MARKETING MANAGEMENT

Prof N B Kanagal

Principles of Marketing Introduction

What is the Marketing Concept

Marketing Concept is about satisfying consumer needs and wants simultaneously Meeting organizational objectives
There are five types of needs:

stated needs: unstated needs: real needs : secret needs: delight needs:

the customer wants an inexpensive car customer expects good service from a dealer customer wants a low operating cost car, not just a low price customer wants to be known as a savvy consumer customer wants a navigation system to be installed

Marketing Concept is about customer satisfaction Customer Satisfaction

Hyundai Launches Hyundai Sonata In the untapped Rs.10-20 lakh Segment - acquisition Volvo, Sweden has been very successful in Customer retention, with a repeat purchase Rate of up to 80% over last 40 years. For Honda 61% of the customers of the flagShip brand Accord are from the Honda Clientele.

Customer Acquisition

Customer Retention

Good customer satisfaction is obtained by focusing on both the customer acquisition and customer retention processes.

Marketing Concept is about customer satisfaction

Customer is also satisfied when they obtain the following

a. VALUE (Indian youth are highly value conscious as is seen in the LCD TV market where higher prices are being paid for a proposition that includes technology, aesthetics and performance. Another category is low cost air carriers. Private labels are emerging in Categories such as snacks.) b. c. d. SERVICE QUALITY Performance, Conformance CHOICE

CUSTOMER VALUE

Satisfaction is the feelings or judgments about a product resulting from comparing a products perceived performance in relation to expectations. If performance matches expectations leads to satisfaction.

If performance exceeds expectations it leads to delight.

Satisfaction is measured through periodic surveys, mystery shoppers judgments. Analysis of lost customers also leads to insights about satisfaction.

Delivering High Customer Value leads to high customer loyalty. This leads to increased profitability if profitable customers are targeted. Value propositioning consists of the whole cluster of benefits the company promises to deliver. It is more than core positioning. MTR Restaurants core positioning is taste, but value proposition includes hygiene in processing, consistency in taste, use of quality ingredients. The value proposition is a statement about the resulting experience customers will gain from the companys market offering and from their relationship with the supplier.

Customer Life time Value CLV represents the net present value of the stream of future profits expected over the customers lifetime assuming that the customer does not defect prematurely.

Customer Equity CE is the total of the discounted lifetime values of all the firms customers. The three drivers of Customer Equity include value equity (quality, price, service), brand equity (surplus meaning of brand), relationship equity (loyalty Programs, special treatment programs, community building programs).

Economic surplus shared with the customer / value in price

Increase of different kind of benefits provided to the customer ( move from no-frills product to fully loaded Product and in value-added services) Provision of social value, rarity value, emotional value, functional value (more of a benefit) Value in uniqueness or differentiation Effective service delivery Reputation / brand value Relationship value

Value

Marketing concept is that of exchanges. A transaction is a measured exchange.

Contract formalizes a transaction either for the present or for future and Legalizes it if necessary and also provides a recourse in case of a market failure
There are five conditions of exchange 1. 2. 3. 4. 5. There are at least two parties Each party has something that might be of value to the other party Each party is capable of communication and delivery Each party is free to accept or reject the exchange offer Each party believes it is appropriate or desirable to deal with other party

A transaction is distinguished from a transfer. A gives X to B but does not receive anything tangible in return. E.g. gifts, subsidies, charitable contributions. Persons making such transfers are possibly expecting gratitude or changed behavior in the person who accepts the transfer.

Marketing Management is Demand Management. Demand represents: desire and willingness to buy ability to buy

Marketing Management is Demand Management. Eight demand

States are possible

Negative demand ex-convicts and alcoholics in factories for employment

No Demand Indian College students in semi-urban areas have no demand for foreign language courses Latent Demand Strong latent demand for harmless cigarettes or fuel efficient cars Declining Demand for Yamaha in Pianos in 1980s Irregular Demand - Metro rail demand through the day, seasonality Full Demand Organizations sell to maximum capacity Overfull Demand Waiting list on Honda Scooters at the dealership Unwholesome Demand Hard Drugs

Marketing Concept has evolved over six stages -Production concept: It holds that consumers will prefer products that are widely available and inexpensive -product concept: Consumers will favor those products that offer the most quality, performance or innovating features -selling concept: Consumers do not buy enough, so firms must put in extra efforts to sell products.

-marketing concept: sense the market and respond with offerings consists of both reactive and proactive market orientation. Reactive means understanding and meeting customers expressed needs. Focusing on customers latent needs leads to proactive orientation.
-holistic marketing concept: Includes dimensions of internal marketing, development of integrated marketing programs that cover the 4Ps, relationship marketing that covers customers, channel and partners and socially responsible marketing that covers ethics, environment, legal and community issues.

Market Places Market Spaces Meta Markets cluster of complementary products and services that are closely related in consumer minds but are spread \ across a diverse set of industries. Automobile meta-market consists of auto manufacturers, dealers, service shops, auto magazines, auto sites on Internet.

