing the market and designing specific marketing
mix to each segment, segmentation reduces the risk of aggregation, which is defined as
the risk of not being able to satisfy customer needs with one marketing mix to all
segments.
7. Targeted marketing: Targeted marketing plans for particular segments allow to
individually approach customer groups that otherwise would look out for specialized
niche players.
8. Filing gaps: Segmentation can help in finding-out the unfilled gaps in a market, which
can then be satisfied through unique product or promotional offerings.
9. Higher market shares: In contrast to an undifferentiated marketing strategy,
segmentation supports the development of niche strategies. Thus, marketing activities can
be targeted at highly attractive market segments in the beginning. By segmenting market,
organisations have better chances to increase their market shares in the overall market.
10. Better utilization of marketing resources: More resources can allocated to segments in
which there are more possibilities of selling the products and fewer resources may be
allocated to the segments in which there are fewer possibilities.

Market Targeting
Market targeting is a broad term that is used to describe the process of identifying groups of
consumers who are highly likely to purchase a specific good or service. There are several
different approaches to this process, with some of them allowing for a broad cultivation of a

market, while others are focused more on identifying markets that are small but somewhat
lucrative. Businesses of all size engage are some form of this marketing essential as part of their
efforts to secure and maintain customers.
Market targeting differs from target marketing in that a product is already established and
decisions must be made as to which market is most appropriate for it.
In target marketing, a company finds a market it wants to serve and then develops a product
appropriate for that market.
Market targeting requires carefully understanding consumer wants and needs, as well as having a
good grasp on how a given product or service can meet those consumer desires. Market
segmentation and targeting takes place with businesses ranging from local bookstores all the way
through to international conglomerates that have a worldwide consumer base.

Basis for Identifying Target Market


1.

Market Attractiveness: It is important to determine whether it would be profitable to


enter a market segment because a company has to expend huge amount of resources in
developing a particular marketing mix for the prospective target segment. Following
factors should be evaluated in finding-out whether a particular market segment is worth
pursuing:
i.
Market Factors: Analysis of customers and industry dynamics are essential
while assessing the attractiveness of the market segment. Additionally, the
segment size and growth rate indicate the long-term feasibility of serving the
segment.
a. Segment size
b. Segment growth rate
c. Price Sensitivity
d. Bargaining power of customers
e. Bargaining power of suppliers
f. Barriers to market segment entry
g. Barriers to market segment exit
ii.
Competitive factors: Competition in a segment determines the extent of
resistance faced by a company while entering the market. Well entrenched players
would have erected strong barriers to entry.
a. Nature of Competition
b. New Entrants
c. Competitive Differentiation
iii.
Political, Social and Environmental Factors: The external environment
presents opportunities and threats for a firm. Changes in the regulatory
framework, economic policies, social values and lifestyles etc. can alter the
attractiveness of market segment.
a. Political Issue.

2.

a.
b.
c.
d.

b. Social
Trends.
c.
Environmental Issues.
Firms capability
to serve segments: A
market segment
may be attractive, but it
may be beyond
the resources and
competencies of the company to serve it profitably. Howsoever attractive s segment may
look to be, a company should not venture to serve it unless it is certain that it has the
required resources and competencies.
Exploitable marketing assets
Cost advantage
Technological Edge
Managerial Capabilities and Commitment

Types or Strategies of Marketing: After evaluating different segments, the company must
now decide which and how many segments to serve. This is the problem of target market
selection. A target market consists of a set of buyers who share common needs or
characteristics that the company decides to serve. Alternative segments targeting strategies or
types can be classified into two parts:
1. Limited coverage market targeting: When only one or few segments are selected as
market targets it is called limited coverage market segmentation. This strategy requires
fewer resources and therefore effective for small companies or in the introduction stage
of a company trying to compete against the giants of the industry.
Limited coverage market targeting can take any of the following forms:
a. Single segment concentration: Company may select a single segment. Through
concentrated marketing, the firm gains a strong knowledge of the segments needs and
achieve a strong. Furthermore, the firm enjoys operating economies through specializing
its production, distribution and promotion. If it captures segment leadership, the firm can
earn a high return on its investment.
P1
P2
P3

b. Selective Specialization: Here the firm selects a number of segments, each objectively
attractive and appropriate. There may be little or no synergy among the segments but

each segment promises to be a money-maker. This multi-segment coverage strategy has


the advantage of diversifying the firms risk.

c. Product Specialization: Here the firm specializes in making a certain product that it sells
to several segments. An example would be microscope manufacturer that sells
microscopes to university laboratories, govt. laboratories and commercial laboratories.

d. Market Specialization: Here the firm concentrates on serving many needs of a popular
customer group. An example would be a firm that sells assortment of products only to
university labs, including microscopes, Bunsen burners and chemical flasks.

Full Market Coverage Targeting


Here a firm attempts to serve all customer groups with all the products they might need.
Only very large firms can undertake a full market coverage strategy. Examples include
IBM (Computer Market) General Motors (Vehicle market) and coca-cola (drink market).
1. Undifferentiated Marketing: In undifferentiated marketing, the firm ignores marketsegment differences and goes after the whole market with one market offer. It focuses
on a basic buyer need rather than on difference among buyers. it designs a product
and a marketing program that will appeal to broadest number of buyers. It uses the
same communication, pricing and distribution strategies. The classical example is soft

drink firms like Coke and Pepsi, who retain the same flavor, advertising, packaging
etc across segments in different geographical areas. Undifferentiated marketing is also
known as mass marketing. In this strategy, an organisation treats its total market as a
single market.
2. Differentiated Marketing: In differentiated marketing, the firm operates in several
market segments and designs different programs for each segment. General Motors
does this when it says that it produces a car for every purse, purpose and
personality
This strategy is also known as selective marketing. This is just the opposite of the
above-mentioned strategy. Here the firm differentiates its products to suit different
segment needs and expectations. With this approach, the business will identify two or
more specific customers groups that are highly likely to become loyal customers.
For Example: An airline that differentiates its products in three classes- first class,
business class, and economy class. Each of these classes is targeted at a specific
segment whose needs are different from the other.
3. Concentrated Marketing: A third market-coverage strategy, concentrated marketing,
is especially appealing when company resources are limited. Instead of going after a
small share of a large market, the firm goes after a large share of one or a few
submarkets. Recycled paper Products concentrated on the market for alternative
greeting cards. This is also known as Focus marketing. This is a combination of
standardization and differentiation.

