Glossary of Marketing Terms

Advertising

Advertising Campaign

A series of advertisements, based on a common creative idea. Different advertisements are

developed by an advertising agency, to fully exploit the potential of the creative idea. A good
example is insurance firm Allianz Bajaj’s humor-based campaign to promote its services. Some
of the headlines in these advertisements read: ‘No more worry lines, only laugh lines,’ ‘Allianz
Bajaj helps you laugh through life by removing your worries’

Advertorial

These are print media advertisements that appear to be part of the editorial matter of the
concerned publication. The visual layout makes the advertisement deceptively similar to that of
the layout of the publication in which it appears. The advantage of using advertorials is that it
catches the reader unaware. People who normally avoid typical advertisements mistake an
advertorial for the newspaper/magazine column. Thus, a relatively high exposure is gained.
Sometimes headlines and body copy are altered to suit the editorial style of a particular
publication in which the advertorial is published.

AIDA Model

AIDA stands for Attention, Interest, Desire and Action. An effective message should get
attention, hold interest, arouse desire and obtain action. AIDA framework suggests the qualities
of a good message. Advertising can effectively perform the first three functions. In the case of
direct-action advertising, it must also translate desire into action, unaided by any other
promotional instruments. In the case of indirect-action advertising, the action can be aided at the
time of purchase by two-way communication between the intending buyer and the sales staff.

In putting the message together, the communicator must solve three problems: what to say
(Message Content), how to say it logically (Message Structure) and how to say it symbolically
(Message Format).

Message Content: The communicator has to select a theme that will produce the desired response.
There are three types of appeals: rational, emotional and moral.

Rational Appeals relate to the audience’s self interest and show that the product will produce the
desired benefits. The messages communicate a product’s quality, economy, value or performance.
For example, a Toyota advertisement says, “Touch the Perfection” which emphasizes the
company’s commitment to quality.

Emotional Appeals try to stir up either negative or positive emotions of the audience that can
motivate the purchase. They include fear, guilt and shame that get people to do things they should
(like brush their teeth) or to stop doing things they should not (smoke, drink too much).
Communicators also use positive emotional appeals such as love, humor, pride and joy. Dettol
recently used emotional appeal by advertising heavily on Mother’s day.
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Moral Appeals are directed at the audience’s sense of what is right and proper. They are used to
urge people to support social causes such as cleaner environment, better racial relations, equal
rights for women and aid to the needy. For example, a blood donation advertisement says: “Rakt
daan maha daan”.

Message Structure: There are three issues in message structure. The first is whether to draw a
conclusion or leave it to the audience. The second is whether to present a one sided argument
(mentioning only the product’s strengths) or a two-sided argument (also including its
shortcomings). Two-sided argument is greatly effective when the audience is highly educated,
negatively disposed or likely to hear opposing claims. Two sided messages can enhance the
advertiser’s credibility and make buyers more resistant to competitor attacks. The third issue is
whether to present the strongest arguments first or last. For example, Maruti in its advertisement
mentions that it is India’s largest selling car, only at the end.

Message Format: A strong format is also very effective for a message. In a print ad, the headline,
copy, illustration and color are important decisions to make. To attract attention, novelty and
contrast, eye-catching pictures, headlines, distinctive formats, message size and position, color,
shape and movement are used. If the message has to be carried over the radio, then sounds and
voices become important. For example, the sound of an announcer promoting banking services
should be different from one promoting furniture. If the message is carried on television or in
person then apart from all the above, body language is also important. This includes facial
expression, gestures, dress, posture and hairstyle.

Bait and Switch Advertising

Occurs when traders entice customers into their stores by publicizing the sale of goods at very
low prices, but only have a handful of sale items in stock. When the advertised goods sell out,
customers are steered towards other products, which are availa ble in the store.

Bleed

Normally, print advertisements are designed as per a layout plan that occupies a certain space in
the target publications. Newspapers/magazines allocate some specified space for inserting
advertisements. To differentiate an advertisement and catch the attention of the reader, some
advertisements are deliberately designed such that they occupy more space than the allotted area.
This is referred to as ‘Bleed’ in advertising.

Center Spread

Two facing pages in the center of a magazine. Advertisers use these pages to insert two-page
advertisements. The advantage is that the attention of readers is caught as they see two continuous
pages without having to turn a page. Normally a higher rate is charged for this space.

Circulation

Circulation refers to the total number of units of a publication that are printed and distributed. In
India, an independent body, Audit Bureau of Circulation (ABC) publishes circulation figures of
magazines and newspapers in all languages, every six months.
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Comparative Advertising

The controversial practice of advertising a product by comparing it – to its advantage – with its
competitors. This goes beyond the old practice of comparing the advertiser’s product with an
anonymous brand. All brands are named. Comparative advertising can be very effective, but it is
potentially litigious.

Copy

Copy refers to every single feature that appears in the body of an advertisement. The main stages
in copy development are the fact-finding stage and the idea finding stage. In the fact-finding
stage, the requirements of the advertiser are identified. Information regarding the communication
objective, target audience etc. is collected. In this stage the advertiser and the ad-agency work in
close co-ordination with each other. In the idea finding stage, tentative ideas are developed under
various heads. The ideas are processed, developed and screened and the best idea is chosen for
the ad campaign. After the copy has been developed it is tested using various methods. Body
Copy is the core content of the advertisement, excluding the headline or the slogan.

Corporate Advertising

Most advertisements promote some product/service. Corporate advertising, on the other hand,
promotes the organization itself. It aims at cultivating a corporate image and is targeted at a wide
cross-section of people, ranging from internal employees to investors and potential employees. A
well-executed corporate advertising campaign helps firms, especially during a crisis. Corporate
advertisements are also common before a public issue.

Corrective Advertising

An advertising message that corrects the wrong perceptions of the consumers that have been
formed as a result of previous (misleading) ads. Usually the advertisers do not make direct
statements about the previous ad’s misleading/incorrect information but convey only the correct
message. For example, Pepsodent Toothpaste ad once carried a statement saying it gives 102%
protection. However, after a few problems with legislators and competitors, it changed the ad, by
removing the portion which mentioned 102% protection.

DAGMAR Approach

DAGMAR is the acronym for Defining Advertising Goals for Measured Advertising Results. As
advertising expenses keep increasing, it is important to get adequate returns for the money
invested. Effective advertisement starts with defining the advertising goals, the specific
communication task to be accomplished, vis-à-vis a defined audience in a given period of time.
Russel H. Colley (1961) distinguished 52 advertising goals that might be used with respect to a
single advertisement, a year’s campaign for a product or a company’s entire advertising
philosophy. These goals pertain to sales, image, attitude, and awareness. Some of the goals are:

• Persuade a prospect to visit a show room and ask for a demonstration.

• Build up the morale of the company’s sales force.
• Facilitate sales by correcting false impression, misinformation and other obstacles.
• Announce a special reason for buying now.
• Make the brand identity known and easily recognizable.
• Provide information or implant attitude regarding benefits and superior features of the brand.
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According to the DAGMAR approach, the communication task of the brand is to gain (a)
awareness, (b) comprehension, (c) conviction, (d) image and (e) action. Advertising goals should
be consistent with these communication tasks. Later, performance on these counts and projected
goals can be compared. DAGMAR is a planning and control tool. It may guide the creation of
advertising. However, the basic inputs of DAGMAR are not so easy to formulate. DAGMAR
may also inhibit creativity.

Effective Reach

It refers to the number of persons or households who are exposed to an advertisement inserted in
a particular medium. If it is a print medium, the average readership figure provides an estimate.
For a commercial telecast on a television channel, the exposure is arrived at by looking at the
TRPs (Television Rating Points) collected by the programme in which the commercial was
telecasted. The reach also depends on the time of carrying the advertisement.

Endorsement

It is the process of using celebrities to draw attention to a particular brand or product. The choice
of celebrity is very critical. A celebrity having high recognition, high positive impact and high
degree of compatibility with the product should be considered. For example, Amitabh Bachchan
has been used for endorsing ICICI Bank’s campaigns.

Gross Rating Point (GRP)

This rating method is used to measure the effectiveness of the media plan.
In mathematical terms:

GRP (Total Exposure)=Media Reach x Frequency of Exposures.

For example, if HLL airs an ad for Lifebuoy on Doordarshan between 8.00 pm and 8.30 pm and
if 70% of the total rural population are exposed to the ad at a rate of 2 ads a week, then the GRP
would be: 70 X 2 = 140.

GRP is only for a single advertisement for a week in a single medium. If the exposures were done
in various other media, the total GRP would be the sum of the individual GRPs.

Media

Media refers to the vehicles, which carry the advertisements. The various types of media are
Broadcast, Internet, Outdoor and Print.

§ Broadcast

Broadcast refers to advertisements in television channels and radio stations. For example,
Doordarshan, Star TV, Zee TV, Radio Mirchi.

§ Internet

Internet advertisements can be in the form of banner ads, email, online contests etc. Examples of
web sites where ads appear are rediff.com, sify.com, contests2win.com etc.
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§ Outdoor

Outdoor refers to advertisements in hoardings, posters, neon-signs, amusement parks, gas

balloons etc. Through outdoor media, consumers can be targeted while they are on the move. In
some cases, outdoor media are more cost effective then the print and broadcast media.

§ Print

Print refers to advertisements in newspapers, magazines and journals. For example, The Hindu,
Times of India, Business India, Fortune etc. The quality of printing has vastly improved with
recent advances in printing technology. Today, attractive ads can be inserted in the print media.

Media Planning

Media planning is a scientific way of determining the exact media vehicles to be used for
advertising and the dates and time for the advertisements to appear. The important factors in
media planning are the campaign objectives, the ad-budget, size and character of the target
audience and the positioning opportunities in the media. Media planners determine the optimal
mix of advertising media to fulfil the marketing and promotional objectives of a specific client. In
India, media planning is becoming very important due to the growing number of media options.
There are various television channels, newspapers and private radio stations. New media options
such as Internet and mobile phones have made media planning more sophisticated and
challenging.

Narrowcasting

Communicating, a highly focused product/service message through a medium, which caters to a

specialized, narrow segment of the market. For example, Victoria’s Secrets places its ads in
premium women oriented magazines like ‘Cosmopolitan’, and other fashion magazines to sell its
high profile and fashionable undergarment products. Insurance companies place ads pertaining to
Directors’ and Officers’ Liability Insurance Policy in magazines like the CFO, and other such
magazines read by the directors of companies.

People Meter

Electronic panels consist of households whose television viewing behavior is recorded

electronically. TV sets are wired to household meters, which are connected to a central computer
by telephone line. The time when the set is turned on and the station, to which it is tuned, are
automatically recorded.

A major problem with audience measurements obtained from meters is that no information is
provided on the number of people watching and their demographic characteristics. A new kind of
meter, called a people meter, takes care of this problem. A remote control coupled to the
television meter allows each of the family members and visitors to log on when they begin
viewing by punching an identifying button. This information is downloaded via a telephone line
to a central computer where the demographics of the household members are stored. Thus,
viewership by demographic segments can be determined. While there is considerable controversy
over the accuracy of people meters, they appear to be superior to the available alternatives.
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Permission Marketing

An approach to selling goods and services in which a customer agrees in advance to receive
marketing information. The aim of permission marketing is to deliver messages that customers
want. It is effective because the customer is more receptive to a message that has been requested
in advance. Permission marketing is also cost-effective because the customer is already identified
and targeted. An example of permission marketing is an Internet user who agrees to receive
updates on specific products and services.

Psychogalvanometer

A galvanometer is a laboratory instrument that detects and measures small electric currents.
Psychogalvanometer is a type of galvanometer for detecting and measuring electric changes in
the body resulting from reactions to mental or emotional stimuli. It is used in advertising research
to measure minute changes in perspiration, which suggest changes related to some stimulus due
to the advertisement. By analyzing these changes, the impact of an advertisement on consumers
can be studied.

Recall

Recall refers to the extent to which consumers can remember a particular advertisement. Recall
by consumers may be aided or unaided. In aided recall, the consumer is shown a picture of the
advertisement with the company or brand name hidden. In unaided recall, only the product or
service name is given to the consumer. This is a technique used in advertising and marketing
research, to test the awareness levels and brand recall status of potential or actual customers.
Advertisers are accountable to marketers for the effectiveness of awareness generating
advertisements. To test their advertising messages, responses are sought from the target audience.

Television Rating Point

Television rating point (TRP) is a measure of the viewership level of a programme. TRP involves
collection of viewership data on a weekly basis from a panel of television viewers in select
market territories. Viewership figures are presented as a percentage of total television audience
with 1 per cent of the audience representing 1 TRP. For example, the TV serial “Kasauti Zindagi
Ki” in Star Plus had a TRP of 10 during the third week of January 2004.

Testimonial

A testimonial is an advertising message that reflects the opinions, beliefs, findings or experiences
of a person/party not related to the actual product manufacturer in any manner. Such
advertisements normally use celebrities, and other well-known personalities, who make favorable
comments about the product. However, this always need not be true. Sometimes, advertisers may
intentionally use testimonials to confuse or mislead, often through vague statements or
exaggerated claims by endorsers who are not easily identifiable. The recent ad of the Cadbury
‘purity seal’ is an example of testimonial advertising. In this campaign, the famous movie star,
Amitabh Bachchan assures the audience about the purity and quality of the product. The ad seems
to be in response to recent media reports that worms were found in a container of Cadbury
chocolates.
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Voiceover

The addition of a voice to a filmed advertisement. Voices are important to the overall impression
given by an advertisement.

Brand Management

Brand

A brand is a name, term, sign, symbol, design or a combination of all, intended to identify the
products or services of one seller or group of sellers and to differentiate them from those of
competitors. A brand is a seller’s promise to deliver consistently a specific set of features,
benefits and services to buyers.

A brand brings to the minds of people certain product attributes. For example, the name Taj group
of hotels stands for many attributes like luxury, class, royal treatment, exquisitely appointed
rooms, modern comforts, the finest standards of hospitality and service and so on. Customers do
not buy attributes. They buy benefits. Therefore attributes must be translated into functional and
emotional benefits. A brand also says something about the buyers’ values. A brand marketer must
identify these specific groups whose values coincide with the delivered benefit package. Taj
customers may value class, royal treatment, quality service and so on. A brand also projects a
personality and it will attract people whose actual or desired self-image matches the brand’s
image. For example, customers might visualize Taj Hotels as a place for business people and
celebrities.

Brand Equity

A brand name that is well known and well liked among consumers is said to have a greater equity
or value. Factors contributing to higher brand equity are high awareness, high brand loyalty, large
customer base, high reputation for perceived quality, proprietary assets such as access to scarce
distribution channel, patents, trademarks or brand association.

Consumers usually prefer high quality brands with high equity as they find it easier to interpret
the benefits that brand is offering, feel more confident and get more satisfaction after using it.
Consequently, the brand can charge a higher price.

High brand equity means, once a brand is established, the company will incur lower marketing
costs relative to revenues. Also because the consumers expect stores to carry the brand, the
company has more leverage in bargaining with resellers. As the brand name carries high
credibility, the company can easily launch brand extensions. Most of all, a powerful brand offers
the company valuable defense against fierce price competition.