AMA definition : Marketing is an organizational function and a set of processes for creating, communicating and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders. Kotler definition : Human activity directed at satisfying needs and wants through exchange processes

Marketing Management is the art and science of choosing target markets and getting, keeping and growing customers through creating, delivering And communicating superior customer value.

Marketing people are in involved in marketing ten types of entities Goods Services Experiences Events Persons Places Properties Organizations Information Ideas

Important Schools of Thought in Mktg

- Functional School - Managerial School - Buyer Behavior School - Organizational dynamics school

Functional School:

Marketing is organized along functions product management, sales, advertising, market research

Managerial School:

The marketing that is taught comprising of PLC, marketing mix, market segmentation and positioning. Pioneered by Joel Dean, John Howard, Neil Borden William Lazer, Theodore Levitt, Philip Kotler

Buyer Behavioral School: Unwise to target an Economic Man. Consumer behavior study will lend more depth. Pioneers include Ernest Dichter, John Howard, George Katona, James Engel Organizational Dynamics School: Interorganizational behavior is the key focal point for understanding marketing process.

Integrated Marketing

Features of Integrated marketing 1. 2. 3. 4. Convergence of mass branding and relationship marketing or one to one mktg Practice of holistic marketing concept Integrate the marketing offer at the firm end guided by positioning / brand identity Integrate the offer at the consumer end contacts of the consumer with the firm leads to experiences which can be customized, either on one-to-one basis or on sub-segment basis, these experiences lead together to a relationship and a unified brand concept / image. The contacts should be managed in an integrated manner both with respect to time and over the target market to give an integrated purchase and consumption experience at the consumer end. Use of Information technology to improve marketing Shift in power from manufacturer to retailer to consumer. This shifts integration of marketing offer at the consumer end. Use of systematic cross selling and up selling Practice of Integrated Marketing Communication

5. 6. 7. 8.

Trends in Marketing

1.

Mass customization: This addresses heterogeneity in markets. e.g. Jenson and Nicholson in paints Mercedes Benz choice of design of cars at factory on order using flexible manufacturing, JIT production JIT distribution, computer information systems Microsegmentation Junior Horlicks, Mothers Horlicks, Womens Horlicks Provision of supervalue / ecstasy Airline frequent flyers tied to hotel rentals/ auto rentals

2. 3.

4.

Wants become needs Todays power steering option- want is tomorrows need
Increasing Brand Proliferation concept of power brands Trend towards relationship marketing. CRM. Customer building takes precedence over classical marketing. Rise of one to one marketing Rise of Competition e.g. HLL Pepsodent-Colgate; Computer Industry Rivalry

5. 6.

7.

8. 9.

Requirement of both reactive and proactive market response mechanisms. Firms should make deliberate attempts to step out of short termism and look at long term

10. Societal Marketing more widely practiced.

11. How to convert niche products to larger markets e.g. mobile phones, internet. Reasons for success of mobile poor landline penetration, proactive govt. policy and regulation, efforts of operators and competition, affordable innovation.

12. Globalization
13. Emergence of New Media 14. Buzz Marketing and Viral Marketing

15. Emergence of Retailing New age packaged food. Organized retail for vegetables and fruits
16. The importance of branding and other intangible assets such as corporate reputation, intellectual capital.

17. Premiumisation or consumer trading up

NEW MEDIA

Today we have virtual explosion of digital technology and content that has led to more channels of communication, with the consumer increasingly in control of content, channels and messaging.

Computer technology - documents, spreadsheets, Databases, websites, email, internet.

Music, video players such as iPods allow customers with huge information. Gaming devices such as Sonys PSP and online game portals such as zapak.com open up opportunities for integration of game and commercial content. Mkt to be $969 million by 2011 for ad revenues from gaming industry. Mobile devices are used for marketing goods and services TV more choice of channels gives more choice to consumers channels offered theme based content to attract consumers (Animal Planet, MTV etc); Reality shows such as Kaun Banega Crorepati. FM superior in playback experience than AM. Relatively inexpensive per exposure.

Technological Advancement

OOH or out of home media rapidly evolved over the past few years. Digital Billboards evolving that can be programmed for multiple messages.
Satellite radio could base itself on advertising and product integration revenue, that could lead to options for marketers.

Technology Advancement

Use of internet for both B2B and B2C mktg. Internet user base of 76 mn In India Use of internet chat, video, speech, email, online banking, download music, job search, social networking, info search engine, online communities, ticket booking, farming techniques, info on fertilizers and pesticides, photo sharing. Use of internet banner advertisements or sponsorships with links to home page of product marketed. Use of internet problem of connectivity and speed internet (dial in) less than 256 KBPS and broadband (internet always on) greater than 256kbps Initiatives for increasing internet usage National e-Governance Plan (NeGP), SWAN State wide Area Network scheme with end points as Common Service Centres (CSC), e-Choupal (ITC), Project Shakti (HUL) Among women in rural India iShakti portal, Project Shiksha (Microsoft).

