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MARKETING….
Marketing: DefinitionMarket segmentationMarketing concepts
• Market demand• Product• Value and satisfaction• Exchange and transactionsMarketing channels Competition
Marketing environmentMarketing mix
Marketing Defined…..
The Chartered Institute of Marketing define marketing as “The management process responsible for identifying , anticipating and satisfying customer requirements
profitably”
According to William Stanton“Marketing is a total system of business activities designed to plan, price, promote & distribute want satisfying products to target markets in order to achieve organisational objectives”
According to Philip Kotler“Marketing is a human activity directed at satisfying needs and wants through exchange process”
Scope of Marketing• Marketing Research• Product Planning & Development• Pricing• Advertising & Publicity• Sales Promotion• Packaging• Branding & Labelling• After Sales Service• Test Marketing
Importance/ Benefits Of Marketing• Satisfaction of human needs & wants• Profits & market reputation• Facilitates specialisation division of labour• Widens the market• Improves standard of living• Bring economic growth• Creates new norms of social economic behaviour• Provides channels of communication to business firms• Facilitates price control• Develops social significance at.
MARKETING CONCEPTS
7
Core Concepts of Marketing
Needs, wantsdemands
Markets Marketing &Marketers
Utility, Value &Satisfaction
Exchange, TransactionRelationships
Products
Need, Want &Demand
A need is a state of felt deprivation of some basic satisfaction
Wants are desires for specific satisfiers of these deprived needs
Demands are wants for specific products that are backed by an ability and willingness to buy them
Marketing Concept Continued…
Product is any thing that can be offered to satisfy a need or want
Exchange is the act of obtaining a desired product from someone by offering something in return
A Market consists of all the potential customers sharing a particular need or want who might be willing and able to engage in exchange to satisfy that need or want.
Market Segmentation
Market segmentation is a marketing strategy that involves dividing a broad target market into subsets of consumers who have common needs, and then designing and implementing strategies to target their needs and desires using media channels and other touch-points that best allow to reach them.
The process of defining and subdividing a large homogeneous market into clearly identifiable segments having similar needs, wants or demand characteristics. Its objective is to design a market mix that precisely matches the expectations of customers in the targeted segment.
Four basic factors that affect market segmentation are
(1) clear identification of the segment,
(2) measurability of its effective size,
(3) its accessibility through promotional efforts
(4) its appropriateness to the policies and resources of the company.
The Marketing Segmentation Process
Take marketing actions to reach target segmentsTake marketing actions to reach target segments
Select the product segments toward which the firm will direct its marketing actionsSelect the product segments toward which the firm will direct its marketing actions
Develop a market/product grid to relate the market segments to the firm’s products and actionsDevelop a market/product grid to relate the market segments to the firm’s products and actions
Find ways to group marketing actions available to the organizationFind ways to group marketing actions available to the organization
Find ways to group consumers according to their needsFind ways to group consumers according to their needs
• Geographic—The study of city size, urban/suburban/rural population distribution and climate.
• Demographic—The study of distribution of population’s age, sex, income, stage in family cycle and ethnic background.
• Psychographic—Personalties, lifestyles, social class including Activities Interests and Opinions (AIO).
• Behaviour towards products.• Benefits desired or sought.• Product usage rate.
Objectives of segmentation are:
1) To reduce risk in deciding where, when, how, and to whom a product, service, or brand will be marketed;
2) To increase marketing efficiency by directing effort specifically toward the designated segment in a manner consistent with that segment's characteristics.
Market segmentation process
1. Identify the needs & wants of customers.2. Identify the different characteristics
between market segments.3. Estimate the market potential.
