Introduction to Marketing

Marketing

Marketing is the social process by which individuals

and groups obtain what they need and want
through creating and exchanging products and
value with others
Kotler

 The planning and implementation of everything

an organization does to facilitate an exchange
between itself and its customers
Marketing

 Marketing is a continuous and dynamic strategic

decision-making process

 Strategic process that matches the firm’s

strengths and resources to potential
opportunities that exist within the marketing
environment
Needs, Wants and Demand
 Needs:- Basic Human Requirements. Air,
food, water, clothing etc…

 Wants:- These needs become wants when

they are directed to specific objects that
might satisfy the need.

 Demand:- These are wants for specific

products backed by an ability to pay.
Marketing as a Business Philosophy

Four orientations or business philosophies

1. Product Orientation
 Focus on making products widely available,

affordable, and require little selling effort

2. Sales Orientation
 Promotes the business philosophy of “selling

what we make”
Marketing as a Business Philosophy

3. Market Orientation
1. Customer focus

2. Coordinated marketing effort

3. Long-term success
Facilitating Exchange by Narrowing Separations

 Marketers create and provide utility (value) to

its customer base.

 Four most important forms of utility:

1. Form Utility

2. Place Utility

3. Time Utility

4. Ownership Utility
Marketing Mix
 Product

 Price

 Promotion

 Place
Marketing Mix

 Product

 Refers to goods, services, people, places and

ideas
 Household consumers

 Business-to-business customers
Marketing Mix

 Place (Distribution)

 Marketing channel is the network of

organizations that create time, place and
ownership utilities for household consumers
and business customers
Marketing Mix
 Promotion
 Integrated Marketing Communication (IMC)

 System of management and integration of

marketing communication elements

• Advertising, publicity, sales promotion,

personal selling, sponsorship marketing,
and point-of-purchase communications
Marketing Mix
 Price

 Pricing decisions are complex and are driven by a

variety of considerations including:

 Customer demand, costs, information

availability, competition, profit motives,
product considerations, and legal
considerations
 Marketing environment

 Forces that directly influence an organization’s

capability to undertake its business

 The trading forces operating in a market place

over which the business has no direct control but
which shape the manner in which the business
functions & is able to satisfy its customers
Components of the marketing environment
 External environment:-  Internal environment:-
Consists of:
- Macro environment: - Forces inside the firm that
Broad forces which shape affect its operations
up the opportunities & - Composed of
threats stakeholders and other
- Microenvironment: functional areas inside a
Forces in the immediate business organization
environment
Controllability

 A firm has:
- No control over its macroenvironment. It
can only respond to the changes taking
place
- Some control over its microenvironment
Why is it important?

 An understanding of macro and micro

environment forces:
- Essential for planning
- Helps a business to compete effectively
- Assists in the identification of opportunities and
threats
- Enable an organization to take advantage of
emerging strategic opportunities
Micro environment

 Refers to the environment more closely

linked to the organization
 It comprises of all those organizations &
individuals who directly affect the activities
of a company
Elements of a micro environment

 Customers  Employees
 Intermediaries  Trade unions
 Suppliers  Co-operators (Partner
 Competitors firms in alliance)
 Local community  Regulators
 Local government
Macroenvironment

 Factors outside the area

of marketing which impact
on but which cannot be
influenced by the
marketing effort including
– demographics, macro-
economic factors,
changes in lifestyles etc.
Elements of macroenvironment

 Macroeconomic environment
 Political environment
 Social & cultural environment
 Demographic environment
 Technical environment
 Legal & regulatory environment
Macroeconomic Environment
 Economic growth
 Cyclic Fluctuations
 Inflation
 Unemployment
 Interest Rates
 Exchange Rates
Political environment
 Marketing is affected by:
- Government & local policies
- Tax regime – the level & nature of taxes
- The extent to which the government is
“business friendly”
- Trade policies
- Actions of special interest & pressure
groups
Social environment

 Consumer demand is affected by changes

in:
- Population size and growth
- Demographic profile of the country or region
(age distribution, family size, income level etc.)
- Culture, beliefs and values of the community
- Lifestyle
Technological environment

 Invention of new goods & services

 Development of CAD – reduction in new product
development time
 Use of data bases in market research & direct
marketing e.g. Credit cards
 New technology facilitates mass customization
 More responsive operations – shorter lead times
 Development of e-commerce
SWOT & PEST
Positive Negative
Internal factors – Strengths- Weaknesses-
the internal Organizational Organizational
environment strengths weaknesses

External factors Opportunities- Threats-

– the PEST Resulting from Resulting from
factors changes in political, economic,
political, social,
economic, social, technological
technological environment
environment
Reasons of Globalisation

