Marketing Management 3

Marketing managementMarketing management

BY: MUKESH MISHRABY: MUKESH MISHRA

Formulating Marketing Formulating Marketing StrategiesStrategies

Differentiation StrategiesDifferentiation Strategies

Competitive advantage is a company`s ability to perform in one or more ways that competitors can not or will not match.

Only few competitive advantages are sustainable. At best they may be leverageable.

Customer must see any competitive advantage as a customer advantage. If the company deliver faster than competitors its not customer advantage.

E.g. Himalaya differentiates itself with other brands in this sector based on the natural, aurvedic ingredients, that it uses and relying on ancient Indian traditions and modern scientific methods


Product

Channel Image

Personnel


a) Personnel differentiation Company can have better trained

employees. Singapore Airlines is well regarded in large part because of its flight attendant.

Similarly, kingfisher Airlines in India differentiated itself partly by courteous behavior of their smartly dressed flight attendants

Personnel Differentiation: Personnel Differentiation: Singapore AirlinesSingapore Airlines

Product DifferentiationProduct Differentiation

Product formFeaturesPerformanceConformanceDurabilityReliabilityReparability

StyleDesignOrdering easeDeliveryInstallationCustomer trainingCustomer

consultingMaintenance

Channel differentiationChannel differentiation

Company can more effectively and efficiently design their distribution channels coverage, expertise, and performance.

E.g. Eureka Forbes, marketers of vacuum cleaners and water purifiers in India, achieved differentiated positonig through their direct to home channel.

Image differentiationImage differentiation

Companies can craft powerful, compelling images. Brand such as Park Avenue, Louis phillippe, van heusen and other work hard to develop a distinctive image.

Image DifferentiationImage Differentiation

Product life-cycle Marketing Product life-cycle Marketing StrategiesStrategies

PLC Marketing StrategiesPLC Marketing Strategies

A company`s positioning and differentiation strategy must change as the product, market and competitors change over the period the PLC

PLC asserts four things1. Product have a limited life.2. Product sales pass through distinct stages, each

posing different challenges, opportunities, and problem to the seller.

3. Profit rise and fall at different stage of PLC.4. Products require different marketing, financial,

manufacturing purchasing, and human resource strategies in each life cycle stage

Product life CyclesProduct life Cycles

Product life CyclesProduct life Cycles

1. Introduction A period of slow sales growth as the product is introduced in

the market, profit are non existence because of heavy expenses of product introduction.

2.Growth A period of rapid market acceptance and substantial profit

improvement3. Maturity A slow down in sales growth because the product has achieved

acceptance by most buyers Profits stabilize or decline because of increased competitions4.Decline Sales shows a downward drift and profit erode

Marketing strategies at Marketing strategies at different stages of PLCdifferent stages of PLC

1. Introduction Stage Since it takes time to roll out a new product, work

out the technical problems, fill dealer pipelines, and gain consumer acceptance, sales growth tends to be slow in the introduction stage.

Profits are negative or low, and promotional expenditures are at their highest ratio to the sale because the need to inform potential customers, induce product trial, and secure distribution in retail outlets.


Firms focus on those buyers who are most ready to buy, usually in higher- income groups. Price tends to high because cost are high.

Companies that plan to introduce a new product must decide when to enter the market.

To be the first can be rewarding, but risky and expensive. To come in later makes sense if the firm can bring superior technology, quality, or brand strength.


2. Growth stage The growth stage is marked by a rapid climb in sales.

Early adopters like the product, and additional consumer start buying it.

New competitors enter, attracted by the opportunities. They introduce new product features and expand distribution.

Prices remain where they are or fall slightly, depending on how fast demand increases.

Companies maintain their promotional expenditures at the same or at the slightly increased level to meet competition and to continue to educate the market.


Sales rise much faster than promotional expenditures, causing a welcome decline in the promotional –sales ratio.

Profit increased during this stage as the promotion costs are spread over a larger volume and unit manufacturing costs falls faster than price decline.

Firms must watch for a change from an accelerating to a decelerating rate of growth in order to prepare new strategies.

E.g. Men Cosmetic market in India .


During the growth stage, the firm uses several strategies to sustain rapid market growth

It improves product quality and adds new product features and improve styling.

It adds new model and flanker products(i.e product of different sizes, flavor, and so forth to protect the main product)


It enters into new market segments It increases its distribution coverage and

enters new distribution channels. It shifts from product awareness advertising

to product preference advertising. It lowers price to attracts the next layer of

price-sensitive buyers


3. Maturity stage At some point, the rate of sales growth will

slow, and the product will enter a stage of relative maturity.

This stage normally lasts longer than the previous stages and posses a big challenges to marketing. Most product are in the maturity stage of the life cycle.


The maturity stage divides into three phases: growth, stable and decaying maturity.

In the first phase the sales growth rate start to decline. There are no new distribution channel to fill.

In the second phase , sales flatten on a per capita basis because of market saturation. most potential customers have tried the product and the future sales are goverened by population growth and replacement demand.


In the third phase, decaying maturity, the absolute level of sales start to decline, and customer begin switching to other products.

This phase poses the most challenges, the sales slowdown create over capacity in industry, which leads to intensified competition. Competitors scramble to find niches

They engage in frequent markdown, they increase ad and trade and consumer promotion


They increase R&D budgets to develop product improvements and line extensions.

A shakeout begins, and weaker competitors withdraw.

The industry eventually consists of well-entrenched competitors whose basic drive is to gain or maintain market share.

Dominating the industry are a few giant firm- perhaps a market leader, a service leader, and a cost leader- that serve the whole market and make their profit mainly through high volume and lower costs


Surrounding these dominant firm is a multitude of market nichers, including market specialists, product specialists, and customizing firms.

The issue facing a firm in a mature market is whether to struggle to become on of the big three and achieve profit through high volume and low cost, or to pursue a niching strategy and achieve profit through low volume and high margin


Sometimes market will become polarized between low- and high end segments, and the firm in middle see their market share steadily erode. E.g. Electrolux.

Strategies Three potentially useful ways to change the

course for a brand are market, product and marketing program modification


1. Market Modification A company might try to expand the market

for its mature brand by working with the two factors that make up sales volume

Volume = no. of brand users x usage rate

A No. of brand user

a) Convert non user- small sachet shampoo market in India


b) Enter new market segment J&J successfully promoting its baby

shampoo to adult user. Pears soap has introduced a pink soap

specially targeted at children

c) Attract competitors customer


B. Increase the Usage Rates Among Usersa) Use the product on more occasion e.g. milkmaid(Nestle) for making variety of

dessert preparations at home.b) Use more of the product on each occasion E.g. drink a large glass of orange juice.C ) Use the product in new ways Use aspirin daily as a medicine for reducing

chances of a stroke.


2. Product Modification Managers also try to stimulate sales by

modifying the product characteristics through quality improvement, feature improvement, or style improvement.

a) Quality Improvement Pillsbury Chakki fresh atta, good for family

heart, rich in fiber, more hygienic.


b) Feature improvement Adding new feature such as size, weight, materials,

additives, and accessories..c) Style improvement It aims at increasing product esthetic appeal. A style

strategy might give the product a unique market identity. yet style competition has problem.

It isdificult to predict whether people and which people will like a new style.

A style change usually reuires discontinuing of old style and the company risks losing customer. E.g. New Coke.


3. Marketing Program Modification

a) Price Would a price cut attract new buyers? If so,

should we lower the prices through prices through price specials, volume or early purchase discounts, freight cost absorption or easiest credit terms? Or would it be better to raise the price, to signal higher quality?


b) Distribution Can the company obtain more product support

and display in existing outlet? Can it penetrate more outlets? Can the company introduce the product into new distribution channels?

c) Advertising Should we increase advertising expenditure?

Change the message or ad copy? The media mix? What about the timing, frequency, or size of ads?


d) Sales promotion Should the company step- up sale promotion-trade

deals, price-off coupons, rebates, warranties, gifts and contests?

e) Personal selling Should we increase the no. or quality of salesperson?

Should we change the basis for sales force specialization? Revise sales territories of sales force incentive? Can we improve sale call planning?

f) Service Can the company speed up delivery/ can we extend

more technical assistance to customers? More credit?


4. Decline Stage Sales decline for a no. of reason, including technical

advances, shifts in consumer tastes and increased domestic and foreign competition..

All can lead to over capacity, increased price cutting and profit errosion,

As sales and profit decline, some firm withdraw from market. Those remaining may reduce the no. of products they offer

They may withdraw from small market segments and weaker trade channels, and they may cut their promotional budgets and reduce prices further.

Common Common Product Life-Cycle PatternsProduct Life-Cycle Patterns


a) Growth –slump- maturity pattern It is characteristics of kitchen appliances.

Sales grow rapidly when the product is first introduced.then fall to certain level that is suatained by late adopter buying the rodct for first time and early adopter replacing it.


b) The cycle –recycle pattern It describe the sales of new drugs. The pharma

company aggressively promotes its new drug, and this produces the first cycle. later the sales starts declining and compny gives the drug another promotion push, which produces the second cycle.

c) Scalloped PLCSales pass through succession of life cycles based on

the discovery of the new product characteristics uses and users . E.g. nylon.

Style, Fashion, and Fad Life Style, Fashion, and Fad Life CyclesCycles


1. Style T is a basic mode of expression appearing

in a field of human endeavor. Style appears in homes, clothing(formal

casual, funky); and art(realistic, surrealistic, abstract)

A style can last for generations ang go in out of vouge.


2. Fashion It is a currently accepted or popular style in a

given field. Fashions passes through four stages:

distinctiveness, emulation, mass fashion and decline.

The length of fashion cycle is hard to predict. Fashion end because they represent a purchase compromise, and consumer start looking for missing attributes.

E.g. As automobiles become smaller they become less comfortable, and then a growing no. of buyers start wanting larger cars


3. Fads Fads are a fashions that come quickly into public

view, are adopted with great zeal, peak early and decline very fast.

Their acceptance cycle is very short and they tend to attract only a limited following who are searching for excitement or want to distinguish themselves from others.

Fad fail to survive because they don’t normally satisfy a strong need.

The marketing winner are those who recognize fads early and leverage them into products with staying power.

Creating the valueCreating the value

Introducing New Market Introducing New Market OfferingsOfferings

Chapter ObjectiveChapter Objective

What challenges does a company face in developing new products and services?

What organizational structures and processes do managers use to manage new-product development?

What are the main stages in developing new products and services?


What is the best way to manage the new-product development process?

What factors affect the rate of diffusion and consumer adoption of newly launched products and services?

New-product OptionsNew-product Options

1) Make or Buy a company can add new product through

acquisition or development. The acquisition rout can take three forms. The

company can buy other companies or it can buy licsence or francise from other company

E.g. coca-cola Thums Up Fritolay –Uncle Chips

New-product OptionsNew-product Options2 Types of

New Product

New-to-the-world

Cost reductions

New product lines

Additions

Improvements

Repositionings

20-49

Moser Baer has moved from Moser Baer has moved from making optical storage media making optical storage media to selling home entertainment to selling home entertainment

Challenges in new product Challenges in new product DevelopmentDevelopment

1.New- product Success Most established company focus on

incremental innovation. It allow companies to enter new markets by tweaking products for new customers, use variations on core product to stay one step ahead of the market

2.New- Product Failure New product development can be quite risky.

New product continue to fail at disturbing rate.

Challenges in new product Challenges in new product DevelopmentDevelopment

New product can fail for many reasons ignored or misinterpreted market researchOver estimate of market sizeHigh development costPoor design Incorrect positioning Inefficient advertising Inefficient distribution supportCompetitors who fight back hard

Copyright © 2009 Dorling Kindersley (India) Pvt. Ltd. 20-52

The New Product Development Decision The New Product Development Decision ProcessProcess

New Product developmentNew Product development

1. Idea Generation Marketing experts believe that greatest opportunities

and highest leverage with new product are found by uncovering the best possible set of unmet customer needs or technological innovation

Encouraged by open innovation movement, many firms are increasingly going outside the company to tap external resources.e.g. P&G connect-and-development approach to innovation.


2.Idea screening In screening idea company must avoid two types

of errors A DROP-error occurs when the company

dismisses a good idea, it is extremely easy to find fault with other peoples ideas.

A Go-error occurs when the company permits a poor idea to move into development and commercialization


The executive committee then reviews each idea against a set of criteria

Does the product meet a need? Would it offer superior value? Can it be distinctively advertised? Does the company have the necessary know how

and capital? Will the new product deliver the expected sales

volume, sales growth and profit?


3. Concept development and testing Suppose a large food processing company gets the idea

of producing a powder to add to milk to increase its nutritional value and taste

A product idea can be developed into several concepts. concept 1- An instant breakfast drink for adults who

want a quick nutritious breakfast without preparation. Concept 2-a tasty snack for children to drink as a midday

refreshment Concept 3- a health supplement for older adults to drink

in the late evening before they go to bed.


