Soni Project

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A MARKETING REPORT

ON

FUNDAMENTALS OF MARKETING

FOR THE YEAR 2010-11

SUBMITTED BY:

SUBMITTED TO:

SOM LALIT INSTITUTE OF COMMERCE, AHMEDABAD


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CERTIFICATE

This is to certify that the report on the

Fundamentals of Marketing Management is submitted to Som Lalit Institute

of Commerce affiliated to the Gujarat University in partial fulfillment of the

requirements for the completion of practical studies at the third year

of the B.com programme for the year 2010-11.

I/C Director. Prof. In. Charge.

Date :


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PREFACE

Management is most important for the world, today. Marketing

management is also an important in our day to day life.

Management has today gained an applauding game worldwide

today when each and every resource is scare. Management comes to

the reseal through. Management no of benefits can be gained its

Ground in each and every field.

The important of practical studies is to analyses the working of anindustry without practical knowledge, and experience no one can be

predict in considering the practical aspects so Gujarat university

has made the students to participate in making of a project report.

So., I got the chance to work on Marketing Management, We come

to know differentiate the theoretical and practical aspects.


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ACKNOELEDGEMENT

I am highly thankful to prof. Sakina Marchant guiding and

instructing us for preparing this report at a proper time.

I am very grateful the director Prof. Shastri, who gave a chance to

visit one of the best beverage company of the India.

I would like to give my gracious trucks to our university and college.

For providing me such a good opportunity and also I am thankful toSom lalit institute of Commerce and our Mr. Shastri for providing

me an opportunity to apply my knowledge through this report.

Once again I am very thankful to all of my classmates, my friends

who help me one or another way in this report.

Thank you.


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1. MANAGING PRODUCT LIFE CYCLE -

Product life cycle

Likehuman beings, products also have life-cycle. From birth to death human beings pass through

various stages e.g. birth, growth, maturity, decline and death. A similar life-cycle is seen in the

case of products. The product life cycle goes through multiple phases, involves many

professional disciplines, and requires many skills, tools and processes. Product life cycle (PLC)

has to do with the life of a product in the market with respect to business/commercial costs andsales measures. To say that a product has a life cycle is to assert four things:

that products have a limited life,

product sales pass through distinct stages, each posing different challenges, opportunities,

and problems to the seller,

profits rise and fall at different stages of product life cycle, and


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products require different marketing, financial, manufacturing, purchasing, and human

resource strategies in each life cycle stage.

The four main stages of a product's life cycle and the accompanying characteristics are:

Stage Characteristics

1. Market

introduction stage

1. costs are very high2. slow sales volumes to start3. little or no competition4. demand has to be created5. customers have to be prompted to try the product6. makes no money at this stage

2. Growth stage

1. costs reduced due to economies of scale2. sales volume increases significantly3. profitability begins to rise

4. public awareness increases5. competition begins to increase with a few new players in

establishing market

6. increased competition leads to price decreases

3. Maturity stage

1. costs are lowered as a result of production volumes increasingand experience curve effects

2. sales volume peaks and market saturation is reached3. increase in competitors entering the market4. prices tend to drop due to the proliferation of competing

products

5. brand differentiation and feature diversification is emphasized tomaintain or increase market share

6. Industrial profits go down

4. Saturation and

decline stage

1. costs become counter-optimal2. sales volume decline or stabilize3. prices, profitability diminish4. profit becomes more a challenge of production/distribution

efficiency than increased sales

PLC OF LUXINTRODUCTION TO LUXGLAMOUR FACTOR\We all want to be pampered, to look and feel great, to enjoy that moment when anything seemspossible. And that's just what Lux offers you on a daily basis at a price you can afford.Lux is the brand of UNILEVER PAKISTAN LTD. It has been winning hearts of Pakistani consumersfor 50 years. Throughout this time, Lux has been closely associated with many of the most glamorous


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and sensual women of the age.

LUX PRODUCTSLux had modified their product into:

Orchid touch Almond delight Energising fruit Aqua sparkleAlmond delight: Lux Almond Delight comes with the deep moisturization of exotic Peach, Cream andprecious Almond Oil

Energizing fruit: Lux Energising Fruit incorporates the beauty secrets of Fruit Extracts, rich MilkCream and Honey, for a fresh renewed feeling.Aqua sparkle: Lux Aqua sparkle has nourishing oil of Cade and cucumber extracts for a radiant andclear skin

15LUX PLCINTRODUCTION STAGELux had been launched in Pakistan in 1957. At that time there was only one competitor of Lux, whichwas LIFEBUOY. In the initial stages Lux was introduced in the major cities of Pakistan like Karachi,Lahore etc. In the initial stages Lux was the market challenger in the field. So the marketing managercame up with different marketing strategies to attract the customers.

MARKETING OBJETIVESThe Lux marketing objectives in the initial stage was to create the product awareness and to attract thecustomers towards the product.

MARKETING STRATEGIESThe Lux marketing mix strategies in the initial stages of the product were based on:

ProductThey offer only on product in the market. They did not come up with the differentiated product.

PriceIn the initial stages of the product, they offer the relatively higher price than their competitor(LIFEBUOY). Because, they want to recover their cost which incurred initially in making the product.Or another reason was that they have segmented the niche market.

AdvertisingIn the initial stages, they allocate more advertising budget to advertise the product. So that more andmore customers could be attracted towards the product. In ads they targeted the early adopters, who

were readiest to buy the product.DistributionTheir distribution was selective and only covers the major cities of Pakistan. Because, they initiallywant to get recognition in the major cities of Pakistan. Their distribution channel was:Manufacturer Retailer ConsumerManufacturer Wholesaler Retailer Consumer

16GROWTH STAGEIn the growth stage, their sales rapidly started rising. In the growth stage, they have expanded theirmarket to the other cities of Pakistan. The marketing mangers also make changes in the marketingobjectives and their marketing strategies.

MARKETING OBJECTIVESIn the growth stage, the marketing objectives of the Lux were to expand their market to the othercities of Pakistan. Another objective was to maximize more market share.

MARKETING STRATEGIESIn the growth stage, company had the following marketing mix strategies:

ProductIn the growth stage, the company had offered the same product in the market.

PriceIn this stage, the company had changed their price to some extent because of maximizing the marketshare.


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AdvertisingIn the growth stage, they had increased their advertising budget as in the initial stages because ofattracting the new customers or to retain the existing customers.

DistributionIn this stage, company had expanded their market to the other cities of Pakistan. Their distributionchannel was the same as in the initial stages of the product.

PromotionIn the growth stage, the company had also used the different promotioning strategies to attract the newand the exisisting customers.

17MATURITY STAGELux is now in the maturity stage, they modified the product by adding some changes in the product. Inthis stage, few competitors enter into the market like (SAFEGUARD, CAPRI etc). So the marketingmanagers make different strategies to handle the competition. The company has expanded theirmarket to almost all the cities of Pakistan.

MARKETING OBJECTIVESThe marketing objective of Lux is to maximize more profit while defending the market share. And toexpand the market to all the cities of Pakistan.

MARKETING STRATEGIESIn this stage, Lux marketing mix strategies are based on:ProductThe Lux has made the modification in the product by introducing:Orchid touch Almond delight Energising fruit Aqua sparkle

PriceThe Lux products are now available at higher prices in the market, the reason behind is that thecompanys marketing objectives is to maximize more profit.

DistributionNow Lux products are available in almost all the cities of Pakistan. Their distribution channel is sameas in the initial stage.

Advertising18In this stage Lux advertising has been reduced to some extent because of the more brand awareness inthe minds of customers. Recently, they show the ad in which the Pakistani leading television and filmactress were shown.

What is Channel Management anyway?