A well defined media strategy is needed to deploy the various media vehicles. This requires an understanding of who to talk to. This means the Marketer needs the following types of data:
Demographic data age, ethnicity, sex, geographic location information, home ownership, type of vehicle, number of HH members, employment status and type Psychographic data values, beliefs, activities, interests and opinions Financial data HH income, home value, net worth, financial scores, debt repayment history Purchase behavior type of credit card, average purchase size, types of brands purchased, frequency of purchase, brand loyalty * Media consumption habits awareness, consideration, preference

These days there is a separation of the media agency from the creative agency, as handling the media strategy is a significant task by itself.

New trends in Media based marketing

Self marketing trends word of mouth, web search for products / services. Word of mouth marketing also called buzz marketing

The job of marketing communications is not just delivering a brand benefit message but also of engaging the consumer and making him / her to feel the brand is relevant to their lives. The challenge is engagement

Intertwining of program content and commercial messages as consumers increasingly skip commercials.

Content expansion - content from a channel has increased and content from all over the world available to the consumer through the internet. Possibility of viewing this content through desktop, laptop, mobile in addition to TV screen. Youtube is an example of production and distribution of content.
Debatable Who owns what content, where can it be viewed and when and the revenue / business model

Display advertising, website development and search accounts for 65% of online spend of firms. Main benefit has been limited to lead generation. Other executions - Viral marketing, interactive media such as brand sponsorships, advergaming, e-commerce.
82% of top 500 marketers spend close to 5% of total advertising budget online. Travel, airline, hotels, car rentals. 76% of online shoppers in 21 to 39 years category.

New Trends in Media Marketing

Use of internet Search Marketing use of key words to drive consumers to their website. Search programs can drive large number of clicks to a website. Also important is that when a search is done, your website comes right on top for easier click through. Main search engines Google and Yahoo Social networking people connect to others Facebook.com, Orkut, LinkedIn, Bharatstudent.com, Yahoo! Pulse, Yahoo!Buzz, Twitter.com, Zedge.net, Ibibo.com, Shtyle.fm

Social media brand specific sites as for Volkswagen, collaboration with stakeholders (IBM), connect with employees (Best Buy), bridge geographic boundaries (IBM), customer support (Hyatt), market research (many firms), corporate blogging ( Infosys), seeking feedback (Titan), Recruiting (Ernst & Young), brand awareness (Apollo Hospitals), brand promotion (Tata Nano, MTV), product development (Dell), employee engagement (IBM). Other uses include customer understanding, knowledge sharing, brand building, social cause promotion.
Social media advertising impacts on ad recall, brand awareness and intent to purchase. Social media consumer side share opinion and reviews, discussions. 50% of consumers use social media to make online purchase decisions. In case of auto sector factors searched online include vehicle specifications, brand image, safety features.

Mobile Media Marketing

670 million mobile users as of Oct 2010, and 35 million wireline subscribers. Teledensity at around 60%. Mobile Social networking 300 million mobile subscribers. Set to increase with smartphones and 3G services. Major sites Facebook, Twitter. Consumers ready to accommodate advertisements in mobile for free music downloads, free instant messaging and free video gaming. Mobile broadband services include internet browsing, mcommerce, video calling, music downloads and streaming, video news updates, enetrprise services for sales force automation, location based services Cloud computing, software as a service, tele-education, tele-medicine, m-governance, VOIP, mobile TV

Mobile money - enabling electronic money transactions over a mobile phone Also called mobile financial services, mobile wallet, mobile payment. Important to enable rural India where credit cards, banking accounts is less. Currently options to use mobile phones as alternative delivery channel to customer through links to Bank accounts and credit cards is being examined. Mobile money transfer models by YES bank, Obopay. Bharti Airtel permitted by RBI to begin mobile payment services called SemiClosed Wallet where transactions Rs. 5000/- or less through mobile payment. Mobile ticketing, bill payment and shopping services to consumers by OnMobile and mChek. Mcommerce Service called ngpay by JiGrahak mobility solutions.

BUZZ Marketing and VIRAL marketing

When one consumer says something to another about a product or service, the message is likely to be immediate, personal, credible and relevant. This sort of communication is called WORD OF MOUTH OR WOM currently called Buzz. The consumers originating the Buzz could also be influentials or opinion leaders.

Buzz is applicable to products as routine as prescription drugs, it could be used consciously and deliberately, could be targeted at both users and nonusers, Could be used for brands anywhere in the PLC. It can be used to spread cultural meaning in a self-replicating way.

VIRAL Marketing Each time a Hotmail user sent someone an email, the email had at the bottom an implicitly user endorsed solicitation Get your free email with Hotmail now. Viral marketing is also about the power of consumer to consumer contacts, as well as a rapid spread of a way of thinking about a product. Viral marketing calls for creating networking in an existing community or creating new community of consumers. Networked communities have their own lives. They have their own brand and product experts who focus attention on the way brands support cultural values. They promote brands for social values as much as they would do for brand benefits. Brands increasingly come to life in network communities conversations, that leads to development of brand meaning. This leads to refinement of brand concept. Forward looking companies such as CNN, Amazon, Disney are building online communities, using bulletin boards, forums, chat rooms.

