MODELS USE IN MARKETING MANAGEMENT

Response Hierarchy Model

1. Introduction :
response process as consisting of movement through a sequence of stages and
assume a similar ordering whereby cognitive development precedes affective
reaction which in turn precedes behavior. While this is a logical progression
that may be accurate in many situations, the response sequence may not always
operate this way. It demonstrates that consumers must be aware of a product's
existence,Be interested enough to pay attention to the product's
features/benefits, and Have a desire to benefit from the product's offerings.

2. Assumption :

Information on which potential clients have ad and/or PR agencies is not

readily available. This information must be obtained in order to reduce the
number of prime prospects.

Many potential customers do not recognize the need for regular marketing
communications activity. This may suggest the availability of more per-project
work.

The target first contact, the Sales/Marketing Manager, is an extremely busy

person and may be difficult to reach.

3. Input :
Inform
Persuade
Remind
Attention,
Awareness
Knowledge

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Exposure
Reception
Cognitive response
Attitude
Intention
4. Output :
Action Purchase
Trial
Adoption Behaviour
5. Limitation :
In many real-life transactions, the assumption fails because some individual
buyers or sellers have the ability to influence prices
6. Relevance :

They delineate the series of steps or stages potential purchasers often must be
taken through to move them from a state of no or little awareness to the point
where they are ready to purchase. The hierarchy models can also be useful as
“intermediate” measures of communication effectiveness.

1.Attracts attention 2.Communicates a strong benefit

7. Improvements :

New technology use to reach the customers.

5 M’s Model For Advertising

1. Introduction :

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The organizations handle their advertising in different ways. In small

companies, advertising is handled by someone in the sales or marketing
department, who works with an ad agency. A large company will often set up
its own advertising department or else hire an ad agency to do the job of
preparing advertising programmes.
In developing a program, marketing managers must always start by identifying
the target market and the buyer’s motives. Then they can make the five major
decisions in developing an advertising program, known as the five M’s.

2. Assumption :
Price elasticity tells us how responsive, or elastic, demand would be to a
change in price.
If demand hardly changes with a small change in price, we say the demand is
inelastic. If demand changes considerably, demand is elastic.
3. Input :

Mission: what are the advertising objectives?

Money: how much can be spent?

Message: what message can be sent?

Media: what media should be used

Measurement: how should the results is evaluated?

4. Output :
Total Sales Increase, Total Direct Cost of MPR Program, Estimated Sales
Increase Due to money measures, social responsibility.
Consumer Promotion can be divided in sales promotion & trade promotion.
5. Limitation :

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Product are expensive and people have no less money.

6. Relevance :

The salesperson needs to learn as much as possible about the prospect

company (what is needs, who is involved in the purchase decisions) and its
buyers (personal characteristics and buying styles) The sales person should
plan an overall sales strategy for the account

7. Improvements :

This model is not explain high price change. companies unveiling a new
technology favor setting high prices to maximize market skimming.

This model should change so that form of image building with at least costs as
possible

Zone Of Agreement Model

1. Introduction :
The zone of possible agreement (ZOPA), in sales and negotiations, describes
the intellectual zone between two parties where an agreement can be met

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which both parties can agree to. Within this zone, an agreement is possible.
Outside of the zone, no amount of negotiation will yield an agreement.
For example, take a person willing to lend money at a certain interest rate over
a certain period of time and a person wanting to borrow money at a certain
rate. If both parties can agree a rate and period then a ZOPA can be
established.

2. Assumption :

1. Accept only creative outcomes

2. Understand cultures, especially your own.

3. Don’t just adjust to cultural differences, exploit them.

4. Gather intelligence and reconnoiter the terrain.

5. Design the information flow and process of meetings.

6. Invest in personal relationships.

7. Persuade with questions. Seek information and understanding.

8. Make no concessions until the end.

9. Use techniques of creativity

10.Continue creativity after negotiations

1. Input :
Seller’s reservation price
Buyer’s reservation price
Seller’s surplus

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Buyer’s surplus

2. Output :
Final contract between buyers and sellers.

3. Limitation :
Cultural differences cause four kinds of problems in international business
negotiations
Language
Non verbal behavior
Thinking and decision-making processes
Value
In real life there is self-selection to which negotiation one gets into, which
effects the emotional commitment, motivation and interests.

4. Relevance :
This American executive’s near blunder reflects more than just a difference in
decision-making style. To Americans, a business negotiation is a problem-
solving activity, the best deal for both parties being the solution.
To a Japanese businessperson, on the other hand, a business negotiation is a
time to develop a business relationship with the goal of long-term mutual
benefit. The economic issues are the context, not the content, of the talks.
Thus, settling any one issue really is not that important
Considering all the potential problems in cross-cultural negotiations,
particularly when you mix managers from relationship-oriented cultures with
those from information-oriented ones, it is a wonder that any international
business gets done at all.

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The economic imperatives of global trade make much of it happen despite the
potential pitfalls. But an appreciation of cultural differences can lead to even
better international commercial transactions—it is not just business deals but
creative and highly profitable business relationships.