Brand Strategy

Brand strategy involves drawing an action plan for creating, building and nurturing brands. Brand
strategy includes decisions relating to line extension, brand extension, multi branding, developing
new brands and brand rationalization.
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Product category
Existing New

Existing
Brand name
Line extension Brand extension

New
Multi brands New brands

§ Brand Extension: Extending a brand to another product, either in the same or a different
product category. As the cost of establishing a new brand is high, brand extension is a
useful tool for the cost effective launch of a new product. Familiarity with an existing
brand also helps both customers and marketers. Customers extend the qualities associated
with the existing brand to the new brand. Market acceptance of the new product becomes
faster. Maggi has been extended from noodles to product lines in related categories like
Maggi ketchup, Maggi soup, etc.

§ Line Extension: Line extension is extending the existing brand names to new forms,
sizes and flavors of an existing product category. For example, Colgate has extended its
brand name in the toothpaste category from Colgate to Colgate gel, Colgate herbal,
Colgate sensitive, Colgate cibaca top, Colgate calciguard and Colgate total.

§ Multi Brands: It involves introduction of additional brands in the same product category.
For example, Hindustan Lever Limited uses multi branding strategy to market its
products. In shampoos, the products offered include Clinic Plus, Clinic All Clear, Lux,
Ayush, Sunsilk and so on.

§ New Brands: It involves creation of new brand names especially when entering a new
product category. For example, Coca Cola entered the mineral water bottle segment with
a new brand name Kinley and the coffee segment with Georgia.

Brand Rationalization

Over a period of time, a company may find it has too many brands. Resources may be getting
spread very thin. This prompts the company to rationalize the brand portfolio, eliminate weak
brands, and sharpen the focus on the better performing brands. For example, HLL has been
undertaking such an exercise in recent times.

Cannibalization

A new product might cut into the sales of another product from the same organization. The risk is
more when both products are in the same segment, with a marginal price difference. For example,
Vicks VapoRub and Vicks VapoRub Plus are cannibalizing each other.

Category Management

A category is a distinct and manageable array of products or services that consumers perceive to
be inter-related and/or substitutable. Category management aims at providing the consumer with
a range of products or services that offer more value. A category manager needs to address issues
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such as - what items should be carried, in what quantities, at what prices, in which stores, where
in the store, how much shelf space should be allocated, what level of advertising is required and
so on.

This practice empowers a category manager with full authority and responsibility for inventory
levels, shelf-space allocation, promotions and buying. Here, emphasis is given to entire product
groups rather than individual items or brands. For example, HLL has been shifting from brand
management (Pepsodent toothpaste) to category management (oral care).

Retailers were one of the early adopters of this sort of management. Pantaloon has created
products across the garments category at different price points, as in fabric, design, colour and
sizes, without special importance being given to any particular brand. Pantaloon offers different
brands of skirts, blouses and trousers for women; and shirts, T-shirts and trousers for men, which
complement each other. For example, John Miller shirts are for formal and semi-formal wear,
Bare is for casual wear. The Pantaloon brand represents only trousers. ‘Annabelle’ is western
wear for women over 25, while ‘Y?’ is western wear for women aged between 18 and 25.

An important tool in category management is the category scorecard, which reflects a category’s
performance in a store against measurable criteria like sales per square feet over a month or a
quarter. This score can be used to compare with results of other stores or against other categories
in the same store.

Generic Brand

A generic brand results when the name of a producer or reseller gets associated with the product.
The competitor’s brand equity is lost. For example, Xerox pioneered photocopying and the name
Xerox became associated with the product itself. A product from a rival like Canon is also
referred to as ‘Xerox machine’.

Licensing

Licensing is the process of loaning out an established brand for a fee or royalty. Most
organizations take years and spend millions of rupees to create their own brand names. Some of
them licence their brand names for others to use, with the objective of generating more revenues
from outside their usual operations and to expand their brand presence. For example, Warner
Brothers has turned Bugs Bunny, Daffy Duck, Foghorn Leghorn and its more than 100 other
Looney Tunes characters into the world’s favorite cartoon brand. The Looney Tunes license
generates annual retail sales of $1 billion by more than 225 licensees. Licensing also benefits the
licensee, who can gain entry in a new market or product segment at a lower risk with a well
known brand name. Pantaloon has acquired the licensing rights for Popeye and Disney characters
and has already launched the Popeye and Disney kids wear brands in the market.

Licensing has some pitfalls. The licensor does not have full control over the licensee. A
successful licensee might later turn out to be a competitor. In order to avoid such complications,
the licensor must take steps to prevent easy imitation and the continued dependence of the
licensee on the licensor.
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Logo

Logo is a combination of characters and/or graphics for creating a single design used to identify a
company, product or service. Along with the brand name, companies often use a logo for visual
identity. Air India’s ‘Maharaja’ is a good example.

Private Brand

A Private brand is a product brand owned by a retailer, wholesaler or dealer as opposed to a

manufacturer or producer. It is also referred to as private label. Private brands have become
popular because they cost substantially less than manufacturer owned brands and offer retailers
more margins. The concept of private brands is very popular in western countries. In India, the
concept of private brands is spreading with the increase in organized retailing and the
establishment of supermarkets and departmental stores. For example, Food World sells atta,
pickles, jam and biscuits under its own name. Shoppers Stop has private brands under the name
Stop and Life. Pantaloon has private brands under the name John Miller and Food Bazaar.

Trademark

A word, phrase, slogan, design or symbol used to identify goods and distinguish them from
products of competitors. Trademarks are generally distinctive symbols, pictures, or words that
sellers affix to distinguish and identify the origin of their products. Trademark status may also be
granted to distinctive and unique packaging, color combinations, building designs, product styles,
and overall presentations. It is also possible to receive trademark status for identification that is
not on its face distinct or unique but which has developed a secondary meaning over time that
identifies it with the product or seller.

Baby Boom

In the US, the major increase in the annual birthrate following World War II, lasted until the early
1960s. The “baby boomers” now moving into middle age, represent a prime target for marketers.
Baby boomers make up a third of the population but account for 40% of the work force and half
of all personal income. Today, the aging boomers are moving to the suburbs and buying homes.
They are also reaching their peak earning and spending years. Thus, they constitute a lucrative
market for housing, furniture, low-calorie foods and beverages, physical fitness products, high-
priced cars, convenience products, and financial services.

Bill of Lading

A document that describes the ownership of a consignment and conditions under which it is being
transported. It also contains details such as quantity and nature of goods being carried by the
transporter and the destination of the consignment.

Cascading

A marketing strategy, favored by the Japanese, in which a small well-defined market segment is
penetrated first. Then the manufacturer “cascades” into other markets. The initial entry provokes
little competition. So the marketer can build up a distribution and servicing network without
attracting too much attention from competitors.
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Caveat Emptor

It means, “let the buyer beware”. The term had great legal significance in the days before laws
were put in place to protect the consumer. In the absence of an express guarantee in a contract,
buyers purchased goods at their own risk. Today, consumers are protected by various laws. It is
the supplier, who must be on the alert!

Cognitive Dissonance

Cognition is awareness and ability to decide on a particular issue(s). Cognitive dissonance (lack
of agreement) is a theory of human motivation that asserts that it is psychologically
uncomfortable for an individual to hold two contradictory beliefs about the same object/person.
Dissonance, being unpleasant, motivates a person to change his/her attitude or behavior towards a
particular object or person. This theory was first explored in detail by social psychologist Leon
Festinger.

Dissonance and consonance (agreement) are the outcome of the interaction between opinions,
beliefs, knowledge of the environment, and knowledge of one's own actions and feelings. There
are three ways to deal with cognitive dissonance.

1. Change one or more of the beliefs, opinions, or behaviors involved in the dissonance;
2. Acquire new information or beliefs that will increase the existing consonance and thus
cause the total dissonance to be reduced;
3. Forget or reduce the importance of those cognitions that are in a dissonant relationship.

For example, people who smoke, know smoking is a bad habit. Some rationalize their behavior
by looking at the bright side. They tell themselves that smoking helps keep the weight down and
that obesity is a greater threat to their health than smoking. Others quit smoking.

Cold Calling

Usually, sales representatives fix up appointments with their prospective customers before
meeting them. Cold call refers to the practice of calling on people without being invited. Direct
marketers normally use this approach to meet potential customers, as it is difficult, impractical
(and sometimes unwise) to fix prior appointments.

Conjoint Analysis

Conjoint analysis is a multivariate technique, which estimates the relative importance which
consumers place on different attributes of a product or service and the value they give to various
levels of each attribute. This method assumes that consumers form opinions or choose products
based on their evaluation about the overall utility of the product. This utility is the sum total of
the individual values of each product attribute.

Simple ranking and rating methods suffer from various weaknesses. These measures do not
effectively deal with attribute levels. Moreover, they give normative responses rather than actual
ones. For example, consumers often state that price and quality are more important than image or
status of brands but when it comes to the actual purchase, they buy high-status brands, though
lower priced, equivalent quality goods may be available. Conjoint analysis overcomes these
weaknesses by measuring the importance of the attributes, as well as value placed on each level
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of each of the attributes. It allows direct comparison of an individual’s preferences across

attributes. For example, the method can determine a consumer’s willingness to trade a 10% price
premium for a 15% reduction in power consumption for a home appliance.

Conjoint analysis has certain limitations. The researcher must be careful while choosing those
attributes and attribute levels that realistically influence consumer preference or choice. As far as
the consumers are concerned, they may have difficulty in indicating preferences with regard to a
large number of attributes. Hence the number of attributes and levels used must not be too large.

Consumer Behavior

The field of consumer behavior studies how people buy and use goods to satisfy their needs and
desires. Consumer behavior is more complicated than we usually think. Consumer buying
behavior is influenced by various personal, social, cultural and psychological factors. Cultural
factors often have the greatest influence on consumer behavior. Consumers may say something
but do something else. Understanding the inner motivation of customers is important for
marketers, while taking decisions regarding product features, prices, channels, communication
mix etc.

The Buying Decision Process

Marketers try to develop an understanding of how consumers actually make their buying decision
and then use various ways to influence them to buy the product. In the process, marketers identify
– who makes the buying decision (buying roles), types of buying decision (buying behavior) and
the steps in the buying process.

Buying Roles

Refers to the specific role that people take in the buying decision. The various roles are:

Buyer: A person who makes the actual purchase.

Decider: A person who decides on any aspect of a buying decision (whether to buy, what to buy,
how to buy or where to buy).

Influencer: A person whose view or advice influences the buying decision. For example, a doctor
may influence the buying decision for a product like toothbrush.

Initiator: A person who first suggests the idea of buying the particular product or service.

User: A person who consumes or uses the product or service.

Types of Buying Behavior

Consumer decision-making varies with the type of buying decision. For example, there are
significant differences between buying a soap and buying a house. Generally, complex and
expensive purchases imply greater consumer involvement. Assael has distinguished four types of
consumer buying behavior based on the degree of buyer involvement and the degree of
differences among the brands available in the market.
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High Involvement Low Involvement

Differences
Significant

between
Complex Buying Variety Seeking Buying

brands
Behaviour Behaviour

differences
Dissonance
between
Brands Habitual buying
reducing buying
behaviour
behaviour
Few

Complex Buying Behaviour: Customers adopt this type of behaviour when they are highly
involved in the purchase and are aware of significant differences among brands. A customer is
highly involved when the products are highly expensive, bought infrequently, risky and highly
self expressive. Typically the consumers do not know much about the product category and have
much to learn. So the marketer must assist the buyer in learning about the attributes of the product
class, their relative importance and the high standing of the company’s brand on more important
attributes.

Dissonance Buying Behaviour: Here, the customers are highly involved in the purchase like in
complex buying behaviour but differences between the brands available in the market are less
significant. The customers will shop around to learn what is available but will buy fairly quickly
because brand differences are not much. For example, buying diamonds is a high involvement
decision as it is expensive. Yet, the buyer may consider most diamond brands in a given price
range to be the same. In this case, marketers should attempt to supply beliefs and evaluations that
help consumers feel good about their brand choice.

Habitual Buying Behaviour: This happens when there is low customer involvement and there are
very few differences among the brands available. Customers have low involvement with most
low cost, frequently purchased products. They do not form a strong attitude towards a brand but
select it because it is familiar. Marketers of low involvement products can effectively use price
and sales promotion to stimulate product trial. For example, buying daily cooking rice is a very
low involvement decision. The customer may buy any rice that is available in the store as
differences among the different brands of rice may not be very significant.

Variety Seeking Buying Behaviour: This buying situation is characterized by low consumer
involvement and significant brand differences. Market leaders try to encourage habitual buying
behaviour by dominating shelf space, avoiding out-of stock conditions and sponsoring frequent
reminder advertising. Companies encourage variety seeking by offering lower prices, deals,
coupons, free samples and advertising. FMCG products like soap, shampoo fall in this category.

Stages in the Buying Decision Process

This refers to the various stages a consumer goes through while buying goods or services. Kotler
has identified five stages: need recognition, information search, evaluation of alternatives,
purchase decision and post purchase behavior. It is not necessary that customers will go through
all the five stages. In some cases, they might skip a particular stage. For example, in the case of
 14

low involvement purchases, a customer might go directly from the need to purchase decision
skipping information search and evaluation.

Evaluation of Alternatives: The consumer analyses the available information.

Information Search: A customer who has recognised a particular need will try to seek more
information. There are various information sources like personal sources (family, friends,
neighbors or acquaintances), commercial sources (advertising, salespersons, dealers, packaging
displays), public sources (mass media, consumer-rating organization and so on) and experiential
sources (handling, examining, using the product).

Need Recognition: The buying process starts when the buyer recognizes the problem or need. The
need can be triggered by internal or external stimuli. For example, thirst or hunger are internal
stimuli. When a passerby sees a sale board at a retail store and decides to buy the product, it is an
example of external stimulus.

Post Purchase Behaviour: Consumers experience some level of satisfaction and dissatisfaction
after the purchase. Based on their experience, consumers may purchase that product again, say
good things about the brand to others or stop buying that particular brand. Marketers must
monitor how the buyers are using and disposing of the product.

Purchase Decision: The customer decides which brand to purchase. The preferences, which the
consumer has already formed in the evaluation stage and his intention to buy the most preferred
brand, guide the purchase decision.

Consumer Adoption Process

Customers go through a mental process from the time they first hear about an innovation to the
final adoption. According to Everett Rogers (Rogers) the adoption process involves five stages:

• Awareness: The consumer is aware of the innovation but does not have enough
information about the product.
• Interest: The consumer is aroused to seek information about the product.
• Evaluation: The consumer analyses whether to purchase the product or not.
• Trial: The consumer tries the product and evaluates it.
• Adoption: The consumer decides to become a regular user of the product.