Marketing channels
Marketing channels can be viewed as a sets of interdependent organizations involved in the process of making a product or service available for use or consumption
Functions• Information• Promotion• Negotiation• Ordering• Financing• Risk taking• Physical possession• Payment• Title
Channel selection
• Analyzing the customer needs (lot size, waiting time, product variety, service backing etc)
• Establishing channel objectives( product characteristics)
• Identifying the major alternatives (types & No of intermediaries)
• Evaluating (Economic, Control, Adaptive Criteria)
Distribution Channel Decisions
SelectingSelecting
ManagingManaging
MotivatingMotivating
DistributionChannelDecisions
DistributionChannelDecisions
Distribution Intermediaries
Distribution ChannelIntermediaries Distribution ChannelIntermediaries
BrokersBrokers
DistributorsDistributors
WholesalersWholesalers
RetailersRetailers
Competition
To prepare an effective marketing strategy, a company must study its competitors as well as its actual and potential customers
A company's closest competitors are those seeking to satisfy the same customers and needs and marketing similar offers
A company needs to gather information on competitor’s strategies objectives, strengths, weakness, and reaction pattern
Types• Pure Competition
low barriers to entry, many choices, no business has dominance, many companies competing and nobody has a significant advantage examples
• small bars and restaurants, variety stores, convenience stores, barbers, small grocery stores, doughnut shops, professional services (dentist, doctor, architects)
Oligopoly very similar products, few sellers, small firms follow lead of big firms, fairly inelastic demands
- many barriers to establishing a business so only the oldest and biggest businesses are operating examples all the businesses are big and of equal size
banking industry, automotive manufacturers, gasoline retail companies, insurance companies, telecommunications companies
• Monopoly one single large seller with no close competition and no alternate substitutes examples
• Indian Railway• Electricity• Postoffice
Monopolistic Competition sellers feel they do have some competition there is one big company dominating the market with a few medium or smaller sized companies examples
Walmart
Airlines
Market Structure
Seller Entry Barriers
Seller Number
Buyer Entry Barriers
Buyer Number
Monopolistic competition
No Many No Many
Monopoly Yes One No Many
Monopsony No Many Yes One
Oligopoly Yes Few No Many
Oligopsony No Many Yes Few
Perfect Competition
No Many No Many
strategies
• Price discounts
• Lower-priced goods
• Value-priced goods
• Prestige goods
• Product proliferation
• Product innovation
• Improved services
• Distribution innovation
• Manufacturing-cost reduction
• Intensive advertising promotion
Marketing environment
The market environment refers to factors and forces that affect a firm’s ability to build and maintain successful relationships with customers.
Two levels of the environment are:
• Micro (internal) environment - small forces within the company that affect its ability to serve its customers.
• Macro (national) environment - larger societal forces that affect the microenvironment.
Marketing Mix
Is the set of marketing tools that the firm uses to pursue its marketing objectives in the target market.
From the sellers view point (4P)• Product• Price• Place• PromotionCustomers View point (4C)• Customer needs and wants• Cost• Convenience• Communication
FUNCTIONS OF MARKETINGThe ten (11) functions of marketing are;
· Researching· Buying· Product development and management· Production· Promotion· Standardization and grading· Pricing· Distribution· Risk bearing· Financing· After sales-service
Sales forecastingElements of a Good Forecast
Timely
AccurateReliable
Mea
ningf
ul WrittenEas
y to us
e
Why is forecasting important?
Demand for products and services is usually uncertain.
Forecasting can be used for…
• Strategic planning (long range planning)
• Finance and accounting (budgets and cost controls)
• Marketing (future sales, new products)
• Production and operations
Principles of Forecasting
Many types of forecasting models that differ in complexity and amount of data & way they generate forecasts:
1. Forecasts are rarely perfect
2. Forecasts are more accurate for grouped data than for individual items
3. Forecast are more accurate for shorter than longer time periods
Types of Forecasting Methods
Forecasting methods are classified into two groups:
Qualitative Methods
Type Characteristics Strengths WeaknessesExecutive opinion
A group of managers meet & come up with a forecast
Good for strategic or new-product forecasting
One person's opinion can dominate the forecast
Market research
Uses surveys & interviews to identify customer preferences
Good determinant of customer preferences
It can be difficult to develop a good questionnaire
Delphi method
Seeks to develop a consensus among a group of experts
Excellent for forecasting long-term product demand, technological changes, and
Time consuming to develop
Executive Judgment: Opinion of a group of high level experts or managers is pooled
Market Research/Survey: Solicits input from customers pertaining to their future purchasing plans. It involves the use of questionnaires, consumer panels and tests of new products and services.