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Channel Management. Yet another sales and marketing phrase that is thrown around like

everyone knows what it means. But so few companies really comprehend channel managementin a way that really helps them. Its really no wonder. Sales channels (being the conduits by

which we distribute our products to the end-user) come in many shapesfrom direct, to the web,

to the traditional retail environment. And, were just doing whatever we can to get any business

from any of them! But is that the most efficient and effective approach?

Thats where Channel Management comes in. Channel management, as a process by which acompany creates formalized programs for selling and servicing customers within a specific

channel, can really impact your businessand in a positive way! To get started, first segmentyour channels by like characteristics (their needs, buying patterns, success factors, etc.) and then

customize a channel management program that includes:

1. Goals. Define the specific goals you have for each channel segment. Consider your goalsfor the channel as a whole as well as individual accounts. And, remember to consideryour goals for both acquisition and retention.

2. Policies. Construct well-defined polices for administering the accounts within thischannel. Be sure to keep the unique characteristics of each segment in mind whendefining policies for account set up, order management, product fulfillment, etc.

3. Products. Identify which products in your offering are most suited for each segment andcreate appropriate messaging. Also, determine where your upsell opportunities lie.

4. Sales/Marketing Programs. Design support programs for your channel that meetTHEIR needs, not what your idea of their needs are. To do this, you should start by

asking your customers within this segment, how can we best support you in the sellingand marketing of our products? That being said, the standard considerations are producttraining, co-op advertising, seasonal promotions, and merchandising. Again, this is not a

one-size fits all, sobe diligent about addressing this segments SPECIFIC needs in these

areas.

Defining a channel management strategy for each segment allows you to be more effective

within each segment, while gaining efficiency at the same time. Still, maintaining brand


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consistency across all channel segments is critical to your long-term success. So find a good

balance between customization and brand consistency and youll be on your way to successfulchannel management.

MAIN PLATERS IN THE INDUSTRY:Goodlass NerolacBerger PaintsICI PaintsShalimarLEMON OPERATIONS

ISABELLE HUITRIC

ASIAN PAINTSMICROSOFT

DISTRIBUTION STRATEGY THE CASE OF ASIAN PAINTSAsian Paints (AP) is the market leader in the Indian paint industry, commanding a marketshare of 38 per cent in decorative paints and 33 per cent overall in the organised sector.Its annual sales turnover exceeds Rs. 1,300 crore, way ahead of all the competitors inthe industry. In profits too, AP is far ahead. APs market leadership in the decorative paints segments can be grasped correctly when we take note of the relative position ofthe various players in the industry. Whereas AP has a market share of 38 per cent, its

nearest rival, Goodlass Nerolac, commands a share of just 14 per cent. All others haveonly less than 10 per cent. Such an achievement by a company that is wholly Indian incapital, management and technology and in an industry historically dominated bymultinationals is certainly a commendable feat.

A STORY OF DISTRIBUTION EXCELLENCEThis case study, in fact, depicts the distribution strategy adopted by AP in the early yearsof its operations. The interesting point is that this strategy serves AP well even today,when the context has somewhat changed. In the earlier years, in the decorative paintsegment, a wide product range in terms of colour and pack size was a crucial factor forsuccess. AP literally leapfrogged and overtook all its competitors, and offered the widestrange of products. It also created the distribution outfit that was necessary for reaching

the wide range of products to customers in every nook and corner of the country. In lateryears, technology came to the rescue of the players in this regard. Customers could getthe colour of their choice through mixing at the retail outlet. With the help of anautomated machine kept at the retail outlet, paint is given the desired colour by mixingdifferent shades and stainers in the required proportion. The paint companies need tomaintain only half-a-dozen basic colourants with retailers; mixing can create the othervariants. The new arrangement helps the campanies to manage with a narrow range ofpaints. They can reduce the number of SKUs handled and cut down inventory holdingcosts.


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The above shift has no doubt reduced somewhat the importance of the physicaldistribution task in the business, compared to the position in the earlier years. At thetime AP entered the Indian paint business, the physical distribution and channelmanagement task was the most crucial one in paint marketing. This context iselaborated in one of the sections in this case study. We can appreciate the lessons ofthe case study better, if we keep in mind this contextual position. Even now, physical

distribution and channel management continue to be crucial functions in the business.In the matter of product range too, companies are not able to totally dispense with theneed for variety in view of the many practical limitations of mixing at retail outlets. It isno easy task to provide mixing and computers. Before we actually go into APsdistribution strategy, let us have brief profiles of the company and that of the paintindustry, so that the contextual setting of the case is clear. Let us start with the industry.

PERFORMANCEAP has been consistently turning out a good performance over the years. For more thantwo decades now, it has been the market leader. Besides, the company has alsoconsistently proved its excellence in operating performance. Exhibit 2 gives details of

APs sales performance during the last fouryears. Exhibit 3 gives some other important

details of APs performance. AP has set a target of gross sales of Rs 2,100 crore by2003. It aims to be amongst the top ten decorative paints manufacturers in the world by2003 and among the top five by 2005.Exhibit 2: Asian Paints-Sales Performance : 1998-20011998 1999 2000 2001Sales Value (Crore) 911 1,033 1,221 1,373Sales Volume (Tonne) 116,942 132,284 162,110 181,271Exhibit 3: Asian Paints Select Performance Indicators (FY 2000)

APs operating profits stood at Rs 191crore in FY 2000, an increase of 37.7percent over the previous year.

The net profit stood at Rs 97 crore as

compared to Rs 77 crore the previousyear, higher by 26.6 per cent. Net3

Operating profits have grown at aCAGR of 13 per cent in last five years,much higher than the sales growth of8.6 per centprofit has grown at a CAGR of 12.7 percent in last five years.

The profit before tax (PBT) stood at Rs143 crore, an increase of Rs 49 croreover the previous year. PBT has grown

at a CAGR of 12.35 per cent in last fiveyears.

Return on net worth (RONW) improvedfrom 25.2 per cent in FY 1999 to 27.1per cent in FY 2000. RONW hasremained close to 25-26 per cent inlast five years.

Return on Capital Employed


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(ROCE) improved from 26.6 percent in FY 1999 to 35.9 per cent inFY 2000.

APs sound marketing has earned it strong brand equity. To quote APs managingdirector: We have been able to build strong brand equity for our products by focusing onfeatures that are appreciated by customers, ensuring that our products are of high and

consistent quality, offering a wide range of shades and packs, and ensuring that ourproducts are available wherever and whenever required, by building a strong distributionsystem.Its brand Tractor, Apcolite, Uttav, Apexand Aceare well entrenched in the market. And

APs logo, Gattu, the impish boy, with the paint tin and brush, symbolises one of themost recognised and most prosperous mascots in Indian business! All this has earnedthe company a place among the worlds leading paint manufacturers. AP is the winnerof the 1995 corporate performance award by the Economic Timesand Harvard BusinessSchool Association of India. It actually received the award twice within a decade.

AP STRIKES A NEW PATH IN DISTRIBUTION

At the time AP entered the Indian paint business, distribution was the most crucial taskfor any new entrant. Both physical distribution and channel management posedformidable challenges. The foreign companies and their wholesale distributorsdominated the business. The foreign companies appointed a few traders as theirwholesale distributors and allowed them to perpetuate a situation of monopoly. Eachdistributor was assigned a large territory and was given the right to operate as theexclusive channel of the company in the assigned territory. The trade terms were alsovery liberal. The companies also extended virtually unlimited credit to the distributors.The credit outstandings for the supplies made throughout the year were required to besettled by the wholesale distributors only at the year-end, at Diwali time.These distributors had neither the compulsion nor the motivation to invest in distributioninfrastructure. They were not required to move out to semi-urban and rural areas. They

concentrated on big cities where they could make the sales without much investment indistribution infrastructure and market development. Also, they were shutting the doorson any new paint company seeking an entry into the business. In other words, thesedistributors controlled the paint business and were making it impossible for a new paintcompany to enter and establish itself n the business. AP sized up the scenario correctlyand formulated a unique distribution strategy. In the normal course, a firm entering theindustry in this scenario would have opted for the low risk strategy of gaining a limitedaccess to the wholesale traders and be satisfied with a small share of the existing4

business. But AP went in for a strategy that differed totally from the existing pattern.APs strategy in fact, meant the polar opposite of the established/existing pattern.Chart 1: Elements of APs Distribution Strategy

AP bypassed the bulk buyer segment and went to individual consumers of paints.AP went slow on urban areas and concentrated on semi-urban and rural areas.