Rogers has also classified people into five categories based on the adoption process:

• Innovators: They are ready to take the risk of trying a new product.
• Early Adopters: They adopt products sufficiently early but carefully.
• Early Majority: They adopt products later but ahead of the average person in the
community.
• Late Majority: They are very cautious while adopting a product. They accept the product
only after the majority of the people have opted for it.
• Laggards: They are very traditional and highly resistant to change. They are the last to
try a new product.
 15

Consumerism

A movement aimed at protecting the rights of buyers. To prevent exploitation by sellers in any
way, consumerism educates consumers about their rights and lobbies for suitable legal protection.
Consumerism empowers buyers and prevents various unfair practices. These include misleading
communication messages, deceptive promotions, hazardous products and price discrimination.
Providing immunity to buyers from such exploitation is the pursuit and goal of consumerism.
Drafting of consumer protection acts, educating buyers about their rights and initiating action
against erring sellers are the main components of consumerism.

Customer Lifetime Value

A company can lose money on a specific transaction, but still benefit greatly from a long-term
relationship. Customer lifetime value is the profit that the customer can provide for the company
in the long run. The amount can be calculated by deducting the customer acquisition and
maintenance costs from the profit made on total customer purchases over time. It marks a shift
from making a profit on each sale to making profits in the long run. Companies are realizing that
losing a customer means losing not just a single sale but a stream of purchases. For example, for
General Motors or Ford, the customer lifetime value of a customer exceeds $1,00,000.

Data Warehousing and Data Mining

Data warehousing is the process of storing and maintaining data from multiple operational
systems of an organization in a meaningful format at one place Data Warehouse. Information
stored about customers includes addresses, transactions, family size, income etc. A data
warehouse is a query processing, not a transaction processing system. Data mining is the process
of extracting and manipulating the information from that pool of data. It analyses the large data
stored in the data warehouse to find patterns that might otherwise go undiscovered. For example,
computers might be programmed to “mine” their database of customers so as to come up with the
names and addresses of everybody who has a birthday on that day. Those people can then be sent
a birthday card.

A company can benefit in several ways by intelligently extracting meaningful information. They
can know:

• Which customers are ready for a product upgrade offer.

• Which customers might buy other products of the company.
• Which customers make the best prospect for a special offer.
• Which customers have more lifetime value and deserve to be served better, to develop a
long term relationship.
• Which customers they are most likely to lose and accordingly demand suitable actions.

Demarketing

Marketing management is concerned not only with finding and increasing demand, but
sometimes also with reducing it. Demarketing is a marketing approach to reduce the demand for a
product(s) temporarily or permanently. The main aim is not to destroy the demand but to reduce
or shift it. For example, the anti piracy campaigns are an attempt to demarket the sales of pirated
CDs and cassettes and to promote the authentic versions. Another example of demarketing is the
 16

efforts by banks to encourage the use of ATMs by charging clients a fee whenever they approach
the bank staff for completing a transaction.

Demand

Derived Demand

Any demand that is not primary in nature, but is dependent on the demand for another product.
For example, the demand for tyres is linked to sales of automobiles.

Elasticity of Demand

Price elasticity of demand refers to the sensitivity of demand for a particular product with respect
to price. When the market has an inelastic demand, the demand for the product does not change
much when price changes. For example, the demand for premium cars is very inelastic. A
prospective customer’s decision to buy a Mercedes Benz will not be influenced by a small change
in price. In case of elastic demand, a small change in price drastically increases or decreases the
demand for the product. Income elasticity of demand is measured as the rate of change in demand
with respect to change in income.

Dumping

It is an international marketing practice, where a company than its cost or charges a product less
than its home market price. This technique is often used to gain market share quickly in a new
country or market. It is usually considered an unfair practice. In recent years, the US has held
many countries guilty of dumping steel.

Ethical Marketing

Marketers are expected to maintain high standards of conduct. Ethical marketing ensures that the
customers are not harmed or misled. It also minimizes the invasion of customer’s privacy.
Various ethical issues in marketing are bribery, stealing trade secrets, false or deceptive
advertising, exclusive dealing and tying agreements, price fixing, predatory pricing and poor
product quality/safety.

Extensible Markup Language (XML)

XML is an Internet protocol, which can tag data with key information that allows software itself
to distribute the most relevant information to destinations. XML was developed by an XML
Working Group formed under the auspices of the World Wide Web Consortium (W3C) in 1996.
XML’s consistent way of representing business information has solved many costly data
exchange problems across various industries. XML has helped marketers in many ways:

• A single promotional XML document can be distributed through multiple distribution

channels. It also allows organizations to create multiple versions of promotional material
to target customers more narrowly by using different information for different market
segments.
• Utilizing an XML based syndication engine (ICE, RSS, etc), companies can rapidly
aggregate relevant content from providers so that each time a customer visits their site
there is new information.
 17

• XML-based content management systems can decrease internal product documentation

cycle time. This ensures that the pricing, support and technical information is current and
available on the website. Through this, companies increase the likelihood that customers
will regularly visit their web site.
• XML allows companies to create dynamically customized documents that incorporate
customer data such as account balance, shipment status or responses to support questions.
• XML can be used to help customize advertisements or product bundles that match
individual profiles.
• XML provides companies with a mechanism to improve online customer support by
allowing users to directly access enterprise support information such as technical
documentation or operations data.

Foot-In-The-Door Technique

A technique where compliance for a relatively large request is gained by first getting compliance
for a smaller request. The initial small request is called foot-in-the-door. For instance, we face
such situations in shopping malls, when a stranger approaches us and tells us about a local
organization working for the welfare of destitute children. The person suggests that we contribute
some affordable amount, which would help the organization to take care of the children’s needs.
This smaller request is later on followed by a bigger request where the requester might try to
persuade us to sponsor one child’s education for a year. The technique succeeds due to a factor,
which social scientists call ‘successive approximations’. The more an individual yields to minor
requests, the more he or she feels obliged to acquiesce to larger requests.

The expression ‘foot-in-the-door’ comes from the days when door-to-door salesmen tried to sell
their goods at the doorsteps of customers. The salesmen were confident that if they could get past
the door, they would make a sale.

We have many a times used samples of products, filled up questionnaires given by vendors or
entered a shop in response to a sale or offer. All these are practices adopted by marketers, based
on the foot-in-the-door technique, because they increase the probability of our making a purchase.

Another related concept is the door-in-the-face technique, where the requester does just the
opposite by beginning with a bigger request. Taking the same example, the person from the
organization requests us to sponsor the education of the child. We are taken aback and we politely
refuse. Then the person asks for a minor contribution, which is his/her actual objective. We find
this more reasonable and we accept. The first step is a set up, to get us in the right frame of mind.
The second step is the real target. It is the action the requester really wants us to perform.

The sequential steps for the two techniques work like this:

Technique First step Second step

Foot-in-the-door Small request (get YES) Bigger request (get YES)
Door-in-the-face Large request (get NO) Real request (get YES)

Game Theory

The tool that economists use to analyze behavior that takes into account the expected behavior of
others and the mutual recognition of interdependence-is called game theory. Game theory was
 18

invented by John Von Neumann in 1937 and extended by Von Neumann and Oskar Morgenstern
in 1944. Today, it is a major area of research.

All games have three things in common—rules, strategies and payoffs. A payoff matrix is a table
that shows the payoffs of every possible action by each player for every possible action by every
other player.

Suppose we have two players, A and B. The equilibrium concept that player A takes the best
possible action given the action of player B and player B takes the best possible action given the
action of player A—is called a Nash Equilibrium. It is so named because it was first proposed by
John Nash of Princeton University, who received the Nobel Prize for Economics in 1994.

A Dominant Strategy is a strategy that is the same regardless of the action taken by the other
player. In other words, each player has a unique best action regardless of what the other player
does. A dominant strategy equilibrium occurs when there is a dominant strategy for each player.

Green Marketing

Green marketing refers to specific development, promotion and distribution of products that are
environment friendly. The use of green marketing by companies to communicate with their
customers has become popular. Advertisers have found it an effective way to sell their products.
Examples of green marketing messages are ‘ozone friendly’, ‘recycled’, ‘natural’ and
‘biodegradable’. But some advertisers have exaggerated environmental messages and mislead
consumers. Such a strategy is, however, counterproductive in the long run.

Halo Effect

The overall perception created about a particular subject (product, person or organization) based
on one outstanding attribute. A subject is evaluated “high” on many traits because of a belief that
the subject is “high” on one trait. This is the effect, which many companies, having a powerful
brand or core competence, exploit while entering a new market or while launching a new product.
For example, if a person using a HLL product is satisfied with the product, all Hindustan Lever
products may be perceived to be good. Similar to this effect is the 'devil effect', whereby a
subject is evaluated “low” on many traits because the subject is “low” on one trait.

Impulse Purchase

Impulse purchase is an unplanned purchase by a customer typically attracted by the packaging

and display. The purchase is typically made in-store with little or no decision making effort.
There is no planning or search effort involved in impulse products. Companies take a lot of pain
to display their products at the right places in a store. Impulse products are widely available, in
different pack sizes. They are placed typically near check-out counters in stores. Examples of
impulse purchase products are biscuits, chocolates and soft drinks.

INCOTERMS (International Commercial Terms)

The Incoterms provide a common set of rules for the most commonly used international terms of
trade. They were first published in 1936 by the International Chamber of Commerce (ICC) and
were updated again in 2000. Incoterms fall into four different groups: Departure (E), Main
 19

Carriage Unpaid (F), Main Carriage Paid (C), and Arrival (D). Each group's letter makes up the
first letter of the Incoterm.

EXW - Ex Works

EXW means that the seller’s obligation is to make the goods available to the buyer at his
(seller’s) premises (i.e. works, factory, warehouse, etc.). In particular, he is not responsible for
loading the goods on the vehicle provided by the buyer or for clearing the goods for export,
unless otherwise agreed. The buyer bears all costs and risks involved in taking the goods from the
seller's premises to the desired destination. This term thus represents the minimum obligation for
the seller.

FCA - Free Carrier

The delivery of goods on truck, rail car or container at the specified point (depot) of departure,
which is usually the seller's premises, or a named railroad station or a named cargo terminal or
into the custody of the carrier, is done at the seller's expense. The buyer is responsible for the
main carriage/freight, cargo insurance and other costs and risks.

FAS - Free Alongside Ship

Here, the seller fulfils his obligation to deliver when the goods have been placed alongside the
vessel on the quay or in lighters at the named port of shipment. The buyer has to bear all the costs
and risks of loss of or damage to the goods from that moment. FAS requires the buyer to clear the
goods for export.

FOB - Free On Board

The seller fulfils his obligation to deliver when the goods have passed over the ship's rail at the
named port of shipment. The buyer has to bear all the costs and risks of loss of or damage to the
goods from that point.

CFR - Cost And Freight

CFR means that the seller must pay the costs and freight necessary to bring the goods to the
named port of destination. The buyer faces the risk of loss of or damage to the goods, as well as
any additional costs due to events occurring after the time the goods pass the ship’s rail in the port
of shipment.

CIF - Cost, Insurance and Freight

CIF means that the seller has the same obligations as under CFR along with procuring marine
insurance against risk of loss of or damage to the goods during the carriage.

CPT - Carriage Paid To

CPT means that the seller pays the freight for the carriage of the goods to the named destination.
Buyer faces the risk of loss of or damage to the goods, as well as any additional costs due to
events occurring after the time the goods have been delivered to the carrier.
 20

CIP - Carriage And Insurance Paid To

The seller has the same obligations as under CPT. But in addition, the seller has to procure cargo
insurance against the buyer’s risk of loss of or damage to the goods during carriage. The seller
contracts for insurance and pays the insurance premium.

The terms CFR & CIF can only be used for sea and inland waterway transport. When the ship's
rail serves no practical purpose, such as in the case of roll-on/roll-off or container traffic, the CPT
& CIP terms are more appropriate to use. In an export quotation, the place of destination
(discharge) is indicated after the acronyms, for example, CIP Chennai, CFR Mumbai and CPT
Tuticorin.

DAF - Delivered At Frontier

DAF means that the seller fulfils his obligation to deliver when the goods have been made
available, cleared for export, at the named point and place at the frontier, but before the customs
border of the adjoining country.

DES - Delivered Ex Ship

DES means that the seller fulfils his obligation to deliver when the goods have been made
available to the buyer on board the ship uncleared for import at the named port of destination. The
seller has to bear all the costs and risks involved in bringing the goods to the named port of
destination.

DEQ - Delivered Ex Quay (Duty Paid)

DEQ means that the seller fulfils his obligation to deliver when he has made the goods available
to the buyer on the quay [wharf] at the named port of destination, cleared for importation. The
seller has to bear all risks and costs including duties, taxes and other charges of delivering the
goods thereto.

DDU - Delivered Duty Unpaid

DDU means the delivery of goods and the cargo insurance is done at the final destination. Buyer
assumes the import customs clearance and payment of customs duties and taxes. The seller may
opt not to insure the goods at his/her own risks.

DDP - Delivered Duty Paid

DDP means that the seller fulfils his obligation to deliver when the goods have been made
available at the named place in the country of importation. The seller has to bear the risks and
costs, including duties, taxes and other costs of delivering the goods thereto, cleared for
importation. Whilst EXW represents the minimum obligation for the seller, DDP represents the
maximum obligation.

Integrated Marketing Communication

 21

A strategy in which a company coordinates advertising, sales promotion, personal selling, and
publicity in order to present a single consistent image for the product and the company. It is the
concept under which a company carefully integrates and coordinates its various communication
channels to deliver a clear, consistent and compelling message about the organization and its
products.

Hierarchy of Effects

The steps in the process of persuading somebody to buy something. The hierarchy moves
through various stages:
• Awareness;
• Conviction;
• Curchase;
• Knowledge;
• Liking;
• Preference.

Marketing communication often takes this hierarchy into account. Experienced sales people often
consider these steps while making a sales pitch.

Internet Marketing

Internet marketing is a new way of interacting with people and doing business with them. The
Internet is a reliable and inexpensive way of bringing together buyers and sellers. Internet
marketing reduces transaction, distribution and promotion costs. The web is also a useful medium
for micro marketing. Personalized products and services can be offered. A good example is the
Amazon website where a registered user gets a welcome as soon he/she enters the website.
Despite the dot com crash of 2001, people are still optimistic about the growth of Internet
marketing.

In India, web marketing faces various challenges. The first is the necessary legal/regulatory
framework. Second is the many infrastructural problems including poor connectivity and
inadequate bandwidth. The third challenge is the lower rate of credit card penetration. But there
are some notable successes like ICICI bank.com.