Each concept represents a category concepts that defines the product competition. An instant breakfast drink would compete against hot milk, cornflakes with cold milk, and other home made items.

A tasty snack drink would compete against soft drinks, fruit juices, sports drinks, and other thirst quenchers.


3. Concept Testing It means presenting the product concept,

symbolically or physically, to target consumers and getting their reactions.

The more the tested concepts resembles the final product or experience, the more dependable concept testing is.

Concept testing of prototypes can help to avoid costly mistakes, but it may be especially challenging with radically different, new- to-the- world products


Concept testing presents consumer with an elaborated version of concept

` Our product is powdered mixture added to milk to make an instant breakfast that gives the person all the days needed nutrition along with good taste and high convenience. The product comes in three flavors( chocolate, vanilla, and strawberry) and would come in individual packs, ten to a box, at Rs 110 a box.`


After receiving this information, researchers measure product dimensions by having consumers respond to following type of questions:

1. Communicability and believability- Are the benefits clear to you and believable? If the score are low, the concept must be refined or revised.

2.Need level- Do u see this product solving a problem or filling a need for you?

3Gap level-Do the products currently meet this need and satisfy u? the greater the gap, the higher the expected consumer interest. Marketers can multiply the need level by the gap level to produce a need –gap score. high score means the consumer sees the product as filling a strong need not satisfied by available alternatives


4.Perceived Value-Is the price reasonable in relationship to the value? The higher the perceived value, the higher is expected consumer interest.

5.Purchase Intention-Would you(definitely, probably, probably not, definitely not)buy the products? Consumers who answered the first three question positively should answer `definitely` here.


6.User targets, purchase occasions, purchasing frequency-

who would use this product, when, and how often?

Respondents answers indicate whether the concepts has a broad and strong consumer appeal, what product it compete against, and which consumer are the best targets


4.Marketing Strategy Development Following a successful concept test, a new

product manager will develop a preliminary three part strategy plan for introducing the new product into the market

The first part describe the target market size, structure, and behavior: the planed product positioning; and sales , market share, and profit goals sought in first few years


5.Business Analysis After management develops the product concept and

marketing strategy, it can evaluate the proposal business attractiveness.

Management need to prepare sales, cost and profit projection to determine whether they satisfy company objectives. If they do, the concept can move to the development stage.

Total estimated sales are sum of estimated first time sales, replacement sales, and repeat sales. Sales estimation methods depend on whether the product is purchased once, infrequently or often


6.Product Development The job of translating target customer

requirement into a working prototype is helped by a set of method known as Quality function deployment(QFD).

The methodology takes the list of desired customer attributes(CAs) generated by market research and turns them into a list of engineering attributes(E As) that engineers can use.


The R&D department will develop one or more physical versions of the product concept. it goals is to find a prototype that embodies the key attributes described in the product-concept statement, that performs safely under normal use and conditions, and that the firm can produce within budgeted manufacturing cost.

When prototype are ready, they must be put through rigorous functional tests and customer tests befor they enter the market place.

Alpha testing is testing the product within the firm to see how it performs in different applications.


After refining the prototype further, the company move to beta testing with customers

Consumer testing can take several forms, from bringing customers into a laboratory to giving them samples to use in their homes.

P&G has on site labs such as diaper testing centre where dozens of mothers bring their babies to be studied


7.Market Testing After management is satisfied with functional

and psychological performance, the product is ready to be dressed up with a brand name and packaging and put into market test.

In a authentic setting marketers can learn how large the market is and how consumers and dealers react handling, using , and repurchasing the product.


Method of consumer goods market testinga) Simulated Test marketing It calls for finding 30 qualified shoppers and questioning them

about brand familiarity and preferences in a specific product category

These consumers attend a brief screening of both well -known and new TV aids. once ad advertises the new product but is not singled out for attention.

Consumer receive a small amount of money an are invited into a store where they may buy any item. the company notes how many consumers buy the new brand and competing brands. This provides a measure of ads relative effectiveness against competition ads in stimulating trial.


b) Controlled Test Marketing In this a research firm manages panel of stores that

will carry new products for a fee. The company with the new product specifies the number of stores and geographic locations it want to test.

The research firm delivers the product to the participating stores and control shelf position; number of facings, displays, and POP and pricing.

Electronic scanners measure sales at checkout.the company can also evaluate the impact of local advertising and promotions


c) Test Markets The ultimate way to test consumer product is to put it

into full blown test markets. The company choose a few representative cities, and the sales f forece tries to sell the trade on carrying the product and giving it good self exposure.

The company puts on a full advertising and promotion campaign similar to the one it would use in national marketing

Test marketing also measures the impact of alternative marketing plans by varying the marketing program in different cities.


8) Commercialization In this process company will face its largest cost

to date.it will need to conract for manufacture or build or rent a full scale manufacturing facility.

a) When(Timing)

1.First Entry

2.Parallel Entry

3.Late Entry


b) Where(Geographic Strategy) The company must decide whether to launch the new

product in a single locality, a region, several regions, the national market, or the international market. Most will develop a planned market rollout overtime company size is also an important factor.

c) Whom(Target market Prospects) Within the rollout markets, the company must target

initial distribution and promotion to best prospect groups


d) How(introductory market strategy) A company must develop an action plan for

introducing new product into rollout markets, because new-product launches often take longer and cost more money than expected, many potentially successful offerings suffer from underfunding.

It is important to allocate sufficient time and resources-but also not overspend- as the new product gain traction in the market place

Setting Product strategySetting Product strategy


What are the characteristics of products and how do marketers classify products?

How can companies differentiate products? How can a company build and manage its

product mix and product lines?How can companies combine products to

create strong co-brands or ingredient brands?

How can companies use packaging, labeling, warranties, and guarantees as marketing tools?

What is a Product?What is a Product?

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

experiences, events, persons, places, properties, organizations, information, and

ideas.

Components of the Components of the Market OfferingMarket Offering

Attractiveness of the market

offering

Value-based prices

Product features and quality

Services mix and quality

Five Product LevelsFive Product Levels


1. Core benefits the service or benefit the customer is really buying.

E.g. hotel guest is buying `rest and sleep`2.Basic Product Marketer must turn the core benefit into a basic

benefits. Hotel room include a bed, bathroom, towels, desk, and dresser.

3. Expected Product A set of attributes and conditions buyers normally

expect when they purchase product. Hotel guest expect a clean bed, fresh towels, working lamp


4. Augmented product- that exceed customer expectation

5.Potential product It encompasses all the possible

augmentation and transformations the product or offering might undergo in the future

Product Classification Product Classification SchemesSchemes

Durability

Use

Tangibility

Durability and TangibilityDurability and Tangibility

Nondurable

goods

ServicesDurable

goods

Consumer Goods Consumer Goods ClassificationClassification

Convenience

Unsought

Shopping

Specialty

Industrial Goods Industrial Goods ClassificationClassification

Materials and parts

Supplies/

business servicesCapital items

Product DifferentiationProduct Differentiation

Product form Features Customization Performance Conformance Durability Reliability Repairability Style

Design DifferentiationDesign Differentiation

Service DifferentiationService Differentiation

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

.

Ginger Ginger Hotels has Hotels has carved a carved a profitable profitable

niche through niche through its innovative its innovative

service service configuration configuration

Developing products for rural Developing products for rural markets markets

Products should be designed keeping in mind the rural conditions

Packaging is one of the key drivers of success in rural areas

Issue of transfer and storage: Rugged packing

The issue of affordability: small-unit packsBrand elements should be decided keeping in

mind rural consumers

Product and Brand Product and Brand RelationshipRelationship

The Product Hierarchy

1. Need family The core need that underlies the existence of

a product family. E.g. security

2.Product Family All the product classes that can satisfy a core

need with reasonable effectiveness.e.g savings and income


3.Product Class A group of product within the product family

recognized as having a certain functional coherence. Also called product category. E.g. Financial Instruments.

4. Product Line A group of product between product class that are

closely related because they perform similar function, are sold to the same customer group, are marketed through a same outlet or channel.


5. Product Type A group of items within a product line that

share one of several possible forms of the product. E.g. term life insurance

6.Item(stock keeping Unit or product variant) A distinct unit within a brand or product line

distinguishable by size, price, appearance

Product MixProduct Mix A product mix is the set of all products and items a

particular seller offers for saleProduct width The width of a product mix refers to how many

different product lines the company carries. HUL is having 12 lines

Product Length The length of the product mix refers to the total no

of item in the mix (28 items in HUL)Product Depth The depth of the product mix refers to how many

variants are offered of each product in line. If Lux comes in 4 variant and 2 size then product depth is 8

Product Mix Width

Home and Personal Care Foods

personal Laundry Skin Hair Oral DeoAyurvedic Color Tea Coffee Foods

Ice Cream

wash Care Care Care personalCosmetic

Product& Health

Line Care

Length LuxSurf Excel F&L Sunsilk

Pepsodent Axe Ayush Lakme

Brook Bond Bru Kissan Kwality

Lifebuoy Rin Ponds Clinic Close-Up Rexona Lipton Knoor Wall`s

Liril Wheel Vaseline Annapurna

Hamam

Breeze

Dove

Pears

Rexona

Product Line AnalysisProduct Line AnalysisProduct Item Contributions to a Product Line’s Total Product Item Contributions to a Product Line’s Total

Sales and ProfitsSales and Profits

Line StretchingLine Stretching

Down-Market StretchDown-Market Stretch

Up-Market StretchUp-Market Stretch

Two-Way StretchTwo-Way Stretch

Line stretchingLine stretching

Every company`s product line covers a certain part of total possible range. E.g Mercedes automobiles are located in the upper price range of the automobile market.

Line stretching occurs when a company lengthens its product line beyond its current range. The company can stretch its line down-market, up-market or both.


1. Down- Market Stretch A company may want to introduce a lower priced

line for any of the three reasona) The company may notice strong growth

opportunities as mass retailers attract a growing no. of shoppers who want value price goods.

b) The company may wish to tie up lower-en competitors who might otherwise try to move up market. If the company has been attacked by a low-end competitor, it often decide to counter attack by entering the low end of the market.


c. The company may find that middle market is stagnating or declining.

2. Up market stretch company may wish to enter high end of market to

achieve more growth, to realize higher margins, or simply to position themselves as full-line manufacturer

3. Two way approach company serving in middle class market might

decide to stretch their line in both direction . E.g. Titan edge, Nebula, Xylus, Sonata. ITC soaps.

Line FillingLine Filling

PruningPruning

Pruning weak brands can strengthen the remaining brands in the line

Co-BrandingCo-Branding Marketers often combine their products from others companies

in various ways In co-branding also called dual branding or brand bundling- two

or more well known brands are combined into a joint product or marketed together in same fashion.

a. Same company co-branding- Gillette Match3 shaving system and shaving Gel

b. Joint venture co-branding--- Indian Oil and Citibank credit cardc. Multiple-sponsor co-brandingd.Ingredient Branding It is a special case of co- branding. It creates brand equity for

materials, components, or parts that are necessarily contained within other branded product

Factors Contributing to the Factors Contributing to the Emphasis on PackagingEmphasis on Packaging

Self-serviceSelf-service

Consumer affluenceConsumer affluence

Company/brand imageCompany/brand image

Innovation opportunityInnovation opportunity

.

Innovations in PackagingInnovations in Packaging

Packaging ObjectivesPackaging Objectives

Identify the brandConvey descriptive and persuasive

informationFacilitate product transportation and

protectionAssist at-home storageAid product consumption

Functions of LabelsFunctions of Labels

Identifies

Grades

Describes

Promotes

Warranties and GuaranteesWarranties and Guarantees

Creating Brand EquityCreating Brand Equity

Chapter ObjectivesChapter Objectives

What is a brand and how does branding work?

What is brand equity?How is brand equity built, measured, and

managed?What are the important decisions in

developing a branding strategy?

What is a Brand?What is a Brand?

A brand is a name, term, sign, symbol or design, or a combination of them, intended

to identify the goods or services of one seller or group of sellers and to differentiate

them from those of competitors.

The Role of BrandsThe Role of Brands

Identify the makerIdentify the maker

Simplify product handlingSimplify product handling

Organize accountingOrganize accounting

Offer legal protectionOffer legal protection

The Role of BrandsThe Role of Brands

Signify qualitySignify quality

Create barriers to entryCreate barriers to entry

Serve as a competitive advantage

Serve as a competitive advantage

Secure price premiumSecure price premium

What is Branding?What is Branding?Branding is endowing products and services with the power of the brand. It is all about creating differences between products. Marketers needs to teach consumer `who` the product is by giving it a name and another brand element to identify it- as well as what the product does and why consumer should care.Branding creates mental structures that help consumer organize their knowledge about product and services in a way that clarifies their decision making and, in process provide value to the firm

What is Branding?What is Branding?

