Marketing Primer

An insight to marketing course.

What Is MARKETING?
Marketing consists of the strategies and tactics used to identify, create and maintain satisfying relationships with customers that result in value for both the customer and the marketer. Marketing is the social process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others..Kotler If a marketer can identify consumer buyer behaviour, he or she will be in a better position to target products and services at them. Buyer behaviour is focused upon the needs of individuals, groups and organisations. It is important to understand the relevance of human needs to buyer behaviour (remember, marketing is about satisfying needs).

Let's look at human motivations as introduced by Abraham Maslow by his hierarchy of needs: The hierarchy is triangular. This is because as you move up it, fewer and fewer people satisfy higher level needs. We begin at the bottom level. Physiological needs such as food, air, water, heat, and the basic necessities of survival need to be satisfied. At the level of safety, man has a place to live that protects him from the elements and predators. At the third level we meet our social and belongingness needs i.e. we marry, or join groups of friends, etc. The final two levels are esteem and self-actualisation. Fewer people satisfy the higher level needs. Esteem means that you achieve something that makes you recognised and gives personal satisfaction, for example writing a book. Self-actualisation is achieved by few. Here a person is one of a small number to actually do something. For example, Neil Armstrong self-actualised as the first person to reach the Moon. The model is a little simplistic but introduces the concept a differing consumer needs quite well.

To understand consumer buyer behaviour is to understand how the person interacts with the marketing mix. As described by Cohen (1991), the marketing mix inputs (or the four P's of price, place, promotion, and product) are adapted and focused upon the consumer. The psychology of each individual considers the product or service on offer in relation to their own culture, attitude, previous learning, and personal perception. The consumer then decides whether or not to purchase, where to purchase, the brand that he or she prefers, and other choices.

The Adoption Process.

Innovators are the first to adopt and display behaviour that demonstrates that they likely to want to be ahead, and to be the first to own new products, well before the average consumer. They are often not taken seriously by their peers. The often buy products that do not make it through the early stages of the Product Life Cycle (PLC).

Early adopters are also quick to buy new products and services, and so are key opinion leaders with their neighbours and friends as they tend to be amongst the first to get hold of items or services.

The early majority look to the innovators and early majority to see if a new product or idea works and begins to stand the test of time. They stand back and watch the experiences of others. Then there is a surge of mass purchases. The late majority tends to purchase the product later than the average person. They are slower to catch on to the popularity of new products, services, ideas, or solutions. There is still mass consumption, but it begins to end. Finally, laggards tend to very late to take on board new products and include those that never actually adopt at all. Here there is little to be made from these consumers

What is the marketing mix? The marketing mix is probably the most famous marketing term. Its elements are the basic, tactical components of a marketing plan. Also known as the Four P's, the marketing mix elements are price, place, product, and promotion. Read on for more details on the marketing mix. The concept is simple. Think about another common mix - a cake mix. All cakes contain eggs, milk, flour, and sugar. However, you can alter the final cake by altering the amounts of mix elements contained in it. So for a sweet cake add more sugar!
It is the same with the marketing mix. The offer you make to you customer can be altered by varying the mix elements. So for a high profile brand, increase the focus on promotion and desensitize the weight given to price.

Price There are many ways to price a product. Let's have a look at some of them and try to understand the best policy/strategy in various situations Premium Pricing. Use a high price where there is uniqueness about the product or service. This approach is used where a substantial competitive advantage exists. Such high prices are charge for luxuries such as Cruises, Five Star Hotel rooms, and Concorde flights. Penetration Pricing. The price charged for products and services is set artificially low in order to gain market share. Once this is achieved, the price is increased. This approach was used by Airtel. Reliance Communications and Dish TV. Economy Pricing. This is a no frills low price. The cost of marketing and manufacture are kept at a minimum. Supermarkets often have economy brands for soups, spaghetti, etc. Price Skimming. Charge a high price because you have a substantial competitive advantage. However, the advantage is not sustainable. The high price tends to attract new competitors into the market, and the price inevitably falls due to increased supply. Manufacturers of digital watches used a skimming approach in the 1970s. Once other manufacturers were tempted into the market and the watches were produced at a lower unit cost, other marketing strategies and pricing approaches are implemented.

Premium pricing, penetration pricing, economy pricing, and price skimming are the four main pricing policies/strategies. They form the bases for the exercise. However there are other important approaches to pricing. Psychological Pricing. This approach is used when the marketer wants the consumer to respond on an emotional, rather than rational basis. For example 'price point perspective 99 paise and not one rupee, and `999 instead of `1000.