Customer databases

Mailing list Vs Customer database Vs Business database Mailing list is just a set of names, addresses and telephone numbers Customer database contains consumers past purchases, demographics, Psychographics, media-graphics. Business database contains customers past purchases, past volumes, prices and profits; buyer team member names; status of current contracts; estimate Of the supplier share of the customers business; competitive suppliers; Relevant buying practices, patterns and policies

Data Warehouse Database that contains not only customer information such as demographics Psychographics and media graphics but also contains customer contact Information Data Mining Use of sophisticated mathematical and statistical techniques to the data in The data warehouse in order to extract information about individuals, Trends and segments. Techniques include cluster analysis, predictive Modeling. The use of Data warehouse and data mining can result in competitive advantage

Marketers use of database 1. Identify prospects. 2. To decide which customers should receive a particular offer 3. Deepen Customer Loyalty by sending gifts, coupons and interesting reading material 4. Reactivate customer purchases thru birthday cards, season promotions 5. To avoid serious customer mistakes e.g. calling on customers for payment when they have already paid as it is not properly recorded

Database marketing used mostly by service providers such as hotels, banks, Airlines, insurance, credit card and telephone companies. Honda for example keeps All their customers under digital surveillance (meaning continually updated database.

Difficulties to Database Marketing and CRM 1. High Investment in technology, people. Difficult to collect the right data. Not worthwhile to build database when (a) product is a one time purchase e.g. piano (b) there is lot of customer churn ( c ) unit sale is very small (d) cost of gathering data is high 2. Buy in of Employees is important 3. Privacy of Information

4. Loyal customers may not necessarily be profitable. Loyals may extract premium service and / or price discounts
5. Not good to implement a CRM before creating a customer strategy 6. More CRM may not necessarily be better.

Consumer Buying Behavior

Analyzing Consumer Markets and Buying Behavior

Interest in examining aggregate market response to firm specific decision variables understanding explaining predicting Method analyze individual level behavior analyse aggregate market behavior

Analysing Consumer Markets and Buying Behavior

Translation of individual level behavioral analysis to aggregate level market response is faced with the issue of aggregation problem. A prime characteristic of consumers is their variation in preferences, tastes, likes, dislikes, purchase behavior patterns. Meaning thereby that markets are heterogenous and consumers exhibit heterogeneity Object of consumer behavior analysis - buyer or user ? answer - both with emphasis on decision maker

Behavioral processes of consumers An integrative conceptual framework

Communication sensitivity

Accultured individuality

Society and Market Environment () Behavioral Process of Consumers

Rational and Economic Decision making

Behavioral Processes of ConsumersCommunication Sensitivity

Within Market Within Market
Communication sensitivity

Word of Mouth Diffusion Processes

Firm To Market

Firm to Market -Consumer Behaviour Concepts -One way/Two way.

Behavioral Processes of ConsumersCommunication sensitivity

Consumer Behaviour Concepts Endogenous Factors

Selectivity Involvement Persuasion Learning

Selectivity Selective attention Marketers have to work hard to get consumers notice consumers are more likely to notice stimuli of current need, stimuli they anticipate, stimuli whose deviations are large e.g. $25 off $100 rather than $5 Selective distortion tendency to twist information into personal meanings that will fit our preconceptions e.g. A customer of LG may interpret an advertisement saying that they are No. 1 company in Microelectronics to be No.1 company in all of consumer durables Selective Retention consumers likely to remember good points of products they like and forget good points of competing products e.g. a user may remember that Pears soap is the only soap good for dry skin though in the market Dove, Santoor and Mysore Sandal Gold is also good for dry skin

Involvement
Krugman proposed the concept of level of involvement influencing buyer behavior. Products purchased are either low involvement Or high involvement. Assael has classified types of buying behavior based on involvement Persuasion Low Involvement products use the peripheral route to persuasion e.g. celebrity endorsements. As of 2008, 60% of all advertising used a known face. High Involvement products use both the central route (cognitive reason) to persuasion and the peripheral route to persuasion. Learning Guided by inner drives, but influenced by cues, stimulus and reinforcement

Assaels Classification of types of Buying Behaviour

High Involvement Significant Difference Between Brands Few Difference Between Brands Low Involvement

Complex Buying Behaviour Dissonance Reducing Behaviour

Variety-Seeking Buying Behaviour Habitual Buying Behaviour

Assaels Classification of types of Buying Behaviour

Complex: First develop beliefs about product. Then develop attitudes and then make a choice Dissonance: First Act, then develop beliefs. Then end up with attitudes Habitual: salt- out of habit, beliefs from passive learning-choice- evaluation/attitudes Variety seeking- lot of brand switchingchocolates (Low involvement)-Beliefs-ChoiceAttitudes.

Behavioral Processes of ConsumersAccultured Individuality

Consumer Behaviour Concepts Personality and Self concept Life style Motivation Memory Social -Reference groups -Family -Roles and Status

Culture Sub Culture Social Class

Accultured Individuality

Personal - Age and Life cycle - Occupation - Economic Circumstances

Independent Factors
1. Culture a) Cultural factors exert the deepest and broadest influence on buyer behavior. Culture is fundamental determinant of a persons wants and behavior b) Subculture countries, regions, races, religions c) Social class Social factors a.