Banner Advertising

Banners are used to promote products or services on the Internet. An offer (products or services)
or company can be reached by clicking on the banner. Ad banners are of different sizes
depending on the web site. The Internet Advertising Bureau (IAB) has specified eight different
banner sizes, according to pixel dimensions. A pixel is the smallest unit of color used to make up
images on a computer or television screen. Banner advertisements usually pop up on other
websites while a person is surfing the Internet. Tickers are banner ads that move across the
screen. Roadblocks are full screen ads that a user must click through to get to other screens. The
surfers usually ignore most of the banner ads. “Click through rate” shows how many computer
users had pointed their mouse at the ad and asked for more information. When the rate is very
low, advertisers worry that they have picked up the wrong website.
 22

Cookies

A cookie is a small piece of information sent by a web server to be stored on the hard disk of a
web browser client so that it can later be retrieved. Cookies come in two flavors: session and
persistent. Session cookies exist only during an online session. They disappear from the browser
client computer when the web server closes the browser software or turns off the computer.
Persistent cookies remain on the browser client computer even after the web server closes the
browser or turns off the computer. Cookies do not identify the client personally. They merely
recognize the client browser, unless the client chooses to identify himself voluntarily. A client
may choose to identify himself for any one of the following reasons: asking the browser to
remember the username and password, responding to a promotional offer, personalizing a web
page or requesting more information about a product or service. Otherwise, the client remains an
anonymous web site visitor. Cookies can be used in various applications like:

• Online Ordering Systems: An online ordering system using cookies remembers what a
person wants to buy even if the visit gets terminated.

• Site Personalization: This allows people to select an option, and from then on (until the
cookie expires) the site guides them in viewing their chosen option.
•
Website Tracking: Site tracking can show dead end paths, places on the website that
people go to and get lost. It can also give more accurate counts of how many people have
been to pages on a particular site. The sites could differentiate 50 unique people seeing
the site, from, one person hitting the reload button 50 times.
•
Targeted Marketing: This is one of the main uses of cookies. They can be used to build
up a profile of where a client goes, and then use target advertisements at client. Cookies
can also be used to store all the advertisements that have been displayed to avoid
displaying the same advertisement twice.

Online Community

One of the challenges in Internet marketing is building a vibrant and cohesive online community.
To build communities, companies may decide to participate in or sponsor Internet forums, news
groups and bulletin boards that appeal to special interest groups. Forums are discussion groups
located on commercial online services. A forum may operate a library, a chat room for real time
message exchanges, and even a classified ad directory. News groups are Internet version of
forums, which allow people to post and read messages on a specified topic. Internet users can
participate in news groups without subscribing. Bulletin Board Systems (BBSs) are specialized
online services that center on a specific topic or group. Web Communities are commercially
sponsored web sites where members come together on-line and exchange views on issues of
common interest.

Payment Gateway

A mechanism operated by a designated third party that processes payment transactions (credit
cards, debit cards and cheques) on behalf of merchants, including payment instructions from the
cardholders. The technology permits subscribers to perform one-stop electronic transactions,
usually related to credit cards.
 23

Based on the type of account the merchant has, Real-Time or non-Real-Time, the card can be
processed in one of two ways.

• Real-Time: The card information flows to the processing center/payment gateway.

• Non-Real-Time: The merchant captures the credit card information and then manually
enters the card information to be sent to the processing center/payment gateway.

Source: www.spectrumadvantage.com

In India, only a few organizations offer payment gateway services. ICICI has a prominent
presence with its solution called 'Payseal'. Global Tele -systems and HDFC also offer payment
gateway solutions. Avenues is India's largest e-commerce solutions provider. More than 1000
premium websites are using the CCAvenue solution. CCAvenue has integrated the Payment
Gateways of CitiBank, ICICI and HDFC bank.

Streaming Media

It is the technical term given to digital audio or video transmissions, which are downloaded
continuously in the form of a stream rather than waiting until the entire file is downloaded. This
technique is gaining importance in multimedia applications. Users prefer to access the data in real
time instead of waiting for the file to be fully downloaded. This is especially important when the
file size is very large, as in case of a movie, television, or other video.

Streaming media can prove to be a very effective communication and marketing tool as it is a
natural way to motivate purchasing. It can be integrated into a website to help people get over
their doubts when they cannot see, feel or touch a product. With video and audio, one can display
and explain the product features more effectively.

Streaming media can be used for product demonstrations, product installation, training business
or sales presentation.

As costs for producing streaming media have decreased, small businesses are finding it possible
to add this media-rich element to their websites. In today's world, where consumers have more
purchasing power and choices than ever before, streaming media can be used to make customers
aware of benefits that can't be found elsewhere. While planning a media -rich campaign, the
 24

marketer should take into account the audience's average Internet connection speed and use the
appropriate streaming technology. As high-speed Internet connections become more prevalent,
streaming media will gain popularity.

Kiosk Marketing

Kiosks are order placing machines that are located in stores, airports and other locations. These
are not vending machines, which dispense the actual product. But customers can enter their
preferences like colour, size etc and see the picture on the screen. If the customer likes the
product he/she places the order by typing the credit card number and an address where the
product is to be delivered.

Logistics

The Council of Logistics Management (formerly NCPDM) defines logistics management as the
integration of two or more activities for the purpose of planning, integration and controlling the
efficient flow of raw materials, in-process inventory and finished goods from the point of origin
to point of consumption. These activities may include but are not limited to, customer service,
demand forecasting, distribution communications, inventory control, materials handling, order
processing, parts and service support, plant and warehouse site selection, procurement,
packaging, return goods handling, salvage and scrap disposal, traffic and transportation and
warehousing and storage. While logistics is important for any company transporting physical
goods, it is critical for raw materials intensive industries like cement and steel. Logistics plays a
crucial role during the launch of a new product. After a high profile advertising campaign, if the
product is not available in the market, it may affect the brand image of the product.

In a country like India, logistics is often a nightmare. Due to poor infrastructure, trucks tend to
move slowly. They are also not available when needed. In case of railways, wagons are often in
short supply. Unless companies are careful, goods may not reach the distributors/ retailers on
time.

A company’s logistics strategy cannot be independent of manufacturing strategy. For example, a

steel plant should ideally be located on the seacoast to take the advantage of low freight cost
offered by sea transport. In an industry where responsiveness to customers is critical, logistics has
to be super-efficient. Ideally in such cases the end product manufacturing facility must be very
close to the market. One of the recent developments in logistics is the emergence of third party
logistics providers. Examples include: Safe Express, GATI, FedEx, DHL and AFL.

• Carrying and Forwarding Agents (C&Fs)

C&F agents constitute a special category of intermediaries. Manufacturers employ C&Fs to

supply stock on their behalf to wholesalers or retailers. The fundamental function of these agents
is distribution. They do not resell goods but merely act as representatives or agents of the
manufacturer.

• Consignment

Consignment is a method of selling where a manufacturer (consigner) provides an intermediary

or agent with the goods but retains the title to the goods. The agent (consignee) sells the goods
 25

and pays the manufacturer only for the actual goods sold and returns unsold goods to the
manufacturer.

• Freight Forwarders

Freight forwarders play a very critical role in the transportation process. International freight
forwarders may handle both sea and air transportation. They are familiar with the modes of
shipping, export regulations, import regulations of foreign countries and documents connected
with foreign trade. Based on this knowledge, a freight forwarder can provide services like
completing export documentation on behalf of the client, advising the client on packaging and
labeling and arranging for goods to be packed and containerized, booking space with the carrier,
arranging for cargo insurance and expediting export clearance. Sometimes freight forwarders act
as freight consolidators by combining small shipments of different shippers into bigger
shipments, to generate economies of scale.

• Multimodal Transport

Multimodal transport is the carriage of goods involving more than one mode of transport. For
example, a container may move by truck from a factory to the load port. Then it may travel by
ship to the destination port. From the destination port, it may again move by road to the
customer’s factory.

• Market-Challengers

Market challengers attack the leader and the other competitors in an aggressive bid for more
market share. Market challengers can pursue various strategies:

• Bypass Attack

The challenger bypasses the competitor and targets easier markets. It might diversify into
unrelated products, move into new geographic markets, or leapfrog into new technologies to
replace existing products.

• Encirclement Attack

An encirclement attack involves attacking from the front, sides and rear at the same time. This
strategy makes sense when the challenger has superior resources and believes that it can break the
competitor’s hold on the market quickly.

• Flanking Attack

The challenger can launch a flanking attack, concentrating on the competitor’s weaker flanks.
Flank attacks make good sense when the challenger has limited resources. For example,
Aristocrat’s low priced molded luggage suitcases were positioned for railway travellers, a
segment ignored by the market leader VIP.

• Frontal Attack

In a full frontal attack, the challenger matches the competitor’s product, advertising, price, and
distribution efforts. The challenger attacks the competitor’s strengths. The outcome depends on
 26

who has the greater strength and endurance. Frontal attack makes little sense if the challenger has
limited resources compared to the competitor.

• Guerrilla Attack

Guerrilla attack refers to unconventional marketing methods intended to get the maximum results
from minimum resources. It is also a much less expensive approach compared to traditional
advertising campaigns. Guerilla tactics are selective price-cuts, intense sales-promotions etc.
They spark the imagination of the market through intelligent and stimulating messages. The aim
of guerilla marketing is to demoralize the competitor and gain market share.

Market Follower

A company may allow other firms to develop innovative products or enter new markets. Then it
carefully studies the consumer response and decides whether to venture into the business or not.
A market follower strategy allows the firm to avoid the mistakes done by the pioneering firm.

Market Segmentation

Differentiated Marketing is the division of a heterogeneous market into relatively homogeneous

segments so that the needs and wants of the different segments may be served more effectively.
For example, CitiBank differentiates itself through personalized service. Undifferentiated
Marketing assumes everyone is the same. Concentrated Marketing is a segmentation strategy in
which the firm concentrates its entire efforts and resources on serving one segment of the market.
It is also called Niche Marketing. Market niches can be geographic areas, a specialty industry,
ethnic or age groups or any other group of people.

Market Segmentation means dividing a market into smaller subgroups. It is essentially the
identification of subsets of buyers within a market who share similar needs and who demonstrate
similar buyer behavior. Each segment is targeted by the marketer with a distinct marketing mix.

Broadly, markets can be segmented on the following basis:

• Behavioral Segmentation: is based on behavioral characteristics such as knowledge,

attitude, use or response to a product. The various behavioral variables are occasions,
benefits, user status, usage rate and loyalty status.

• Benefits Segmentation: is based on buying motives. For instance, in case of toothpastes,

benefits could be decay prevention, white teeth, fresh breath, good taste, low price etc.

• Demographic Segmentation: is based on variables such as age, sex, family size, marital
status, income, occupation, education, family life cycle, religion, nationality, social class
etc.

• Geographic Segmentation: is based on geographic regions.

• Psychographic Segmentation: is based on variables such as lifestyle, personality and

buying motivation.
 27

Market Segmentation Matrix

A useful segmentation tool, which enables a company to further dissect a market. The
segmentation matrix is divided into various segments such as possible markets, primary uses for
the product and the people who influence the purchase decisions. This type of analysis helps to
identify potential markets and target customers more effectively.

Marketing Information System

Marketing Information Systems are intended to provide intelligent and timely information to
support managerial decision making. A marketing information system has four components: the
internal reporting system, the marketing research system, the marketing intelligence system and
marketing decision support system. Internal reports include orders received, inventory records
and sales invoices. Marketing research takes the form of purposeful studies, either ad hoc or
continuous. Marketing Intelligence gives everyday information about developments in the
marketing environment that helps managers prepare and adjust marketing plans. A marketing
decision support system is a co-coordinated collection of data, systems, tools and techniques with
supporting software and hardware by which an organization gathers and interprets relevant
information and turns it into a basis for marketing action.

Marketing Mix

Marketing mix is the set of controllable tactical marketing tools – product, price, place and
promotion – that the firm blends to strengthen its competitive position. In case of services, there
are three additional Ps – People, Process and Physical Evidence.

Marketing Myopia

Many sellers make the mistake of paying more attention to the physical products they offer than
to the benefits provided by these products. They see themselves as selling a product rather than
providing a solution to a need. A manufacturer of drill bits may think that the customer needs a
drill bit, but what the customer really needs is a hole. These sellers suffer from Marketing
Myopia, a term coined by the famous marketing professor, Theodre Levitt. They are so involved
with their products that they lose sight of underlying customer needs. They forget that a physical
product is only a tool to solve a consumer problem. These sellers have trouble if a new product
comes along that meets customer needs more efficiently.

Marketing Research

The systematic process of collection, analysis and reporting of data with respect to a specific
marketing situation. Research can be broadly classified under two heads. Qualitative research
focuses on data that cannot be expressed numerically. For example, respondents in a car survey
may express their preference for a roomy, sporty or reliable car. Quantitative research includes
gathering and analysis of data using various statistical tools. For example, the growth of a market
in the past 10 years can be computed. Based on this, the future growth can be projected. They are
further categorized as various types:
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Anthropological Research

Anthropology is derived from two Greek words [anthropos], which means human or man, and
[logos] which means word or discourse. Anthropology deals with the origin, development,
characteristics and customs of mankind. Anthropological research is the investigation of the
usage pattern/habits of people for a particular product.

Bass Diffusion Model

It is a model used to forecast sales for innovative consumer products. The model takes into
account factors like the number of customers when the product was first launched as well as the
repeat purchases, which are made subsequently by the first purchasers. Using this model, the
company can not only forecast sales, but also determine which year will have the highest sales
growth. This model can be applied only to those product categories, which have long purchase
cycles. Therefore, FMCG products, which have shorter purchase cycles do not rely much on this
model.

Blind Test

A market research technique in which two unidentified products are sampled by consumers who
indicate their preferences. Blind test is often used to test a new product against an established
brand. Brand names heavily influence consumers’ perception of products. So a blind test is the
only way to compare the taste, smell and texture of two brands.

Causal Research

A research design in which the major emphasis is on determining a cause-and-effect relationship.

For example, we may like to find out why a product is more popular in one geographical region
than in another.

Chi2 -Test

It is a statistical tool, which allows researchers to test various hypotheses:

1. Test for Goodness of Fit: This test is used to find out if the sample data follow a particular
pattern in the population. For example, we can determine the most preferred shade out of ten
shades of Revlon nail enamel by teenagers, provided, the sample data for the population is
available.

2. Test for Homogeneity: This test enables a researcher to find out similarities in some specific
characteristics across various populations. For example, we can find out if there is any difference
in administering questionnaires by post and by e-mail.

3. Test for Independence: This test is used to find out whether two sets of subjects of the same
population are independent of each other regarding certain characteristics. For example, we can
determine whether the ultra premium car segment buying decision is influenced by the combined
effect of both the performance and the color of the car.

Cluster Analysis (Benefit Segmentation)

 29

Cluster analysis is an exploratory data analysis tool for solving classification problems. Its
objective is to sort people, things, events, etc into groups or clusters, so that the degree of
association is strong between members of the same cluster and relatively weak between members
of different clusters. Cluster analysis may reveal similarities in patterns within the sample
subjects, which may not be otherwise so visibly evident. The results of cluster analysis may
contribute to the definition of a formal classification scheme.

Delphi Method

A research method for defining a problem through a series of interviews with a panel of experts.
For example, when an MNC is planning to enter a new market, it might like to talk to experts to
get an understanding of what type of local product customization might be necessary.

Exploratory Research

It is a systematic approach, where the interviewer asks the respondents a series of questions and
tries to categorize the responses to find possible solutions. The interviewer arrives at ideas,
hypotheses or suggestions for a problem. For example, a doctor asks the patient a series of
questions to ascertain the possible ailments. Then he specifies the type of tests required to
diagnose the ailment.