Product Line Pricing. Where there is a range of product or services the pricing reflect the benefits of parts of the range. For example car washes. Basic wash could be $2, wash and wax $4, and the whole package $6. Optional Product Pricing. Companies will attempt to increase the amount customer spend once they start to buy. Optional 'extras' increase the overall price of the product or service. For example airlines will charge for optional extras such as guaranteeing a window seat or reserving a row of seats next to each other. Captive Product Pricing Where products have complements, companies will charge a premium price where the consumer is captured. For example a razor manufacturer will charge a low price and recoup its margin (and more) from the sale of the only design of blades which fit the razor. Product Bundle Pricing. Here sellers combine several products in the same package. This also serves to move old stock. Videos and CDs are often sold using the bundle approach.

Promotional Pricing. Pricing to promote a product is a very common application. There are many examples of promotional pricing including approaches such as BOGOF (Buy One Get One Free).

Geographical Pricing. Geographical pricing is evident where there are variations in price in different parts of the world. For example rarity value, or where shipping costs increase price. Value Pricing. This approach is used where external factors such as recession or increased competition force companies to provide 'value' products and services to retain sales e.g. value meals at McDonalds.

Place, distribution, channel, or intermediary

It is the mechanism through which goods and/or services are moved from the manufacturer/ service provider to the user or consumer. There are six basic 'channel' decisions: Do we use direct or indirect channels? (e.g. 'direct' to a consumer, 'indirect' via a wholesaler). Single or multiple channels. Cumulative length of the multiple channels. Types of intermediary (see later). Number of intermediaries at each level (e.g. how many retailers in Southern Spain). Which companies as intermediaries to avoid 'intrachannel conflict' (i.e. infighting between local distributors).

Selection Consideration - how do we decide upon a distributor? Market segment - the distributor must be familiar with your target consumer and segment.
Changes during the product life cycle - different channels can be exploited at different points in the PLC e.g. Foldaway scooters are now available everywhere. Once they were sold via a few specific stores. Producer - distributor fit - Is there a match between their polices, strategies, image, and yours? Look for 'synergy'. Qualification assessment - establish the experience and track record of your intermediary. How much training and support will your distributor require?

Types of Channel Intermediaries. There are many types of intermediaries such as wholesalers, agents, retailers, the Internet, overseas distributors, direct marketing (from manufacturer to user without an intermediary), and many others.

Product For many a product is simply the tangible, phsysical entity that they may be buying or selling. You buy a new car and that's the product
These are known as the 'Three Levels of a Product.' So what is the difference between the three products, or more precisely 'levels?'

The CORE product is NOT the tangible, physical product. You can't touch it. That's because the core product is the BENEFIT of the product that makes it valuable to you. So with the car example, the benefit is convenience i.e. the ease at which you can go where you like, when you want to. Another core benefit is speed since you can travel around relatively quickly. The ACTUAL product is the tangible, physical product. You can get some use out of it. Again with the car example, it is the vehicle that you test drive, buy and then collect. The AUGMENTED product is the non-physical part of the product. It usually consists of lots of added value, for which you may or may not pay a premium. So when you buy a car, part of the augmented product would be the warranty, the customer service support offered by the car's manufacture, and any after-sales service. Another marketing tool for evaluating PRODUCT is the Product Life Cycle (PLC). The Product Life Cycle (PLC) is based upon the biological life cycle. For example, a seed is planted (introduction); it begins to sprout (growth); it shoots out leaves and puts down roots as it becomes an adult (maturity); after a long period as an adult the plant begins to shrink and die out (decline). In theory it's the same for a product. After a period of development it is introduced or launched into the market; it gains more and more customers as it grows; eventually the market stabilises and the product becomes mature; then after a period of time the product is overtaken by development and the introduction of superior competitors, it goes into decline and is eventually withdrawn

Strategies for the differing stages of the Product Life Cycle. Introduction. The need for immediate profit is not a pressure. The product is promoted to create awareness. If the product has no or few competitors, a skimming price strategy is employed. Limited numbers of product are available in few channels of distribution. Growth. Competitors are attracted into the market with very similar offerings. Products become more profitable and companies form alliances, joint ventures and take each other over. Advertising spend is high and focuses upon building brand. Market share tends to stabilise .