AP went retail.

AP went in for an open-door dealer policy.

AP voted for nationwide marketing / distribution.AP BYPASS THE BULK BUYER SEGMENT AND GOES TO INDIVIDUALCONSUMERSBulk buyer segment was the major segment of the paint business in the earlier days and


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any paint company needed a share of this major segment for sheer survival. Though,this segment was dominated totally by foreign companies and their wholesaledistributors, a new entrant to the business like AP would normally have rushed to thissegment and tried to garner a share of it. AP, however, had a totally different game plan.Seeing that this segment was not a growth segment, though it was certainly the majorsegment at that point of time, AP decided to ignore this segment for the present and go

to individual consumers. And that was a crucial decision. It influenced everysubsequent decision AP took in the realm of distribution. Over time, AP proved to thepaint industry that there existed a large and bottomless segment in the paint business ofIndia, outside the bulk buyer segment, comprising of individual consumers.AP GOES TO SEMI-URBAN AND RURAL AREASAlong with the decision to go to individual consumer segment leaving aside the bulkbuyer segment, AP also decided that within the individual consumer segment, semiurbanand rural areas would constitute APs priority market. Prior to APs entry, the paintbusiness was by and large concentrated in the urban areas. All the major paintcompanies and their wholesale distributors were content with the market that wasavailable in the urban areas. In contrast, AP clearly saw that a large market for paintswas emerging in the semi-urban and rural areas, and felt it wise to tap this market. AP

also understood that a new entrant like AP had also a compulsion to go to the semiurbanand rural areas. The major companies and their wholesale distributors were notgiving any worthwhile opening in the big cities for new entrants. AP found it difficult toattract the wholesalers in the cities to deal in its products. It had to necessarily turn tothe semi-urban and rural areas for support. AP wisely decided against committing all itsresources on a head on collision with the foreign companies and their big wholesaledistributors in the urban areas.AP GOES RETAILGoing directly to retail dealers was the next major strategic decision of AP in the realm ofmarketing and distribution. Here too, AP totally broke with the prevailing distributionpractice. As mentioned earlier, the foreign companies, who were the main players, werepractising a wholesale distributor-dependant marketing system. AP did not see any

great merit in the system. It totally bypassed the well-entrenched wholesale distributorsand went directly to the retailers. While APs competitors remained content with theirlinkage with a handful of wholesale distributors, AP preferred direct contact withhundreds of retail dealers.5

AP GOES IN FOR AN OPEN-DOOR DEALER POLICYAP followed an open-door policy in the matter of adding retail dealers to its network. Theprevailing trend in those days was to limit the number of dealers to the barest minimum.AP broke this trend and chose to use practically everyone in the trade, who was willingto function as its dealer. It was as a combined result of the policy of going directly toretailers and the policy of open door to dealership that APs dealer network swelled rapidly. Even after achieving stability and maturity in distribution, AP continued to follow

a policy of continuous expansion of dealer network. By 1990, AP was having a 7,000strong dealer network. By the year 2000, the number had swelled to 12,000. And evennow, on an average, AP is adding 200 to 250 new dealers every year.AP VOTES FOR NATIONWIDE MARKETING/ DISTRIBUTIONAP took yet another important and strategic decision in the realm of distribution. Thosedays nationwide distribution/marketing was not the standard practice in the paintbusiness. On the one side, there were the 1,000 odd small paint companies who, as aclass, believed in marketing their paints in limited territories in and around their point ofproduction. On the other side were the big companies, who as a class, believed in


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limiting their distribution to the big cities. In contrast to both these existing practices. APvoted for a nationwide distribution/marketing. It wanted to have an active presencethroughout the country, in all the geographical zones, states and territories.THE IMPLICATIONS OF APs DISTRIBUTION STRATEGY

APs distribution strategy described in the preceding paragraphs had its associatedimplications. AP had to take due note of them and face them squarely.

GOING TO INDIVIDUAL CONSUMERS IMPLIED WIDE PRODUCT RANGE ANDCOMPLEX DISTRIBUTIONHad AP concentrated on the bulk buyer segment, it could have managed with a limitedproduct range, at least, in the initial years. But, APs decision to turn to the individual consumers necessarily meant a wide product range. In the nature of things, theindividual consumer segment involves a very wide choice in terms of products,materials, shades and pack sizes. On top of this, AP believed in making products basedon the preferences of consumers. It gathered feedback from the consumers and turnedout products, shades and pack sizes on the basis of such feedback. This policy resultedin a further burgeoning of the product range.SMALLER PACKS PROLIFERATED THE PRODUICT DEPTH FURTHER

At the time of APs entry, paint companies were supplying paints in containers of 500 ml

or larger. AP saw that there was a felt need in the market for paints in smaller packs. Allend uses did not require a large quantity. Moreover, it was common practice forconsumers to buy paint initially in a larger quantity and supplement it with small sizepurchase to complete the job. AP decided to harness the business opportunity andstarted supplying it paints in small packs- in 200 ml, 100 ml and 50 ml packs. Thisproliferation in pack sizes also contributed to APs growing product range. AP was bynow manufacturing and marketing as many as 2,000 distinct items of paints, none ofwhich was strictly a substitute for the other.WIDE PRODUCT RANGE IMPLIED EXPENSIVE DISTRIBUTIONThe policy of having the widest range of products, colours and pack sizes had itsimplications on APs distribution. When 2,000 different items had to be made available6

to the consumers, it automatically meant that the company had to be prepared for highinventory holding in its various depots/retail outlets. Accounting and sales arrangementshad also to be provided for on a matching level. Naturally, distribution was becomingmore complex and expensive for AP.GOING TO SEMI-URBAN / RURAL MARKETS FURTHER ENLARGEDDISTRIBUTIONThe decision to go to the semi-urban and rural markets instead of confining to the urbanmarkets also meant enlargement of the distribution function. AP had to go in for moredealers in order to serve the scattered semi-urban and rural market. The decision alsomeant that AP could not opt for a simple, centralised distribution of its products from itsfactory. It had to go in for a decentralised, field-focussed distribution, with a network ofdepots located all over the country/marketing territory. Without such extensive and

intensive distribution network, it would not have been possible for AP to cover the semiurbanand rural markets.Chart 2: Main Steps in the Implementation Process

AP created a large network of dealers It successfully resolved the costserviceconflict in distribution

It established a network of companydepots to service the dealersi (i) A strong commitment toii distribution cost control, without


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iii compromising service level

It created a marketing organisation thatmatched its distribution(ii) Effective inventorymanagement(iii) IT initiatives in distribution cost

iv controlGOING RETAIL IMPLIED DEEP INVOLVEMENT IN CHANNEL MANAGEMENTThrough its decision to go retail, AP was getting deeply involved in physical distributionand channel management. In the system chosen by AP, the physical distribution-cumchannelmanagement task was far more demanding, compared to the wholesalerorientedsystem practised by the other paint companies. While, for companies thatembraced the wholesaler-oriented system, it was enough to service a handful ofdistributors, AP had to service a network of thousands of retail dealers. Having taken thedecision to go retail, AP necessarily had to create and service a vast dealer network. Italso had to create the physical distribution facilities required for servicing such a largenetwork.National Marketing Necessitated Nationwide Organisation

Extent of marketing territory and complexity of distribution organisation are interrelated.The moment AP voted for nationwide marketing, it was getting into intensive as well asextensive physical distribution and channel management. AP thus had to create anationwide distribution-cum-marketing organisation.DISTRIBUTION BECOMES APS SHOWCASE FUNCTION

APs strategies made distribution the most important element of its marketing mix. And,AP gave to distribution all the inputs that were demanded by it. In fact, the rest of thiscase study is essentially a description of how AP managed its distribution activitieshow it chalked out its distribution programmes, how it implemented them, what problems7

it encountered in this task, how it tackled them and how through distribution success, itachieved marketing and corporate success.