Focus Groups

A group of people who come together for an informal discussion on a particular topic. Focus
groups are used to gain customer insights in case of new and existing products. The assumption is
that individuals will share their ideas more freely, when they discuss an issue in the group. Focus
groups are designed to reflect the characteristics of a particular market segment. The respondents,
selected according to the relevant sampling plan, meet at a central location. In Europe, focus
groups consist of 6 to 8 respondents, and meet for a period ranging from 1.5 to 4 hours. In the US
it involves 8 to 12 people and lasts for about 2 hours. The moderator, who is conducting the focus
group, is the key to the success of the focus groups. The moderator must be well versed in
interviewing techniques, handling group dynamics, and should be able to steer the group tactfully
and skillfully.

But there are some problems with focus groups. One or a few persons might dominate the
discussion. Repeat and professional respondents are a major problem. The same professionals
may come for all the focus groups, whatever be the issue, whatever be the product, whoever be
the market research agency conducting the focus group. Focus groups assume that the participants
will behave spontaneously. If they have done the exercise before, there is a chance of their being
less objective and more biased.

Motivational Research

A form of market research using techniques like word association and sentence completion to
discover the underlying attitudes of customers towards products. It has been reported that
motivational research into air travel led advertisers to emphasize its time-saving aspects rather
than its safety, since an appeal to safety merely aroused people’s fear of flying. Sentence
Completion is a technique requiring the subject to complete a sentence using the first phrase that
comes to mind. This technique assumes that the description of vague objects requires
interpretation based on an individual’s own background, attitude and values. So they are more
 30

likely to give a revealing response. For example, the question “I prefer LG brand because ____ “
can be administered to customers buying LG products.

Panel

A sample of consumers who record their purchases over time. While audits attempt to measure
consumer patterns from the viewpoint of the seller, panels attempt to measure consumer patterns
from the viewpoint of the buyer.

A diary panel consists of a number of consumers who use diaries to keep a regular record of all
their purchases of selected products. In some cases, diaries of people’s television viewing habits
are also collected.

Primary and Secondary Data

Primary data is data collected by the researcher based on original observation. The census data
reported by the Indian government is an example of primary data collection. Secondary data
means data collected by a researcher or an agency and used by another entity. When we use the
census data for our research, it becomes secondary data. Secondary data is available in
newspapers, periodicals and journals and these days in various electronic databases.

Questionnaire Design

A questionnaire is a flexible market research instrument used to collect primary information from
the chosen respondents. Questions may be of two types- closed end and open end. In case of
closed end, answers to questions are provided. The respondents have to select one or more of the
answers. In case of open end questions, which are typically used for exploratory research,
respondents write their responses in their own words. A questionnaire needs to be carefully
developed, tested and debugged before it is administered on a large scale. The wording should be
simple, direct and unbiased. The questions should flow in a logical order. The opening question
should try to create interest. Difficult and personal questions are ideally kept at the end.

Research Design

A detailed plan of action is prepared before a market research is undertaken. Research design
covers Literature Documentation, Problem Definition, Hypothesis Formulation, Research
Methodology, Data Collection, Hypothesis Testing, Data Interpretation and Report Generation.

Survey Method

Gathering of data through personal contact and interviews. A survey usually elicits the views of
respondents about an issue, product, or business outlook. To make the survey manageable and
cost effective, data is often collected only from a sample of a population. This is known as a
sample survey.

Test Marketing

The initial launch of a new product in one or more selected geographic areas for a trial period
prior to a full-scale launch. Usually a new product is introduced in selected test cities that
 31

represent a typical market, so that results of the performance in these markets can be projected on
a national basis.

Time Series Analysis

A time series is a set of observations over time regarding a variable. Time series analysis assumes
that patterns observed in the past can be used to predict the future. A time series includes trend,
cycle, seasonal and random variations.

Trend is the basic long term underlying pattern of growth, stability or decline in a series. Sales
rise and fall depending upon the general state of business, the level of demand for the products,
competitors’ activities and other factors. For example, the demand for mobile phones showed a
rising trend in 2003. When the fluctuation takes place over a longer period, say more than a year
it is said to be a cyclical variation. If the fluctuation takes place over a shorter period, say within a
year, it is called seasonal variation. Random variation is due to isolated or unexpected events. For
example, after the 11th September 2001 attack, the demand for disaster recovery services has
increased.

Mass Customization

Mass customization is the ability to produce in bulk, products which are designed to meet the
requirements of individual customers or small groups of customers. In mass customization,
customers are actively involved in the product specification process. New technologies such as
computers, databases, robotics and email have made mass customization possible. For example,
Asian Paints provides custom-made decorative paints for its customers, who can specify the
colour they prefer.

Measurement & Scaling

Measurement is the assignment of numbers to characteristics of persons or objects, according to

rules. When objects are counted, what is measured is not the object itself, but only its
characteristic. The term ‘number’, in the definition of measurement does not have the usual
meaning of number used in mathematical calculations. Instead, it is used as a symbol to represent
certain characteristics of the object. Rules specify how the numbers are to be assigned to the
characteristics to be measured. The rules for assigning numbers represent the essential criteria for
defining each scale. The properties of the numbers must be the same as the properties of the
objects that we are measuring. Different scaling properties can be used:

1. Assignment property or description property is the researcher’s use of unique

characteristics to identify each object within a set. For example the use of colors (blue,
black, brown etc.) to identify things (like cars, shirts etc.) that consumers buy for personal
use.
2. Order property refers to the relative magnitude between the characteristics, used as scale
points. For example, 1st place is better than 5th place.
3. Distance property allows the researcher and the respondent to identify, understand, and
accurately express absolute differences between the objects. For example, family A has
more income than family B.
4. Origin property refers to the use of a unique starting point in a set of scale points. This
point is a ‘true natural zero’ or true state of nothing. For example, age.
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Scale measurements can be classified as: nominal, ordinal, interval and ratio.

• Nominal Scale is used to categorize objects or events. Here, all the members of a
category have the same number. It activates the assignment scaling property. For
example, we may assign the number 1 to denote a girl and the number 0 for a boy in a
particular class. In the final research report, terms are generally substituted for numbers
to describe nominal categories. The number 1 does not imply a superior position to the
number 0.

Example: Please indicate your gender __Female __Male

• Ordinal Scales are used to rank items. Items can be classified not only on the basis of
whether they share some characteristics with another item but also whether they have
more or less of this characteristic than some other object. But the ordinal scale does not
provide any information on how much more or less of the characteristic the items have.
Ordinal data indicates the relative position of two or more items on some characteristics
but not the magnitude of the differences between the items. Ordinal scale activates both
the assignment and order scaling properties. For example, if there are four different
grades of wheat and if they are ordered based on quality, they can be ranked into grade A,
grade B, grade C and grade D.

Example: Tell us who is your favorite cricket player. Among the persons listed below, please
indicate your top three preferences using a ‘1’ to represent your first choice, a ‘2’ for your second
choice, and a ‘3’ for your third choice.

__Ajit Agarkar __Yuvaraj Singh

__Ricky Ponting __ Saurav Ganguly
__Sachin Tendulkar __Brian Lara
__Shaun Pollock __Muthiah Muralitharan

• Interval scale is used to rank items such that numerically equal distances on the scale
represent equal distances in the property being measured. However, the choice of zero is
arbitrary. For example, Index numbers are a form of interval measurement in marketing.
An index number is calculated by setting one number, such as sales, for a particular year
equal to 100. This is the base period or base value. Other numbers for the subsequent
years are then expressed as percentages of the base value. Index numbers have an
arbitrary zero point and equal intervals between scale values. Interval scale activates the
distance property in addition to the assignment and order properties.

Example: In which of the following categories does your age fall?

__Under 18 __18 to 25 __26 to 35 __36 to 45

__46 to 55 __56 to 65 __Over 65

• Ratio Scale represents numbers that rank items such that numerically equal distances on
the scale represent equal distances in the property being measured. In this case, the
number zero has an absolute observed meaning. For example, when comparing a zero-
child family to a three-child family, the researcher can assume that the three-child family
will have significantly higher school educational expenses than the zero-child family and
also that the expenses for the zero-child family will be nil. Measurements such as sales,
 33

costs and number of purchasers are made using ratio scales. Ratio scale activates distance
and origin properties in addition to assignment and order properties.

Example: Please circle the number of persons above 60 years of age currently living in
your house.
0 1 2 3 4 (if more than 4, please specify: __)

• Likert scale is used in attitude measurement. Likert scales require a respondent to

indicate a degree of agreement or disagreement with each of a series of statements related
to the attitude such as:

1. The Indian cricket team is the strongest team in the world.

__Strongly agree __Agree __Neither agree & nor disagree __Disagree __Strongly
Disagree
2. The Indian cricket team is not playing satisfactorily.
__Strongly agree __Agree __Neither agree & nor disagree __Disagree __Strongly
Disagree

To analyze responses, each category as indicated above is assigned a number ranging from 1 to 5.
It is doubtful that the interval between each of these items is exactly equal. However, the
researchers treat the data from such scales as if they are of equal interval since the results of most
standard statistic al techniques are not affected significantly by small deviations from the interval
requirement.

Multi Dimensional Scaling (MDS)

MDS is used to graphically portray consumer evaluation of products/brands. A person’s buying

decision is the outcome of not one, but a variety of stimuli, eg. the product features, the
company’s image, the advertising message, etc. Techniques have been developed to scale and
measure such multi dimensional stimuli. The technique takes consumer judgments of perceptions
and preferences and builds geometric representations or maps in which brands that are judged to
be similar get plotted near each other in the geometric space. The map helps the researcher to
understand how a given brand is perceived by the consumer in relation to other brands and helps
him understand the position it currently enjoys. Such information can be used for repositioning
the brand.

Semantic Differential Scaling (SDS)

SDS requires the respondent to rate the attitude of the object on a number of itemized, seven point
rating scales bounded at each end by one of two bipolar adjectives or phrases.
It is the intensity and content of a respondent’s attitude towards the brand’s image.

Fast _____ _____ _____ ______ ______ ______ ______Slow

Plain_____ _____ _____ ______ ______ ______ ______Stylish
Large _____ _____ _____ ______ ______ ______ ______Small
Inexpensive_____ _____ _____ ______ ______ ______ ______Expensive

The instructions indicate that the respondent must mark the blank that best indicates how
accurately one or the other term describes or fits the attitude. The end positions indicate
“extremely”, the next pair indicate “very”, the middlemost pair indicate “somewhat”, and the
middle position indicates “neither nor”.
 34

Metamarketing

Metamarket describes a cluster of complementary products and services that are closely related in
the minds of consumers though they may seem to belong to different industries. For example, the
automobile metamarket consists of automobile manufacturers, new car and used car dealers,
financing companies, insurance companies, mechanics, spare part dealers, service shops, auto
magazines, classified auto ads in newspaper and auto sites on the internet. In planning to buy a
car, a buyer will get involved in many parts of this metamarket. Thus automobile companies not
only sell vehicles but also provide vehicle financing and insurance. Metamediaries assist buyers
in moving seamlessly through these groups, although they are disconnected in physical space. For
example an automobile site might not only sell vehicles but also give links to other sites, which
sell insurance, finance or spare parts.

Micro Marketing

Micro Marketing is a method adopted by companies to meet the needs of small groups of
consumers. In micro marketing the companies tailor their marketing programs to serve narrowly
defined geographic, demographic, psychographic or behavioral segments.

Missionary Selling

A technique used by a company to support the wholesaler or distributor. A company

representative (the missionary sales person) might, for example, visit teachers in order to inform
them about new educational toys that the company is bringing out. The teachers in turn may
recommend these toys to the students or their parents. The parents then buy them from the shops
where they are available.

Monopolistic Competition

In a monopolistic market, many firms produce slightly differentiated products. Companies have
easy entry and exit. Monopolistic competition differs from perfect competition in that the goods
and services produced by firms are differentiated. This differentiation may be due to advertising,
convenience of location, product quality, reputation of the seller, or other factors. A good
example is restaurants. Each restaurant has many close substitutes. These may include other
restaurants and fast-food outlets. Even if a restaurant keeps its prices slightly above those of
competitors, it will have customers. Because the restaurant is different from other restaurants,
some people will continue to patronize it. Thus, the restaurant can set its price independently.
Other industries characterized by monopolistic competition are retail stores, beauty shops, auto
repair shops, service stations and banks.

National Council of Applied Economic Research (NCAER)

NCAER is an organization reputed for executing large field surveys. Reports prepared by
NCAER form a valuable source of information for Indian marketers. The Market Information
Survey of Households (MISH) is one of the most comprehensive primary data-based annual
surveys conducted by using a massive sample size of 300,000 households drawn from each
district of India. MISH tracks consumer demographics and consumption patterns across a wide
variety of product categories by collecting data on manufactured goods.
 35

Each MISH Product Category Report gives detailed information on both consumables and
consumer durables according to:

• The number of households owning/using the product by income group.

• The income group, town size and the occupation of the household head (purchase data for
the product is cross-tabulated against the above parameters).
• The key influencer of purchase and details on the mode of finance or purchase for
durables.
• Product purchase by price range across different income groups.
• The brand-wise penetration figures across income groups.
• Distribution of purchases by price range and by income class.
• Overall purchase broken down by type of purchase - first time, additional, replacement,
gifting and second hand.

Network Marketing

Also known as Multi Level Marketing. It is a modified version of direct selling. The process
begins with the recruitment of a core group of distributors, who have to be introduced to the
company by a sponsor. Each distributor recruits another set of distributors. And the same process
continues. For each sale done by the second level of the distributors, the first level of distributors
get the commission. For each sale done by the third level, both first and second levels receive the
commission. Network marketing lays special emphasis on meeting people and making friends, to
boost sales. Examples of network marketing are Amway, Oriflame etc.

In network marketing, the distribution network grows rapidly, continuously and automatically.
Hence it is a quick and cost effective method of marketing, suited to fast moving consumer
products targeted at niche markets. But once the network is broken, the entire distribution
network suffers a setback. The distributors of network marketing are also often perceived as
irritants by the prospect. As the distributors are also the customers in most cases, losing any
distributor will shrink the customer base. Another major drawback is that the seller does not have
the desired control over the distributors, as they are not employees of the company. Network
marketing may not be suitable for very high priced, sophisticated, high involvement items.

Oligopoly

In an oligopoly, the market is dominated by a few firms, each of which recognizes that its own
actions will produce a response from its rivals and that those responses will affect it in turn.

The firms in an oligopoly recognize that they are interdependent. What one firm does affects each
of the others. In monopolistic competition, each firm is so small that it assumes the rest of the
market will, in effect, ignore what it does. A perfectly competitive firm responds to the market,
not to the actions of any other firm. In oligopoly, the interdependence of the firms is the defining
characteristic of the market.