 Proximity to Market Place

 Declining Population growth in Developed
nations
 Rate of Population growth in Developing
nations
Driving Forces
 Technology
 Regional Economic Agreements
 Market Needs
 Product Development Cost
 Transportation and Communication
Improvement
 Quality
 World Economic Trends
 Global/Transnational Corporation
Restraining Forces
 Culture
 Market Differences
 Costs
 National Controls
 War
 Management Myopia
 Domestic Focus
The Porter Diamond
Porter introduced a diagram—the Porter diamond—that has
become very well known

 Focuses on four central aspects of the home base, which

Porter views as the determinants of competitive advantage

 Factor conditions
 Demand conditions
 Related and supporting industries
 Firm strategy, structure, and rivalry

 Main argument: “Nations are most likely to succeed in

industries or industry segments where the national
‘diamond’ is most favorable”
The Porter Diamond
Porter Diamond
 Factor conditions

 Porter considers labor, land, natural resources, and physical

capital to be basic factors that are largely inherited

 More important from Porter’s point of view are advanced factors

that are created which include
 Sophisticated infrastructure

 Labor educated and trained in very specific ways

 Focused research institutions

 Porter also makes a distinction between

 Generalized factors—can be used in a number of different
industries
 Specialized factors—tailored for use in specific industries
Porter Diamond
 Demand conditions

 Stresses three aspects in the home base

 Demand composition

• Sophisticated, demanding, and anticipatory (anticipates

trends in global demand) home demand contributes to
firms’ success

 Demand size and pattern of growth

• Large, rapidly-growing, and early home demand are
positive aspects of the home base

 Degree of internationalization
• The more home demand is synchronized with
international demand trends, the more it contributes to
firms’ competitiveness
Porter Diamond
 Related and supporting industries

 Supplying industries in the home base has several

advantages in downstream industries

 Efficient, early, rapid, and sometimes preferential

access to the most cost-effective inputs
 Ongoing coordination
 Innovation and upgrading

 A competitive domestic supplier industry is better than

relying on well-qualified foreign suppliers
Porter Diamond
 Firm strategy, structure, and rivalry

 One country differs from another with regard to managerial

systems and philosophies and with regard to capital markets

 Institutional environments that allow firms to take a long-

term view contribute positively to competitiveness

 Presence of a large number of competing firms or rivals in

the domestic industry
 Competition among firms is necessary for allocative
efficiency in a market system, but domestic rivalry
contributes to dynamic, technological efficiency
 Issues During Stages in the Consumption
Process
Consumer’s Perspective
How does a consumer decide that he/she
Pre needs a product?
Purchase What are the best sources of information
Issues to learn more about alternative choices?
Is acquiring a product a stressful or
Purchase pleasant experience? What does the
Issues purchase say about the consumer?
Does the product provide pleasure or
perform its intended function?
Post How is the product eventually disposed
Purchase of and what are the environmental
Issues consequences of this act?
Marketer’s Perspective
How are consumer attitudes towards
products formed and/or changed?
What cues do consumers use to infer
which products are superior to others?
How do situational factors, such as time
pressure or store displays, affect the
consumer’s purchase decision?
What determines whether a consumer
will be satisfied with a product and
whether he/she will buy it again? Does
this person tells others about his/her
experiences with the product and
influence their purchase decision?
Why do we need to study
Consumer Behaviour?

Because no longer can we take the

customer/consumer for granted.
Why Consumer Behaviour?

o Understanding Consumer Behaviour is

good business.

 Firms exist to satisfy consumer’s needs,

so
 Firms must understand consumer’s needs
to satisfy them.
Importance of Consumer Behaviour

Personal
Characteristics

Product Consumer Marketing

Characteristics Behaviour Strategy

Consumption
Situation
Language Problems
 “Please leave your values at the desk” - Paris
hotel
 “Drop your trousers here for best results” -
Bangkok laundry
 “The manager has personally passed all
water served here” - Acapulco restaurant
 “Because of the impropriety of entertaining
guests of the opposite sex in the bedroom, it
is suggested that the lobby be used for the
purpose.” - Zurich hotel
 Ladies are requested not to have children in
the bar.”- Norway bar
“Come alive with Pepsi”

 “Come alive out of the grave” - Germany

 “Pepsi brings your ancestors back from
the grave” - China
Factors Affecting Buyer Behaviour

Consumer
Consumer

Marketing
Marketing Buyer
Buyer Buyer
Buyer Buyer
Buyer
4Ps
4Ps Environment
Environment Characteristics
Characteristics Decision Process
Decision Process Decision
Decision
Buyer’s Decision Process
The Consumer Decision Making Process

Stimuli Problem Environmental Influences

Marketer Activities Recognition Culture
Others Social Class
Reference Groups
External Search Search Personal Characteristics

Evaluation Evaluation
Internal Search Of Alternatives Criteria

Formation of Attitude Formation

Intentions

Purchase

Consumption

Outcomes
Problem Recognition
This results when there is a difference between one’s
desired state and one’s actual state. Consumers are
motivated to address this discrepancy and therefore they
commence the buying process.