Positioning
Concept of Positioning: Positioning is a platform for the product or brand. It
facilitates the brand to get through to the target consumer. Positioning is the act of fixing
the locus of the product offer in the demands of the target consumers. In positioning, the
firm decides how and around what parameters, the product offer has to be placed before
the target consumers.
According to Kotler, Positioning is the act of designing the companys offering and
image to occupy a distinctive place in the target markets mind.

Importance of Positioning
1.

2.

Putting product in pre-determined orbit: positioning is the specific task of taking the
product to a chosen orbit in the minds of the target consumers. If the positioning decision
is faulty, the product suffers heavy losses. It may take a long time and enormous effort to
retrieve a wrongly positioned product.
Connects Product offerings with target market: While target market selection clarifies
for whom the product is intended, and marketing mix shows the way in which the 4Ps are

3.

4.

to be aligned in the offer to the target market, positioning acts as the bridge linking the
product offer with the target market.
Product cannot be Everything to Everyone: The need for positioning arises out of
the fact that a product cannot be everything to everyone and has to be something to
some segment. Normally, some unique feature of the product, some special needs of the
market or some noticeable gap in competing offers is picked-up and the product is
positioned around that feature/or a combination of features for a particular target
audience.
Brand seeks a locus in space through positioning: In positioning, the consumers mind
is viewed as a geometric perceptual space, with different product categories and brands
occupying certain positions.

Factors affecting Brand Positioning


1. Brand Attributes: What the brand delivers through features and benefits to consumers?
2. Consumer Expectations: What consumers expect to receive from the brand?
3. Competitor Attributes: What the other brand in the market offer through features and
benefits to consumers?
4. Price: Price is an easily quantifiable factor against competitors.
5. Consumer Perceptions: The perceived quality and value of your brand in consumers
mind.

Process of Positioning
The process of positioning takes the form of following stages:
1. Competitors Identification: This step requires broad thinking. Competitors may not be
just those, whose products and/or brands fall into our product class or with which we
compete directly.
2. Determining how competitors are perceived and evaluated: Once we define the
competitors, we must determine how they are perceived by consumers. Which attributes
are important to customers in evaluating a product and/or brand? Consumers are asked to
take part in focus groups and/or complete surveys indicating which attributes are
considered important to them in their purchase decisions.
3. Determining the Competitors position: We must determine how each competitor is
positioned with respect to each attributes. This will also show how the competitors are
positioned relative to each other. Consumer research is required to make this assessment.
4. Analyzing customers preferences: Segmentation distinguishes among groups of
consumers, including life styles; purchase motivations, demographic differences and so
on. One way to determine these differences is to consider the ideal brand or product,
defined as the object the consumer would prefer over all others, including objects that can
be imagined but do not exist.

5. Making the positioning decision: After going through the first four steps, the final
positioning decision is to be made. Such a decision is not always clear and well defined.
However, conducting research may provide only limited input; in that case, the marketing
manager must make some subjective judgment.
6. Monitoring the position: once a position has been established, it is necessary to monitor
how well this position is being maintained in the market place. Changes in consumers
perception can be determined with any slippage immediately noted and reacted to. At the
same time, the impact of competitors can be determined.

Requisites for Successful Positioning


1. Relevance: Positions that do not focus on benefits that are important to people or reflect
the character of the product will fail. Often in their search for differentiation, marketers
seize upon some attributes in their product which is different but in reality is of little
concern to customers.
2. Clarity: A position should be easy to communicate and quick to comprehend. Difficulty
in either suggests that a position is too fuzzy to be of value to the brand.
3. Distinctiveness: People have few needs that are unfulfilled, and they have many choices
to fill the needs they have. If a brands position lacks distinctiveness it will be forced to
compete on the bases of price or promotion.
4. Coherence: Speak with one voice through all the elements of the market mix to create a
strong position. If a brand positioned as premium quality and price appears in an endaisle sale display, its quality image will suffer.
5. Commitment: often people will get nervous when strong position threatens to ignore or
even alienate some segment of the population as a price of clearly communicating desired
target. Once a position is adopted, it takes commitment to see it through, in the face of
criticism and pot shots.
6. Patience: Crest has dominated its market for over thirty years. When it was first
introduced, positioned as a cavity fighter its share never rose above 13% for three years.
The ADA approval was the key to launching the brand to over 40% of the market. Had
P&G lost patience after two or three years, someone else would be enjoying the profits of
the powerful brand position.
7. Courage: It goes without saying that adopting a strong brand position requires bravery. It
is much easier to defend an appeal to everyone with rather generic sales pitch. It must be
believed that the position makes strategic sense for this brand and then stick to your guns.