For branding strategies to be successful and brand value to be created, consumer must be convinced there are meaningful differences among brands in the product or service categories.

Brand differences are often related to attributes or benefits of the product itself.

Gillette, 3M and others have been leaders in their product categories due to continual innovation. Other brand create competitive advantages trough non product related means,

What is Branding?What is Branding?

Marketer can apply branding virtually anywhere a consumer has a choice.

It is possible to brand a physical goods( Maggi, Lux)a service (ICICI Bank) a Store(Big Bazaar) ,a Place(Goa) etc.

Brand ElementsBrand Elements

Brand elements are those trademarkable devices that identify and differentiate brand.

Most strong brand employ multiple brand elements. Nike has the distinctive ‘swoosh’ logo, the empowering “just do it” slogan, and the “Nike” name based on the winged goodness of victory.


Marketers should choose brand element to build as much brand equity as possible.

The test of brand building ability of these element is what consumers would think or feel about the product if the brand element were all they knew.

g


Brand Element choice Criteria.1. Memorable How easily the brand element recalled and

recognized? Short brand name such as Lux,LG and Taj are memorable brand elements.

2. Meaningful Is the brand element credible and suggestive of the

corresponding category? Does it suggest something about a product ingredient or the type of person who might use brand. E.g.. Fair& Lovely, Close-up, Tropicana 100%


3. Likable Is it likable visually, verbally and in other

ways? Concrete brand name such as Scorpio, splendor, Maharaja, evoke much imagery.

4. Transferable Can the brand element be used to introduce

new product in the same or different categories?. E.g. Amazon.com. The Amazon is famous as the world biggest river, and the name suggest the wide variety of goods that could be shipped, an important descriptor of diverse range of product company now sell


5. Adaptable How adaptable and updatable is the brand

element? E.g. Lifebuoy after no. of up gradation and transformation maintain its core value proposition of ‘health’.

6.Protetible How legally protectable brand element?

E.g. Heinz glucose and Dabur glucose

Branding TermsBranding Terms

Brand line Brand mix Brand extension Sub-brand Parent brand Family brand

Line extension Category extension Branded variants Licensed product Brand dilution Brand portfolio


1. Brand Extension When a firms uses an established brand to

introduce a new brand, the product is called a brand extension.e.g. Amul Masti Dahi.

2. Line Extension In line extension parent brand covers a new

product within a product category it currently serves, such a new forms, colors ingredients and package size. E.g. lifebuoy line extensions are lifebuoy care, lifebuoy total etc.


3. Brand Line It consists of all product-original as well as line

and category extension sold under particular brand.4.Brand Mix It is the set of all brand lines that a particular seller

makes available to buyers.5.Licensed Product It is one whose brand name has been licensed to

other manufactures that actually make the product.

Brand NamingBrand Naming

Individual namesIndividual names

Blanket family namesBlanket family names

Separate family namesSeparate family names

Corporate name-individual name combo

Corporate name-individual name combo


1. Individual names P&G India has several individual brands in

different categories such as Vicks(health care),Whisper(feminine Hygiene), Ariel and Tide(fabric wash),Pantene, Head &Shoulders, Rejoice(hair care) Pamper(baby care).

A major advantage of individual name strategy is that the company does not tie its reputation to the product. If the product fails or appears to have low quality, the company name or image is not hurt.


2.Blanket family names This policy is followed by TATA. The blanket

family name of the company is used in diverse product category such as salt, tea, automobiles, and steel.

Development costs are lower with blanket names because there is no need to run `name` research or spend heavily on ad to create recognition.

Corporate image associations of innovativeness, expertise, and trust worthiness have been shown to directly influence consumer evaluation

Corporate branding strategy can lead to greater intangible value to firm.


3.

Devising a Branding StrategyDevising a Branding Strategy

Develop new brand elements

Develop new brand elements

Apply existing brand elements

Apply existing brand elements

Use a combination of old and new

Use a combination of old and new

What is Brand Equity?What is Brand Equity?

Brand equity is the added value endowed on products and services, which may be reflected in the way consumers, think, feel, and act with respect to the brand.Brand equity is a set of assets(and liabilities) liked to a brand`s name and symbol that adds to (or subtracts from) the value provided by a product or service to a firm and /or that firm`s customers

Brand Equity ComponentsBrand Equity Components

Brand AwarenessBrand Awareness

Brand LoyaltyBrand Loyalty

Perceived qualityPerceived quality

Brand associationsBrand associations

Brandawareness

BrandEquity

Brandloyalty

Perceivedquality

Brandassociation

Other brand assets

•Reduced marketing cost•Trade leverage•Attracting new customer•Respond to competitive threat

•Familiarity-liking

•Brand to beconsidered

•Reason to buy•Price•Channel memberInterest•Extensions

•Reason to buy•Create positiveAttitude•Extensions

CompetitiveAdvantage

Provide value to The customer by enhancingCustomer`s•Interpretation/Processing of Information

•Confidence in thePurchase decision

Use satisfaction

Provide valueTo the firm byEnhancing•Efficiency andEffectiveness of Marketing programs•Brand Loyalty•Prices•Brand extensions•Trade leverage•Competitive advantage

Brand AwarenessBrand Awareness

Awareness refer to the strength of the brand`s presence in the consumer mind.

Awareness is measured according to the different ways in which consumers remember a brand ranging from recognition(have you been exposed to this brand before?) to recall(what brands of this product class can u recall?) to top in mind(the first brand recalled) to dominant(the only brand recalled)


Perceived quality is usually at the heart of what customers are buying, and in that sense, it is a bottom-line measure of the impact of a brand identity.

Perceived quality reflects a measure of goodness that spread over all elements of the brand.

Even when the brand identity is define by functional benefits, most studies will show that perceptions about those benefits are closely related to perceived quality


Achieving perception of quality is usually impossible unless the quality claim has substance.

Percieved quality may differ from actual quality for a variety of reasons

Firstly, consumer may be overly influenced by a previous image of poor quality.

Second, a company may be achieving quality on a dimension that consumer do not consider important.


Third, consumers rarely have all information necessary to make a rational and objective judgment on quality- even if they do have information, they may lack the time and motivation to process it.

As a result, they rely on one or two cue that they associate with quality; the key to influencing perceived quality is understanding and managing these cues properly.

Brand loyaltyBrand loyalty

Brand loyalty is a key consideration when placing a value on a brand that is to be bought or sold,because a highly loyal customer can be expected to generate a very predictable sales and profit.

It is simply much less costly to retain customers than to attract new customer.

n


The loyalty of existing customers also represents a substantial entry barrier to the competitors in part because the cost of enticing customers to change loyalties is often prohibitively expensive.

Loyalty Segmentation

A market can usually be divided in the following groups


Noncustomers(Those who buy competitor brands or are not product class users)

Price Switchers(Those who are price sensitive)

The Passively Loyal(Those who buy out of habit rather than reason)

Fence Sitters(Those who are indifferent between two or more brand

Committed


The Challenge is To improve Brand Loyalty Profile To increase no. of customers who are not

price switchers. To strengthen the fence sitters and

committed ties to the brand To segment in which firms often under

invest r passive loyal and the committed customers

Brand AssociationsBrand Associations

It is the associations that consumer make with a brand.

These association might includes product attributes, a celebrity Spokesperson or brand symbol.e

Brand associations are driven by the brand identity-what the organization wants the brand to stand for in the customers mind.

Measuring Brand EquityMeasuring Brand Equity

Young &Rubicam`s Brand asset Valuator A major global add agency,who measured brand

equity for 450 global brands and more than 8000 local brands in 24 countries.

Each brand was examined using a 32 item Questionnaire that included,in addition to a set of brand personality scales, four set of measures

1 Differentiation- Measures how distinctive the brand is in market place


2.Relevance-Measure whether the brand has personal relevance for the respondant.is it meaningful to them? Is it personality appropriate?

3.Esteem- Measures whether a brand is held in high regard and considered the best in class. closely related to perceived quality and the extent to which the brand is growing popularity.

4.Knowledge- A measure of understanding as to what a brand stands for.

g


Differentiation multipied by Relevance =Brand Strenghth If there is no point of difference, a brand value will be

low. The Y&R model hypothesise that a new brand with

ambiton to become strong must start by developing a point of real differentiation .conversely a loss in differentiation is usually the first sign that a strong brand is fading.


Relevance comes next, unless a brand is relevant to significant segment, it will not attract a large customer base.

Ferrari and Jaguar are very high in differentiation but extremely low in relevance.

Brand Strength It represents differentiation multiplied by

relevance.the logic is that a brand must have both characteristic in order to be strong.


Esteem multiplied by Knowledge=Brand Stature Esteem combines perceived quality with perceptions of a

growth or decline in popularity. on average, esteem is largely based on perceived quality. but there are brands for which a decline or growth in popularity affects esteem.

Knowledge indicates that customer not only is aware of the brand but also understands what the brand stand for.the true understanding of the brand is culmination of brand building effort.

Unlike awareness, it is not simply built by exposures; rather it is generated by real customer intimacy with the brand.


Comparing Esteem and knowledge Comparing a brands esteem with its knowledge often

provides some important insights.for instances, some brand rank higher in esteem than in knowledge. this means that relatively few people understand what the brand stand for but those who hold it in high regard.

A brand in this situation is likely to have some unrealized potential which it may or may not be poised to take advantage of – it can find a way to expand knowledge.


Conversely a brand may have knowledge but low esteem. this means that more people know what the brand stands for,but relatively few hold it in high regards.e.g. MTV ,cigarette and alcohol brands.

High stature brand such as coke, Hallmark considered to have a rich heritage and identity.

Interbrand's Top BrandsInterbrand's Top Brands

Interbrand,a UK-based branding cosulting company, used a very different approach to identify the strongest brands in the world.its asset of crieteria,chossen subjectivity, included the business prospects of the brand and brands market environment, as well as consumer perception. 500 brands were evaluated based on 7 crieterias


1.Leadership This criteria reflects economies of scale for the first

place brand in communication and distribution, as well problem also brand have

in maintaining distribution and avoiding price erosion.

2.Stability Long-lived brands with identities that have become

part of the fabric market-and even the culture-are particularly powerful and valuable.


3.Market Brands r more valuable when they r in markets

with growing or stable sales levels and a price structure in which successful firms can be profitable

4.International Brands that r international are more valuable

than national or regional brand in part because of economies of scales .


5.Trend The overall long term trend of the brand in terms of

sales can be expected to reflect future prospects. A healthy growing brand indicates that it remains contemporary and relevant to consumers.

6.Support Brands that have received consistent investment and

focused support r regarded as stronger than those that have not.However quality of support should be considered along with level of support.


7.Protection The strength and breadth of a brand`s legal

trademark protection is critical to the brands strength.

The Brand Equity TenThe Brand Equity Ten

The ten measure were chosen on the basis of 4 criteria set forth

A)Loyality measures

1.Price premium

2.satisfation/ Loyality

B)Perceived Quality/ Leadership Measures

3.Perceived Quality

4.Leadership/Popularity


C) Associations/Differentiation Measures5.Perceived Value6.Brand Personality7.Organisational AssociationD) Awareness Measures8 Brand AwarenessE) Market Behavior Measures9.Market price 10. Market price and Distribution Coverage


1.Price premium A basic indicator of loyalty is the amount a

customer will pay for the brand in comparison with another brand offering similar or fewer benefits.

In measuring price premium, it is useful to segment the market by loyality.e.g. the market might be divided into loyal buyers of the reference brand, customer who r brand swithers,and noncustomers. Each group,of course, will have very different perspective on the equity of the reference brand.


The price premium measure is defined with respect to a competitors or a set competitors, who must be clearly specified. a set of competitors is usualy prefered for measurement, because the brand equity of a single competitors can decline while eqity of other competitors remains stable.


2.Customer satisfaction/ loyality Satisfaction is a direct measure of how willing

customers are to stick to a brand.Problem/ Cautions An important limitation of satisfaction

measures is that they don’t really apply to noncustomers.thus,there is really no measure of the extent of brand equity beyond the customer base


3.Perceived QualityPerceived quality can be measured with scale

such as High quality versus shoddy quality Best in category versus worst in category Consistent quality versus inconsistent quality Finest quality versus average quality versus

inferior quality


4.Leadership and popularity Leadership has 3 dimensions. first, it reflects in

part the `number one`syndrome.the logic is that if enough customers are buying into the brand concept to make it the sales leader, it must have merit.

Second, leadership taps the dynamics of customer acceptance. third it can also tap innovation within a product class-i.e. whether a brand is moving ahead technologically.