Sources of problem recognition include:

 An item is out of stock
 Dissatisfaction with a current product or service
 Consumer needs and wants
 Related products purchase
 Marketer – induced
 New products
Information Search
Once the consumer has recognised a problem, they
search for information on products and services that
problem. Consumers undertake both an internal
(memory) and an external search.

Sources of information include:

 Personal sources
 Commercial sources
 Public sources
 Personal experience
Alternative Evaluation
At this stage the consumer compares the brands and
products that are in their evoked set.

How can the marketing organisation increase the

likelihood that their brand is part of the consumer’s
evoked set.
Consideration is in terms of
 Functional benefits
 Psychological benefits
 Marketing organisation
Buyer’s Decision
 Product Choice
 Brand Choice
 Dealer Choice
 Purchase Timing
 Purchase Amount
Post - Purchase Behaviour
 Satisfaction
 Actions
 Use and Disposal
Buying Roles

 Initiator
 Influencer
 Decider
 Buyer
 User
Roger’s Diffusion Theory

Diffusion of Innovation (new product)

 Awareness
 Interest
 Evaluation
 Trial
 Adoption
Roger’s Factors Affecting Rate of
Innovation Adoption

 Relative advantage
 Compatibility
 Complexity
 Divisibility
 Communicability
Roger’s Diffusion of Innovation
Theory
 Innovators 2.5%

 Early Adopters 13.5%

 Early Majority 34%

 Late Majority 34%

 Laggards 16%
Industrial Marketing
 Also called: Business-to-Business (B2B)
and Organizational Marketing.
 Definition: the creation and management
of mutually beneficial relationships
between organizational suppliers and
organizational customers.
 Customer can be private firm, public
agency, or nonprofit organization.
So what’s different about B2B?
 Marketing Concept
 Marketing Mix
 Market Segmentation
 Product Life Cycle

 All apply in both B2C and B2B.

So what’s different about B2B?

 The technical characteristics of the

product are important.
 These products directly affect the
operations and economic health of the
customer.
 The customer is an organization
rather than an individual consumer, or
family.
Five Major Differences
Between B2B and B2C

 Products/Services being marketed

 Nature of demand
 How the customer buys
 Communication process
 Economic/Financial factors
Products/Services
 More complex
 Functional vs. Symbolic Attributes
 Large unit dollar value/Large quantities
 Custom/Tailored
 Various Stages from raw material to
finished goods.
 Foundation, Entering, Facilitating Goods
Nature of Demand
 Derived
 Joint/Shared
 Concentrated
 Inelastic
How Customer Buys
 Group Process
 Formal
 Lengthy
 Loyal
 Decisions based on risk and opportunity
Communication
 Personal selling more important than mass
paid advertising
 Support sales with other promotional
activities: advertising in trade journals,
catalogs, trade shows, direct mail, WWW.
 Message focused on technical, factual,
and descriptive content.
 Multiple audience members.
Economic/Financial Factors
 Competition oligopolistic
 Power/Dependency relationships
 Reciprocity:Doing business with
companies that do business with them.
 Economic variables: interest rates,
inflation, business cycle
Classification
 Producer Market

 Reseller Market

 Government Market

 Institutional Market
Participants
 Initiator
 Influencer
 Users
 Deciders
 Approvers
 Buyers
 Gatekeepers
Buying Process
 Problem Recognition
 General Need Recognition
 Product Specification
 Searching Potential Suppliers
 Value Analysis
 Vendor Analysis
 Order Routine Specification
 Multiple Sourcing
 Performance Review
The Fundamentals of Marketing Strategy

 Market

 Market segmentation

 Target market
Positioning

Positioning

 Image that customers have about a product

in relation to the product’s competitors
Marketing Strategy

 Identifying target markets

 Tailoring marketing mixes that meet the needs

and wants of each specific target market

 Developing marketing mixes that reinforce the

product’s desired positioning strategy in the
marketplace
Benefits of Segmentation
 Effective use of resources
 Gain a focus
 Create Value for a target market
 Positioning
 Steps in Market Segmentation, Targeting,
and Positioning
Market Segmentation
1. Identify bases for
segmenting the market
2. Develop segment profiles

Market Targeting
3. Develop measure of
segment attractiveness
4. Select target segments

Market Positioning
5. Develop positioning for
target segments
6. Develop a marketing
mix for each segment
 Market Segmentation
Levels of Market Segmentation

Through Market Segmentation, Companies Divide Large, Heterogeneous

Markets into Smaller Segments that Can be Reached More Efficiently And
Effectively With Products and Services That Match Their Unique Needs.