THE IMPLEMENTATION PROCESSWe shall see how AP went about the actual management of the distribution function. Themain steps in APs implementation process are shown in Chart 32.2. Let us see thedetails.AP Creates a Large Network of DealersAn extensive network of dealers and a matching physical distribution infrastructure playa crucial role in the decorative paints segment. This is essential for ensuring easyaccessibility of the product to customers. In this, Asian Paints scored over its competitorswith a massive network of 15,000 dealers spread over 3,500 towns across the country.AP has the largest distribution network among all the players. Goodlass has a network of8,000 dealers.AP Established a Network of Company Depots

AP established a large chain of company operated depots/stock points throughout itsvast marketing territory, from where the retail dealers could conveniently pick up theirrequirements. APs basic strategies explained in the earlier sections necessitated a liberal approach in the matter of stock points/depots. It also meant that the depots had tobe company operated. After all, AP did not have any wholesale distributors to whom theresponsibility for operating the stock points could possibly have been assigned. APestablished a network of 30 company-run depots, spread through out the country andserviced its retailers from them. The number of depots varied from city to city. Forexample, Bangalore had just one depot while Mumbai had four depots. The depots


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typically supplied to about 200-300 dealers.AP creates a Marketing Organisation that Matched its Distribution IntensityEffective control of the large number of depots, each having substantial stocks of 2,000odd distinct items necessitated a matching marketing organisation structure. AP set up amarketing organisation consisting of four regional sales offices, 35 branch sales officesand a large number of sales supervisors and sales representatives spread all over the

country. The marketing organisation of the company is presented in Exhibit 4. It can beseen from the chart that a very extensive structure has been created in the consumerdivision. It is primarily meant for taking care of the massive distribution task involved inthis sector. Each branch sales office has its own depots and the various items arestocked in the depots under the control of the concerned branches. The branchesservice the dealers and customers in their territories.These are supported by six regional distribution centres, which cater to 55 depots. Eachdepot has a branch manager for supervision of several salespersons who cater to morethan 14,500 dealers in the more than 3,500 big and small cities all over the country. APfaced many challenges. Of these, the cost-service dilemma was no doubt, the mostimportant one. And, that is the aspect in which we are mainly interested in this casestudy.

Exhibit 4: APs Marketing Organisation8General Manager(Marketing)

AP Successfully Resolves the Cost-Service Conflict in DistributionManaging the cost-service conflict was the main challenge that AP faced in theimplementation of its distribution strategy. AP met this challenge successfully.We have seen that AP has over 15,000 dealers in 3,500 towns in India. AP caters to allof them directly. As a result, for AP, the distribution task gets tremendously extended anddistribution cost becomes a significant business parameter.Demand for decorative paints is characterised by seasonality. Demand drops duringmonsoons and picks up around a mouth-and-a-half before the festive season. Major part

of the sales take place in the second half of the financial year. Manufacturers have tocarry huge inventories during the lean period. As a result, distribution cost becomes allthe more significant.Naturally, distribution cost emerged as a major hurdle that AP had to cross. The strategyadopted by AP necessitated expensive distribution. In addition, AP took another basisdecision. It went in for a very high service level in distribution. Service level is measuredin terms of the number of stock keeping units (SKUs) available in stock as a percentageof the number of SKUs that should have been in stock. APs service level is more than85 per cent whereas that of other large paint companies falls between 50 and 60 percent. This meant a further rise in APs physical distribution costs. AP had to resolve thiscost-service conflict.In the chapter on Physical Distribution and Logistics Management, we had seen that a

cost-service dilemma is inherent in any physical distribution situation. A high servicelevel in physical distribution-in transportation, warehousing, order processing and9Sales Manager(Trade)Manager(Export)Sales Manager(Industrial)Regional


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(1) (2)Sales(3)Managers(4)ProductManager(1)ProductManager(2)ProductManagerZonal Managers (4)Branch ManagersorDepot Executives (35)ProductExecutives (6)Product

Executives (6)ServiceRepresentatives (4)Sales Supervisors (13)Sales Representatives (168)Sales Representatives(Industrial Paints)(27)

inventories necessarily means a high level of costs. Every firm has to face this costservicedilemma and work out a compromise. AP voted for a high service level andwithout compromising this service level, it tried to contain the distribution costs.Interestingly, AP succeeded in this endeavour.When we go in to the details as to how AP actually resolved the cost-service dilemma,four factors stand out:

A strong commitment to distribution cost control, without compromising service level

Effective inventory management

Effective control of credit outstanding

IT initiatives in support of distribution cost controlStrong Commitment to Distribution Cost ControlWhile following a totally customer-oriented distribution strategy. AP could not afford toignore the cost angle. AP was in no position to pass on any additional costs to theconsumers. APs marketing philosophy demanded that the consumer price of its paintsshould be on the lower side, so as to suit the pockets of the average Indian. Moreover,

APs business growth demanded more and more investment in manufacturing and

distribution. AP had to find the resources. This apart, the intensity of competition hadalso been on the increase. Naturally, profitability was coming under greater strain inthese circumstances. AP had to control its distribution costs in order to maintain itsprofitability and market leadership. The question was how to control the costs withoutsacrificing the service level.EFFECTIVE INVENTORY MANAGEMENTEffective inventory management is the first major component of APs strategy ondistribution cost control. And, AP achieved high efficiency in this regard. Actually, ininventory cost, AP took the lowest position in the industry. APs average inventory level


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equals only 28 days sales, while the industry average is 51 days sales. This right awayprovided a 45 per cent edge in inventory costs to AP compared t its competitors. APsstock of finished goods was just 7 per cent of its net sales while for the others in theindustry it was nearly twice that level. What is particularly striking in this achievement isthat AP offered customers and dealers a high level of service in product deliverycompared to its competitors and yet kept the inventory costs down by 45 per cent

compared to the competitors.CONTROL OF CREDIT OUTSTANDINGSLarge credit outstandings, running beyond two months or more, was a naturalconcomitant of the distribution strategy chosen by AP. The dealers are required tomaintain stocks of all the SKUs that are on demand in the territory. It pushes upinventory levels at the outlets. They need credit. AP allowed 15-21 days credit fordealers located in the major towns and 22-30 days credit for dealers in upcountryregions.AP had to pull off a smart credit control strategy for survival. It resolved the thornyproblem through an innovative dealer incentive scheme. AP stipulated that each of itsdealers should pay for the supplies within a specified tme norm and offered them asattractive incentive scheme for doing so. It consisted of two components:

(a) A special discountof 3.5 per cent. This was referred to as the discount for perfectionin payments. It was passed on at the end of the year, provided each and everypayment throughout the year was made within the stipulated time norms.10

(b) A cash discountof 5 per cent. This was paid for all outright cash purchases. It wasgiven whenever payments were received within 24 hours of the supply/invoice. Inrespect of outstation accounts, the payment have been made in advance by draft inorder to be eligible for the cash discount.The scheme was a grand success. APs credit outstandings always stood below 25days, while the outstandings of the other major companies were in the range of 40 daysand above. Systematic computerisation also helped AP maintain the credit outstandingwithin limits.