Errors in Positioning
Positioning is undeniably a tough job, and if a marketer attempts to position a product
without careful planning, it becomes very difficult to sustain the product in the market and
derive a competitive advantage. There are certain errors that might creep up while
positioning a product:

1. Obvious aspects of the product features: Quite often, it happens that a product is
positioned on the basis of the obvious aspects of the product features; this become too
predictable and the charm in positioning is lost. However, many times, the obvious
aspects have to be used for positioning.
2. Living in the Future: Most companies try to live in future rather than position their
products based on their current capabilities.
3. Under Positioning: This occurs when buyers know much less about the brand or do not
know anything special about the brand. Marketers often commit the mistake of diluting
the positioning strategy to make it more attractive. Product should be positioned with
powerful ideas and communicated as they are.
4. Over Positioning: Just as under positioning of a brand is a possibility, there is also scope
for over positioning a brand. In this situation, buyers may have a very narrow image of
the companys brand. Over positioning is usually seen in cases where the firm initially
promotes its brand as a premium brand.
Example: Customers perceive the Tanishq jewellery brand to be very high priced, while
the reality is quite the opposite as Tanishq offers jewellery that suit every budget also.
5. Short-term gains: Companies often position their products such that it helps them
achieve short-term sales and profits. Positioning has to be done keeping in mind longterm gains in the market and short-term gains.
6. Confused positioning: Another error is confused positioning. Marketers should not
confuse consumers by meddling too much with the positioning strategies of their
established brands.
7. Doubtful positioning: Sometimes companies try to create brand awareness among
customers even before positioning the brand clearly in the market. This type of
positioning generates a negative attitude towards the brand.
8. Positioning on the wrong attributes: Companies quite often do not realize what
customers expect from the product. As a result, they position the product based on the
wrong attributes or on attributes that are of no interest to the customers.

Repositioning
Repositioning involves changing the identity of a brand and product, relative to the identity of
competing products, in the collective minds of the target market. Repositioning is changing the
positioning of the brands. Sometimes certain positioning does not work for the brand and hence
the company tries to re-position it
Example: Cadburys Dairy Milk is a classical example of a re-positioning exercise where earlier
the chocolate was targeted at children. When the market got saturated it started targeting youth
with the Asli Swadh Zindgi ka campaign.

Reasons of Brand Repositioning


Brand repositioning exercise may be due to the following reasons:

1. Increasing market penetration: This happens when the brand wants to penetrate into
the market. That is, either it wants to increase its occasion of use or get new customers to
the brand.
Example: Moov a knee sprain healer was repositioned as a backache healing balm to
increase the occasion of use. The brand was repositioned for more purposes to increase its
uses and hence its sales.
2. Increasing relevance to customers: Sometimes, a product is launched with some initial
positioning. However, with time, the company realizes that the brand is not working may
be because its positioning is not right in the consumers mind. Alto is a classic example.
3. Making brand contemporary: As times change, brands have to change as well and so
has the position of the brand. Brands have repositioned themselves when they have been
termed old- fashioned or when they have tried to move with changing markets.
4. Change in market or market conditions: Sometimes when the market changes or the
company enters a new market, it has to reposition itself. Readers Digest too repositioned
itself from a non-Indian magazine to a general interest family magazine customized for
the needs of Indians.
5. Other reasons to reposition brand: Brand repositioning in necessary when one or more
of the following conditions exist:
a. The brand has a bad, confusing or non-existent image.
b. The primary benefit the brand owns has evolved from differentiating benefit to a
cost of entry benefit.
c. The organisation is significantly altering its strategic direction.
d. A new competitor with a superior value proposition enters the industry.
e. The organisation is entering new businesses and the current positioning is no longer
appropriate.
f. Competition has usurped the brands position or rendered it ineffectual.

Types of Repositioning Strategies in Indian marketing


There are seven kinds of repositioning strategies which have been adopted by various companies
in Indian marketing situation; these are as follows:
1. Value Oriented Repositioning: This strategy is useful in two situations:
a. When a brand offering values is competing against the unorganized sector.
b. When a brand has strongly established a value proposition.
Example: Reynolds is a brand of ball pen which was launched in India during the
eighties. It was nearly double the price of the other competitive offerings in the market.
These offering which were in the unorganized sector were of poor quality. Reynolds used
the skimming the price strategy and became a successful brand.

2.
3.

4.

5.

6.
7.

Segment oriented repositioning: This strategy is useful when a brand wants to change
the segment to which it is currently catering some.
Celebrity oriented brand enhancement repositioning: This strategy is useful when
brand uses imaginary (can even be a celebrity) to strengthen its association and makes an
attempt to enter new segment based on the strength of the same imaginary. This celebrity
had a charismatic appeal and would have been a good fit for the brand which is targeting
the rural Indian population.
Symbolism oriented repositioning: This strategy is useful when a brand with a strongly
entrenched functional image wants to expand its market using a symbolic positioning
without losing its earlier association.
Up market technology oriented repositioning: This kind of strategy is useful when a
down market brand attempts an upward stretch apart from continuing to serve its current
consumer segments.
Niche oriented market: This strategy is useful when a niche brand is interested in
expanding its consumer base after it has created brand awareness.
Change of image oriented repositioning: It is worthwhile to invest gate the impact of
marketing mix elements on positioning strategies. An interesting aspects is that the
environment can also influence the positioning of a brand along with its marketing mix
strategies.

Unit 3
Marketing Mix
The term marketing mix was first coined by the American Marketing expert James
Culliton. The description of the marketing Mix as four Ps was given by the wellknown American Professor Jerome McCarthy.

Four Ps of Marketing Mix


1.

2.

3.

Product: The product itself is the first element. Products satisfy consumer needs. The
management must decide the products to be produced by knowing the needs of the
consumers. The product mix combines the physical product, product services, brand and
package.
Price: The second element to affect the volume of sales is the price. The marked or
announced amount of money asked from a buyer is known as basic price-volume placed
on a product. There may be basic price alterations may be made in the form of discount,
allowances etc. Apart from this, the term of credit, liberal dealings will also boost sales.
Place: The third element of the marketing mix is place. Place refers to having the right
product, in the right location, at the right time to be purchased by consumers. This proper
placement of products is done through middle people called the channel of distribution.

4.

Promotion: Promotion is the persuasive communication about the products by the


manufacturer to the public. Firms must undertake the promotion work like advertising,
publicity, personal selling etc., which are the major activities. Thus the public may be
informed of the product and be persuaded by the firms.

