;

BASICS OF
MARKETING
MBA, SEMESTER-I
According to the New Syllabus of ‘Savitribai Phule Pune University, Pune’

Dr. Nilesh Rameshchandra Berad

Ph. D. (Mkt. Mgmt.), MBA (Mkt. Mgmt.), B. Pharmacy
Director,
MET's Institute of Management, Nashik
'%

Dr. Hemant J. Katole

Ph D, MBA, BE
Assistant Professor,
Savitribai Phule Pune University, Pune

Pooks are JZvaiCaSCefor OnCine ‘Purchase at: [Link]

1
THAKUR PUBLICATION PVT. LTD., PUNE
* Lucknow * Meerut * Bengaluru * Hyderabad * Jaipur * Chennai * Ahmedabad *
* Nagpur * Bhubaneswar * Jalandhar * Rohtak * Bhopal * Kerala * Kolkata*
 i ‘1L*

BASICS OF MARKETING

Edition 2013-14
Edition 2016
Revised Edition 2019
Copyright © All Rights Reserved
This book is sole subject to the condition that it shall not, by way of trade or otherwise, be lent, resold, hired out, or
otherwise circulated without the publisher’s prior written consent, in any form of binding or cover, other than that in which
it is published and without including a similar condition. This condition being imposed on the subsequent purchaser and
without limiting the rights under copyright reserved above, no part of this publication may be reproduced, stored in or
transmitted in any form or by any means (electronic, mechanical, photocopying, recording or otherwise), without the prior
written permission of both the copyright owner and the below mentioned publisher of this book.

Published by :
Thakur Publication Pvt Ltd .
C.T.S. No-635, Flat No-T-7, Third Floor, Bhudhwar Peth, ABC Market,
.
Pune-411002. Mob.- 9325036341, 9326863355, 9373086387.
Website: [Link] E-mail: thakurpublication@[Link]
HEAD OFFICE : [Link]. 645B/187, Abhishekpuram, 60 Feet Road, Jankipuram, Near Ram Kishor
Covent Inter College, Lucknow-226021. Mob.- 9235318594/22/17, 9335318517
Retailers /Distributors
PUNE 15. Vikas Book & Stationers- 151, Budhwar Peth, Appa Balwani
1. Adarsh Book Agency- 629, Budhwar Peth, Appa Balwant Chowk, Near Jogeshwari Mandir, Pune. Ph- 020-24468737,
Chowk, Near Ratan Cinema Basement Pune. Ph-020-24497435, 9921331187.
9881394953. 16. New Laxmi Book Depot- Shop No.-5, Shree Samarth
!
2. Aryan Books- 680, Budhwar Peth., ABC Chowk, Near Jageshwar Residensy, Manaji Nagar, Narhe, Mob.: 9850852240
Temple, Opp. Venus Traders Mob.: 07350785050, 09552292929. 17. Suyog Enterprises-Add. 1- Shop No.7, Dhruv Darshan
3. Goel Book Agency- 31, Budhwar Peth, Next to Jogeshwri Society, Behind Pimpri Chinchad Polytecnic, Akrudi, Pune-
Temple. Pune-411002. Ph. 020-24453267, 9890938870. 411044 Mob-957005005
4. Jagruti Book Agency- 128, Budhwar Peth Sakshatkar, Opp. Add. 2- D.Y. Patil College, Near Girls Hostel, Nehru Nagar,
Jogeshwari Mandir, Pune. Mob. 09850039320. Pune Mob- 8381005005
5. Jai Mata Ji Book Collection-Aakurdi Main Road, Near Maruti 18. Yash Books- 28/A Ambar Chambers, Appa Balwant Chowk,
Temple, Pune Mob-9420202943 Pune-2, 411002 Mob-9923699235
6. Laxmi Book Depot- Dhavalgiri Apartment, Shop no.13-14, NASHIK
Opp. MIT-WPU College, Vishwanath Marg, Rambavg Colony, 19. Anmol Book Service- 5, Munanda Market, M.G Road, Nashik
Kothrud, Pune-411038 Mob-8888307035, 9527705325.
Ph. 0253-2505501, 2339401, 9325362413
7. OM Book Stall- 629, Budhwar Peth., Ratan Talkies, Kakade
Arcade, Ground Floor, Shop No. 4, 12A, Pune-411002. Ph.:
20. Anmol Pustakalaya- Saubhagya Chambers, Bytco Point,
Nashik Road, Pune. Ph. 0253-2461603, 2461003.
020-24435333.
8. 21. Rahul Book Centre- Tilak Path, Opp. Sarvajanik Vachanalaya,
Patel Traders- 676/A, Budhwar Peth, Opp. Jogeshwari
Mandir, Pune - 411002. Mob.: 09225656963, 020-24457322.
Near Bank of Maharashtra, Nashik-1. Ph. 020-2599608, 2502168.
9. Pradeep Book Depot- Shop No.4 Indraprastha “I” Building,
22. Maharastra Pustak Bhandar- Nasik, 475, Opp. Shani Mandir,
Ravi War Peth, Nasik, Mob.: 9860221213
Manjari Phata, Hadapsar, Pune-411028. Ph. 020-26990101,
26993647, 9604010202. AHMED NAGAR
10. Pragati Book Centre- 157, Budhwar Peth, Opp. Ratan Talkies, 23. Shreepad Granth Bhandar- Shani Chowk, Ahmed Nagar. Ph.
Pune-411002. Ph. 020-24458887, 66022707. 0241-2347307.
11. Sakalp Stationers- Canal Road, Baramati. Mob.: 09765018999,
09209800339. MAI .[Link]
12. Samarpanam Book Seller Pimpri- Sant Tukaram Nagar, Opp. 24. Kasturi Book Depot- Opp. KBH School, Narkar Plaza
Ganesh Mandir, Mhada Complex. Ph.: 9922307131. Shopping Centre Malegaon. Ph. 09370422111.
13. Samarpanam Book SeUer- Shop No. 12, ‘S’ bldg., Dhruv
Darshan Cmplx, Near P.C.C.O.E., Akurdi. Mob. 09823665769. >• JALGAON
14. Saraswati Granth Bhandar- 671, Budhwar Peth, Appa Balwant 25. Prashant Book House- 17, KDM Shopping Centre, Opp. SBI
Chowk, Pune. Mob. 09423580797, 09822679099. Jalgaon, Jalgaon-425001. Ph. 0257-2235520, 942163646.
i

“Dedicated
to
my Beloved Students
1
&
Colleagues”
- Dr. Nilesh Rameshchandra Berad

!
“The book is,
in all humility dedicated to my Parents,
Mr. Jay want Katole and Mrs. Usha Katole,
whose entire life has been an undiluted inspiration to me.”
- Dr. Hemant J. Katole

\;
 Preface
Marketing is important and necessary because it takes place all around us everyday, has a major effect on our
lives, and is crucial to the survival and success of firms and individuals. Successfulmarketing provides the
promise of an improved quality of life, a better society and even a more' peaceful world. Today corporate
success largely depends on the marketing .strategies adopted by the organisations..Today’s market environment
is changing rapidly. These changes .are throwing companies into a state of confusion; if they lack marketing
know-how and appropriate marketing strategy. Vastly improved marketing practices are needed for performing :
well in rapidly changing markets.

We have great pleasure in presenting the book ‘Basics of Marketing’, which is intended for students of
management. This text book provides an exciting picture of rapidly changing place and value of marketing.
This book provides students and practitioners the framework and knowledge with which they could make more
effective marketing decisions. It includes all the key principles and practices plus the integration process that
maximises marketing effectiveness,

The subject material of each unit of the book has been written in easy language and precise way so that student
can understand the topics superbly. The exercise given at the end of every unit will give extreme usefulness and
benefit to the students and we are sure that they will attain the highest satisfaction level through this
comprehensive book.

Although extreme care has been taken during the preparation and proofreading of manuscript, still some errors
and mistakes might inadvertently creep in. The authors owe an apology to the readers for that and suggestions
for improvement of the subject matter of the book will be accepted and acknowledged gratefully.

Please e-mail us at, thakurpubIication@[Link]

Website, [Link] i

f
 Acknowledgement
I am blessed to be surrounded by many good people in my life, without them, it would no possible for me to do
what I do I am deeply grateful for the support extended by them shaping my life. I am blessed to have the
Parents Mrs. Surekha & Dr. Ramesh R. Berad, whose, kindness & discipline have shaped my life because of
them only I could enjoy many' Achievements in my life. I would like to special thank my beloved one for
standing beside me & for giving me much required support during All the times. I am especially thankful to my
Trustees for this support & guidance. I would like to special thank my Staff and Students for their sustenance
during all the times.

I am thankful to the Thakur Publication Pvt. Ltd especially, Mohd. Farook Azam (Copy Editor, Marketing
Editing Department) and Mrs. Sona Singh (Marketing Coordinator) for giving me support for this project right
form inception so to my Friends & to all those known & unknown persons in my life, whose names are
mentioned here thanks for your support beyond my wildest imagination.

- Dr. Nilesh Rameshchandra Berad

:
Every author owes a great deal to others and I am no exception.

I am very grateful to all my Colleagues and Friends for their instantaneous help, guidance, and motivation.

I have no words to express my deepest feeling for the support and encouragement from my beloved Parents,
Wife Bhagyashri Katdle, Son Om Katole and other Family Members, without their treasured love and
support, the completion of this work would have not been meaningful and possible at all.

Last but not the least, I earnestly thank the entire team of Thakur Publication Pvt. Ltd. especially, Mohd.
Farook Azam (Copy Editor, Marketing Editing Department) and Mrs. Sona Singh (Marketing Coordinator)
for their support and cooperation in bringing this book to the market.

- Dr. Hemant J. Katdle

 -6-
f

Syllabus
BASICS OF MARKETING
Unit 1: Introduction to Marketing
Definition & Functions of Marketing: Scope of Marketing, Evolution of Marketing, Core concepts of
marketing - Need, Want, Demand, Customer Value, Exchange, Customer Satisfaction, Customer Delight,
Customer loyalty, Concepts of Markets, Marketing V/S Market Competition, Key Customoer Markets, Market
places, Market Spaces, Meta-markets, Digital Markets, Brick & Click Model. Implact of Globalisation,
Technology and Social Respoensibility on Marketing. New Consumer Capabilities, New Company Capabilities.
Functions of Marketing Manager. Linkage of Marketing Functions with all Functions in the Organisation.
Company Orientation towards Market Place,

Product-Production-Sales-Marketing-Societal-Relational, Holistic Marketing Orientation. Selling versus

Marketing. Concept of Marketing Myopia. Marketing Process, Understanding Marketing as Creating,
Communicating and Delivering Value. (5+2)

Unit 2: Marketing Environment: Concept of Environment, Macro Environment & Micro Environment -
Components and Characteristics, Need & Trends, Major Forces Impacting the Macro Environment & Micro
Environment, Need for Analysing the Marketing Environment. Analysing the Political, Economic, Socio¬
cultural, Technical and Legal Environment. Demographics. (5+2)

Unit 3: Segmentation, Target Marketing & Positioning: Segmentation-Concept, Need & Benefits.
Geographic, Demographic, Psychographic, Behavioural Bases of Segmentation for Consumer Goods and
Services. Bases for Segmentation for Business Markets. Levels of Segmentation, Criteria for Effective
Segmentation. Market Potential & Market Share. Target Market-Concept of Target Markets and Criteria for
Selection. Segment Marketing, Niche & Local Marketing, Mass Marketing, Long Tail Marketing. Positioning-
Concept of Differentiation & Positioning, Value Proposition & Unique Selling Proposition (8+2)

Unit 4: Consumer Behavior: Meaning & Importance of Consumer Behavior, Comparison between
Organisational Buying Behavior and Consumer Buying Behavior, Buying Roles, Five Steps Consumer Buyer
Decision Process-Problem Recognition, Information Search, Evaluation of Alternatives, Purchase Decision,
Post Purchase Behavior, Moment of Truth, Zero Moment of Truth, ZMOT, Moderating Effects on Consumer
Behavior. (7+2)

Unit 5: Marketing Mix: Origin & Concept of Marketing Mix, 7P’s - Product, Prize, Place, Promotion, People,
Process, Physical Evidence, Product Life Cycle: Concept & Characteristics of Product Life Cycle (PLC),
Relevance of PLC, Types of PLC and Strategies across Stages of the PLC. (10+2)

Note: Real World Examples/Cases are expected to be analysed in the class as well as included in the
examination.
.

:
 -7-

Contents
Unit 1: Introduction to Marketing 1.3.6. Societal Marketing Orientation 34
1.1. Marketing n 1.3.7. Transactional Marketing 34
Orientation
1.1.1. Meaning and Definition of 11
Marketing 1.3.8. ' Holistic Marketing Orientation: A 35
1.1.2. Nature of Marketing 11
New Set of Beliefs
1.3.9. Relational Marketing Orientation 36
1.1.3. Scope of Marketing. 12
1.4. The New Marketing Realities 37
1.1.4. Core Concepts of Marketing 13
[Link]. Need, Want and Demand
1*4.1. Introduction. 37
1A2- Technology 37
[Link]. Goods-Services Continuum- 13
1A3' Globalisation 39
[Link]. Products 14
1.4.4. Social Responsibility 40
[Link]. Utility 15
1.4.5. A Dramatically Changed 41
[Link]. Customer Value 15 Marketplace: Impact of
[Link]. Exchange and Transactions 16 Globalisation, Technology and
[Link]. Relationship Marketing & 16 Social Responsibility on Marketing
Networks [Link]. New- Consumer Capabilities 41
[Link]. Customer Satisfaction 16 [Link]. New Company Capabilities 42
[Link]. Customer Delight 17 [Link]. Changing Channels 43
[Link]. Customer Loyalty [ .
17 [Link]. Heightened Competition 43
[Link]. Market 18 1.5. Marketing Management 44
[Link]. Marketers 18 1.5.1. Introduction ,44,
1.1.5. Functions of Marketing i" 18 1.5.2. Objectives of Marketing 44
1.1.6. Importance of Marketing 20 Management
1.1.7. Selling versus Marketing 21 1.5.3. Marketing Process 44
1.2. Markets 21 1.5.4. Functions of Marketing Manager 45
1.2.1. Concepts of Markets 21 1.5.5. Concept of Marketing Myopia 46
1.2.2. Marketing Versus Market 22 1.6. Linkage of Marketing Functions 47.
1.2.3. Importance of Markets 22 with All Functions in the
Organisation
1.2.4. Types of Markets 23
1.6.1; Introduction 47
1.2.5. Competition 24
1.6.2. Research & Development (R&D) 47
1.2.6. Key Customer Markets 25
1.6.3. Purchasiing 48
1.2.7. Marketplaces, Market Spaces and 26
Metamarkets 1.6.4. Production (Manufacturing) 48
1.2.8. Digital Markets/Digital Marketing 28 1.6.5. Operations 48
1.2.9. Brick and Click Model 31 1.6.6. Finance 49
1.3. Evolution of Marketing/ 31 1.6.7. Accounting 49
Company Orientation towards 1.6.8. Human Relations Management 49
Marketplace (HRM)
1.3.1. Introduction 31 1.6.9. Information System 50
1.3.2. Production Orientation 32 1.7. Understanding Marketing as 50
1.3.3. Product Orientation 32 Creating, Communicating, and
Delivering Value
1.3.4. Sales Orientation 33
1:7.1. Introduction 50
1.3.5. Marketing Orientation: Modem 33
Concept of Marketing 1.7.2. Selecting the Value to be Offered 51

-
 -8-

1.7.3. Creating the Value " 51 2.3,2.2. Market Intemte'diaries 68

1.7.4. Delivering the Value 52 [Link]. Customers 68
1.7.5. Capturing Value Back for the Firm 52 [Link]. Competition/ Competitors 69
from the Market [Link]. Public •p 69
1.7.6. Communicating the Value 53 2.3.3. Differences between Macro and 69
1.7.7. Enhancing the Value 53 Micro Environment
1.8. Exercise 54 2.4. Exercise 70

Unit 2: Marketing Environment Unit 3: Segmentation, Target

2.1. Marketing Environment 55 Marketing & Positioning
2.1.1. Concept of Environment 55 3.1, Target Marketing: STP 71
2.1.2. Characteristics of Marketing 55 Approach
Environment 3.1.1. Introduction 71
2.1.3. Need for Analysing the Marketing 56 3.1.2. Steps in Target Marketing 71
Environment 3.2. Market Segmentation 72
2.1.4. Impact of Environment on 56 3.2.1. Concept of Market Segmentation 72
Marketing
3.2.2. Need for Market Segmentation 72
2.1.5. Process of Marketing Environment 56
3.2.3. Bases of Segmentation for 73
Analysis
Consumer Goods and Services
2.1.6. Components of Marketing 57
Environment [Link]. Geographic Segmentation 73
[Link]. Internal Marketing Environment 57 [Link]. Demographic Segmentation 73
[Link]. External Marketing Environment 58 [Link]. Psychographic Segmentation 74
2.2. Macro Environment: 59 [Link]. Behavioural Segmentation 74
Components & Characteristics 3.2.4. Bases for Segmentation for 76
2.2.1. Introduction 59 Business Markets
2.2.2. Analysing Needs and Trends 3:2.5. Levels of Segmentation 77
2.2.3. Major Forces Impacting the Macro 60 3.2.5.L Segment Marketing 77
Environment [Link]. Niche Marketing 78
[Link]. Analysing the Political 60 [Link]. Long Tail Marketing 78
Environment [Link]. Local Marketing 79
- i
[Link]. Analysing the Economic 62 [Link]. Individual Marketing 79
Environment 3.2.6. Criteria for Effective Segmentation 80
[Link]. Analysing the Socio-Cultural 63 3.2.7. Identification of Market Segments: 80
Environment The Process of Market
[Link]. Analysing the Technical 64 Segmentation
Environment 3.2.8. Factors Influencing Market 82
[Link]. Analysing the Demographic 65 Segmentation
Environment 3.2.9. Benefits of Market Segmentation 82
[Link]. Analysing the Natural Environment
66 3.3. Targeting: Target Market 83
[Link]. Analysing the Legal Environment 66 3.3.1. Concept of Target Market 83 f
2.3. Micro Environment: 67
Components and Characteristics 3.3.2. Process of Targeting the Market 83
3.3.3. Evaluating Market Segments to 84
2.3.1.
2.3.2.
Introduction
Major Forces Impacting the Micro
67
67
Target: Bases for Identifying
Target Customers
i
Environment
3,3:4. Selecting Target Markets,: Target 84- :
[Link], Suppliers / / 68 Market Strategies
L /I wv
/
i !;
 -9-

3.3.5. Limited Market -/< Coverage 84 4.1.6. Types of Buying Decision 104
Targeting Behaviour
3.3.6. Full Market Coverage Targeting 85 4.1.7. Buying Motives of Consumers 105
[Link].

[Link].
[Link].
3.3.7.

3.3.8.
Mass Marketing/Uitdifferentiated 85
Marketing
Differentiated Marketing
Concentrated Marketing

Benefits of Targeting
85
86
Criteria for Selection of Target 86
Market
87
4.1.8.
4.1.9.

4.Z

4.2.1.
4.2.2.
Buying Roles of Consumers
Importance
Behaviour

Decision Process
Introduction
of

Problem Recognition
... 106
Consumer 106

Five -Steps Consumer BjJXfiL. 107

107
107
3.3.9. Difference between Segmentation 88 4.2.2.I. Types of Problems Recognition 108
and Market Targeting [Link]. Conditions Resulting in Problem 108
3.4. Positioning and Differentiation 88 Recognition
3.4.1. Concept of Differentiation and 88 [Link]. Marketing Implications 108
Positioning 4.2.3. Information Search 109
3.4.2. Tasks Involved in Positioning: 88 [Link]. Origin of Information for Purchase 109
Process of Positioning Search
i
3.4.3. Importance of Positioning 89 [Link]. Factors Affecting External Search 110
' f
3.4.4. Positioning Strategies 90 [Link]. Marketing Implications 110
i
3.4.5. Differentiation Strategies 91 4.2.4. Evaluation of Alternatives 111
3.4.6. Value Proposition & Unique 93 [Link]. Factors Affecting the Extent of 111
f
Selling Proposition (USP) Evaluation
3.5. Demand Measurement 94 [Link]. Marketing Implications Ill
3.5.1. Introduction 94 4.2.5. Purchase Decision 112
3.5.2. Major Concepts in Demand 94 [Link]. Marketing Implications 113
Measurement [Link]. Consumer Decision Rules 113
; 3.5.3. Market Potential 95
[Link]. Situational Factors Affecting the 114
i [Link]. Uses of Market Potential 95 Purchase Decision
[Link]. Methods for Estimation of Market 96 4.2.6. Post Purchase Processes 114
Potential 4.2.6.I. Marketing Implications 115
[Link]. Market Potential Analysis 97 [Link]. Consumer Satisfaction and 115
3.5.4. Market Share/Sales Potential 98 Dissatisfaction
[Link]. Determinants of Market Share 98 [Link]. Cognitive Dissonance 116
[Link]. Estimation of Market Share 98 4.3. Organisational Buying Behaviour 117
3.6. Exercise 99 4.3.1. Introduction 117
4.3.2. Nature of Organisational Buying 117
Unit 4: Consumer Behaviour Behaviour
100 4.3.3. Objectives of Organisational 118
4.1. Consumer Behaviour
Buying Behaviour
4.1.1. Meaning and Definition of 100
4.3.4. Factors Influencing Organisational 119
Consumer Behaviour
Buyer Behaviour
4.1.2. Characteristics of Consumer 100
4.3.5. Organisational Buying Situations 121
Behaviour
101 4.3.6. Organisational Buyer Decision 122
4.1.3. Scope of Consumer Behaviour
Process
4.1.4. Need for Studying Consumer 102
4.3.7. Comparison between 123
Behaviour
Organisational Buying Behaviour
4.1.5. Factors Affecting Consumer 103' & Consumer Buying Behaviour
Behaviour

--v
s
 - ' > T- 3:ÿS:K.'

- 10-
4.4. Moment of Truth 124 5.1.6. Reasons for- -Additional Ps for 133
4.4.1. Introduction 124 Services
'4.4.2. Zero Moment of Truth (ZMOT): 125 5.1.7. Strengths an<l. Weaknesses of 4Ps 134
Moderating Effects on Consumer and 7Ps £
Behaviour 5.1.8. Importance of Marketing Mix 134
4.4.3. ZMOT Techniques for Marketers 125 5.2. Product Life Cycle (PLC) 135
4.5. Exercise 126 5.2.1. Concept of Product Life Cycle 135
5.2.2. Characteristics of Product Life 135
Unit 5: Marketing Mix Cycle
5.2.3. Types of PLC 136
5.1. Marketing Mix 127
5.2.4. Relevance of Product Life Cycle 137
5.1.1. Origin of Marketing Mix 127
5.2.5. Stages of Product Life Cycle 137
5.1.2. Concept of Marketing Mix 127
5.2.6. Strategies Across Stages of the 138
5.1.3. Characteristics of Marketing Mix 128 PLC
5.1.4. Elements of Marketing Mix 128 5.3. Exercise 141
5.1.5. 7Ps of Marketing Mix 129 Case Studies 142
[Link]. Product 129 Solved Paper (2014) 150
[Link]. Price 130 Solved Paper (2015) 156
[Link]. Place 131 Solved Paper (2016) 162
[Link]. Promotion 131 Solved Paper (2017) 164
5.I.5.5. People 132 Solved Paper (2018) 168
[Link]. Process 132
[Link]. Physical Evidence 133

y >
Introduction to Marketing (Unit 1) 11

UNIT 1 Introduction to Marketing

. MARKETING
1.1.1. Meaning and Definition of Marketing
In a narrow view, marketing is an activity of selling and purchasing of goods or services. But, the nature and
scope of marketing is a much wider perspective. Along with the fulfilment of needs and wants related to the
sale and purchase of goods and services, it encompasses the entire process of customer satisfaction. Hence, the
process involves identification of consumers’ needs and wants and fulfilling it to the extent till the customers
are pleased and contented. With the changing marketing environment, the taste and preferences of the
customers are also changing. Therefore, marketing also considers the changing requirements of the consumers
apart from providing them with basic products or services. In totality, marketing comprises of all activities like
producing, interacting, distributing and exchanging products/services which offer value to the customers.

According to William J. Stanton, “Marketing is a total system of interacting business activities designed to
plan, price, promote and distribute want-satisfying products and services to the present and potential
customers”.

According to Prof. Malcolm McNair, “Marketing is the creation and delivery of standard of living to the
society”.

According to Cundiff and Still, “Marketing is the business process by which products are matched with the
market and through which the transfers of ownership are affected”.

According to American Marketing Association (new definition), “Marketing is an organisational function

and a set of processes for creating, communicating and delivering value to customers and for managing
customer relationships in ways that benefit the organisation and its stakeholders”.

1.1.2. Nature of Marketing

The nature of marketing is as follows:
1) Marketing is an Integrated Process: Instead of being a sole activity, marketing is a cohesive process of
numerous allied activities. The integration of different activities makes it distinct from other features of
marketing. It comprises of functions related to planning and control. Marketing also serves the social needs
of society by satisfying the consumers’ needs and wants.
2) Marketing is Customer-oriented: Customer is the centre of focus for all activities related to marketing.
The existence of marketing is to identify and satisfy the needs and wants of present consumers and future
prospects.
3) Marketing is a System: Marketing functions \as a system in which several sub-systems are involved. In
marketing, society acts as a source of input and these inputs are processed into outputs which are further
provided to the society.
4) Marketing is Creative: Time, place and possession utilities are created by marketing. The creation of time
utility is done by, conserving products for future use. By delivering products to places where they are
genuinely required,' creates place utility. While, possession utility is created by transferring products and
services from producer to customer. However, in all these marketing activities the most important factor is
the exchange process between buyer and seller.

i,
12 MBA First Semester (Basics of Marketing) SPPU

5) Marketing is Goal-oriented: The goal-oriented characteristic of marketing. is considered the most

significant. It provides benefits to both, i.e., buyer and seller. They share mutual benefits by fulfilling the
customers’ needs and earning profits from customers through sale of products and services.
6) Marketing is Universal: Marketing is not limited to business activities. It plays a key role in other
organisations also. In social and other organisations, marketing is used to promote programmes and
initiatives such as adult education, family planning, public harmony, environmental protection, national
integration, etc. This form of marketing is known as social marketing. v
7) Marketing is a Science as well as an Art: Marketing is closely related to social and behavioural sciences,
though it has developed from economics. It includes various subject areas like Psychology, Economics,
Anthropology, Law, Sociology, Information Technology, etc. The marketing conditions also depend upon
the factors affecting the target market such as political environment, philosophy, demographic environment,
statistics, mathematics, etc.
8) Marketing is an Exchange Activity: Marketing is an on-going and dynamic practice. Therefore, it
involves exchange of technology, ideas, services and information. This commercial exchange activity helps
the marketers to produce better and quality products and services for customers.
9) Marketing is a Continuous Process: Marketing is a significant functional aspect of management. It
encompasses continuous planning, implementation and control. Thus, it is considered as a complex,
continuous and inter-related process.
10) Selection of Target Markets: It is just not possible for a marketer to satisfy one and all in the market.
Instead of making an unrealistic attempt, a marketer has to select target markets. Therefore, marketing
enables marketers to start with market segmentation, choosing a target market, identifying the needs and
wants of the target market and satisfying these needs more effectively than the competitors using relevant
marketing mix.

1.1.3. Scope of Marketing

The major driving force of marketing is to achieve the organisational goals by harmonising activities which
help to attain customer satisfaction. Therefore, marketing has wide scope in relation with its universal activities.
The scope of marketing is described below:
1 ) Analysing Consumer Needs and Wants: Marketing is the study of needs and wants of consumers. This is
necessary to fulfil consumers’ needs in the best possible way. Finally, production of goods and services is
carried out on the basis of consumer preferences.
2) Analysing Consumer Behaviour: An effectual analysis of consumer behaviour is essential to identify the
pattern of consumer buying. This enables the marketers to segment and target the market.
3) Product Planning and Development: The marketing process initiates with idea generation and ends up
with product development. Product planning involves numerous activities such as branding, packaging and
product line decisions.
4) Pricing Decisions: Product pricing is also defined by marketers. The pricing policy varies from product to
product. Different factors like marketing goals, stage of product life cycle, competition level, etc., are
considered for determining pricing policies.
5) Distribution: Designing of an effective distribution channel for improved sales and profit is also an
important scope of marketing. The study of distribution channels helps to cater large number of customers
at low distribution cost.
6) Promotion: Marketing is also responsible for promoting products of an organisation. Marketers use
different techniques like advertising, sales promotion, personal selling, etc. An appropriate promotion mix
is designed to achieve marketing objectives.
7 upany Analysis: In marketing, company analysis is, carried out by evaluating the cost structure and
company’s resources. The actual position of the company is estimated on the basis of its competitors.
Marketers can also determine the profit earned through different product offerings across jdifferent customer
segments with the help of accounting department. Another technique of company analysis can be brand
auditing. This highlights the market potential of a brand in the market. , C
Introduction to Marketing (Unit Tf ' 13 -
8) Competitor Analysis: ‘ This analysis is done to determine the strengths and weaknesses of various
competitors in the rttatket. A detailed evaluation of competitors’ sources of profits, competencies,
resources, cost structure, and differentiation and positioning strategies is done to figure out the most
competitive organisation.

1.1.4. Core Concepts of Marketing

The first step in the process of marketing is the determination of consumer needs and demands. Today,
consumer is the king of the market. The significant change in the demand-supply condition is one major reason
behind consumerism. Unlike earlier times, the demand for a product is less than its market supply. Marketers
use different tactics to retain and satisfy their customers in this competitive market. The core concepts related to
marketing, considered as its elements are given below:
Core Concepts of Marketing

P Need, Wants and Demand

Products
— -1 Goods-Services Continuum
Utility
|

Customer Value
1 Exchange and Transactions
Relationship Marketing & Customer Satisfaction
Networks
Customer Delight Customer Loyalty
Marketers
Market

I.I.4.I. Need, Want and Demand

The three basic elements of marketing i.e., needs, wants and demands are the major factors of consumer
motivation to buy a product. The desire of consumer to satisfy his needs and wants, gives a kick start to the
marketing [Link] refer to the; basic necessities of human beings related to their inherent characters.

The need fulfilment criterion depends upon the cultural and social environment of the society. For example,
shelter is the basic need of an individual, as one cannot reside on roadside or on footpaths. Wants refer to the
desires for particular things which are unified with the needs of the individual. For example, for fulfilling the
need of shelter, a person may desire of a house in a clean locality. In comparison with the needs, individuals have
numerous wants.
These wants are constantly re-created due to the influence of social institutions and factors. In the present
scenario, individuals have boundless wants but the resources to fulfil those wants are scarce. Therefore,
consumers wish to spend their money only on those products which ensure maximum value and satisfaction.
Demands are those definite wants for any product(s) which are supported by the willingness and ability to buy
them. The purchasing power of the consumers converts their wants into demands. In marketing, a marketer is
more interested to know about the consumers having the purchasing power rather than those who only desire to
have a product. For example, a person may, desire of a penthouse by the seaside, but due to low purchasing
power his demand remains ineffective.

I.I.4.2. Goods-Services Continuum

In general, organisational products are a composition of goods and services. According to the goods-services
continuum in figure given below, some products may have either tangible (e.g., salt) or intangible (e.g., teaching)
characteristics. However, there are some products which provide both goods and services at the same time, like
travelling via airplane. The position of product on the continuum enables the marketer to spot potential opportunities.

At the tangible (pure goods) end of the continuum, Only those goods are positioned which are not related to
services. At the intangible (pure services) end of the continuum, only those services are positioned which have
no association With physical products. The middle portion of both the ends consists of the products which have
combined characteristics of both goods and services, e.g., goods like air-conditioners also require services like
installation and delivery, besides being a product in itself.
 !
14 MBA First Semester (Basics of Marketing) SPPU

Scale of (In) Tangibility Teaching

Advertising agency
Air travel Q Intangible elements
(most services)
Balanced Entity
c~>
Television
Q
Low oS>2 d
Low

d
Tangible d
elements (most Balanced Entity
goods) Fast-food shop

| t House
LÿJj Dog food
[ÿJj Tailored suit
Automobile (

1
— Degree of Intangibility
t Degree of Tangibility

High | E Necktie
Salt Figure 1.1: Goods-Services Continuum

All the three positions involved in goods-services continuum, are described below:
1) Goods Dominated Products: These types of products are tangible in nature and are complemented with
supporting services. For example, one month warranty or toll-free services are mainly offered by the company
to increase the value of the product. The strategy of associating the supporting services with the main product is
called ‘embodying’. The term embodying is used by IT industry, where companies use this strategy to enter
into international market which is flooded with low-cost products having inappropriate user-guidance.
2) Equipment-Based or Facility-Based Services: In this category, both goods and services combine to form
a complete product. For example, restaurants and hotels are placed in middle of the continuum, as they use
goods (e.g., expensive crockery) and services (e.g. skilled manpower). Other facility-driven services such as
museums, multiplexes, zoos, amusement parks, etc., involve following three factors:
i) Operational Factors: Effective utilisation of different technologies should be practised so that customers
feel delighted while using services. A proper set of instructions and indications must be provided to guide
customers about using the service. This may help the company to reduce their waiting time.
ii) Locational Factors: These services are commonly purchased services, e.g., ATM or dry clean services.
Here, location plays an important role as these services are provided at particular locations.
iii) Environmental Factors: These are storefront services where customers visit the place for services.
Therefore, environment of that particular place should be attractive enough to appeal customers. For
example, banks must provide an elegant and sophisticated appearance, advanced technology, quick
services, etc., to their customers.
3) People-Based Services: These products mainly include services and are placed towards the intangible
(service) side of the continuum. People-based services are becoming popular because people are finding it
difficult to take out time for several tasks. For example, people recruit professionals for their legal and tax
related work. Personal fitness trainers have a great business in mostly all cities. Even people hire
professional dog walkers for their pets.

I.I.4.3. Products
Product is anything that is offered for sale. It is a process where a thing is produced as a result of labour,
growth, thought, or activity. A product can be anything, a service or even an item. It may be produced
immediately or gradually. It may also be a resultant of mental efforts or an unconscious effort such as seasonal
fruits, by-products, etc.

According to Philip Kotler, “A product is a bundle of physical service and symbolical particulars expected to
yield satisfaction or benefits to the buyer”. In marketing; product is anything tangible or intangible in nature,
which is offered for consumption in order to satisfy consumer needs.
,
Introduction to Marketing (UnitTfiÿ 15

For example, in manufacturing, product is brought as a raw material and sold as a finished good, which is
further distributed in the market to satisfy customer needs and wants. While in retailing, products are known as
‘merchandise’. The level of customer satisfaction for a product can be derived on several bases like quality,
quantity, brand name, usage, warranty, service warranty, packaging, etc.