5.Value The value propositon,which usually invoves a

functional benefits,is basic to the brand in most product classes.if the brand does not generate value it is vulnerable to the competitors.

Brand value thus can be measured by the folloeings Whether the brand proves good value for the

money Whether there is a reason to buy this brand over

others


6.Brand personality For some brands, the brand personality provides links to

the brands emotional and self expressive benefits as well as a basis for brand customer relationships and differntiation.

Candidate scales might include the following Does this brand have a personality? Is this brand interesting? I have a clear image of the type of person who would

use the brand. This brand has a rich history.


7.Organizational Associations It is particularly likely to be factor when the brands

are with respect to attributes, when the organization is visible or when corporate brand is involved.

To tap the brand as organization, following scale could be considered

This brand is made by an organization I would trust. I admire the brand X organization. I would be proud(or pleased) to do business with the

brand X organization.

Building BrandsBuilding Brands

Brand Building Task

g

BrandBuilding

Build associationsCreate differentiation

CreateVisibility

Develop deepRelationship

Brand BuildingBrand Building

Implementation of brand strategy usually focuses on creating(or enhancing) visibility, brand associations, and deep customer relationships. each of these task is guided by brand identity and brand position.

The power of visibility is often underestimated. Brand such as coke have developed dominant market positions largely on the basis of sheer presence.


Such visibility not only can stimulate consideration at every purchase, it can also affects perceptions.

A brand such as Intel is given credit for leadership,success,quality,and even excitement and energy , mostly because of its visibility.


Visibility has several components, including recognition(have u heard of this brand),unaided recall(what brands do u know) and top of the mind status(what is the first brand that comes to your mind)in the consumer buying process and brand attitude structure.

The relative importance of each will depend on the competitive context. for a small or emerging brand in a big market, recognition might be major objecti ve.in other situations, recall is more important in building strong brand.


Creating a deep relationship-Find customers sweet spot

Developing a deep relationship with a segment of customers is usually much more important than sheer nos. might suggest. Not only do loyal committed customers influence others, but they provide a stable sales base.

Not all brands can create a large core group of committed customers, but for those that can, it can be a significant asset.

Brand BuildingBrand BuildingThe customer Relationship Model Customer

Brand Self concept

DrivingIdea

Brand ImageBrand IdentityValue PropositionBrand Position

PossessionsSweet SpotActivities andInterestValues andBeliefs

BrandBuildingprograms

DeepRelationshipIntenseFBEBSEB


A brand cannot develop deep relationship without a rich insightful understanding of the customer. The need is to find the customers sweet spot, that part of his or her life that represents significant involvement and commitment and/or express who they are-their self-concept.

One way to find sweet spot is to look at existing committed customers. Why do such people have such strong attachment to the brand? it also helps to use qualitative research that is designed to look beyond the obvious to find deeper motivations.


The key is to learn customers as as individuals rather than about the customers as groups.

2.Value and Beliefs A customers set of values and belief represents

the essence of that person, what he or she stands for.

3.Activities and Interest A brand can connect by becoming integral part

of activity and interests and delivering exceptional functional benefits


Driving IdeaA good driving idea will precipitate programs

that Built the brand by creating visibility ,

associations, and relationships. Resonate with customer Break out of the clutter. driving idea is inspired by customer sweet

spot.

Brand Building beyond Brand Building beyond AdvertisingAdvertising

1. Clarify the brand identity, value proposition, position2. Find the sweet spot3. Find the driving idea4. Involve the customer5. Surround the customer6. Target7. Break out the clutter8. Link the brand building to the brand9. Strive for authenticity and substance10. Stretch the brand building program


1.Clarify yours brand`s identity, value proposition, and position

A clear brand identity with depth and texture will guide those designing and implementing the communication programs so that they don’t inadvertently send conflicting or confusing messages to the cutomer

Both Nike and Adidas saw brand building effectiveness improve markedly when they review and sharpened their brand identities


2 Find the sweet spot A brand –building program should strive to

understand the customers in depth and their spots, those elements that are central to their lives and self-concepts.

Finding a sweet spot and a way to make the brand a part of it is the route to a deep relationship and a core group of committed loyal customers.

Maggie's passion for cooking was the sweet spot for their loyalist group.


3.Find the driving Idea Find the driving idea, a concept that will build the

brand by resonating with customers and breaking out of the competitive clutter.

This driving idea should become a hub or central concept around which a set of coordinated brand building programs can be developed.

The source of driving idea can be the customer and an identified sweet spot or it can be brand(personality,the symbol, or the product itself)


4.Involve the customer Relationships are strengthened when the

participants become actively engaged and involved.

Consumer weigh prior interaction with a brand more heavily than subsequent information about it.

Addidas street ball challenge


5.Surround the customer Surround the customer with a set of mutually

reinforcing brand building program like those of Maggi,Nike,or Mastercard.

There is a natural temptation to manage each brand-building approach separately, but research in a variety of contexts has shown that multiple media are synergistic rather than additive

There can even be more than one lead vehicle- Nike for example, uses media advertising, endorsements from top athletes and Nike town.


6.Target Brand building needs to target the customer or

segment in order to resonate; most brand start to become diffuse when the segmentation strategy gets fuzzy

A balance must be found , however, between being so focused that the brand lacks a wide appeal and so broad that the brand mean nothing.

Amazons e-mail communication- skillfuly tailor a message to an individuals


7.Break out of the clutter There is a clutter not only in the advertising

context but also in virtually all alternative brand-building approaches.

A brand needs to surprise and perhaps even shock the consumer in a positive way, whether implementing familiar programs in an innovative way or by creating new program

Nike town, Addidas street ball challenge.


8.Link the brand building to the brand To build strong brands, the execution needs to be

brilliant in all respects; good isn`t good enough. But brilliance needs to be linked clearly to the brand, rather than separate force that overwhelms it.

Advertising practitioners are too familiar with having breathtakingly creative ads that are remembered and even talked about even though few can recall the involved brand.


9.Strive for authenticity and substance Authenticity is a powerful brand association, and one

test of the brand building programs is whether they contribute to the brand`s authenticity.

The position and identity elements should be communicated in a way that attaches genuine feeling to the brand and makes it a legitimate owner of the desired association.

g

Brand Building ProcessBrand Building Process

Analysis of brand environmentAnalysis of brand environment

Setting the brand VisionSetting the brand Vision

Determining brand valuesDetermining brand values

Defining brand objectives Defining brand objectives

Crafting appropriate brand strategy

Crafting appropriate brand strategy

Developing an effective implementation Plan

Developing an effective implementation Plan


a) Analysis of brand environment External environment analysis typically follows all

environmental forces. The internal environment of thye brand involves

understanding the degree of commitment and confidence employees have in the brand

b) Brand Vision The brand environment analysis helps to identify opportunities

and threats. Based on such identification, brand strategists need to decide

where they see the brand over a period of time- 10 years


While defining the vision , one has to keep in mind that dream alone is not enough. It has to be backup with action plan.

Contribution from the employyes at the bottom of hierarchy is as important as the top man communicating his dream

Often sales conferences, management meeting, and even informal get together can help create a shared vison of brand


c) Brand values There are tangible and intangible beliefs that a

marketer wishes to create about a brand. E.g. if the tangible value is technology

leadership in the product category, then the brand has to continuously leap frog and be the first to introduce the latest features in the product.

Intangible values relate the convenience, comfort, service, self-esteem


d) Brand Objectives The vision statement also helps the strategist to define

short, medium, and long term brand objectives. Short and medium term objectives will relate to brand

awareness, market penetration, and communication to the target market

In the case of multiple variant of brand, the firm has to ensure outlets stock all these variants.

Also the sale of each variant across each outlet in different markets can help refine the brand`s sales and market share objectives


e) Brand strategy Strategy is a set of actions deliberately

chosen, after careful evaluation of alternatives, to help the strategist actualize his vision and achieve the brand`s long term objectives.

Strategy is required because there are multiple alternatives to achieving brand vision. The brand strategy could be leader strategy, a follower, or a niche strategy


f) Implementation plan An implementation plan refers to the

development of an intgrated set of cues which reinforce the brand image in the target market

Hence the marketer has to develop an integrated cue set. This include


Packaging

Point of Purchase(POP) Material Retail Outlet. Marketing communication Event management and sponsorship Co-branding

Reasons for Brand PortfoliosReasons for Brand Portfolios

Increasing shelf presence and retailer dependence in the store

Attracting consumers seeking varietyIncreasing internal competition within the

firmYielding economies of scale in advertising,

sales, merchandising, and distribution

Delivering ValueDelivering Value

Designing and managing Designing and managing integrated Marketing integrated Marketing

ChannelsChannels

Chapter objectiveChapter objective

What is a marketing channel system and value network?

What work do marketing channels perform? How should channels be designed? What decisions do companies face in managing

their channels? How should companies integrate channels and

manage channel conflict? What are the key issues with e-commerce?

What is a Marketing Channel?What is a Marketing Channel?

A marketing channel system is the particular set of interdependent

organizations involved in the process of making a product or service available for

use or consumption.

Channels and Channels and Marketing DecisionsMarketing Decisions

A push strategy uses the manufacturer’s sales force, trade promotion money, and other means to induce intermediaries to carry, promote, and sell the product to end users.

A pull strategy uses advertising, promotion, and other forms of communication to persuade consumers to demand the product from intermediaries.

Channel DevelopmentChannel Development

Deciding on the best channel might not be a problem; the problem is often to convince the available intermediaries to handle the firm`s line.

If the firm is successful, it might branch into new markets and use different channel in different market.

In smaller market firm might sell directly to retailer; in larger markets, it might sell through distributor. In rural areas, it might work with general good merchant.

Hybrid ChannelsHybrid Channels

Today`s successful companies are also multiplying the no. of channels in any one market area.

E.g. Dell, HP has used its sales force to sell to the large accounts, outbound telemarketing to sell to sell to medium size accounts, direct mail with an inbound no. to sell to small accounts, retailers to sell to still smaller accounts, and internet to sell specialty items.

Companies that manage hybrid channels must make sure these channels work well together and match each target customers preferred way of doing business.

Buyer Expectations for Buyer Expectations for Channel IntegrationChannel Integration

Ability to order a product online and pick it up at a convenient retail location

Ability to return an online-ordered product to a nearby store

Right to receive discounts based on total online and offline purchases

Rural Distribution Rural Distribution Traditional Channels for Reaching Out to Rural Customers• Haats• Mandis• Melas

Innovative DistributionChannels for RuralMarkets• Hub and Spoke• Model• Mobile shops and offices• Linkage with community

based organizations(SHGs, NGOs, andcooperatives

Understanding Customer Understanding Customer NeedsNeeds

Consumers may choose the channels they prefer based on number of factors; the price, product assortment, and convenience of a channel option, as well as their own particular goals(economic social, or experiential)

In many market buyers fall into one of four categories

Understanding Customer Understanding Customer NeedsNeeds

a) Habitual Shoppers- purchase from the same places in the same manner overtime

b) High- value deal seeker- know their needs an go for channel surfing, purchase from the channel who give best deal at lowest possible price.

c) Variety –loving shoppers- gather information in all channel, take advantage of high touch services, and then buy in their favorite channel, regardless of price.

d) High-involvement shoppers- gather information in all channels, make their purchase in low cost channel, but take advantage of customer support from a high touch channel

Value NetworkValue Network It is a system of parternership and alliances that a firm create

to source, augment, and deliver its offering. The company should first think of the target market and than

design supply chain backward from that point. This view is called demand chain Planning

Demand chain planning yields several insights. First, the company can estimate whether more money is made upstream or downstream., in case it might want to integrate backward or forward.

Second, the company is more aware of disturbances anywhere in the supply chain that might cause costs, prices, or supplies to change suddenly.

Third, company can go online with their business partner to carry on faster and more accurate communications, transactions, and payments to reduce costs, speed up information, and increase accuracy.

Channel Member FunctionsChannel Member Functions

Gather information Develop and disseminate persuasive

communications Reach agreements on price and terms Acquire funds to finance inventories Assume risks Provide for storage Provide for buyers’ payment of their bills Oversee actual transfer of ownership

Marketing Channel FlowsMarketing Channel Flows

Consumer Marketing ChannelsConsumer Marketing Channels

Industrial Marketing ChannelsIndustrial Marketing Channels

Designing a Designing a Marketing Channel SystemMarketing Channel System

Analyze customer needs

Evaluate major channel alternatives

Identify major channel alternatives

Establish channel objectives

Type of IntermediariesType of Intermediaries

A firm needs to identify the types of intermediaries available to carry on its channel work.

Company should search for innovative marketing channels.HUL`s operation shakti, involves self-help groups(SHGs) of women to distribute its products in rural areas;ITC choupal also fall in this category.