Utility of Marketing Mix


The utility of marketing mix can be understood as under:
1. Attracting Customers: The 4Ps are the tools of the marketing manager and manager has
to use these tools for attracting customers, facing marketing competition, and for
promoting sales.
2. Better use of resources: Marketing mix promotes better utilization of limited resources
as it helps the marketing manager to understand his customer and invest in the areas in
which the consumer is interested. With limited components at its disposal, it attempts to
gain the best possible results.
3. Balanced approach: Marketing mix is an effective tool for solving the problems. It
keeps the marketing manager to be on the right track. It reminds him, on the one hand
manager should be careful to consider the market forces and on the other hand think of a
total program instead of relying on any particular aspect.
4. Significance of marketing mix lies in the mix or blend: The components of marketing
mix are individually important but their significance lies in the mix or blend. It is
necessary to combine them properly.
5. Applicable to business as well as Non-Business organizations: The concept of
marketing mix is applicable to business as well as non-business organisations such as
clubs, colleges, associations etc.

Factors affecting Marketing Mix


Factors affecting marketing mix can be divided into the category of controllable and
uncontrollable factors as given below:
1. Controllable factors: There are certain factors, which can be controlled by the marketing
management. Some of them are as follows:
a. Product Planning: The product of the company must have the quality of satisfying
the needs of the customers and it should plan and develop its products accordingly.
b. Brand Policy: It includes decisions regarding trademarks and brand name because it
influences the sale volume of the product of the company. He may decide one brand
name for the different products of the company or different brand may be used for
different qualities of the product.
c. Packaging Policy: Packaging also has an important effect on sales. The marketing
manager is to decide whether product should be sold loose or packs. If he decides to

sell the product in packs then size, quality and getup of packing should be considered
very carefully.
d. Personal selling: Personal selling is good to increase the sale and the same time to
know the consumers needs and desires.
e. Special sales promotion policy: Apart from personal selling and general
advertisement policy, the business should provide for the special sales promotion
campaigns as a part of its sales promotion policy to increase its sales.
f. Physical distribution: All the above variables create demand but creation of demand
is not sufficient. The marketing manager must plan to supply the product in
accordance with the needs of the public of the different markets.
g. Market Research: Market research is a system by which one can analyze the market
conditions. It helps a marketer in formulating the policies by which the product
reaches in an efficient way in the hands of the consumers.
2. Uncontrollable Factors: Uncontrollable factors are also known as external factors. These
factors can be classified under four heads:
a. Consumers Buying Behavior: Consumers buying behavior is affected by buying
habits, purchasing power, motivation in buying, living standard, social environment,
technological changes.
b. Competition: marketing manager should also study the competitive conditions in the
market. For this purpose, he should take into account basis of competition, the
number of competitors, the viewpoint towards the consumers, quality and
characteristics of competitors product.
c. Pattern of Distribution system: The marketing manager should consider the various
forms of distribution system and the nature and behavior of distributors before
deciding upon the marketing mix of his company.
d. Government Control: The marketing manager should consider the rules and
regulations of the government in respect of products, pricing, competitive practices,
advertising etc.

Product
Product is anything that can be offered to a market that might satisfy a want or need.
According to Philip Kotler, A product is a bundle of physical services and symbolic particular
expected to yield satisfactions or benefits to the buyers.

Characteristics of Product
1. Tangibility: It should be perceptible by the touch. An item to be called a product should
have a tangibility character- touch, seen of feeling.
2. Intangible Attributes: The product may be intangible in the form of services, for
example, banking, insurance services, repairing etc.

3. Associated Attributes: Such attributes may be brand, package, warranty etc. For
example Hindustan Levers Vanaspati Ghee has a brand name Dalda and with its
package it can be identified by the consumers.
4. Exchange value: Whether the product is tangible or intangible, it should have exchange
value and must be capable of being exchanged between seller and buyer for mutually
agreed prices.
5. Consumer Satisfaction: Products should have the ability to offer value satisfaction to
the consumer. The satisfaction must be both real and psychological.

Types of Product
There are different approaches and parameters to differentiate products which are as follows:
1.
a.
b.
c.
d.
e.
f.
g.
h.
i.
2.

Based on the Nature: based on nature, product can be classified into ten types. These
are
Goods: These are intangible performances where the consumption and production point
is the same.
Ideas: Every market offering includes the basic idea at its core. For example,
Consultancy firm, Ad agency.
Experiences: By orchestrating several services and goods, one can create stage and
market experiences. For example: Science City, Aquatica Theme park and water world.
Events: Marketers promote time based events such as Olympics or Movie Awards.
Persons: Celebrity marketing has become a major business .Different film stars and
sportsperson have their own publicity and endorsement agents.
Places: Places can be marketed to attract tourist industries etc. For example: KeralaGods Own Country Campaign.
Properties: Properties are intangible rights of ownership of either real property of
financial property such as Maruti or TCS IPO campaign.
Organisations: Organisations actively work to build a strong favorable image in the
mind of their customers. For example: Philips uses a tagline Lets make things Better.
Information: Information can be produced and marketed as a product. For example,
Dictionaries, Encyclopedias, Schools etc.
Based on Consumers Intentions: Products can be classified into two broad categories
based on who will use them and how they will be used. These are:
I.
Consumer Products: Consumer products are those bought by final consumers
for personal consumption. Marketers usually classify these goods further based on
how consumers go about buying them. Consumer products include convenience
products, shopping products, specialty products and unsought products.
Examples: Newspapers, drugs, grocery products, prescription medicines, a
lawyers services etc.
II.
Industrial Goods: A product bought for use in the production of other products
or in an Organizational operation is an industrial product. Business products are

intended for resale, for further processing in producing other products, or for use
in conducting business. Industrial goods include raw materials, capital equipment,
Component parts, Supplies and industrial services etc.
Example: Grains, fruits, minerals, products from forests and seas, machineries,
cranes, motors, hand tools, paints, office stationeries, financial, legal, marketing
services.
3. Based on Social Benefits: From the social aspects, we can differentiate the products
depending on long-term and short-term advantages:
i.
Pleasing Products: These give high immediate satisfaction, but do harm to
consumers in the long run. For example: Pan Masala, cigarettes, alcohols etc.
ii.
Deficient Products: These have neither immediate appeal nor long-term run benefits.
Firms are not interested in such products as there is no chance to make any profit at
all. For example, Typewriter or pager.
iii.
Salutary Products: They have long run advantages but have no immediate appeal to
consumers. Hence firms are not primarily interested in such products. For example:
Soyabean chips (diet chips).
iv. Desirable Products: These have a happy combination of high immediate satisfaction
and high long run consumer welfare. Tasty, nutritious, ready- made food products are
the examples of such desirable products.