I.I.4.4. Utility
In economics, utility is an important concept which is related to marketing. The term utility is a measure of
absolute desirability, or consumption, or satisfaction towards a particular product. It explains the ability of
goods or services to satisfy the needs and wants of the consumers. The measure of utility helps to identify the
increase or decrease in the level of utility. It may also be used to explain the economic behaviour in the form of
number of attempts required to increase a product’s utility.

The basis of exchange process comprises of products and/or services and marketing of these products and/or
services. Both these elements combine to generate utility. There are four types of utilities, viz., form, time, place
and ownership, where the ‘form utility’ of goods or services is created by the production process and marketing
process is responsible for the remaining three. Richard Buskirk has introduced four types of utilities that
describe marketing as an activity. They are as follows:
1) Form Utility: The process of product planning and development combines to create form utility. This
involves various stages from converting the raw material to the developments a finished product. Finally,
the form defines the utility of the product.
2) Time Utility: Time utility occurs when the product is made available to cater the consumer’s demand at
his/her time of desire. This can be made possible when the goods manufactured are delivered through
proper channels at right time to the final destination.
3) Place Utility: Availability of a product at right place, keeping in mind the convenience of the customer,
creates place utility. This can be done by providing the product at the place, where it is required the most by
using different channels of distribution.
4) Ownership Utility: When a seller legally transfers his ownership over products to the buyer through a sales
operation, ownership utility is created. The products remain liable to the producer, retailer or seller until it is
purchased by someone else.

I.I.4.5. Customer Value

Value refers to the worth or usefulness of goods or services. The best definition of value from consumer’s
perspective is the difference between a potential customer’s evaluation of the benefits and costs of one product
in comparison to others. The value can be generated only when product and user come together. Therefore, the
level of value generated is determined in terms of high satisfaction, satisfaction or dissatisfaction. It also affects
the customer decision-making and long-term relationship with the organisation.

Value is a much broader concept than the price of a product. The characteristics of value are multi-dimensional
and it offers products of high quality, low price and excellent service experience to specific target markets. All
the elements such as price, quality, service, company’s image and intangible factors help to define company’s
value proposition. In general, the product benefits can be evaluated on the basis of customer’s satisfaction and
competitor’s offerings. By using the formula given below, value can be calculated:

Benefits Deriving froma Product

Customer Perceived Value =
Costof Acquiring the Product

From the above equation, it can be concluded that the value from a product is only created, when the perceived
benefits are more than the actual cost of the product. Another crucial factor for value creation is that the value
of firm’s product should also be more than the competitor’s product. Applying this equation has proved
beneficial to marketers. Now, they know the two significant approaches which are most desirable to survive in
any market. The first approach is to increase the perceived benefits and the other one is to lower the cost of
product.
 ;

MBA First Seinester (Basics of Marketing) SPPU

Following the two approaches, it is widely preferable to focus on providing highly perceived benefits rather
than competing on prices. Enhanced customer value is the only way through which marketing concept can be
implemented. The marketing concept is all about customer satisfaction and this can be achieved by creating and
delivering customer value. It can be further said that, customer value is the crux of marketing.

Ll.4.6. Exchange and Transactions

The basic nature of marketing activity is the exchange of products and services \yith the objective to satisfy
consumer needs and wants. Exchange is the process of acquiring a desired prodiidt by giving goods or services
of the same value in return. In terms of marketing, it is a social concept. Usually, the exchange process takes
place when both parties involved are meant to be agreeable on the terms and conditions related to exchange.
When an exchange gets completed, then it is known as ‘transaction’.

Needs
—
>. Wants
_
> Demand
_ > Exchange
_
<
Offers
—
for sale-? Research

t
Figure 1.2: Needs, Wants, Demand, and Exchange

Exchange is the major activity of marketing which creates customer value. There are five conditions which
should be followed, so as to properly go through the exchange process:
1) Two or more parties (buyer and seller) are required to commence the exchange process.
2) Both the parties must have goods or services of value for one another.
3) Parties should be able to communicate and deliver the product and services.
4) Parties should have freedom to accept or reject the products and services offered.
5) Parties should be confident enough about exchange process and its appropriateness or desirability.

The basic unit of exchange is transaction. Transaction is an act of exchanging goods and services between two
parties. It can be in form of money or barter. The transaction activity comprises of several elements like
exchangeable units of value, mutual agreement, time of agreement, and place of agreement. This agreement is
implemented and supported by legal system under the transaction process.

[Link], Relationship Marketing & Networks

An integrated marketing activity that aims to identify, develop and manage long-term relationships with large
number of customers individually is known as relationship marketing.

According to Professor Philip Kotler, “Relationship marketing is the process of building long term, trusting,
and win-win relationship with customers, distributors, dealers and suppliers. Over time, relationship marketing
promises and delivers high quality, efficient service and fair prices to the other party. It is accomplished by
strengthening economic, technical, and special ties between members of the two organizations or between the
marketer and the individual customer.”

Relationship marketing is a long-term relation between marketers and different parties, viz., customers,
suppliers, distributors, etc. It acts as a unique company asset which is also known as a network of mutually
beneficial business relationships. The basic aim of all organisations is to understand its customers and deliver
high customer value and satisfaction. This helps to build a strong relationship between the organisation and
customers. As a result of relationship marketing, organisation earns few loyal customers.

A network is the channel relationship between the organisation and its key stakeholders. The stakeholders can be
in the form of suppliers, employees, customers, channel members, advertising agencies, etc. In the competitive
environment, more than being competent as an organisation, one must have an effective marketing network.

[Link]. Customer Satisfaction

The term ‘customer satisfaction’ is basically used to measure how well the expectations of a customer are fulfilled
by utilising the products and services of a company. Customer satisfaction acts as an important performance
indicator of a business and is also one of the four perspectives that together constitute a ‘balanced scorecard’.
Introduction to Marketing (Unit 1) 17

Marketing professionals consider customer satisfaction as the most important point of interest. In other words,
customer satisfaction means how much the customer is pleased with the performance and delivery of products
and services offered by the company. ‘Gap Model’ is used most frequently in order to measure the level of
customer satisfaction. The equation given below defines the gap model:
-
Customer Satisfaction = Delivery Expectations
The term Delivery denotes the opinion that a customer constructs, regarding the product and service, after
consuming it. Whereas, Expectations denote what customer had expected from the product and service offered
by the company. Hence, customer satisfaction is the ‘gap’ or difference between his expectations and what he or
she has actually received. For example, if a customer bought a product which he thought will last for 3 months
but it actually lasted for 6 months, this will made the customer feel much satisfied. On the other hand, if the
same product lasts only for 1 month, then the customer may feel extremely discontented.
Hence, expectations can be considered as a base point for measuring customer satisfaction. The marketing
executives of the company not only focus on the process of launching the product or services in the market but they
also focus on managing the insights of the customers, about the quality and delivery of product and services offered
to them. Marketing also helps customers to create more genuine and practical expectations about the product.

I.I.4.9. Customer Delight

A customer feels delighted when he receives more than what he has expected. It is a situation where the
products and services offered to a customer not just satisfy his needs and wants, but also provide an
unanticipated value. For example, when a customer visits a grocery store and finds all the products he/she was
willing to buy, then he/she not just feels delighted but also finds the shopping experience faster and convenient
from his/her earlier experiences.
Customer delight plays a very important role in achieving success. It is considered as an outcome of offering
products or services to customers that goes beyond their expectations. A company can exceed the expectation
level of customers only when it provides quality products or services, which make the customers feel delighted.
If the customer is dissatisfied by the product or service offered to him then the company fails to delight the
customer, because before making a customer feel delighted, it is essential to make him satisfied. Delighted
customers are also crucial for the company in order to compete with the competitors.
Customer satisfaction and customer delight are different terms having different meaning. A customer feels
satisfied when his expectations regarding the product are met. Whereas, a customer is said to be delighted
when a product exceeds his expectations. The features of a product or service are the central focus of customers.
In the product function, the features define a product, therefore it is essential for a manager to deliver such
products or services. For example, the availability of petroleum is a must, hygiene of a washroom satisfies, and
getting exemption from a custom duty is a delight.

As per Kano, the product involves various features by which customer is satisfied and dissatisfied such as
delivery, availability, etc.

As per Oliver, there are two theories namely, psychological consumer behaviour and behavioural consumption.
Psychological theory explains the positive and negative emotions of a consumer, which is an amalgamation of
joy and surprise attributes and is denoted as a delight. Whereas, behavioural theory states that the performance
and satisfaction level of consumers. Hence it can be said that, the chances of being loyal towards a company,
are more for a delighted customer than that of a customer who is merely satisfied.

[Link]. Customer Loyalty

Customer loyalty refers to the behaviour of customers who are repeated buyers of a particular product and those
who give good ratings, positive feedback, and recommendations to the company. There are some customers
who favour and provide benefits to a specific company by giving them positive word of mouth for a particular
product or services. They also recommend the product to their friends and relatives, hence making them loyal
customers as Well. Moreover, customer loyalty can be defined as a process, a programme, or a set of
programmes adopted by a marketer to delight its customers and gain more business from them.
18 MBA First Semester‘(Basics of Marketing) SPPU

A company can achieve customer loyalty by offering guaranteed quality products to its customers. It can also
attain customer loyalty by providing various offers and discounts, free coupons, high value trade-ins, low or
zero interest financing, extended warranties, rebates and incentive programmes. The main aim of developing a
customer loyalty program is to delight the customers so that they make repeated purchases and also motivate
others to buy products or services of a particular company. As a result, customer loyalty programmes not just
help in gaining profits but also make stakeholders happy. Green card sponsored by pantaloons is a suitable
example of customer loyalty programme. Customer loyalty also denotes a strong and stable relationship
between a person’s relative attitude and repetitive investment with a supplier. The secret behind the success of
loyalty leaders is that they organise their entire business system keeping in mind the brand loyalty. In addition,
attaining highly loyal customers should be the most significant part of every business strategy.

Customer loyalty programmes include various one-time programmes or a group of programmes such as free
gifts, lucky draws, buy-one-get-one-free, etc. Such programmes are used to lure customers. Offering a risk
free trial period for a product or service in the form of incentive also plays a key role in achieving customer
loyalty. The main objective of customer loyalty programme is to motivate customers to make repetitive
purchases of a particular product or service and buy new products or services that are available in the
market under the same brand name.

[Link]. Market
In general, market is a place where a sum total of all buyers and sellers of a region or area collect to exchange
goods and services, e.g., fruit and vegetable market. In terms of marketing, ‘market’ is a group of consumers or
firms who want to purchase a product are capable of purchasing the same product and the ownership of such
product is permitted by law.

[Link]. Marketers
In an organisation, marketer is a person who is responsible for recognising the goods and services required by
the group of consumers and then marketing those goods and services on behalf of the organisation.

According to Philip Kotler, “A marketer is someone seeking a resource from someone else and willing to
offer something of value in exchange. It is clear that marketer is not a producer. Marketer is one of the parties to
exchange”.

A person, whose duty is to sell goods and services in a market where only specific commodities are sold, is
known as a marketer. In general, marketer represents an organisation which serves a market of end-users. The
relevant products and services required by the end users ' are directly sent by the organisation and the
competitors through marketing intermediaries. The environmental forces and respective intermediaries also
impact the relative effectiveness of the organisation.

1.1.5. Functions of Marketing

Different functions of marketing are as follows:
1) Market Information: The basic function of marketing is to identify market information in the form of
consumer needs, wants, and demands. The study of market information enables the marketers to design
effectiye marketing strategies. This analysis helps to determine the internal strengths and weaknesses of the
firm and J'evaluate the macro-environment of the target market. Further, this information is used in
segmenfajtibn of the market.
2) Research: Another important function of marketing is research. This enables the target market to collect
required information for decision-making. The research process involves identification of size, culture,
genders, belief, behaviour, needs and wants of target market. This forms the basis of product development
to fulfil the consumers’ needs.
3) Buying Function: Buying is also a significant function of marketing to procure quality raw material for
production function. This function is accomplished by the purchase and supply department of the
organisation. But the description and specification of the material is directed by the marketer. Hence, while
designing the product for target market, the marketer must buy all materials essential for the production.

&
Introduction to Marketing (Unit !) , 19

4) Market Planning: This function of marketing involves planning for production decisions, promotion
decisions and other relevant activities. The main purpose of market planning is to achieve the desired goals
of the organisation through capturing targeted market, expanding market presence or through increasing
,

market share.
5) Exchange Function: Exchange function of marketing involves the buying and selling activities. It makes
sure that the required products and services are available to consumers in adequate quantity. The measures
like sales promotion, personal selling and advertising assist the exchange function to sustain in the market.
6) Product Designing and Development: The purpose of product design and development is to make the
product better and more attractive. In accordance with the changing market environment and consumers’
preferences, the product should be cost-effective along with high-end quality, style, appearance, suitability and
design. All these factors influence the consumer’s buying decision.
Hence, product development is very crucial in marketing. The product development process comprises of
various stages where the consumers’ needs and wants are identified and accordingly the product is developed.
The product can also be maintained by conducting its performance evaluation. All this is done to capture a
large share of target market.
7) Production: This function is managed by the production department. Even though, many associated
production activities are undertaken by the marketing department like product testing, techniques used,
packaging, etc. All this is done to assure that the product meets the needs and wants of the target market.
8) Promotion: Promotion is one of the key functions of marketing. After production, the final product is
launched in the target market for sale. It is the responsibility of marketing department to promote its final
products and communicate with its target market about the product. This requires the marketer to adopt
certain promotional methods to reach its consumers such as advertising, sales promotion, personal selling,
public relations, etc.
9) Standardisation and Grading: Marketers also perform standardisation and grading function. In
standardisation function, products are developed under specific guidelines which meet out the set quality
and quantity throughout the production. This helps to maintain the consistency and homogeneity in the
product. In grading function, the final products are grouped into various categories on the basis of their
characteristics. The standard measures used for grading depend upon the size and weight of the product.
Marketers may also use grading for pricing of products.
10) Pricing: Pricing is the process of determining the value which the company will receive in return of its
products and services. Marketers are responsible for designing of pricing policies and systems. The price of
product is usually based on the product life cycle and performance of the product.
11) Distribution: Distribution system plays a significant role in marketing. It helps to move goods from the
production house to the final destination in stipulated time. Different modes of transportation are used to
reach the target market like air, water, rail, road, etc. Marketers also decide the type of intermediary being
used in the distribution channel along with their motivation and incentive plan.
12) Packaging, Labelling and Branding: The functions of packaging, labelling and branding are also
performed by marketing department. Packaging refers to the act of designing a product package. While,
labelling is the process of mentioning the general information about the product on the package. Both these
activities are used as a source of promotion by the company. Branding provides a unique name to the
product another than its generic name. For example, hair oil is the generic name of the product whereas
“Dabur Amla” is the brand name. Branding is also important in services marketing.
13) Financing: In marketing, financing provides credit to its consumers and channel members. Financing is
that part of marketing which generates income for the business. It helps in raising capital for start-up
activities of the business and also for its growth and sustainability. It also acts as a mode of payment for the
customer’s purchases.
14) Risk-takihg: Risk-taking is another key function of marketing. Marketers take risk in producing and
marketing of products and services which consumers may or may not purchase in future. Here, marketers
are uncertain about the buying decisions of the consumers.
20 MBA First Semester'(Basics of Marketing) SPPU

15) Customer Support: Marketers also perform customer support function, which handles and manages
customer queries and complaints. These support functions comprise of pre-sales queries, post-sales
services, grievance handling services, complaints handling services, financial and credit services, etc. For
example, service warranty of mobile devices after it has been purchased, is a marketing function of the
organisation.

1.1.6. Importance of Marketing

Marketing has converted numerous management thoughts and practices into reality such as flat organisational
structure, flexible manufacturing systems, high involvement towards customer service, etc.

Therefore, marketing is important to different people in different ways. Some of them are as follows:
1) Importance to the Marketers: Marketing is important for the marketers in following ways:
i) Financial Success: The success of an organisation largely depends upon the effectiveness of marketing
the products or services. Other organisational functions such as finance, operations, accounting are
worthless, if the demand for the product or services is not significant. Hence, marketing acts towards
profit-maximisation while other functions are cost-based.
ii) Marketing is often the Route to the Top: Like other top positions in an organisation, people related to
marketing are also titled to the post as Chief Marketing Officer. The CMOs are very much similar to the
chief finance officer or chief strategy officer. Marketing activities and strategies are a part of every
annual report presented by the organisation. Marketing is considered as the most vital and significant
part of the entire organisation.
iii) Enhances Sales: Other than prompting the products and services, marketing is also responsible for
keeping up the sales volume of the product. It is the role of marketing executives to recognise the
preferences and demands of the consumers and present them the best product. For all this, marketing
integrates with communication mix to relate with the customers in an effective way.
iv) Develops Company’s Image: Marketing plays a significant role in building the company’s image. This
can be established through brand name, logo, caption, brand image and tagline which is viewed and
perceived by the customers via television commercials.
v) Major Component of Product Pricing: Marketing is an important component for deciding the price
of the product, as a major portion of the price is related to the marketing activities like promotion,
product designing, market research, etc. One of the biggest issues of product pricing decisions is to
reduce the product cost without compromising with the marketing objectives.
2) Importance to the Consumers; Following points reflect the importance of marketing for the consumers:
i) Availability of Global Goods: The integration of marketing activities with the information technology
has aided the consumers to access variety of products from different countries globally. Different tools
like websites, online communities, e-mails, SMS, e-businesses, etc., are used by marketers to reach
global customers and facilitate exchange. With the advanced technologies, one can easily compare
different global products and make a final decision for purchase.
ii) Promotes Product Awareness: The main source of product recognition and awareness is through
marketing. This helps the customers to uplift their standard of living. No one ever thought of
technologies like mobiles phones and laptops to be the part of daily life. Marketers are the initiators of
these innovative products in the market.
iii) Creating Utilities: Different utilities are developed through marketing. Major utilities are time utility
(arranging the product at required time), form utility (changing the raw material into .desired form of
final product), information utility (informing about required product available at a particular place and
at reasonable price), possession utility (by transferring the ownership authorities), and place utility
(making product available to the customer). • •,
!
3) Importance to the Society: Society gets benefitted from the marketing in following ways:
i) Protection against Depression: Depression is a situation where large number of sellers offer
homogenous products in the market. Marketing facilitates the availability of variety 'bf products at
reasonable prices, thus avoiding the depression situation.
Introduction to Marketing (Unit.1) , 21

ii) Job Opportunities: Marketing provides several job opportunities to the society like advertising, personal
selling, marketing research, logistics, product design, retailing, packaging, media relations, event
management, market analysis, etc. Other than these opportunities, non-commercial job opportunities also
have wide scope such as social marketing, ethical marketing, advocacy marketing, cause marketing, etc.
iii) Availability of Various Products: Without marketing, there would have been no customer preferences.
Marketing offers a wide range of products and services to consumers with different tastes and preferences.

1.1.7. Selling versus Marketing

Following points highlight the differences between selling and marketing:
Basis of Difference Selling Marketing
1) Emphasis In selling, emphasis is given to the product. In case of marketing, consumers’ needs and
wants are emphasised.
2) Approach Traditionally, selling approach involves In marketing approach, first the needs and wants
manufacturing and then sales of the of customers are identified and then the product
product. is delivered.
3) Primary and The primary and secondary motive of In marketing, the primary motive is to satisfy the
Secondary Motive selling is sales and company’s satisfaction customers and secondary motive is to meet die
respectively. consumers’ expectations.
4) Orientation It is a sales-volume oriented process. It is a profit-oriented process.
5) Planning It is a short-term plan based on prevailing It is a long-term plan based on the tastes and
products and markets. preferences of the consumers.
6) Need Priority It focuses on the needs of sellers. It focuses on the needs and demands of
consumers.
7) Philosophy Business is considered as a source of profit Business is considered as a way to satisfy
generation. consumer needs.
8) Technology Selling process is based on existing Marketing process is based on superior
technology with limited costs. technology to provide better value and
innovative products to customers.
9) Work Delegation Different departments perform There is common goal to all departments and
individually, with distinct objectives. they work as a team.
10) Price Price is determined by manufacturing Price is determined by consumers, i.e., market.
Determination costs.
11) Customers In selling, customers are considered as the
last link. prime link.__
In marketing, customers are considered to be the

1.2. MARKETS
1.2.1. Concepts of Markets
Market is defined as a group of individuals or organisations that is interested in purchasing products and
services, is capable of purchasing and has the permission of law to purchase that product.

According to Cournot, “Economists understand by the term market, not any particular market place in which
things are bought and sold, but the whole of any region in which buyers and sellers are in such free intercourse
with one another that the prices of the same goods tend to be at equality easily and quickly”.

According to Philip Kotler, “A market consists of all the potential customers sharing a particular need or
wants who might be willing and able to engage in exchange to satisfy that need or want”.

According to Pyle, “Market includes both place and region in which buyer and seller are in free competition
with one another”. The number of persons, whose needs are not satisfied but they have the ability to perform the
transaction for fulfilling their requirements, determines the size of the market.
 L

22 MBA First Semester' (Basics of Marketing) SPPU

1.2.2. Marketing Versus Market

Basis of Difference Marketing Market
Marketing consists of all those A market is basically a medium that
procedures that ensure the delivery of facilitates the process of exchange of goods
1) Meaning goods and services from the place of and services among the buyers and sellers. In
production to the place of consumption. market, prices are determined according to
the demand and supply of product or service.
“Marketing” is basically a mechanism Goods and services can be easily delivered
2) Outlet versus that helps in transferring the goods to due to establishment of “Market”. Market
Means
_
the right person, at the right time, and
at the right place. _
can be considered as a store or an outlet for
the exchange of goods.
“Marketing” is the combination of all “Market” is referred to as a system or an
the activities that are involved in arrangement of facilities that lead to the price
successful delivering of goods and fixation of a commodity. Hence, in case of a
3) System versus services from producers to end well-organised or well-settled market it is
Activity consumers. This delivering of goods not mandatory that products and people are
symbolises the activity of marketing, it available at same place.
means that after fixing the price, seller
delivers the product to buyer._
“Marketing” is a broader concept. It “Market” is a narrow concept. It determines
4) Narrow versus
determines all the procedures that are the location and environment where the
Comprehensiv
involved in the process of delivering sellers and buyers come together for further
e Concept
goods to the end consumers. _ transactions.
The process of marketing starts after Market involves the forces of demand and
5) Occurrence of
the market gets defined because entire supply that help in determining the price. As
marketing management revolves the transactions start, the physical movement
Event
around the market. of goods take place mid the ownership of
product is transferred._
On the contrary, marketing is more In a market, changes take place more quickly
consistent than market and it takes a lot in comparison to marketing because market
of time to change because it depends consists of those factors which are very
6) Change versus on various factors of external dynamic in nature such as, sellers, buyers,
Consistency environment such as, political their needs and demands, supply channel,
environment, government policies, etc.
rules and regulations, etc., and these
factors adopt changes very slowly.

1.2.3. Importance of Markets

Following points reflect the importance of a market:
1) Reciprocal Benefits: Market creates a reciprocal benefit in a way that consumers can fulfil their requirements
by purchasing the products, whereas the sellers can acquire the market for continuing their marketing activities.
2) Incentive to Producers: The main aim of producing goods is to sell them to consumers. But the goods
cannot be sold if market does not exist. So, the existence of market for certain product plays a very
impptt juit role in motivating the producers to continue their production activities.
3) Generation of Employment: Market also plays a vital role in creating new opportunities of employment
because day to day selling and purchasing of goods and services require manpower for performing various
operations.
4) Index of Economic Situation: Market condition of any country helps in determining its economic
situation. If a country is performing its business operations in worldwide market then it is considered to be
an advanced country as far as business is concerned.
5) Supply vs. Demand Adjustment: In the absence of market there will be no demand for product and
services. Some products such as, sugarcane, cotton, jute,, etc., are produced seasonally butdheir demands
persist throughout the year. So over a long period of time, a well-managed market helps ip. maintaining a
balance between supply and demand and also plays a vital role in controlling the price fluctuations.

%
Introduction to Marketing (Unit 1) 23

1.2.4. Types of Markets

On the basis of different approaches, markets can be classified in various ways, which are mentioned below:
1) On the Basis of Geographical Areas: On the basis of geographical areas, market can be of following types:
i) National Market: A country is considered to be a national market for a particular commodity when all the
facilities of production, distribution, communication, etc., are available in that country. Currently in India,
goods or services can be delivered quickly in any comer of the country because of effective transportation
and communication system. That is why India is national market for near about all the products and brands.
ii) International Market: A market is referred to as an international market when the buyers and sellers
of products and services are involved in the process of exchange beyond the geographical boundaries of
a country.
:i!> r
;ii) Regional Market: When a market is confined to a specific region or area of a country, then that market
is termed as a regional market. For example, India is distributed in four regions namely Eastern India,
Western India, Northern India, and Southern India for most of the purposes.
iv) Local Market: A market that is restricted to a small area for doing business operations is called local

vegetables, etc. _
market. Local market involves markets of consumable goods of daily requirement such as, milk,
‘

Types of Market

On the basis of On the basis of On the basis of On the basis of actual On the basis of On the basis of
geographical nature of position of commodities competition volume of business
area transactions sellers transacted

!• Perfect Imperfect

_
Market Market
I I
Future
Market
Spot
Market
Primary
Market _
Secondary/ Terminal
Central . Market
Market
Retail Wholesale
Market Market
Industrial
Market

1 Produce Manufactured
I
Bullion Stock
National International Regional Local Exchange Goods Market Market Market
Market Market Market Market Market

2) On the Basis of Nature of Transaction: On the basis of nature of transactions, market can be of following
types:
i) Spot Market: Spot market is that type of market where commodities are delivered immediately as soon
as their transaction is settled.
ii) Future Market: In case of future markets, contracts are signed for the transaction of a commodity
which is to be settled on any future date, i.e., payment and delivery of product will take place in future.
Contracts are signed generally for price fixation. ,, -
3) On the Basis of Position of Sellers: On the basis of position of sellers, market can be of following types:
i) Primary Markets: In primary markets, organisations sell their products to some tmdidlerrien like,
distributor or wholesaler.
ii) Secondary Market: In this type of market, the middlemen like wholesalers, further sell their products
to another middleman like retailers.
iii) Terminal Market: Terminal market is that market where goods are finally sold to the end users of the
product.
4) On the Basis of Commodities/Goods: On the basis of commodities, market can be of following types:
i) Produce Exchange Market: Sale and purchase of only one commodity takes place in ‘produce exchange
markets’ and these markets are set-up and managed by the buyers and sellers of that commodity. These
markets can only be seen in cities which ’ate industrially developed. Cotton Exchange Market of Mumbai
and Wheat Exchange Market of Hapur are some of the examples of such markets.
24
.csst,.. K. e.

MBA First Semestpr

'

—
ii) Manufactured Goods Market: Manufactured goods are bought and sold in these types of markets.
Some examples of these markets are Piece Goods Exchange of Mumbai, Leather Exchange Market of
Kanpur, etc.
wre

of Marketing) SPPU

iii) Bullion Market: Commodities like gold and silver are bought and sold in these types of markets.
For example, Bullion markets of Kolkata, Kanpur, Mumbai, etc.
iv) Stock Market: Mutual funds, equity shares, bonds, debentures, etc., are bought and sold in these types
of markets. Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) are the stock
exchanges that regulate the stock markets of India.
5) On the Basis of Nature and Degree of Competition: On the basis of nature and degree of competition,
market can be of following types:
i) Perfect Market: If the market fulfils following conditions then it can be referred to as a perfect market:
a) Sellers and buyers are huge in number,
b) Similar products are offered by all the sellers,
c) All the buyers and sellers have full knowledge about the market and
d) Factors of production are equally accessible by all the sellers.
ii) Imperfect Market: The market is referred to as imperfect market, if at least one of the aforementioned
conditions is not fulfilled. The degree of imperfection again provides a basis for categorising the
market. The worst of the imperfect markets are those where only one buyer, i.e., monopsony, or only
one seller, i.e., monopoly, exists.
6) On the Basis of Volume of Business Transacted: On the basis of volume of business, market can be of
following types:
i) Retail Market: In these types of markets goods are directly sold to end consumers. End consumers buy
goods for personal consumption and not for making profit from it.
ii) Wholesale Market: In these markets, dealers or retailers buy goods in bulk quantity for the purpose of
re-sale.
iii) Industrial Market: In industrial markets, goods are bought in bulk either for consumption or for the
purpose of further processing on it, e.g., raw material.

1.2.5. Competition
Competition may be defined as a process in which individuals, groups, countries, etc., compete with each other
in order to acquire something, such as, customers, resources, rank, etc. In case of businesses, most of the
companies are continuously competing with their counterparts in order to acquire the customers who have
similar needs and are seeking similar products.

Competition encourages organisations to develop new products, to improve the existing ones, to make them
price-effective by not compromising with the quality, to ensure effective distribution, etc. It is also essential for
determining the health of the industry because healthiness of an industry is evaluated on the basis of various
elements like, variety of products, quality, geographical reach, affordability, etc.

Competition inspires the organisations to analyse the marketing environment, to examine the change in needs
and expectations of customers, and to review their product range and markets. Finally after reviewing,
companies can make suitable changes in their product range in order to fulfil the changing needs of
customers.
Competition motivates new participants to become distribution channels of any industry, which leads to more
convenient and effective delivery of goods and services to customers. It also gives benefit to customers because
these new participants or intermediaries try innovative ways to attract the customers. These intermediaries play
an important role in linking the needs of customers with the offerings of the company, which in long run results
in customer loyalty.
v. .1,*.
According to Bergen and Petrel, competitors must be categorised on the basis of two criteria, shown in
figure 1.3.
Introduction to Marketing (Unit 1) 25

Resource Similarity
High

Potential Direct
Competitors Competitors
Low High Market
Incipient Indirect Commonality
Competitors Competitors

Low
Identification of Competitors
Figure 1.3

First criterion represents the degree upto which the competitors are competing in common markets, and this
criterion is called ‘market commonality’. The second criterion represents the competitors’ degree of similarity
and that of their ability to satisfy the requirements of defined market; this criterion is known as ‘resource
similarity’.

Direct competitor is that company which scores high in both the criteria; whereas the company which is not
operating in the same market but has resources similar to its competitors are referred to as the potential
competitor. Indirect competitor is that company which has similar market area of operation but does not have
similar resources. Lastly, the company that scores low in either of the criteria is termed as incipient customers.
Hence, it is essential to monitor these companies to find out any type of changes in resources and competencies
required to perform market activities because it can make them capable of becoming direct competitors.

Types of Competition
There are mainly three levels of competition which are explained below:
1) Immediate/Direct Competition: It is the level up to which companies, in common markets compete with
each other. Direct competition is very narrow form of competition where only those brands compete that
are operative in same industry, i.e., they deal in same products. It is also referred to as ‘immediate
competition’ or ‘category competition’.

For example, a detergent brand named as Surf Excel is competing with other brands namely, Ariel, Tide,
Wheel, etc. When two companies are direct competitors and one of them launches a new product in its
product-line, then this leads the other company to also launch a similar product in order to stay in
competition.
2) Related/Indirect Competition: At this level, competition exists between those companies who offer
products that are substitute of each other, such as, Amul butter competes with various brands of jam and
sauces; similarly, Tata Tea may compete with Nescafe coffee, etc.
3) Unrelated/Budgeted Competition: Budgeted competition is the broadest form of competition. In this
category, all those companies are competitors to each other on which'a customer can spend his money. For
example, a family is having 20000 to spend on several unrelated products such as, home appliances,
sanitary wares, etc., then in such a case, LG, Samsung, and other companies of home appliances become the
competitor of brands of sanitary wares, such as, Hindware, Jaguar, Parryware, etc.

1.2.6. Key Customer Markets

Market is traditionally defined as a place where buyers and sellers come together and exchange the goods to
satisfy their needs. Various economists have defined market in such a way that it is a group of sellers and
buyers, who exchange certain product or group of products, such as, grain market, housing market, automobile
market, jewellery market, etc. According to marketing point of view, marketers together form an industry while
the buyers together form a market. Market is an environment in which individuals want their needs to be
satisfied, want money which they can spend, and the readiness to spend it. Basically, market consists of three
important elements, i.e., people with their needs, their ability to purchase, and their readiness to spend. Key
customer markets are classified into following four types:
26 MBA First Semester (Basics of Marketing) SPPU

Key Customer Markets

Consumer Markets
Business Markets

Global Markets
„ Non-Profit and Government
Markets

1) Consumer Markets: Consumer markets refer to the group of those buyers who buy goods for their
personal use and not for re-selling or more processing. In this market, goods and services are produced in
large scale and are sold to end consumers such as, soft drinks, FMCG goods, confectionaries, etc. In
consumer market, the companies aim on building a superior brand image because value of brand depends
upon its image, packaging, and accessibility to the customers.
2) Business Markets: These types of markets consist of organisations. Products or services are bought by the
organisations for further processing such as, manufacturing, reselling, renting, leasing, etc. Purchase
process is a part of business decision-making which helps the business buyers in identifying, evaluating,
and selecting among other brands and suppliers and creating demand in the consumer market for the
products already purchased by them. Organisations that sell their products to other organisations must
understand the organisation’ s buying behaviour as well as the behaviour of the business market.
3) Global Markets: Global markets are those markets where buyer and seller can be of any country. Sale and
purchase of various products takes place in this market. Any country, to become a part of global market, has
to face many challenges such as, deciding the host country, how to penetrate the market of a foreign
country, what should be the mode of entry (licensing, exporting, franchising, joint venturing, etc.), what
modifications in the product should be done, price fixation in different countries, formulating the strategies
of marketing communication in accordance with the culture of host country, etc.
4) Non-Profit and Government Markets: Non-profit organisations are those organisations which do not
work with the intent of making profits. Government agencies, charitable organisations, health organisations,
schools, colleges, and universities are some of the examples of such organisations. Since, these
organisations have limited financial resources, so they must set their prices very carefully. Mostly
government buying takes place through auction process and lowest bid is preferred the most if it does not
require any qualifying factor.

1.2.7. Marketplaces, Market Spaces and Metamarkets

A group of buyers and sellers together forms a marketplace! If can also be defined as a group of individuals
and organisations with identical needs, which can be fulfilled by a particular product or service. For example,
automobile market is the combination of buyers and sellers of automotive vehicles. Similarly, the housing
market is the combination of buyers and sellers of residential properties.