5. Improvements :
Model should be more competitiveness.
Zonal Equality is there.
negotiation tactic is more useful when it more emphasis on value on time.

Service Quality Model:

1. Introduction :

Customers thinking they're getting better service than expected

Because the perception gap is based on the difference between what a

customer expects to receive from a service and what they think they received
both sides of the gap are "soft" – they are based on customer impressions rather
than a "hard" definable quality. This means the perception gap is difficult to
measure, difficult to manage and is likely to change with time and experience.
nevertheless it's vital to business success.

2. Assumption :
they are under stationary or “no trend” conditions
the different brands show no special groupings, ie no market partitioning.
Competition is rooted in industry economic structure
Goal of a business is longterm profitability.

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Intensity of competition in industry is neighter a matter of coincidice or bed

luck.
Competition is rooted in industry economic structure.
3. Input :

Financial data—Facts for this section will come from management accounting,
costing and finance sections.

Product data—From production, research and development.

Sales and distribution data - Sales, packaging, distribution sections.

Advertising, sales promotion, merchandising data - Information from these

departments.

Market data and miscellany - From market research, who would in most cases
act as a source for this information. His sources of data, however, assume the
resources of a very large organization. In most organizations they would be
obtained from a much smaller set of people

Word of Mouth Communications

Personal Needs
Past Experience

4. Output :
Service Delivery (including pre and post-contacts)
Translation of perceptions into Service Quality Design
Management Perceptions of ConsumerExpectations
Expected Service
Service Delivery - External Communications
5. Limitation :

Access

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Courtesy
Understanding/Knowing the customer
6. Relevance :

To explain why service marketing has become a centre of attention in

recent years.

To identify the characteristics of services that are important from the

marketing point of view.

To discuss the service marketing process

7. Improvements :
Feedback on complaints is diagnostic.

Product\Market Management Model:

1. Introduction :
The product-market matrix helps to understand and assess marketing or
business development strategy. Any business, or part of a business can choose
which strategy to employ, or which mix of strategic options to use. This is one
simple way of looking at strategic development options :
Each of these strategic options holds different opportunities and
downsides for different organizations, so what is right for one business

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2. Assumption :
Direct utility models of consumer choice are reviewed and developed for
understanding consumer preferences. We begin with a review of statistical
models of choice, posing a series of modeling challenges that are resolved by
considering economic foundations based on constrained utility maximization.
Direct utility models differ from other choice models by directly modeling the
consumer utility function used to derive the likelihood of the data through
Kuhn-Tucker conditions. Recent advances in Bayesian estimation make the
estimation of these models computationally feasible, offering advantages in
model interpretation over models based on indirect utility, and descriptive
models that tend to be highly parameterized. Future trends are discussed in
terms of the antecedents and enhancements of utility function specification
This monograph provides a review of choice models in marketing from the
perspective of a utility maximizing consumer subject to budgetary restrictions.
Marketing models of choice have undergone many transformations over the
last 20 years, and the advent to hierarchical Bayes models indicate that simple,
theoretically grounded models work well when applied to understanding
individual choices. Thus, we use economic theory to provide the foundation
from which future trends are discussed. We begin our discussion with
descriptive models of choice that raises a number of debatable issues for model
improvement. We then look to economic theory as a basis for guiding model
development, and conclude with a discussion of promising areas for future
work.
3. Input :
On X Axis
Existing market
Existing Product
On Y Axis
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New market
New Product
boundaries of the market segments to be served, distribution channel
the breadth and depth of the product line.
4. Output :
Product development,
diversification
Market penetration
market development.
Product marketing frequently differs from product management in high-tech
companies.
5. Limitation :

the focus on short-term sales can significantly under-value the importance of

longer-term equity building activities.

when used for media mix optimization, these models have a clear bias in favor of
time-specific media (such as TV commercials) versus less time-specific media
(such as ads appearing in monthly magazines); biases can also occur when
comparing broad-based media versus regionally or demographically targeted
media.

6. Relevance :
Marketing mix models provide much useful information, there are two key
areas in which these models should be taken into account by all of those that
use these models for decision making purposes. Contribution by marketing
activity - ROI by marketing activity - Effectiveness of marketing activity -
Optimal distribution of spends - Learnings on how to execute each activity

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better e.g. optimal GRPs per week, optimal distribution between 15s and 30s,
which promos to run.
7. Improvements :

Interpretation of promotional activities across industries for e.g. promotions in

CPG do not have lagged effeects as they happen in-store, but automotive and
hospitality promotions are usually deployed through the internet or through
dealer marketing and can have longer lags in their impact.

Hospitality industry marketing has a very heavy seasonal pattern and most
marketing-mix models will tend to confound marketing effectiveness with
seasonality, thus over or under estimating marketing ROI.

Time-series Cross-Sectional models like 'Pooled Regression' need to be

utilized, which increase sample size and variation and thus make a robust
separation of pure marketing-effects from seasonality.

Automotive Manufacturers spend a substantial amount of their marketing

budgets on dealer advertising, which may not be accurately measurable if not
modeled at the right level of aggregation. If modeled at the national level or
even the market or DMA level, these effects may be lost in aggregation bias.