Product mix
Product Mix is the composite of products offered for sale by a firm or a business unit. A product
mix is the combination of products that a company offers. The greater the number of offerings,
derives the greater the chance of satisfying a customer.
Example: If an enterprise manufactures or deals with different varieties of soap, oil, toothpaste,
toothbrush etc. the group of all these products is called Product Mix.

Product Mix Decisions


An Organisation with several product lines has a product mix. A product mix consists of all the
product lines and items that a particular seller offers for sale.
A companys product mix has a certain width, length, depth and consistency which are described
below:
1. Product Mix Length: The length of a product mix refers to the total number of items in
the mix. HUL carries many brands within each line. For example, it sells six laundry
detergents, ten soaps, four shampoos and two toothpastes etc.
2. Product Mix Width: The width of a product mix refers to how many different product
lines the company carries. For example, HUL markets a fairly wide product mix

consisting of many product lines, including paper, food, household cleaning, medicinal,
cosmetics, and personal care products.
3. Product Mix Depth: The depth of a product mix refers to how many variants are offered
of each product in the line. In other words, product mix depth refers to the number of
versions offered of each product in the line. If Close-up comes in 5sizes and three
formulation (red, green, blue), Close-up has depth of 15.
4. Product Mix Consistency: The consistency of the product mix refers to how closely
relate the various product lines are in the end use, production requirements, distribution
channels, or some other way. HUL product lines are consistent in so far as they are
consumer goods that go through the same distribution channels.

Factors Influencing Change in Product Mix


1. Change in Market Demand: The change in the demand of a product affects the decision
of product mix.
2. Cost of Production: If the company can develop a new product with the help of the same
labour force, plant and machinery and techniques, it can decide to start the production of
that product at lower cost.
3. Quantity of Production: If the production of a new product is considered to be at a large
scale and the company can add one more item to its product line just to get economies of
large scale production.
4. Advertising and Distribution Factors: Advertising and distribution factors may be the
one of the reasons for the changes in production mix.
5. Use of residuals: If residuals can be used gainfully, the company can develop its by
products into the main products. For example, a sugar mill can profitably develop the
production of paper, card board or wine from bagasse.
6. Change in Company Desire: Keeping in mind the objectives of the firm i.e. maintaining
or increasing the profitability of the concern, the firm may eliminate some of its
unprofitable processes or may start a new more profitable product.
7. Competitors Actions and Reactions: The decision of adding or eliminating the product
may be the reaction of competitors actions. If the company thinks that it can meet the
competitions well by making necessary changes in the size, color, packing or price, it can
make such changes.
8. Change in Purchasing Power or behavior of the customers: If the number of
customers are increased with the increase in their purchasing power or with the change in
their buying habits, fashion etc. the company may think of adding one or more products
keeping mass-production or increase in profitability in the mind.
9. Full utilization of marketing capacity: if the company is not getting the desired result
from the market, it can decide to stop the production of such a product and divert its
resources to produce a new product or improve the existing product.
10. Financial resources: Finance is the life blood of a firm. Availability of finance may
necessitate some changes in the product of the company. If the company is short of

finance or if the product is continuously going into loss the company may decide to drop
the production of such product.

New Product Development


A new product is one which is really innovative which is significantly different from existing
and imitative products that are new to the company.
Once a company has carefully segmented the market, chosen its target customers, identified
their needs, and determined its market positioning, it is better able to develop new products.

Factors Contributing to New Product Development


Several factors contribute to new product development, while most are related to external
environmental variables, the most important internal factors in the product development is
the surplus capacity that a firm may have at any given time.
1. Changing Customer Preferences: The driving force in new product development is
changing customer life styles, leading towards a change in the customers preferences and
expectations.
2. Technological Changes: Another factor is the technological change in the industry and
the market. For example: If Mrs. Indira Gandhis government had not decided to expand
the television network to cover 70% of the Indian population, launched its own satellite
INSAT IB and started color telecast in 1982. It is extremely doubtful if many of todays
products would have seen the light of the day in the Indian market.
3. Government Policy: Government policy can also encourage or foster new product
development processes. For example, a government policy encouraging competition and
entrepreneurship can motivate firms to launch new products.
4. Product Life Cycle (PLC): In order to maintain growth in sales and profits firms decide
to drop or modify or develop new products when the existing products reach maturity or
decline stages in product life cycles.

New Product Development Process


There are eight steps of NPD Process comprising the key elements of a new product
development. These steps are discussed below:
1. Idea generation: The first step of NPD requires gathering ideas to be evaluated as
potential product options. For many companies idea generation is an ongoing process
with contributions from inside and outside the Organisation. Idea generation includes
customer comments and suggestions via toll free telephone numbers and website forms
etc.