According to marketers, the term ‘market’ means only the purchasers or buyers. This basic perception of
marketers has not changed since long; the only thing which has changed is the location of sellers and buyers.
In earlier times, the value creation took place due to the effective coordination of production and distribution
of products, in exchange of money or barter in the marketplace. But after the introduction of managerial
improvements’,and bigger organisations, value creation was determined by the management of well-organised
production and distribution activities. Due to the improvements in transportation and communication
technologies, marketers become capable of connecting with various forces of marketplace and controlling
them. ..... • ’.ÿÿÿÿ•

Furthermore, this system consists of both tangible and intangible products. Tangible products are physical
components of product (size, shape, etc.) and intangible prodticts are information based components of product
(warranties, terms and conditions, etc.). Marketing helps in adjusting the supply according to th'es demand and
managing the distribution channel through which products and information regarding them are delivered to
customers,

;
f
Introduction to Marketing (Uflit 1) 27

Marketing models were emerged so that the consumption level of customers can be raised to a great extent.
These models helped in motivating the customers to purchase or repurchase the goods and services of the
organisation. Because, of this, the marketing management of a company shaped the behaviour of distribution
channel and also of consumers through direct sales, mass media, and advertising. So in a marketplace, a
company is the main point of value creation because of its greater managerial abilities and its capability of •
maintaining the relationship with customers.

Marketplaces such as, grocery stores, flea markets, mall, etc., still exist but technology is one of the main
reasons behind some of the growing markets. Electronic marketplaces that are free from the limitations of time
and space are referred to as the ‘market space’. Internet is the medium through which products, services and
information are exchanged in a market space. Amazon, Flipkart, Snapdeal, Shopclues, etc., are some of the
examples of market spaces.

Many of these market spaces are now considered as similar to shopping malls because they deal in almost every
product that a customer may require such as, apparels, footwear, electronic goods, jewellery, beauty products,
sport products, books, etc. Business-to-business companies are also dealing in market spaces. The change of
trend from marketplace to market space has many effects on the marketers. Businesses in market space must be
capable of operating without any pause so that customers can shop, place order, and interchange information at
any time.

Since technology has made human communication easier through social networking sites (Facebook, Twitter,
etc.), blogs, or discussion forums, the customers can now interact with one another to exchange information
about the product and service outside the market space also. Along with the positive impacts, this
communication can also affect the marketers negatively, i.e., the company may lose control over the
information that is spreading about them and their product.

Market spaces like OLX are very successful because they remove the role of any mediator or third party from
the process of buying a product. Most of the customers find it difficult to adopt market spaces because the
element of face-to-face interaction is not present in them. Hence, the marketers who operate in market spaces
face a severe challenge in designing and implementing the online experience. Now customers can increase their
level of awareness by analysing the amount of information available in market spaces, and they can also
compare and negotiate the prices before purchasing a product.

Another key progress is that the suppliers of related goods and services are coming together under one roof for
providing facilities to the customer. For example, when an individual wants to buy a house, he may need
various facilities such as, finance, household goods, furniture, interior designer, etc. When the suppliers or
providers of all these facilities come under one roof then a ‘metamarket’ is generated.

The facilitators or providers who constitute a metamarket are known as ‘metamediaries’. Nowadays, in various
buying situations these metamarkets are becoming very common. In today’s world, it is very likely that one can
see a firm operating in marketplace, market space, as well as in metamarkets. For example, banks provide
home loans and car loans from their physical branches, their websites, and also through the car dealers and real
estate companies.

In this era of competition, it is very essential for the organisations to maintain long-term relationship with
their customers by using various techniques and methods. According to Jonathan R. Copulsky and
Michael J. Wolf, there are three main elements which are involved in relationship marketing process, which
are as follows:
1) Current and potential buyers must be identified and their database must be maintained. This database must
include demographic and psychographic details as well as the buying behaviour of target customers.
2) Content of message and channel of communication should be decided as a part of marketing
communication strategy. The database (as explained in above point) can be used as a basis to form the
strategy.
3) Relationship with the consumer should be reviewed in order to make sure that the customer comes for
repeat purchases.
 -1

:
28 MBA First Semester (Basics of Marketing) SPPU

Metamarket is a place where all the related goods and services are available, whereas ,a metamediary is the
provider or seller who constitutes a metamarket. In reality, the buyers do not use these terms but they are totally
aware about the concept of acquiring all the related products, services, and information under one roof. For
example, iVillage ([Link] has now become a well-known metamediary in the field of
internet, which deals with the issues related to women such as, pregnancy, parenting, etc. Nervous and worried
parents frequently visit iVillage for getting proper advice. Hence, metamediaries like iVillage are providing
quick and convenient solutions to the problems of people by providing them required information, products, or
services.

1.2.8. Digital Markets/Digital Marketing

Digital market is a digital platform used for the buying and selling of goods and services. This digital platform
may include internet, e-commerce sites, apps, computers, laptops, smartphones, general mobiles, etc.

Digital market enables the consumers to search about a product or service. They can also compare and contrast
goods and services in terms of pricing, quality, service providers, delivery, and promptness. The virtual pool
enables the consumers to read the review about the goods/services and also to study opinions of other buyers.
All these things have become simpler and possible due to advent of virtual means which is rather a quick and
economic resource.

All these activities can be carried out irrespective of the fact that the prospective buyer makes the actual
purchase on the web or not. The e-pool has literally made possible things which couldn’t be previously
imagined. It has enabled the consumers to make informed choices by getting full description about what they
are buying and the details about manufacturer or service provider. It has become easier for the sellers to expand
their services as they can reach the buyers anytime and anywhere regardless of their geographic location.

Today, the marketers don’t have constraints of storage as catalogues can be modified very easily with the
changing demand patterns. Moreover it has also become possible to extend the catalogue items beyond any
limits. For example, a Computer manufacturer does not need distributors or retailers to making sales as it is
possible for the company to offer the products and services through e-store from where the exact needs of th#
customer can be understood and accordingly customised product and catering personalised services can be
offered.

Buyers can find the seller who is offering the goods at the most economical prices, similarly seller can also find
the customer who can pay the highest amount. Such a situation can be seen on online store, such as eBay where
the highest bidder wins the auction. Moreover, rapid flow of information helps in efficient supply chain
management by synchronising production, record keeping and delivery. The virtual reality has enabled the
manufacturer to draw more information about their consumers, business associated, and business rivals.

Digital marketing is an interactive marketing of products and services using digital technologies to reach
customers on-time and retain them. This interactive channel of distribution can be of various media forms like
mobile, internet and other digital outdoor tools. Digital marketing is the most accessible, easy to use and
contemporary method of promotion which is also known as ‘online marketing’. It has a great potential to
replace traditional and out-dated methods of marketing and may prove inappropriate to new and potential
consumers.

Digital marketing is not just confined to the methods using internet, rather it is beyond this. It involves other
distribution channels to reach customers, which do not require internet for promotion of goods and services.
Therefore, digital marketing uses different mediums such as text messages, multimedia messages, mobile
phones, digital boards, banners, television, radio, etc., for communicating with the customers. These techniques
help the marketer to directly reach their customers in a cost-effective manner.

Earlier, internet marketing was viewed as a separate promotional service but now it is viewed/as the main
domain of marketing which mostly covers all traditional methods. Presently, the method of communicating with
the customer is same, but now it is made more interactive by using digital technologies. Going,digital enables
the companies and marketers to serve and engage their customers effectively.
Introduction to Marketing (Unit 1) 29

“Digital marketing is the promotion of brands using all forms of digital advertising. This now includes
television, radio, internet, mobile and any other form of digital media.” Digital marketing is growing steadily in
the Indian market. Indian consumers need time to become familiar with the use of digital marketing
technologies. However, there is a wide scope for web-based companies in India as consumers are constantly
moving towards web-based marketing.

Tools of Digital Marketing

Some of the important tools of digital marketing are as follows:
1) Blog Marketing: It is a webpage where few experts or users of a particular product or service share their
opinions, experiences and reviews in a written form, which is termed as a ‘Blog’. Most of the blogs are
public and can be accessible by everyone whereas, some are private blogs having restricted access.

Sometimes, these blogs are used as a medium for expressing personal egos and experiences while, there are
few blogs which are used for professional communication. A blog usually contains posts on diverse subjects
and links of different internet sites for reference which assists the reader to get a clear and honest review on
a topic or a product he is going to use in future. These pages are organised in a reversed chronological
order, where the most recent blog is viewed on the first page.
2) Advertising and Personal Interactive Television: The rapid growth of the satellite televisions with high
frequency bands, the advent of broadcasting mobile services in mobile communication and the introduction
of P2P (Peer-to-Peer) technology to access and share audio-video files has led to the emergence of new
trends in advertising which is highly opposing traditional video advertising. One such new trend of
advertising is personal interactive television. In this, supplementary data services are added to the
traditional television technology.

For example, digital TV set-top box is a very common form of personal interactive television where on-
demand delivery of content can be made such as movies on demand or cookery channels on demand. It is a
personalised service which is provided to the viewers for having fun, socialising and getting access to
additional services.
3) Text Messaging Marketing: This type of marketing is an interactive and direct way of communicating
with the target audience via sending texts. It is most widely used for promoting movies, live sports events
and breaking news, business, etc. Text messaging campaigns are mainly sponsored by the marketing
agencies. They provide all sort of information concerned with the target audience to the television channels
which is vital for their marketing strategies.

These campaigns prove to be very advantageous for mobile phone operators. Since, customers pay a
nominal amount from their phones while the mobile phone operators receive a considerably high percentage
of that amount. This type of marketing has been expanded in form of multimedia messaging, which also
includes messages having video content. The rapidly growing popularity of such campaigns has made it an
effective tool of digital marketing. It is also believed that it will increase the profit margins of the mobile
phone operators.
4) . Multimedia Messaging: Multimedia messaging is a tool of digital marketing which offers personalised
services to its customers with immediate response. It also enables interactive communication with the
customers and provides services like news, sports, entertainment, healthcare, social network, gaming, etc.

These types of messages usually receive a positive response from the users. However, it may include
several issues like lack of knowledge, high cost, education level, etc. Here, one of the biggest issues is the
technical problems which arise due to absence of a standard format for the multimedia messages which is
applicable for all mobile phone users.

This happens because there are only few users who possess text and multimedia facilities together. In
addition, there are some users who possess phones with MMS facilities but cannot upgrade their phones for
such messages while some users do not want to receive such multimedia messages. Hence, companies are
always unsure about the number of customers actually receiving the message.
 ..,j tiaassija

:
30 MBA First Semester (Basics of Marketing) SPPU

5) Really Simple Syndication (RSS): It is a digital format where live streaming of, most recent political,
economic, sports, social and entertainment news is done through Really Simple Syndication (RSS). A
programme called ‘aggregator’ is used in this technology to notify the users about,any update on their
preferred websites. Under this technology, the users need not access the website tq view the new changes
related to it. Instead, the RSS applications available these days will automatically show a pop-up regarding
any news or change on the pre-selected website at any point of time. One of the conditions for availing this
facility is that the desired websites must have the RSS option.

However, most of the websites are now considering it. Accessing information online has been
revolutionised by the RSS (Really Simple Syndication) technology. Now, users can instantly access any
information, latest news and updates through RSS technology. In future, RSS is expected to be the most
effective method for fetching information.
6) SEO: This is the practice of optimising a website to rank higher on the search engine results pages for
relevant search terms. SEO involves creating relevant, fresh and user-friendly content that search engines
index and serve when people enter a search term that is relevant to product or service. SEO has a key role
to play in acquisition, as it ensures organisation’s offering will appear in the search results, allowing it to
reach potential customers. A site that is optimised for search engines is also a site that is clear, relevant
and well designed. These elements ensure a great user experience, meaning that SEO also plays a role in
retention.
7) Search Advertising: In pay-per-click or search advertising, the advertiser pays only when someone clicks
on their ad. The ads appear on search engine results pages. The beauty of search advertising is that it is
keyword based. This means an ad will come up in response to the search terms entered by the consumer. It
therefore plays a role in sales, acquisition and retention. It allows the advertiser to reach people who are
already in the buying cycle or are expressing interest in what they have to offer.
8) Online Advertising: It covers advertising in all areas of the internet - ads in e-mails, ads on social
networks and mobile devices, and display ads on normal websites. The main objective of display
advertising is to raise brand awareness online. It can also be more interactive and therefore less disruptive
than traditional or static online advertising, as users can choose to engage with the ad or not. Online
advertising can be targeted to physical locations, subject areas, past user behaviours, and much more.
9) Affiliate Marketing: It is a system of reward whereby referrers are given a ‘finder’s fee’ for every referral
they give. Online affiliate marketing is widely used to promote e-Commerce websites, with the referrers
being rewarded for every visitor, subscriber or customer provided through their efforts. It is a useful tactic
for brand building and acquisition.
10) Video Marketing: It involves creating video content. This can either be outright video advertising, or can
be valuable, useful, content marketing. Since it is so interactive and engaging, video marketing is excellent
for capturing and retaining customer attention. Done correctly, it provides tangible value - in the form of
information, entertainment or inspiration - and boosts a brand’s image in the eyes of the public.
11) Social Media: It, also known as consumer-generated media, is media (in the form of text, visuals and
audio) created to be shared. It has changed the face of marketing by allowing collaboration and connection
in a way that no other channel has been able to offer. From a strategic perspective, social media is useful for
brand building, raising awareness of the brand story and allowing the consumer to become involved in the
story through collaboration. Social media platforms also play a role in building awareness, due to their
shareable, viral nature. They can also provide crowdsourced feedback and allow brands to, share valuable
content directly with their fans.
12) E-Mail Marketing: It is a form of direct marketing that delivers commercial and content-based messages
to an audience. It is extremely cost effective, highly targeted, customisable on a mass scale and completely
measurable - all of which make it one of the most powerful digital marketing tactics. E-mail/marketing is a
tool for building relationships with potential and existing customers through valuable . content and
promotional messages. It should maximise the retention and value of these customers, ultimately leading to
greater profitability for the organisation as a whole. A targeted, segmented e-mail database, means that a
brand can direct messages at certain sectors of their customer base in order to achieve the best, results.
 Introduction to Marketing (Unit 1)' 31

1.2.9. Brick and Click Model

Bricks-and-clicks also called as click-and-mortar, clicks-and-bricks, clicks and flips (flips here refer to
catalogues) refer to a business model which enables a firm to carry on their business through online (clicks) and
offline (bricks) models. For example, it is possible for the consumer to Order the product online and receive it
from the regional store which can be located through the suitable software: On the other hand, it is also possible
to see the desired item at the display store (e.g., furniture) and order it online.

B&C Model refer to amalgamation of online and physical store. In this way the concept of Brick and click is
related to online and offline business, while e-commerce is selling the products through online mode. For
example, Argos has e-commerce business, as it is offering its products through online mode only. A bricks-and-
clicks business is a unique combination of availing the benefits of physical store and e-store. It enables the
customers to order the product and services online (click) and get it from the nearby physical store (brick) or
vice versa. This model also enables the company to gear up its business.

Generally, bricks and clicks model has been utilised by the conventional traders with a wide logistics and supply
chain network. It is rather simple for such traditional companies to establish its virtual presence instead of the start¬
up company to go online or an online company to open a retail outlet (not even in case of well-known brands).
B&C model’s tremendous success has put a big question mark in front of all the business analysts who predicted
that online stores will result in obsoleting the conventional stores by eliminating the need of market intermediaries.

Benefits of Brick-and-Click Model

1) Best use of Core Competency: If any company intends to stay ahead in the market and to achieve success,
it should focus on its core competencies. These core competencies can be anything, like customer service or
developing a new product. Brick-and-click model enables a traditional company to utilise its core
competency deeply and widely to bring in maximum returns.
2) Existing Supplier Networks: Bricks and mortar firm establish trustworthy relationship with then-
suppliers. Such a bonding helps is a guarantee of hassle free and timely delivery. It also helps in availing
discounts and other special benefits.
3) Existing Distribution Channels: Apart from having a strong network of suppliers, traditional firms can
; also use their present marketing channels to offer discounts, and prompt delivery to the online and offline
customers.
4) Brand Equity: Generally traditional companies have established their brand identity throughout the years
by spending a huge amount. Good returns can be acquired on such spending by going online. For example,
brands like Disney.

1.3. EVOLUTION OF MARKETING/COMPANY ORIENTATION

TOWARDS MARKETPLACE
1.3.1. Introduction
With the changing market environment, the organisational philosophies, approaches and tools are also changing
rapidly The marketing concepts are the approaches which may be used by the organisation tbWafds target
market for marketing of products and services. Different approaches adopted by different organisations vary in
accordance with their organisational objectiveÿ' like some organisations are customer-focussed, some offer
customer value, while others consider customers as king of the market.

However, the concepts used by the organisation should be implemented in an effective and socially responsible
way. It is very significant for the marketing approaches to escort marketing efforts. Other than this, it is also
important to maintain equilibrium between the company’s interests, customers’ needs and wants and benefits of
the society and public in general.

The marketing Concepts are mainly used to achieve the desired exchange between the potential customers and the
market. There are different marketing concepts or philosophies available to the companies, which are as follows:
32 MBA First Semester (Basics of Marketing) SPPU

Company Orientation towards Marketplace

Production Orientation Product Orientation

Sales Orientation Marketing Orientation

Societal Marketing Orientation Transactional Marketing Orientation

Holistic Marketing Orientation Relational Marketing Orientation

1.3.2. Production Orientation

The production orientation was introduced during the industrial revolution in the 19th century and lasted till the
late 1920s. This concept is based on the law that “supply creates its own demand”. Under this orientation,
consumers’ tastes and preferences are not considered while producing goods and services. Earlier, it was
believed by marketers that the goods produced by them will be sold as per the consumers’ requirements. Based
on the law that “supply creates its own demand”, it is assumed that with the increase in production and
distribution activities, the sale of products and services also increases. This concept is very old and is
implemented only in limited situations.

For example, if a firm wants to cut-down its cost of production then this can be done by increasing production
of goods and services. This will generate economies of scale and reduce the cost of products. In a similar way,
the disequilibrium between the demand and supply can be managed by applying production concept. With high
demand, the prices of products also start increasing which leads to high profits.

The organisations following production orientation assume that if products are of low cost then they can be
offered at various locations and marketers will not face any problem. In consideration with above statement,
organisations focus on low cost of production and wide distribution network. This process involves large scale
of production which is a crucial problem for the organisation. It is not always necessary that customers will buy
cheap goods and services, whenever offered. This organisation is very useful in banks, hospitals, and industries
producing convenience products.

1.3.3. Product Orientation

This marketing concept is all about providing good quality products and services with attractive features to
consumers at reasonable prices. It helps the sellers to focus on products considering their quality, performance,
innovative features, etc. Along with these standards, it is also important to look after the design, packaging and
better distribution channels so as to appeal more customers. The major problem of this concept is marketing myopia,
because of which the organisation ignores other alternatives and its competitive advantages present in the market.

Based on the concept, it is believed by many organisations that customers can be easily attracted by good
quality products and services. This concept evolved on the basis of thinking that quality of goods largely
attracts the customers. As a result, all the marketing efforts are used to increase the quality of a product. The
organisations using ‘product orientation’ automatically assume that consumers rely on the products of high
quality. Therefore, organisations put all their effort, time and money to bring out new and innovative products
and attain product excellence.

But, in reality, good quality is not the only factor responsible for attracting customers and making them buy the
products or services. Other important factors affecting the buying decisions can be price of the product,
availability of product, etc. The monthly or yearly budget of a customer gets disturbed due to availability of
quality products at high prices. Thus, focussing only on the quality aspects of the product is not considered as
an effective marketing approach.
There is a remarkable difference between ‘product orientation’ and ‘production orientation’. Production
orientation is about capturing the market and making profit by producing large amount of goods at low cost.
While, product orientation seeks to achieve the same objective through product excellence whibh involves high-
quality products, improved features, attractive designs, etc. In short, the product concept of marketing deals
with the product and its related features to win the market.
Introduction to Marketing (Unit- !ÿ)’ 33

1.3.4. Sales Orientation

From the late 1920s till the mid of 1950s, the sales orientation or concept was widely used as the management
philosophy. This approach involved larger-scale selling and promotional activities related to products and
services. The main aim of this concept was to attract large number of customers. In general’, -there are many
products which consumers do not purchase, but are produced by the firms. Therefore, sales concept is used to
attract such customers.

It involves high amount of risk, because organisations need to sell the product whether it is liked by the
customers or not. In case the product is not liked by the customers, it may tarnish the goodwill of the
organisation. The sales orientation suggests that the customers’ can be attracted towards the product. It is also
believed that goods are not bought but they have to be sold. Consequently, the organisations focus on their
efforts towards communicating and attracting customers. They follow the philosophy ‘selling what you have’.

The concept also suggests that by making continuous attempts marketer can sell anything to the customers. But
this may not be applicable in all situations, as marketer can attract customer to buy a product once. It is not
necessary that the customer will buy the same product each time. This may prove as a disadvantage to the
organisation. Hence, sales concept is a short-term concept, which cannot be used to achieve long-term goals.

1.3.5. Marketing Orientation: Modern Concept of Marketing

Marketing orientation is a customer-oriented concept, it is also known as the modern marketing concept.
The basic philosophy of marketing concept states that the objective of an organisation can only be achieved by
acknowledging consumers’ needs and wants as well as satisfying them. This also helps the organisation to
maximise their profits.

The organisations followed the customer-oriented concept to develop products which satisfied and attracted the
customers. In the early 1960s, customer-oriented concept was implemented by the marketing department of
some organisations. Later, these organisations were also known as ‘marketing companies’.

Consumer
Surveys

a
1
a Research and Consumer
I
3
Analysis Production <_>. Distribution

"S'
Sales O Satisfaction

&
s
Products and
Markets
Figure 1.4: Marketing Orientation: Modern Concept of
- Marketing

Under marketing orientation, organisations should recognise the needs and wants of customers and produce
desired products to satisfy the customers in the most effective manner than its competitors. Generally, people
misunderstood marketing and selling concepts as the same philosophy. But there is a difference between the
two. In case of selling concept, focus is on production, promotion and sales of goods and services to earn profit.
Whereas, marketing concept already has a target market, it only focuses on satisfying customers’ needs and
wants and developing long-term relationship with them.

Therefore, marketing concept is very beneficial for long-term goal-oriented organisations. It is believed by
many organisations that through customer satisfaction, success can be achieved. In accordance with this belief,
only those products and services should be produced which consumers want or desire. Subsequently, it can be
said that they produce what they can sell, rather than selling what they have produced. Following the same
concept, marketing efforts of the organisation are carried out so as to attain customer satisfaction.
 •
-n [Link]!-- iiciwMai:

i
;
34 MBA First Semester (Basics of Marketing) SPPU

The customer-oriented marketing is not just about selling of goods and services; rather it also involves after-sale :
services. Under this concept, consumers’ needs and wants are of utmost [Link] organisation tries to
fulfil all those needs and wants of customers. The marketing orientation also has some limitations. It aims at
satisfying consumers only and ignores the responsibility towards the investors, employees and suppliers or
distributors, who are vital elements of the organisation. There are also few inhibiting, factors which affect the
execution of marketing concept like societal constraints, innovation and organisational constraints, internal
disagreement, etc.

1.3.6. Societal Marketing Orientation

During the 1980s and 90s, several modifications took place in the marketing concept.’ These modifications were
specifically based on the understanding of consumers’ needs and developing products as per their requirements.
This new concept of marketing is known as ‘societal marketing concept’, as it also deals with the concept of
social welfare other than satisfying consumer needs. Societal marketing orientation is a rational concept of
marketing where good marketing decisions are taken in relation with the company’s requirements, consumers’
wants and long-term interests of the society:

It is also associated with the philosophies of sustainable development and corporate social responsibility. This
concept states that organisations should first identify the interests, needs and wants of target markets, then
design effective strategies to fulfil their requirements, and apply these strategies in such a way that along with
customer satisfaction the society’s improvement is also achieved. Whereas, pine marketing concept creates
conflict between long-run welfare and short-run wants of consumers.
Society
(Human Welfare)

Y> •

) Societal
Marketing
Concept

;
Consumers Organisation
(Satisfaction) (Profit)
Figure 1.5: Societal Marketing Orientation
Societal marketing orientation is the advanced form of marketing concept. This concept is not just about
customer satisfaction only. Its main aim is to provide social welfare to the general public. For example, a
generator set manufactured by a company, provides electricity back-up which will satisfy the customer needs,
but in return will cause environmental pollution, ignoring social welfare.
i
/
With the help of social welfare, organisations can develop higher standards of living and pollution-free
environment. Therefore, all the marketing efforts made by the organisations are focussed towards customer
satisfaction and social welfare. For attaining long-term profit, organisations generally implement this concept of
marketing. ->ÿÿÿ>.

This concept directs the organisation’s marketing plan towards the long-term welfare of the society as a whole.
Along with performing basic marketing functions like product and service marketing, societal marketing
focuses on the society at large. Thus, it aims at satisfying needs and wants of consumers, organisational goals,
and long-term welfare of the society.

1.3.7. Transactional Marketing Orientation

Transaction orientation is basically a marketing strategy which, is used for generating sales and- for increasing
efficiency. This type of orientation is very simple and so it has (Several disadvantages, on the, other hand, it also
has many advantages for some specific type of organisations.. A business organisation adopts transactional
marketing orientation when it only wants to increase the sales. All the marketing strategies, instead of focussing t
:
Introduction to Marketing (lHdt4>) • 35

on the customer, focus ’only on the advantages of the products and on promoting it to make it look more
attractive. In this marketing orientation, no or very less effort is made once the sufficient or targeted sale is
done. Marketing strategies and activities are dynamic in nature in order to stay in harmony with the changing
products and their features. Transactional marketing orientation is an orientation that mainly stresses upon
increasing the sales volume and on increasing the efficiency of personal sales by encouraging the point-of-
purchase transactions.

This orientation does not give any importance to creating and fostering healthy relationship with buyers. It is
based on four elements of marketing, i.e., 4 Ps, which are as follows:
1) Product: Developing a product according to the requirements of a customer.
2) Pricing: Pricing of the product must be done in such a way that it not only raises the organisational profit
but also attracts the customers.
3) Placement: Product must be distributed in the market through a proper and effective distribution channel.
4) Promotion: Through various activities, such as, publicity, advertising, personal selling, etc., product should
be communicated to customers in such a way that it not only informs them but also appeals to them.

Relationship marketing approach acts as a substitute to the transactional model and it focuses on retaining
customers as well as on fostering a long-term relationship between them and the company. None of the two
approaches are absolutely perfect as both of them have some merits and demerits.

According to Michael Lowenstein, an expert of customer relationship management, transactional orientation

does not focus on retaining the customers, so this may result into “passive, reactive, and short-term customer
relationships”. Whereas, the main disadvantage of relationship based model is that it is relatively expensive than
the transactional approach. But, better the strategies Customer Relationship Management (CRM) implements
while communicating with buyers; better will be the Return on Investment (ROI) in future. Most of the
organisations adopt a combination of both the approaches. Nonetheless, the traditional elements of marketing
mix, i.e., 4Ps, still play a vital role in making an effective marketing strategy.

1.3.8. Holistic Marketing Orientation: A New Set of Beliefs

In the 21st century, all top-most organisations follow a new set of beliefs and practices known as ‘holistic
marketing’. This concept involves unique marketing strategies, actions and processes which are designed,
developed and applied in order to determine the extent and level of interdependence. Therefore, holistic
marketing is a step to identify and re-organise the scope and issues related to marketing.
Holistic Marketing Orientation

I i
Internal Integrated Performance Relationship
Marketing Marketing Marketing Marketing

- Marketing department - Communication - Sales revenue - Customers

- Senior management - Products and services - Brand and customer - Channel
- Channels equity - Partners
- Other departments
- Ethics
- Environment
- Legal
- Community

The scope of holistic marketing involves following set of modem marketing processes:
1) Internal Marketing: The basic concept of marketing has evolved internal marketing. In this strategy,
employees are viewed as internal customers and their jobs or responsibilities are viewed as internal
products. It focuses on fulfilling the organisational objectives by satisfying the needs and wants of internal
customef-Si Thus, internal marketing is a continuous process which directs, motivates and empowers the
organisational employees to constantly provide better customer value.
36 MBA First Semester (Basics of Marketing) SPPU

2) Integrated Marketing: In this strategy, the marketer applies integrated marketing programs in order to
develop, connect and deliver significant customer value. There are various types of marketing activities
which can be used to determine value. McCarthy has categorised these marketing activities as four Ps of
marketing (product, price, place and promotion), also known as ‘marketing mix’. Hence, every marketing
process must involve these four Ps to fulfil the objectives of marketing activities.
3) Performance Marketing: Performance marketing is a strategy which encompasses the performance of all
the marketing activities along with their ethical, legal, environmental and social impacts. Other than the
evaluation of marketing activities, the top management also examines the scorecard along with the
profit/loss statement in order to analysis the level of customer satisfaction, market share, quality of
products, rate of customer loss, etc., through performance marketing.
4) Relationship Marketing: It helps to build long-term relationships with the key participants of organisation
in order to be successful. Marketing network is a unique company asset which is the resultant of
relationship marketing. The network comprises of the company and its stakeholders such as employees,
suppliers, distributors, customers, ad agencies, researchers, etc., with whom the mutual relationship has
been developed.

1.3.9. Relational Marketing Orientation

Relational marketing is defined as the mutual relationship between the organisation and the customer. On the basis
of relationship, customer is bound to be loyal towards the organisation and make purchases from the same in
future as well. This type of philosophy is only beneficial for making purchases like a car or a house. However,
pure relational marketing has a risk of mutual relationship as it holds uncertainty of customer purchases.

The development of strong and long-lasting relationships with people and organisations to attain organisational
success is the main goal of marketing. The concept of relationship marketing has taken a significant shift in
marketing. It has changed the approach of marketing in terms of competition and conflict and transformed it
into cooperation and mutual inter-dependence. Not only this, it also determines the relevance of employees,
distributors, suppliers and retailers, etc., which provide significant value to customers in an integrated manner.

The relationship marketing concept has following significant features:

1) It emphasises on building relationships with customers and partners or agencies than focussing on '
organisational products.
2) It emphasises more on customer retention rather than on customer acquisition.
3) It depends on cross-functional teams rather than working on departmental-level.
4) It believes in listening and learning process rather than talking.

Components of the Relational Marketing Orientation

Relational marketing concept is made-up of several inter-linked components, which are as follows:
1) Trust: Tmst acts as the core element of relationship marketing. The term trust has many advantages, which are
defined by many researchers. In general, trust is considered as the basis of long-term relationships, since short¬
term inequalities are unavoidable. Different entities involved in relationship concept of marketing are confident
that, the short-term inequalities will be resolved and will result in long-term profits. For a trustworthy
:
relationship, it is very important to have effective communication and trust among buyers and sellers.
2) Bonding: Bonding is very essential for creating relations with customers and other parties. It is bonding
which develops a sense of belongingness with relationship and organisation at large. This helps to create
customer loyalty. There are various types of bonds based on relationships and they differ with the
contrasting nature of shared values.
3) Communication: Another basic concept of relationship marketing is communication. Effective information
exchange is the main focus of any relationship, irrespective of the quality or quantity it naturally extracts
from former communications. In other words, if an individual is asked about the communication level of
his/her organisation with a partner organisation, only latest communications between them are defined, ;
whereas past communication is ignored. An attitude based on coordination is improved by the
communication and this helps the buyers and sellers to understand each other’s objectives and capabilities.
 Introduction to Marketing (Unit 1) 37

4) Shared Value: The concept of shared value can be defined as the goals, policies and practices of the
organisation about which a partner firm knows in common. It also defines the significance, applicability
and accuracy about the shared values. Every organisation has its own culture and values involving rules,
outlines, rewards and punishment policies, functional politics, etc. All these elements define the nature and
outlook of the organisational members. Relationship marketing enables the organisations to understand the
complications, thinking procedure and rules of each other. The long-term customer relations are developed
by improving and guarding customer-oriented organisational culture.
5) Empathy: Empathy is the capability of a person to understand and share the feelings of another person. It is
only possible when two persons have a good relationship with each other. If a customer is facing a problem
then an efficient sales team helps the customer to resolve the problem. Apart from selling the products and
demonstrating a sales presentation, the salesforce must also listen and interact with customers and
prospects. So as to identify and satisfy customers’ needs and wants, the salesforce should remain in touch
with them and treat each customer as an individual.
6) Reciprocity: It is another important element of relationship marketing, which enables parties to offer
favours and allowances for each other in order to receive the favour in future events. This creates long-term
trust and mutual understanding between different parties.'

1.4. THE NEW MARKETING REALITIES

'
1.4.1. Introduction
Today’s world has changed the traditional marketing concepts and has given rise to new marketing realities. The
marketplace is not the same as the traditional ones. Likewise, the marketers have also got acquainted with the new
marketing realities as they have to welcome and adopt several developments. One of the main reasons behind the
emergence of improved economy is the technological advancements and innovations. In order to develop the
understanding of the new economy, it is very important for the marketers to understand the characteristics of old
economy. The old ecbnomy was based on the industrial revolution where huge amount of standard gciods were
manufactured in order to reduce the overall costing and to fulfil the demand of a large population.

As the production in the country increased, many companies started entering the new and emerging niarkets
across various geographical regions. In the old economy, top to bottom approach was prevalent among the
organisational hierarchy, in which all the instructions were given by the top level management to the middle
level management and then middle level managers communicate to the lower level employees. On the contrary,
in the present scenario, things are changed and the market is more developed and enhanced. Due to the digital
revolution, now customers can get all the necessary information about various products or services which they
are interested in.

Moreover, they not only can collect the information but also can purchase the product from anywhere, anytime,
and at any place; even the product gets delivered at their doorstep. Additionally, in the new economy the trend
of customised products is rapidly increasing and is eventually replacing the standardised offerings. With the
advent of digital revolution, now one can easily communicate with others through mobile phones, e-mails,
video conferencing, etc. Due to this, the organisations can successfully implement the strategies and can take
the decisions quickly. The emergence of digital revolution has resulted into enormous growth for the companies
and it also enabled them in providing qualitative products or services to the customers. It is also observed that
the companies are required to reconstruct their procedures and systems with the help of outsourcing in such a
way that the total cost can be reduced. Three key forces driving marketing’s new realities are technology,
globalisation, and social responsibility.

1.4.2. Technology
The advancements in the field of technology,' which is used to make innovative products and enhance the
operational methods which influences the business is termed as technological environment. Recent
technological developments include mobile phones, computers, laptops, metros, automobiles, and other
production tecKriiques, etc. These developments are also focussed towards providing new and different products
and services baSbd on improved production techniques. It is not just responsible for economic growth but also
 /•

38 MBA First Semester (Basics of Marketing) SPPU

affects the production policy of different organisations. In order to be competitive in the market, different
marketers modify their products and production strategies according to the technological environment. For
example, technological factors enabled the transformation of typewriting machines into keyboards and
computers. In India, technology has changed the face of urban areas and is yet to set its impact across rural
areas. But, it has been introduced in rural areas by launching Green Revolution. This has enhanced the
productivity of farms using mix of high-yielding varieties, tractors, fertilizers and better irrigation facilities.
Technology has enabled spread of abundant information which is used by both buyers and manufacturers.