IT INITIATIVES IN DISTRIBUTION COST CONTROLAPs IT initiatives in respect of distribution-inventory control and control of creditoutstanding, in particular-helped it to control distribution costs without lowering theservice level. AP went in for a fully computerised distribution system. AP did this notonly with an eye on distribution cost control, but also for the sake of distributioneffectiveness per se. But for such an approach, APs distribution management wouldhave gone haywire. Here was a situation where 2,000 different items of paints,manufactured at four different plants, had to be distributed to 15,000 dealers in 35,000towns spread all over the country, through 55 depots. AP accomplished this, maintainingthe average service level at 85 per cent, a clear 25 per cent above that of competition.The IT initiatives also ensured prompt billing, accurate customer accounting andeffective control of credit outstanding.

Computerisation also enabled AP to process recent sales data for the 100 fastestmoving SKUs. This analysis was used to project sales of specific products, whichhelped plan production and raw material purchases. With computerisation, AP was ableto analyse past trends to arrive at a 90 per cent accurate sales forecast. Correctionswere made every month between the sales projections and actual sales. Productionwas thus evened out month-to-month. Sales statistics were maintained, classified byproduct, month, salesman, branch, region and dealer. Such computerised planning andcontrol of production, sales and inventories helped AP cut distribution costs withoutcompromising on the high level of service sought by it in physical distribution.


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AP later hired from the Department of Telecommunications, satellite time and got all itsoffices in the country networked. They transmit data daily to the corporate head office inMumbai, which uses it for sales and production planning. AP has consistently improvedits IT systems over the years. It has linked al its factories and 55 depots through C-SATterminals, and derived big benefits in terms of streamlined distribution. More recently,AP has implemented supply chain management software from 12 technologies. AP

plans to upgrade its communication infrastructure through VSAT leased lines and ISDNlines all over India. It is also implementing an ERP solution from SAP to be completed in2001.AP ACQUIRES A COMPETITIVE ADVANTAGE THROUGH ITS INVENTORYMANAGEMENT AND CREDIT CONTROL.One can grasp the full import of APs success in this sphere only when due note is takenof the fact that AP has achieved the lowest distribution cost as well as the highestdifferentiated position in the industry. APs Apcolite, the largest selling brand of paint inthe country, is available in 151 different shades and in eight different pack sizes. Beingin the business of colours, AP utilised colour to achieve differentiation, and none of its competitors could match AP in this aspect. Simultaneously, AP also achieved the lowest11

cost position in the industry. Normally, when a firm consciously opts for thedifferentiation route with a wide product line, it automatically points towards higherinventory levels and consequently higher inventory and other costs. But AP, through itseffective distribution management, inventory management and control of creditoutstandings, in particular, managed to retain its inventory size and inventory costs atthe lowest possible level.AP actually saved so much on inventory carrying costs that it almost earned itspromotion budget through these savings. This is again praiseworthy because APspends as much as 10 per cent of its sales on promotion, the highest in the industry. Ithas to spend so much in order to maintain its differentiation advantage. But strikingly, ithas kept its total marketing costs the lowest in the industry. The two factors together-thelowest cost position as well as the highest differentiation position-has conferred a

significant competitive advantage on AP.LEADERSHIP THROUGH DISTRIBUTION EXCELLENCEThe story of Asian Paints is a story of distribution excellence. AP achieved an enviableleadership position through the distribution route. While AP did not ignore any of theother functions of marketing, it was by mastering the distribution function that APs gained a distinct and powerful competitive advantage. APs distribution strategy wastruly innovative; it broke new ground in every aspect of distribution. In the final analysis,excellence in distribution led the company to marketing and corporate excellence.

E-MARKETING

Web MarketingA Firms efforts to communicate , promote &


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sell its products & services over theinternet.

Interactive form of marketingThe two components of web marketing are :

Marketing to Business Buyers

Marketing to ultimate consumers

We can view web marketing in four ways :A Business A Medium A Marketing Channel (or tool for channel less marketing)A Complete Market placeElevation of the Web from a medium of

communicationto a marketing channel to a complete marketplace.The largest, most dynamic, sleepless,electronicbazaar/mall of goods and services , the world

has everseen!!

Internet marketing is sometimes considered to be broad in scope[citation needed] because it not only

refers to marketing on the Internet, but also includes marketing done via e-mail and wireless
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media.[citation needed] Management of digital customer data and electronic customer relationship

management (ECRM) systems are also often grouped together under internet marketing.[citation

needed]

Internet marketing ties together creative and technical aspects of the Internet, including design,

development, advertising, and sales. Internet marketing also refers to the placement of mediaalong many different stages of thecustomer engagementcycle throughsearch engine marketing

(SEM),search engine optimization(SEO),banner adson specific websites,email marketing, andWeb 2.0strategies. In 2008,The New York Timesworking withcomScorepublished an

initial estimate to quantify the user data collected by large Internet-based companies. Counting

four types of interactions with company websites in addition to thehitsfrom advertisementsserved from advertising networks, the authors found the potential for collecting data upward of

2,500 times on average per user per month.[1]

benefits

Internet marketing is inexpensive when compared to the ratio of cost against the reach of thetarget audience.[citation needed] Companies can reach a wide audience for a small fraction of

traditional advertising budgets.[citation needed] The nature of the medium allows consumers to

research and to purchase products and services at their own convenience.[citation needed]

Therefore,businesses have the advantage of appealing to consumers in a medium that can bring results

quickly.[citation needed] The strategy and overall effectiveness of marketing campaigns depend on

business goals andcost-volume-profit (CVP) analysis.

Internet marketers also have the advantage of measuring statistics easily and inexpensively.

Almost all aspects of an Internet marketing campaign can be traced, measured, and tested. [citationneeded] The advertisers can use a variety of methods, such aspay per impression, pay per click,

pay per play, andpay per action.[citation needed] Therefore, marketers can determine which messages

or offerings are more appealing to the audience.[citation needed] The results of campaigns can be

measured and tracked immediately because online marketing initiatives usually require users to

click on an advertisement, to visit a website, and to perform a targeted action. [citation needed] Such

measurement cannot be achieved through billboard advertising, whereby an individual might be

interested but then decide to obtain more information at a later time.[citation needed]

Because exposure, response, and overall efficiency of Internet media are easier to track than

traditional off-line media[citation needed]

through the use ofweb analyticsfor instance[citation

needed]Internet marketing can offer a greater sense of accountability for advertisers.[citation needed]

The effects ofmultichannel marketingcan be difficult to determine, but are an important part ofascertaining the value of media campaigns.

Limitations
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From the buyer's perspective, the inability of shoppers to touch, to smell, to taste, and "to try on"

tangible goods before making an online purchase can be limiting.[citation needed]

However, there isan industry standard for e-commerce vendors to reassure customers by having liberal return

policies as well as providing in-store pick-up services.[citation needed]

The buyer can also be biased if there is not sufficiently reliable product information availableonline

All products do not lend equally well for WebmarketingLimitation of examining the productProblem of Delivery

Problem of confidenceProblem of paymentLow Density of PCs & internetLegal Problems

Problems Web Marketing faces in

IndiaLegal / Regulatory Problems E-documentation is not yet legally admissible Absence of Taxation Law

Infrastructural Problems Low density of telephone, PCs & internet access

Infrastructural bottlenecks Commercial Problems Problem relating to payment Low density of credit cards Inability to pay foreign suppliers
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Other ProblemsConfidence in the system is lowProblem of Hacking

Problem of Illiteracy

GROWTH OF WEB MARKETING

The Internet marketing has been increasing around in India since last 5 years.

However, e-commerce has picked up only recently and Online Marketing is slowly

growing up in India too. Currently, most of the business people were doing their

business through online due to more technology development and internet users

across the India.