Mass Marketing
Same product to all consumers
(no segmentation, i. e. a commodity)

Segment Marketing
Different products to one or more segments
(some segmentation, i.e. Marriott)
Market Segmentation
Geographic Segmentation

International

National

Regional/City
Market Segmentation
Demographic Segmentation
 Dividing the market into groups based
on variables such as:
 Age
 Gender
 Family size or life cycle
 Income
 Occupation
 Education
 Religion
 Race
 Generation
 Nationality
Market Segmentation
Psychographic Segmentation
Divides Buyers Into Different Groups Based on:
Market Segmentation
Behavioral Segmentation

 Dividing the market into groups

based on variables such as:
 Occasions

 Benefits

 User status

 Usage rate

 Loyalty status

 Readiness stage

 Attitude toward product

Market
Market Segmentation
Segmentation
Segments
Segmentsmust
mustrespond
responddifferently
differentlyto
todifferent
differentmarketing
marketingmix
mixelements
elements&&
programs
programs
RRequirements
equirements for
for effective
effective segmentation
segmentation

• Size, purchasing power, profiles

Measurable
Measurable of segments can be measured.

• Segments can be effectively

Accessible
Accessible reached and served.

• Segments are large or profitable

Substantial
Substantial enough to serve.

• Effective programs can be

designed to attract and serve
Actionable
Actionable the segments.
Evaluating Market Segments

 Segment size and growth

 Segment structural attractiveness
 Company objectives and resources
Choosing a market-coverage
strategy
 Company resources
 Degree of product homogeneity
 Market homogeneity
 Competitors’ strategies
Step 3: Positioning for Competitive
Advantage
 Product’s Position - the way the product is
defined by consumers on important attributes -
the place the product occupies in consumers’
minds relative to competing products.
Marketers must:
 Plan positions to give their products the
greatest advantage in selected target markets
Positioning Strategies
 Positioning by specific product attributes
 Positioning by benefits
 Positioning for user category
 Positioning for usage occasion
 Positioning against another competitors
 Positioning against another product class
 Steps to Choosing and Implementing
a Positioning Strategy
 Step 1. Identifying Possible Competitive
Advantages: Competitive Differentiation.
 Step 2. Selecting the Right Competitive
Advantage: Unique Selling Proposition
(USP).
 Step 3. Communicating and Delivering
the Chosen Position.
Product Differentiation

 Physical attributes
 Service differentiation
 Personnel differentiation
 Location
 Image differentiation
Which differences to promote?

 Important to customers
 Distinctive
 Superior
 Communicable to customers
 Preemptive
 Affordable
 Profitable
What is a Product?
 Product: bundle of physical, service,
and symbolic attributes designed to
enhance buyers’ want satisfaction
What are Goods and Services?
 Service: intangible task that satisfies
consumer or business user needs
 Goods-services continuum: device that
helps marketers to visualize the differences and
similarities between goods and services
 Characteristics that distinguish services
from goods:
 Intangibility

 Inseparability

 Perishability

 Difficultyof standardization
 Frequent requirement of
interaction between buyer
and Seller
 Variability
Product Levels

Potential Product

Augmented Product

Expected Product

Basic Product

Core
Core
Benefits
Benefit
Classifying Products

 Consumer products:
products products destined for
use by ultimate consumers

 Business (or B2B) products:

products those that
contribute directly or indirectly to the output of
other products for resale
 Also called industrial or organizational
products
Types of Consumer Products
 Convenience product:
product good or service that
consumers want to purchase frequently,
immediately, and with minimal effort
 Impulse goods and services are
purchased on the spur of the moment.
 Staples are convenience goods and services
that consumers constantly replenish to
maintain a ready inventory.
 Emergency goods and services are bought
in response to unexpected and urgent needs.
 Shopping product:
product good or service
purchased only after the customer compares
competing offerings from competing vendors
on such characteristics as price, quality, style,
and color
 Typically cost more than convenience
purchases.
 Include tangible items.