Technology has significantly impacted traditional marketing practices. In the past, having more information
than the rival firms were considered as competitive advantage. But in present times, the belief ‘sharing
information is power’ has changed the past trend of ‘information is power’. Generally most of companies have
online communities which enable the customers to share their ideas, thoughts, and experiences among
themselves. Social media enables the marketers to acquire vital data about the consumers. Discount based
advertising offers are also run by companies on social media sites, such as Facebook. These social media sites
/ and customer’s communities also prompt customers to exchange their mobile numbers and email-id along with
their names.

Technology used in everyday life js undergoing tremendous transformation. In such a scenario, marketers
should attempt to remain abreast with the latest developments, so that it is possible to catch the prospective
customers on the gadgets where/ they are spending their maximum time. Technology is also giving new
dimensions to the way strategies are devised, marketing is done and people work together. The technological
advancements have given new definition to the field of marketing in the last few decades. Following five
technological advancements whiph have affected everything considerably in last few years:
1) Big Data: Data can be collected from a number of sources which was not possible in past. Sometimes it is
difficult to decide how to utilise the acquired data. However, such a data can be very beneficial for the
marketers, as it tells them about the consumers, the success rate of marketing campaign and business of the
company. A study conducted in recent past has revealed that valuable information drawn from the big data
has enabled 44% marketers to enhance customer’s responsiveness.

Technology has enabled the marketers acquire more information about the customers than never before.
This clearly indicates that it has become easier for marketers to formulate customer oriented marketing
campaign and persoAalised marketing plan for them. The success of the ad campaign can also be reviewed
through data analytics. Acquiring comprehensive and accurate data helps in ascertaining which marketing
plans are successful and which are not so as to make required modifications.
2) Artificial Intelligence: The latest technology can acquire more data than that could be processed by human
mind. Artificial intelligence (AI) helps in finding association between patterns, insight, and numbers which
can be helpful in many ways. It helps the marketers predicting more about customers’ behaviour and in
making good target ads. AI programmes help in auto generation of target ads as in case of suggestions
given by YouTube and Netflix.
\
AI is also used by search engines interpreting search queries and showing suitable results. This indicates
that for preparing best content for search engines, marketers should give due consideration to AI.
Tremendous researches are carried by the tech companies, like Google and Facebook, and it is vital to

—
remain updated with the latest advancement in this area.
3) The Internet of Things: Internet of Things (IoT) is a new source from where new information is being

—
gathered. IoT refers to rising number of internet-connected devices. It can include anything, such as,
automobile, refrigerators, air conditioners, lawn mowers, etc. Usage of IoT devices by the consumers
creates the prospective for the marketers to know more about them. Using more internet connected devices
by people helps the marketers to know more about them and their nature.
t

ss."SWri
““ “tssxsty ;
* 1
users can
f
\
Introduction to Marketing (Unitl) 39

4) Augmented Reality: Augmented realitjris the technology which ensures amalgamation of real and virtual
world where virtual' world supersede die real one. Some companies took a giant step and adopted this
technology in their marketing plan. For example, Home Depot launched a Project Color app, where patent
technology is used to show users what a paint colour will look like, in their home. This helps 'the customers
in making quick and conscious decision regarding their paint choice.
5) The Cloud: Marketers now organise the data and synchronise it with the project from anywhere across the
globe through the cloud technology. For this purpose, marketers should create advertising campaigns which
spread across various blogs along with search engines and social media sites. When a number of people are
working on same project, it’s difficult to synchronise the data. However, the data stored on cloud can be
turned into an integrated ad campaign. Vital information about die valuable customers and important
campaigns which can be accessed from anywhere can also be stored on the cloud.

Same data can be used by a number of marketers for refining their marketing efforts and as everyone has
the same information, so everyone is sailing in the same boat. Cloud technology proves to be handy when a
number of people are working on one single project but are not working in the same location. For example,
even if copywriter is located in London, graphic designer in New York and web Designer in China, they
can synchronise their work by getting real-time information regarding work status of different members
through cloud technology.

1.4.3. Globalisation
Globalisation is an international integration which involves exchange of products, services, ideas, business
practices and cultures. It has emerged as one of the most dominant factors responsible for shaping the future
patterns of the world market. In other words, globalisation is a process which integrates regional economies and
their culture, by developing a network of world trade, transportation, immigration and communication.
Globalisation is a crucial term which is dictating the world of business since past ten years or so. In fact
globalisation has affected different facets of life from economy, business, society, ecology to the extent that it is
unimaginable for a company to remain untouched by it. It has affected the world in terms of rising rate of
competition, quick changing technology, and quick transformation of information.

The rise of communication and technology has shrunk the world into a small global village. Latest
developments in communication and transportation have enabled people to travel across the world easily, to get
information from anywhere, anytime and to buy and sell from anywhere. The world of advertising is highly
vibrant and related with lively world. For this reason, it is impossible to not experience the effects of
globalisation. Though, every company doesn’t decide to go global, yet, all of them experience the impact of
globalisation in some or the other way. The reason for this is that the company has to compete with the global
brands and at the same time if the consumers’ demands are not fulfilled, they are likely to move to some other
market (though the intensity is not very severe). For surviving in such a scenario, the company has to give due
consideration to major influences of globalisation at the time of devising their marketing strategies.

Globalisation has caused the emergence of following factors:

1) Globally Oriented Customer: Undoubtedly the customer of today is more global oriented than he was in
the past. The rise of network technology has crossed over borders and has carved path for hassle free
exchange of information and ideas. However, despite this fact most of the Indian consumers like to spend
their surplus income on goods and services offered in India (not necessarily produced here). The purchasing
and sourcing globally is found to be rare in Indian context. However, the situation is different in case of
business which can buy anything from anywhere.
2) Rise in Global Brands: The last decade has experienced rise in global brands, such as Apple, Lloyd, etc.
Global brand, such as Xiaomi has experienced high growth in the smartphone industry in the recent past. In
fact, the brands are getting diverged into two ends, very local and very global. Hence, it is for the company
to decide if it wants its brand to go local or global.
3) Accessibility of Goods and Services at Economical Rates: Globalisation has enabled availability of
goods and services at economical rates at anywhere in the world. It has resulted in better standards of living
for the people and rising expectation of cotisumers. Moreoypr, the incoming of imported commodities has
helped in controlling inflation and market ups and downs in India.
 ti£££J.U. -

40 MBA First Semester (Basics of Marketing) SPPU

4) Rise in Competition: Globalisation has also resulted in rise in competition for consumers as well as
marketers. Few decades back, only a few MNCs were the market leaders, however, at present, numerous
companies from all over the world are competing in the global market. In 'fact, there is cut throat
competition among global players for establishing their market place in different sectors.
5) Rising Complexity of International Business Transactions: Previously, only business forms, like export-
import and foreign direct investment came under the scope of international business. However, the
complexity of transactions in global trading has become wide, as it includes transfer of technology,
contracting, franchise, counter trading, global strategic alliances, turnkey operations, etc.
6) Fast-paced Spreading of Technology: There is quick spread of technology among marketers and markets. Due
to dynamic nature of technology, the market cannot be dominated by one technology Company in the long run.
For this reason, it is vital for the companies to take the most of their inventions before it is copied by anyone else.
7) Rise in Borrowing and Financing Options: Borrowing and financing is not confined to domestic
boundaries. Now it is possible to get investment for running business from international markets. In such a
scenario, traders can pick the investor which offers minimum interest rates based on variation in currency
values and fluctuations in market conditions.
8) Rise in Collaborations: One of the obvious results of globalisation is formation of collaborations and
association in domestic and international markets. As the business is not an economical affair and is full of
complexity and risk, business alliance is always desirable. The business alliance can be foreign traders,
manufacturers or distributors and even business rivals. Business alliances help in synergising every
significant activity from manufacturing to selling and conducting R&D.
9) Efficient Supply Chain Management: One of the other driving forces behind globalisation is ability to
manage supply chain management effectively. For example, global strategies are adopted by some
companies in order to secure raw material and labour at low costs. At times companies also adopt
globalisation in order to adopt skills and technology related to R&D, designing, manufacturing, etc., which
couldn’t be acquired within the national boundaries.
10) Cultural Diffusion: Countries have come closer due to globalisation to the extent that can adopt each
other’s cultural elements. As a result, people are now making demand for a variety of commodities which
are produced in other nations.

1.4.4. Social Responsibility

Marketers need to bear the responsibility towards society. The society is not free from vices and there are a
number of them, such as, poverty, illiteracy, pollution, global warming, war, unequal distribution of resources
which need to be addressed by the marketers. In today’s world of social awareness, marketers are ready to play
their part by taking initiatives for making people’s living situations better. In fact, the notion of corporate social
responsibility has been recognised by most of the companies across the globe. As marketing effects the all
facets of society, so it is the duty of the marketers to give due consideration to ethical, legal, ecological, and
social aspects of their actions.
It is the responsibility of the marketer to understand desires and requirements of their target customers and to cater
them satisfactorily. Along with this, the liability of maintaining welfare of the customer and the society at large
lie? with them. Today the goods have become commercialised and the customers are becoming more and more
socially conscious. In such a scenario, various companies like Tata Motors, Infosys, ITC, etc., have kept social
responsibility as a part of their company goals. Such an act helps the companies to establish their distinguishing
image in the market, win customers’ loyalty which in long run helps in ensuring high returns on sales.
Socially responsible marketing includes the following activities:
:
1) Enlightened Marketing: The idea of enlightened marketing is based on the principle that the marketing
campaign of the company should be able to generate good marketing system results, 'There are five
principle of enlightened marketing which are as follows: v .v
i) Consumer-Oriented Marketing: Customers’ perspective should be considered while organising
marketing actions of the company. The marketing plan should be organised in a Way to cater the
consumers with nothing but the best which helps in' ensuring an enduring and profit generating
relationship with them. Vi.
Introduction to Marketing (Unit-1) 41

ii) Customer-Value Marketing: It states that marketing efforts should be a value buildiiig effort. In other
words, marketing, should help in catering the customers with maximum benefits which helps in
strengthening, long-term relationship with them. There are many marketing efforts such as one shot
sales promotions, direct response advertising and minor packaging modification which usually help in
increasing sale within a short span but fails to add much value for the customer. For winning the loyalty
of the customers and establishing a sustaining relationship, marketers can focus bn improving product
quality, attributes, handling for adding value to the customers.
iii) Innovative Marketing: It indicates that the company should constantly strive to improve its quality
and marketing efforts by focusing on innovating marketing strategies and products.
iv) Sense-of-Mission Marketing: It is based on the principle that the goal of the company should be
defined in terms of wider social responsibility instead of narrow range of product description.
v) Societal Marketing: Societal marketing is based on the notion that marketing decisions of the company
should be based on needs and long term interest of the end users along with the long term societal interest.
2) Marketing Ethics: There are a number of ethical issues in front of the socially conscious marketers which
often makes it difficult to make choices. However, many managers fail in this regard. For this reason, it is
the moral obligation of the company to frame out ethical policy for the company which should be
mandatory for every member. Guidelines about quality of advertising campaign, general moral standards,
relationships with the distributors, customer service, cost of products, and product improvement should be
provide in these policies.

1.4.5. A Dramatically Changed Marketplace: Impact of Globalisation, Technology

and Social Responsibility on Marketing
The marketplace is rapidly transformed because of many forces. These forces pertain to technology,

_ _
globalisation, and socialisation which are source of acquiring new capabilities for companies and the customers.
The marketplace is also getting impacted due to high competition levels and modifications in distribution
channels. :
Impact of Globalisation, Technology and
Social Responsibility on Marketing

New Consumer Capabilities New Company Capabilities

Changing Channels Heightened Competition

I.4.5.I. New Consumer Capabilities

In today’s scenario, the basic products of almost all the companies are similar. This is the reason why customers
are less loyal towards any particular brand. The factors towards which the customers pay attention are price and
quality of the product. Some of the new customer capabilities are as follows:
1) Significant Increase in Purchasing Power: Here the term ‘purchasing power’ is referred not only to the
money that one can spend on purchasing a product but also to some other factors. Now a customer can do
information search very easily through internet, i.e., he can compare prices, features, can get reviews from
various users, etc.

Now-a-days, customers themselves can quote the price which they can spend for a service. Similarly, the
industrial buyers have the power to conduct an auction for making a deal, where sellers try to quote the
price as low as possible in order to seal the deal. Customers sometimes coordinate with other customers
with similar needs to take the benefit of bulk discount.
2) Wide range of Products and Services are Available: Due to the emergence of online shopping websites,
customers can now purchase any category and any brand of a product from anywhere and at any time. For
example, Flipkart is India’s leading online store which offers a wide range of product categories, such as,
electronics, apparels, cbsnietics, home decor, etc., and it has now even started the section of automobiles.
With the help of such websites, customers have the option of ordering goods from other countries where the
prices are less.
 42 MBA First Semestet (Basics of Marketing) SPPU [
3) Richness of Information among Customers: Now-a-days, customers can access any information material
of the world from their home through internet. Accessing encyclopaedias, company reports, customers’
feedback, newspapers of various countries, etc., can help the customer in information search during the
buyer decision process.
4) Easy Ordering and Delivering Process: In the current scenario, marketplace is functional every single
minute of a day. People can place order for any product at anytime from anywhere and get their product
delivered at their doorstep or wherever they want, that too against very nominal or no extra cost.
5) Ability to Compare the Products and Share the Reviews with Others: Various websites are
specifically designed to empower the customers, where they can compare various products and share
their experience with other users, e.g., [Link], [Link], [Link], etc.

: Other than these specific websites, the social networking websites also bring closer the people of similar
; interests. All the persons, who are well-acquainted with the internet, prefer some of such websites to do
their research about any product before making the final purchase. These websites are most popular
among the younger generation.
6) Speed of Communication is Very Fast: Customers can communicate their views through internet in order
to influence others. Due to internet the speed of communication has become very fast. User can spread his
views through websites such as MySpace, Wikipedia, Youtube, etc.

For example, in 2004, a company launched a kind of bike-locks but it could not succeed because customers
found that their lock can easily be unlocked only with the help of pen. A video demonstrating the unlocking
went viral on various websites, which put the company in a very bad situation.

I.4.5.2. New Company Capabilities

Similar to customers, companies also have developed varipus new capabilities. Some of them are as follows:
1) Detailed and Widespread Marketing Communication: By using the power of internet, companies can
expand their reach for advertising their product to the customers situated in any part of the world. With the
help of a website, companies can communicate several details to the customers, such as, product line,
product width, terms and conditions, history of the company, achievements, mission and vision, career
opportunities, etc.
2) Online Researches: Researchers play a very important role in collecting required information about existing
and prospective customers, competitors, elements of external business environment, etc. These researchers, by
using the power of internet, can conduct the marketing researches more effectively and more quickly.
3) Effective Communication within the Organisation: By developing a private network, i.e., intranet within
the organisation enables faster communication in it. Here the employees can interact with each other
regarding any query, can ask for advice from anyone, and can extract important information from server
computer.
4) Promotion through Brand Advocates: Now-a-days, the trend of promoting the brand through brand
advocates is prevailing. These promotions are considered to be more effective because they are not the paid
promotions. Brand advocates are the people who talk positive about the brand and do positive word-of-
mouth publicity among their peers, friends, social network, etc..
5) Two-way Communication: Due to the emergence of special-interest publications, TV channels, blogs,
etc., targeting the market of specific interest and doing two-way communication have become easier.
Similarly, with the help of extranets, the companies can now easily communicate and transact with
suppliers, distributors, etc. Companies now-a-days also interact with every customer in order to provide
them customised products and services.
6) Tracking Customers: Customers who ask companies to keep them
informed about the new products,
provide free samples, issue gift vouchers, etc., are very valuable for the companies
because companies can
track such customers in order to know their purchasing pattern, tastes and preferences, purchasing
power,
and other demographic elements such as, age, gender, location, etc. '
!

3 )
 Introduction to Marketing (Unit !) 43
.!
7) New Marketing Techniques: Various new techniques of marketing are evolving, which are enabling a
marketer to reach out the customers anywhere at any time. For example, companies can publish their
advertisements on popular websites like Facebook, YouTube, Twitter, etc. They can also register their
>>•’
addresses with the company logos on various navigation maps, e.g., Google maps.
8) Customised Offerings: Due to advancements in production processes, communication technologies,
marketing software, etc., the companies are becoming capable of producing goods or services in accordance
1
with the demands of every customer. Customers can order the products personally, via phone, internet, etc.
For example, BMW, a leading manufacturer of premium cars, offers a facility to customise the car as per - v;
the requirements and preferences; it offers 90 different colour option, 170 accessory items, etc. Similarly, •V'

Archies gift store provides a wide range of personalised gift items. $

9) Feedbacks are Valued: Companies also started giving value to feedbacks and suggestions of clients
regarding any of the companies’ activities such as, recruitment, training, production, marketing,
communication, etc. For example, companies use corporate blogs in order to publish their latest
developments, so that stakeholders can get to know about them. It also helps in collecting feedbacks,
suggestions, and complaints of the customers.
10) Ability to Compare Similar Products: Companies who purchase raw material or semi-finished goods
from other companies can now compare the prices and specification of material offered by different sellers.
They can now buy material through auction process or on their own terms. Doing this can help the
corporate buyers to save a lot, which in turn can reduce the cost of final product. Moreover, because of this
comparison, company can also acquire good quality material.
11) Online Recruitment and Training: With the help of internet, companies can conduct the process of
recruitment via video-conferencing. Furthermore, the online training material can also be provided, which
can be downloaded by the employees, distributors, etc.

I.4.5.3. Changing Channels

The change in the distribution channels has empowered the consumers. It has increased their market choices
due to the twin forces of disintermediation and transformation of retail. ' £
I:
1) Retail Transformation: Retail stores do not just compete against retail stores these days. They face
competition against new forms of retailing like catalogue companies. There are also other entities like e-
1
commerce companies. Direct mailer companies, home shopping using the TV medium etc. As a result,
retailers also have to innovate retail designs. They have set up kiosks, opened up entertainment options like 1
cafes and gaming zones inside their stores. Rather than just selling a product, retailers these days are
focusing more on providing an “experience”
2) Disintermediation: E-commerce companies have changed the distribution games these days. They have
1
reduced the number of channels required to
companies like Amazon and E-Trade.
deliver
Traditional
the product to the consumer. This has been pioneered by
retailers have had to innovate and introduce models like
“brick and click”, which is a combination of traditional retailing with online retailing. In fact, online-
t
„
f
:
retailers or pure-click players are now facing tough competition from those retailers who have adequate .1
capabilities as they have good brand image and adequate resources. $

I.4.5.4. Heightened Competition ;

The level of competition has increased in the marketplace. This is particularly so because of the growth of mega ,
brands, private brands, privatisation and deregulation trends. These are explained below: , j
1) Private Labels: This is a combination of retailers and manufacturers. In this, retailers brand manufacturers -
brands under their own brand name. They are in no way different from other brands in terms. of product
quality. For example, Shoppers Stop has a private label named Stop.
'
4
*
2) Mega-brands: Mega brands are brands which expand their reach into more consumer categories. This
expansion is done to encash new opportunities that are emerging in different industrial sectors.
3) Deregulation: Many industries have also grown because of deregulation by the authorities. This has :
allowed growth in thought, more market opportunities and increase in number of players.
4) Privatisation: Competition has also increased because Of transfer of companies from the public to the -
private sector. This has been done because of the inefficiencies of the public sector.
*
 -g3g3* :

.44 MBA First Semester (Basics of Marketing) SPPU I

1.5. MARKETING MANAGEMENT
1.5.1. Introduction
Marketing management is a composition of two terms ‘marketing’ and ‘management’. Where, the term
‘marketing’ is a set of actions and processes of a company associated with buying and selling of goods or
services. ‘Management’ is a function of coordinating the integrated efforts of people towards a common goal by
effective utilisation of available resources. ‘Marketing management’ is an organisational approach which
focuses towards the accomplishment of marketing objectives of the organisation such as achieving customer
satisfaction, securing high sales and profit, etc. Therefore, it includes various techniques and processes aimed at
fulfilling all the inter-related marketing objectives.
According to the American Marketing Association, “Marketing Management is the process of planning and
executing the conception, pricing, promotion, and distribution of ideas, goods and service to create exchanges
that satisfy individual and organisational objectives”.
Consequently, marketing management is the most practical aspect of business management which deals with
needs and wants of consumers, determines the promotion and pricing strategies to generate demand for goods
and services, new product development, aids in distribution of these products or services to final consumers,
and collects customer feedback and other information regarding the customer satisfaction.

'i 1.5.2. Objectives of Marketing Management

The main objective of all enterprises is to satisfy the customer needs and attain maximum profit. In the similar
way, marketing management aims to accomplish these business objectives effectively. Some of the basic
objectives of marketing management are as follows:
1) Creating New Customers: The prime objective of marketing manager is to build new customers for the
company’s product. Managers use different techniques like advertisement, sales promotion, etc., to attract
hew customers. This objective helps in increasing sales of the organisation.
2) Satisfying Customer’s Needs and Wants: Marketing managers should carefully determine the needs and
demands of the customers in order to satisfy them with its products and services. The process of marketing
management is customer-oriented and all its marketing activities revolve around customers.
3) Increasing the Business Profitability: Marketing department is the main source of income for the
organisation. The productivity and profitability of marketing department ensures long-term survival and
success of the organisation. Hence, profit-making is one of the major aims of marketing management which
can be guaranteed through high sales volume.
4) Enhancing the Standard of Living: Another key objective of marketing management is to enhance the
living standards of people. Therefore, marketing involves various innovative techniques and marketing
research to introduce wide range of goods and services to the consumers.
5) Managing the Marketing Mix: Marketing mix refers to the association of four basic elements of
marketing i.e., product, price, place and promotion. Marketing management helps to effectively plan and
implement these elements in the most appropriate manner to meet the customer demands.

1.5.3. Marketing Process

Following are the steps involved in the marketing process:
Step 1: Setting Marketing Objectives: The first step of marketing management process is setting marketing
objectives. While setting objectives, the organisational mission must be considered. The mission helps the
marketer to conduct the proper environmental scanning and search,for new opportunities.

Step 2: Analysing Marketing Opportunities: In the next step, different marketing opportunities are analysed
in accordance with the strengths and weaknesses of the organisation, which can be internal or external. The
availability of further opportunities can be examined on the basis of the project or work assigned.. A consistent
market information system is needed for the effective analysis of the opportunities. This enables the marketers to
have information regarding choices and preferences of target customers, their geographical locations, buying
behaviour, social behaviour, etc.
Introduction to Marketing (ynit 1) 45'

Step 3: Researching and Selecting Target Markets: After analysing

the opportunities, the research and selection of target market is carried Setting Marketing Objectives
out. For selecting a target market, it is very essential to understand
that how the attractiveness of a particular market can be measured.
T
There are various techniques which are used to measure the market Analysing Marketing Opportunities
potential and forecast the future demand.
T
Under modem marketing concept, the whole market is divided into Researching and Selecting Target
several small segments. These segments are evaluated to select the Markets
target markets, and then different positioning strategies are applied to I
each market. Designing Marketing Strategies

Step 4: Designing Marketing Strategies: This is the most crucial

step of marketing management process. In this, the marketing strategy
I
Planning Marketing Programmes
of an organisation is designed for the target markets. The strategy
reflects the overall plan of the organisation for achieving marketing or T
business objectives. Marketing strategy states the major approaches Organising, Implementing and Controlling
through which an organisation can achieve its business goals in a the Marketing Effort
target market. It also comprises of basic decisions related to marketing
mix, marketing expenditure and marketing distribution. Figure 1.6: Marketing Process

This step also involves extensive marketing research for the development of firm-market system. Based on the
system, four Ps of marketing mix, viz., product, price, place, and promotion are determined and applied on the
consumers. The organisation should also decide the total expenditure to be used for marketing mix.

Step 5: Planning Marketing Programmes: The broad marketing strategies alone are not enough to meet the
organisational goals. In order to achieve the business goals and implement marketing strategies, the
organisation requires effective marketing programmes.

These marketing programmes include decisions regarding the product characteristics, packaging, policies
related to services, branding, pricing (retail as well as wholesale), credits, discounts and allowances,
recruitment, selection and integration of different marketing intermediaries for effective distribution,
advertisement, sales promotion, personal selling, direct marketing, etc.

Step 6: Organising, Implementing and Controlling the Marketing Effort: The concluding step in marketing
management process involves organisation of resources and implementation and control of the marketing plan.
A marketing organisation is designed to apply the marketing plan into action, that is, for the implementation of
marketing plan. Once the plan is executed, activities concerned with customer feedback and sales forecast are
organised. This is done to evaluate the effectiveness of marketing plan. In marketing plan, control is very
essential component through which alterations or modifications can be done.

Controlling in marketing is responsible for determining performance standards, analysing actual performance,
and minimising the difference between actual and desired performance. It involves three main elements, i.e.,
measuring, analysing, and monitoring. The marketing manager compares the actual performance with the
standard performance and takes corrective measures, if required. In case of applying corrective measures, the
reason for the deviation is identified by conducting market research.

1.5.4. Functions of Marketing Manager

Functions of marketing manager are as follows:
1) Defining Marketing Objectives: The major function of marketing manager is to define the marketing
objectives. The marketing objective should be unambiguous and in accordance with the organisational
objectives.. These objectives can be short-term or long-term.
2), Planning: After deciding the short-term or long-term objectives of the organisation, the next function of a
marketing manager is to plan different ways to accomplish the objectives. Different approaches like marketing
strategies, formulation of marketing programmes and sales forecasting etc., are utilised for effective planning.
 .. . .'ÿ! :
—
M sy
If 46 MBA First Seriidster (Basics of Marketing) SPPU
B
‘ ,3) Organising: After designing the plan, implementation of plan is important: BUC-before implementation,
til many things need to be gathered and organised in order to achieve the defined objectives. It involves
'k several functions at different levels of the organisation such as defining structure of the organisation,
9
outlining the power, duties and responsibilities of different organisational members’, etc.
I 4) Staffing: The survival and success of an organisation largely depends upon its emplpyees. Therefore, it is
I very important to hire right candidate at right place to attain business objectives. The marketing department
i coordinates with the HR department to employ only those candidates who possess & desired capability.
5) Directing: Direction can be understood as creating new markets, providing guidance, inspiration,
y leadership, motivation and supervision to the employees in order to achieve organisational objectives.
Marketing manager is responsible for directing all interrelated marketing activities. They also synchronise
these activities with other departments in the organisation.
4 6) Coordinating: For a marketing head, the main task is to keep a check on the coordination between different
ii- departments and various activities associated with the marketing, warehousing, production, transportation,
F jjg product planning and customer satisfaction.
i 7) Motivation: Every individual’s effort is countable in the modem marketing approach. A successful team
i leader is the one who is able to motivate all its employees and keep their morale high. Motivation helps the
employees to work efficiently towards the attainment of business objectives, viz., high volume sales and
K? profit with customer satisfaction.
: 8) Controlling: Sometimes, a good marketing plan flops. This happens due to the poor implementation of
marketing activities. Therefore, it is crucial for marketing managers to maintain a proper control over the
marketing activities. The control process mainly involves establishment of standards, performance
S evaluation and taking corrective actions. It also helps the marketers to maintain the operational cost and
1 budget of the organisation.

I 9) Analysis and Evaluation: In marketing management, it is necessary to analyse and evaluate the
performance and productivity of the employees. This helps the organisation to identify the ability of an
i employee to achieve the business objectives.
10) Promotion: Promotion is the key role of marketing managers. The manager should introduce various :
I promotional methods to increase the sales of the product. He should also introduce new and innovative
‘I methods and strategies for promotion.
11) Research and Development: With the changing tastes and preferences of the consumers, marketers must
keep a track on the prevailing trends of the market. Therefore, it is the responsibility of marketing
managers to conduct research and development in order to define the benefits and limitations of a
| particular product.

1.5.5. Concept of Marketing Myopia

I
The concept of marketing myopia was introduced by Theodore Levitt. The reason behind its origin was few :
crucial issues related to marketing concept. In this concept, the term “myopia” means short-sightedness. Hence,
l marketing myopia is a condition where marketers fail to view the broader scope of marketing. They are unable
.1 to understand the value of marketing when applied within an organisation.

With the changing environment, the organisation needs to adapt certain changes to stay at power with the
competitors in the long run. The process of organisational shift from customer to the product or the organisation ’
itself causes myopia. Therefore, marketers should analyse the market effectively, and make Changes in the
: company and products in accordance with the needs and wants of the target market. Market
heeds should be :
given utmost priority and hence should be catered first. ,v>

i
I i'/iV
I
 Introduction to Marketing (Unit 1) 47
I

According to Levitt, marketing myopia is management’s failure to recognise the scope of its business. Product-
oriented rather than customer-oriented management endangers future growth. Levitt cites many service
industries, such as dry cleaning and electric utilities, as examples of marketing myopia. But many firms have
found innovative ways to reach new markets and develop long-term relationships.

For example, Coca Cola Company focussed on its soft drink products and avoided the demands of consumers’
for coffee and fresh fruit juices. Because of which, the business of soft-drink was largely affected. In marketing,
customers are the central focus of the organisation. Customers are crucial part of having a successful business,
whose negligence, [Link] marketing myopia.

In such condition, organisations mainly focus on production of their products due to which customers shift their
preferences and start buying products from other marketers. To avoid such situations, all marketers must satisfy
the needs and wants of the customers and also adapt to the changing preferences of the target market.

1.6. LINKAGE OF MARKETING FUNCTIONS WITH ALL

FUNCTIONS IN THE ORGANISATION
1.6.1. Introduction
Now-a-days, customers’ demands are increasing, life cycle of product is contracting, and competition is
becoming fierce. In order to survive in such situations companies are making changes in their structure, i.e., by
encouraging inter-functional teams and lifting the communication barriers among the workers of different
functional departments. Those companies which follow the ‘Marketing Orientation’ towards marketplace
understand the significance of all the functional areas in the process of satisfying the needs of target customers.

These functional areas involve finance, human resource, production and R&D. Such companies believe that
marketing function integrates all the functional areas and thus this process is termed as ‘integrated marketing’. This
concept of integration is crucial for organisational success because it is the responsibility of all the functional areas
to expand the customer base, retain the customers, maintain the market share, and market the products and services.
; !
But, if the functional and marketing areas work for different purposes then the overall performance of the
organisation will be severely affected. In order to avoid such situations, marketing interface attempts to
establish a link between its objectives and the organisational goals. This influences the objective formulation
and implementation of every functional area. Key functional areas of an organisation, with which marketing
function establishes a link, are as follows:
Linkage of Marketing Function with All
Functions in Organisation

Research and Development

Purchasing
Production (Manufacturing)
Operations
Finance
Accounting
Human Resource Management
Information System

1.6.2. Research & Development (R&D)

The R&D and the marketing department are very different from each other mainly in terms of their culture,
objectives, and employees. The staff members of R&D department include technical experts and scientists, who
like to take on technical challenges in order to add more features to the product and are less concerned about the
revenue and sales payoffs. They choose to work independently without much control and responsibility.
Whereas, marketing and sales personnel ace, well aware of the marketplace and their main objective is to
increase the -revenue of the company by keeping the product cost as low as possible. According to marketers,
R&D people are more focussed on achieving technical qualities compared to designing of a product as per
customer’s requirement. On the other hand R&D personnel believe that marketers only focus on increasing the
 i II

48 MBA First Semester (Basics of Marketing) SPPU

sales and revenue by selling the product anyhow. Therefore, for ideal case both R&D and marketing
departments should work in synchronisation and should take on the responsibility of making the product
innovative keeping in mind the customers’ needs. Marketers should not only focus on increasing the sales but
should also analyse the needs, tastes, and preferences of target market. Similarly, R&D personnel should not
only focus on adding more features but should also make efforts in the direction of product launch.

1.6.3. Purchasing
Purchasing department is in-charge of acquiring the appropriate quality and quantity of raw materials, semi¬
finished goods and "other components at the most reasonable cost from the suppliers. According to them,
marketing personnel introduce several variants in the product line which leads to the requirement of more items
in lesser quantities than purchasing them in bulk. This in turn, reduces the chance of getting benefits related to
bulk purchases and increases the overall cost component. Another issue that purchasing department often has
with marketing department is the inaccurate forecasting of marketers which leads to placements of order in
urgency and on higher prices.

Purchasing department also feels that marketers demand for much high quality components and raw materials*
which also adds to the [Link], the synchronisation between marketing and purchasing activities is important
not only to make the manufacturing and financial activities efficient, but it is also significant in delivering the
products or services as per customer expectations. Both the departments should share sound communication,
interaction, information exchange, etc., in order to improve the problem-solving ability of company, the ability of
satisfying the needs of customers and lastly to improve the overall performance of the company.

1.6.4. Production (Manufacturing)

This department is responsible for carrying out the production process effectively by manufacturing right
product in right quantity at the right time and at the right cost. Usually, manufacturers face various issues
related to machine failure, insufficient inventory, labour conflicts, etc., which in turn hampers the quality,
quantity, and on-time production and delivery of goods. Marketers feel that inefficiency of the manufacturers is
the main reason behind the delayed deliveries, poor quality, shortage of finished products, etc.

According to the production department, marketers are not concerned about the factory issues. Instead, they
mainly focus on the issues related to the customers like exchange of defective merchandise, offering factory
:
services, getting fast delivery, etc. Above all this, marketers provide inaccurate sales forecasts, acclaim
offerings that are difficult to manufacture, and assure high-end factory services which are irrational.
Synchronisation between the marketing and production department is very crucial for the success of business.
The process of production planning is mostly viewed as a positive contribution towards overall performance of
the organisation; moreover marketing function also works in the same direction. Hence, it can be said that
process of production planning provides a platform to marketing as well as production department so as to
incorporate their efforts and skills in the process.
Shapiro views that in cases of intricate planning problems, both departments should sincerely work together in
order to solve the problems. There are several researches which have been carried out on the linkage of
marketing and production department. Yet, none of them examines that how much contribution does production ;

planning process actually made in the linkage.