Maturity. Those products that survive the earlier stages tend to spend longest in this phase. Sales grow at a decreasing rate and then stabilise. Producers attempt to differentiate products and brands are key to this. Price wars and intense competition occur. At this point the market reaches saturation. Producers begin to leave the market due to poor margins. Promotion becomes more widespread and use a greater variety of media. Decline. At this point there is a downturn in the market. For example more innovative products are introduced or consumer tastes have changed. There is intense price-cutting and many more products are withdrawn from the market. Profits can be improved by reducing marketing spend and cost cutting.

Problems with Product Life Cycle. In reality very few products follow such a prescriptive cycle. The length of each stage varies enormously. The decisions of marketers can change the stage, for example from maturity to decline by price-cutting. Not all products go through each stage. Some go from introduction to decline. It is not easy to tell which stage the product is in. Remember that PLC is like all other tools. Use it to inform your gut feeling.

Promotion
This includes all of the tools available to the marketer for 'marketing communication'. You can 'integrate' different aspects of the promotions mix to deliver a unique campaign. The elements of the promotions mix are:

Personal Selling. Sales Promotion. Public Relations. Direct Mail. Trade Fairs and Exhibitions. Advertising. Sponsorship.

BCG matrix model

The BCG matrix or also called BCG model relates to marketing. The BCG model is a wellknown portfolio management tool used in product life cycle theory. BCG matrix is often used to prioritize which products within company product mix get more funding and attention. The BCG matrix model is a portfolio planning model developed by Bruce Henderson of the Boston Consulting Group in the early 1970's. The BCG model is based on classification of products (and implicitly also company business units) into four categories based on combinations of market growth and market share relative to the largest competitor.

When should I use the BCG matrix model?

Each product has its product life cycle, and each stage in product's life-cycle represents a different profile of risk and return. In general, a company should maintain a balanced portfolio of products. Having a balanced product portfolio includes both highgrowth products as well as low-growth products. A high-growth product is for example a new one that we are trying to get to some market. It takes some effort and resources to market it, to build distribution channels, and to build sales infrastructure, but it is a product that is expected to bring the gold in the future. An example of this product would be an iPod. A low-growth product is for example an established product known by the market. Characteristics of this product do not change much, customers know what they are getting, and the price does not change much either. This product has only limited budget for marketing. It is the milking cow that brings in the constant flow of cash. An example of this product would be regular Colgate toothpaste. But the question is, how do we exactly find out what phase our product is in, and how do we classify what we sell? Furthermore, we also ask, where does each of our products fit into our product mix? Should we promote one product more than the other one? The BCG matrix can help with this. The BCG matrix reaches further behind product mix. Knowing what we are selling helps managers to make decisions about what priorities to assign to not only products but also company departments and business units.

Segmentation,Targeting and Positioning

Segmentation is the process of grouping people or organizations within a market
according to similar needs, characteristics, or behaviors

Dividing the market into groups

an entire market rarely has the same tastes and preferences it is difficult to handle all preferences too Mercedes Benz, for example (only high-end)

Targeting is the actual selection of the segment you want to serve the target market is
the group of people or organizations whose needs a product is specifically designed to satisfy

Positioning is the use of marketing to enable people to form a mental image of your
product in their minds (relative to other products)

How to segment a market?

On what basis/bases? What are some criteria/variables?

Segmentation - Variables
Demographic Segmentation
Age

Bicycles Disneys Cartoons Pension Plans, Retirement Funds e.g. LIC

Gender Leo Toys Barbie for girls, GI Joe for boys Gillette Razors for men, women Most cosmetics, perfumes etc

Income
Like Toyota did Lexus for high end Camry for the middle of the roaders Corolla for low end HLL soaps - Dove for high end, Hamam for low And so on Income is possibly the most common basis for segmentation

 Other Demographic Variables Include Religion, Ethnicity, Occupation, Generation (Baby Boomers, Generation Next, Yuppies) and so on

Geographic Segmentation
snow boots in the Northern part of USA Of course, all International Marketing is done on a regional (geographic basis) The Same Honda Accord is different in different countries! Most MNCs vary their products according to country Special tires in the Middle East Taj: AP - hot food, Kerala - more coconut and so on

Behavioural Segmentation
On the basis of occasions, product usage, benefits sought, brand loyalty

Occasions
Y2K Cruises Hallmark Cards A greeting card for every occasion - Valentines Day Card, Deepavali card

Benefits Sought
There are certain specific benefits sought - example would be Colgate Tartar Control for Tartar

User Status
Non-Users Vs. Current Users Credit Card Companies New card vs another card Blood Banks, entry level cars/bikes

Usage Rate
Heavy Users Vs. Light Users
The Beer Market is a classic example Miller Lite, BudWeiser all target the heavy user Bajaj M80 could be another candidate

Psychographic Segmentation
Lifestyle products like Raymond, westside etc.