The product market in oligopoly can vary anywhere from standardized, homogeneous goods to
highly differentiated products produced for custom orders. Some oligopoly industries make
standardized products: steel, aluminum, wire and industrial tools. Other oligopoly industries make
differentiated products: cigarettes, automobiles, computers, ready-to-eat breakfast cereal and soft
drinks.
 36

Oligopoly presents a problem in which decision makers must formulate strategies taking into
account the uncertain responses of their rivals. A choice based on the recognition that the actions
of others will affect the outcome of the choice and that takes these possible actions into account is
called a Strategic Choice. Among the strategic choices available to firms in oligopolistic
competition are pricing, promotion, and product development. An airline’s decision to raise or
lower its fares-or to leave them unchanged-is a strategic choice. The other airlines’ decisions to
match or ignore their rival’s price change is also a strategic decision.

Once a firm implements a strategic decision, there will be an outcome. The outcome of a strategic
decision is called a payoff. In general, the payoff in an oligopoly game is the change in profit to
each firm. The firm’s payoff depends partly on the strategic choice a firm makes and partly on the
strategic choices of rivals.

Perceptual Mapping

Perceptual mapping aims at describing consumers’ perceptions of brands or other objects on one
or a series of “spatial maps” such that the relationship between brands can be easily seen.

Perceptual mapping techniques are designed to accomplish four major tasks:

1. To determine the number of dimensions customers use to distinguish between or choose

from various offerings.
2. To provide insights into the nature or characteristics of these dimensions;
3. To locate brands or other objects on these dimensions as consumers perceive them;
4. To determine the preferred location of a brand on each of the relevant dimensions.

There are two major approaches to creating perceptual maps--attribute-based and non attribute-
based. Both approaches seek to map the structure of consumers’ perceptions of both existing and
ideal products without having the consumer do so directly.

Attribute-based approaches require respondents to evaluate a set of brands or other objects on a

large number of attributes. This is typically done using semantic differential or Likert scales. The
fundamental assumption of attribute-based techniques is that respondent ratings or judgments
about specific attributes are manifestations of the underlying or latent dimensions that consumers
use to distinguish between brands. Thus, attributes such as helpful salespersons and good service,
may represent a dimension such as “easy to do business with,” which consumers use to compare
departmental stores.

While consumers use relatively few dimensions to compare brands or objects, the set of attributes
that the researcher provides to the consumer must be complete. For example, consumers may use
ease of access as a dimension in comparing supermarkets. This dimension could be reflected by
such attributes as “ample parking,” “no traffic congestion,” and “close by.” If these or similar
attributes are not included on the semantic differential, the underlying dimensions cannot be
uncovered.

Attribute-based perceptual maps are derived by having respondents evaluate brands or objects on
numerous attributes. Unfortunately, they require the researcher to develop a complete set of
attributes in advance. Nonattribute based techniques are generally referred to as multidimensional
scaling (MDS). MDS overcomes the weakness associated with the attribute-based approaches. In
MDS, consumers do not rate brands on individual attributes. Instead they rate brands in terms of
similarity or, less frequently, preference. A computer program then derives the number of
 37

dimensions and the location of each brand on each dimension that would be required to duplicate
the consumer’s similarity or preference judgments. Thus, the researcher does not supply the
attributes in advance. The respondents use their normal, implicit criteria in making their
judgments.

There are three commonly used perceptual mapping techniques:

1. Factor Analysis

Factor analysis attempts to analyze the inter-relationships among a large number of variables such
as consumer ratings of numerous product attributes and to explain these variables in terms of their
common underlying dimensions (factors).

Respondents rate each of n brands or other objects on each of i attributes. A computerized factor
analysis program using this data and judgmental decisions by the researcher isolates j dimensions
called factors. A factor loading score indicates the nature of the association between each
attribute and each factor. A measure of the variance in the original data explained by that factor is
also provided. This is often interpreted as an indicator of the importance of that factor. The
computer program provides a factor score for each individual for each brand. This represents the
position of that brand on the underlying dimension as seen by that individual. The average factor
scores across individuals for each brand are used to position the brands in the perceptual map,
with the factors serving as axes. Thus, it is important that the respondents have reasonably similar
perceptions of the brand set. The original attributes are incorporated into the map as lines or
vectors such that the direction of the line indicates the nature of its association with each of the
factors and the length of the line representing the strength of that association.

2. Discriminant Analysis

Factor analysis attempts to reduce a data set to a set of underlying dimensions that can be
interpreted to explain the variance in the original data set. Discriminant analyses seek to generate
dimensions that will separate the brands or objects as much as possible. The procedure in
Discriminant analysis is roughly analogous to that described for factor analysis.

3. Correspondence Analysis

Factor and Discriminant analysis require interval or at least “near” interval data. However, a
substantial amount of marketing data is nominal or ordinal in nature. For example, blue is
preferred to red which is preferred to green, and so on. Such nominal or ordinal data are often
accompanied by interval data on other attributes. Correspondence analysis allows the creation of
perceptual maps using categorical data as well as mixed data sets (nominal, ordinal, and/or
interval).

Positioning

Positioning is all about differentiating an offering from competing brands in such a way that it
occupies a distinctive place in the customers’ mind. For successful positioning, a consistent and
unique value proposition needs to be devised, so that the brand becomes associated with its
unique benefits. For example, Ceat is positioned as a ‘tough’ tire while MRF is positioned as a
‘space-age’ hi- technology tire.
 38

Pricing

Pricing depends on the costs involved, competition, consumer demand and government controls.
Pricing strategies can be classified as cost oriented, customer oriented and competition oriented.

Cost-Oriented Strategies: A firm’s need for profits or cash flow and its structure may motivate
marketers to adopt strategies based solely on the internal needs of the company. There are three
possible approaches to pricing: cost-plus pricing, target-return pricing and experience-curve
pricing.

Cost-Plus Pricing is adding a standard markup to the cost of the product. For example,
construction companies follow cost-plus pricing. They add a profit amount to the total project
cost. Target-return Pricing is pricing a product by setting a specific profit objective and then
calculating price on the basis of fixed and variable costs and the number of units expected to be
sold. Experience-curve Pricing assumes that costs will fall as volumes rise.

Customer-Oriented Pricing Strategies are focused on the customer tastes and preferences, life
style, purchasing behavior, and price sensitivity. Pricing strategies, which are customer oriented,
are skim pricing, penetration pricing, psychological pricing and value pricing.

Skim Pricing is often used while introducing a new and innovative product. A high price is set in
order to take advantage of the relative price insensitivity of some market segments. Penetration
Pricing means setting a low price in order to penetrate a price-sensitive market segment.
Psychological Pricing strategies such as image pricing (setting a high price to convey an image of
high quality) and reference pricing (prices that buyers carry in their mind and refer to when they
look at a given product) recognize that a buyer’s psychological reaction to a given price can play
an important role in the purchase of a product. For example, Bata is using this concept in its
pricing to target price sensitive customers. Slippers are priced at Rs 49.95. Value-based Pricing
involves setting prices based on buyers’ perceptions of value rather than the seller’s cost.

Competition-Oriented Strategy is adopted primarily to increase or protect market share. The

major approaches are competitive-advantage pricing, promotional pricing and market-entry
pricing. In Competitive Advantage Pricing, the marketers set their prices according to how well
their product measures up feature-by-feature vis-à-vis competing products. Promotional Pricing
is setting temporarily low prices on selected items in order to build market share quickly at the
expense of competitors. Market entry Pricing is used when a product enters a new market or
when a new product is launched in an existing market. Affordability based Pricing, also known as
social welfare pricing is relevant in case of essential commodities. Essential commodities meet
the basic needs of all sections of the society. The aim is to set prices in such a way that all
sections of people are in a position to buy and consume the product. The prices are set
independent of the costs involved. Often, this is made possible through government subsidies.
These items are often distributed to the people through the public distribution system. Essential
commodities like sugar, rice, wheat, kerosene and the like, are available in government owned
ration shops or fair price shops, state owned cooperative stores, etc., at concessional prices.
Bundling is the practice of grouping together several services or products into a single package
that is then offered to the consumer at one price. Microsoft bundled the Microsoft Explorer
browser application for free with the Windows operating system to gain entry into the Internet
browser market. This strategy was extremely successful. Within no time, Netscape Navigator was
displaced as the market leader. Unfortunately for Microsoft, because of bundling, the company
also attracted the unwanted attention of the US anti trust authorities!
 39

• List Price

The selling price associated with a product at a retail outlet is called the list price. This price is
usually inclusive of all taxes, retail margins, freight tariffs, cost of manufacture and the
company’s margin.

• Predatory Pricing

Selling a product/service at a price that is below the cost of producing it. Big firms often follow
this pricing strategy, even at a temporary loss, to eliminate competition. This strategy is often
pursued by big international airlines against smaller competitors.

• Proactive Pricing

It is a pricing practice in which a company sets prices for its products, based on the market
dynamics. The company does not follow any premeditated approach but keeps all its pricing
options flexible. A company following proactive pricing establishes specific objectives to be
accomplished by the prices. He is not always an initiator of price changes. He may at times
deliberately choose to be a follower. He reduces prices where required and increases them when
there is an opportunity. He offers the consumers some additional features and charges a premium
in a way, which has a favorable impact on the customers. He also ensures optimum use of the
price structure, which includes the credit terms, cash and volume discount, rebates, retail margins,
etc.

• Target Costing

In target costing, companies first use market research to establish a new product’s desired
functions. Then they determine the price, which the market will take. They deduct the desired
profit margin from this price, and this gives the target cost they must achieve. They then examine
each cost element i.e. design, engineering, manufacturing, sales. They try to bring the final cost
projections into the target cost range, by reengineering components, eliminating functions and
bringing down the cost of parts.

Proactive Marketing

Proactive marketing tries to gain insights into why a target group acts the way it does. The factors
that influence the buying process are carefully examined through research. The marketer
proactively identifies client needs, stated and unstated. An ongoing relationship with the clients
and identification of their needs enables a marketer not only to meet current needs but also
emerging and unarticulated needs.

Product

Anything that can be offered in a market for attention, acquisition, use or consumption to satisfy a
want or need is called a product. It includes physical objects, services, persons, places,
organisations and ideas.
 40

According to Philip Kotler, the product planner needs to think of a product at three levels. The
most basic level is the core product consisting of the problem solving services or core benefits
that consumers are really buying. Then the planner must build an actual product around the core
product. It includes a product’s parts, quality level, design, brand name, packaging and other
attributes that combine to deliver the core product benefits. The augmented product consists of
the additional consumer services and benefits built around the core and actual products. For
example, in case of Titan, the core product is the watch and the actual product might be the
wristwatch or the alarm clock or the wall clock. The protective packing is the augmented product
for the alarm clock.

Products can be of various types. Industrial products are those purchased for further processing
or for use in conducting a business. There are three types of industrial products: materials and
parts, capital items and supplies & services. Materials and parts are industrial products that enter
the manufacturer’s product completely. Capital items are industrial products that aid in
production or operations. They include installations and accessory equipment. Supplies and
services are those items that do not enter the finished product. They include operating supplies
like fuel, electricity etc., and repair and maintenance items.

Consumer products are bought by final consumers for their personal consumption. Convenience
products are bought by the customer frequently, immediately and with minimum comparison and
buying effort. They can be further classified as staples, impulse products and emergency
products. Shopping products are goods that the customer, in the process of selection and
purchase, characteristically compares with different products on attributes such as suitability,
quality, price and style. For example, vehicles, furniture etc. Specialty products are consumer
products with unique characteristics or brand identification for which a significant group of
buyers is willing to make a special purchase effort. For example, Ferrari sports car. Unsought
products are consumer products that the consumer either does not know about or knows about but
does not normally think of buying.

• Labeling

Sellers must label their products. The label may be a simple tag attached to the product or an
elaborately designed graphic that is part of the package. The label might carry only the brand
name or a great deal of other information. Even if the seller prefers a simple label, local laws may
insist on additional information.

• Designer Label

A much-valued label attached to a piece of clothing, which proves that it has come from a highly-
rated designer. In the past, labels were hidden discreetly inside the clothing. Today they are a
visible badge of good taste. Indeed, some designer labels even have snob value. Examples
include Calvin Klein, Versace, and GUCCI.

• Packaging

Packaging includes the design and production of the container for a product. A package might
come in several levels. Thus, an aftershave lotion is typically offered in a bottle (primary
package) that is in a cardboard box (secondary package). A corrugated box (shipping package)
might contain dozens of these boxes.
 41

Packaging has become a potent marketing tool. Well-designed packages can create convenience
and promotional value. Various factors have contributed to the growing use of packaging as a
marketing tool. An increasing number of products are sold on a self-service basis. So they should
be easy to handle. Rising consumer affluence means consumers are willing to pay a little more for
the convenience, appearance, dependability, and prestige of better packaging. Packageing
contribute to instant recognition of the company or brand. Innovative packaging can provide more
value to consumers and generate more profits for producers.

Developing an effective package for a new product involves several decisions. The first task is to
establish what the package should basically be or do for the particular product. Then decisions
must be made on size, shape, material, color etc. Decisions must be made on “tamperproof”
devices. The various packaging elements must then be harmonized with each other.

After the packaging is designed, it must be tested to make sure that the package stands up under
normal conditions, the script is legible, dealers find the packages attractive and easy to handle,
and consumers are favorably disposed to the packaging.

• Blister Pack is a form of packaging in which products are wrapped in clear plastic so that
consumers can see properly what they are buying.

Product Life Cycle

A product typically progresses through various stages – introduction, growth, maturity and
decline. Each stage calls for a different kind of marketing strategy.

Product Life Cycle Diagram

Product Sales

Introduction Growth Maturity Decline

Introduction Stage

In the introduction stage, the firm seeks to build product awareness and develop a market for the
product. For example, ITC’s branded ready-to-cook product “Ashirwaad,” is in the introduction
stage.

• Product: Branding and quality level are established, and intellectual property protection
for patents and trademarks is obtained.
• Pricing: Low penetration pricing to build market share rapidly, or high skim pricing to
recover development costs.
• Distribution: Selective until consumers accept the product.
 42

• Promotion: Targeted at innovators and early adopters. Marketing communications seek to

build product awareness and to educate potential consumers about the product.

Growth Stage

In the growth stage, the firm seeks to build brand preference and increase market share. A good
example is TVS Victor.

• Product quality is maintained and additional features and support services may be added.
• Pricing is maintained as the firm enjoys increasing demand with little competition.
• Distribution channels are added as demand increases and customers accept the product.
• Promotion is aimed at a broader audience.

Maturity Stage

In this stage, sales growth slows down. Competitors may start offering similar products. The
primary objective at this point is to defend market share while maximizing profit. For example
“Splendor”, Hero Honda’s popular bike, is now in the maturity stage.

• Product features may be enhanced to differentiate the product from that of competitors.
• Pricing may be lower because of the new competition.
• Distribution becomes more intensive and incentives may be offered to encourage
preference over competing products.
• Promotion emphasizes product differentiation.

Decline Stage

Sales decline at this stage. A good example is BPL Television.

• Maintain the product, possibly rejuvenating it by adding new features and finding new
uses.
• Harvest the product - reduce costs and continue to offer it, possibly to a loyal niche
segment.
• Discontinue the product, liquidating remaining inventory or selling it to another firm that
is willing to continue the product.