1.6.5. Operations
‘Manufacturing’ is associated with the process of producing physical goods. ‘Operations’ is related to those
industries which render services to the customer such as, hotel industry, consultancies, etc. For example,
operations department of a hotel involves receptionists, guard, waiters, etc. Marketing department wants the
operations department to focus on customer requirements and . provide them commendable services. But,.
operations department is often seen to be directed towards its own convenience and ends up delivering just the
ordinary goods. Marketers promise their existing and potential customers to offer customised and quality
services. If the operational department fails to offer that level of services to the customers, then this may harm
the goodwill of the company. Moreover, the efforts of marketing department go in vain resulting in decline of
the business. Therefore, it is essential to have a linkage between the operations and marketing department.
Introduction to Marketing (Unit 1) 49

1.6.6. Finance
Finance department of a business enterprise is concerned with the evaluation of business activities in terms of
profit generation. The finance executive has the right to question the marketer that how much revenue they can
produce after spending a certain amount on the promotion, advertising, incentives to salesmen, etc. If a
marketer is unable to answer the question asked by the financial executive, then this act notifies that the forecast
made by the marketers is self-made and manipulative. Finance executives believe that marketers bargain the
prices easily in order to achieve more number of units sold and do not make efforts to keep the prices more
profitable. They assert that marketers “know the value of everything and the cost of nothing”.

While, marketers comprehend that finance executives “know the cost of everything and the value of nothing”.
Credit officers or financing officers often reject the applications of several potential customers on the grounds of
their credibility. These officers feel that marketers do not consider anything like credit history, income level, etc.,
before making a sale to anyone. On the contrary, marketers view the credit guidelines as very tough. They also feel
that company is losing to several customers if it has ‘zero bad debts’ in its financial statements.

Marketers often feel demotivated because they make efforts to acquire a customer and finance executives prove
them ineligible. The success of a company can be measured in terms of various parameters like ‘per unit cost’,
‘return on investment’, etc., whereas, success of the marketing function can be evaluated on the basis of market
share, product development, market development, gross margin, etc. In earlier times, the company having a
major portion of market share was assumed to be the most profit-making company.

At present, there are many business enterprises that have integrated their marketing and finance departments.
This linkage has expanded their external boundaries and strengthened their illustrative power. In addition,
several advanced methods have also been applied to explain the relativity between these two functional areas.
The association of advanced methods and relative perspective has proved itself as the basis for scholars,
businessmen, and investors to analyse the effectiveness of both the departments.

1.6.7. Accounting f
Accounts department assists marketers in preparing their sales report and in developing effective marketing
information system. Both of these activities impact the performance of the business enterprise. Accounts
personnel feel that marketers are not punctual as far as submission of sales reports is concerned. Marketers
often do amendments in the sales procedure, as asked by the customers, only in order to achieve good sales
figures.

However, this activity of marketers is disliked by the accountants because such activities require special
accounting procedure than the prevalent one. Accountants impose a fixed cost on every product which increases
its price resulting in low sales volume. Marketers feel that the products can generate more profit if these extra
costs are not added to them. They also suggest the marketers to prepare common sales and profit reports based
on different segments, products, regions, etc.

1.6.8. Human Relations Management (HRM)

The HRM department of an organisation is responsible for recognising the human resource requirement of an
organisation and acquiring them in best possible manner. It is important for the HR department to have a linkage
with marketing department because marketers identify the company’s demand for human resources with specific
skills and knowledge. The HR department must also have the information about the new product and service
development. The requirement of human resource mostly arises when new products or services are launched in the
market.

It is the responsibility of a marketer to inform the HR department about the requirement on time. The attributes of
human resources play a significant role in success and failure of a company. A person must have appropriate
skills, attitude, commitment, morale, quality, etc., to perform effectively. However, the involvement and
initiative of a person may differ from one organisation to another. It is very essential for the HR department to
manage and control all the personnel issues efficiently so as to achieve the marketing objectives. A company is
not just focussed on achieving high sales volume and attracting large number of customer, rather it is also
50 MBA First Semester (Basics of Marketing) SPPU

involved in absorbing skilled personnel for the company. Thus, both marketing and human resource department
play an important role in the company’s long-term success. With the changes in markets and customer
requirements, marketers have to modify their products and marketing campaigns so as to remain competitive in
nature. Similarly, the expectations and needs of employees also change, so HR department should also amend
the salary structure, facilities, work environment, etc., of the employees.

1.6.9. Information System

In an organisation, information system is a source that links the management, computer science and information
science all together. It also connects the activities of different departments with one another. These departments
are marketing, human resources, production/operations, finance and accounting. In earlier times, information
systems were used in every major department separately in order to increase the efficiency of that particular
department. But such structure sometimes may prove to be inefficient because several business activities take
place in coordination of several other functional departments.

For example, when a customer places an order with the marketing department and wants to make a credit
payment then those formalities are processed by the finance department. Whereas, the availability of product is
checked by the operations department and packing is done by packaging department. Further, the accounts
department will issue the bill for the same, and again the finance department will arrange for shipping insurance.
Similarly, several other activities may also take place in complying of a single order. Therefore, the flow of
information between various departments must be accurate and effective so as to avoid delays and customer
dissatisfaction.

Above all, the activities of marketing and information systems must be well-synchronised. This will help the
marketers to make effective decisions regarding improvements in product quality, price, packaging, advertising,
media placements, distribution channels, etc. Broadly, marketing information system is used to collect,
scrutinise, and disseminate the required information for the process of decision-making. It is derived from the
concept of management information system and has a wider scope than that of market research.

1.7. UNDERSTANDING MARKETING AS CREATING,

COMMUNICATING, AND DELIVERING VALUE
1.7.1. Introduction
The foundation of the “value framework” is to focus on activities which increase value to customers or rather,
create value with a certain profit. Marketing as well all business activities combined are thus, an effort to create
value. In fact, consumers are increasingly become value centred. It does not matter if the consumer is buying a
product or a service. Consumers compare all the alternatives that are available in the marketplace and choose
the option that gives them maximum value. The aim of marketing is to create the combination which gives the
maximum value to the consumer. This is done using the “value framework”.
The value framework is often bundled along with marketing. This is because marketing is the interface between the
organisation and the customer. Marketing helps the organisation to get insight on which value aspects to incorporate
in the product or service design. Marketing helps to get information on the business environment, market dynamics,
the size, and features of the market, the extent of competition forces and offerings, the likes and dislikes of the
consumers, etc. This is done through market research and environment scanning. This information helps the
organisation to decide which of the elements to incorporate so that the value is created for the end consumer.
Marketing also ensures the transmission of the “value pack” to the consumer in the most effective way. It has to
do this in a way that is in tune with market dynamics and also retains the competitive edge of the organisation.
Value creation is thus a two - way process and cannot be the sole responsibility of Marketing. The value
framework is thus a model for action. It is concerned with how the organisation is delivering value to the end
consumer. The value framework has several components. Each of these components has distinct roles and
responsibilities. The marketing function gets defined when all these components are integrated.
The components of the value framework are defined in the section below:

)
 Introduction to Marketing (Unit'l). * • 51

Understanding Marketing as Creating,

Communicating, and Delivering Value

Selecting the Value to be

Offered Creating the Value

Delivering the Value Capturing Value Back for the

Firm from the Market
Communicating the Value
Enhancing the Value

1.7.2. Selecting the Value to be Offered

The first step in the value framework is to select on what value is to be offered to the consumer. The other
components - the level of technology to be employed, the design procedure, engineering, production method,
packaging, logistics, sales, mass promotion etc., can only be done after the value offering is decided. To decide
the level of value to be offered, the organisation has to first find out what the customers value in terms of
perceptions. It then picks the most relevant values and tries to incorporate the same in design.
It is also a possibility that the capabilities of the organisation may not match what the consumer may want in
terms of value. The value framework does not force the company to meet the needs of the customer at any cost.
The organisation can well move to another customer segment which is a better fit in terms of capabilities. The
beauty of the “value framework” lies in the fact that if done properly, it ensures that products offered by the
company are purchased by the customers without any additional efforts.

Deciding the Intensity of Value to be Offered

While selecting value, main difficulty lies in the amount of value that needs to be incorporated by the organisation
in the product or service. There has to be cost associated with every value dimension. This cost also has to be
recovered from the end consumer. In other words, the selection of value impacts the price that is charged from the
end user. It is very important for the organisation to know the price sensitivity of the consumer.
It is necessary to know what level of price is comfortable with the consumer. There is thus a point of inflexion.
Adding too much value may make the product excessively expensive for the consumer. Adding less value will
make the consumer dissatisfied. The company therefore has to choose that combination of value which is
possible within the price band and possible for it to deliver in terms of capabilities.
Avoiding Under-Selection and Over-Selection of Value
There is really no actual limit upto which a company can add value to a product or a service. The amount of
value that can be inserted is based on how innovative the company is in terms of ideas, how effective these
ideas are and how easy it is to implement them. A company runs the risk of having dissatisfied customers, who
are likely to move to competing services If it chooses less than required value. On the other hand, if it selects a
high value then this increases the product price.
The increase in price makes the product out of reach from the majority of the market segment. Hence, offering
low value reduces chances of product success and higher and required value selection may lead to problems in
maintaining high profit returns. The challenge therefore lies in picking the right amount of value in terms of
customer expectations and also organisation capabilities. The right value also has to priced correctly so that a
steady stream of customers and revenue is guaranteed for the organisation.

1.7.3. Creating the Value

Once it has been decided how much value is right, the next important step is to make the product, i.e., value
creation. This is the main part of value delivery by the firm. All the functional areas of the organisation are
involved in this important task. The various functions like Technology, Engineering, Marketing, Logistics etc.,
have a big role to play in this stage. The structure of the organisation also has an important role. It is very
important for all the departments of the organisation to play an integrated role in this value creation process.
Innovation plays a big part in incorporating the required value in the design of the product while, at the same
i time ensuring that the costs of designing the product do not overshoot.
 *h --L.'

52 MBA First SemesteijÿBasics of Marketing) SPPU :

Value means that the designed product or service captures all the benefits that the target- consumer seeks from it.
These benefits can be economic, functional or emotional in nature. Customers expect this bundle of benefits at a
certain cost. Costs could pertain to the monetary aspect, time expended by the consumer, psychological costs,
etc. The value is basically a combination of the quality along with the desired service and the cost of the
delivery. In other words, value can be considered as a ratio of benefits to costs. Hence, value can be considered
by increasing the benefits at the same level of cost or redesigning the product so that the same benefits can be
given at a reduced cost. Value can also be considered by increasing both benefits and costs, but increasing
benefits more than costs.

1.7.4. Delivering the Value

Value delivery can be interpreted in two ways. At one level, it pertains to the selection, design and delivery of
value to the end consumer. The second interpretation refers to the actual delivery of the designed product to the
consumer. The organisation needs to be careful on how it treats the value creation exercise. It cannot just add
value infinitely to a product. The value also needs to be delivered to the end consumer. The organisation should
design the products keeping the value requirement in mind and ensure the delivery of the same to the consumer
in an effective manner.

Front end responsibilities are becoming more demanding and difficult with every passing day. However, it also
offers marketers an opportunity to delight the end consumer by creating an overall unique experience.
Marketers have to exist in very dynamic world. This also applies to the delivery process. Delivery systems are
moving from a transaction- based system to a relationship- based system. This is why Customer Relationship
Management (CRM) has become such an important facet of modem marketing activities. Delivery formats are
also getting transformed from mass- based solutions to customised-based solutions, depending on the needs of
customers.

1.7.5. Capturing Value Back for the Firm from the Market
Giving value to the consumer is only one part of the Value framework. The firm also has to be compensated in
the form of returns. This share is received through the price that is charged to the end consumer.

The mechanism that ensures that the firm gets adequately compensated for the value that it gives is called value
pricing. The steps of value pricing are as follows :
1) Decide on the value that the consumer desires. :
2) Create the value in terms of product / service features.
3) Getting back the adequate through the price mechanism.

The value framework is a give and take process. The exchange process explains the features or benefits that
must be incorporated into the product or service and compares this to the costs that the consumer must pay to
acquire the product/ service. The customers get the product in exchange for the money paid and the company
get the money for continuing the business activities. In the traditional business model, the cost of the company
was the central theme in the pricing dictum. Pricing was decided on a cost- plus basis. The objective of the
pricing mechanism was to cover the cost that the company incurs and also earn a certain extra surplus and thus
be able to recover the amount that it has invested in the design of the product / service.
!
On the other hand, in value pricing, the cost is not the central theme. What is considered is the value that is
being offered to the end consumer. The company then decides on a price for the value which adequately
compensates the company and also does not dissuade the consumer from buying. The value pricing ensures that
the firm is able to price the product appropriately and thus create a good surplus for itself. The price strategy
can both be economy (low) or premium or somewhere in between.

The question is not really about whether the price is set high or low but how much value the consumer gets for
the cost that he incurs and also if the company gets compensated adequately. Value pricing thus leads to a win-
win situation where both the consumer and the company get treated fairly. The guiding principle of value
pricing is “offer value and capture value”. Needless to say, the company can get a fair price, only if the right
amount of value is delivered to the end consumer. hv
/

Introduction to Marketing (Unfit 1) ’ 53

1.7.6. Communicating the Value

The value offer also has to be communicated to the end consumer. This is a two- step process. In the first step,
the value offer is created. In the next, it is communicated to the end consumer.
1) Working out a Value Proposition: The product is not just what is offered to the consumer. Along with it,
a value proposition is also offered to the customer. The various features of the product/ service are
explained to the end .consumer as value propositions. The company also explains how it is different from
other competing products in the market. The task of marketing is to construct the appropriate value
: proposition and also convince the customer about the superiority of the same.

The company can choose to communicate the value proposition to consumers in several ways through an
integrated communication plan. It can resort to advertisement on TV, press, digital media, road-shows,
promotions, etc. The marketing cell decides on the most effective communication channel and also
allocated a budget for it based on the communication objectives.

2) Communicating the Value Proposition: The next step is the communication of the value proposition.
Marketing has a big role to play here. The entire gamut of communications is available to the company at
this stage. The company explains its unique selling properties to the consumers at this stage. The
communication medium chosen can be mass communication or even personalised communication. These
days digital advertising also allows mass customisation.

Marketing normally is faced with the problem that value delivery seems to be relegated to the value
communication stage. In many organisations, the value delivery process is associated with promotions and
advertisement. Marketing has often has to cover up for an poorly designed products and rely on ad agencies
to create a story which will convince customers to buy.

1.7.7. Enhancing the Value

Value creation is a continuous process. The organisation is continuously seeking ways in increasing the value
for the end consumer. Value creation is thus a dynamic process. By continuously upgrading the existing value
propositions and also effectively communicating to the consumers, the company is able to stay modem and
relevant. Technology is continuously changing the paradigms of many businesses. It is constantly recreating
boundaries.

Hence, only companies which can be abreast of technological advancements and enhance value propositions
can survive in the long run. The company constantly keeps track of the satisfaction levels of its consumers
through social media, feedback mechanisms, etc. It collects this feedback religiously and incorporates the same
in the design of its product / service. This is an unending activity for the organisation. Competing products and
also substitutes of the product are continuously trying to capture each other’s value proposition.

The company needs to keep checking for gaps in the value proposition and fill them at the right time. This
allows the company to stay relevant to consumers and maintain its market [Link] enhancements can
happen through major innovations and also through incremental value additions. The major enhancements give
opportunities for rapid growth. However, it is not possible to have big bang innovations on a regular basis.
These happen with lesser frequency.

On the other hand, constant and incremental improvements allow the organisation to add value on a steady
basis. Value enhancement thus, needs to happen on a sustained basis. Value enhancement and sales promotion
activities are two separate terms. Consumer promotions or trade promotions are short term measures. They
don’t add significantly to the value of the product. These are just short-term inducements to alter the benefit
cost equation so that consumers are tempted.

These are not sustaining by nature as competitor can also use them to lure the customers. On the other hand,
long term erihancements to the value of the product are not fickle and occur through functional / feature
enhancement;’ improvement of quality, convenience, improved distribution, better after sales service and
sustained brand building activities.
 ; siazey-ua

;
:
54 MBA First Semester (Basics of Marketing) SPPU

1.8. EXERCISE
l
1,8.1. Very Short Answer Type Questions
1) Define marketing.
2) List the core concepts of marketing.
3) What is meant by exchange?
4) State any two differences between selling and marketing.
5) Name the types of utilities.
6) Explain product orientation in three to four lines.
7) What is sales orientation?
8) What is integrated marketing?
9) Give the meaning of globalisation.
10) Mention any two factors that have contributed to heightened competition.
11) Define marketing management.
12) Give any two objectives of marketing management.

1.8.2. Short Answer Type Questions

1) Give the scope of marketing in brief.
2) What are need, want and demand?
3) Give the meaning of customer value.
4) State the concepts of markets.
5) Describe the key customer markets in short.
6) Write a brief note on digital markets.
7) Explain societal marketing orientation.
8) What is holistic marketing orientation?
9) Highlight the new consumer capabilities.
10) State the concept of marketing myopia,
11) Explain marketing as delivering the value.
'

12) Describe linkage of marketing with information system.

1.8.3. Long Answer Type Questions

1) Discuss the various functions of marketing.
2) Write a detailed note on evolution of marketing.
3) Give a description on customer satisfaction, customer delight and customer loyalty.
4) What are marketplaces, market spaces and metamarkets? Explain.
5) Describe the various types of markets.
6) What is a brick and click model? Give its advantages.
7) Discuss the production and marketing orientations.
8) Explain relational marketing orientation in detail.
9) What are the new marketing realities? Explain with respect to technology.
10) Give the meaning of social responsibility. Describe the different business actions towards socially responsible
marketing.
11) Write a note on impact of globalisation, technology and social responsibility on marketing.
12) Discuss the new company capabilities in detail.
13) Explain the functions of a marketing manager.
14) Give a detailed description on linkage of marketing functions with all functions in the organisation.
15) State the steps involved in the marketing process.
16) Explain marketing as creating and communicating the value.
 Marketing Environment (Unitr2) 55

UNIT 2 Marketing Environment

2.1. MARKETING ENVIRONMENT

2.1.1. Concept of Environment
Environment refers to the surroundings, conditions and influences in which living organisms exists. In the
similar way, organisational environment is a sum total of events circumstances and objects that influence the
organisation. Therefore, it is imperative to understand the influences that the environment has over the
organisation.

This is possible by going through the key features of the market environment. There are various environmental
factors which directly influence the marketing activities and decision-making ability of the organisation. These
factors combine to form the marketing environment.

For example, the marketing environment for a car tyre manufacturer may include technology for
manufacturing, car buyers, manufacturers, dealers, distributors, competitors, import-export policies, tax system,
etc. These are the external environmental factors which influence the company. Other than this, the company’s
internal environment also affects the marketing activities such as production system, finance, technology used,
sales force, etc.

According to Philip Kotler, “Marketing environment refers to external factors and forces that affect the
company’s ability to develop and maintain successful relationship with its target customers”.
i
With the fast changing marketing environment across India, the marketing managers and business leaders are
facing many challenges. They are finding it difficult to strive with the dynamism of environmental factors. So
as to remain competitive, improve market share or capture new markets, companies are adopting various IT
strategies to make alterations, modifications in their products and services.

2.1.2. Characteristics of Marketing Environment

The characteristics of marketing environment are discussed below:
1) Complexity: The marketing environment comprises of several factors which are interconnected and
mutually dependent on each other. Due to this, the environment becomes complex to understand. A slight
variation in one factor affects the other factor immediately. Conversely, the interdependence between these
factors changes according to the circiimstances. Hence, it turns out to be very crucial to foresee the
environment.
2) Dynamism: The nature of marketing environment is ever-changing and dynamic. Environmental factors
influence the functioning of organisation because of which its form and character keeps on changing
constantly.
3) Multi-Faceted: The character and form of the marketing environment can be known through insights of
the viewer. However, a particular environmental change can be viewed differently by different people.
Many times, a development is considered to be an opportunity by one organisation, while a threat by
another.
4) Influential Impact: The impact of marketing environment on the organisation is comprehensive in nature.
It affects the working of the organisation in numerous ways. It plays a very crucial role in profitability and
growth of the organisation.
56 MBA First Semester (Basics of Marketing) SPPU

2.1.3. Need for Analysing the Marketing Environment

The significance of marketing environment analysis is highlighted below:
1) Providing Marketing Environment Information: Marketing management largely depends upon the
information related to the marketing environment. Marketing environment analysis is vital because it keeps an
accurate balance between the organisation and the marketing environment by using tools like marketing mix.
This analysis provides the information about the prevailing trends and changes associated with the environment.
Through this information, the organisation is able to handle such issues and take suitable actions, if required.
2) Facilitating Strategic Response to Environment: The basic purpose of environmental analysis is to aid
the organisation’s strategic response to the ever-changing environmental factors. The company needs to
remain updated with alternative strategies and programs that are aligned with actual environment. This can
be done by carrying out accurate environmental analysis. This environment analysis enables the
organisations to identify the available opportunities in the marketing environment which are relevant and
fulfil the organisational objectives.
3) Determining Opportunities and Threats: The key role of marketing environment analysis is to identify
the available opportunities and threats within the marketing environment. This helps the organisation to
exploit the favourable opportunities and meet out the prevailing threats. As a result, the marketing
objectives can be accomplished without any hurdles.
4) Handling the Tasks Related to Marketing Environment Analysis: The process of collecting, sorting and
analysing the data related to marketing environment is called ‘marketing environment analysis’. It also
involves the tasks like observing environmental changes and finding out opportunities and threats. All these
activities assist the marketing manager to make the future plans for the organisation.

2.1.4. Impact of Environment on Marketing

The marketing activities of an organisation are influenced by various elements of marketing environment.
Business is either directly or indirectly influenced by these elements. The effect of environment on marketing
efforts can be through either direct-action or indirect-action forces.
1) Direct-Action Forces: Direct action forces include consumers, shareholders, labour organisations,
suppliers, and government bodies. There is a direct impact of these forces on the firm and its activities of
marketing. They affect the strategies, policies and plans of marketing and are also commonly termed as
immediate external forces.
2) Indirect-Action Forces: Factors such as demographic, economic, social-cultural, politico-legal, ecological,
physical and technology are included in indirect-action forces. They consist of external marketing
environment and thus affect the marketing efforts of a firm indirectly. The overall environment in which the
marketing firm functions is affected by these forces. The values, goals, customer relations, business
decisions, and technology, also get affected by these forces. It is through the direct action forces that the
indirect action forces exercise their impact.

2.1.5. Process of Marketing Environment Analysis

Following steps are involved in the marketing environment analysis:
Step 1: Observing the Environmental Attributes: The first step of marketing environment analysis defines
the level of uncertainty in the market. Several consequences of marketing environment are assumed such as,
Will it remain fixed or will it change and in what manner? Whether the change is easy or difficult to interpret?
This aids in deciding the area on which the analysis needs to focus.

Step 2: Reviewing Environmental Influences: The next important step in marketing environment analysis is
reviewing the environmental influences. It is meant to identify the environmental factors which have influenced
the past business operations and developments. It also helps to create depictions and situations that might occur
in future so as to analyse the degree of changes required in strategies.

Step 3: Identifying Competitive Forces Using Structural Analysis: This step focuses on .finding out the :
major forces operating in competitive and immediate environment and their importance. Along with this, then-
significance is also determined by recognising their relative potential. n;;
 Marketing Environment (Unit 2) 57

Step 4: Recognising Strategic Position: In this step, the strategic

position of the organisation is recognised. This is done by comparing Observing the Environmental Attributes
one’s own organisation with other organisations on the basis of its
competitors, customers and identical resources. I
Reviewing Environmental Influences
Different methods are used to implement the process, such as:
1) Competitor analysis, I
2) Strategic group analysis, in terms of similarities and dissimilarities of Identifying Competitive Forces Using
the strategies they follow, Structural Analysis
3) The analysis of market segments and market power,
4) Market growth/ market share analysis, and I
5) Attractiveness analysis. Recognising Strategic Position

Step 5: Finding out Key Opportunities and Threats: The last and final i
step in any marketing environment analysis procedure is identifying key Finding out Key Opportunities and
opportunities and threats. In this step, marketers are required to be Threats
familiar with the available opportunities in order to eliminate or avoid the Figure 2.1: Process of Marketing
threats. It is crucial to develop an understanding regarding the resources Environment Analysis
that the organisation has, while formulating strategies.

2.1.6. Components of Marketing Environment

Numerous factors affect the marketing environment of an organisation, mostly in two ways, i.e., positively or
negatively. These environmental factors can be sub-divided into two groups:
1) Internal environment/ Controllable elements, and
2) External environment/ Uncontrollable elements.
Macro
Environment

Micro International
Social and Environment Environment
Cultural /
Company :mographic'
Public Suppliers
Internal
Environment
Political .Competitors' Customers

Market
Economic
Intermediaries
Technological

Natural

Figure 2.2: Marketing Environment

2.I.6.I. Internal Marketing Environment

The internal marketing environment refers to the factors prevailing inside the organisation. It also affects the
marketing function of the organisation. Commonly, the internal factors are known as controllable factors, as
these factors can be controlled or regulated by the organisation itself. They can be altered or transformed as per
the changing situations, in form of physical and personnel facility, functional and organisational means, similar
to the marketing mix.

The controllable factors of internal environment have the capability to control the organisational operations.
Internal marketing environment enables the marketing managers to effectively utilise the factors present within
! the organisation for achieving organisational goals. The major factors which affect the internal marketing
operations are as follows:
58 MBA First Semester -(Basics of Marketing) SPPU

Internal Marketing Environment

Top Management
Finance and Accounting

Research and Development

Manufacturing
Purchasing 0i !
— Company Image and Brand Equity

1) Top Management: One of the major factors present in internal environment is top management. It includes
organisational setup, level of professionalism in management, composition of Board of Directors, etc.,
which affect the decision-making process of marketing. The organisational mission and goals determine the
philosophy, business areas, business policies, development plans, preferences, etc., of the organisation. The
support provided by the organisational hierarchy such as Board of Directors, shareholders, and employees,
towards the top management, significantly impact the marketing decisions and its execution.
2) Finance and Accounting: Finance department of an organisation acts as a source of funds to be used
towards the fulfilment of marketing objectives. The factors influencing the organisational decisions,
policies and operations comprises of financial situation, capital structure, financial policies, etc. Whereas,
the accounting department determines the revenues and costs associated, in order to evaluate the
organisational performance. Finance and accounting together constitute an important internal factor
affecting the marketing environment.
3) Research and Development: The R&D department within the organisation is responsible for the
development of new and innovative products with the help of available technology. This factor defines the
ability of an organisation to compete, innovate and influence the marketing activities.
4) Manufacturing: It refers to the process of producing preferred amount of goods and services of high
quality. The manufacturing activity involves physical assets, technology, production capacity, machinery
and distribution channels, which affect the functioning of the company.
5) Purchasing: Purchasing is the activity of acquiring goods and services to attain organisational goals. It is
considered as the strategic function and varies according to the needs of the organisation. Under this,
availability of required raw materials, machines, parts, equipment, or supplies, etc., at required place and
time without compromising the quality and quantity, is very important for the success of any business.
6) Company Image and Brand Equity: Company image refers to the company’s reputation or performance
in view of the public. It acts as an internal factor which may influence the marketing function of the
organisation such as finance, strategic alliances, distribution channels, new product launch, selling or
purchasing, etc.

Similarly, brand equity also plays an important role in some marketing activities. The effectiveness of
!
marketing operations depends upon factors such as brand equity, channels of distribution, and marketing
resources like marketing organisation and ability of marketing executives. These are also critical for new
product launch and brand extension.

2.I.6.2. External Marketing Environment

The environment prevailing outside the organisation is known as external marketing environment. These
factors are beyond the control of the organisation. Hence, they are referred to as uncontrollable factors such as
economic factor, government and legal factor, socio-cultural factor, geo-physical factor, demographic factor,
etc. Uncontrollable factors exist outside the organisation and influence the marketing strategies and plans of the
organisation designed by the marketing manager. These factors are uncontrollable in nature because of which
marketing manager faces numerous challenges. As a result, the marketing manager adopts various techniques to
regulate the activities of external environment such as forecasting, analysis and surveillance.
The external marketing environment can be categorised into two parts:
1) Micro environment, and ,T
2) Macro environment. ;ufcV:

k
Marketing Environment (Unit 2) . 59

2.2. MACRO ENVIRONMENT: COMPONENTS & CHARACTERISTICS

2.2.1. Introduction
The external environment of the organisation has both opportunities as well as threats. Agile companies keep a
constant watch on the external environment of the company. They quickly react to any changes that take place.
The task of identifying the major events that occur and how they impact the organisation are the concern of a
marketer. The marketing department tries to analyse both the customer and the competitive market. Companies
are able to modify existing strategies and devise future strategies to exploit the opportunities and steer clear of
the threats, by understanding external environment dynamics.

Apart from all the functional groups, marketers should always be aware of the market opportunities and trends. 4;
The understanding of the external environment is very important for gamering the marketing insight. The
external environment can be understood by understanding the needs, of the customer segment. The various
external events can also be analysed in terms of their impact on the existing business.

2.2.2. Analysing Needs and Trends

It is very important for marketers to know about the needs and wants of customers. This is done through a
market need analysis. This helps the marketers to recognise and fulfil the current needs and also understand
how the needs are likely to pan out in the future. It also tells the organisation about the various opportunities
that exist and also the likely threats in exploiting the opportunities in the market. This can be a very complicated
task and it is the responsibility of the marketing team to unravel it.

Many a time, complex nature of customer needs leads to conflict with the organisational objectives. Marketers
need to strike a balance between the goals of the organisation and the needs of customers. They need to present
this in the form of concrete ideas and also to devise a suitable course of action that fulfils the customer needs as
well as achieves the marketing plan goals. A very good example of an organisation which gained from need
analysis is the Nivea brand. Nivea is a famous brand in the skin care and beauty segment. It was introduced in
the year 1911 with a range of beauty products for women like skin creams, face washes, deodorants and shower
gels. In 1980, it extended its product line to men and covered products like shaving creams, deodorants, after
shaves and a particular type of aftershave balm for a man which was non-alcoholic in composition.

The products of the company gained a wide acceptance and a huge popularity among the customers. The success
of Nivea as a brand was because of well-crafted marketing strategy that was a result of need analysis that was
conducted by Nivea. They took advantage of their presence in the female beauty products segment by offering the
male segment a beauty and skin care product - especially the one that was taking care of their shaved face.

Nivea’s strategy can be understood better by understanding the difference between fad, trends, and megatrends.
These are explained as follows:
1) Fad: A fad is very difficult to predict. It has short life and it is not the outcome of any trend that can be seen
in political, social and economic activity. It is possible for a company to take advantage of fads. For
examples, Fidget Spinners, Pokemon Go, Tamagotchi Videogames, etc. However, the success of a fad is
often a matter of chance or luck. A trend on the other hand has a particular direction and certainty. They are
much easier to predict as well as long lasting than fads.
2) Trend: A trend tells how the future is likely to look like providing new prospects. For example, it has been
seen that there is a large segment of people especially in their thirties, young women, high-end consumers,
etc., - are very conscious of their health and fitness levels.
3) Megatrends: Megatrends can be described as significant development in the technological, economic and
political landscape. These do not happen overnight and normally take time to develop. However, once they
occur, their effects can be felt for a long time - from seven to ten years or even longer. For example, this
was seen in India during the IT boom. A very large pool of people joined the workforce in this period. This
increased the consumption power of the nation significantly and the demand for household goods went up.
In fact, the importance of the youth in several purchase decisions and also family decisions has undergone a
significant transformation over the years.
 i
;

60 MBA First Semester (Basics of Marketing) SPPU

2.2.3. Major Forces Impacting the Macro Environment

The new century brought many obstacles in front of organisations - the plummeting stock markets because of
the financial crisis severely dented savings and investment. People are highly affected due to changes like
business scandals, high unemployment rates, decline in retirement funds, and the malice of terrorism. The
global business scenario has been majorly influenced with these changes.
*>/
The factors which are not immediate environment to the organisation constitute to form macro environment.
These factors are external to the organisation and uncontrollable in nature. They indirectly influence the
marketing decisions but do not affect the marketing strategies of the organisation. The macro environmental
factors that influence the marketing decisions of an organisation are discussed below:

Macro Environment

Political Environment
Economic Environment

Socio-Cultural Environment
— Technological Environment i

Demographic Environment
— Natural Environment
:

Legal Environment

2.2.3.I. Analysing the Political Environment

Political environment is defined as the governmental actions which influence the functioning of the
organisation. The environment is closely associated with the economic conditions surrounding the organisation.
The factors involved in this environment may be acts, policies, laws, rules and regulations, related to business !
and economy. Different countries have different political environment.

For example, most socialist countries follow a centrally planned economic system. There are different laws for
regulating business activities other than the financial and technical matters. The business laws consist of
standards and rules set for different products, packaging and promotional activities. The Indian Government has
a widespread restraining impact on different facets of the business. Various policies related to business involve
industrial licensing for deciding location, production and process, import licensing for acquiring raw material
and machinery, loan financing, pricing policies, growth and expansion strategies, etc. :
Being a democratic country, India has a steady political system in which the government actively participates as
a planner, regulator and promoter of economic activity. Hence, the businessmen are well aware of the political
environment confronted by their organisations. All the business decisions taken by the government are based on
political considerations and philosophies which are followed by political parties governing the central and state
level. It affects the rules and regulations formulated by the government under which the organisations operate.
Every organisation needs to abide by the rules and regulations laid down by the political system as the law of
the land. '

Impact of Political Environment

Political environment is a significant part of macro environment. The state-owned laws, government
organisations and various regulatory bodies have a huge impact on the entire marketing system. The influence
of such an environment on the marketing activities is categorised into following groups:
1) Laws Governing Business: The current scenario has witnessed rise in the number of controlling Acts. The
major reasons behind this are as follows: T :
i) To shield the company,
ii) To defend customers from partial performance of producers, and
iii) To safeguard the society from fraudulent businessmen.
 Marketing Environment (Unit 2) 61

2) Altering the Enforcement of Government Agencies: There are certain agencies that are appointed by the
government of every country to monitor the proper implementation of act. These agencies at times gain
momentum, while remaining inactive at other times. The employees in these agencies are all experts in their
work. Hence, the decision-making has a huge effect on marketing activities.
3) Increase in Public Interest Groups: Public interest groups are gaining significance in the marketing
system. They boost the consumer power and raise their concern against unfair practices. They basically
operate for the well-being of the consumers and also influence the marketing activities of goods and
services. Such groups serve the purpose of protecting the customers from fraudulent businessmen. They
make consumer laws globally known in order to spread awareness among consumers.
4) Political Ideology of Government: Government’s political ideology discusses the thoughts, vision and
approach towards social and economic activities of the country. It determines the type of business
operations the country should have, operations to be included in the private and public sectors respectively,
areas to be opened for foreign investment, areas to be marked for small scale operations, etc. Therefore,
political ideology greatly influences various business organisations.
5) Political Stability in the Country: The most important factor for economic growth is a steady political
system which comprises of honest, dynamic, efficient members, which make sure that the citizens are safe
within the country. The reason behind the success of major developed countries and their economic stability
is the political system of those countries.