 Shopper lacks complete information and

gathers information during the buying
process.
 Specialty product:
product good or service with
unique characteristics that cause the buyer to
value it and make a special effort to obtain it

 Unsought product:
product good or service
marketed to consumers who may not yet
recognized in the need for it
Types of Business Products
 Installation:
Installation major capital investment by a
business buyer that typically involves expensive
and relatively long-lived products, such as a
new factory or piece of heavy machinery

 Accessory equipment:
equipment capital product,
usually less expensive and shorter-lived that
insulation, such as a laptop computer

 Component parts and materials:

materials finished
business products that become parts of buying
firms’ final products, such as spark plugs for
new cars
 Raw materials:
materials business product, such as a
farm product (wheat, cotton, soybeans) or
natural product (coal, lumber, iron ore) that
become part of a final product

 Supplies:
Supplies products that represent regular
expenses necessary to carry out a firm’s daily
operations but are not part of the final product.
Supplies are sometimes called MRO items

 MRO item:
item part of business supplies
categorized as maintenance items, repair items,
or operating supplies such as light bulbs, nuts
and bolts used in repairing equipment, or pencils
 Business services:
services intangible product
purchased to facilitate a firm’s production
and operating processes such as financial
services, leasing of vehicles, legal advice
and consulting
Development of Product Lines

 Product Line:
Line a series of related products
 Motivation

 Desire to Grow

 Enhancing the Company’s Position in the

Market
 Optimal Use of Company Resources

 Exploit the Product Life Cycle

The Product Mix
 A company’s assortment of product lines and
individual offerings
 Product Width--the number of product lines
offered.

 Product Length--the number of different

products a firm sells.

 Product Depth--variations in each product that

a firm markets in its mix.
 Product Mix Decisions
 A firm may lengthen or widen its product mix

 A Company may decide to add variations

that will attract new users
 A product may be pruned or altered, and
new product may extend the product life
cycle
 Line extension: introduction of a new
product that is closely related to other
products in the firm’s existing line
The Product Life Cycle
 Product life cycle:
cycle progression of products through
introduction, growth, maturity, and decline stages
 Introduction Stage
 Firm works to stimulate demand for the new
market entry
 Promotional campaigns stress features

 Additional promotions to intermediaries

attempt to induce them to carry the product
 Although prices are typically high, financial
losses are common due to heavy
promotional and research-and-development
costs
 Growth Stage
 Sales volume rises rapidly
 Firm usually begins to realize substantial profits
 Success attracts competitors
 Firm may need to make improvements to the
product
 Additional spending on promotion and
distribution may be necessary
 Maturity Stage
 Industry sales continue to grow, but
eventually reach a plateau
 Many competitors have entered the market,
and profits began to decline
 Differences between competing products
diminish
 Available supplies exceed industry demand
for the first time
 Competition intensifies and heavy
promotional outlays are common
 Decline Stage
 Innovations or shifts in consumer
preferences cause an absolute decline in
industry sales
 Industry profits fall -- sometimes become
losses
 Firms cut prices in a bid for the dwindling
market
 Manufacturers gradually drop the declining
items from their product lines
Extending the Product Life Cycle

 Marketers usually try to expand each stage of the

life cycle for their products as long as possible
 Product life cycles can stretch indefinitely as a
result of decisions designed to:
 Increase the frequency of use by current
customers
 Increase the number of users for the product

 Find new uses

 Change package sizes, labels, or product quality

Product Deletion Decisions
 Product lines must sometimes be pruned and
marginal products eliminated
 This decision is typically faced during the late
maturity and early declined stages of the
product life cycle
 An unprofitable item may be continued in
order to provide a complete line for
customers
Business Mix of ITC Ltd.

FMCG
• Cigarettes
• Foods
• Lifestyle Retailing
• Greeting, Gifting & Stationery
• Safety Matches
• Agarbattis

Paperboards & Packaging

• Paperboards & Specialty Papers
• Packaging
Business Mix (Cont’d)

Agri - Business
• Agri-Exports
• e-Choupal
• Leaf Tobacco

Hotels

Group Companies
• ITC Infotech; etc.
 Business wise Sales data
Business/ Year Growth Value (Rs in Crore)
% 2005 2004

FMCG-Cigarettes 8.4 10002.54 9230.27

FMCG-Others 85.2 563.39 304.16
Hotels 124.1 577.25 257.53

Agribusiness 4.2 1780.07 1708.77

Paper & pkg. 24.9 1565.31 1253.29
Net revenue 12.99 13349.58 11815.04
CAGR during FY 2005-2008
Category CAGR Growth parameters

Cigarettes 10.9 % Pricing power

Hotels 22.7% Inward traffic, occupancy

Paper 17.2 % Capacity utilization, value

added products
Agri 34.3 % E-choupal, choupal sagar,
business
FMCG- 60.2 % Fast track, decent share.
Others
 Market share of ITC Ltd.
Outstanding market leader
 Cigarettes, Hotels, Paperboards, Packaging and
Agri-Exports.