Delphi Method: As opposed to regular panels where the individuals involved are in direct communication, this method eliminates the effects of group potential dominance of the most vocal members. The group involves individuals from inside as well as outside the organization.
Quantitative Forecasting MethodsQuantitativeForecasting
RegressionModels
2. MovingAverage
1. Naive
Time SeriesModels
3. ExponentialSmoothing
a) simpleb) weighted
a) levelb) trendc) seasonality
Time Series ModelsTry to predict the future based on past data. Assume that factors influencing the past will continue to influence the future
Naive Approach:Demand in next period is the same as demand in most
recent period
2. Simple Moving Average
n
A+...+A +A +A =F 1n-t2-t1-tt
1t
n
A+...+A +A +A =F 1n-t2-t1-tt
1t
• Assumes an average is a good estimator of future behavior
– Used if little or no trend
– Used for smoothing
Ft+1 = Forecast for the upcoming period, t+1n = Number of periods to be averagedA t = Actual occurrence in period t
• Gives more emphasis to recent data
• Weights – decrease for older data– sum to 1.0
2. Weighted Moving Average
1n-tn2-t31-t2t11t Aw+...+Aw+A w+A w=F 1n-tn2-t31-t2t11t Aw+...+Aw+A w+A w=F
Simple movingaverage models
weight all previousperiods equally
Simple movingaverage models
weight all previousperiods equally
3. Exponential Smoothing• Assumes the most recent observations have the
highest predictive value– gives more weight to recent time periods
Ft+1 = Ft + (At - Ft)Ft+1 = Ft + (At - Ft)et
Ft+1 = Forecast value for time t+1
At = Actual value at time t
= Smoothing constant
Need initial forecast Ft
to start.
Need initial forecast Ft
to start.
• Collect historical data
• Select a model– Moving average methods
• Select n (number of periods)• For weighted moving average: select weights
– Exponential smoothing• Select
• Selections should produce a good forecast
To Use a Forecasting Method
…but what is a good forecast?
Measures of Forecast Error
b. MSE = Mean Squared Error
n
F-A =MSE
n
1=t
2tt
n
F-A =MSE
n
1=t
2tt
MAD = A - F
n
t tt=1
n
MAD =
A - F
n
t tt=1
n
et
Ideal values =0 (i.e., no forecasting error)
MSE =RMSE MSE =RMSEc. RMSE = Root Mean Squared Error
a. MAD = Mean Absolute Deviation
Regression Analysis as a Method for Forecasting
Regression analysis takes advantage of the relationship between two variables. Demand is then forecasted based on the knowledge of this relationship and for the given value of the related variable.
Ex: Sale of Tires (Y), Sale of Autos (X) are obviously related
If we analyze the past data of these two variables and establish a relationship between them, we may use that relationship to forecast the sales of tires given the sales of automobiles.
The simplest form of the relationship is, of course, linear, hence it is referred to as a regression line.