In the absence of an effective political system it is difficult to define the long-term goals of the organisation.
With the changing government, the economic policies also change frequently, leading to the uncertainty of
;
business class. The various factors related to the instability of political system are communal riots,
declaration of emergency, civil war, etc.
6) Relationship between Government and Other Countries: A healthy and peaceful relation of the country
with other foreign countries enhances the flow of foreign trade in the country. In addition, it also assists the
country to reduce their defence budget which can further be allocated for the growth and development of
the economy. All these activities positively influence the business organisation.
7) Views of Opposition Parties towards Business: Currently, the political system of India has adopted the
federation of different political parties. As a result, such alliance leads to contrasting ideologies of different
parties. This has made the political environment of the country more complicated to understand.
For example, FDI in retail is supported by few parties, while other parties strictly oppose its entry.
8) International Business Policies: A country’s political environment significantly influences the business
activities irrespective of the area and scope of the business operations. Since, MNCs need to face the
political environment of different countries; it is a challenging task for the company to operate successfully.
Due to these complications, environment can be categorised into three types, viz., domestic, foreign and
international. Irrespective of the size and nationality of the company, these environments directly influence
the organisation. The most critical part is that the home and host countries both are significant for
international business activities.
9) Government Control and Restriction: The activities of a company are controlled and restricted by the
government, who decide which activities to promote by extending support and which activities to
discourage by prohibiting or curbing them. A nation has the right to permit or restrict a company to operate
within its boundaries and have an authority over it citizens while performing business operations. Hence,
political environment of foreign countries is a matter of concern for those who intend to operate
internationally. The marketer should carefully analyse the salient features of the political conditions before
entering the global market.
10) Treatments of Foreign Investors: The political environment has the power to administer foreign
companies and its managers. For example, the political system in China exhibits that foreign investors
have the liberty to enter the market, plan their actions, administer their moves and eventually increase their
earnings. Political system consists of political institutions, organisations, interest groups, and the political
rules and regulations that control their actions.
62 MBA First Semester (Basics of Marketing) SPPU

2.23.2. Analysing the Economic Environment \V

Economic environment refers to those economic factors which largely influence the functioning of business
organisation. These factors consist of production process and wealth distribution system. The economic
environment also affects the marketing activities of the organisation. In addition to this, the market size and
consumers’ willingness to spend also plays a vital role in determining the economic environment. Thus, some
of the other economic factors are interest rates, inflation, disposable income, savings’Of the society, etc. All
these factors prevailing in the environment influence the purchasing power of the consumers. While, economic
development leads to changes in the tastes and preferences of the customers.

For example, due to the fall in interest rates of banks, customers find it favourable to invest in stock markets
than opening savings account in banks. Following factors Should be analysed deeply by marketing managers to
deal with economic environment:
1) Gross national product,
2) Per capita income,
3) Balance of payments position,
4) The stages of industry lifecycle and the present stage of the company. The four stages of industry lifecycle
comprises of recovery, boom, recession and depression,
5) Pricing trends of products and services, i.e., inflation or deflation,
6) Interest rate in banks and fiscal policies, as these directly affect the business investment in banks and
indirectly the demands of customers, and
7) Fluctuations in exchange rates, where fall in exchange rate increases exports while imports become more
expensive leading to cost-push inflation.

Impact of Economic Environment

An organisation is strongly affected by the economic environment. Not only the consumers, but their
purchasing ability also influences the market conditions. The ability of consumers depends upon their earning
capacity, savings, price of a product and debt facilities. While designing the marketing strategy, marketer must !

keep a balance between earning and spending ratio of an average consumer in a particular nation. Therefore, to
set an effective marketing plan, one needs to carefully analyse the economic environment.
Some of the factors affecting marketing decisions are as follows:
1) Changing Income: The purchasing power of the consumers directly affects the economic environment,
while the purchasing ability depends on the income capacity of the consumers. Since few decades, the per
capita income has increased but the purchasing power of consumers is contracting. The factors affecting the
economic state of customer involves economic uncertainty, heavy taxation, high rate of unemployment,
inflation condition, etc.
There are some people whose purchasing power is on rise, but generally, the economic condition of people
having low income is deteriorating day by day. Few big companies in the market provide hefty pay
packages to the deserving candidates. These people increase the rate of cash flow in the market with their
high income level. Hence, marketers should analyse the income capacity of the market before launching
their products and services.
2) Changing Consumer Spending Patterns: The consumer spending pattern is a significant factor for
marketing of products and services of an organisation. Most of the household expenses are incurred on
food, transportation and housing. With increase in family income, expenditure on food decreases, the
amount spend on housing remains the same and the expense incurred on the other categories ace considered
as savings.

With the increased income, the consumption pattern of different commodities change and it may cause
variation in demand. The factors such as change in income, spending patterns, cost of living, etc., have a
;
powerful impact in the market. For this purpose, economic forecasting is used by the companies to predict ;
the changes. The companies should not get affected by the downfall or boom of the market conditions. This
may help them to gain advantage of the economic environment. -S.'lO 'ÿ
Marketing Environment (Unit.?) • , 63

2.2.33. Analysing the Socio-Cultural Environment

Typically, the socio-cultural environment refers societal forces and institutions influencing the business or
marketing activities. These socio-cultural factors comprise of social preferences, values, behaviours, education,
ethical standards, social stratification, conflict, cohesiveness, etc. These factors determine the nature of inter¬
relationship between society and the organisation, as well as the functioning of the organisation.

This relationship between the organisation and individuals is determined by ethics, beliefs and norms of the
society. It is not an easy task for the marketer to alter these factors. Marketers should be trained and skilled
enough to measure effects of these factors on their business.

Following are the factors and influences that are present in the environment:
1) Social issues like environmental pollution, role of business in society, corruption, consumerism, and
utilisation of mass media.
2) Social values and attitudes, like social norms, ideologies, expectations of society from business, practices
and rituals, materialism and change in lifestyle trends.
3) Changing family structure, family values, attitude towards the family as well as within the family.
4) Position of children and adults in the family and society as well as the role of women in society.
5) Level of education, rights and work ethics of members in the society.

Besides the presence of core social values and norms, some flexible cultural values are also present in our societies
which are prone to changes like hairstyle, outfit, etc. There is a large part of the society which has not accepted
these changes. Different age groups and social classes have diverse ways of perception and attitude towards socio¬
cultural changes. The religion of different culture also affects the marketing of business organisations.

While analysing the effect of socio-cultural factors on marketing, the managers need to be cautious about socio¬
cultural elements like beliefs, attitudes, morals, lifestyles, cultures, cross-cultures and sub-cultures of people.
The actual purchase of the customers from the market can be found out with the help of socio-cultural factors.
They can also be interpreted by the buying pattern, place of purchase, time of purchase, the seller type and the
way of using the products.

Impact of Socio-Cultural Environment

Socio-cultural environment is a broad term for business organisations as their products and policies are
dependent on the factors present in this environment.
The major impact of socio-cultural environment on businesses can be seen with the help of following factors:
1) Perseverance of Cultural Values: Cultural values and beliefs are the most crucial factors within the socio¬
cultural environment. Different people have different values and norms in the society, which are persistent
in nature. These values are inherited by an individual from their ancestors, and are nurtured through
educational institutions, business, and the society. The values and norms which are considered secondary by
the society can be altered easily.
For example, significance of marriage is a core belief, but getting married early is a secondary belief.
Modifying core values is very critical for marketers, as compared to the secondary values of individuals.
For example, vegetarian food habit is a core belief and different food options in vegetarian category may
be secondary beliefs. Marketers may attract consumers with their variety of dishes.
2) Sub-cultures: Another major factor of socio-cultural environment is sub-culture. Each culture has a sub¬
culture. The beliefs, morals, attitudes, etc., of people from sub-culture are similar to core-culture people, but
their secondary beliefs are different. For example, rich people have a different thought process and
lifestyle. They prefer being different from others.
3) Influence of Other People: Majority of individuals in the society get influenced by the lifestyle and
consumption pattern of others. They demand similar products and services consumed by others, in order to
follow their living standards. For example, many people buy LED TV, home theatres of latest technology just
because others have them. Therefore, marketers should be very careful in analysing the interests of the people.
 WBMPHWa-ir.:-

64 MBA First Semester, (Basics of Marketing) SPPU

;

4) Changing Preferences: Continuous alteration in consumer preference is yet another important socio¬
cultural factor that impacts business decisions. These preferences tend to change with time; therefore,
marketers should be informed about the changing preferences of potential customers. These changes have
the capability to challenge the success of a product in the long run.
5) People’s Orientation towards Society: The attitude of people towards the society changes with time.
What people feel about the society impacts their buying pattern and attitude towards the marketplace.
Marketers come up with promotions and products based on national theme, these types of marketing
campaigns are attractive and likable. But, gesturing red and green can be a little challenging. Hence,
marketers must take care of reactions towards such emotions.

2.2.3A. Analysing the Technical Environment

Technological environment is the macro environment, which includes factors like machines, materials, and
knowledge for producing various goods and services. These factors significantly affect the functioning of the
business organisations. The advancements in the field of technology, which is used to make innovative products
and enhance the operational methods which influences the business is termed as technological environment.
Recent technological developments include mobile phones, computers, laptops, metros, automobiles, and other
production techniques, etc. These developments are also focused towards providing new and different products
and services based on improved production techniques. It is not just responsible for economic growth but also
affects the production policy of different organisations. !

In order to be competitive in the market, different marketers modify their products and production strategies
according to the technological environment. For example, technological factors enabled the transformation of
typewriting machines into keyboards and computers. In India, technology has changed the face of urban areas
and is yet to set its impact across rural areas. But, it has been introduced in rural areas by launching ‘Green
Revolution’. This has enhanced the productivity of farms using mix of high-yielding varieties, tractors,
fertilizers and better irrigation facilities. Recently, introduction of ‘White Revolution’ in India has launched
new technologies for animal husbandry and institutionalised dairy activities through cooperatives, which has led
i
to considerable increase in the production and availability of milk.

Impact of Technical/Technological Environment

Technological environment and its factors have immense impact on the functioning of the business
organisations. In order to implement such changes, marketers face several challenges and threats. The
technological factors affecting the marketing environment are as follows:
1) Rapid Technological Change: Technological changes are being witnessed every day. A business organisation
must be in accordance with the changing technology. This enables the organisation to cope up with the market
competition. In order to market their goods, companies need to keep themselves updated with the latest
technology. In case of communication process, previously traditional telephones were used for communication,
which were immobile and frequently faced disturbances. The invention of mobile has made communication
easier than telephone. Hence, modem technology must be put into use by business organisations. :

2) Unlimited Opportunities: Technological factors provide numerous opportunities for businesses. New
developments cause the production and marketing of new and improved products and services with
reasonable prices. Marketers should be able to identify these opportunities and convert them into reality.
Researchers are giving their best to invent the following:
i) Antibiotics for cancer,
ii) Use of solar power,
iii) Electric cure system, and
iv) Precautions for AIDS.
These inventions are technologically safe and secure. Its main aim is to reduce the cost of production. One
P of the important topics of marketing is “thinking about others”. If everyone is busy in exploiting unlimited
»ÿ technology then someone should think the other way round and market those technical goods and services.
;;
3) Huge Budget for R&D: The research and development activities that support technological development
in global markets require an extensive budget. As number of experts is required to carry out R&D activities,
therefore, marketers should plan effectively for research and development.
,::P
i
Marketing Environment (Unit 2) 65

4) Business Processes: Developments in the technological environment causes modifications and alterations in
business processes. The old machineries and techniques can be replaced with new ones. It may also involve
minor as well as major changes in the business processes. Sometimes, it becomes very hard for organisations
to change their business processes which may lead to loss of market share. Therefore, marketers should be
always ready to implement new changes in the business processes. It may be costly in nature.
5) Impact on Workplace: Work culture is also affected by technological changes. Due to the introduction of
new techniques and technologies, employees need to develop proficiency for better productivity. Therefore,
marketers should arrange training and induction programmes for employees to develop their skills.

[Link]. Analysing the Demographic Environment

Demographic environment is a fundamental element of macro environment. The most important thing which is
taken into consideration by the marketers is population, since people combine to form markets. The factors
which influence the business organisation are population growth rate, population size, ethnic mix, age
distribution, household pattern, education level, regional characteristics and movements.

The demographic environment must be analysed by the corporate planriers and extensive features of the
population which affect the organisation must be identified. If the management is attentive, it will be able to
gauge the potential variation in the demographic factor and search for more attractive markets and better
product lines. The most relevant factors in the demographic environment are trends in ageing geographical shift,
size and literacy of population.
! ' •

Impact of Demographic Environment

While comparing the two sides, macro environment is found to be highly important or effective which is not
under control of management. With respect to macro environment, demographic environment is the most
important force which is studied by the marketers. Market has no meaning without population. Hence, changes
in population must be seriously contemplated before entering into a market.
Following are the effects of changes held under on demographic environment:
1) Age Structure of the Total Population and its Changes: A variety of age-group can be seen in a
particular population or market including children, youth, adult and senior age groups. Therefore, a single
product is not meant for every age group. Marketers need to be very creative in designing appropriate
products and services for these groups. Along with population increment or deduction, demand varies
respectively. Thus, marketers must analyse the population trend before finalising their marketing strategies.
2) Changed Family Life: Family lifestyle is changing steadily in the current prevailing environment. These
lifestyle changes include increase in the number of working women, increase in marital age in women, rise
in the earning status of women, and right to demand for divorce, etc. This plays an important role while
devising marketing strategy.
Previously, women were simply home-makers, but now, they have extended their roles outside the
periphery of their family circle. This has reduced the time they devoted to household chores. This has
resulted in capturing the attention of the marketers towards ready-made foods, semi-cooked foods, breads,
washing machines and dishwashers, etc. may prove to be helpful for the working women.
3) Education and Profession: There is a vast difference between needs and demands of educated and
uneducated customer groups. Differences may also exist among individuals with different levels of
education. Buying preferences of customers in any population also vary due to their distinct profession or
occupation. With time, several new professions have been evolved developed in the market and therefore
different products and services are required to fulfil their demands. Marketing managers need to be very
careful in designing marketing plans for a population to match the consumer requirements.
4) Geographical Shift in Population: Due to some reasons or problems people shift from one place to other
temporarily or permanently and this shift causes change in their tastes and preferences. Marketing strategy
is vastly affected by a geographical shift in population. Majority of people visit foreign countries and
become resident' of that country due to their job or other factor, and when they return to their home country
their tastes and choices get changed. So, understanding this factor is also very important for marketers in
order to design effective marketing strategy.
1
:f. : 'ÿÿ3- .i' rr.ÿL-i- n

66 MBA First Semester (Basics of Marketing) SPPU

2.23.6. Analysing the Natural Environment

Natural environment is the group of natural resources which is used by business. It covers everything from its
existing location to weather conditions that affect production and sales of a business. This natural environment
is uncontrollable in nature. All the operations of the business are influenced by natural factors. For marketing
managers, it is very essential to identify such factors and alter their business operations. Due to inappropriate
and large scale consumption of natural resources, the ecological balance is affected, which ultimately affects the
business decisions and strategies. For example, petroleum reserves are not abundant in India that is why these
are imported from gulf countries. Organisations using petroleum products develop crucial production strategies
in such situations.

Impact of Natural Environment

A large-scale consumption of natural resources is noted in different business operations. Any minute change in
the natural environment may cause a significant impact on the businesses. The major impacts of natural
environment on businesses may be listed as follows:
1) Raw Material Deficiency: The prime impact of natural factors on the business operations is the shortage of
raw materials. Due to continuous consumption of natural resources there may exists a situation of
deficiency of raw materials. This may lead to the ineffective production of the organisational products and
services. Also the natural calamities can cause the distortion of natural resources. Therefore, marketers
should be careful in utilising raw materials available in the natural environment. Accordingly, an
appropriate level of raw materials should be extracted from the natural environment. r
2) Increase in Cost: The increase in cost of frequently exploited resources such as energy and water is another
-
important impact of natural environment. The key, economies are basically dependent on the energy
resources. As a result, the cost of such resources is getting costlier day by day. Marketers need to design
effective production methods for using alternative energy sources. This will reduce the use of scarce
resources. For example, solar energy is used by marketers to manufacture exclusive products.
3) Climate: The surrounding climate of the business organisation is also an important factor affecting its
marketing operations. Climate refers to the mixture of wind, temperature, humidity, and other elements
present in a particular area over a period of time. The business operations are influenced by the climate of
the area where, the business is located. Therefore,, marketers should keep observing the climate, in order to
effectively operate their processes. r
4) Topography: In geography terminology, topography determines the slope, elevation, and terrain features
associated with any location. The topography of a particular region also influences the business processes of
an organisation. The quality of raw materials may differ between two places having different topography.
Therefore, marketers should carefully utilise the available raw materials.
5) Government Regulations: Different government regulations and acts prevent or reduce the use of certain
natural resources for the organisational production. This prohibits the marketers from getting involved in
the anti-nature activities. Therefore, marketers should adopt these regulations and design innovative
production processes to solve the natural crisis.

2.23.1. Analysing the Legal Environment

i'
Legal environment refers to those factors which are associated with the legal laws and orders influencing the
marketing environment. It is essential for the marketing environment to follow all the rules and regulations of
the Indian Penal Code. The legal factors may include laws, constitution, legal rights, courts, penalties, and other
legal practices, etc. These factors significantly influence the marketing operations of different organisations.
Different legal factors attached to an organisation ‘"may also include licencing, bribery, copyrights and
trademarks, and jurisdiction for organisation as well as customer related disputes, etc. Arbitration or local courts
are used for dispute settlement.

Business operations are also influenced by State, Central government and local bodies. There are several laws
passed by the Government on matters like wages;, prices, health and safety at -workplace, employment ;

opportunities, location, gas emission, amount of noise, permissible, etc. Such laws affect the daily working of
the organisations. Even their strategic choices also affect the activities of the government as it might create or
restrain business opportunities.
Marketing Environment (Unit 2) . * > , 67

Impact of Legal Environment

It is important for the management to correctly understand the legal system of the country under which the
business has to be operated. Along with this, they must be aware of the nature of international as well as
domestic legal profession and legal relationships shared by countries. There are also differences in legal system
with reference to theocratic law, common law, and civil law and the degree of independence of judiciary from
political process.

Below mentioned are the impacts of legal environment:

1) Deregulation: Sometimes, government removes certain regulations from particular sectors and promotes
the entry of other players in the field. This causes severe competition and affects the profitability of
established business organisations.

For example, foreign direct investment in infrastructure or construction industry causes the entry of foreign
players. This creates a tough competition between different players in this sector. Therefore, marketers
should be ready to face such situations. An effective contingency plan should be designed in advance.
2) Globalisation: Globalisation exerts a pressure on the Indian firms to stand in competition against the
international firms in the local as well as global market. The rules and regulations of global market are
totally different from the domestic market. This is because firms are dependent on numerous sources of
competitive advantage to uphold their markets. For example, liberalisation of foreign direct investment in
equity and removal of controls over foreign exchange add to the momentum in concern with the entry of
multinational corporations in India.
3) Environment Protection Norms: Legal environment also protects the natural environment. A number of
laws and acts have been passed by the Central and State Government of India to safeguard the
environment shaping the operations of different organisations. The production and marketing policies of
different organisations are affected by such norms. For example, due to introduction of laws relating to
prevention of gaseous emissions, organisations will have to developed different production technologies
in accordance.

2.3. MICRO ENVIRONMENT: COMPONENTS AND CHARACTERISTICS

2.3.1. Introduction
The environment in which the company thrives, or the set of factors surrounding the company itself, is known
as micro environment. These factors are responsible for the organisational ability to develop products and
services and satisfy the market needs. It also consists of those people who directly influence the growth of the
company.

“The micro environment consists of the actors in the company’s immediate environment” that affect the
performance of the company. These include the suppliers, marketing intermediaries, competitors, customers,
and publics. “The macro environment consists of the larger societal forces that affect all the actors in the
company’s micro environment namely, the demographic, economic, natural, technological, political and
cultural forces.”

It is quite obvious that the micro environmental factors are more intimately linked with the company than the
macro factors. The micro forces need not necessarily affect all the firms in a particular industry in the same
way. Some of the micro factors may be particular to a firm. For example, a firm, which depends on a supplier,
may have a supplier environment, which is entirely different from that of a firm whose supply source is
different.

2.3.2. Major Forces Impacting the Micro Environment

Generally all the organisations operating in a single industry are not affected by the micro environment in
similar fashion due to variation in the size, capability, strategies and capacity. For instance, large organisations
receive greater discounts from the raw material suppliers. In fact the smaller organisations will not enjoy the
similar type of discounts.
68 MBA First Semester (Basics of Marketing) SPPU

Similarly, there will be no threat to a firm from the competitor firms which are smaller in size but in case of
large competitors, it will feel anxious. In some cases, there will be similar micro environment for all the
organisations operating in a certain industry. In these events, there may be difference in the responses of these
organisations towards their micro environment due to the attempts made by each one to accomplish higher
success. The common micro environment elements are presented below:
Micro Environment

Suppliers
Market Intermediaries

Customers
Competitors

Public

2.3.2.I. Suppliers
An important factor in the micro environment is the supplier, i.e., those who supply raw materials and
components and machines to the company. The suppliers should be reliable and act as business partners,
working in coordination to fulfil the ultimate consumer expectations. If the suppliers are reliable, there is no
need to keep heavy inventory stocks that increases the risk of obsolescence and damage and also blocks the
working capital of the company. !
According to Michael Porter, “the relationship between suppliers and the firm epitomises a power equation
between them. This equation is based on the industry conditions and the extent to which each of them is
dependent on the other”.
Suppliers provide businesses with the materials they need to carry out their business activities. A supplier’s
behaviour will directly impact the business it supplies. For example, if a supplier provides a poor service this
could increase timescales or product quality. An increase in raw material prices will affect an organisation’s
Marketing Mix strategy and may even force price increases. Close supplier relationships are an effective way to !

remain competitive and secure quality products.

23.2,2. Market Intermediaries i

These are the middlemen who form part of the distribution channel and those who help reach the
product/service to the ultimate consumer. They can be few or many in number, depending on the length of the
distribution chain and the type of distribution system that the company adopts. If this chain is hassle free and
functions without many hurdles, it eventually helps the organisation. On the other hand, if this is not true, then
the company spends much time, money and energy on solving the problems relating to the marketing
intermediaries. The firm must build healthy relationship with the intermediaries such that the firm and the
distributors benefit in the long run.

[Link]. Customers
Customers are the central focus of the organisation. They can be categorised into five types like:
1) Ultimate Customers: They can be individuals or groups of people who use or consume the goods and
services of the company.
2) Industrial Customers: These customers are mainly the small and large organisations which purchase
goods and services to produce other useful products. Their main aim is to earn profit and attain
organisational goals.
3) Resellers: They can be retailers, wholesalers and distributors. They buy goods and services from one place
and resell them at high prices to gain profit at some other places.
4) Government and Other Non-Profit Customers: They buy goods and services, mostly for the
consumption purpose of other people. These people can be ultimate customers or end users.
5) International Customers: They are the customers across national borders, who purchase goods and :
?ÿ
services for industrial purpose or may be for their own consumption. They can be individuals,
organisations, resellers, or even governments.
Marketing Environment (Unit 2) 69

2.3.2A. Competition/ Competitors

The competitive environment Consists of certain basic things which every firm has to take note of. No company,
howsoever large it may be, enjoys monopoly. In the original business world a company encounters various
forms of competition. The most common competition which a company’s product now faces is from
differentiated products of other companies. For example, in the Colour Television Market, Philips TV faces
competition from other companies like Videocon, Onida, BPL and others. This type of competition is called
brand competition. It is found in all durable product markets.

The consumer wants to purchase a two-wheeler, the next question in his mind is with gear or without gear, 100
cc or more than that, self-starter or kick starter, etc. This type is otherwise known as ‘Product form
competition’. There are other business entities that manufacture similar products and compete with a company
for market share and turnover. These have to be managed well and market intelligence is required to find out
about their future plans. These can play a major role in making or marring the fortunes of any company.

The firms producing and selling identical products and services in the same market are known as competitors.
The competition is mainly based on price and product variation. In order to manage this situation, an effective
marketing system is very necessary. The use of marketing system enables improved results and self-reliance
within the organisation.

To become competent, the identification and careful analysis of existing competitors is important. It is also
crucial for a marketing manager to study and note different basic aspects related to competitive atmosphere.
Philip Kotler suggests that a buyer’s perspective is very useful in determining the level of competition for an
organisation.

[Link]. Public
Public is also an important factor of micro environment. The satisfaction of general public should be the utmost
aim of organisation as competitors and customers are all part of general public. The policies and activities of the
organisations have a significant impact on other groups of the general public. A public refers to “any group that
has an actual or potential interest in or impact on a company’s ability to achieve its objectives”. Hence, public
relation is crucial for the long-term survival and growth of the organisation.

These refer to the immediate physical environment of any organisation. People, who live around an office or a
factory area, exert considerable influence with regard to disposal mechanisms of waste, production practices
employed, noise pollution generated, nuisance value created, etc. These people cannot be ignored or else they
may also go as far as getting the business closed down. The company has a duty to satisfy the people of the
society at large along with competitors and the consumers. It is an exercise which has a larger impact on the
well-being of the company for tomorrow s stay and growth. Create goodwill among public, help to get a
favourable response for a company.

2.3.3. Differences between Macro and Micro Environment

The following table portrays a difference between macro and micro environment:
Point of Difference Macro Environment Micro Environment
1) Meaning External environments of an organisation. Internal environments of an organisation.
2) Nature Very complex. Less complex to perceive.
3) Task of the Marketer interacts with the elements Marketer interacts with other functional areas of
Marketer _
prevailing outside the organisation. the organisation._
4) Extent of Factors remain beyond the control of Factors may be controlled to a large extent by
Control marketers. marketers.
_
_

Creates a huge impact on shaping Remains comparatively independent in shaping

__
5) Impact
marketing decisions. marketing decisions.
6) Function Factors may create opportunity or pose Factors reveal the capabilities of an organisation
threat to the marketing activities of an to exploit the opportunities created by the macro
environment or to combat the threat through its
organisation.
_
marketing activities.
M
I -:
I
T
. .

70 MBA First Semester (Basics of Marketing) SPPU

2.4. EXERCISE
2.4.1. Very Short Answer Type Questions
1) Define marketing environment.
2) State the impact of environment on marketing.
3) List the major factors which affect the internal marketing operations.
4) What is economic environment?
5) What is legal environment?
6) Give the meaning of demographic environment.
7) State any two differences between macro and micro environment.

2.4.2. Short Answer Type Questions

1) Explain the concept of environment.
2) Highlight the need for analysing the marketing environment.
3) State the process of marketing environment analysis in brief.
4) Give the major forces impacting the macro environment.
5) Mention the impact of economic environment.
6) Describe the impact of technical environment.
7) Present the impact of legal environment.
8) Explain in brief, the major forces impacting the micro environment.

2.4.3. Long Answer Type Questions

1) Discuss the components of marketing environment in detail.
2) What is macro environment? Analyse its needs and trends.
3) Give the meaning of political environment. State its impact.
4) What is socio-cultural environment? Present its impact in detail.
5) Write a detailed note on suppliers, markets intermediaries and competitors as factors which impact the micro
environment. i

!'

i
r

i
;
Segmentation, Target Marketing & Positioning (Unit 3) 71

Segmentation, Target
UNIT 3 Marketing & Positioning

3.1. TARGET MARKETING: STP APPROACH

3.1.1. Introduction
The awareness about the product amongst the consumers is the basic requirement of marketing. It is the
responsibility of the marketer to effectively communicate with customers in order to inform them about the
products and services being offered by the company. Since, requirements and demands vary from individual to
individual; marketing planning cannot afford to be a clean sweep. The marketing planning has to have such
campaigns made so that USPs (Unique Selling Prepositions) are logically and clearly communicated to the
customers. A single product cannot satisfy all customers. Therefore, due to the varying needs and requirements,
it is essential to make different segments of consumers and plan for each segment separately. This process in
marketing is called ‘Target Marketing’ which is also termed as STP (Segmentation, Targeting and
Positioning).

3.1.2. Steps in Target Marketing

After segmenting the market, the marketers have to select the segments to create their target market. This is
known as targeting a target market. This makes the consumer aware of the product. The products are placed into
the minds of the customer, which is called positioning of the product. The entire process of segmenting,
targeting and positioning is referred as market selection. These three activities in the target marketing of market
selection are as follows:
1) Identifying Market Segments (Market Segmentation): The first and foremost action in target marketing
is to locate the target markets which have not been served yet. The unsatisfied needs of such markets
become the basis of segmentation. Following three phases are involved in segmentation:
i) Analysing the pattern of demand,
ii) Determining the segmentation bases, and
iii) Identifying the available market segments.
1
Determining demand pattern
Identifying
Establish possible bases of segmentation
2 Market Segmentation
>
3
Identify potential market segments >
T
4 Selecting
Develop measures to gauge segment attractiveness >
Target Market
5 (Market Targeting)
Select the target segment
T
Develop positioning for each target segment (position the 6
company’s offering in relation to competitors) Developing
Market Positions
7
Developing marketing mix for each target segment

Figure 3.1: Steps in Target Marketing Strategy

 72 MBA First Semester (Basics of Marketing) SPPU

2) Selecting Target Market (Market Targeting): After dividing the markef into homogenous segments, the
marketers aim at identifying those segments for which they could develop their products. This involves:
i) Analysing the segments to determine their attractiveness, and
ii) Selecting the potential segment(s).
3) Developing Market Positions (Market Positioning): Each selected segment differs from the other one on
the basis of different types of customers and their expectations about the product. Thus, positioning
includes:
i) Identifying possible positioning concepts for each target segment, and
ii) Developing marketing mix for each target segment.

3.2. MARKET SEGMENTATION

3.2.1. Concept of Market Segmentation
The market contains variety of products and they differ from each other in their specifications, quality,
durability as well as prices. The customers also differ from each other in their habits, preferences, hobbies,
income, culture, purchase decisions, etc. In order to streamline the marketing process, the consumers of similar
characteristics are grouped together in segments. This is termed as ‘market segmentation’. Market segmentation
means division of market into smaller groups having similar needs and qualities.

This helps the company to modify the products or services to suit the different groups more effectively. Even, the
advertisement messages and promotional methods are needed to be modified so that they are well-understood by
the group. For example, a product being sold in the State of Tamil Nadu is required to be advertised in Tamil
language. Here, getting the endorsement of local popular film star will be an added advantage.

According to Philip Kotler, “Market segmentation is sub-dividing a market into distinct and homogeneous
subgroups of customers, where any group can conceivably be selected as a target market to be met with distinct
marketing mix”. [
;
According to Philip Kotler, “The purpose of market segmentation is to determine difference among them or
marketing to them”. :

The quality of precision in market segmentation is helpful in accurately defining the customer needs. The actual
objective of segmentation is to develop separate marketing plan for each segment so that consumers can be
better served and their expectations are met effectively. In marketing planning, the market segmentation is
perceived as the first step towards betterment. After identification of a particular consumer group and
application of four Ps, i.e. product, price, place, and promotion, in proper manner, the marketers are able to
design products and services according to the target market.

3.2.2. Need for Market Segmentation

Market segmentation is essential for marketers because of the following reasons:
Need for Market Segmentation
. Meeting the Needs and Demands of
Increasing Profits for Organisations
Customers

Greater Chances for Growth

w
Retain Customer Base

Target Marketing Communications

Gain Share of Market Segment (

1) Meeting the Needs and Demands of Customers:

Different customers have differArit types of needs and
demands. By segmenting a large market, customers of
different segments can be ' offered products or
services which provide them higher level of
satisfaction.
Segmentation, Target Marketing & Positioning (Unit 3) 73

2) Increasing Profits for Organisations: The price sensitivity of customers varies in accordance with their
disposable incomes. By segmenting the markets, organisations can increase their average price of the
products and services, thereby improving their profits.
3) Greater Chances for Growth: Segmentation of a market can lead to high volume of sales. For example, a
customer can be lured or motivated to purchase a product in future when a firm offers first sample of the
product at an introductory price which is very low.
4) Retain Customer Base: Customers go through various types of transition phases such as they become
adults, start working, get married, have children, get promotion, and hence keep on changing their
purchasing pattern. Any business organisation can continue to retain its customer base by offering them the
products and services which they may need at different phases of their life cycle; otherwise, these
customers may get diverted to other brands or products.
5) Target Marketing Communications: All the business organisations should communicate with their target
customers. Organisations may face the following challenges if the target audience is too large:
i) The important customers may be left unnoticed.
ii) The cost of communicating with the customers may be very high, making the marketing
communication unprofitable. Hence, through market segmentation, target customers can be approached
frequently and offered products at lower prices.
6) Gain Share of Market Segment: The profitability of any organisation cannot be increased until it has a
substantial or major market share. Brands that are less popular in the market may face problems such as
diseconomies of scale in manufacturing and marketing processes, lesser shelf space in outlets, continuous
pressure from distributors, etc.

3.2.3. Bases of Segmentation for Consumer Goods and Services

There are different factors based on which consumer market can be segmented. The bases for segmentation are
as follows: - - :
Bases Segmentation
of
-
Consumer for Goods and Services

Geographic Segmentation
Demographic Segmentation
Psychographic Segmentation
Behavioural Segmentation

3.2.3.I. Geographic Segmentation

This includes the segmentation of market based on location, size, population density, climate, etc. This type of
segmentation enables the planning for better marketing. Rural and urban markets can be easily segmented by
such segmentation. The geographic location is very helpful for marketers to design the marketing plan. For
example, there are different regions in India like Assam, Bengal, Punjab,
Gujarat and Tamil Nadu which prefer clothes and food-items based on their regional culture and food habits.
Marketers must be very much conversant with regional languages. Also, places known for extreme climate
conditions affect the need as well as the buying behaviour. For example, in cold climate, there is permanent
need for woollen garments and heating systems whereas for hot climate, air-conditioners are needed.