2.

b.

Reference groups primary (family, coworkers), secondary (religious groups) Reference groups aspirational groups and disassociative groups (Nestle during the boycott). Honda car is an aspirational car of the Indian middle class; most of the auto car positioning has been aspirational in India Three influences of reference groups 1. individual exposed to new behaviors, lifestyle Caf Coffee Day sells conversations along with coffee. 2. create pressures for conformity (affects choice thereby) 3. influence attitudes and self concept

c.

2.

Social Factors - Family - Family of orientation influences beliefs, values, attitudes - Family of procreation influences day-to-day living and purchases People buy products that communicate their role and status in society

3.

Endogenous Factors Accultured Individuality Lifestyle A lifestyle is a persons pattern of living in the world as expressed in activities, interests, opinions. Lifestyle portrays the whole person. Marketers search for relationships between their products and lifestyle groups. If it is found that most computer buyers for home purpose are achievement oriented, then the marketer may aim his brand at achiever lifestyle Psychographics is a way of using psychology and demographics for understanding consumers. VALS of SRI consulting is a useful framework Tatas have several lifestyle brands such as top end jewellery brand Tanishq, fashion accessories brand Fastrack and watch brand Xylys Lifestyle needs vary by generation from child to adoloscent to young adult to middle age to elderly.

Accultured Individuality Endogenous factors Personality and Self Concept

Personality is a set of distinguishing human psychological traits that lead to Consistent responses to environmental stimuli. E.g. Self Confidence, dominance Autonomy, sociability, defensiveness
Brand Personality is a specific mix of human traits attributable to a particular brand Consumers choose brands which have a personality similar to that of their own. Self Concept - Actual self concept how he/she views him/herself - ideal self-concept how she/he likes to view her/himself - others self concept how he/she thinks others see him/her A marketer has to judge the form of self concept from the above to market his brand

Endogenous Factors Accultured Individuality

Motivation A person has many needs (biogenic, psychogenic). A need becomes a motive When it is aroused to a sufficient level of intensity. In other words a motive is a need that is sufficiently pressing to drive the person to act. Freuds Theory Motivation Theories Maslows Theory Herzberg Theory

Freuds Theory Consumers behavior is shaped largely by unconscious psychological forces. A technique called LADDERING is used to trace the persons motivation From the stated ones to the terminal ones. The marketer can then decide to Target his appeal to the most appropriate level. Motivation researchers also use projective techniques such as word association Sentence completion, picture interpretation etc.

Maslows Theory Self Actualization Needs

Esteem Needs Social Needs Safety Needs Physiological Needs This helps how various products fit into lives, goals and plans of consumers. Consumers fill their needs starting from lowest to highest. So it is not of much use to target a high end need product to a person who is still satisfying his lower end need.

Endogenous Factors Accultured Individuality Motivation Herzberg Theory Factors for buyer motivation are of two types hygiene factors (or Dissatisfier removers) and motivators (satisfiers). It is not enough if hygiene Factors are present. Motivators must be present for a purchase.

Behavioral Processes of Consumers- Beliefs and Attitudes

Communicati Accultured on Individuality sensitivity

Beliefs/Values
Society & Mkt. Environment

Experience & usage In Decision making For consumption

Attitudes
Inputs from rational and Economic Decision Making

Beliefs / Values and Attitudes A Belief is a descriptive thought that a person holds about something. On Blind Test Diet Coke and Diet Pepsi are equally preferred. But on revealing brand Names Diet Coke was preferred by 65% of consumers and Diet Pepsi by 35%. This is an illustration of role of beliefs. An attitude is a persons enduring favorable or unfavorable evaluations, emotional feelings and action tendencies toward some object or idea. A marketer is well advised to fit his product into existing attitudes rather than try To change attitudes, which take a long time. Sometimes it pays to change Attitudes 1. Buying New in exchange for old pays to change attitude as market is going to be large 2. These days food brands should have a diet variety as there is health consciousness in the market pays to fit product

Behavioral Processes of ConsumersRational and Economic Decision making

Decision making process - Need Recognition - Information Search - Evaluation (perception) - Purchase (Preference) - Post-Purchase

Behavioral Processes of ConsumersRational and Economic Decision Making

Consumer Behaviour Processes/Concepts Individual constraints Budget constraints Situational factors Beliefs and values Attitudes Market environment Store Environment Firm decision variable Competitor decision variable Post Purchase Feelings -Cognitive Dissonance - Regret Theory

Rational and Economic Decision making

Behavioral Outcomes of Rational and Economic Decision making Process

Evoked set Consideration set
Purchase intention Purchase preference Purchase Behaviour Purchase behaviour decisions What to Buy (Basket of goods decision) Where to Buy (Store choice) Which brands to buy (Brand choice) How much to Buy (purchase quantity) How often to Buy (Purchase timing)