2. Screening of Idea: In step 2 the idea generated in step 1are critically evaluated by
company personnel to isolate the most attractive options. Depending on the number of
ideas, screening may be done in rounds. Only those ideas are selected which are feasible
and workable to develop. Non feasible ideas can clearly be costly for the company.
Acceptable ideas move on the next step.
3. Concept Development and Testing: With a few ideas in hand the marketer now attempts
to obtain initial feedback from customers, distributers and own employees. Ideas are
presented to a group in the form of concept and not in actual working form.
4. Marketing Strategy and Development: How will the product/service idea be launched
within the market? A proposed marketing strategy will be written laying out the
marketing mix strategy of the product, the segmentation, targeting and positioning
strategy sales and profits that are expected. After testing, the new-product manager must
develop a preliminary marketing-strategy plan for introducing the new product into the
market.
5. Business Analysis: At this point in the NPD process the marketer has reduced a
potentially large number of ideas down to one or two options. Now in this step the
process becomes very dependent on market research as efforts are made to analyse the
viability of the product ideas. The key objective at this stage is to obtain useful forecasts
of market size, operational costs and financial projections. Organisation must determine if
the product will fit within the companys overall mission and strategy.
6. Product and Marketing Mix Development: Finally it is at this stage that a prototype is
finally produced. The prototype will clearly run through all the desired tests, and be
passing through business analysis are given serious consideration for development. Once
the prototype is ready the marketer seeks customer input. However, unlike the concept
testing stage where customers were only exposed to the idea, in this step the customer
gets to experience the real product as well as other aspects of the marketing mix.
7. Test marketing: Test marketing means testing the product within a specific area. The
product will be launched within a particular region so the marketing mix strategy can be
monitored and if needed, be modified before national launch.
8. Commercialization- Launching the Product: If the test marketing stage has been
successful and displays promising results then the product will go for national launch.
There are certain factors that need to be taken into consideration before a product is
launched nationally. These are timing, how the product will be launched, where the
product will be launched, will there be a national roll out or will it be region by region?

Benefits of New Product Development


Some of the benefits of the new product introduction include:
1. Product Introduced on Time:
a. Shorten the time from a products concept initiation to its release to manufacturing,
b. Plan and manage overall duration of the NPI process and each of its phases,

c. Manage change and lifecycle for various deliverables, and


d. Standardise format and attributes for different deliverables.
2. Higher Productivity:
a. Capture and automate company specific NPI process steps,
b. Incorporate a best-practice project plan, document templates and metrics,
c. Identify and reduce time spent on non-value add activities,
d. Focus effort and increase R&D throughout.
3. Lower Project Cost:
a. Define, plan track, and manage project cost,
b. Increase the number of projects completed on-budget
c. Quickly identify, capture, and resolve action items and risks,
d. Identify and eliminate repeating activities and
e. Speed adoption, and improve consistency of process execution.
4. Greater Revenue from New Products:
a. Provide process visibility to management, accelerating benefit of implementation,
b. Improve quality of metrics, and reduce collection time,
c. Focus on the most critical quality initiative and
d. Achieve timely market introduction of the complete product.

Product Life Cycle


Like a human being, all products have certain length of life during which they pass through
certain identifiable stages. Through the conception of the product, during its development and
upto the market introduction, product remains in pre-initial stage. Its life begins with its market
introduction, then goes through a period during which its market grows rapidly, eventually, it
reaches at maturity and then stands saturated. Afterwards its market declines and finally its life.

Most product life cycle curves are portrayed as bell-shaped. This curve is typically divided into
four stages:
1. Introduction: A period of slow sales growth as the product is introduced in market.
Profits are nonexistent in this stage because of the heavy expenses incurred with product
introduction.
2. Growth: A period of rapid market acceptance and substantial profit improvement.
3. Maturity: A period of slowdown in sales growth because the product has achieved
acceptance by most potential buyers. Profits stabilize or decline because of increased
competition.
4. Decline: The period when sales show a downward drift and profits erode.

Characteristics of PLC
The life cycle is nothing but the pattern of demand for a product over time.
1. No every product goes through every stage. Infact, many products never get past the
introduction stage.
2. The length of time a product spends in any one stage may vary.
3. Some products may move through the entire cycle in weeks.
4. Repositioning of a product can lead to a, new life cycle. Repositioning is basically
changing the image or perceived uses of the product.

Assumptions of PLC
The following points are to be assumed in studying the product life cycle concept:
1. Products have a limited life.

2. Product sales pass through distinct stages, each posing different challenges, opportunities,
and problems to the seller.
3. Profits rise and fall at different stages of the product life cycle.
4. Products require different marketing, financial, manufacturing, purchasing, and human
resources strategies in each stage of their life cycle.

Product Life Cycle Strategies


Products typically go through four stages during their lifetime. Each stage is different and
requires marketing strategies unique to the stage.
1. Introduction Stage This stage involves introducing a new and previously unknown
product to buyers. Sales are small, the production process is new, and cost reductions
through economies of size or the experience curve have not been realized. The promotion
plan is geared to acquainting buyers with the product. The pricing plan is focused on
first-time buyers and enticing them to try the product.
2. Growth stage: In this stage, sales grow rapidly. Buyers have become
Acquainted with the product and are willing to buy it. So, new buyers enter the market
and previous buyers come back as repeat buyers. Production may need to be ramped up
quickly and may require a large infusion of capital and expertise into the business. Cost
reductions occur as the business moves down the experience curve and economies of size
are realized. Profit margins are often large. Competitors may enter the market but little
rivalry exists because the market is growing rapidly. Promotion and pricing strategies are
revised to take advantage of the growing industry.
3. Maturity Stage: In this stage the market becomes saturated. Production has caught up
with demand and demand growth slows precipitously. There are few first-time buyers.
Most buyers are repeat buyers. Competition becomes intense, leading to aggressive
promotional and pricing programs to capture market share from competitors or just to
maintain market share. Although experience curves and size economies are achieved,
intense pricing programs often lead to smaller profit margins. Although companies try to
differentiate their products, the products actually become more standardized.
4. Decline Stage: In this stage buyers move on to other products and sales drop. Intense
rivalry exists among competitors. Profits dry up because of narrow profit margins and
declining sales. Some businesses leave the industry. The remaining businesses try to
revive interest in the product. If they are successful, sales may begin to grow. If not, sales
will stabilize or continue to decline.