The marketing mix decisions in the decline phase will depend on the selected strategy. For
example, the product may be changed if it is being rejuvenated, or left unchanged if it is being
harvested or liquidated. The price may be maintained if the product is being harvested, or reduced
drastically if it is being liquidated.

Product Line

A group of closely related products marketed by a firm. These products are generally marketed
through similar outlets, and are targeted at customer groups which are alike. A good example is
the ‘Ayush’ range of Ayurvedic cosmetic products marketed by HLL. To cater to differing
requirements, products are offered in different sizes, flavours and variants. The total number of
variations in which a product is sold is called the product line depth. For example, the fabric wash
product line of HLL consists of products like Surf, Wheel, Rin, Sunlight, Ala and 501.
 43

Product Repositioning

In dynamic markets, marketers sometimes realize that the original positioning is no longer
relevant. In such instances, a repositioning of the product is attempted. For example, Onida TV
repositioned itself from a status-oriented product (‘Neighbor’s envy- Owner’s pride) in the early
1990s to a youth oriented product (with the launch of Onida Candy TV) in the mid-1990s. At one
point of time, Complan had the image of a sick man’s drink. Later, Glaxo repositioned it as a
health drink suitable for varied occasions and users.

Profit Impact of Market Strategy (PIMS)

The PIMS study was originally established in the 1960s, as a corporate appraisal technique to
identify strategic choices that most influenced cash flow and investment success. The scope of the
study was later extended.

PIMS analyses the impact of a variety of strategic choices, strategic issues and product-
market/competitive/environmental influences on business performance. The basic PIMS
principles may also be used to predict how a combination of strategic choices and market
conditions will affect business performance. The PIMS study shows that companies with large
market shares enjoy a greater rate of return on investment, compared to competitors with a
smaller market share. The primary reason for the market-share/profitability linkage is that large
market share leads to scale economies. This results in lower per-unit costs compared to smaller
competitors.

Promotional Mix

Marketers reach out to their target audience through a variety of options – advertising, sales
promotion, personal selling, direct marketing and public relations. All these elements together
constitute the promotion mix.

Direct Marketing

Direct Marketing is the process by which, a firm approaches its customers on a one-to-one basis
and markets its products directly to them. Rising media costs, increasing fragmentation of media
and their growing clutter have increased the attractiveness of direct marketing.

• Direct Mail Marketing: In direct mail marketing, free product samples, gifts and
compliments are mailed with letters or brochures. For example, HLL uses Direct mail
marketing for “Denim Aftershave.”

• Direct Response Marketing: Direct response marketing uses instruments like telephone,
mailers, radio, television, computers etc to give information about products, benefits and
usage aspects and a contact telephone (usually toll-free numbers), address or fax number
to elicit responses from customers. In the case of print media, usually a coupon is
attached to elicit response.

• Mail Order Marketing/ Catalogue Marketing: The use of the mail service as a
distribution channel. Based on catalogue selling, mail order is a long established business
 44

in USA. Mail order was considered a down market way of selling, but recent experience
has shown that it can be made to appeal to more up market consumers as well.

• Online Marketing/Marketing on the Web: The marketer displays the products’ features,
price and benefits on the web. The consumer orders the product and pays for it with
credit card, debit card or by cash.

• Telemarketing: Selling or promoting a product/service over the telephone. It is a kind of

cold call. Telemarketing is quite commonly used by the credit card industry. Advantages
of this method are that many people can be contacted in a short span of time and it is
cost-effective. But for many customers, it is an unwelcome intrusion. A movement is on
against unsolicited telemarketing. Regulatory authorities maintain a register for those
who are not interested in receiving telephonic sales calls. Before calling a number,
telemarketers are required to refer to the register. Violators face a penalty.

• Teleshopping (Home Shopping): The consumer watches the product on the TV screen at
home, phones up the marketer and places his order. For example, Tele Shopping Network
(TSN).

Public Relations

The form of communication that seeks to make use of publicity and other non-paid forms of
promotion. Public relations programmes aim at creating and maintaining a positive corporate
image, spreading awareness, influencing public opinion, generating support and developing trust
and co-operation. Companies use press releases, articles, video news releases, events and
community activities as part of their public relations efforts. Target audiences include the media,
government bodies, customers and suppliers, investors, the wider community or even employees.
The advertisement “India Shining” is a public relations campaign of the Bharatiya Janata Party.

Event Management

Event management is an offshoot of advertising and public relations. The basic idea of event
management is to convert an event into a grand publicity stint through a variety of
communication and display techniques. The event could be anything from a product launch to an
exhibition, stage show or sports tournament. The intention is to lend a unique character to the
event such that it creates a lasting impression on the audience. In 1998, Coca-Cola alone
sponsored 70 music related events across the country.

Event management has come to be recognized as an industry. There are many event management
outfits that specialize in all event details. These firms, on behalf of the client, do everything right
from conceptualization, programme design and logistics planning to venue management.

Fountainhead is a leading name in the industry and is known for organizing events for the Times
of India group. It provides event support to two of the most well recognized events in the country-
the Femina Miss India contest and the Filmfare Awards function. Femina Miss India’s official
corporate sponsor for 2004 is Ponds. Events like Femina Miss India and its male equivalent
Graviera Mr. India contests have started pulling in huge crowds and corporate sponsorships and
have come as a boost to the event management industry.
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Sales Promotion

Sales promotion is a key ingredient in marketing campaigns. It consists of various incentives

designed to stimulate faster or greater purchase of particular products or services. Sales
promotion encompasses consumer promotion, trade promotion and business & sales force
promotion.

Business And Sales Force Promotion Tools

Sales Contest: It is a contest conducted among the sales force or dealers. Prizes are awarded to the
best performers.

Specialty Advertising: Specialty advertising consists of useful, low-cost items bearing the
company’s name and address, and sometimes an advertising message. Salespeople give these
items to prospects and customers. For example, T-shirts, pens, calendars etc.

Trade Shows and Conventions: Industry associations organize annual trade shows and
conventions where firms buy space and set up booths and displays to demonstrate their product.
For example, many automobile companies displayed their products at the India International
Trade fair conducted in Delhi during November 2003.

Consumer Promotion Tools

Cash Refund Offers (Rebates): A price reduction after purchase rather than at the retail shop. The
consumer submits a specific proof of purchase to the manufacturer who refunds part of the
purchase price.

Coupons: Coupons are certificates, which provide a discount on the purchase of a specific
product. Redemption rate varies with the mode of distribution. Coupons are effective in
stimulating sales of a mature brand and for encouraging early trial of a new brand.

Cross-promotions: Using one brand to advertise another non-competing brand. LG while

advertising its mobile phones promoted the Reliance Network.

Free Trials: Inviting prospective purchasers to try the product without cost in the hope that they
will buy the product. For example, Automobile dealers offer test-drives.

Patronage Awards: Values in cash or other forms that are proportional to the patronage of a
certain vendor or group of vendors. For example, Indian Airlines has special offers for frequent
fliers.

Premium (Gifts): Merchandise offered at a relatively low cost or free of cost as an incentive to
purchase a particular product. A with-pack premium accompanies the product inside or on the
package. The package itself can serve as a premium. A free in-the-mail premium is mailed to
consumers who submit proof of purchase.

Price Packs: Consumers can be offered savings off the regular price of a product. A reduced
price pack is a single package sold at a reduced price (five for the price of four or buy one get one
free). A banded pack consists of two related products banded together. For example, Tooth paste
and brush)
 46

Prizes (Contest, Sweepstakes): Prizes entice customers with the chance to take part in a contest
and win cash, trips, or merchandise as a result of purchasing something. Sometimes customers are
asked to submit an entry and take part in a competition. A panel of judges selects the best entries.
There are also dealer contests meant exclusively for dealers.

Product Warranties: Explicit or implicit promises by sellers that the product will perform as
specified. Otherwise, the seller will fix it or replace the product.

Samples: Offer of a free amount of a product or service delivered door to door, sent in the mail,
picked up in a store, attached to another product, or featured in an advertising offer. For example,
recently, Coca Cola freely offered two sample packets of Sunfil with one liter bottle of Kinley
mineral water.

Tie-in Promotions: Two or more brands or companies may team up to increase pulling power.
For example, Hero Honda tied up with State Bank of India in April 2003, and Hero Honda
customers were offered SBI credit cards on which there was neither any joining fee nor service
charges during the first year.

Trade Promotion Tools

Allowance: An amount offered in return for the retailer’s agreeing to feature the manufacturer’s
products in some special way. An advertising allowance compensates retailers for advertising the
manufacturer’s product. A display allowance compensates them for carrying a special product
display.

Free Goods: Offers of extra cases of merchandise to intermediaries who buy a certain quantity or
who feature a certain flavour or size. Manufacturers might offer push money or free specialty
advertising to retailers that carry the company’s name.

Price-off (off-invoice or off-list): A straight discount off the list price on certain items purchased
during a stated time period. This encourages dealers to buy a quantity or carry a new item that
they might not ordinarily buy.

Psychographics

Different customers have different lifestyles, based on the social class to which they belong.
Psychographics looks at the attitudes of people towards brands and their purchase behavior. This
is an important tool to segment customers. For example, in 2001, Titan created a sub-brand
Fastrack, targeted at outdoor loving urban youth.

Push and Pull Strategy

Pull strategy is a marketing strategy that stimulates customer demand by communicating directly
with potential customers, leading them to seek out and purchase a product. Pull strategy is
appropriate when there is high brand loyalty and high involvement in the category, people
perceive differences among brands, and choose the brand before they go to the store.

Push strategy creates an incentive for retailers and other distributors to sell or ‘push’ a product to
customers. Push strategy is especially used where there is low brand loyalty in a category. Brand
 47

choice is made in the store or before the salesman. The product is often an impulse item, and the
benefits are well understood. For example, banks marketing their credit cards (Such as ICICI,
HDFC etc).

Pyramid Selling

A system of selling goods by setting up layers and layers of agents. The first agent sells to a
number of other agents for a commission. Each of them then sells to a number of others again for
a commission, and so on. By the time the pyramid has built up into a reasonable size there are
hundreds of agents all over the place. There is no way that they can sell all the products they hold
at a price which will leave them all with a profit. In some countries, pyramid selling has been
declared illegal.

Qualified Prospect

Prospecting is the process of looking up and checking out leads. It involves the continuous search
for and evaluation of individuals or organizations that might be in the market for the firm’s
products. Leads are different from qualified prospects. A lead is a person or organization that may
need or want the seller’s product or that might benefit from buying it. But a qualified prospect is a
person or organization that not only needs a product but that can also afford it and is likely to
make the decision to purchase it. For example, if a multinational company like Nestle opens a
new office, it is a qualified prospect for products such as air-conditioners and fax machines.

Relationship Marketing

Personal selling and negotiation are transaction oriented. Their purpose is to close a specific sale.
But in many cases, the company is not seeking an immediate sale but a long-term supplier-
customer relationship. The company wants to demonstrate that it has the capability to serve the
account’s needs in a superior way. Companies, especially those selling complex products or
services, should investigate the prospect’s problems and needs, to demonstrate their superior
capabilities and then obtain a long-term commitment. Today, more and more companies are
moving away from pursuing an immediate sale to developing a long-term customer relationship.

Relationship marketing is based on the premise that important accounts need focused and
continuous attention. Salespeople working with key customers must not meet customers only
when they might be ready to place orders. They should call or visit at other times, socialize with
them, and make useful suggestions about their business. They should monitor key accounts,
understand their problems, and be ready to serve them in a number of ways.

When a relationship management program is properly implemented, the organization will begin
to focus as much on managing its customers as on managing its products. At the same time,
companies should realize that relationship marketing might not be effective in all situations.
Ultimately, companies must judge which segments and which specific customers will respond
favorably to relationship management.

Retailing

Retailing is the process of selling goods or services directly to the final consumers. Some of the
most important retail-store types are described below:
 48

Catalog Showroom: This features a broad selection of high-markup, fast moving, branded goods
at discount prices. Customers order goods from a catalog in the showrooms, and then collect
these goods up at a merchandise pickup area in the store.

Convenience Store : Relatively small store located near a residential area, open long hours seven
days a week. Such stores carry a limited line of high-turnover convenience products at slightly
higher prices. Many have added takeout sandwiches, coffee, and other essential commodities. For
example, Kirana Stores in India. Mom–n-Pop Stores in the US can also be considered a type of
convenience store. These are typically owned, and run by members of a family and located in the
local neighborhood.

Departmental Store: Has several product lines-typically clothing, home furnishings, and
household goods- with each line operated as a separate department managed by specialist buyers
or merchandisers. For example, Shopper’s Stop and Lifestyle.

Discount Store: Sells standard merchandise at lower prices with lower margins by holding
higher volumes. True discount stores regularly sell merchandise at lower prices and offer mostly
national brands. For example, Big Bazaar of Pantaloon.

Factory Outlets: Are owned and operated by manufacturers and normally carry the
manufacturer’s surplus, discontinued, or irregular goods.

Hypermarkets: Are huge stores especially popular in Europe. They range in size between 80,000
and 220,000 square feet, and combine supermarket, discount, and warehouse retailing principles.
Product assortment goes beyond routinely purchased goods and includes furniture, large and
small appliances, clothing items, and many other items. Giant is an example of hypermarket.

Off-Price Retailer- Merchandise bought at less than regular wholesale prices and sold at less
than retail prices. They are often leftover goods obtained at reduced prices from manufacturers or
other retailers. Independent off-price retailers are owned and run by entrepreneurs or by divisions
of larger retail chains.

Shop-in-Shop: Many superstores reserve special areas in their shops exclusively for particular
brands. These are known as shop-in-shops. For instance, if we go to Shoppers Stop, we can see an
exclusive area for the Louis Phillippe line. Another good example is ‘Philips Corner’ established
by Philips. Philips Corner was designed with internationally standardized colors, shelves and
displays that resulted in instant brand recognition among customers.

Showroom: Showrooms are a type of exclusive retail outlets. A firm can practice exclusivity in
varying degrees and in combination with non-exclusive retailing. Showrooms can be of two kinds
- own and franchised.

Own showrooms help the firm in having better control over the marketing activities and getting
direct market feedback from consumers. It was Reliance which pioneered the ‘showroom’ or
exclusive retail outlet’ idea when it entered the textile business. Reliance established around 1800
‘Vimal’ showrooms and used these not only for distribution but also for promotion. The slogan
that always went with Vimal ads was “Vimal Showrooms - the largest nationwide retail network,
there is one near to you”. Reliance thus gained a big advantage over other textile firms that used
the showroom concept in a limited way.
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Specialty Store: Has a narrow product line with a deep collection, such as apparel stores, sporting
goods stores, furniture stores, florists and bookstores. For example, Reebok and Raymond.

Supermarket: Relatively large, low-cost, low-margin, high-volume, self-service operation

designed to serve the total needs for food and household maintenance products. For example,
Food World.

Warehouse Clubs or Wholesale Clubs: Sell a limited selection of brand-name grocery items,
appliances, clothing, and a range of other goods at deep discounts to members who pay some
annual membership fees. Warehouse clubs serve small businesses and group members from
government agencies, nonprofit organizations, and some large corporations. Wholesale clubs
operate in huge, low-overhead, warehouse like facilities and offer few frills. They offer rock-
bottom prices-typically 20– 40% below supermarket and discount-store prices but make no home
deliveries and do not accept credit card.