Rational and Economic Decision making

Post purchase feelings

Analysing Consumer Markets and Buying Behavior

Buying Roles Initiator, Influencer, Decider, Buyer, User Stages of the Buying Decision Process Problem Recognition Information Search Evaluation of alternatives Purchase decision Post Purchase behavior

Marketing Process

Consumer India
Fifth largest economy on GDP PPP terms with around 6% of world GDP 57% of our GDP is driven by private consumption

232 mn under age 18 Gen Future 300 mn age 19 to 24 years Generation Next (71% from rural India, 1% from wealthy households more than Rs. 80000/- per month) 308 mn age 25 to 39 years Generation Now 300 mn age greater than 40 Generation Yesterday (40-54 years) and Vintage (55 years and above)
Rural India is not poor, nor is it totally agriculture dependent. Rural India Represents 50% of Indias GDP. Half of that rural GDP is non-agricultural. Indian consumers are not backward. They would be value conscious Individually less affluent but collectively rich..

Consumer Indias Demand Structure Take for example the two wheeler market. There are four Income classes. the High, the Upper Middle, the Lower Middle and the Lower. The LM group has less than one fifth the household penetration of two wheelers, as compared to the high income group. However the LM group has nine times the number of households as the H group. So LM group has 1.8 times the sales of two wheelers of the H group. Based on the Market Information Survey of Households (MISH) of NCAER, for FMCG, the lowest income group has three times the value of consumption as the highest income group. The oft quoted story of shampoo sachets to manage demand of low income groups is a case in point.

Demand Segments

Information Technology India Agricultural India Government India Self Employed India Manufacturing Sector India Services Economy India

Market Structure Constructs

Premium Popular Discount normally bought by rich, middle, low income groups Rule of Thumb Roughly equal proportions of consumption value by these three segments. Case 2: Deprived - < Rs. 90,000/- per annum Aspirants - Rs. 90,000/- to Rs. 200,000 per annum Seekers Rs. 200,000/- to Rs. 500,000 per annum Strivers - Rs. 500,000/- to Rs. 1000,000 per annum Global Indians - > Rs. 1000,000 per annum Case 1:

Case 3:

Rich Consuming Class Climbers Aspirants Destitute

Case 4: Benefit maximizers / money for value (Mercedes); Value for Money (Surf); Cash -Constrained benefit maximizers (Nirma); Economy (Sachets).

Case 5:

Consumption Based Stratification Samriddha Prosperous; Sampanna Well off, not wealthy; Siddha just entering upper classes; Unmukha Upward looking moving beyond average; Saamaanya Average, Sangharshi (Strivers); Nirdhana Poor.

Market Structure based on Consumption and Ownership Pattern

Very Rich, those who buy the most expensive consumer pdts

Consuming class those that buy bulk of consumer goods Marketed in the country.

Indian Market

Climbers who own or purchase slightly more expensive consumer Goods like B/W TV, sewing m/s, mixers.

Aspirants those who purchase a few inexpensive consumer Goods like cycle, radio/transistor

Destitutes - Consume very little of m/f goods

Market Structure based on SEC Classification Education Illiterate, School upto 4th, Literate but no formal Schooling, School 5th 9th, SSC/HSC, Some College but not A graduate, Graduate/Post Graduate General, Graduate / Post Graduate- Professional

SEC Urban

Occupation Unskilled Workers, Skilled Workers, Petty traders, Shop Owners, Businessmen / Industrial with no of employees (a) 1-9 (b) 10+, Self Employed Professional, Clerical / Salesman, Supervisory Level, Officers / Executive Junior, Officers / Executives Middle/Senior The eight socio-economic classes in the urban area A1, A2, B1, B2, C, D, E1, E2

Market Structure based on SEC Classification

Education Illiterate, School upto 4th, Literate but no formal Schooling, School 5th 9th, SSC/HSC, Some College but not A graduate, Graduate/Post Graduate General, Graduate / Post Graduate- Professional

SEC Rural

Type of House Pucca, Semi Pucca, Kuchha

The five socio-economic classes in the rural area are R1, R2, R3, R4, R5

New Product Market Management Process

Marketing Management Process

Existing Product Market Management Process

In many organizations the new product managers and existing product managers are separate. The new Product Market management process starts with need identification or idea generation and moves onto concept testing, Business analysis, test marketing, commercialization. Existing product managers using classical marketing principles to design, develop and monitor marketing Programs for a brand.

Opportunity identification

Analyze opportunities

Opp. Eval. Demand estimation Understand Customers / Buyers

Analyze Competition
Select Target markets Develop Marketing Strategies Position Initiate Pdt Dev, Test, Launch, Monitor Decide on Marketing Expenditure And Market allocation 4Ps

Marketing Management Process

Plan Marketing Programs Transform Mktg Strategy into Marketing Programs.