Factors affecting the Life Cycle of a Product


1. Rate of technical change: Life cycle of a product is affected by the rate of technical
change in the country. If the rate of technical change in the country is very high, the life
of the product is limited.

2. Rate of man at acceptance: The rate of customer acceptance also affects the life cycle of
products. If the rate of market acceptance is high, the life cycle of products in that
country is limited.
3. Ease of Competitive Entry: The situation of competition in the market also affects the
life cycle of the products. If the entries of competitors are easy and unchecked, the life of
the products will be shorter as the new and new products will enter the market.
4. Risk bearing capacity: The risk bearing capacity of the enterprise also decides the life
cycle of its products. If the enterprises have risk bearing capacity, they can keep their
product alive in the market for a long period as they can face the challenges of the market
very effectively.
5. Economic and managerial force: Enterprise having strong economic and managerial
forces, can keep their products standing in the market and the life cycle of their product
will be longer that of the life cycle of the products of those enterprises having weal
economic and managerial forces.
6. Protection of patents: The life cycle of the products is fairly long if their patents have
got registered. On the other hand, if the products are not patented, their life is out short.
7. Goodwill of the Enterprise: If the goodwill of the enterprise is good in the market as the
producer of good quality products, its product will last long in the market as compared to
the products of those enterprises whose goodwill is not good or which are not known to
the public.

Branding
The term branding refers to the entire process involved in creating a unique name and image for
a product in the consumers mind, through advertising campaigns with a consistent theme.
In marketing, a brand is the symbolic embodiment of the information connected with a product
or service. A brand typically includes a name, logo, and other visual elements such as images,
fonts, colour schemes, or symbols.

Characteristics of Successful Brands


1. Superior Product Quality: Examples are Sony and BMW, which has developed a very
strong brand image in the market because their products are known world-wide for their
excellent quality. A strong brand image goes automatically with quality and consistency.
2. Additional Services: Maruti has service stations almost in every spot in India, giving it
an edge over other players. This gives Maruti customer preference. This is because
customer known that whenever and wherever they have a problem with their Maruti cars,
a Maruti service station is never far away as the slogan says. Similarly, Apollo Tyres
conducts a free check-up for all its customers for the first year and even replaces the
tyres, if required.
3. Differentiation from Competition: Organisations need to differentiate their offerings
from that of competitors, to develop successful brands. The distinction must be clear in

the minds of customers. If this is accomplished, customer will recognise and appreciate
the unique aspect of the product. Bose speakers use the highest quality woofer
components, making their product outstanding.

Functions of a Brand
1. To consumer: A brand perform the following functions for consumers:
a. Identification of source of product: Brands identify the source or maker of a
product.
b. Assignment of Responsibility to product-maker: Brand allows consumers to assign
responsibility to a particular manufacturer or distributor.
c. Risk Reducer: brands can reduce the risks in product decisions. Consumers may
perceive many different types of risks in buying and consuming a product.
d. Search cost reducer: Brand allows consumers to lower search costs for products
both internally and externally.
e. Promise, Bond, or Deal with maker of Product: The relationship between a brand
and the consumer can be seen as a type of bond or deal. Consumers offer their trust
and loyalty with the implicit understanding that the brand will behave in certain ways
and provid them utility through consistent product performance and appropriate
pricing, promotion and distribution programs.
f. Symbolic Device: Brands can serve as symbolic devices allowing consumers to
project their self-image. Certain brands are associated with being used by certain
types of people and thus reflect different values or traits.
g. Signal of Quality: Brands can also play a significant role in signalling certain
products characteristics to consumers.
2. To manufacturers: Brands perform the following functions for manufacturers:
a. They serve an identification purpose to simplify product handling or tracing for the
firm.
b. A brand also offers firm legal protection for unique features or aspects of the product.
c. Brands can signal certain level of quality so that satisfied buyers can easily choose the
product again.
d. Investments in the brand can endow a product with unique associations and meanings
that differentiate it from other products.
e. A brand helps the firm to face competition effectively.
f. A brand is source of financial returns for the firms.

Factors to be considered in Branding


Professor David Jobber identifies seven main factors in building successful brands are given
below:
1. Quality: Quality is a vital ingredient of a good brand. Remember the core benefits- the
things consumers expect. These must be delivered well, consistently. The branded

2.
3.

4.

5.

6.

7.

washing machine that leaks, or the training shoe that often falls apart when we will never
develop brand equity.
Positioning: Positioning is about the position a brand occupies in a market in the minds
of consumers. Strong brands have a clear, often unique position in the target market.
Repositioning: Repositioning occurs when a brand tries to change its market position to
reflect a change in consumers tastes. This is often required when a brand has become
tired, perhaps because its original market natured or has gone into decline.
Communications: Communications also play a key role in building a successful brand.
It was suggested that brand positioning is essentially about customer perceptions-with the
objective to build a clearly defined position in the minds of the target audience.
First-Mover Advantage: In terms of brand development, by first-mover they mean
that it is possible for the first successful brand in a market to create a clear positioning in
the minds of target customers before the competition enters the market.
Long-Term Perspective: This leads onto another important factor in brand building: the
need to invest in the brand over the long-term. Building customer awareness,
communicating the brands message and creating customer loyalty takes time. This
means that management must invest in brand, perhaps at the expenses of short term
profitability.
Internal marketing: Internal marketing means it is meant that the whole business should
understand the brand values and positioning. This is particularly important in service
businesses where a critical part of the brand value is the type and quality of service that a
customer receives.