Day by day, online shopping is truly catching on in India, traditional brick and

mortar stores are also getting the hand of doing business online. The trends

demonstrate that traditional stores will keep on doing sufficient business while

the online stores increase their virtual presence on the internet.

The internet is also proving to a boon in disguise for many small and medium

enterprises, which are joining hands with major Indian online portals to display

their products and advertise their services.

Internet Marketing is one of todays fastest growing marketing opportunities. With

the use of todays Internet Marketing medium one can open doors to potential

client who will be able to search and seek your website through the use of SearchEngines.

Indian Firms taking to WebMarketingBanking IndustryEntertainment Industry

Information ServiceStock BrokingAirwaysHotels


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Others

PROMOTION MIXThere are seven main aspects of a promotional mix.

[1]These are:

Advertising- Presentation and promotion of ideas, goods, or services by an identified

sponsor.Examples: Print ads, radio, television, billboard, direct mail, brochures andcatalogs, signs, in-store displays, posters, motion pictures, Web pages, banner ads, and

emails. (Not Always Paid For)

Personal selling- A process of helping and persuading one or more prospects to

purchase a good or service or to act on any idea through the use of an oral presentation.Examples: Sales presentations, sales meetings, sales training and incentive programs for

intermediary salespeople, samples, and telemarketing. Can be face-to-face or via

telephone.

Sales promotions- Media and non-media marketing communication are employed for a

pre-determined, limited time to increase consumer demand, stimulate market demand or

improve product availability.Examples: Coupons, sweepstakes, contests, product

samples, rebates, tie-ins, self-liquidating premiums, trade shows, trade-ins, andexhibitions.

Public relations- Paid intimate stimulation of supply for a product, service, or businessunit by planting significant news about it or a favorable presentation of it in the media.

Examples: Newspaper and magazine articles/reports, TVs and radio presentations,

charitable contributions, speeches, issue advertising, and seminars.
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Corporate image- The Image of an organization is a crucial point in marketing. If the

reputation of a company is bad, consumers are less willing to buy a product from thiscompany as they would have been, if the company had a good image.

Direct Marketingis often listed as a the fifth part of the marketing mix

Exhibitions- are try-outs. You make your product, and let potential buyers try the

product, this way, you know directly what people see in your product. The downside,your competitor can see exactly what you are doing.

Promotional Mix CASE STUDY:

It is surprising that Google has become one of the worlds largest search engines when thepromotion strategy of the company relies heavily on viral, or referral, marketing. With its

minimalist homepage and knack for gaining consumer trust through a morally superior

advertisement policy, Google has gained consumer loyalty and in turn Google customers

recommend Google to their friends. Their best reference is a friend with enough friends, they

will create a buzz and significant exposure by word of mouth, the ultimate branding technique

(The Four Ps). While word of mouth has been Googles predominant form of promotion,the company does use advertising. Most of Googles advertising is done online, with a fewexceptions. Google promotes its services and products by purchasing its own AdWords internet

ads and through its own Google channel on YouTube. A prime example of Googles minimalistinternet advertising strategy was when they released Google Chrome. When the product was

released, Google placed a link on its homepage that stayed up there for a very short period oftime- a week. This modest advertising strategy truly shows the faith that Google has put in viral

marketing.

When it comes to Google Apps, the company has gone a little further in their advertising

campaign through the use of television ads, the most notable being those for the Android mobilephone platform, sales promotions, and other public installations. In August of 2009, Google

used sparse billboard advertisements to increase public awareness about Going Google. These

billboards [ran] for a month portraying how and why some 3,000 organizations are signing upto use Google apps each day (Google Adopts New). The billboards, found in New York,Boston, Chicago, and San Francisco, were changed each day to entice commuters through direct

marketing to go Google by visiting a special website (google.com/appsatwork) designedspecifically to showcase Google applications. Coupled with the Going Google campaign inAugust, Google used a form of sales promotion (it is noted that since most of Googles services

are free to use, these sales promotions can more likely be deemed use promotions) to give

away Google fare when users who have Gone Google fill out a Google Doc describing their

experience (Google Adopts New). Google does have its own Public relations division thatreleases and monitors press on product announcements and reviews, furthering the squeaky

clean image Google has managed to establish and maintain.

It is safe to assume that Google relies heavily on internet advertising and viral marketing.While the company has strayed from its low key promotional strategy at t imes, Googlesreputation and brand has gained clout because of their dedication to simplicity.

MARKET SEGMENTATION
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Market segmentation is a concept ineconomicsandmarketing. A market segment is a sub-set

of amarketmade up of people or organizations with one or more characteristics that cause themto demand similar product and/or services based on qualities of those products such as price or

function. A true market segment meets all of the following criteria: it is distinct from other

segments (different segments have different needs), it is homogeneous within the segment

(exhibits common needs); it responds similarly to a market stimulus, and it can be reached by amarket intervention. The term is also used when consumers with identical product and/or service

needs are divided up into groups so they can be charged different amounts.The people in a given

segment are supposed to be similar in terms of criteria by which they are segmented and differentfrom other segments in terms of these criteria. These can broadly be viewed as 'positive' and

'negative' applications of the same idea, splitting up the market into smaller groups.

Examples:

Gender

Price

Interests
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Market Segmentation/Share of WalletUnderstanding the characteristics of

High-Potential Customers

A Case Study byHarte-Hanks Research & AnalyticsHarte-Hanks Research & AnalyticsSan Diego, California 92037

Client Objective

Gain an understanding of the companys share of telecommunications dollars spent bycustomers.

Tailor sales and marketing plans toward industry segments, showing maximum revenuegrowth potential.

Broader Audience for CaseA share-of-wallet study can be fruitful for virtually any business, whether the client markets toconsumers or other businesses, or even in a non-profit development context. It can be

particularly relevant if customers frequently buy from multiple vendors, or if you have just

grown through merger or acquisition and want to gain a quick handle on your acquired customer

base.Its also valuable if your industry is going through rapid growth. If everybody in the sector is

growing, youll want to get a handle on whether your own growth is hiding things: For instance,

possibly the fact that customer penetration is shallow and that you are actually losing ground tokey competitors.

Whenever its undertaken, the end resulta marketing strategy focused on the best revenue

opportunitiesis always desirable.The Harte-Hanks Solution

In order to analyze the clients share of wallet in customer spending, Harte-Hanks first

matched the clients customer list to Harte-Hanks Market Intelligences syndicated database

(which contains statistics, by site, on long-distance voice expenditures and volumes of datacommunications product usage, each identified by service provider).

For all matched sites, Harte-Hanks coupled average price points for data communications

products with reported product usage in a formula that estimated data communications spending.Calculated data communications spending was added to the reported long-distance voice

spending to arrive at total spending for each customer.

The customers actual client billing data could then be compared with total estimated spending to

arrive at the clients share-of-wallet versus the dollars each customer spent with othercommunications carriers.

Once core calculations to determine total spending and share of wallet were completed, cuts of

the customer base were made by industry and by three client-spending tiers. Harte-Hanksidentified segments offering the most revenue potential in long distance, data communications,

and combined overall revenue based upon estimated dollars spent with competitors on

communications services. These segments were then analyzed on a time-series basis, viewing

customer spending over a four-year history to spot the strongest growth trends.


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The analysis identified areas where significant future revenue growth, beyond just that captured

in current spending data, might lie.Finally, a cluster analysis identified groupings of customers with internally homogeneous

characteristics that distinguished them, in general, from other customers. Clustering, which uses

combinations of factors (rather than just single attributes) to formulate distinctions, yields amulti-dimensional picture of the various constituencies within the customer base.

FindingsInitial analysis showed that the client held its highest share of spending in the lowest targeted

customer tier. Share was slightly lower in the highest tier, while the middle spending tier offered

the most potential with only a 23% share-of-wallet captured.