Control Chart Model:

1. Introduction :
Control charts are one of the most commonly used methods of Statisical
Process Control (SPC), which monitors the stability of a process. The main
features of a control chart include the data points, a centerline (mean value),
and upper and lower limits (bounds to indicate where a process output is
considered "out of control").They visually display the fluctuations of a
particular process variable, such as temperature, in a way that lets the engineer
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easily determine whether these variations fall within the specified process
limits. Control charts are also known as Shewhart charts after Walter
Shewhart, who developed them in the early 1900.
The original purpose of a control chart was to determine whether a
manufacturing or other process was performing or behaving as expected. From
a manufacturing standpoint if a process was performing as intended it was ‘in
control’ if something happened so that the process had changed the process
was considered ‘out of control’. Therefore the original intent of control charts
was for things to be in control.
2. Assumption :
The assumptions that relate to measurement processes apply to statistical
control; namely that the errors of measurement are uncorrelated over time and
come from a population with a single distribution. The tests for control depend
on the assumption that the underlying distribution is normal (Gaussian), but the
test procedures are robust to slight departures from normality. Practically
speaking, all that is required is that the distribution of measurements be bell-
shaped and symmetric.
3. Input :

t-test method of analysis

collect the data

Take the average of the absolute deviations.

Take the absolute moving deviation
4. Output :
Calculation of target range.
Upper limit
Desired level.

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Lower limit.
5. Limitation :

It uses less data.

Can determine significant results but take more time.
Uses the time series component of the data and is a more sensitive test.
6. Relevance :
It centers attention on detecting and monitoring process variation over time.
It provides a tool for ongoing control of a process.
It differentiates special from common causes of variation in order to be a
guide for local or management action.
It helps improve a process to perform consistently and predictably to achieve
higher quality, lower cost, and higher effective capacity.
It serves as a common language for discussing process performance.
7. Improvements :
Use another estimale which are easy to calculate.

Financial Model On Return On Net Worth

1. Introduction :
A measure of the net income that a firm is able to earn as a percent of
stockholders' investment. Many analysts consider ROE the single most
important financial ratio applying to stockholders and the best measure of
performance by a firm's management. Return on equity is calculated by
dividing net income after taxes by owners' equity.

Financial analysis refers to an assessment of the viability, stability and

profitability of a business, sub-business or project.

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It is performed by professionals who prepare reports using ratios that make

use of information taken from financial statements and other reports. These
reports are usually presented to top management as one of their bases in
making business decisions

2. Assumption :

The sustainable growth model shows us that when firms pay dividends,
earnings growth lowers. If the dividend payout is 20%, the growth
expected will be only 80% of the ROE .

ROE is calculated from the company's perspective, on the company as a

whole. Since much financial manipulation is accomplished with new
share issues and buyback, always recalculate on a 'per share' basis, i.e.,
earnings per share/book value per share.

3. Input :
Net income,
total asset
average stock holder equity.
4. Output :
Return on equity
5. Limitation :
Only a mathematical calculation can’t judge the overall framework where
the company is making money.
6. Relevance :
We can measure the firm's ability to remain in business in the long run,
without having to sustain significant losses in the conduct of its business.
Assessing a company's stability requires the use of both the income

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statement and the balance sheet, as well as other financial and non-financial
indicators
A tool is market-share analysis, which compares a company’s sales with
those of its competitors. Companies can express their market share in a
number of ways, by comparing their own sales to total market sales, sales
within the market segment, or sales of the segment’s top competitors. Third,
marketing expense-to-sales analysis gauges how much a company spends to
achieve its sales goals. The ratio of marketing expenses to sales is expected
to fluctuate, and companies usually establish an acceptable range for this
ratio. In contrast, financial analysis estimates such expenses (along with
others) from a corporate perspective. This includes a comparison of profits
to sales (profit margin), sales to assets (asset turnover), profits to assets
(return on assets), assets to worth (financial leverage), and, finally, profits to
worth (return on net worth).
7. Improvements :
Do some changes so companies measure customer satisfaction

GAP Model:

1. Introduction :

This model offers an integrated view of the consumer-company relationship. It

is based on substantial research amongst a number of service providers. It is
based on substantial research amongst a number of service providers. In
common with the Grönroos model it shows the perception gap and outlines
contributory factors.

2. Assumption :
The model should take all service quality assumpation.

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Customer always use10 dimensionsto form the expectation and perception.

3. Input :

Word of Mouth communications, Personal Needs, Past Experience, Expected

Service , Perceived Service , Service Delivery, External Communications to
Customers.

4. Output :

Service Standards , Management Perceptions of Consumer exceptions

5. Limitation :
Inadequate market research orientation
Insufficient relationship focus
Absence of customer driven standards
6. Relevance :
GAP model could be used to identify the target audiences and the most cost
effective ways of communicating the message to the groups.
7. Improvements :
Ineffective management of customer expectations should improve.
Inadequate horizontal communications should improve.
Human resource policies should improve.

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