Sometimes a company chooses a new or unconventional channel because of difficulty, cost, or ineffectiveness of working with dominant channel.e.g Eureka Forbes

Number of intermediariesNumber of intermediaries Companies must decide on the number of intermediaries to use

at each channel level. Three strategies are available: exclusive, selective and intensive

distributiona) Exclusive distribution It means severely limiting the number of intermediaries. Its

appropriate when the producer wants to maintain control over the service level and output offered by the reseller.

b) Selective Distribution It relies on more than a few but less than all of the

intermediaries willing to carry a particular product. It make sense for establish companies and for new companies seeking distributors

Number of intermediariesNumber of intermediaries

The company does not need to worry about too many outlets; it can gain adequate market coverage with more control and less cost than intensive distribution.

c) Intensive distribution In this manufacturers places the goods or

services in as many outlet as possible. This strategy is generally used by items such as snack foods, soft drinks.

Terms and responsibilities of Terms and responsibilities of channel memberschannel members

Each channel member must be treated respectfully and given the opportunity to be profitable.

The main element in trade relation mix are price policies, conditions of sales, territorial right and specific services to be performed by each party.

Terms and responsibilities of Terms and responsibilities of channel memberschannel members

a) Price policy- it calls for the producer to establish a price list and schedule of discounts and allowances intermediaries see as equitable and sufficient.

b) Conditions of sale- refers to payment terms and producer guarantees

c) Distributors territorial rightsd) Mutual services and responsibility

Evaluating the major alternativesEvaluating the major alternatives The Value-Adds vs. Costs of Different The Value-Adds vs. Costs of Different

ChannelsChannels

Break-Even Chart for the Choice Between a Break-Even Chart for the Choice Between a Company Sales Force and Manufacturer’s Company Sales Force and Manufacturer’s

Sales AgencySales Agency

Channel management Channel management decisiondecision

a) Selecting a channel to facilitate channel member selection, produce

should determine what characteristics distinguish the better intermediaries.

They should evaluate the no. of year of business, other line carried, growth and profit record, financial strength, cooperativeness, and service reputation

If intermediaries are sales agents, producer should evaluate the no. and character of other lines carried and the size and quality of the sales force.

Training and Motivating Training and Motivating channel Memberschannel Members

A company needs to view its intermediaries in the same way it views its end users

It needs to determine intermediaries needs and construct a channel positioning such that its channel offering is tailored to provide superior value to these intermediaries

The company should plan and implement careful training programs, market research programs and other capability building programs to improve intermediaries performance.


Producer varies greatly in the skill in managing distributors

Channel power is the ability to alter channel member behavior so that they take actions they would not have taken otherwise.

a) Coercive Power a manufacturer threatens to withdraw a resource or

terminate a relationship if intermediaries fails to cooperate.

This power can be effective but its exercise producers resentment and can generate conflict and lead the intermediaries to organize countervailing power.


b) Reward power The manufacturer offers intermediaries an

extra benefit for performing specific act or functions

Reward power typically produces better results than coercive power, but it can be overrarted.The intermediaries may come to expect a reward every time the manufacturer want a certain behavior to occur


c)Legitimate power The manufacturer requests a behavior that is warranted under

the contract. As long as the intermediaries view the manufacture as a legitimate leader, legitimate power works.

d) Expert power The manufacturer has special knowledge the intermediaries

value. Once the intermediaries acquire this expertise, the expert power weaken.

The manufacturer must continue to develop new expertise so that the intermediaries will want to continue cooperating.

e) Referent Power The manufacturer is so highly respected that intermediaries are

proud to be associated with it,

Evaluating channel MembersEvaluating channel Members

Producer must periodically evaluate intermarries performance against such standards as sales-quota attainment, average inventory level, customer delivery time, treatment of damaged and lost goods, and cooperation in promotional and training program.

producer should set up functional discounts in which they pay specific amounts for the trade channel performance of each agreed-upon service.

Underperformers need to be counseled, retained, motivated or terminated.

Evaluating channel MemberEvaluating channel Member

Producer must periodically evaluate intermediaries performance against such standards as sales-quota attainment, average inventory levels, customer delivery time, treatment of damaged and lost goods, and cooperation in promotional and training programs.

Producer should set up functional discounts in which they pay specified amounts for the trade channel`s performance of each agreed-upon service.

Under performance need to be counseled, retrained motivated, or terminated.

Modifying Channel Design Modifying Channel Design and Arrangementsand Arrangements

A producer must periodically review and modify its channel design and arrangements

He needs to modify them when the distribution channel is not working as planned, consumer buying pattern change, the market expands, new competition arises, innovative distribution channel emerge, and the product moves into later stages in the product life cycle.

Channel Integration and SystemsChannel Integration and Systems

Vertical marketing systems

Corporate VMS Administered VMS Contractual VMS Horizontal

marketing systems Multichannel

systems


1. Vertical Marketing System It comprises the producer, wholesaler and retailer

acting as a unified system. One channel member, the channel caption, owns the others or franchises them or has so much power that they all cooperate.

a) Corporate VMS It combines successive stages of production and

distribution under single ownership.b) Administered VMS It coordinates successive stages of production and

distribution through the size and power of one of the members manf. dominant brand are able to secure strong trade cooperation and support from reseller.


c)Contractual VMS It consists of independent firms at different levels

of production and distribution, integrating their programs on a contractual basis to obtain more economies or sales impact than they could achieve alone.e.g wholesaler sponsored voluntary chain.

2.Horizontal Marketing Systems In this system two or more unrelated companies

put together resources or programs to exploit an emerging marketing opportunity.

e.g. HUL entering strategic tie up with PepsiCo India for bottling and distribution of Lipton RTD.

Channel ConflictChannel Conflict

Channel conflict occurs when one member’s actions prevent another channel from achieving its goal.

Types of channel conflict– Vertical– Horizontal– Multichannel

Channel ConflictChannel Conflict

a) Vertical channel conflict It means a conflict between different levels within

the same channel. E.g. HUL came into conflict with its distributors in Kerala.

b) Horizontal Channel conflict It involves a conflict between members at same

level within the channel. Dealers frequently get into conflict with each other

for the transgression of the domain of operation and under cutting.

c) Multichannel Conflict It exists when the manufacturer has established

two or more channel that sell to the same market.

Causes of Channel ConflictCauses of Channel Conflict

Goal incompatibility

Unclear roles and rights

Differences in perception

Intermediaries’ dependence

on the manufacturer

Causes of Channel ConflictCauses of Channel Conflict

a) Goal incompatibility The manufacturer may want to achieve rapid market

penetration through a low-price policy. Dealers, in contrast, may prefer to work with high margins and pursue short-run profitability.

b)Unclear roles and right Territory boundaries and credit for sales often produce conflictc) Differences in perception The manufacturer may be optimistic about short –term

economic outlook and want dealers high inventory. Dealer may be pessimistic.

d)Intermediaries dependence on the manufacturers The fortunes of exclusive dealers, such as auto dealer, are

profoundly affected by manufacturers product and pricing decisions.

Managing channel conflictManaging channel conflict

As companies add channels to grow sales, they run risk of creating channel conflict.

Some channel conflict can be constructive and lead a better adaptation to a changing environment, but too much conflict is dysfunctional. So ways of effective conflict management are

a) Adoption of super ordinate goal Channel members come to an agreement on the

fundamental goal they are jointly seeking, whether it is survival, market share, high quality or customer satisfaction.

They usually do this when the channel faces an outside threats, such as more efficient competitions

Managing channel conflictManaging channel conflict

b)Exchange of personc)Joint membership in trade associationd) Cooptation It is an effort by one organization to win the support of the

leaders of other organization by including them in advisory councils, boards of director and likes.

e)Diplomacy mediation , or arbitration Diplomacy takes place when each sides sends a person or group

to meet with its counterpart to resolve the conflict. Mediation means resorting to a neutral third party skilled in

conciliating the two party interests Arbitration occurs when two parties agree to present their

arguments to one or more arbitrators and accept arbitration decision

Managing retailing, Managing retailing, Wholesaling, and logisticsWholesaling, and logistics

1

Tata Steel has Tata Steel has entered entered

organized organized steel retailing steel retailing

through through steeljunction® steeljunction®

What is Retailing?What is Retailing?

Retailing includes all the activities involved in selling goods or services

directly to final consumers for personal, nonbusiness use.

Major Retailer TypesMajor Retailer Types

Specialty storeDepartment storeSupermarketConvenience store

Discount storeOff-price retailerSuperstoreCatalog showroom

1

Levels of Retail ServiceLevels of Retail Service

Self-service

Self-selection

Limited service

Full service

Levels of Retail ServiceLevels of Retail Service

1. Self services- many customer are willing to carry out their own locate- compare- select process to save money.

2. Self selection- customer find their own goods, although they can ask for assistance

3.Limited services-4 full service- sales people are ready to assist in

every phase of the locate- compare-select process.

Retailers’ Marketing Retailers’ Marketing DecisionsDecisions

Target market

Product assortment

Procurement

Prices

Services

Retailers’ Marketing Retailers’ Marketing Decisions (cont.)Decisions (cont.)

Store atmosphere

Store activities

Communications

Locations

Marketing DecisionsMarketing Decisions

a) Target Market Until it defines and profiles the target market, the

retailer cannot make consistent decisions about product assortment, store décor, advertising message and media, price, and service level.

b) Product assortment Retailer decide on product assortment keeping in the

mind of the requirement of their target customers. The retailer has to decide on the product assortment

breadth(no of categories ) and depth varient of each category

The next challenge for a store is to develop a product differentiation strategy


b) Procurement Retailers are rapidly improving their skills in

demand forecasting, merchandise selection, stock control, space location and control.

Stores are using direct product profitability(DPP) to measure products handling cost( receiving, moving to storage, paperwork, selecting checking, loading and space cost) from the time it reaches the warehouse until a customer buy it in the retail store.


c) Prices It is key positioning factor and msut be decided in

relation to the target market, the product and service assortment mix, and the competition

Most retailer fall into high-markup, lower volume group(fine specialty product) or lower markup, higher volume group(mass merchandising and discount stores)

Retailers must also pay attention to pricing tactics. Most retailers will put low prices on some items to serve as traffic builder or loss leaders or to signal their pricing policies.


d)Services The service mix is a key tool for differentiating

one store to another. Retailer must decide on the services mix to offer customer

a) Pre purchase services include accepting telephone and mails orders, advertising.

b) Post purchase service include shipping and delivery, gift wrapping, alternation and tailoring.

c) Ancillary service include general information, check cashing, parking, restaurants, and baby attendant service


e) Communications Retailer use a wide range of communication

tools to generate traffic and purchase. They place ads , run special sales, issue

money saving coupon and run frequent shopper reward programs, in –store food sampling, and coupon on shelves or checkout points.

They will also work with manufacturer to design point- of- sale material that reflect the retailer`s image as well as that of the manufacturer `s brand


f) Location Decision In view of the relationship between high

traffic and high rents, retailers must decide on the most advantageous locations for their outlets, using traffic counts, surveys of consumer shopping habits, and analysis of competitive locations

Location DecisionLocation Decision

Central business districts Regional shopping centers Community shopping

centers Shopping strips Location within a larger

store

Indicators of Sales EffectivenessIndicators of Sales Effectiveness

Number of people passing by

% who enter store

% of those who buy

Average amount

spent per sale

Organized rural retailing Organized rural retailing

Rural retail has a large potentialTraditionally rural retail was done by local

tradersSome companies have entered organized rural

retailHariyali Kissan Bazaar, is a pioneer in new

format rural retailingChaupal Sagar by ITC acts as a collection

centre as well as retail outlet

WholesalingWholesaling

Wholesaling includes all the activities in selling goods or services to those who buy for resale or business use.

Why do manufacturer not sell directly to retailers or final consumers? Why are wholesalers used at all?

Wholesalers are more efficient in performing one or more of the following function

Wholesaling FunctionsWholesaling Functions

Selling and promoting

Buying and assortment building

Bulk breakingWarehousing

TransportationFinancingRisk bearingMarket informationManagement

services and counseling

Market Logistics PlanningMarket Logistics Planning

Deciding on the company’s value proposition to its customers

Deciding on the best channel design and network strategy

Developing operational excellenceImplementing the solution

Market LogisticsMarket Logistics

Sales forecastingDistribution

schedulingProduction plansFinished-goods

inventory decisionsPackaging

In-plant warehousing

Shipping-room processing

Outbound transportation

Field warehousingCustomer delivery

and servicing

What are What are Integrated Logistics Systems?Integrated Logistics Systems?

An integrated logistics system (ILS) includes materials management, material flow systems, and physical distribution, aided by information

technology.

Market Logistics DecisionsMarket Logistics Decisions

How should orders be handled?