Sales of Autos (100,000)
Selecting the Right Forecasting Model
1. The amount & type of available data Some methods require more data than others
2. Degree of accuracy required Increasing accuracy means more data
3. Length of forecast horizon Different models for 3 month vs. 10 years
4. Presence of data patterns Lagging will occur when a forecasting model meant for a
level pattern is applied with a trend
Forecasting Software
• Spreadsheets– Microsoft Excel, Quattro Pro, Lotus 1-2-3 – Limited statistical analysis of forecast data
• Statistical packages– SPSS, SAS, NCSS, Minitab– Forecasting plus statistical and graphics
• Specialty forecasting packages– Forecast Master, Forecast Pro, Autobox, SCA
Pricing DecisionsWhat consumers give up to purchase a product or service
What consumers give up to purchase a product or service
TimeTimePrice VariablePrice Variable
Mental activityMental activity
Behavioral effortBehavioral effort
Factors the firm must considerFactors the firm must consider
CostsCosts
DemandDemand
CompetitionCompetition
Perceived valuePerceived value
Relating Price to Ads and Promotion
Price must be consistent with perceptions of the productPrice must be consistent with perceptions of the product
Higher prices communicate higher product qualityHigher prices communicate higher product quality
Lower prices reflect bargain or “value” perceptionsLower prices reflect bargain or “value” perceptions
Price, advertising and distribution be unified in identifying product position
Price, advertising and distribution be unified in identifying product position
PricingConsiderationsPricingConsiderations
A product positioned as high quality while carrying a lower price than competitors will confuse customers
A product positioned as high quality while carrying a lower price than competitors will confuse customers
Legal and Ethical Issues in Pricing
Unfair Trade Practices
Key Legaland Ethical
IssuesRelated to
Price
Key Legaland Ethical
IssuesRelated to
Price
Price Fixing
Price Discrimination
Predatory Pricing
Special Pricing Tactics
Odd-EvenPricing
Two-PartPricing
BundlePricing
BaitPricing
PriceLining
FlexiblePricing
ProfessionalServices
LeaderPricing
SinglePrice
CommonSpecial Pricing
Tactics
CommonSpecial Pricing
Tactics
• Advertising– Any paid form of nonpersonal presentation and
promotion of ideas, goods, or services by an identified sponsor.
16- 55
Major Advertising Decisions
16- 56
Advertising
• Advertising objectives can be classified by primary purpose:– Inform
• Introducing new products– Persuade
• Becomes more important as competition increases
• Comparative ads– Remind
• Most important for mature products
Setting objectivesSetting objectives
Setting the budgetSetting the budget
Developing the Developing the advertising advertising strategystrategy
Evaluating Evaluating advertising advertising campaignscampaigns
Key Decisions:Key Decisions:
16- 57
Advertising
Major Media TypesMajor Media Types
• Newspapers• Television• Direct Mail
RadioRadio
MagazinesMagazines
OutdoorOutdoor
InternetInternet
Major Types of Advertising
Corporate Image
Advocacy Advertising
Typesof
Advertising
Typesof
AdvertisingPioneering
Competitive
Comparative
ProductAdvertising
InstitutionalAdvertising
Advertising Campaign Decision Process
Determine the campaign objectives.
Make creative decisions. Make media decisions.
Evaluate the campaign.
Sales promotion is the short-term incentives to encourage the purchase or sale of a product or service
Tools for Consumer Sales Promotion
Coupons
Premiums
Frequent Buyer Programs
Contests and Sweepstakes
Samples
Point-of-PurchaseDisplays
SixCategories
ofConsumer
SalesPromotions
SixCategories
ofConsumer
SalesPromotions
Elements of the Promotion Mix
Advertising
Ingredientsof the
PromotionMix
Ingredientsof the
PromotionMix
Public Relations
Personal Selling
Sales Promotion
• Sales Promotions– Can be targeted at final buyers,
retailers and wholesalers, business customers, and members of the sales force.
– The use of sales promotions has been growing rapidly.
Sales Promotion
16- 64
Sales Promotion
Consumer Promotion ToolsConsumer Promotion Tools
• Samples• Cash Refunds
(Rebates)• Price packs (cents-
off deals)• Advertising
Specialties
PremiumsPremiumsPatronage Patronage RewardsRewardsPoint-of-Purchase Point-of-Purchase CommunicationsCommunicationsContests, Games, Contests, Games, and Sweepstakesand Sweepstakes
16- 65
• Trade Promotion Tools– Discounts (also called price-offs,
off-list, and off-invoice discounts)– Allowances
• Advertising allowances• Display allowances
– Free goods– Push money– Specialty advertising items
Sales Promotion
16- 66
• Key Decisions When Developing the Sales Promotion Program:– Size of the incentive– Conditions for participation– Promotion and distribution of the actual sales
promotion program– Length of the promotional program– Evaluation
• Surveys and experiments can be used
Sales Promotion
Creating a Promotion Plan
Choose Promotion Mix
Develop Promotion Budget
Set Promotion Objectives
Identify Target Market
Analyze the Marketplace