[Link]. Demographic Segmentation

Another important basis commonly used for market segmentation is the demography, i.e. age, gender, income,
education, religion, family size, social class, nationality, etc. This type of division of market is admired by most
marketers. These are discussed below:
1) Age and Life Cycle Stage: Under this segmentation, the requirements of consumers are related to age
group and this can be divided into four categories, i.e. children, young, adult and old. For example, Dabur
produces oils especially for children.
2) Gender and Sexual Orientation: Males and females have different requirements and it is inherent in their
nature. For example, females generally prefer to spend on expensive clothes, cosmetics, jewellery whereas
males prefer to purchase cars, hot drinks, going to clubs, etc.
74 MBA First Sei&ester (Basics of Marketing) SPPU

3) Marital Status: Lifestyle of married and unmarried individuals is totally .different. A bachelor normally
spends his earning on entertainment, hotels, whereas, a married person will generally spend on home
furnishing, children education or purchase of house, etc.
4) Income: Buying behaviour of consumers is derived from their income. In our country, it varies from few
thousands rupees to even millions. Therefore, individuals have different buying behaviour.
5) Social Class: As per the social status of a person, the buying patterns change. A business tycoon will prefer
Mercedes, Audi, BMW cars, expensive cell phones, spacious and luxurious apartments or bungalow. A
commoner will go for economy cars, common cell phones and a suitable accommodation for family.
6) Family Size: The purchase requirements vary with family size. The consumption-level are different for
joint family and nuclear family.
7) Occupation: Occupation of an individual affects the buying behaviour to a great extent. For example,
people related to glamorous film world have totally different orientation in buying behaviour in comparison
to researchers and academicians.
8) Educational Level: People with same educational background and income have different preferences for
certain products but it cannot be taken as a thumb rule.
9) Religion: Certain rituals, festivals, eatables, clothes, colours, etc. are related to religion. The market can
also be segmented on such considerations.
:
[Link]. Psychographic Segmentation
Psychogfaphic segmentation of the market is not absolutely correct and it is generally found that persons of
same age, financial status, educational background and occupation, adopt different procedures in purchasing the
products, selecting a new product or choosing a shop. This is due to some psychographic factors which include
personality, values, lifestyles, beliefs, etc. These are described below:
1) Lifestyles: Lifestyle of a person greatly affects his/her buying behaviour. The lifestyle is associated with
the standard of living and the way in which money and time is spent by a person. This is also a result of
social background, culture, religion, psychology and demography. It is an important factor in dividing the
market and should not be ignored. For example, corporate icons prefer to buy costly suits and luxurious
cars, whereas an executive goes for normal clothes and shoes. ;
2) Personality: Another variable in psychographic segmentation is personality. Different individuals have i
different personality which determines their buying behaviour. Marketers utilise this phenomenon to design
products having brand personality. Thus they segment the market according to the personality of
individuals. For example, Levi’s Jeans, Vimal Suiting’s, Tanishq Jewellery, Sabyasachi and Gaurang Shah
for Sarees, Paris perfumes, etc., have personality statement which automatically attracts a particular
segment of the society.
3) Values: Values are the belief systems of individuals, Which affect their buying behaviour. These are also
utilised for segmenting consumer market. This is the most appealing strategy to attract the customers
because it touches their inner-self due to which selection of the product becomes easy.
4) Beliefs: Marketers know the fact that belief plays an important role in buying and hence they accordingly ;

divide the market. People adopt certain characteristics from childhood which gradually becomes their firm
conviction or belief that govern their buying behaviour. For example, it is a common observation that
people exhibit buying behaviour and lifestyle as per their religion, irrespective of festivals or normal days.

The psychographic segmentation reveals that consumers’ attitudes, values, motivation, life style are
responsible for their buying behaviour for a particular product. Many marketing research companies are
engaged in studying the individual clients for psychographic effect.
s':
3.2.3A. Behavioural Segmentation
It involves segmenting the market on the basis of understanding how customers use a particular product, how
they respond towards a particular product, what they know. about product or what their attitude towards a
product is. The market segmentation is based upon the analysis of behavioural variables like occasions,
benefits, user status, usage rate, loyalty and attitude of the consumers.
VV5
Segmentation, Target Marketing (Unit 3) 75

The analysis of these variables helps in developing the market segments. These derivatives are described below:
1) Occasions: The marketers do recognise the occasions that are helpful in developing needs. The household
items are regularly purchased by the salaried people on every first working day of die month. Festivals,
family functions or celebrations for specific events develop needs for purchase. The companies can plan to
enhance the supply of products based on these occasions. Two types of occasions are common:
i) Regular: These include occasions like Republic Day, Holi, Diwali, Dushehra, Eid, Christmas,
Independence Day, etc.
ii) Special: These include marriage, anniversary or any happy occasion like winning an award, promotion, etc.
2) Benefits: The market is also segmented on the basis of benefits derived by the consumer. A consumer may
purchase a watch as an essential need to know the exact time or to gift someone or use it as a status symbol,
wear it to match with the dress or even wear it as a jewellery item. The marketers do recognise this fact and
provide different brands of the product to take care of each segment separately.
3) User Status: The market can also be segmented on the basis of user status. For example, the users for
deodorant can be categorised as:
i) Non-user: This category is not interested in using the given product. For example, children and aged
people generally do not use deodorants.
ii) Potential User: This category heavily relies on given product consumption. For example, deodorants
are frequently used by fashionable teenagers and corporate executives.
iii) First Time User: There are consumers who use a new product for the change. For example,
deodorants used by college going students.
iv) Regular User: There is a section in the society who leads a lifestyle which requires regular use of
deodorants or other cosmetics like film stars, models, corporate big-wig and fashion conscious ladies.
v) Ex-user: Some people give up using a particular product (like deodorants) because of allergy or
medical advice.
4) Quantity Consumed/Usage Rate: The quantity consumed or the rate of consumption of a product is also
an established basis for segmentation of market. This segmentation is commonly used in tea, coffee and soft
drink markets. There are three categories:
i) Light: The frequency of consumption of the consumer is not constant but occasional. For example, use
of cosmetics by a housewife who is not so fashionable.
ii) Medium: The frequency of consumption of product is frequent. It is observed that teenagers frequently
use cosmetics.
iii) Heavy: The consumption of product is regularly made in large quantity. For example, the celebrities
working in the film industry, models, etc., use cosmetics regularly since it is a part of their profession.
5) Buyer Readiness Stage: There are different readiness stages of consumers regarding a product purchase.
Some consumers may be unaware, others may not be interested, and some might be interested while some
might be ready to buy the product definitely. The market is segmented as per the readiness of the consumers.
6) Loyalty Status: There are different levels of loyalty of consumers for specific brands as described below:
i) Hard Core Loyals: Such consumers always buy the same brand of product, like newspaper, coffee,
certain brand in clothes and sarees. They get hooked to these products due to their long experience and
develop a sort of addiction and do not switch to other brands.
ii) Soft Core Loyals: Such consumers limit themselves to two or three type of brands of the product. For
example, a consumer using Sony, LG, Voltas products is a soft core loyal consumer. Such consumers need
to be motivated by marketers to stick to one brand so that they could be turned into hard core loyalist.
iii) Split Loyals: Such consumers shift their loyalty for a change. For example, majority of customers
prefer Colgate tooth paste but some also use Pepsodent or Close Up.
iv) Switchers: Such consumers never stick to a brand rather they enjoy switching to new brands for
experience and thrill.
7) Attitude: Attitude is the principal driver behind a product purchase. Some people lose interest in life due to
some sad events, while some lead a very simple life as directed in scriptures. Such people do not indulge in
fun or luxuries of life and behave differently. However, normal persons want to enjoy their life to the fullest
and have fun. Keeping these things in mind, the customers are categorised as enthusiastic, positive,
indifferent, negative and hostile.
 : -'KIMS

;;
S'
76 MBA First Semester (Basics of Marketing) SPPU

3.2.4. Bases for Segmentation for Business Markets

The business market is also known as organisational/ industrial/ business to business (B2B) market/ manufacturer/
producer, etc. It is an association of different organisations and individuals who buy products or services which are
to be used in the production of other products or services that are rented, supplied, Or sold to others. In simple
terms, industrial market is a place where industrial buyers directly interact with the industrial sellers.

In contrast to consumer market, the industrial buyers are spread over different geographical locations, have a
derived demand and a homogenous marketing mix and are more trivial to deal because the sellers have to deal
with several decision-makers in trading such goods. Almost same bases can be used for segmenting an
industrial market which is employed for segmenting the consumer market. However, some other bases can also
be used to segment the industrial markets. These are as follows:
Bases for Segmentation for Business Markets

Size of the Customer

Geographical Location
End Use
Buying Criteria or !

Benefits Seeking Behaviour/Motivation of Buyer

l
Nature of Customer
Frequency of Use
Buying Process
Situational Factors

1) Size of the Customer: The size of a firm determines the quantity to be purchased. Big retail chains,
manufacturers, and engineering firms purchase products in large quantities and are known as big customers.
On the other hand, small quantities of product are purchased by small manufacturing organisations and
retail outlets, and hence they are known as small customers. The industrial buyers who buy goods in huge
quantities have different parameters for sales approach than small industrial buyers.
It is termed as ‘key account selling’ in which the sales managers deal with major accounts firstly since they
!:
are vital customers for the organisation. This can be considered as a conventional method of industrial
market segmentation. Depending on their purchase and size, industrial buyers can be segmented into
following three categories:
i) Category customers (heavy purchase) - these buyers purchase in huge quantity.
ii) Category customers (medium purchase) - these buyers purchase lesser quantity than that of category
customers but more than that of small buyers.
iii) Small buyers - These buyers purchase in small quantity.
2) Geographical Location: The market of industrial products can also be segmented on the basis of
geographical location of industrial customers. The industrial customers who are located in different
locations within a country can be divided according to sales persons’ territories or regions. At an
international level, different market segments are created on the basis of different parts of the world, as
globalisation has broadened the scope of regional territories.
This segmentation proves to be beneficial for the management as it can divide a huge market into small
groups which can be managed easily. Decision-making is also decentralised so as to make precise and
speedy decisions. For example, Airtel office situated in Delhi targets North India, whereas the office in
Mumbai targets the market o; West India.
3) End Use: The market can also be segmented on the basis of their end-users who use a particular company’s

focus «
*££££• capaci,y' wtos ,he “°“uyere -y *»

G i
 Segmentation, Target Marketing & Positioning (Unit 3) 77

4) Buying Criteria or Behaviour/Motivation of Buyer: The market segmented on the basis of end-use can
be re-segmented on the basis of purchase criteria. For example, a market can be sub divided into sensitive,
moderately-sensitive, and highly sensitive segments, taking the price of product under consideration.
5) Benefits Seeking: Alike consumer market, an industrial market can also be segmented on the basis of
benefit seeking criteria which is one of the most significant factors for segmentation. In simple words, the
different business organisations can be divided into small groups which are seeking the similar type of
benefits from the products or services.
6) Nature of Customer: The nature of industrial customers can be .totally different from that of the consumer
market customers. These types of customers can either be a small retail outlet or a heavy equipment
manufacturer. The customer can also be an individual who uses the products and services for further processing
in order to manufacture a new product or an individual who buys the product for his/her own end-use.
7) Frequency of Use: The industrial customers can order different quantities of the products depending upon
their requirements. These customers can be segmented as infrequent or light buyers and frequent or heavy
buyers.
8) Buying Process: The business organisations can divide their industrial customers on the basis of buying
process which can be centralised or decentralised. The purchasing decisions are mainly held by closed
bidding, tenders, open negotiation or by the amount by which customers allow any variation in product
i
specification.
'! 9) Situational Factors: Some buying situations may require specific personal approach, while others may
require a business-like formal approach. Therefore, such situations also affect the market segment process.

3.2.5. Levels of Segmentation

The market is broken into several smaller segments to pay more attention to marketing plans for each segment.
For each segment, the type of information needed as well as the method of handling it is different. The marketer
must know the type of segments and the ways to tackle them and in-tum develop a suitable strategy to operate
in these segments in harmony. Four levels of market segmentation are described below:
Levels of Market Segmentation

Segment Marketing
Niche Marketing
Long Tail Marketing
Local Marketing

Individual Marketing

3.2.5.I. Segment Marketing

It is based on similar needs, financial status, location, buying attitudes and habits of individuals belonging to a
market segment. The companies which follow segment marketing understand the varying needs of different
types of customers. Different customers may have different habits, expectations, needs, income levels,
geographical locations, etc. In case of a transport company, business organisations and domestic customers can
be seen as two segments of the market. A domestic customer may require transportation services for travelling
or shifting of luggage from one place to another; whereas, a business organisation can use these services for the
distribution of goods or services. A company does not customise its market offerings for each customer
individually; rather, it creates a separate market segment for customers of similar needs.

For example, a car manufacturing company may identify four segments seeking different features in a car like
simple transportation, safety, luxury or high performance. Segment marketing is not as accurate as individual
marketing. It comes somewhere between the individual marketing and mass marketing. For a transportation
company, some industrial customers may require containers with refrigerating facilities for storing vegetables,
milk, and meat products. The marketers try to create a balance between individual marketing and mass marketing
while segmenting market. With the help of segment marketing, a marketer becomes capable of providing more
sophisticated and superior products or services to the customers and that too within the price range best suited to
the targeted segment. It also simplifies the procedure for making promotion and distribution decisions.
 ‘
78 MBA First Semester (Basics of Marketing) SPPU

[Link]. Niche Marketing

These are the areas which have been overlooked by the other marketers due to1"certain reasons. They have a
limited area and a small turn-over but attract new comers for possibility of limited profit. A niche refers to a
group of customers who are combined together because they have similar tastes and preferences. For example,
a bike manufacturer can consider the entire nation as a target market but among all the target customer groups,
there can be a certain class of customers who give preference to mileage, colour* design, features, and so on.
The group of customers having same preferences can be treated as a niche market by the bike company.
Niche market has only one or a few competitors, whereas there can be several competitors in a broad market
segment. The customers of niche market are ready to pay high prices for the products and services as the
marketer understands the specific needs of the niches. For example, Hotel Taj of Mumbai charges a premium
price from its customers and customers even pay it willingly because they know that no other hotel can provide
such high-end services. The main features of an attractive niche are as follows:
1) The needs of the customers are quite unique and difficult to satisfy.
2) Customers are ready to pay high prices to those marketers who can serve them best.
3) The niche marketers should have expertise in their products and services in order to stand above all the
competitors.
4) The position of a niche leader is very firm in the market and cannot be taken up easily by other competitors.

Vigilant business organisations are now focussing on niche marketing. Reebok makes different athletic shoes
f;
for different activities such as walking, running, football, cricket, etc. Various banks are offering customer
centric accounts such as saving accounts for students, ladies, farmers, small businessmen, etc.

[Link]. Long Tail Marketing

Wired Magazine editor Chris Anderson was the one who made the principle of long tail popular through his
bestseller book “The Long Tail: Why the Future of Business is Selling Less of More”. “In modem times, the
concept of long tail in terms of retailing has become quite popular. This concept state the niche strategy used
for selling limited quantities of large number of distinct products- as compared to selling limited number of
product at a large scale. When this strategy is implemented effectively in terms of distribution and inventory
costs, high profits can be earned by selling limited number of exclusive products to a large number of
customers, rather than selling huge quantities of limited popular products.
::
;
;
Long tail is the overall sales of the huge quantities of “non-hit products”. For example, majority of us must
have purchased from Amazon, and some products will be selected based on recommendations and referrals.
Long tail is mainly the strategy in which many niche markets are targeted with the help of a certain product or
service. The business which is manly governed by the big market leader commonly implements this strategy.
With the increasing competition, the main concentration of the organisation can be switched to different niche
markets in which demand is low. Both the mass marketing or mass media and long tail marketing concepts are
!'
totally opposite to each other. For attracting the mass market, it is important to have the availability of 20% of
most popular products in large quantities for the customers.
In case of a retail bookstore, this indicates having the best sellers and popular books in the shelves rather than
catering to the needs of smaller niche markets. The online retailers (e-tailers), for example, Amazon and
Netflix are the ones who implement the concept of long tail in most efficient manner mainly because of the
supply side issues involved in the inventory management. A limited shelf space is available to the brick-and-
mortar video rental store or bookstore and the major proportion of this space must be provided to the inventory
of products that are high in demand. The products which have limited demand have to struggle to occupy the
limited space, due efforts required to sort and stock and due to increased cost both in value and time.
Centralised warehouse is being used by Amazon and Netflix for storing the products. In comparison to
physically storing the items, these products are displayed on a virtual sales floor that is unlimited (i.e., the
website) which will reduce the cost involved in the shelf management. There are some costs-of maintaining the
web-page but in contrast to the physical sorting, storing and management of the shelves, this-is quite less. At the
same time, there is almost no warehouse space required by some digital product’s seller, for example, iTunes,
or Kindle books. Apart from Internet commerce, microfinarice businesses can also utilise the long tail principles
as they provide smaller loans to huge number of individuals all over the world. '
Segmentation, Target Marketing (ÿPositioning (Unit 3) 79

Developing Long Tail Marketing Strategy

For following the long tail strategy, it is important for any organisation to have, the potential for the large scale
inventory management. An organisation which is looking to implement long tail market strategy should have the
potential to offer popular products because if these products are not offered to the customers it will result in loss of
sales opportunity. This inability to offer popular items can also result in customers choosing the rival companies
for making purchases in the future. Development and implementation of long tail strategy means supplementing
the inventory rather than just focusing on having large variety of less popular item inventory instead of popular
item inventory.

Decrease in cost of storing and distributing inventory makes it quite easy to implement. There is a very limited
storage and distribution cost incurred by e-tailers that deal with digital products. For obtaining, storing, tracking and
shipping inventory to the customers, effective warehouse management methods are needed to be implemented by
retailers who deal with physical products. The customers should be able to find the products easily so as to convert
the inventory to sales. Thus, having a catalogue/search system which facilitate easy finding of products and
information about the product by the users is the most vital element in implementation of long tail. Database must
include each newly added product with the title and category along with the description tags which will facilitate
the customers to browse the products conveniently on the online sales platform.

[Link]. Local Marketing

A marketer tries to go deeper into the levels of segmentation in order to know the location of their niche market.
With the help of localised market segments, a marketer can know the specific marketing activities which are to
be performed and the location which has the maximum requirements for a particular product. For example, if a
marketer of sports shoes finds that the maximum customers in South Delhi are looking for tennis sports shoes,
then the marketer will use maximum numbers of displays, hoarding, and other modes of advertising in South
Delhi [Link] also stock large amount of inventory at that location.

In such marketing, the marketing tactics are tailored to suit the local consumers. This may include inviting the
consumers by sending them coupons, offering freebies for first few consumers, organising special events and
offering scratch cards individually to customers, developing an emotional cord by addressing them by name,
sending greetings on birthday or marriage anniversary, etc. Even some banks have recognised the essence of
local marketing and modified their working to suit the local population.

In view of those marketers who emphasise on focussing the organisation’s marketing efforts on the
demographic variations of different communities such as age, gender, income, etc., national marketing of
products and services is nothing but a wastage of resources as these activities fail to address the local target
customer groups. On the contrary, the critics of local marketing believe that it increases the manufacturing and
marketing costs by decreasing the economies of scale. Moreover, the issues related to inventory and logistics
arise when a company attempts to fulfil the requirements of regional and local markets. Along with this, the
image of a brand also gets hampered when the product and message vary in accordance with different regions.

[Link]. Individual Marketing

This is the ultimate level of marketing where the individual needs of the consumers are considered and products
are modified accordingly. Earlier, the market provided the individuals with customised food and clothes
matching their tastes and comfort. Now, the consumers generally visit a particular food joint, tailor or cobbler
who provides them satisfaction. This practice is being revived by big business houses to captivate their
customers. For example, DELL, a computer company, seeks consumer’s specific requirements and
incorporates them into its computer system before,delivery.

This level of market segmentation includes collection of data from various customers in order to create a niche
which can be used for the better understanding of the overall formation of global market segment. A high level
of brand loyalty, and the practice of re-purchasing can be induced among the customers with the help of sales
force and customer service representatives who remain in direct contact with individual customers. For
example, a boutique making a wedding dress for. the bride and a jeweller making the jewellery with the names
of customers engraved on it. Individual marketing, is a common practice in industrial buying where a certain
buyer has specific requirements for product specification, payment conditions, distribution, and so on.
80 MBA First Semester (Basics of Marketing) SPPU

3.2.6. Criteria for Effective Segmentation

Market segmentation is a complex decision and requires due care while selecting the criteria on which decisions
are to be taken. It is very essential for products and services to be planned for a' particular market. The product
being launched should attract the market segment. It should have substantial size and growth potential
alongwith the capacity to provide remarkable returns. The market segmentation criteria are discussed below:
Criteria for Effective Market Segmentation

Measurable
Substantial
Accessible
Differentiable

Actionable
:
1) Measurable: While establishing a market segment, the consumers of the product are counted along with
their financial status and characteristics. The number of such consumers should be enough to be measured
with ease. These calculations are obtained only after the marketing analysis and research work is done.
2) Substantial: The market segment must have customers of similar characteristics like age group, financial
status, culture and should be aware about the different brands of the product. The size of the segment should
be substantial so that suitable marketing strategy can be adapted which is convenient to all. The products
should be supplied as per consumer preferences like quantity-wise, i.e., in small or big packs.
3) Accessible: The product and market segment should be compatible in price and financial status of the
population. The location of the segment should have easy transportation facility for smooth flow of the
product. The marketing strategy adopted for one consumer group is always different from other consumer
group due to differences in their needs.
For example, the fashion needs may vary on the basis of age groups therefore each group requires different
products respectively. The effectiveness of marketing lies in catering to real needs of the customers
belonging to different segments.
4) Differentiable: The marketing managers should clearly differentiate between the different segments since
each segment requires different strategy for marketing. The consumers react differently to different
products, and the advertisements are also designed in accordance with the consumers of different locations.
Various marketing tools are used to take due care of nuances of local area to attract the customers.
5) Actionable: A well-defined market segmentation is always actionable on the part of the consumers, who
are captivated by the products, services, advertisements and marketing strategies and as a result indulge in
purchasing activity. The product placed at reasonable price coupled with marketing efforts is bound to bring
favourable returns.

3.2.7. Identification of Market Segments: The Process of Market Segmentation

As per the universally accepted view, market segmentation process
primarily includes three stages, which are as follows: Determining Demand Pattem/Survey Stage
1) Determining Demand Pattern/Survey Stage: It is crucial to
ascertain the demand patterns related to products and services as T
they signify the changing needs of customers as well as their Establishing Possible Bases of Segmentation/
consistent or non-varying tastes and preferences for a definite Analysis Stage
class of products and services. There are following three
demand patterns which are usually encountered by a company:
i) Homogeneous Preferences: Homogeneous preferences
T i

can be understood as a marketplace where majority

of the Identifying Potential Market
customers have similar tastes and preferences. There is Segments/Profiling Stage
indication of any natural segments in such a marketplace no
is quite easily envisioned that
It Figure 3.2: Process of Market
the present brands would be Segmentation
identical and concentrated around the middle
of the scale
both m terms of positive and negative
effects.
Segmentation, Target Marketing & Positioning (Unit 3) 81

ii) Diffused Preferences: In contrast with homogenous preferences, consumer preferences may vary
greatly from each other. Such type of preference is known as diffused preference. It symbolises that
consumers have a wide range of preferences which are altogether different from each other. The first
firm to enter the market will hold the central position in the market and can have the potential to attract
most of the consumers.
iii) Clustered Preferences: A particular market can be divided into different preference clusters. Such
preference clusters can be termed as market segments. The first company or brand to enter the market
has three alternatives, viz. to position itself in the centre position so as to engage most of the customers,
to come up with different brands and position them at different market segments or to position itself in
the largest market, i.e., concentrated marketing. In case the first company entering the market is
engaged in developing a single brand in a particular segment, then the other entrants (competitors)
would try to develop and launch their brands in the other market segments.

Furthermore, the survey stage is categorised into following segments:

i) In-depth interviews and focus group discussions with an intention to know or understand consumer
behaviour, attitude, preferences and motivation.
ii) On the basis of the information gathered from the above mentioned activities, a questionnaire is
developed which is dispensed or issued to a sample group of customers. The main purpose of this
questionnaire is to gather data related to:
a) Patterns in which customers make use of a product.
b) Attitude of customers towards a general product or the entire class of product.
c) The priority ratings of customers associated with different products and to know on what basis they
prioritise a particular product.
d) Prevailing habits of customers, namely, their psychographic, demographic and media habits.
e) Brand awareness among customers and ratings given by them to different brands.
2) Establishing Possible Bases of Segmentation/ Analysis Stage: According to marketing school of thought,
segmentation is extensively considered as an art and not as science. The most significant activity is to locate
the variable(s) that are responsible for dividing the market into prospective segments. Generally, there are
two kinds of segmentation variables, which are as follows:
i) Needs
ii) Profilers

Customer needs are the fundamental basis for any market segmentation. Market research is essentially required
to discover the needs and wants of consumers in a market. Illustrative and computable consumer attributes like
age, location, gender, income, nationality, etc., are known as profilers, which are useful in informing a
segmentation exercise. For the purpose of identifying factors that can distinguish different customer groups,
factor analysis is used. That is, once the data collection process is complete, it is reviewed with the help of
factor analysis. However, for clustering customers into different groups, cluster analysis is used.
3) Identifying Potential Market Segments/ Profiling Stage: This stage involves profiling each cluster of
customers on the basis of their behaviour, attitude, consumption pattern, alongwith their psychographics,
demographics and media habits. Every segment can be named by the marketer either on the basis of
dominants or unique characteristics. Customer segmentation helps the marketer to understand the potential
customers of the firm from a demographic viewpoint. In order to understand the penetration rates and the
market potential for different products and services, a perfect and explicit profile of consumers is required.

It helps in analysing a particular market as well as gives an idea about the closely related markets. Such
analysis enables the marketer to explore the market opportunities and implement the market penetration
strategies. Highest market penetration can be achieved by identifying and understanding the customers in
clusters which helps in target marketing. It also helps in planning business activities for the prospective
buyers. Moreover, the ROI and response rates can be increased by specifically marketing to the potential
customers with attractive offers. Profiling the customers becomes a necessity in the process of evaluating the
entire market opportunities and the profits that can be generated from such markets. Further, it also helps in
identifying the potential customers present in the selected market. It is possible only for few companies to
make effective site selection decisions in the absence of appropriate information of customer profiles.
82 MBA Firk Semester (Basics of Marketing) SPPU

3.2.8. Factors Influencing Market Segmentation

Segmentation gets influenced by the following factors:
1) Size, Resources, and Objectives of the Company: Market segmentatibri of a company is greatly
influenced by its size, the objectives according to which it works, and the resources available with it. For
example, a global automobile company considers many countries as its market and segments accordingly,
whereas a local boutique caters to a city and does its segmentation on a local level.
2) Type of Product and Market: Product portfolio of a company also influences its process of segmentation.
For example, a company of bakery products, cleaning materials, etc., can do the segmentation easily; however,
the process of segmentation will be complicated for the companies of apparels, financial services, etc.
3) Competitive Structure of the Industry: Process of segmentation for a company also depends on the
competitive structure of the industry in which it is operating. Companies attempt to differentiate then-
products from that of competitors, if the competition in the industry is very high. This in turn creates the
need for tight segmentation because in such competitive industries where numerous options are available,
customers demand more and more features in a product.
4) Nature of Market: Decisions related to market segmentation depend on the nature of the market also. For
example, company operating in a high competitive environment will have a different segmentation
approach than one operating in a less competitive environment.
5) Life Cycle Stage: Product life cycle also influences the segmentation decision of a company. For example,
the segmentation approach of a company would be different when its product is in growth stage.
6) Competitive Strategy of Firm: Segmentation decision of a company also depends on its competitive
strategy. And the companies which strategically target their markets and segment its consumers are more
likely to achieve success in a highly competitive industry.

3.2.9. Benefits of Market Segmentation [

The benefits of market segmentation are as follows:
1) Adjustment of Product and Market Appeals: Marketing is a complex activity but segmentation has
slightly simplified it. This gives an opportunity to analyse each segment separately and make adjustments to
attract maximum number of customers by suitable advertisements or other attractions.
:
2) Better Position to Spot Marketing Opportunities: Depending upon the sales volume of the product in
different segments, the marketer can make alterations in distribution or advertisements. The inputs from
market research can further help in modifying marketing strategies.
3) Allocation of Marketing Budget: Different segments generate different sales volumes. This helps to
analyse and regulate the budget allocated to these segments. In case of markets with limited sales budget,
the allocation of budget can be curtailed or diverted to other progressing segments. :

4) Understanding and Meeting the Needs of Consumers: Since, every smaller market segment is concentrated,
it gives marketer an opportunity to fully understand the needs, habits, tastes and expectations of the customers.
This enables to make better decisions related to customers, which further improves the business opportunities.
5) Stronger Positioning: Positioning is all about establishing an image of the product in the minds of the
consumers for satisfying their needs and improving the situation in the best possible manner. The four tools,
i.e. price, place, product and promotion, when used in analytical way make the position of the product
stronger. In a market, varieties of similar products are available offering similar benefits. A good positioning
makes a product stand out from the rest. Thus, market segmentation gives the product a stronger positioning.
6) Enhanced Efficiency: The purpose of market segmentation is to make marketing more effective. The
practice of locating customers in a segment and trying to attract them through advertisement (by sending
messages), will have little or no effect and it will be a mere waste of money. Accurate segmenting enables
the marketers to locate the most interested customers, and deliver them specific marketing messages to
improve their buying behaviour. In this way, segmentation enhances the marketing efficiency.
7) Competitive Advantages: In the present competitive scenario, the company which can retain its customers
is a winner. After understanding the customer segments, a common opinion can be made on what attracts a
customer to a particular brand. An extensive market research is needed to study the buying behaviour of the
customers and suggest an appropriate brand which suits their requirements and needs. The inputs from the
market can be successfully used by the marketers for their competitive advantages.
Segmentation, Target Marketing & -Positioning (Unit 3) 83

8) Targeted Media: Segmentation divides the market into small groups comprising selected people. This
enables the marketer to select suitable media for advertisement of a product. This can be done through
hoardings, SMS on mobile phones or advertisements on local television channels, etc.
9) Market Expansion: Segmentation also helps in market expansion. For example, if a business is set-up in a
particular region and it is a success, then it can be extended to a nearby region without much hassle.
Similarly, a demographic basis of segmentation may also be utilised for expanding one’s range of products
or adding new product lines. For example, Reebok provides t-shirts and other sportswear along with shoes.
10) Better Communication: The effective communication is possible only after understanding the target
market. The customer is convinced up to the hilt about the product due to the identical products present in
the market. Thus, segmentation results in better communication between customers and sellers.
11) Increases Profitability: Various aspects of business like brand equity, customer retention, brand recall,
communications, competitiveness, etc., are influenced by effective segmentation strategies. The overall
impact of segmentation finally leads to profitability of the business. As a result, the product becomes a USP
for different businesses.
12) Identifies New Markets: Segmentation of market also brings in new market segments which have not been
tapped due to some reasons. This can even be a small segment that needs a different product, which
certainly opens a new business opportunity.
13) Reduces Costs: Market segment is a smaller portion of the market which can be operated economically.
This may lead to reduction in transportation costs, advertisement costs, manpower, paper work and time.
14) Reduces Credit Risks: It is generally found that some individuals or companies do not make payments of
the products purchased or even cause delay in making payments. Such customers should be avoided or
offered products only when they make on-the-spot payment in cash. On the other hand, the customers with
good payment records may be offered products on credit. These decisions are taken on the basis of market
segmentation since it helps to manage the market, business and the consumers.

3.3. TARGETING: TARGET MARKET

3.3.1. Concept of Target Market
Market segmentation helps the company to identify various opportunities. On the basis of these market
segments the marketer can determine the specific markets to be targeted. Market targeting is a process of
ascertaining groups of customers who are likely to purchase the products and services of the company. This is
done in ways where some companies can cater to the entire market while others can focus on developing
products and services for small niche markets which are profitable. Targeting is undertaken by companies of all
sizes in order to retain and maintain their customers.

Market targeting is not the same as target marketing. In market targeting, the product positioning is done
beforehand and only decisions related to choosing of suitable target market has to be made. In target marketing, it is
the other way around. The company already chooses a target market and then decides on what products and services
it has to offer. Marketing is all about understanding the customers’ needs and wants, and developing the products that
satisfy them. Both market segmentation and targeting is practised by all organisations, ranging from the small comer
book store to large MNCs. A successful marketing plan can be developed by the company only when there is
complete synchronisation between what the customer wants and what can be provided by the company.

3.3.2. Process of Targeting the Market

The target market is a market segment (group of customers) selected by the company for directing its marketing
efforts and offerings (goods and services). It is the first component of the marketing strategy. The marketing
strategy comprises of target market and the four elements of the marketing mix - product, price, place and
promotion, which are most crucial for the success of a product in the market. After deciding the group of
customers, the company can develop a marketing mix strategy to satisfy its target market. Thus, the market
targeting process- m-volves the following steps:
1) Evaluating the market segments to target, and
2) Selecting the target market.
84 MBA First Semester (Basics of Marketing) SPPU

3.3.3. Evaluating Market Segments to Target: Bases for Identifying Target Customers
In the process of evaluating various market segments, the company must identify the potential of the segments
and also its own capability to target these segments. The marketer needs to make sure that while serving the
segments of market, the organisational objectives are achieved. While deciding bn the market segments, the
firm must consider three factors, such as:
1) Segment Size and Growth: The potential of the segment can be assessed by using forecasting techniques.
Market segmentation analysis involves demand forecasting for each element of the product market other
than for the product market as a whole. The potential of the entire market can be identified by aggregating
the potentials of each market segment. This can be shown as follows:
MP=YSP;
1=1

where,
MP = Market potential for the product market,
SPj = Segment potential in the i* segment,
n = Number of segments formed for the product market.
2) Segment Structural Attractiveness: The structural factors influencing the attractiveness of the segment
must be assessed along with its size and growth. For example, if the segment already has many powerful :
competitors, then the market becomes less attractive. These competitors offer potential substitute products
and may also limit prices and profits that one can earn.

Buyers with strong bargaining power also influence the attractiveness of market segment as they force the
company to slash down their prices, demand for more products and services, and try to raise disputes
among competitors all at the expense of seller’s profitability. Similarly, some strong and aggressive
suppliers demand for lowering of prices or compromise on the quality of the product. This again leads to i
destruction of structural attractiveness.
3) Company Objectives and Resources: If a company is satisfied with its market size, growth and structural
attractiveness, then it must not compromise with its objectives and resources. Some segments of the market can
be terminated if they are not appropriate for fulfilling long-term objectives of the company. Even if a segment
fits the company’s objectives, die skills and resources required for the company’s growth must be ensured.

3.3.4. Selecting Target Markets: Target Market Strategies

Once all the segments have been evaluated and analysed, the company has to decide the number of markets that
it wants to serve. A target market consists of a group of customers who have homogeneous needs which the 1.
company chooses to fulfil. Alternative segments targeting strategies can be of two types:
1) Limited coverage market targeting, and
2) Full market coverage targeting.