Where should stock be located?

How much stock should be held?

How should goods be shipped?

Market Logistics DecisionMarket Logistics Decision

Order processing

Warehousing

Inventory

Transportation

Determining Optimal Order Determining Optimal Order Quantity Quantity

Transportation FactorsTransportation Factors

Speed Frequency Dependability Capability Availability Traceability Cost

Communicating ValueCommunicating Value

Designing and managing Designing and managing integrated marketing integrated marketing

communicationscommunications

Chapter objectiveChapter objective

What is the role of marketing communications? How do marketing communications work? What are the major steps in developing effective

communications? What is the communications mix and how should

it be set? What is an integrated marketing communications

program?

What are What are Marketing Communications?Marketing Communications?Marketing communications are the means

by which firms attempt to inform, persuade, and remind consumers, directly

or indirectly, about the products and brands they sell.

Marketing Communications MixMarketing Communications Mix

AdvertisingSales promotionEvents and

experiencesPublic relations and

publicity

Direct marketingInteractive

marketingWord-of-mouth

marketingPersonal selling


a) Advertising Any paid form of nonpersonal presentation and promotion of

ideas, goods, or services by an identified sponsor.b) Sales permotion A variety of short term incentive to encourage trial or purcahse

of product or services.c)Events and experience Company sponsored activities and programs designed to create

daily or special brand related interactiond)Public relation and publicity A variety of program designed to promote or protect a

company image or its individual product


e) Direct Marketing Use of mail, telephone, fax, e-mail or internet to communicate

directly with specific customers and prospects.f) Interactive Marketing Online activity and program designed to engage customers or

prospect and directly or indirectly raise awareness, improve image.g) word-of-mouth marketing People to people oral, written, or electronic communication that

relate to merits or experiences of purchasing or using products or services

h) Personal Selling Face to face interaction with one or more prospective purchasers for

the purpose of making presentation, answering questions and procuring orders

Communication PlatformsCommunication Platforms

Advertising Print and broadcast ads Packaging inserts Motion pictures Brochures and booklets Posters Billboards POP displays Logos Videotapes

Sales Promotion Contests, games,

sweepstakes Premiums Sampling Trade shows, exhibits Coupons Rebates Entertainment Continuity programs

IMC Builds BrandsIMC Builds Brands


Events/ ExperiencesSportsEntertainmentFestivalsArtsCausesFactory toursCompany museumsStreet activities

Public Relations Press kits Speeches Seminars Annual reports Charitable donations Publications Community relations Lobbying Identity media Company magazine

Special Special events to events to promote promote Scorpio Scorpio

during its during its launch launch

campaign campaign


Personal Selling Sales presentations Sales meetings Incentive programs Samples Fairs and trade shows

Direct Marketing Catalogs Mailings Telemarketing Electronic shopping TV shopping Fax mail E-mail Voice mail Blogs Websites

Word-of-Mouth MarketingWord-of-Mouth Marketing

Person-to-person Chat rooms Blogs

Elements in the Communications Elements in the Communications ProcessProcess

Response Hierarchy ModelsResponse Hierarchy Models

Response Hierarchy ModelsResponse Hierarchy Models

All these model assume that buyer passes through cognitive, affective and behavioral stage.

`learn-feel-do` sequence is appropriate when the audience has high involvement with a product category perceived to have a high differentiation such as automobile house.

Do –feel-learn is relevant when the audience has high involvement but perceive little or no differentiation with product category.e.g Airline ticket or PC.

Learn-do-feel is relevant when the audience has low involvement and perceives little differentiation within the product category. E.g. FMCG

Response Hierarchy ModelsResponse Hierarchy ModelsHierarchy- of –effect model in context of marketing communication campaigna) Awareness if most of the target audience is unware of the object, the communicator's task is to

build awareness.b) Knowledge The target audience might have brand awareness but not know much more. The

company may want its target audience to know the value proposition of the brand.c) Liking If the target market know the brand, how do they feel about it? If the audience does

not view the value proposition of the brand favorably, then the communicator needs to find out the reasons.

If unfavorable view is based on real problems with the product efficacy, then the same has to be fixed and its renewed quality need to be communicated

If unfavorable view is based on perceptions created by the problems with message execution, then it needs to be addressed through a revamp communication strategy

Response Hierarchy ModelsResponse Hierarchy Modelsd)Preference The target audience might like the product but not prefer it to others. In

this case communicators must try to build consumer preference by comparing quality, value, performance, and other features to likely competitors.

e) Conviction a target audience might prefer a particular product but not develop

conviction about buying it. The communicator`s job is to build the conviction among interested consumer by why me positioning strategies.

f)Purchase Some members of target audience might have conviction but not quite get

around to making a purchase The communicator must lead these consumers to take a final step, perhaps

by offering the product at the low price, offering a premium, or leting consumer try it out

An Ideal Ad CampaignAn Ideal Ad Campaign The right consumer is exposed to the message at

the right time and place The ad causes consumer to pay attention The ad reflects consumer’s level of understanding

and behaviors with product The ad correctly positions brand in terms of

points-of-difference and points-of-parity The ad motivates consumers to consider purchase

of the brand The ad creates strong brand associations

Steps in Developing Effective Steps in Developing Effective CommunicationsCommunications

Identify target audience

Determine objectives

Design communications

Select channels

Establish budget

Decide on media mix

Measure results/ manage IMC

Identify the Target audienceIdentify the Target audience

The process must start with a clear target audience in mind; potential buyers of the company`s product , current users, deciders, influencer; individuals, groups, particular public or general public.

The target audience is a critical inlfuence on the communicators decisions about what to say, how, when, where and whom.

Communications ObjectivesCommunications Objectives

Category Need Brand Awareness

Brand Attitude Purchase Intention

Designing the CommunicationsDesigning the Communications

Message strategyCreative strategyMessage sourceGlobal adaptation

Designing the CommunicationsDesigning the Communicationsa) Message Strategy In determining message strategy, management searches

for appeals, themes, or ideas that will tie into brand positioning and help to establish point of parity or points of difference.

Some of these may be related directly to product or services performance, whereas others may relate to more extrinsic consideration( the brand as being contemporary, popular, or traditional.)

Buyers expecting one of the four type of rewards from a product: rational,sensory, social or ego satisfaction

Buyers might visualize three rewards from result-of-use experience, product-in-use- experience, or incidental-in-use -experience

Crossing the 4 types of reward with 3 types of experience generate 12 types of message


b) Creative strategy Communication effectiveness depend on how a

message is being expressed, as well as content of message itself.

If the communication is ineffective, it may mean the wrong message was used or the right one just poorly expressed.

Creative strategies are the way marketer translate their message into a specific communication.

It can be broadly classified as informational or transformational appeal.


1. Informational Appeal it elaborates on product or service attributes

or benefits e.g problem solution ads, product demonstration ads, product comparison ads, and testimonial from unknown or celebrity endorser.

2.Transformational appeal It elaborate on a non product-related benefits

or image. It might depict what kind of person uses a brand.


Transformational appeals often attempt to stir up emotions that will motivate purchase.

Communicator use negative appeals such as fear, guilt, and shame to get people do things(brush their teeth) or stop doing things(smoking, alcohol).

Fear appeals work best when source credibility is high, and when communication promises to relieve, in a believable and efficient way, the fear it arouses.


Communicators also use positive emotional appeals such as humor, love, pride, and joy.

Humor is often used to highlight a particular benefit of brand by exaggerating it.

the magic of advertising is to bring concepts on a piece of paper to life in minds of consumer target.

In a print ad, the communicator must decide on headline, copy, illustration and color

For radio message communicator must choose words, voice quality and vocalization.


c)Message Source Message delivered by attractive or popular

sources can achieve higher attention and recall, which is why advertisers often use celebrities as spokespeople . E.g. DCP TajMahal tea.

The important factor is spokesperson's credibility. Three most important source credibility factor are expertise, trustworthiness, and likability

1

Message SourceMessage Source

Celebrity Characteristics– Expertise– Trustworthiness– Likeability


If a person has positive attitude toward a source and message, or a negative attitude toward both, a state of congruity is said to be exist.

What happens if the person holds one attitude towards the source and opposite one towards the message?

Attitude change will take place in the direction of increasing the amount of congruity between the two evaluations.

The principle of congruity implies that communicators can use their good image to reduce some negative feeling towards a brand


d) Global Adaptation1. Product Many products are restricted or forbidden in certain part

of world. E.g. Beer, wine, and spirits cannot be advertised or sold in many Muslim countries

2. Market segment In many countries no TV aid may be directed under 12.

to play it safe McD advertises itself as a family restaurant in Sweden. In India , tobacco products and alcoholic beverage can not be advertise in mass media. To overcome this restriction, alcoholic beverage companies advertise their brand as other innocuous products such as soda.


3.Style Comparative ads, although acceptable and

even common in US and Canada unacceptable in Japan. PepsiCo had comparative taste test ad in Japan that was refused by many TV stations

4.Global or Local

Issues Facing Global Issues Facing Global AdaptationsAdaptations

Is the product restricted in some countries?Are there restrictions on advertising the

product to a specific target market?Can comparative ads be used?Can the same advertising be used in all

country markets?

Selecting the communication Selecting the communication channelchannel

Selecting efficient means to carry the message become more difficult as the channels of communication become more fragmented and cluttered.

Communication channels may be personal and nonpersonal,

1 .Personal It means two or more person communicate face

to face, person- to- audience, over the telephone, or through e-mail


a) Advocate It consist of company sales people contacting

buyer in the target marketb) Expert It consist of independent expert making

statement to the target buyerc) Social channel It consist of neighbors, friends, family

members and associate talking to the target buyer

1

Stimulating Stimulating Personal Influence ChannelsPersonal Influence Channels

Identify influential individuals and devote extra attention to them

Create opinion leaders Use community influential's in testimonial

advertising Develop advertising with high “conversation

value”


2. Nonpersonal communication channela) Media it consist of print media; broadcast media and display

media(billboard)b) Sales promotion It consist of consumer promotion(such as sample,

coupons and premium); trade promotion(such as advertising and display allowances); and business and sales force promotions( contests for sales person)

c) Event and experience- includes sorts, arts entertainment .d) Public Relation- include communications directed

internally to employees of the company or externally to consumers, other firms, the government, and media.

Establish the BudgetEstablish the Budget

Affordable

Percentage-of-Sales

Competitive Parity

Objective-and-Task

Objective-and-Task MethodObjective-and-Task Method

Establish the market share goal Determine the percentage that should be reached Determine the percentage of aware prospects that

should be persuaded to try the brand Determine the number of advertising impressions per

1% trial rate Determine the number of gross rating points that would

have to be purchased Determine the necessary advertising budget on the

basis of the average cost of buying a GRP

Deciding on the marketing Deciding on the marketing communication mixcommunication mix

Company must allocate the marketing communications budget over the eight major mode of communication-

advertising, sales promotion, public relation and publicity, event and experience, direct marketing , interactive marketing, word –of-mouth marketing, and sales force

Within the same industry, companies can differ considerably in their media and channel choices.

Amway concentrates on personal selling through network marketing whereas L`Oreal spend heavily on ad Eureka Forbes focuses on door-to-door selling with 5000 field sales force

Characteristics of MarketingCharacteristics of Marketingcommunication Mixcommunication Mix

1 Advertising It reaches geographically dispersed buyers. It can build up a long term image of product Just presence of adverising might have effect on sales2.Sales Promotion Companies use sales promotion tools- coupons, contests,

premiums and the like- to draw stronger and quicker buyer response.

They gain attention and may lead the consumer to the product

They incorporate some concession, inducement, or contribution that gives value to the customer


3.Public Relations and Publicity News stories and features are more

authentic and credible to readers than ads Public relation can reach prospects who

prefer to avoid salespeople and advertisement.

Public relations has the potential for dramatizing company or product.


4. Events and Experiences It can be used as brand building as well for selling

the product. E.g. Kurkure Express A well chosen event or experience can be seen as

highly relevant because the consumer get personally involved.

5. Direct and Interactive Marketing Direct and interactive marketing take many forms-

over the phone, online, or in person The message can be prepared to appeal to the

addressed individual The message can be changed depending on the

persons response


6. word-of-Mouth marketing Since people trust others they know and

respect word of mouth can be highly influential.

It can be very intimate dialogue that reflects personal facts, opinion and experiences.

7. Personal selling It is most effective tool at later stages of

buying process, particularly in building up buyer preference and action

Factors in Setting Factors in Setting Communications MixCommunications Mix

Type of product market Buyer readiness stage Product life cycle stage

Factors in Setting Factors in Setting Communications MixCommunications Mix

1. Type of Product Market Communication –mix allocations vary

between consumer and business market Consumer marketers tend to spend

comparatively more on sales promotion and advertising

Business marketer tend to spend comparatively more on personal selling

Insurance companies have been utilizing personal selling to sell insurance produxt.