Organize, Implement, Control Marketing Plan - Build Mktg Organization to deliver value - 3 types of control - Annual Plan Control ( quarter by quarter) - Profitability Control - Marketing Strategy Control

Connect with Customers - STP

Marketing Management Process is Value Delivery Process

Create and Capture Value Products and Price

Deliver Value Place / Distribution

Communicate Value (Sales, Advertising)

The Marketing management process can also be seen as a Customer Relationship Management process
Look at Customer Customer Value, Long Term Customer Value Customer Satisfaction as a precursor to relationships Look at Relationship Customer Retention, Intimacy, Loyalty Understanding Nature of Relationship - Trust, Commitment Building long term relationship Look at Management of Customer Relationships Customer Equity Relationship risk Build competitive advantages using relationships

One of the most important elements of the Marketing Process is Managing the Marketing Environment

Mega Marketing

Identify Trends and Megatrends

Managing the Marketing Environment

Monitor environmental forces Monitor Changes in Consumer tastes and preferences

Understand the impact of environmentalism on marketing

Manage consumer action groups Consumer Protection Act

Market externalities are decisions taken by members external to the decision making unit of firm Management of market externalities is called MegaMarketing

This includes Lobbying with the Government, Banking relations, Decisions of Channel members

One of the most important outputs of the marketing process is the marketing plan.

Executive Summary Situation Analysis Information on sales, costs, profits, market, competitors, macro-environment conditions and pertinent historical information used for a SWOT Framework. Opportunity and - Review opportunities done in SWOT, issue analysis Identify issues affecting org objectives

Objectives Sales volume, market share, profit, customer satisfaction goals

Marketing Strategy - STP, Use inputs of Purchasing, M/F, Sales, Finance, HR Action Programs (quarter by quarter) Who will do, what will they do, How much it will cost, how is progress measured Financial Projections Proforma P/L, Bal. Sheet, Budget Approvals Schedule of Implementation and Controls

Marketing Strategies

Strategy
the art or skill of using stratagems in business, politics, courtship or like (American Heritage Dictionary of the English Language, 1973, p 1273) a plan of action resulting from the practice of this art or science the set of strategic decisions for a particular marketing situation
guidelines for decision making in a contingent framework

apportionment of relative emphasis among the different elements of the strategic decision set

Marketing Strategy

Business Strategy

Technology Strategy

Sourcing Strategy

Other functional Strategies

Marketing
Conceptualization

Design Build Up
of Marketing to Programs Identify and satisfy customer needs and wants Through exchange processes simultaneously Fulfilling organizational objectives

Execution
Monitor

Strategy
Long term implications Huge Investments Contingency Build Up

Market Orientation = Customer Orientation + Competitor Focus + Inter-Organization Orientation

Marketing Strategy

Integration of the elements of marketing into a marketing mix that includes : Market entry / timing Market selection encompassing segmentation Differentiation and Positioning Product planning Pricing Distribution systems Marketing communications Functionalities Market exit Evolution of marketing strategy as the market grows and matures Introduction - market development Rapid growth - expansion of primary demand, product proliferation Levelling - off - maximize market share as total demand has levelled Market maturity - maintain mkt share, customer service / satisfaction

Marketing Strategy Formulation - STP - Decisions in the Marketing Consideration set as outlined in the previous slide - Communication of the Value Value Proposition Positioning Slogan Writing Branding

Marketing Strategy

Marketing Strategy Implementation

Intensive Growth Opportunities

Growth Opportunities

Integrative Growth Opportunities

Diversification Growth Opportunities

Intensive Growth Strategies Ansoffs Product-Market Expansion Grid

Current Products Current Markets Market Penetration Strategy

New Products Product Development Strategy

New Markets

Market Development Strategy

(Diversification Strategy)

Identification of Growth Opportunities cont

Integrative growth opportunities backward (acquiring suppliers) , forward (acquiring channel members) and horizontal integration (acquiring competitors) Diversification growth opportunities concentric technological or marketing synergies to a new group of consumers e.g. audio cassettes from a firm making computer tape Conglomerate new opportunities which have no relation to current technologies, products or markets Reliance into Telecom Horizontal diversification Appeal to current customers with new technologies e.g. Music company produces CD / Cassette racks

PORTERS GENERIC STRATEGIES

Cost Leadership Firm achieves a lower cost of performing value chain activities than its competitors Firm choosing this strategy must find and exploit all sources of cost leadership e.g. economies of scale, proprietary technology, preferential access to raw mat. Must achieve parity or proximity in Differentiation relative to competitors to be called a Cost Leader

Cost Focus

Cost advantage is achieved by Focus to control select cost drivers Reconfiguring the value chain e.g. Fed Ex reconfigured its air parcel delivery value chain to focus on small packages requiring rapid delivery Tailor value chain to segment

Differentiation
Differentiation could be in product, marketing practices or anywhere in value chain Differentiation occurs when firm provides something unique beyond Offering a low price The analysis of value chain for differentiation is different from the analysis of Value chain for strategic cost purpose e.g. transportation and insurance is a small component for strategic cost purpose but since it impacts timely delivery its differentiation value is high Differentiation affects cost drivers adversely. Thus impact of cost drivers play a role in success or failure of differentiation strategy The uniqueness produced must be valuable in the buyers value chain e.g. travelers cheques may not be useful if one has a credit card

Differentiation Focus

Tailor value chain for one buyer or one segment.