When these results were further segmented by industry and specific spending categories, pockets

of potential emerged in all three tiers of monthly spending. For example, despite the relatively

high share of wallet in the lowest spending tier, the Education, Wholesale and Governmentcustomers in that category still offered high potential across all three revenue categories

(longdistance,

data communications and total revenue).Some industries showed potential in specific service lines. For example, Transportation

customers in the highest spending tier offered strong long-distance spending potential, while

Business Services customers in the lowest tier offered strong data communications potential.Conversely, though they were not highlighted for either specific service, Communications

customers in the middle tier presented strong overall spending potential.

With historical trend analysis that pinpointed areas of growth, more middle-tier industry

segments (where the current customer base was less penetrated) appeared to be good futurerevenue possibilities.

Finally, the cluster analysis showed a new perspective. Rather than being dominated by industry

characteristics, clustering factors tended to be size of site or enterprise and use of specificservices. Seven clusters were identified:MomandPopISDNHeaviesVoiceandDataHeaviesTelemarketingSmallerPrivateNetworkAverageJoeFranchiseLocationsClientCustomers

1. Franchise Locations (small sitelarge enterprise)

2. Mom and Pop (small sitesmall enterprise)3. Average Joe (medium site with PBX)

4. Smaller Private Network (medium site with data services)

5. Telemarketing (medium-to-large site with high long-distance)6. Voice and Data Heavies (large site with voice, data and T1)

7. ISDN Heavies (very large sites with very heavy ISDN)


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The clients share of wallet was strongest in high-use clusters 6 and 7, and lowest in the small

site clusters, 1 and 2. This illustrated that even though the client had a high share-of-walletoverall in the lowest of three spending tiers, there were still significant pockets of opportunity to

be realized in targeting services to smaller sites.

Results

The client used this industry segment information and cluster analysis to design a new marketingstrategy. Sales quotas, sales force structure and product pricing were all re-aligned to focus on

areas of greatest opportunity based upon these discoveries about revenue potential.

Ideas to Consider for Your BusinessNot every industry will have a syndicated database available for use in estimating

customer spending, but that doesnt mean share-of-wallet analysis is impossible.

Financial services firms, for example, may be able to estimate household credit usage ormortgage sizes by looking at demographics, psychographics or cluster codes. Other

consumer or business-to-business marketers might survey a sampling of customers about

stated frequency of purchases in the category, then compare the results to their actual

purchase activity with your firm. From the limited sample surveyed, a model can be

created based on purchase patterns and demographic or firmographic characteristics toproject estimated total spending for non-surveyed customers. Aggregate spending

statistics from government sources may also be available that can be used as a reality

check on self-reported data, helping to normalize information by geographic areas.

When looking at growth potential by customers and segments, incorporating a historical

perspective is important, particularly in rapidly changing industries. While a segmentscurrent spending level may be modest, knowing that it has doubled in size over the past

year suggests a trend to watch. Similarly, its important to consider combining that with

a geographic perspective to look at how the territories where you market are changing.

Trends of business and consumer populations by area, for instance, might be missedwhen looking only within your customer database. If a whole population is underrepresented

in your customer base but is growing rapidly, reaching out to expand it

presents a big opportunity.

Cluster analysis to segment by multiple characteristics versus one-at-a-time can adddistinct value, particularly with product packaging and promotion strategy. The

descriptive pictures for each cluster offer a fertile basis for developing price offers,

upgrade deals, or even advertising messages that might appeal to a specific group.Knowing each groups overall size, as well as its opportunity size, helps you know how

to prioritize funds. If you elect to drive your marketing through a segmentation scheme,

however, its wise to flag segment members at an initial point in time and then reevaluate

periodically to track segment growth and inter-segment movement. Different customerlife stages usually involve changes affecting the descriptive segment characteristics, and

knowing the patterns of movement will give you important insights.Each company, industry and marketing situation offers unique characteristics, of course. These

ideas are just suggestions, and we hope youll contact us at Harte-Hanks to discuss solutions for

your specific business opportunity.

BRAND MANAGEMENT


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Brand management is the application ofmarketingtechniques to a specificproduct,product

line, orbrand.

The discipline of brand management was started atProcter & Gambleas a result of a

famous[citation needed]

memo byNeil H. McElroy.[1]

SELECTING BRAND NAME

Developing a name for your company orproduct is crucial in brand building. Itsnot a process to take lightly, nor is it wiseto rush to a decision because letterheadneeds to be printed or the Web site isready to launch. Here are 11 ELEMENTS to helpsuccessfully develop a brand name:

1

1 Dont describedistinguish.The biggest mistake companies make is being toodescriptive with their names. A name should notattempt to simply describe; it should have the ability tosuggest the essencethe unique characteristicsofyour company. To be effective, a name must have brandpotential. A name that is narrow or too descriptivedoes not have the depth or dimension to become aneffective brand.2 CEO involvement is key.Because selecting and adopting a new name is a highlyemotional and political decision, you will not succeed

without support from the top. Be sure that you havebuy-in from the C-Suites in the beginning and thatyou keep them on board throughout the process.3 Avoid alphabet soup.Names that are comprised of initials are meaningless.They get lost in the marketplace clutter and areextremely costly to support and promote. Jack Troutsays in The New Positioning, A no-name name is thecorporate equivalent of a disguise. Unless you are aGE or an IBM with millions to spend on advertising,avoid initials. Real or invented words are many timeseasier for consumers to remember.4 Research cannot replace decision making.While research is a valuable tool to test for unforeseenred flags in a potential new name, there is a tendencyfor many to fall back on research to select the name. Noone understands your organization and your positioningobjectives better than you do. Dont allow popularity todetermine the name. The most popular name is notnecessarily the strongest name for the long term.5 If its comfortableforget it.Everyone else will. The most successful names over thelong term are often those that are initially the mostcontroversial (think Google, Yahoo!, Chipotle, and Ikea).When you select a name, you are looking for something
http://en.wikipedia.org/wiki/Marketinghttp://en.wikipedia.org/wiki/Marketinghttp://en.wikipedia.org/wiki/Marketinghttp://en.wikipedia.org/wiki/Product_%28business%29http://en.wikipedia.org/wiki/Product_%28business%29http://en.wikipedia.org/wiki/Product_%28business%29http://en.wikipedia.org/wiki/Product_linehttp://en.wikipedia.org/wiki/Product_linehttp://en.wikipedia.org/wiki/Product_linehttp://en.wikipedia.org/wiki/Product_linehttp://en.wikipedia.org/wiki/Brandhttp://en.wikipedia.org/wiki/Brandhttp://en.wikipedia.org/wiki/Brandhttp://en.wikipedia.org/wiki/Procter_%26_Gamblehttp://en.wikipedia.org/wiki/Procter_%26_Gamblehttp://en.wikipedia.org/wiki/Procter_%26_Gamblehttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Neil_H._McElroyhttp://en.wikipedia.org/wiki/Neil_H._McElroyhttp://en.wikipedia.org/wiki/Brand_management#cite_note-0http://en.wikipedia.org/wiki/Brand_management#cite_note-0http://en.wikipedia.org/wiki/Brand_management#cite_note-0http://en.wikipedia.org/wiki/Brand_management#cite_note-0http://en.wikipedia.org/wiki/Neil_H._McElroyhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Procter_%26_Gamblehttp://en.wikipedia.org/wiki/Brandhttp://en.wikipedia.org/wiki/Product_linehttp://en.wikipedia.org/wiki/Product_linehttp://en.wikipedia.org/wiki/Product_%28business%29http://en.wikipedia.org/wiki/Marketing


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to punch through the marketplace clutter, not add to it.Overtly literal meanings can sometimes limit growth andshow a lack of company creativity.6 Keep it brief.One word brands are most effective. Lengthy, multipleword names lead to truncation. When people abbreviateyour name, you lose control over your brand.