Significance of Branding
The significance of branding to producers, middlemen and consumers are:
1. Significance to Producers:
I.
Easy to Advertise: With a particular brand, it makes very easy for the enterprise to
advertise its products because the enterprise can use the name of brand in its
advertisement messages.
II.
Easy to identify the products: The producers can advertise their products with their
brand and consumers can identify such product easily.
III.
Creation of Separate Market: Producers can create a separate market for their
products if they use a particular brand because the use of a particular brand
differentiates these products from others.
IV.
To get more prices: When consumers like a brand and they start to use the product of
that brand, they do not mind a little increase in the prices of such products.
V.
Easy to Expand the product mix: If the brand of a producer is very popular in the
market and the demand of such products is quite encouraging, the producer may
decide to expand his product mix. He can add new product lines to his product mix.
VI.
Personal Contacts with Consumers: When the brand of a producer becomes
popular among consumers, it becomes very easy for the producer to eliminate the

middlemen or to reduce the number of middlemen because he is in a position to sell


his products directly to the consumer.
2. Significance to Middlemen:
I.
Easy to understand the needs and wants of consumers: Use of brand makes it
very easy for the middlemen to understand the needs, wants, preferences, and
requirements of consumers because the consumers ask a particular brand.
II.
Less Risk: As the demand of the products of a famous brand already exists in the
market, the middlemen have no risk in keeping the products of these brands.
III.
No need of advertisement and sales promotion: As the demand for the products
is already exists in the market and the customers knows these product by name,
there is no need for the middlemen to advertise such products.
IV.
Increase in Sales: Middlemen can easily increase their sales, if they deal in
products of famous brand because the market for such products alrady exists.
V.
Increase in Profits: As the sales of products of famous brand are high, profits of
the middlemen also increase substantially.
VI.
Increase in Goodwill: If a middlemen deals in the products of a famous brand it
increases his goodwill.
3. Significance to Consumers:
I.
Easy to Recognise: Use of a particular brand of a producer makes it very easy for
the consumers to recognise the product of such producer because almost all the
products of a producer are of the same brand, packing, design, colour etc.
II.
Availability of Quality products: The producers, who use a particular brand for
their products, always, keep themselves busy on improving the quality of their
products because they want that the demand for their products should be on
increasing.
III.
Minimum Fluctuations in Price: It has been the experience that the prices of the
products of standard brands fluctuate very rarely. It brings certainly in the prices
of these products.
IV.
Improved Packing: The packing of the products of standard brands is always of
high quality. The name of the brand and all the relevant particulars about the
product are printed in packing itself.
V.
Mental Satisfaction: The use of the products of a standard brand provides mental
satisfaction to the consumers that they are using the goods of high quality and
paying reasonable price for these products.

Packaging
Packing means wrapping of goods before they are transported or stored or delivered to a
consumer. On the other hand, packaging is the sub-division of the packing function of marketing.
Packaging has been defined as an activity which is concerned with protection, economy,
convenience and promotional considerations.

Purposes of Packaging

1. Product Protection: The most obvious purpose of packaging is to physically protect the
product inside. Package protects the products and is fundamental in idea. Their journey
from manufacturer to consumer is facilitated. Packaging protects the products from
various types of damages.
2. Product Containant: Package means using just the space in which a product will be
contained. Ordinary packing is in the form of throw-away containers.
3. Product Attractiveness: The size and shape of the package, its colour, printed matter on
it etc, must make the package attractive to look at.
4. Product Identification: Packages differentiate similar products. Packaging and labelling
are inseparable and are closely related to branding. Package has more significance, when
the product cannot be seen by the buyer packed milk, fruit juice etc.
5. Product Convenience: The purpose of packaging is not merely confined to consumer
service. The design and size of the package must be in accordance with the contents i.e.
product; must be convenient to ultimate customers.
6. Segmentation: Packaging can be tailor-made for a specific market group. If a firm offers
two or more package shapes, sizes, colours, or designs it may employ differentiated
marketing.
7. Channel Co-operation: Packaging can address wholesaler and retailer needs with regard
to shipping, storing, promotion, and so on.
8. New Product planning: New packing can be a key innovation for a firm and stimulate
sales.
9. Increase marketing: Attractive packaging will helps to draw more customers and will
encourage more purchases of the product.
10. Self-service and Supermarket: Self-service on any large scale is completely dependent
on packaging; although it is also true to say that the growth of self service in
departmental store and supermarkets has had a corresponding great impact on packaging
developments.

Types of Packaging
The most important kinds of packaging are as follows:
1. Consumer Package: It is a kind of package which holds the required volume of product
for the household consumption. For example, Toothpaste, shoe polish etc.
2. Family Package: When products are related in use and are of similar quality, the firm
makes the packages identical for all products by using common feature on all the
packages.
3. Re-use package: It is also known as dual package. A producer sells the contents in such a
package, which can be re-used for other purposes after the product is consumed. For
example: the glass jar of Nescafe Instant coffee, and many other products are packed in
such a way that the package can be put into many uses.
4. Multiple Packages: The practice of placing several units in one-container is known as
multiple packaging. For example, Make-up set, babys care etc.

5. Transit packaging: Transit packaging is that kind of packaging which keeps the product
safe from production to consumption in the process of distribution. Materials used for this
type of packaging are wooden containers, drums, tins, sacks etc.

Factors Influencing Packaging Decisions


There are a number of factors that influence decisions in respect of packaging features like size,
shape, design, surface graphics, colour schemes, labelling materials etc.
1. Physical Characteristics: packaging decisions are influenced by certain physical
characteristics of the product like the physical state, weight, stability, rigidity, surface
finish etc.
2. Economy: While packaging is very important in marketing, it is costly too. Indeed, there
are a number of cases where the cost of packaging is more than the cost of the content.
Every effort should be made to reduce the cost of packaging.
3. Convenience: Packaging should also necessarily possess the quality of convenience from
the point of view of consumers, distributors and producers. Hence, apart from the
functional needs, a good package should possess certain features like ease to open and
close, ease to dispense and ease to dispose-of etc.
4. Miscellaneous factors: Apart from the factors mentioned above, packaging decisions
may be influenced by a number of other factors. Statutory regulations and socio-cultural
factor also influence packaging decisions.