Gaining market share

 Nascent businesses of Packaged Foods &
Confectionery, Branded Apparel and Greeting
Cards.
Segment Dominance Contribution %
Revenue PBIT
Cigarettes 70% share 77.0% 87.7%

Paper & Packaging board – No. 1 in 7.3% 10.7%

Packg. Asia
Agri 1of the largest xporters from 7.0% 3.7%
business India
Hotels ITC Group ranks No.2 4.3% 5.4%

FMCG 20% share of greeting cards 4.4% -7.5%

(Others) market, 'Aashirvaad' atta
is No.1 in branded
segment
A
c
t
2

Market attractiveness & Competitive

strength is also important.
Limitations
 Assumes market growth rate. A firm may
grow the market.
 A “Dog” may be helping other products.
 High market share/Growth is not the only
success factor.
 Linkage between market share and
profitability is questionable.
The BCG Matrix for ITC Ltd.
Stars ?
Hotels FMCG- Others
Paperboards/
Packaging.
Agri business.
Cows Dogs
FMCG-Cigarettes Maybe ITC Infotech.
What is a Brand?
 A brand is a name, term, sign, symbol or
design, or a combination of them, intended to
identify the goods or services of one seller or
group of sellers and to differentiate them from
those of competitors.
 By developing a distinctive name, packaging and
design, a brand is created.
 EG: Sony, Nike (swoosh), Google, Yahoo, Red
Bull, Ferrari (prancing horse). Eases the
purchase decisions.
The Role of Brands
 Identify the maker (the company that stands
behind the product)
 Simplify product handling (or tracing)
 Organise accounting (accounting records)
 Offer legal protection (through unique features)
 Ease of purchases decisions.
 Let seller achieve loyalty amoung customers.
 Generic products do not carry any brands
names, only generic names, cheaper..
What is Branding?
 Branding is endowing products and services with
the power of the brand.
What is Brand Equity?
 Brand equity is the added value endowed on
products and services, which may be reflected in
the way consumers, think, feel, and act with
respect to the brand.
 Arises from differences in customer response.
 Differences in response from differences in
consumers’ brand knowledge.
 Customer-based brand equity can be positive or
negative.
Advantages of Strong Brands
 Improved perceptions of  Larger margins
product performance  More inelastic consumer
 Greater loyalty response
 Less vulnerability to  Greater trade cooperation
competitive marketing  Increased marketing
actions communications
 Less vulnerability to effectiveness
crises  Possible licensing
opportunities
 Brand equity is the added
value endowed to
Brand Equity
products and services.
 An important intangible
asset to the firm.
 Brands with strong
equity:-
 Raise consumer
awareness;
 Create strong brand
loyalty;
 Help introduce new
products;
 Customers less susceptible
to price competition; and
 Allow for larger margins.
What is a Brand Promise?

A brand promise is the marketer’s vision

of what the brand must be and do for
consumers.
Drivers of Brand Equity
 Brand elements
 Marketing activities
 Meaning transference
Brand contacts
 Brand contacts are information-bearing
customer experiences (touch points) with
the brand.

 Positive or negative.
Designing Holistic Marketing
Activities
 Personalisation
 Integration
 Internalisation
Personalised Branding
 Personalised branding involves making
sure the brand and its marketing are as
relevant as possible to as many customers
as possible.

 Experiential
marketing
 One-to-one marketing

 Permission marketing
Integrated Branding
 Integrated branding involves mixing
and matching marketing activities to
maximise their individual and collective
effects.

 Brand identity
 Brand image
Internal Branding
 Internal branding comprises activities
and processes that help to inform and
inspire employees.

 Choose the right moment

 Link internal and external marketing

 Bring the brand alive for employees

The 10 Most Valuable Brands

World’s 10 most valuable brands’ 2006

Managing Brand Equity
 Brand reinforcement
 E.g. Volvo
 Brand revitalisation
 E.g. Harley-Davidson
Branding Strategies
 Brand Extension

 Line Extension

 Multi Brands

 New Brands
Brand Name Choice
 Individual Family Name
 Blanket Family Names
 Separate Family Names for all Products
 Company trade name combined with
individual product names
Customer Equity
 Customer equity may be defined as “the
sum of lifetime value of all customers”.

 Acquisition

 Retention

 Add-on spending
Estimating Customer
Lifetime Value (Prof Jan Novak & Dr Peter Mario)

 Annual customer revenue:$3,000 (“equity”)

 Average number of loyal years: 20(“lifetime”)
 Company Profit Margin: 10% (“profitability”)
 Customer lifetime value: $6,000 (CLV)
 CLV= PM x EQ x LT=10% x $3,000 x 20.
(
Packaging
 Packaging involves designing a container or
wrapper for a product.
 Packages: contain, protect, promote and make
the product convenient in handling and use.
Packaging Strategies
 Packaging the product line

 Multiple Packaging

 Changing the Package

Labeling
 Labels indentify, describe, grade, promote and
price products.
Types of Labels
 Brand Labels