Cash and Carry: A form of limited-service wholesaling that has become popular. The retailer or
customer gets a minimal service. Typically, there is no sales force, no delivery service, no
creditor and no reordering assistance. The retailer or customer goes to the warehouse, pays for
the goods, and takes them away. Because of the no frills arrangement, costs can be cut.

Display: Display is a sales promotion tool that attempts to entice the buyer to switch over to the
displayed brand. Advertising creates awareness and interest about the product in the consumers’
minds but a good display at the point of purchase can help in clinching the sale. A consumer may
go to the store for his usual brand of deodorant or soap. But on seeing another brand attractively
displayed, she may get an impulse to buy the other brand.

Displays can be window displays, wall displays, aerial displays, floor displays or counter displays
depending on where they are fixed. They involve a broad spectrum of materials like posters,
balloons, streamers, stickers, danglers, etc. To enhance the appeal of the displays, manufacturers
use illuminated designs, motion displays, etc. and locate them at vantage points within the store.
Specific messages may be designed and displayed at strategic locations within an outlet, for
targeting shoppers. When Nestle launched Maggi Instant Noodles in 1983, it used a unique wire
mesh bag, which hung from the ceiling. Not only did this provide instant brand recognition but it
also helped the retailer save shelf space. Consumers were able to locate the product amidst the
retail clutter. A noticeable feature in many retail stores is the way Kwality-Walls ice cream is
stored in glass-topped freezers, which often induce the consumer to buy.

The cooperation of retailers is critical for the success of the display. But retailers also understand
that a better ambience can draw in more consumers. So they are often willing to cooperate with
the companies. Retailers are sometimes paid a fee by advertisers for prominent displays. This is
called display allowance.

Non-Store Retailing: Non-store retailing refers to various ways in which consumers secure goods
without having to visit retail stores. The various methods of non-store retailing are direct selling,
multi-level marketing, marketing by vending machines and consumer fairs. Examples of non-
store retailing are Hindustan Lever Direct, Amway and Coffee Day vending machines.

Retail Audit: A permanent sample of retail shops is maintained to supply periodic information on
aspects like stock holding of the shops, rate of stock turnover, sales level of different brands,
price trends, etc. The researcher often does a physical verification of inventory in these shops.
Retail audits help companies to find out the purchasing patterns of retailers as well as consumers.
 50

Companies can plan production and supply schedules better with information from retail audits.
Retail audit is also called store audit. In India, market research agency AC Nielsen ORG-MARG
does retail audits on an extensive scale.

Shrinkage: A euphemism for the stock in a retail outlet that disappears without being recorded in
the cash register. In other words, it is the stock that is damaged, shoplifted, stolen (in the case of
perishables) left over, thrown away or given away.

Sponsorship: Companies associate themselves with major events by way of sponsorships.

Depending on the scope of sponsorship the sponsor gets various benefits and rights. There are
various types of sponsorship such as title sponsorship, co-sponsorship, official supplier etc. For
example, Pepsi, Hero Honda and LG sponsored the Cricket World Cup in South Africa in 2003.

Reverse Channels

Trade channels are usually utilized to move goods from manufacturers or stocking points to the
retail outlets from where buyers purchase them. Reverse channels enable goods to move from
customers to trade partners or manufacturers. These channels are employed for various
applications – to handle defective goods, to recycle packaging materials or to exchange an old
product for a new product.

Rural Marketing

The concept of rural marketing has evolved rapidly. Rural India constitutes an estimated 70% of
the nation’s population. Most of the rural market is undiscovered and un-reached and provides a
huge unexploited potential for marketers.

Rural and urban markets have some major differences. Rural consumers are largely bound by
traditional, religious and cultural factors. Demand is more seasonal compared to the urban
demand, as agriculture is the main source of income. The seasonality effect is further amplified
because very often, marriages and festivals coincide with the harvest season. Rural markets are
not easy to tap because of their remoteness. Companies need to invest greater amounts in
generating awareness and building supply-chains while keeping the prices affordable. At the
same time, it is important for marketers to understand that there is no stereotype rural customer. A
sizable segment of rural customers are not tradition bound and also have high purchasing power
as a result of the Green Revolution of the 1970s.

The marketer should be very careful while entering the rural markets. He may wish to concentrate
on categories like washing soaps, packaged tea, hair oils, bicycles and pressure cookers etc. for
which there is proven demand in the rural market.

Most FMCG companies have recognized the importance of small packs in the rural markets,
characterized by the latter’s low purchasing power. Sunsilk, Chik and Clinic Plus shampoos are
available in 4 ml packs ranging from Rs.0.50 to Rs. 2/-, Cinthol and Fair Glow 75 gm cakes,
which used to sell at Rs.9/- are now available in 50 gm packs at Rs.5/-. Sometimes, a distinct
brand offering may have a major impact on rural marketing. A good example is ‘Tiger’ of
Britannia.

Advertising and positioning are also critical success factors in rural marketing. Many rural
customers tend to recognize a brand by its packaging. Indeed, many local brands in rural areas
imitate the packaging of national brands. Symbols add value to brand personality in rural markets.
 51

Thus ‘Gattu’ has played a major role in the success of Asia n Paints, one of the pioneers of rural
marketing in India.

The rural customer has also gradually changed over time and is becoming more brand conscious
than he was earlier. Most of the marketers are thus in a process of repositioning their brands.
Mahindra Bolero Camper was earlier positioned as a transport and pick-up truck best suited for
villages. The company identified the changing preferences and repositioned the Bolero Camper as
a family vehicle. Since then, the Camper has seen a 30% rise in its rural sales. HLL has launched
a new version of Lifebuoy called ‘Lifebuoy Active Green’ and is positioning it as a health soap for
both men and women unlike Lifebuoy, which is perceived as a soap for males only.

Given the vastness of the setting, rural marketing poses a major challenge to the sales force in
terms of their adaptability to the culture. Knowledge of local language plays a key role and
patience is a great virtue. Since a single product line may not generate enough volume, the rural
sales force should be able to handle several product lines simultaneously.

Sales Lead

A qualified prospect or potential customer who is ready to be contacted by the sales

representatives. Not every prospect can be a sales lead. Only those with a reasonable probability
of being turned into customers are called leads. They are then passed on to the sales force.

Sampling

A sample is the segment of the population selected for gathering information. Based on
observations made about the sample, inference can be drawn about the population as a whole.
Sampling is the scientific procedure of selecting the sample. It involves decisions like who is to
be surveyed (sampling unit), how many people should be surveyed (sample size) and how people
in the sample should be chosen (sampling procedure). There are two basic sampling procedures,
probability and non-probability. In probability sampling each member of the population has a
known chance of being included in the sample. But probability sampling may cost more or take
too much time. Then, marketing researchers use non-probability sampling.

Probability sampling includes methods such as simple random sampling, systematic random
sampling, stratified random sampling, cluster sampling, multi-stage sampling, multi-phase
sampling, quota sampling and area sampling. Non-probability sampling methods include
judgment sampling and convenience sampling.

Area Sampling: It is a form of multi-stage sampling in which maps, rather than lists or registers
are used. This method is more frequently used in those countries, which do not have a satisfactory
sampling frame such as population lists. For example, a city map can be used for area sampling.
Various blocks can be identified on the map. The entire city area can be divided into blocks,
which can be numbered and from which a random sample is finally drawn.

Cluster Sampling: Instead of selecting a random sample scattered over a wide area, a few
geographical areas are selected at random and every single household in each area is interviewed.
The great advantage of this type of sampling is the saving in time and cost. Many interviews can
take place within a short space of time with a minimum of travel. Moreover, it does not require
any knowledge of the population before the survey is undertaken.
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Convenience Sampling: Sometimes, sampling is based on the convenience of the researcher. This
is also called accidental sampling, as the respondents in the sample are covered usually because,
they are available on the spot where the survey is in progress. A survey based on such a sample of
respondents may not be useful if the respondents are not representative of the population. The
main question mark about convenience sampling is the representativeness of the selected sample.
As such, it introduces an unknown degree of bias in the estimate. Convenience sampling should
be avoided as far as possible. It may, however, be more suitable in exploratory research, where
accuracy is less important and the focus is on getting new ideas and insights into a given proble m.

Judgment Sampling: The main characteristic of judgment sampling is that units or elements in the
population are purposively selected. Hence, judgment samples are also called purposive samples.
Since the process of selection is not random, a judgment sample is considered to be non-
probability sampling. For example, a business analyst may consider only the large listed
companies, while studying corporate governance practices in a country.

Multi-Phase Sampling: Multi phase sampling should not be confused with multi-stage sampling.
In multi-phase sampling, the unit of sample remains unchanged though additional information is
obtained from a sub sample. For example, suppose a survey is undertaken to determine the nature
and extent of health facilities availa ble in a city and the general opinion of the people. In the first
phase, a general questionnaire can be sent out to ascertain, who amongst the respondents had at
one time or the other used the hospital services. Then, in the second stage, a comprehensive
questionnaire may be sent to only these respondents to ascertain what they feel about the medical
facilities in the hospitals.

Multi-Stage Sampling: It involves the selection of samples in stages. In such a sampling

technique, the population consists of a number of first stage sampling units, called primary
sampling units (PSUs). Each of these PSUs consists of a number of second-stage sampling units.
First, a sample is taken of the PSUs, and then a sample is taken of the second-stage units. This
process continues until the selection of the final sampling units. At each stage of sampling, a
sample can be selected with or without stratification. Suppose a sample of 6250 urban households
from all over the country is to be selected. In such a case, the first stage sample may involve the
selection of districts. Suppose 25 districts out of say 600 are selected. The second stage may
involve the selection of cities, say five from each district. Finally, 50 households from each
selected city may be chosen. Thus one would have a sample of 6250 urban households, arrived at,
in three stages.

Quota Sampling: This method involves the selection of prospective participants according to
prescribed quotas based on demographic characteristics, specific attitudes, or specific behaviors.
For example, an interviewer might be told to go out and select 20 adult men, 20 adult women, 10
teenage girls and 10 teenage boys to find out about their television viewing.

Simple Random Sampling: It is a probability sampling procedure, where researchers use a table of
random numbers, random digit dialing, or some other random selection procedure that ensures
that each sampling unit making up the defined target population has a known, equal, nonzero
chance of being included in the sample. For example, there is a school with 1000 students. We
want to select 100 students out of them for further study. We might put all their names in a box
and then pull 100 names out randomly. Each name has an equal chance of being selected. And the
selection is free from any human judgment.

Snowball Sampling: A method that involves the practice of subjectively identifying and
qualifying a set of initial prospective respondents who can, in turn, help the researcher identify
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additional people to be included in the study. After interviewing one person, the interviewer can
solicit that person’s help to identify other people with similar characteristics, opinions, or
feelings. Members of the defined target population who might not hold beliefs or feelings similar
to those of the respondents are less likely to be included in this type of sample.

Stratified Random Sampling: Here, the population is divided into mutually exclusive and
mutually exhaustive strata or sub-groups. Then a simple random sample is selected within each of
the strata or sub-groups. For example, instead of taking one percent of the whole population, we
can divide it into five strata on the basis of monthly income or any other criteria depending upon
the relevance, and then select one percent from each stratum as sample.

Systematic Random Sampling: Using some form of an ordered list of the members of the defined
target population, researchers select a random starting point for the first sampled member. Then
they determine an interval value and select subsequent sample members. For example, if the first
sample member is 32nd in the list and the interval is determined as 100, then the sample will
consist of the members holding numbers, 32nd , 132nd , 232nd , 332nd and so on. This method is more
efficient than simple random sampling.

Sampling Error: Conducting a census to get an opinion of the whole population is too expensive
and time consuming. Generally, inferences are drawn from a sample of the population. The
difference between a sample result and the result of a complete census is called sampling error.
This error is inherent in any sampling exercise. It can be reduced by a careful selection of the
sample so that it is representative of the population from which it is drawn and also by drawing a
sufficiently large sample. The more representative a sample and larger the sample size, less the
sampling error.

Social Marketing

Social marketing is the design, implementation and control of programs to influence the
acceptability of social ideas. It is frequently used for bringing about changes in socially
significant attitudes and behavior in such diverse areas as smoking, the use of seat belts in cars,
drug abuse, heart disease and organ donation. It generates discussion and promotes information,
attitudes, values and behaviours. By doing so, it helps to create a climate conducive to social and
behavioural change.

The campaign, "Will Balbir Pasha get AIDS?” was launched by Population Services International
(PSI) in Mumbai in November 2002, to sensitise people to HIV/AIDS risk from unprotected sex
with non-regular partners. The personalized message created empathy through identifiable real-
life situations. The success of the campaign prompted campaigns in Andhra Pradesh and Tamil
Nadu in September 2003 with the tagline: “Will Puli Raja get AIDS?” This campaign was
supplemented by a parallel print media campaign to persuade men to stick to one partner.

Straight Rebuy

Purchase decisions of buyers vary according to the nature of the product. While some purchase
behavior is complex, for many heavy consumption items, the purchase procedure is routine and
straightforward. Straight Rebuy refers to buying situations where a customer reorders regularly
the same product, without any variations. For example, Purchase of furniture or stationery in
government organizations.
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Vertical and Horizontal Marketing Systems

One of the most significant recent channel developments is the rise of vertical marketing systems.
A conventional marketing channel comprises an independent producer, wholesaler(s), and
retailer(s). Each is a separate business seeking to maximize its own profit, even if this goal
reduces the profit for the system as a whole. No channel member has complete or substantial
control over other members.

A vertical marketing system (VMS) consists of the producer, wholesaler(s) and retailer(s) acting
as a unified system. One channel member, the channel captain, owns the others or franchises
them or has so much power that they all cooperate. The channel captain can be the producer, the
wholesaler, or the retailer. VMS eliminates the conflict that results when independent channel
members pursue their own objectives. VMS improves efficiency through scale and elimination of
duplicated services. A corporate VMS combines successive stages of production and distribution
under a single ownership. An administered VMS coordinates successive stages of production and
distribution through the size and power of one of the members. Manufacturers of a dominant
brand are able to secure strong trade cooperation and support from resellers. A contractual VMS
consists of independent firms at different levels of production and distribution integrating their
programs on a contractual basis to generate more economies or sales impact than they might
achieve alone.

A horizontal marketing system involves two or more unrelated companies combining resources or
programs to exploit an emerging marketing opportunity. Many supermarket chains have
arrangements with local banks to offer in-store banking. Each company lacks the capital, know-
how, production, or marketing resources to venture alone, or it is afraid of the risk. The
companies might work with each other on a temporary or permanent basis or create a joint
venture company. Adler calls this symbiotic marketing.

Viral Marketing

Viral marketing is a method used to grow the customer base in a manner similar to the spread of a
virus. The information about the product or service is disseminated among consumers by email,
word of mouth and SMS. The information could be about special offers, discounts, etc. Viral
marketing is also referred to as buzz marketing.