Cost Effectiveness by Buyer Readiness Cost Effectiveness by Buyer Readiness StageStage


3. Product life- cycle Stage Communication tools also vary in cost- effectiveness at

different stages of product life cycle. In the introduction stage, advertising, events and experiences

and publicity have highest cost-effectiveness, followed by personal selling to gain the distribution coverage and sales promotion and direct marketing to induce trial.

In growth stage demand has its own momentum through word of mouth.

In maturity stage, advertising events and experiences, and personal selling all become more important.

In the decline stage, sales promotion continue strong, other communication tools are reduced, and sales people give the product only minimal attention

Measuring Communication Measuring Communication ResultResult

Managers want to know the outcomes and revenues resulting from their communication investments.

After implementing communications director must measure its impact on the target audience.

Member of target audience are asked whether they recognize or recall the message, how many time they saw it, what point they recall, how they felt about the message, and their previous and current attitude towards the product and company

The communicator should also collect behavioral measure of audience response, such as how many people bought the product, liked it, and talked to others about it.

Current Consumer States for Two Current Consumer States for Two BrandsBrands

What is Advertising?What is Advertising?

Advertising is any paid form of nonpersonal presentation and promotion of ideas, goods, or services by an identified

sponsor.

Procter & Gamble’s Procter & Gamble’s Advertising HistoryAdvertising History

The Five M’s of AdvertisingThe Five M’s of Advertising

Advertising ObjectivesAdvertising Objectives

Informative

advertising

Reminder

advertising

Reinforcement

advertising

Persuasive

advertising

Factors to Consider in Setting an Factors to Consider in Setting an Advertising BudgetAdvertising Budget

Stage in the product life cycle

Market share and consumer base

Competition and clutter

Advertising frequency

Product substitutability

Developing the Developing the Advertising CampaignAdvertising Campaign

Message generation and evaluation

Creative development and execution

Legal and social issues

TelevisionTelevision

Advantages Reaches broad spectrum

of consumers Low cost per exposure Ability to demonstrate

product use Ability to portray image

and brand personality

Disadvantages Brief Clutter High cost of production High cost of placement Lack of attention by

viewers

Print AdsPrint AdsAdvantages Detailed product

information Ability to

communicate user imagery

Flexibility Ability to segment

Disadvantages Passive medium Clutter Unable to demonstrate

product use

Print Ad ComponentsPrint Ad Components

Headline

Picture

Signature

Print Ad Evaluation CriteriaPrint Ad Evaluation Criteria

Is the message clear at a glance? Is the benefit in the headline? Does the illustration support the headline? Does the first line of the copy support or explain

the headline and illustration? Is the ad easy to read and follow? Is the product easily identified? Is the brand or sponsor clearly identified?

Communicating to the Rural Communicating to the Rural Audience Audience

Large variations in language and cultureCampaigns have to be tailor made for product and

regionProduct demonstrations in haats, mandis, and melas

(fairs) are usefulTV and print media do not reach all villages and all

customersWall paintings and signboards very popularFolk theatre, magic shows and puppet shows are also

used as a media vehicle

Media SelectionMedia Selection

• Reach

• Frequency

• Impact

• Exposure

Relationship Among Trial, Awareness, Relationship Among Trial, Awareness, and the Exposure Functionand the Exposure Function

Choosing Among Major Media TypesChoosing Among Major Media Types

Target audience and media habitsProduct characteristicsMessage characteristicsCost

Major Media TypesMajor Media Types Newspapers Television Direct mail Radio Magazines

Outdoor Yellow Pages Newsletters Brochures Telephone Internet

Advertising Research Advertising Research Techniques Techniques

For Print AdsFor Broadcast AdsIn-house testsTrailer testsTheater testsOn-air tests

Place AdvertisingPlace Advertising

BillboardsPublic spacesProduct placementPoint-of-purchase

Measures of Audience SizeMeasures of Audience Size

Circulation Audience Effective audience Effective ad-exposed audience

Classification of Advertising Timing Classification of Advertising Timing PatternsPatterns

Factors Affecting Timing PatternsFactors Affecting Timing Patterns

Buyer turnoverPurchase frequency Forgetting rate

Media Schedule PatternsMedia Schedule Patterns

Continuity Concentration Flighting Pulsing

Evaluating Advertising Evaluating Advertising EffectivenessEffectiveness

Communication-Effect Research– Consumer feedback method– Portfolio tests– Laboratory tests

Sales-Effect Research

Formula for Measuring Sales Impact of Formula for Measuring Sales Impact of AdvertisingAdvertising

Sales PromotionSales Promotion

What is Sales Promotion?What is Sales Promotion?

Sales promotions consist of a collection of incentive tools, mostly short term, designed to stimulate quicker or greater purchase of

particular products or services by consumers or the trade


Advertising offers a reason to buy, sales promotion offer incentive to buy.

1. Sales promotion includes tools for consumer promotion(samples , coupons , cash refund offer, price off, premiums, prizes, patronage rewards, free trials, and free goods)


2. Business and sales force promotion It includes trade shows and conventions,

contests for sales representative, and specialty advertising)

Sales Promotion TacticsSales Promotion TacticsConsumer-directed Samples Coupons Cash refund offers Price offs Premiums Prizes Patronage rewards Free trials Tie-in promotions

Trade-directed Price offs Allowances Free goods Sales contests Spiffs Trade shows Specialty advertising

Sales Promotion TacticsSales Promotion Tactics

1. Sample – offer of free amount of a product or service delivered door-to-door.

2. Coupons-- certificates entitling the bearer t a stated saving on the purchase of specific product.

3.Cash refund offer(rebates)– provide a price reduction after purchase

4. Price Packs- offers to the consumer of saving off the regular price of product

Sales Promotion TacticsSales Promotion Tactics

5. Premiums(gifts)— buyer offered at a relatively low cost or free as an incentive to purchase a particular product.

6. Frequency programs- programm providing rewards related to the consumer`s frequency and intensity in purchasing the company product or service.

Consumer Promotion ToolsConsumer Promotion Tools

7. Prizes(contests, sweepstakes, game) A contest calls for consumers t submit an

entry to be examined by a panel of judges who will select the best entries.

A sweepstakes asks consumers to submit their names in a drawing.

A game presents consumers with something every time they buy. Eg. Number missing letter

Consumer Promotion ToolsConsumer Promotion Tools

8.Patronage Awards– values in cash or in other forms that are promotional to patronage of certain vendor.

9. Free Trials—Inviting prospective purchasers to try the product without cost in the hope that they will buy.

10. Tie-in promotion– Two or more bands or companies team up on coupon to increase pulling power

11. Cross promotionsusing one brand to advertise another noncompeting brand

12. POP display.

Trade Promotion ToolsTrade Promotion Tools

1. Price-off(off-invoice or off-list)- a straight discount off the list price on each case purchase during a stated time period

2. Allowance– Display allowance, rack discount.

3. Free goods--- 12+1, 24+3.

Business and Sales-Force Business and Sales-Force Promotion ToolsPromotion Tools

1. Trade show ad conventions--- Participating vendors expect several benefits, including generating new sales, maintaining customer contacts, introducing new products ,meeting new customers, selling more to present customer, and educating customer.

2. Sales Contests– A sales contest aims at inducting the sales force or dealers to increaes their sales results over a stated period, with prizes( money, trips, gifts, or points) going to those who succeed.

Business and Sales-Force Business and Sales-Force Promotion ToolsPromotion Tools

3. Specialty Advertising--- it consists of useful, low-cost items

bearing the company`s name and address, and sometimes an add message that salespeople give to prospects and customers.

Common items are ballpoint pens, calendars, key chains, bags, and memo pad.

Using Sales PromotionsUsing Sales PromotionsEstablish objectives

Select tools

Develop program

Pretest

Implement and control

Evaluate results

Using Sales PromotionsUsing Sales Promotions

1. Objectives Sales promotion tools vary in their specific

objectives. A free sample stimulates consumer trial, whereas a free management advisory service aims at cementing a long-term relationship with a retailer

Sellers use incentive-type promotions to attract new triers, to reward loyal customers, and to increase the repurchase rates of occasional users,


Sales promotion often attract brand switchers, who are primarily looking for low price, good value, or premiums.

If some of them would not have otherwise tried the brand, promotion can yield long terms increases in market share.

Sales promotions in markets of high brand similarity can produce a high sales response in short run but little permanent gain in brand preferences. In market of high dissililarity, they may be able to alter market share permanently


In addition to brand switching, consumers may engage in stockpilining– purchasing earlier than usual, or purchasing extra quantities. So sales may then hit a post promotion dip.

For retailers objective include persuading retailers to carry new items and higher level of inventory, encouraging of season buying, encouraging stocking of related item, offsetting competitive promotion, building brand loyalty, and gaining entry into retail outlet.


2. Selecting promotion Toolsa) Consumer promotion toolsb) Trade promotion Tools--Marketer award money to

the tradeI. To persuade the retailer or wholesaler to carry the

brand.II. To persuade the retailer or w/s to carry more unit

than normal amountIII. To induce retailers to promote the brand by feature

display and price reduction.IV. To stimulate retailers and their sales clerks to push

the product.

Using Sales PromotionsUsing Sales Promotionsc) Business and sales force promotion tools In deciding to use a particular incentive

marketer must I. Determine the size of incentive.A certain

minimum is necessary if promotion is to succeed.

II. Marketing manager must establish conditions for participation.

III. Duration of promotionIV. Distribution vehicleV. Timing of promotionVI. Total sales promotion budget

Using Sales PromotionsUsing Sales Promotions3. Pretesting Although most sales promotion programs

are designed on the basis of experience, pretest can determine whether the tools are appropriate, the incentive size optimal, and presentation method efficient.

Consumers can be asked to rate or rank different possible deals, or trial tests can be run in limited geographic area.

Using Sales PromotionsUsing Sales Promotions4. Implementing Marketing manager must prepare

implementation nd control plans that cover lead time and sell in time for each individual promotion.

Lead time is the time necessary to prepare the program prior to launching it

Sell in time begins with the promotional launch and end when approximately 95% of the deal merchandise is in the hands of consumer.

Using Sales PromotionsUsing Sales Promotions5.Evaluating the program Marketers can evaluate the program usung

sales data, consumer surveys, and experiment.

Sales data helps analyze the type of people who took advantage of promotion, what they bought before the promotion, and how they behaved later toward the brand and other brand.

Using Sales PromotionsUsing Sales Promotions Consumer surveys can uncover how many recall

the promotion, what they thought of it, how many took advantage of it,and how the promotion affected subsequent brand choice behavior.

Additional cost beyond the cost of specific promotion include

I. The risk that promotion might decrease long-run brand loyalty

II. Costs of special production runs, extra sales force effort, and handling requirement.

III. Certain promotion irritate retailers, who may demand extra trade allowance or refuse to cooperate.

Why Sponsor Events?Why Sponsor Events? To identify with a particular target market or life

style To increase brand awareness To create or reinforce consumer perceptions of

key brand image associations To enhance corporate image To create experiences and evoke feelings To express commitment to community To entertain key clients or reward employees To permit merchandising or promotional

opportunities

Using Sponsored EventsUsing Sponsored Events

Establish objectives

Choose events

Design programs

Measure effectiveness

Ideal EventsIdeal EventsAudience closely matches target market

Event generates media attention

Event is unique with few sponsors

Event lends itself to ancillary activities

Event enhances brand image of sponsor

Customer Experience Management: Customer Experience Management: Experience ProvidersExperience Providers

Communications Identity Product presence Co-branding

Environments Internet Electronic media People

Steps in the CEM FrameworkSteps in the CEM FrameworkAnalyze the customer’s experiential world

Build the experiential platform

Design the brand experience

Structure the customer interface

Engage in continuous innovation

Public RelationPublic Relation


Public relation includes a variety of programs to promote or protect a company`s image or individual product.

The company takes concrete steps to manage successful relations with its key public.

Most companies have a PR department that monitors the attitude of the organization`s publics and distributes information and communications to build goodwill.


A public is any group that has an actual or potential interest in or impact on a company`s ability to achieve its objective.

The best PR departments counsel top management to adopt positive programs and eliminate questionable practices so negative publicity doesn't arise in in the first place.

They perform following functin

Tasks Aided by Public Tasks Aided by Public RelationsRelations

Launching new productsRepositioning a mature productBuilding interest in a product categoryInfluencing specific target groupsDefending products that have encountered

public problemsBuilding the corporate image in a way that

reflects favorable on products

Public Relations FunctionsPublic Relations Functions

Press relationsProduct publicityCorporate communicationsLobbyingCounseling


1.Press release– presenting news and information about the organization in the most positive light.