Evaluation of Segments
Having segmented the market, which one to choose?
What are the criteria? Is there potential sales, growth and profit? Big Emerging Markets (BEMs) China, India, Brazil etc.

Potential Competition and Cost

is it too much? Imagine going against Microsoft in the PC OS market for someone like Unix

Potential Risk
Environmental doing business in Iraq now Or even Kashmir

Is it compatible with my current business?

Mercedes going downscale with E-Class will it hurt the Mercedes brand? will it cannibalize my existing brand? Air India starting a budget airline?

What is a Marketing Channel?

A marketing channel system is the particular set of interdependent organizations involved in the process of making a product or service available for use or consumption. A push strategy uses the manufacturers sales force, trade promotion money, and other means to induce intermediaries to carry, promote, and sell the product to end users. A pull strategy uses advertising, promotion, and other forms of communication to persuade consumers to demand the product from intermediaries.

Criticisms of Marketing
Marketing Encourages People to Purchase What They Do Not Need Marketers Embellish Product Claims: false claims Marketing Contributes to Environmental Waste: packaging, bill boards, new building constructions Marketing Encroaches on Customers Right to Privacy: by knowing and recording individuals buying behaviour. A common tool used within marketing was developed by Igor Ansoff in 1957. His model gives organisation five strategic business options.

1. Market Penetration: This involves increasing sales of an existing product and

penetrating the market further by either promoting the product heavily or reducing prices to increase sales. 2. Product Development: The organisation develops new products to aim within their existing market, in the hope that they will gain more custom and market share. For Example Sony launched PlayStation 3 to replace their existing model.

3. Market Development: The organisation here adopts a strategy of selling existing

products to new markets. This can be done either by a better understanding of segmentation, i.e. who else can possibly purchase the product or selling the product to new market overseas.

4. Diversification: Moving away from what you are selling (your core activities) to providing
something new e.g. Moving over from selling foods to selling cars.

5. Consolidation: Where the organisation adopts a strategy of withdrawing from

particular markets, scaling back on operations and concentrating on its existing products in existing markets.

What is Branding?
The American Marketing Association (AMA) defines a brand as a "name, term, sign, symbol or design, or a combination of them intended to identify the goods and services of one seller or group of sellers and to differentiate them from those of other sellers. Therefore it makes sense to understand that branding is not about getting your target market to choose you over the competition, but it is about getting your prospects to see you as the only one that provides a solution to their problem. The objectives that a good brand will achieve include:

Delivers the message clearly Confirms your credibility Connects your target prospects emotionally Motivates the buyer Concretes User Loyalty

To succeed in branding you must understand the needs and wants of your customers and prospects. You do this by integrating your brand strategies through your company at every point of public contact. Your brand resides within the hearts and minds of customers, clients, and prospects. It is the sum total of their experiences and perceptions, some of which you can influence, and some that you cannot. A strong brand is invaluable as the battle for customers intensifies day by day. It's important to spend time investing in researching, defining, and building your brand. After your entire

brand is the source of a promise to your consumer. It's a foundational piece in your marketing communication and one you do not want to be without. When creating your brand strategy for a product or service it is important to perform a careful analysis to determine principal barriers that you may come in contact with. These barriers are also known as market conditions that can keep your product or service from achieving success. For example they could include the following: Competition Timing Financing Location Lack of Demand

Steps in Strategic Brand Management

Identifying and establishing brand positioning Planning and implementing brand marketing Measuring and interpreting brand performance Growing and sustaining brand value

Brand equity

is the added value endowed on products and services, which may be reflected in the way consumers, think, feel, and act with respect to the brand.

How do we measure Brand equity?