 Descriptive Labels

 A Grade Labels
Pricing Strategies
Price

The sum or amount of money at which a thing is

valued, or the value which a seller sets on his
goods in market; that for which something is
bought or sold, or offered for sale; equivalent in
money or other means of exchange; current
value or rate paid or demanded in market or in
barter; cost.
Penetration Pricing
 Price set to ‘penetrate the market’
 ‘Low’ price to secure high volumes
 Typical in mass market products – chocolate
bars, food stuffs, household goods, etc.
 Suitable for products with long anticipated life
cycles
 May be useful if launching into a new market
 Market Skimming
 High price, Low volumes
 Skim the profit from the
market
 Suitable for products that have
short life cycles or which will
face competition at some point
in the future (e.g. after a
patent runs out)
 Examples include: Playstation,
jewellery, digital technology,
new DVDs, etc.

Many are predicting a firesale in

laptops as supply exceeds
demand.
Value Pricing
 Price set in
accordance with
customer perceptions
about the value of the
product/service
 Examples include
status
products/exclusive
products Companies may be able to set prices
according to perceived value.
Loss Leader
 Goods/services deliberately sold below cost to
encourage sales elsewhere
 Typical in supermarkets, e.g. at Christmas,
selling bottles of gin at £3 in the hope that
people will be attracted to the store and buy
other things
 Purchases of other items more than covers ‘loss’
on item sold
 e.g. ‘Free’ mobile phone when taking on contract
package
Psychological Pricing
 Used to play on consumer perceptions
 Classic example - £9.99 instead of £10.99!
 Links with value pricing – high value
goods priced according to what consumers
THINK should be the price
Going Rate (Price Leadership)
 In case of price leader, rivals have difficulty in competing
on price – too high and they lose market share, too low
and the price leader would match price and force smaller
rival out of market
 May follow pricing leads of rivals especially where those
rivals have a clear dominance of market share
 Where competition is limited, ‘going rate’ pricing may be
applicable – banks, petrol, supermarkets, electrical
goods – find very similar prices in all outlets
Tender Pricing
 Many contracts awarded on a tender basis
 Firm (or firms) submit their price for carrying out the
work
 Purchaser then chooses which represents best value
 Mostly done in secret
Price Discrimination
 Charging a different price
for the same
good/service in different
markets
 Requires each market to
be impenetrable
 Requires different price
elasticity of demand in
each market
Prices for air travel differ for the same
journey at different times of the day
Destroyer/Predatory Pricing
 Deliberate price cutting or offer of ‘free
gifts/products’ to force rivals (normally smaller
and weaker) out of business or prevent new
entrants
 Anti-competitive and illegal if it can be proved
Absorption/Full Cost Pricing
 Full Cost Pricing – attempting to set price
to cover both fixed and variable costs
 Absorption Cost Pricing – Price set to
‘absorb’ some of the fixed costs of
production
Marginal Cost Pricing
 Marginal cost – the cost of producing ONE extra or ONE
fewer item of production
 MC pricing – allows flexibility
 Particularly relevant in transport where fixed costs may
be relatively high
 Allows variable pricing structure – e.g. on a flight from
London to New York – providing the cost of the extra
passenger is covered, the price could be varied a good
deal to attract customers and fill the aircraft
Marginal Cost Pricing
 Example:

Aircraft flying from Bristol to Edinburgh – Total Cost (including normal

profit) = £15,000 of which £13,000 is fixed cost*
Number of seats = 160, average price = £93.75
MC of each passenger = 2000/160 = £12.50
If flight not full, better to offer passengers chance of flying at £12.50 and
fill the seat than not fill it at all!
*All figures are estimates only
Contribution Pricing
 Contribution = Selling Price – Variable (direct
costs)
 Prices set to ensure coverage of variable costs
and a ‘contribution’ to the fixed costs
 Similar in principle to marginal cost pricing
 Break-even analysis might be useful in such
circumstances
Target Pricing
 Setting price to ‘target’ a specified profit
level
 Estimates of the cost and potential
revenue at different prices, and thus the
break-even have to be made, to
determine the mark-up
 Mark-up = Profit/Cost x 100
Cost-Plus Pricing
 Calculation of the average cost (AC) plus a
mark up
 AC = Total Cost/Output
Influence of Elasticity
 Any pricing decision must be mindful of the
impact of price elasticity
 The degree of price elasticity impacts on the
level of sales and hence revenue
 Elasticity focuses on proportionate (percentage)
changes
 PED = % Change in Quantity demanded/
% Change in Price
Influence of Elasticity
 Price Inelastic:
 % change in Q < % change in P
 e.g. a 5% increase in price would be met by a
fall in sales of something less than 5%
 Revenue would rise
 A 7% reduction in price would lead to a rise in
sales of something less than 7%
 Revenue would fall
Influence of Elasticity