2. Product publicity– sposorship efforts to publicize specific products

3. Corporate communications– Promoting understanding of the organization through intrnal and external communication


4. Lobbying– Dealing with legislators and govt. officials to promote or defeat legislation and regulation.

5. Counseling---Advising management about public issues, and company positions and image during good times and bad.

Marketing Public Marketing Public Relations(Publicity)Relations(Publicity)

Many companies are turning to MPR to support corporate or product promotion and image making.

The task of MPR is of securing editorial space ---as opposed to paid space--- in print and broadcast media to promote or hype a product, service, idea, place, person , or organization

g


MRP Plays an important role in the following taskI. Launching new productsII. Repositioning a mature productsIII.Building interest in a product categoryIV.Influencing specific target groupsV. defending products that have encountered public

problemsVI.Building the corporate image in a way that reflects

favorably on its product


As the power of mass advertising weakens, marketing managers are turning to MRP to build awareness and brand knowledge both for new and established product.

MRP is also effective at reaching specific groups and can be more cost effective than advertising.

Major Tools in Marketing PRMajor Tools in Marketing PR

Publications Events Sponsorships News Speeches Public Service Activities Identity Media


1. Publication- company rely extensive on published materials to reach and influence their target market. These include annual reports, brochures,articles,company newsletter and magazines, and audiovisual material.

2. Events-company can draw attention to new products or other company activities by arranging special events, such a news conferences, seminars, trade shows and exhibits.


3.Sposorships- companies can promote their brands and corporate name by sponsoring sports and cultural events and highly regarded cause.

4.News- one of the major tasks of PR professionals is to find or create favorable news about the company, its products, and its people and to get media to accept press releases and attend press conferences


5. Speeches- Give talks at trade associations or sales meeting, these appearances can build the company`s image.

6. Public Service Activities- company can build goodwill by contributing money and time for good cause.

7.Identity Media- Companies need a visual identity that the public intermediately recognizes.The visual identity is carried by company logos, stationary, brouchers, signs, busness forms, business card. Etc.

Decisions in Marketing PRDecisions in Marketing PREstablish objectives

Choose messages

Choose vehicles

Implement

Evaluate results

Decisions in Marketing PRDecisions in Marketing PR

1. Establishing Objectives MPR can build awareness by placing stories

in the media to bring attention to a product, service, person, organization, or idea.

It can build credibility by communicating the message in an editorial context.

It can help boost sales force and dealer enthusiasm with stories about a new product before it is launched.

It can hold down promotion cost because MRP cost less than direct-mail and media ad.

PropagandaPropaganda

It is an idea or statement that are intended as publicity for a particular cause, esp,a political one are often exaggerated or false.

Propaganda is the means of gaining support for a given cause , belief, opinion or attitude.it is essentially bias towards a particular view point.

It signifies an organized effort to spread a peculiar doctrine. It is not frank, open and only look for achievement by any means

Propaganda/AdvertisingPropaganda/Advertising

Propaganda sends message which is not commercial in nature while advertising is commercial

Propaganda achieves its objectives by poisoning the minds of public while advertising is not sinister in this approach.

The identity of propagandist is not known but in case of advertising it is known.

The claim of propagandists can not be easily tested while those of advertiser can be tested.

Personal SellingPersonal Selling

It entails personal communication between a seller and a buyer for the purpose

of determining and satisfying the buyers current and latent needs.

Personal sellingPersonal selling

It involves an individual salesperson or a sales team to establish and build a profitable and symbiotic relationship with customer over a time for multiple transaction cycle.

In the process of building relationship, a salesperson must determine a buyer`s needs and influence or persuade the buyer to purchase his product with the assurance that the product or service will satisfy the buyer more than the competitors products.

Types of personal selling

• Industrial selling

• Retail selling

• Services selling

Types of personal sellingTypes of personal selling

1. Industrial Selling It is basically termed as BtoB selling but

in a traditional business model, it is characterized as the manufacturing sector selling.

These are grouped into four categories on the basis of their consumer base


a)Selling to resellers A reseller is a wholesaler or a retailer or an

intermediary who buys finished goods and resell them to the end –users..

b) Selling to business users This means the output of one producer enters

into production process of another producer to manufacture a final goods for the consumption of end users


c) Institutional selling These institutional customers use the products in

their daily operation. Companies such as Xerox in photocopiers, J&J in

surgical equipments, and Reynolds in office stationeries sell directly to institutions for institutional consumption.

d) Selling to governments company is also selling their goods in govt.

organization. such as railway canteen,defence canteen etc.


2.Retail Selling Retailing is defined as the all the activities

directly related to the sales of goods and services to ultimate customers for personal or non business use or consumption

3.service selling Services such as insurance, airline, and travel

are intangible in nature. unlike products services cannot be separated from their source and hence cannot be stored for future use.

Selling skillsSelling skills

Selling Skills

Listening Skills

Conflict management and resolution skills

Negotiation and bargaining

skills

Problem solving skills

Effective communication

skills

The Selling ProcessThe Selling Process

Process The selling process is defined as a process by which

a salesperson identifies and locates the prospects, separate the prospects from suspects, approaches them and makes a sales presentation, handle the objections, and close a sale

The selling process can help a salesperson to identify the customers needs, arouse their interest in product or brand, and motivate them to make a purchase decision

The Selling ProcessThe Selling Process

It is assumed to be a chain process that a salesperson ha s to follow step by step to have a synergistic effort.

Each of these step can be called a sales proposition,

it is a n orderly process in which a salesperson can respond to the decision making process of the customers and close a sale to the end of the process

.

Stages in the selling process

Pre-sale preparation

Sales Presentation

Handling Customer Objections

Closing the Sale

Follow up action

Approach to the customer

Pre- approachbefore the interview

Prospecting

PricingPricing

ObjectivesObjectives How do consumers process and evaluate prices? How should a company set prices initially for

products or services? How should a company adapt prices to meet

varying circumstances and opportunities? When should a company initiate a price change? How should a company respond to a competitor’s

price challenge?

Gillette Commands a Gillette Commands a Price PremiumPrice Premium

Synonyms for PriceSynonyms for Price Rent Tuition Fee Fare Rate Toll Premium Honorarium

Special assessment Bribe Dues Salary Commission Wage Tax

Common Pricing MistakesCommon Pricing Mistakes

Determine costs and take traditional industry margins

Failure to revise price to capitalize on market changes

Setting price independently of the rest of the marketing mix

Failure to vary price by product item, market segment, distribution channels, and purchase occasion

Consumer Psychology Consumer Psychology and Pricingand Pricing

Reference Prices

Price-quality inferences

Price endings

Price cues

Possible Consumer Reference PricesPossible Consumer Reference Prices

“Fair price” Typical price Last price paid Upper-bound price

Lower-bound price Competitor prices Expected future price Usual discounted

price

Price CuesPrice Cues

“Left to right” pricing ($299 vs. $300)Odd number discount perceptionsEven number value perceptionsEnding prices with 0 or 5“Sale” written next to price

When to Use Price CuesWhen to Use Price Cues

Customers purchase item infrequently

Customers are new Product designs vary

over time Prices vary seasonally Quality or sizes vary

across stores

Steps in Setting PriceSteps in Setting Price

Select the price objective

Determine demand

Estimate costs

Analyze competitor price mix

Select pricing method

Select final price

Step 1: Selecting the Pricing ObjectiveStep 1: Selecting the Pricing Objective

Survival Maximum current

profit Maximum market

share Maximum market

skimming Product-quality

leadership

Step 2: Determining DemandStep 2: Determining Demand

Price Sensitivity

Estimating

Demand Curves

Price Elasticity

of Demand

Inelastic Inelastic and Elastic Demandand Elastic Demand

Factors Leading to Less Price SensitivityFactors Leading to Less Price Sensitivity The product is more distinctive Buyers are less aware of substitutes Buyers cannot easily compare the quality of substitutes The expenditure is a smaller part of buyer’s total income The expenditure is small compared to the total cost of the end

product Part of the cost is paid by another party The product is used with previously purchased assets The product is assumed to have high quality and prestige Buyers cannot store the product

Step 3: Estimating CostsStep 3: Estimating Costs

Types of Costs

Target Costing

Accumulated

ProductionActivity-Based

Cost Accounting

Cost Terms and ProductionCost Terms and Production Fixed costs Variable costs Total costs Average cost Cost at different

levels of production

Cost per Unit as a Function of Cost per Unit as a Function of Accumulated ProductionAccumulated Production

Tata motors developed Tata motors developed ‘Nano’its small car with a ‘Nano’its small car with a

target price target price

Step 5: Selecting a Pricing Step 5: Selecting a Pricing MethodMethod Markup pricing Target-return pricing Perceived-value pricing Value pricing Going-rate pricing Auction-type pricing

Break-Even ChartBreak-Even Chart

Auction-Type PricingAuction-Type Pricing

English auctions

Dutch auctions

Sealed-bid auctions

Step 6: Selecting the Final PriceStep 6: Selecting the Final Price

Impact of other marketing activitiesCompany pricing policiesGain-and-risk sharing pricingImpact of price on other parties

Price-Adaptation StrategiesPrice-Adaptation Strategies

Geographical Pricing

Discounts/Allowances

Differentiated Pricing

Promotional Pricing

Price-Adaptation StrategiesPrice-Adaptation Strategies

Countertrade Barter Compensation deal Buyback arrangement Offset

Discounts/ Allowances Cash discount Quantity discount Functional discount Seasonal discount Allowance

Promotional Pricing TacticsPromotional Pricing Tactics Loss-leader pricing Special-event pricing Cash rebates Low-interest financing Longer payment terms Warranties and service

contracts Psychological discounting

Promotional Pricing TacticsPromotional Pricing Tactics

1. Loss leadership Supermarkets and department store often drop

the price on well known brands to stimulate additional store traffic.

This pay if the revenue on the additional sales compensates for the lower margins on loss leader item.

Manufacturer of loss leader brands typically object because this practice can dilute brand image and bring complaints from retailers who charge the list price.


2. Special event pricing Sellers will establish special prices in certain

seasons to draw in more customer. Every august , there are back to school sale.

3. Low interest financing Instead of cutting its price, the company can

offer customers low-interest financing, automakers have used no –interest financing to try to attract more customers.


4.Longer payment system Seller specially mortgage banks and auto

companies, stretch loans over longer periods and thus lower EMI.

5. Psychological discounting This strategy involves setting an

artificially high price and then offering the product at substantial savings

Special festival Special festival pricing by pricing by

Coca-Cola on Coca-Cola on the occasion of the occasion of

Ramzan in Ramzan in Pakistan.Pakistan.

Differentiated PricingDifferentiated Pricing

Customer-segment pricing

Product-form pricing Image pricing Channel pricing Location pricing Time pricing Yield pricing


1. Price discrimination Occurs when a company sells a product or

service at two or more prices that do not reflect a promotional difference in costs

In first degree price discrimination, the seller charges a separate price to each customer depending on the intensity of his demand


In second degree price discrimination, the seller charges different amounts to different classes of buyers

In third degree price discrimination, the seller chargers different amounts to different class of buyers

A. Customer-segment pricing-different customer group pay different pricing. E.g different interest for senior citizen.


B. Product form pricing – big bazaar sells men's shirt in many style fabric and levels of quality

C .Image pricing- Some companies price the same product at two different levels based on image difference. This is common in the cosmetics and garments industries.

D. Channel pricing- Coca- Cola carries a different price depending on whether the consumer purchases it in a fine restaurant, a fast food restaurant, or a vending machine

Pricing for rural markets Pricing for rural markets A large proportion have a low and seasonal income Several approaches adopted by retailers and companies to

address this Rural retailers often extend credit Retailers also “break the bulk” and sell in loose form, in small

quantities Companies use a similar strategy by introducing “low-unit

packing” or LUP Companies also develop low-priced products with a target

price for rural markets Companies might offer refill packs or recyclable and reusable

packs

Increasing PricesIncreasing PricesDelayed quotation pricing

Escalator clauses

Unbundling

Reduction of discounts

Increasing PricesIncreasing Prices

1. Delayed quotation pricing- the company does not set a final price until the product is finished or delivered. This pricing is prevalent in industries with long production lead times, such a s industrial construction.

2. Escalator clauses- the company requires the customer to pay today`s price and all or part of inflation increase takes place before delivery.

Increasing PricesIncreasing Prices

3. Unbundling- the company maintains its price but remove or price separately one or more elements that were part of former offer.

4. Reduction of discounts- the company instructs its sales force not to offer its normal cash and quantity discount

Brand Leader Responses to Competitive Brand Leader Responses to Competitive Price CutsPrice Cuts

Maintain priceMaintain price and add valueReduce priceIncrease price and improve qualityLaunch a low-price fighter line

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