Interbrands method looks at the on-going investment and management of the brand as a business asset. This means that our method takes into account all of the many ways in which a brand touches and benefits its organization from attracting and retaining talent to delivering on customer expectation. The final value can then be used to guide brand management, so businesses can make better, more informed decisions. There are three key aspects that contribute to the assessment: The financial performance of the branded products or services, the role of brand in the purchase decision process and the strength of the brand

Top 10 Brands in 2010

Brand Barriers
In order to be prepared to face these obstacles or barriers it is important to spend time doing a careful analysis of your product or service. This analysis will assist you not only in the development of your brand, but also in the positioning of your product or service. A careful and thorough analysis will assist you in answering the following questions:

Do you have a niche market? What problem does your product or service solve or need? How should you determine the price of your product or service? Who are your potential customers and where can you find them? Who are your biggest competitors? What can you do better than them? How should you advertise? Where will you find your target market? Will you use new media or traditional media?

Direct selling: The direct personal presentation, demonstration, and sale of products and services to consumers, usually in their homes or at their jobs. Direct marketing is a form of advertising that reaches its audience without using traditional formal channels of advertising, such as TV, newspapers or radio. Businesses communicate straight to the consumer with advertising techniques such as fliers, catalogue distribution, promotional letters, and street advertising. Personal selling means when a customer and supplier meet face to face to complete the transaction.

What is the marketing environment? The marketing environment surrounds and impacts upon the organization. There are three key perspectives on the marketing environment, namely the 'macro-environment,' the 'micro-environment' and the 'internal environment'. The micro-environment This environment influences the organization directly. It includes suppliers that deal directly or indirectly, consumers and customers, and other local stakeholders. Micro tends to suggest small, but this can be misleading. In this context, micro describes the relationship between firms and the driving forces that control this relationship.

The macro-environment
This includes all factors that can influence and organization, but that are out of their direct control. A company does not generally influence any laws (although it is accepted that they could lobby or be part of a trade organization). It is continuously changing, and the company needs to be flexible to adapt. There may be aggressive competition and rivalry in a market. Globalization means that there is always the threat of substitute products and new entrants. The wider environment is also ever changing, and the marketer needs to compensate for changes in culture, politics, economics and technology.

The internal environment.

All factors that are internal to the organization are known as the 'internal environment'. They are generally audited by applying the 'Five Ms' which are Men, Money, Machinery, Materials and Markets. The internal environment is as

important for managing change as the external. As marketers we call the process of managing internal change 'internal marketing.' Essentially we use marketing approaches to aid communication and change management.

The external environment can be audited in more detail using other approaches such as SWOT Analysis, Michael Porter's Five Forces Analysis or PEST Analysis.

Some useful terminologies

E-Commerce
Business-to-business (B2B) describes commerce transactions between businesses, such
as between a manufacturer and a wholesaler, or between a wholesaler and a retailer.

Business-to-consumer (B2C, sometimes also called Business-to-Customer) describes

activities of businesses serving end consumers with products and/or services. An example of a B2C transaction would be a person buying a pair of shoes from a retailer. The transactions that led to the shoes being available for purchase that is the purchase of the leather, laces, rubber, etc. However, the sale of the shoe from the shoemaker to the retailer would be considered a (B2B) transaction.

Business-to-government (B2G) is a derivative of B2B marketing and often referred to as

a market definition of "public sector marketing" which encompasses marketing products and services to various government levels - including federal, state and local - through integrated marketing communications techniques such as strategic public relations, branding, advertising, and web-based communications.

Consumer-to-consumer (C2C) (or citizen-to-citizen) electronic commerce involves the

electronically-facilitated transactions between consumers through some third party. A common example is the online auction, in which a consumer posts an item for sale and other consumers bid to purchase it; the third party generally charges a flat fee or commission. The sites are only intermediaries, just there to match consumers.

Consumer-to-business (C2B) is an electronic commerce business model in which

consumers (individuals) offer products and services to companies and the companies pay them. This business model is a complete reversal of traditional business model where companies offer goods and services to consumers (business-to-consumer = B2C). We can see this example in blogs or internet forums where the author offers a link back to an online business facilitating the purchase of some product (like a book on flipkart.com), and the author might receive affiliate revenue from a successful sale.

Government-to-Business (abbreviated G2B) is the online non-commercial interaction

between local and central government and the commercial business sector, rather than private individuals (G2C).

Government-to-Citizen (abbreviated G2C) is the communication link between a

government and private individuals or residents. Such G2C communication most often refers to that which takes place through Information and Communication Technologies (ICTs), but can also include direct mail and media campaigns. G2C can take place at the federal, state, and local levels. Ex. http://india.gov.in/