Focus could be on products range of toothpastes on buyers range of IT products for banks on specific geographic markets.

The strategic square of marketing strategy

Market Leader

Market Nichers Market Followers

Market Challengers

Expand the total Market

Market Leaders

Defend Market Share

Increase Market share if that is profitable

Penetrate those who might use it but do not e.g. mobile usage among housewives when they go shopping

New users

Those who have never used it toothpowder among hard rural In another geographical market use of paan in western markets

Expand total market

New uses

Use product development email for computer

Increase quantity of consumption e.g. Vicks originally On nose, later on chest and back

More usage

Increase frequency of consumption e.g. Use Pepsi / Coke as light user to medium and heavy user

Defend Market Share

Flanking Defense

Competitor or potential competitor

ConFrontation Strategy Proactive Reactive

Fortress or Position Defense strategy

Leader Pre emptive defense

Contraction or Strategic withdrawal

Counter Offensive defense

Mobile Defense

Share Maintenance Strategies Fortress or Position defense Increase satisfaction, loyalty and repeat purchase among current customers by building on existing strengths; appeal to late adopters with same attributes and benefits offered to early adopters. Colgate in Toothpaste Flanker Confrontation Mobile Defense Contraction or strategic withdrawal Increase ability to attract new customers in selected high growth segments by focusing offerings and resources on those segments; withdraw from smaller or slowergrowing segments to conserve resources e.g. Levers in Chemicals

Protect against loss of specific segment of current customers by developing a second entry that covers a weakness in original offering; improve ability to attract new customers with specific needs or purchase criteria different from those of early adopters. Maruti with its premium models

Protect against loss of share among current customers by meeting or beating a head to head competitive offering; improve ability to win new customers who might otherwise be attracted to competitors offering. Nutrasweet vs HSC

Increase ability to attract new customers by developing new product offerings or line extensions aimed at a variety of new applications and user segments; improve ability to retain current customers as market fragments e.g. Intel

Possibility of invoking dominant firm action as laid out in the Competition Act of India

economic cost of obtaining market share may exceed the resulting profit. The incremental customers conditions for adopting the firms products may not be attractive loyal to competitors, have unique Needs. Sometimes profit can be improved by decreasing mkt. share

Expand Market Share If profitable

Inappropriate marketing mix as in excessive expenditures on advertising

System problems on high growth, effects on maintaining quality

Challenger Strategies Leapfrog strategy

Flanking attack

Guerilla attack

Target Competitor

Frontal Challenger attack

Encirclement Strategy

Share growth strategies Frontal attack Capture substantial repeat/ replacement purchases from target competitors current customers; attract new customers among later adopters by offering lower price or more attractive features e.g. Tide / Ariel Vs Surf Wars Leapfrog Induce current customers in mass market to replace their current brand with superior new offering; attract new customers by providing enhanced benefits Casio bypassed Slide rule with Caluclators Flank attack Attract substantial share of new customers in one or more major segments where customer needs are different from those of early adopters in the mass markets GM made big cars. Volkswagen Made small cars Encirclement Attract substantial share of new customers in a variety of smaller specialized segments where customers needs or preferences differ from those of early adopters in the mass market Komatsu encircled Caterpillar Guerrilla attack Capture a modest share of repeat/ replacement purchases in several market segments or territories; attract a share of new customers in a number of existing segments Netscape vs Microsoft

Specific attack strategies of Challengers - Price discount Big Bazaar - Low Price Goods Ruf and Tuf Jeans - Value Priced goods Nirma, Subhiksha - Prestige goods Challenger can offer higher quality product at higher price Apartment market in Bangalore, better amenity flats are coming up - Product proliferation Baskin-Robbins offered more flavors to beat competition - Product Innovation 3M enters new markets with an innovation

- Improved services Avis vs Hertz

- Distribution Innovation Avon vs leading cosmetic firms - Intensive advertising promotion HLL in toothpastes vs Colgate

Follower Strategies

Counterfeiter- duplicates product and sells in black market thru Disreputable dealers Apple Computer, Rolex watches

Cloner emulates leaders product PC Market

Market Follower Strategies

Imitator copies but maintains differentiation in packaging, advertising Pricing, location e.g. Matsushita in Japanese is maneshita denki meaning Electronics copied.

Adapter adapts or improves leaders products e.g. Sony Innovates then LG, Samsung bring out improved versions

Nicher
Nicher leader in a small market or niche. Better margin than mass marketer as end user needs served better by nicher

Some useful Nicher roles - end user specialist software for banks - vertical level specialist copper company concentrates on producing finished goods - Specific Customer specialist P&G WalMart - Service specialist banks take loan requests over phone and delivers money personally

ambush marketing a marketing strategy in which a competing brand connects itself with a major sporting event without paying sponsorship fees

1996 Cricket World Cup; Pepsi ran a series of advertisements titled "Nothing official about it" targeting the official sponsor Coca Cola.