7 Employee contests dont work.While they are often well-meaning, they do not result innames that are based on the appropriate strategic rationale.8 Its about strategy, not emotion and politics.Many clients are surprised that selecting a name is suchan emotionally charged decision. Naming decisions arefraught with politics, turf issues, and individualpreferences. Stick to the strategy and do not allowthe lowest common denominator solution.9 Manage the decision-making process.There is always someone who will try to derailthe process. Determine at the outset who thedecision-makers will be, and then work diligentlyto keep the process on track.10 Always be prepared for leaks.

It is very difficult to keep a new name a secret. At thebeginning of the naming process, prepare your pressrelease and press kit in the event of a leak.11 Dont expect unanimity.In the first few weeks following introduction, there isoften a lot of discussion and publicity about a new name.Familiarity breeds comfort. As people become morefamiliar with the name, they will become morecomfortable with it.23

DIFFERENTIATION CREATE UNIQUE OF BRAND4

B randing, under any circumstance, is a tough job for the brand manager and the marketing organization. On theone hand, the overall marketplace is all about continuously seeking and finding equilibrium: enough supply to meet

demand, but not too much to create a glut; optimal distribution in the right markets to fill customer needs at the right time;

pricing that provides value for the user, but some level of profit for the seller. In short, market forces are continuously

trying to even out and level the system.

On the other hand, branding and marketing are all about destabilizing the market: Creating differential advantages for the

producing or supplying organization by making the product or service different from competitors. In other words, the

brand manager and the marketer are always trying to create some marketplace disturbance that will offset the naturally

occurring marketplace equilibriumto the advantage of the marketer and the disadvantage of the competitor.

Brand managers and marketers have developed a multitude of marketing concepts over the years to try to create this

market destabilization.

The challenge, of course, comes when a brand and branding are used to create some type of marketplace disequilibrium.

Then, when the brand manager shifts the focus from short-term market destabilizing activities such as price promotions,

discounts, rebates and the likenone of which create much long-term marketplace valueto a heavy emphasis on brands

and branding as ways of differentiating their products and services, serious issues arise. In too many instances, these issues

arent well recognized or adequately dealt with by the brand manager.


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So, the brand manager truly lives on a knifes edge. Initially, the goal is to create some type of market destabilization

through brand development and/or brand promotional elements. Separate the brand from competing brands by creating

some type of consumer brand preference.

But once that brand preference is created, the brand managers challenge quickly shifts to some type of market

stabilization approach among those converted brand users. The goal? Brand loyalty for that is the ultimate form of market

stability, where both the buyer and the seller are satisfied with the status quo and a steady state of equilibrium results.

This almost immediate shift from marketplace destabilization through various types of brand differentiation activities to

market stabilization through the creation of ongoing brand loyalty is what creates so much difficulty for brand managerstoday.

Its truly a fine line between stability and chaosone that successful brand managers master, but others dont. Be


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too different and you move the brand to the outer fringes of the marketplace, into the well-known niche areas that are

often hard to escape. Be too undifferentiated and you become a commodity, where price is the only differentiating factor,

profits are hard to find and brands are hard to support.

Trying to walk this fine line between brand differentiation and brand loyalty is where brand managers are in jeopardy.

Break through with brand differentiation, then stabilize customer brand loyalty quickly and effectively using a different set

of tools. Drift across the line on either side and trouble quickly develops.

Following are some examples that illustrate these two key issues.Burger King, over the last few years, has tried myriad promotional and brand initiativeswithout ever seeming to find

the right mix. The swinging door of brand management at Burger King has tried everything from the product-

differentiating flame broiling claim to a scary-looking, nonverbal king character who pops up seemingly without reason,

to dancing and talking chickensand many, many others in between. Over the years, it seems the Burger King brand

managers have become masters of short-term, market destabilization as testified to by the number of creative awards won.

Highly acclaimed, short-term, attention-getting activities that even lead to some short-term sales boosts. But, when it

comes to quickly transferring those market destabilizing activities into brand loyalty, everything seems to come apart. So

whats the Burger King brand managers apparent solution? More market destabilizing gizmos and gimmicks. In other

words, brand managers at Burger King simply cant walk the fine line of moving from using the brand to destabilize the

market to creating continuing ongoing customer brand value. McDonalds does it; Burger King hasnt.

Alternatively, look at Levis. The darling of the 1970s and 1980s denim-revolution got lost in the shuffle, when designer

jeans destabilized the market. They made jeans an up-market fashion item. The logo on the back pocket became the

critical consumer decision factor. Levis, with its 1849 gold rush heritage, has tried to fight back, although not very

successfully, over the past couple of decades. Being unable or unwilling to create short-term market destabilizingactivities, Levis has gone all out with attempts at brand differentiation. The most recent attempt was to relate Levis to the

poet Walt Whitmana relationship that seems a stretch too far for even the most jaded Lycra-infused jeans buyers. Walt

Whitman just doesnt seem to have the destabilizing power the brand really needs to differentiate Levis from the host of

now authentic jeansa position Levis abandoned several years ago.

The fine line between market destabilization and brand loyalty is one Levis brand managers simply havent mastered.

Today, Toyota is caught on the wrong side of that fine line. The organization did a fabulous job of destabilizing the

automobile marketplace by focusing on quality some years agosomething Detroit either ignored or couldnt develop.

Toyota quickly converted that brand differentiation into brand loyalty.

But all that customer brand loyalty, which was built up over the years, is now under threat. Toyota managers failed to

understand the fine line of building a brand on product quality, and then supporting that quality brand position at al l costs.

Lose your brand quality, which is what seems to have happened to Toyota, and the marketplace will quickly seek

equilibrium with buyers shifting to other nameplates.

What will happen to the Toyota brand? No one really knows, but, it is clear that brand differentiation based on product

quality is a slippery slope. Thats particularly true when managers begin to focus more on gaining or holding market share(i.e., market destabilization), than on maintaining customer loyalty.

Branding is a tough job; its tougher than most brand managers really seem to realize. And its certainly tougher than the

platform presentations you see at conferences and seminars around the world. The line between destabilizing the market

and building brand loyalty is a very thin one. Maybe thats why even great brands are at risk when the brand managers

cross or cant cross the line.567891011

POSITIONING THE BRAND

Positioning

Although there are different definitions of Positioning, probably the most common is: identifyinga market niche for a brand, product or service utilizing traditional marketing placement strategies

(i.e. price, promotion, distribution, packaging, and competition).


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Also positioning is defined as the way by which the marketers creates impression in the

customers mind.

Positioning is a concept in marketing which was first introduced by Jack Trout ( "Industrial

Marketing" Magazine- June/1969) and then popularized by Al Ries and Jack Trout in their

bestseller book "Positioning - The Battle for Your Mind." (McGraw-Hill 1981)

This differs slightly from the context in which the term was first published in 1969 by Jack Trout

in the paper "Positioning" is a game people play in todays me-too market place" in the

publicationIndustrial Marketing, in which the case is made that the typical consumer is

overwhelmed with unwanted advertising, and has a natural tendency to discard all informationthat does not immediately find a comfortable (and empty) slot in the consumers mind. It was

then expanded into their ground-breaking first book, "Positioning: The Battle for Your Mind," in

which they define Positioning as "an organized system for finding a window in the mind. It is

based on the concept that communication can only take place at the right time and under the rightcircumstances" (p. 19 of 2001 paperback edition).

What most will agree on is that Positioning is something (perception) that happens in the minds

of thetarget market. It is the aggregate perception the market has of a particular company,

product or service in relation to their perceptions of the competitors in the same category. It will

happen whether or not a company's

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