 Price Elastic:
 % change in quantity demanded > % change
in price
 e.g. A 4% rise in price would lead to sales
falling by something more than 4%
 Revenue would fall
 A 9% fall in price would lead to a rise in sales
of something more than 9%
 Revenue would rise
 Promotion Mix

Promotion Mix
Advertising Personal Selling Sales Promotion Publicity

Advertising
Advertising is a non-personal form of promotion
that is delivered through selected media outlets
that, under most circumstances, require the
marketer to pay for message placement. 
Advertising

Advertising is a message paid for by an identified

sponsor and delivered through some medium of
mass communication. Advertising is persuasive
communication.”
Russel and Lane

Advertising has long been viewed as a method of mass

promotion in that a single message can reach a
large number of people.  But, this mass promotion
approach presents problems since many exposed to
an advertising message may not be within the
marketer’s target market, and thus, may be an
inefficient use of promotional funds. 
Six Basic Components

 Paid
 Non-personal communication
 Sponsor is identified
 Using mass media
 Tries to persuade or influence
 Reaches large audience
Personal Selling

“Personal selling is the two-way flow of

communication between a buyer and seller,
designed to influence a person’s or group’s
purchase decision.”
 Public Relations

“Public
“Public relations
relations is
is aa form
form ofof
communication
communication management
management that that
seeks
seeks to
to influence
influence the
the feelings,
feelings,
opinions,
opinions, or
or beliefs
beliefs held
held byby customers,
customers,
prospective
prospective customers,
customers, stockholders,
stockholders,
suppliers,
suppliers, employees,
employees, and and others
others
about
about aa company
company and and its
its products
products or
or
services.”
services.”
 Publicity

“Publicity
“Publicity is
is communication
communication about
about an
an
organization
organization that
that is
is nonpersonal
nonpersonal and
and
not
not paid
paid for
for directly
directly by
by the
the
organization.
organization.
 Sales Promotion

Sales
Sales promotion
promotion is is aa short-term
short-term
offer
offer of
of value
value designed
designed to to arouse
arouse
interest
interest in
in buying
buying aa good
good or
or
service.
service.
 Direct Marketing

Direct
Direct marketing
marketing usesuses direct
direct
communication
communication with with consumers
consumers to to
generate
generate aa response
response in in the
the form
form ofof
an
an order,
order, aa request
request forfor further
further
information,
information, oror aa visit
visit to
to aa retail
retail
outlet.
outlet.
Distribution Channels
 A distribution channel is a set of independent
organizations involved in the process of making
a product or service available to the consumer
or business user

 Used to move the customer towards the product

Why Use Marketing
Intermediaries?

 Selling through wholesalers and

retailers usually is much more efficient
and cost effective than direct sales
Distribution Channel Functions

 Information: gathering and distributing

marketing research and intelligence
information about the marketing
environment

 Promotion: developing and spreading

persuasive communications about an
offer
Distribution Channel Functions

 Contact: finding and communicating

with prospective buyers

 Matching: shaping and fitting the offer to

the buyer’s needs, including such
activities as manufacturing, grading,
assembling, and packaging
Distribution Channel Functions

 Negotiation: agreeing on price and other

terms of the offer so that ownership or
possession can be transferred

 Physical distribution: transporting and

storing goods
Distribution Channel Functions

 Financing: acquiring and using funds to

cover the costs of channel work

 Risk taking: assuming financial risks such

as the inability to sell inventory at full
margin
Number of Channel Levels
 Channel level can be described as distribution
channels

 Direct marketing channel

 Retailer

 Wholesaler
Customer Marketing Channels
Channel Organization

 A vertical marketing system (VMS)

consists of producers, wholesalers, and
retailers acting as a unified system

 One channel member either owns the

others, has contracts with them, or
wields so much power that they all
cooperate
Conventional vs. Vertical Marketing
Channels
Vertical Marketing Systems

 Corporate VMS combines successive stages

of production and distribution under single
ownership
 Administered VMS coordinates successive
stages of production and distribution through
the size and power of the parties
 Contractual VMS consists of independent
firms at different levels of production and
distribution who join through contracts to
obtain economies or sales impact
Channel Organization
 Alliances are developed to allow two
organizations to benefit from each other’s
strengths
 Horizontal marketing systems are two or
more companies at one level that join to
follow a new marketing opportunity
 Multi-channel marketing occurs when a
single firm sets up two or more marketing
channels to reach one or more customer
segments
Selecting Channel Members

 Customer Needs

 Attracting Channel Members

 Evaluating Major Channel Alternatives

 Economic Feasibility of the Channel Member
 Control Criteria
Business Location
1. Understand the marketing strategy and
target market of the company

2. Conduct a regional analysis, which involves

the selection of geographic market areas

3. Select an area within that region

4. Choose individual sites