3.3.5. Limited Market Coverage Targeting :

When the company chooses to operate in one or a few market segments then it is called limited market coverage
targeting. This strategy involves limited or fewer resources. It is thus, appropriate for a small company or new
entrants who are trying to compete alongside large players in the industry.
ML M2 M3 Mi M2 M3 M, M2 M3 M, M2 M3
Pi Pi Pi p‘M
p2

P3
p2

P3|
pJ _ / / PJI
i 1 1

I §|i PJ p3 -
(a) Single Segment (b) Selective Specialisation ' •
(e) Product Specialisation
I
(d) Market Specialisation
Figure 3.3: Limited Coverage Market
Segmentation, Target Marketing Positioning (Unit 3) 85

The different forms of limitedmarket coverage targeting are:

1) Single-Segment Concentration: The Company may choose to operate in a single segment. By adopting
concentrated marketing strategy, a company is able to identify the needs and wants of a particular segment,
which may help to attain large market share. The company can achieve economies of scale by focusing on
its production, distribution and promotion activities. A high return on investment can also be achieved by
market leadership.
2) Selective Specialisation: Under this type of targeting, firm operates in large number of segments, each of
which is profitable and attractive. There may or may not be interaction between the various segments but they
are all profit-making segments. Being operational in various segments helps the company to diversify their risk.
3) Product Specialisation: Here, the strategy of the company is product-based. The company decides to
specialise in a product and then sell it to various market segments. For example, a manufacturer of
generators, who sells the generators to hospitals, organisation, educational institutions, etc., provides
generators of different size and capacity, as per the needs of the customer. The company specialises in this
product and does not sell any other product to the customers.
4) Market Specialisation: In this strategy, the company focuses on a particular customer segment and tries to
supply as many products as possible to this segment. For example, company supplying laboratory
equipment like Bunsen burners, beakers, microscopes, etc., to universities and colleges labs may earn profit
and reputation by specialising in this particular area. The only drawback related to this type of targeting is
that sometimes the customer may cut-short its demand due to its limited budget.

3.3.6. Full Market Coverage Targeting

In this strategy, the firm chooses to satisfy all types of customers by providing different products. This is
suitable for only large firms who can cover full market. For example, Mahindra and Mahindra in automobile
market, Pepsi and Coke in beverages market and Hindustan Unilever in FMCG industry are practising full
market coverage targeting. This can be done in three ways:

(a) Undifferentiated (b) Differentiated (c) Concentrated

Marketing Marketing Marketing
Figure 3.4

3.3.6.I. Mass Marketing/Undifferentiated Marketing

In this, the firm does not consider different market segments and offers homogenous products to the entire market.
The seller only focuses on the fundamental needs of the customers than the variations in customer choices. The
firm develops a product which captures a large number of customers using standard marketing mix strategies for
product, price, place and promotion. The best example of this is Coke and Pepsi who use same pricing,
advertising and packaging means throughout various consumer segments and geographic areas.
The major benefit of undifferentiated marketing is that it earns economies of scale through mass production and
marketing activities. Undifferentiated marketing can also be termed as mass marketing. Here, the company
assumes the entire consumer market as a single market. It adopts a single marketing mix, i.e., a standardised
product, uniform pricing, same promotional schemes and the same distribution channels to reach out to its
consumers.

[Link]. Differentiated Marketing

In differentiated marketing, the firm produces and designs different product value propositions for different
market segments! It therefore, caters to the individual needs and wants of customers belonging to a particular
segment. For example, Maruti Suzuki serves various segments of customers by offering them variety of cars
like level cars (800, Alto), Sedans (Esteem, SX4), Hatchbacks and Vans. Differentiated marketing is also called
 \
86 MBA First'Sfemfester (Basics of Marketing) SPPU

selective marketing or multi-segment marketing. Unlike undifferentiated marketing, here, the firm markets
different products to address different needs of customers in different segments. With this, the firm is able to
find out consumer groups who are loyal towards its products. Then the firm mainly focuses on those customers
and creates good relations with them. The parameters like age, income, gender, economic status, and occupation
are considered which are commonly found in customer groups. For example, Indian railways have different
product offerings for different customers like general coach, sleeper coach, AC coach, etc. In this, the socio¬
economic status of customers in each category is different. The price of each coach also varies accordingly.

[Link]. Concentrated Marketing

This is the third market coverage strategy. This strategy is adopted by the companies having limited resources.
The firm targets a large share of one or more sub-markets instead of a small share in a large market. An
example of this strategy is recycled paper products, which is used for making greeting cards. This strategy is a
combination of standardisation and differentiation and is also known as focus marketing. Here, the core
strategy used is alike for all segments but differences occur in relation with the diverse requirements of the
customers. This strategy also helps to recognise the customer groups who generate revenue and enable the firm
to earn profits. In other words, the focused marketing tries to find a profitable niche of customers and develops
products and services which are not being offered by their competitors.

However, focussed marketing as a strategy is losing out to its significance to other forms of marketing since the
companies want to cater as many customer segments as possible. A classic example is Mahindra’s Scorpio which
has five or six variants to cater to different categories of customer needs. The basic version of the model has
certain basic features but customers can opt for upgraded models having features like power steering, airbags, GPS
services, etc., by paying more. In this way, the company can achieve economies of scale and large market share.
All this depends on the type of strategy adopted by the marketer so as to achieve high market penetration.

3.3.7. Criteria for Selection of Target Market

Five criteria for selecting a target market are explained below:

Criteria for Selection of Target Market

Company’s Image and Experience

Responsiveness
Substantial
Competitive

Profitable

1) Company’s Image and Experience: The process of targeting a market segment should be in accordance
with the overall corporate image of the organisation. Usually, a business organisation tries to have a
consistent and integrated image for all of its business activities. Thus, a target market that does not have a
consistent image is removed from any kind of consideration.
2) Responsiveness: Responsiveness refers to the reactions of the target market towards the marketing mix of
a company, i.e., what the target market likes or ignores about the company. If various kinds of marketing
stimuli such as price discounts, product specifications, sales promotions, etc., are not able to affect the
prospective business customers, then these activities are a complete waste. Such non-responsiveness occurs
when a company’s manager is totally against the use of new alternatives and is strongly devoted towards
implying predefined methods. Similar situation can also take place when the prospective customer has a
less scope to analyse the offerings of a marketer because there are numerous guidelines and rules to be
followed or because of time and resource constraints.
3) Substantial: The size of a market segment needs to be considered not only in terms of the number of
business customers but also the amount of products and services purchased by them over,a certain period of
time. There are segments that have long-term viability whereas some get saturated or matured quickly,
which leads to limited or no selling opportunity or a very slow rate of growth. The market segments get
Segmentation, Target Marketing &, Positioning (Unit 3) 87

affected by the changing , buying behaviour of organisations and they may not. remain attractive as before.
Therefore, substantiality , is the most crucial factor in the industrial segmentation because technological
advancements can prove to be meaningless for a certain approach.
4) Competitive: Competitive advantage is one of the key elements of an effective segmentation. Though, a
market segment is in accordance with the corporate image of the organisation and it looks quite viable and
substantial, still a business organisation may not address the needs and wants of the customers of this
segment. While selecting a segment, a business organisation must ensure the strengths needed to maintain
the competitive advantage over other players for a longer period of time in that particular market segment.
5) Profitable: Most of the marketing decisions are taken after evaluating their profitability. While selecting
the target market, profitability and maintenance of profitability over time is considered as the most
important aspect. In some market segments, there can be numerous buyers and they may purchase a huge
quantity of products and services of the organisation but in order to acquire such customers, the
organisation has to compromise on its profit margins.

Apart from this, in order to maintain the competitive advantage in such segment, the company may have to
incur huge cost on fulfilling the requirements of several activities such as, product development,
distribution, promotion, etc., which may make the segment less profitable because of lower rate of return.

3.3.8. Benefits of Targeting

Targeting is not only significant, it is essential. The main advantages of targeting are explained below:
1) With the help of targeting, the marketer can predict and analyse the features of products and services which
are of utmost importance to the target customers. For example, a tailor can serve all those customers who
want to get their clothes stitched. But different people may like different benefits and features which depend
on their usages such as, clothes used for wedding dress, casuals, office wears, etc.
2) A marketer can provide the right product to the targeted customers. A product manager who is targeting a
certain market segment has a clear idea about the customer’s price affordability, age range, tastes and
preferences, etc. On this basis, a manager can develop products that match the requirements of target
customers in best possible way.

For example, the manufacturer of laptops can produce a laptop for the customers at a price of 15,000.
Because with the help of market feedback, a marketer may know that the students need laptops at low
prices for the purpose of their studies.
3) With the help of target market, a marketer can have a fair idea about the price which the targeted customers
are willing to pay for a particular offering. Experienced marketers generally have a clear picture about the
average income of their target customers as well as price sensitivity of their target market. For example, a
high quality apparel company will focus on businessmen or customers with high incomes.
4) A marketer can induce more sales on the amount spent on advertising activities with the help of target
marketing. In simple words, target marketing will enable a marketer for not spending the financial resources
on those advertising activities which are not directed towards their target customers. As a result, their
advertising becomes more efficient as they do not spend on those customers who are not interested in, the
products or services of the firm.

Target marketing helps the company to become more effective by approaching right customers with a right
message which is appealing to them. The company can choose the best media for advertising to reach to the
target customers. Most of the advertising firms provide vital demographic information about the audience
which they reach to. For example, a business magazine is more popular among corporates and bureaucrats.
5) With the help of target marketing, the organisations can also have information about the target customers’
location which in turn helps them in identifying more potential customers from those localities. The market
segmentation maps can be used for viewing different income levels of customers residing in different areas.
Such information is very important for the marketers to position their outlets in relevant areas. Apart from
this, the changing tastes and preferences of customers also depend upon the geographical locations. With
the help of target marketing, the organisation can also address these varying preferences effectively.
 r
88 MBA First'Semester (Basics of Marketing) SPPU

3.3.9. Difference between Segmentation and Market Targeting

The difference between segmentation and market targeting is explained as follows:1 '
Basis Segmentation Market Targeting
Definition Segmentation of market can be defined as a Market targeting is a process of identifying customer
process of dividing the market on the basis of groups that are most: probable to buy the products or
customers having homogenous needs and wants. services of a firm. / / __
Types Geography, demographics, behaviour and There are two bases of market targeting, namely,
psychographics of the customers are the major limited market coverage and full market coverage.
basis of market segmentation._
Function Segmentation permits an organisation to Targeting allows the firm to effectively develop
customise the marketing communication for
_
different segments of the market.
strategies for marketing communication for the target
market.
Benefit It allows companies to concentrate on the needs It helps the marketers in concentrating on particular
and wants of the potential customers. segment of market for designing of a well-planned and
cost effective marketing campaign. _ L

3.4. POSITIONING AND DIFFERENTIATION

3.4.1. Concept of Differentiation and Positioning
Positioning is a marketing approach which creates a distinct position for a brand or a product in the minds of
the customers. It aims to provide a different and new product to the customers in comparison to the other
competing brands or products. Here, the organisation decides the basis on which the product offers have to be
. ©
placed in front of the consumers. David Ogilvy explains the importance of product positioning that, ‘the results
of your campaign depends less on how we write your advertising than on how your product is positioned.’ [

According to Kotler, “Positioning is the act of designing the company’s offering and image to occupy a
distinctive place in the target market’s mind”.
According to Ries and Trout, “Positioning starts with a product a piece of merchandise, a service, a company, i"
an institution, or even a person. But positioning is not what you do to a product. Positioning is what you do to
the mind of the prospect. That is, you position the product in the mind of the prospect”.
Whereas, product differentiation is a marketing approach which is used to gain an edge over the competitors’
product. It is done to stand out in the market against other identical products. In a marketplace, there are several firms
producing the same product, therefore, managers must try to develop a product which is unique and exceptional.

In marketing strategy, positioning and differentiation of a product are considered as the main elements. These
strategies are important to face the stiff competition prevailing in the market. If a marketer is successful in
developing a unique product and has also discovered the right way, time and place to launch a product, then this
means that the marketer has designed a seamless positioning and differentiation strategy.

3.4.2. Tasks Involved in Positioning: Process of Positioning

Positioning involves the fulfilment of many objectives. The marketer can generate a successful positioning
strategy only if the various required tasks for positioning a product are done properly. These tasks are as follows:
1) Competitor’s Identification: The company has to be very careful in the way in which it defines the
competition. The definition of the competitor has to be broad. It need not only be limited to companies
which are making the same type of products as the company. It should actually include all Companies Which
are the likely competitors of the company. A company should analyse this keeping the customers
in mind
and the way they use the products.
2) Determining how Competitors are Perceived and Evaluated: After r
the definition of the competitor, the
next task is to map the perception of the customers with regard to these competitors and products. One
needs to understand the various features/ attributes that are considered important by
have to be analysed through marketing research techniques. The customers indicatetfie
customers. These r
their preference via
focus groups and other survey method and this helps the company to understand their perceptions.

k
Segmentation, Target Marketing positioning (Unit 3) 89

3) Determining the Competitor’s Position: Once the various

Competitor’s Identification
attributes and their importance to customers is understood, the next
step is to rate each competitor on these attributes. This helps us to
understand how each competitor is positioned with respect to the I
attribute. This also helps to understand the relative positioning of Determining how Competitors are
the competitors, i.e., which competitors are similar and which are Perceived and Evaluated
not so similar in terms of an attribute.
4) Analysing Customer’s Preferences: By the process of segmentation I
it is possible to classify the customers into various segments based on Determining the Competitor’s Position
age, income, psychographics, education, etc. These various segments
hÿve different motivation to purchase and also have different ratings
for the attributes that have been identified. 4
Analysing Customer's Preferences
Marketers generate the ideal preference for each segment, which is -
nothing but the ideal product or brand that the customers seek
among all available alternatives, including those that are not Making the Positioning Decision
available. Once the ideal product is recognised, it is very easy for
the marketers to recognise the ideals for different segments. It also
helps to identify segments which are similar in terms of ideal points. r I
Monitoring the Position
5) Making the Positioning Decision: The next task involved in
positioning is about making positioning decision. It is not easy for
Figure 3.5: Tasks Involved in
the marketers to take clear and accurate positioning decision. Even
Positioning
market research is not so helpful to determine the positioning.
Therefore, some subjective decisions are taken by marketers by
keeping in mind the following questions:
i) Whether the segmentation is suitable or not?
ii) Whether enough resources are available for communication or not?
iii) What is the level of competition?
iv) Whether the present positioning strategy is productive or not?
6) Monitoring the Position: Once the positioning strategy is generated, the company needs to check how
successful the strategy is in the marketplace. These are typically noted through tracking studies. These
studies check the change in the image of the company over a period of time. The perceptions of consumers
are noted without any lag time. The competitive impact of the positioning strategy is also noted.

3.4.3. Importance of Positioning

The importance of positioning is explained below:
1) Placing the Product in Customers’ Mind: Positioning and differentiation are the marketing activities
which help the marketers to place the product in the minds of the target customers. The product fails to
survive in market if the positioning decision goes wrong.

And if the product is positioned wrongly then enormous time and effort is needed to retrieve the product.
Despite the fact, repositioning of a product at a later stage is much easier than correcting a wrongly
positioned product.
2) Connects Product Offerings with Target Market: The process of target market selection helps to
determine the actual target audience for whom the offering is proposed, and the marketing mix assists in
bringing the 4Ps in line with the intended target market. Therefore, market positioning acts as a linkage
between the product and the target market.
3) Product cannot be ‘Everything to Everyone’: A product cannot be ‘everything to everyone’ but a little or
more to some. This may define the need for differentiation and positioning of a product. For this, some
distinctive features of the product or some unusual requirements of the market, or some visible gaps in the
competitors products are identified and on the basis of these specifications the product is positioned for a
specific target market.
'

V 90 MBA First,Semester (Basics of Marketing) SPPU

4) Creates a Locus in Customers’ Mind: The customer’s mind may be vieweÿÿ[Link] perceptual space
which is occupied with diverse products and brands having specific positionsÿ
new product can take hold
of the space by replacing the existing brands from their position. A brand position in the customer’s mind
can be achieved through several ways. Placing a brand against another existing brand or against certain
expectations raised by the consumers may seek a position in customer’s mind. ' ' :
5) Providing Competitive Advantage: Positioning of a product is the finest method for providing a
competitive advantage to a product or service. This helps the marketer to determine the competitor’s
potential moves and responses so that appropriate steps can be taken, such as:
i) Providing the target markets the motive to buy the services and then plan the entire strategy.
ii) Providing the guidelines to device me marketing mix, such that every element is aligned with the
positioning. ;

6) Better Serving and Covering the Market: Here, the marketer identifies that every consumer or group of
customers has different requirements and belongs to different market categories. In this approach, the main f
aim of marketer is to recognise the potential market segments, monitor the market in those segments and
offer the customers’ with their desired needs and wants.

3.4.4. Positioning Strategies

The creation of brand differentiation considering the value frame of the customers is the key role of positioning
strategy. For this, positioning of a product can be done by using different strategies, such as:
1) Attribute Positioning: This strategy involves multiple product attributes or uses that the brand can offer to
its customers, other than the competitors. For example, a movie theatre publicising that it offers the best
movie experience is an attribute positioning. A fairness cream can be positioned by stating the attribute that
it is made from herbal ingredients. i
2) Price/Quality Positioning: This approach stresses the product’s place on the price/quality continuum by
positioning it in the minds of consumers. This can be executed at both ends of the continuum (e.g., at the
high end with Mercedes cars and at the low end with Tata Nano cars).
3) Use or Application Positioning: In this strategy, a product is positioned on the basis of its usage or r
applicability. For example, Kent RO purifier can be an example of application positioning. Here, the i-
purifier is positioned by affirming that it has an inbuilt seven stages of water purification.
1:
4) Product User Positioning: This type of product is associated with the specific category of user. For
example, Lady Bird brand has positioned its bicycles as fashionable and sporty for young females only.
5) Usage and Use Time Positioning: This type of positioning is done on the basis of the product usage or its
usage time. For example, Livon hair serum is positioned to be used after shampoo to detangle hair. I:
6) Product Class Positioning: Product class positioning involves association with a particular group of !ÿ

products, which are different from the conventional products. For example, positioning an exclusive
limited edition of Ferrari watches as race day watches. Olay a skin care brand has a new product line of
vitamins that are positioned as beauty supplements.
7) Category Positioning: In this type of strategy, the product is positioned other than its original category to
which it belongs. This is advisable when the existing product category is overcrowded and brand :
differentiation becomes difficult. For example, an herbal tea brand may position itself as a health brand
instead of positioning itself in the beverage category.
8) Benefit Positioning: Usually, consumers’ purchase products for acquiring the benefits related to the product.
With the help of this strategy, marketers may select an exclusive and not-yet-offered benefit to position the brand.
For example, a tea brand (Red Label natural care) can help improve immunity of a person if consumed regularly.
9) Price-Quality Positioning: A brand may also position itself on the basis of price-quality continuum. At the
bottom end, it means an ‘economy’ position (like wheel detergent, with both low quality, low price positions)
and at the top-end, it means premium position (Ariel Mafic, with both high quality and high price).
10) Competitive Positioning: Here, the, positioning ©f a product is done in reference to , the prevailing
competition in the market. This product is set as a favpurable substitute against the established brand. For
example, the toothpaste brand Colgate Sensitive is launched as a competitor against the tooth paste brand
Sensodyne in the market. vm,.
 n :
Segmentation, Target Marketing <£’ Positioning (Unit 3) 91

11) Corporate Identity Positioning: A brand attempts to make a direct connection with the corporate identity and $1
tries to play on its key' credentials. A corporate brand is used by products to label their offerings in the market.
The offerings by Nestle, Cadburys and Kellogg’s, all disclose their corporate identity on their products. :|
12) Brand Endorsement Positioning: Unlike the previous method, here a successful brand acts as an endorser
of a new product. For example, Cadbury uses its successful brand, Dairy Milk, to promote its other
confectionaries. oil'
*ÿ?.!
3.4.5. Differentiation Strategies
An organisation may differentiate its market offerings in five dimensions, like:
Specific Ways to Differentiate 4
f
Product Differentiation
1
Service
Differentiation
t
Personnel
Differentiation
I
Channel
Differentiation
1
Image Differentiation
<'ÿ

- Form
- Ordering Ease - Competence Coverage - Symbol :
- Features
- Performance
- Conformance
- Durability
- Delivery
- Installation
- Consumer
- Courtesy
- Credibility
- Reliability
E Expertise
Performance
- Media
- Atmosphere
- Events
M
- Reliability
Training
- Customer
- Responsiveness
- Communication
if i

- Reparability
Consulting
- Style - Maintenance
yi.
- Design
- Differentiation
and Repair r
based on Ingredients si
w..
1) Product Differentiation: It is based on different features associated with the core products in order to
differentiate it:
i) Form: A product can be differentiated on the basis of its shape, form, size or physical structure. For
example, bath soap is an essential commodity which can be differentiated by fragrances, shape, size
and colour.
,r
ii) Features: There are many products that can be offered having diverse attributes that add an extra value to
the basic functions of a product. By introducing a new attribute to a product is the best way to compete in
the market. For example, Kissan and Nestle came up with a tetra pack for its tomato ketchup products t&
‘Kissan Chotu’ and Nestle ‘Pichkoo’ in the India market. These pocket sized tetra packs are introduced li
with a special feature of plastic nozzle. This feature has added up an extra value to the product. %
;;,r
iii) Performance Quality: Performance quality can be measured at four levels, i.e., low, average, high or
superior. Mostly the products are established at one of the four performance levels, i.e., low, average,
high or superior. For example, Sony has achieved reputation in many of its electronic product
offerings, by providing an excellent performance and quality delivered by the brand.
iv) Conformance Quality: Here, the products manufactured by a firm are homogenous in nature with
m
assured specifications. Therefore, buyers anticipate products to have a high conformance quality.
v) Durability: Durability is the ability of a product to last longer without substantial deterioration. It is the
most vital feature of products like furniture, automobiles, home appliances, etc.
vi) Reliability: Reliability is a degree of assurance that the buyer has over a particular product. If a buyer
is satisfied that the product will work efficiently without any fail, then he is even ready to pay a
premium price for that product.
vii) Reparability: Products which are easy to repair are most preferred by the buyers. Reparability strategy
of a product helps the buyers to fix all the issues related to a product. For example, Maruti Suzuki
automobiles have a high reparability value. The parts of automobiles are easily replaceable and have
large number of service stations all around the country.
viii) Style: The appearance and impression is defined as ‘style’ of a product. A buyer is ready to pay premium
price for the products which are highly attractive and stylish. This can be differentiated by the product’s
packaging, package design and convenience. For example, shampoos in pouches, Fevikwik in a handy
tube and Dhara cooking oil in a see-through-pack are all examples of differentiation through packaging.
 92 MBA Firs,t Semester (Basics of Marketing) SPPU

ix) Design: Design is the most persuasive way to differentiate a company’s prqcluct or service. It is directly
proportional to the success of company and product. A well-designe,d product makes huge positive
difference to the buyer. It ensures product reliability and durability and also, increases customer comfort.

For example, Woodland shoes used product design as their differentiation strategy. The conventional
formal shoes and regular sports shoes had become almost monotonous and standard products.
Therefore, Woodland introduced a semi-formal category of men’s shoes especially designed for
Weekends. They also reinvented the sport shoes category by offering exclusive designs for varied sport
activities.
x) Differentiation based on Ingredients: Ingredients used to prepare a product can also be used for
differentiation. For example, Real Fruit Juice made a distinction by claiming that it uses fresh fruit
pulp for making juices and it does not contains any other added preservatives in their products.
2) Services Differentiation: When a product fails to differentiate itself, then the other way to successfully
differentiate a product is by providing value-added services and offering quality products. Under this
differentiation strategy, many organisations have achieved services differentiation through fast, suitable, or
careful delivery. ;
r

For example, Maruti Automobiles has positioned itself as “the most excellent after-sales service
provider” — their service station operates seven days a week, which includes evening shifts. Easy
availability of service thus may differentiate one organisation from another, like free repair services for a :
sold product. Thus, water purifier dealers who provide top-notch after-sale services are largely preferred by
the consumers.
The following factors are the main service differentiators:
i) Ordering Ease: A company may provide an easy ordering facility to its customers. This may act as a
service differentiator in the market.
ii) Delivery: Under service differentiation, a company may provide delivery services to its customers. This
includes speed, accuracy and proper handling of the entire delivery process. !
iii) Installation: It refers to assembling of various parts and connection of services related to a particular
product in order to make it operational at an intended location. When a buyer purchases a heavy
!:
equipment, then he expects to receive a good installation service.
iv) Customer Training: Customer training involves providing adequate training to the employees working
for the customer’s organisation, so that they use the purchased equipment correctly and efficiently.
For example, the manufacturers of expensive medical equipment provide a training session to the b
I- buyer along with proper presentation and guidelines to be followed. ;
v) Customer Consulting: There are many customer consulting organisations which assist customers with
services like data search, information systems and advising services.
vi) Maintenance and Repair: Maintenance and repair is all about the service program that helps
customers in keeping the purchased products in a working and manageable condition. :
3) Personnel Differentiation: An organisation comprising of skilled and trained personnel has a strong
competitive advantage. For example, La Meridian hotels have an admirable market reputation, primarily
on account of their efficient and hard-working service staff. The employees of Barista are courteous, the
DELL employees are professional and the Google employees are upbeat. The sales force of organisations
such as Nestle, P&G and HUL enjoy an exceptional market reputation. Personnel who are well-trained
mainly exhibit six personalities:
i) Competence: They own the necessary skill and knowledge;
ii) Courtesy: They are polite, selfless and friendly;
iii) Credibility: They are honest and dependable;
iv) Reliability: They perform the service consistently
and precisely;
v) Responsiveness: They are highly responsive towards the
requirements and issue's faced by the
customers; and P
vi) Communication: They try to understand the customer’s
insight and communication effectively.
Segmentation, Target Marketirig & 'Positioning (Unit 3) 93

4) Channel Differentiation of distribution is another way of achieving competitive advantage. This

can be achieved by accurately deciding the coverage area, expertise and performance of the company. For
example, ‘Eureka Forbes’ manages to distinguish itself by building and organising superior direct-
marketing channels using telephone and internet sales.
5) Image Differentiation: The consumers behave differently towards the different companies and brand
images. The identity and image of the company should be differentiated correctly. Identity is the manner ifi
which an organisation wants to portray or position itself or its product offerings. Image refers to the way the
public recognises the organisation or its products.
Image is affected by several factors:
i) Symbols: Image of a product can be improved by using strong symbols. The business can select a
symbol such as the Tree (Dabur), or Apple (Apple Computer).
ii) Media: The selected image should be incorporated into advertisements and media that expresses a
story, a mood and a claim which can prove to be a distinct approach. It must also be included in
financial statements, reports, catalogues, the company stationery, brochures and business cards.
iii) Atmosphere: The location or the atmospherics of the organisation is also considered as one of the
influential image generators.
iv) Events: An organisation may construct its identity by the ways in which it selects its sponsored events.
For example, Hercules bicycles brand became renowned by laying down exercise tracks and
sponsoring health sports events.

3.4.6. Value Proposition & Unique Selling Proposition (USP)

The most eminent tools used to explain the reason to prospects for buying a product and using the terms
applicable to them are regarded as value proposition and the Unique Selling Proposition (USP). A product
must represent a unique selling proposition through its positioning statements and value propositions. This
differentiates the product from other players in the market. Therefore, value proposition and the unique selling
proposition acts a source with the help of which the marketer aims to attain sustainable competitive advantage.

It specifies the ways through which a customer can gain value from the product and also determine the related
costs and benefits. If the value driver of a product is cost, then the low price or non-price cost of purchase
should be incorporated into a product’s position. This has to be further communicated in its value proposition.
Alternatively, a product positioning can also be done on hard and soft benefits or on several combinations of
benefits and costs.

In either cases, the target customer must have a clear statement of value proposition, of how will he/she derive
an increased value by purchasing a product. A value proposition is very clear about what the product does for
the consumer (and sometimes, what it does not) and also involves information related to pricing in comparison
with the competitor’s products. Therefore, value propositions should represent a Unique Selling Proposition
(USP) of the product. Alternatively, value proposition is used in place of product positioning. In its direct form,
a value proposition can be defined with the help of three elements:
1) Target market,
2) Benefits offered (and not offered), and
3) Price range (relative to competitors).

At. the time of preparing a positioning statement or value proposition, it is essential to highlight the benefits of
the product to the customer rather than its attributes, quality or high-end services. These benefits are the
ultimate measurable consequences that the customer will experience while using the product, in contrast to the
other products. A statement of differentiating a product or a service from that of the competitors is referred as a
Unique Selling Proposition (USP), or Unique Selling Position. To bring in uniqueness in a product is a
challenging task. It is rare to develop a product with unique features uninterruptedly. Philip Kotler says that
the level of difficulty faced by firms in creating functional uniqueness has made them “focus on having a
unique Emotional Selling Proposition (an ESP) instead of a USP”. He has explained this by giving an example
of the Ferrari car and the Rolex watch. Each of them not only has a different functional uniqueness, but also has
a unique Emotional Selling Proposition in the minds of the customers.
 ;
,
94 MBA First Semester (Basics of Marketing) SPPU
M: USP is the basis of any successful marketing plan. It is the unique position that the customers have in their
minds towards a particular organisation. It is an actual consideration of the .customers’ experience with the
organisation and its products. The first and foremost priority of a marketer,is: to create a unique selling
proposition, as it is a difficult task for the marketer to stand out in the market, from the rest, to convince the
customers’ for buying the product.
f
It is most essential for the organisation to highlight the distinct features of the product to the target audience.
4 Hence, this is referred as the USP of the product and the organisation. It influences the customers to know the
usefulness of the product and make purchases above all other available alternatives. Therefore, an organisation
should create a powerful and dynamic USP.
Pv
$>•
5% 3.5. DEMAND MEASUREMENT
-m
i
•J 3.5.1. Introduction
Before launching a product, an organisation must identify and evaluate the size of a market along with its
growth and profit prospective (market demand). Therefore, two concepts are used for this purpose, i.e., ‘Market

*
u%
Potential’ and ‘Sales Potential’. The term ‘demand’ refers to the willingness and ability of consumers to buy a
product or service at a particular time-period under the influence of defined marketing mix. Therefore, it is
essential for marketers to measure the total market demand and potential market share of the organisation.
68
The technique such as sales forecasting is used for determining the market demand. Different departments use
this technique for forecasting sales, e.g., finance department relies on sales forecast to generate required capital
for organisational investments and processes. Likewise, manufacturing department uses it for building capacity
f;f and end product levels. In order to procure adequate amount of raw materials or supplies, sales forecast is also
utilised by purchasing department.

It is also applied for recruiting the desired number of manpower by HR department. The duty of preparing the r
V* sales forecast lies with the marketing department. In case of faulty forecasts, the organisation will have to face
V..
several problems like excess or scarce stock availability. The whole concept of sales forecasting is based on
.• defining the demand in the target market. Therefore, marketers should accurately determine the market demand.
:

14 3.5.2. Major Concepts in Demand Measurement

% Demand measurement comprises of two major concepts, such as:
Major Concepts in Demand Measurement
l¥
is I
;ÿ r Market Demand Company Demand

i i
i i

Market Market Company Sales Company Sales

Potential Forecast Potential Forecast
h
f
1) Market Demand: Market demand defines the total market available for a particular type of product offered
by the organisation. Generally, the creation of market demand is considered as a function of the
organisation which depends upon the proficiency of the marketers. Thus, market demand is based on two
elements:
i) Market Potential: Market potential refers to the size of the market available for a particular product at
a particular time. It also defines the maximum possible size of the market. The quantities like sales
volume or the sales value is used for determining the market potential.
ii) Market Forecast: Market forecast is a crucial element of market analysis. The,.total number of
potential customers, their attributes, requirements, and market trends are predicted through forecasting.
The expected number of prospective customers is segmented in a typical market forecast; .
Segmentation, Target Marketing -& 'Positioning (Unit 3) 95

2) Company Demand: A' definite proportion of a market, which is covered by an organisation at a specific
time period, is known *as ‘company demand’. The demand for a company can be calculated by multiplying
the market share with the total market demand of a product. It includes following two elements:
i) Company Sales Potential: Sales value achieved by an organisation in a particular market within a
given time period, defines the company sales potential. The sales potential and market potential of a
company are inter-related and can be improved by implementing effective marketing strategies.
ii) Company Sales Forecast: Company sales forecast is the term used for describing the predicted sales
and revenue of the company in a particular time period. It can be derived from the past historical data,
market analysis, present trends, assessment of sales executives, etc. This forms the basis of future and
present business plan which depends on sales budget, i.e., revenue generated.

3;5.3. Market Potential

Market potential is an assessment of total sales opportunities existing in a specific market segment. These
opportunities are open for all sellers and marketers of goods and services. For example, the market potential for
small cars in India for the year 2015 would be determined by sales forecasts of maximum number of small cars
that can be sold in India in 2015. In simple words, the market potential denotes the level of particular products
that can be sold using relevant marketing strategies in a given market during a specific time period. Market
potential has been defined as “the maximum demand response possible for a given group of customers within a
well-defined geographic area for a given product or service over a specified period of time under well-defined
competitive and environmental conditions”.

The above definition may be described differently. Firstly, the level of demand response with particular
customer group in presence of given assumptions is called market potential. It provides a reasonable edge to the
estimated demand. Secondly, the market potential also depends on the group of present and potential customers.
The level of market potential varies according to the types of customers, diverse interests of customers and the
market location. Moreover, market location should be clearly defined by the marketer so as to segment the
markets on the basis of different customers. The process of market segmentation helps the organisation to
appoint a salesforce for the particular segment in order to efficiently monitor and control the sales activities of
different areas.

In order to understand the market potential, it is essential for marketers to know about the products and
services for which the estimation of market potential is to be ascertained. If a product has to be substituted by
another product, then it is necessary to understand the product class than the product characteristics. For
example, tea is replaced by coffee in demand measurement. Another factor which should be considered while
estimating market potential is time-period. The timing for estimating market potential should match to the
time-period of planning in an organisation. The time-period may be short or long, as per the convenience of
the organisation.

The concept of market potential is different from sales potential and sales forecast. It can be regarded as similar
to the case of a saturated market. This condition occurs only when the products are mature and well-established.
Ordinarily, the sales forecast is expected to be less than the sales potential as well as the market potential. Sales
potential is the maximum capacity of sales that an organisation can have in an ideal setting, whereas, sales
forecasting is a prediction of future sales.

3.5.3.I. Uses of Market Potential

Market potential is utilised in following ways:
1) To Make Entry/Exit Decisions: The estimates of market potential are used for making entry/exit decisions
to a particular market. These estimates provide a true understanding of the market.
2) To Make Resource Level Decisions: The correct allocation of resources is related to the product lifecycle.
Growth stage of the product lifecycle is considered as the adequate stage for allocating resources. The
compressed graph of a product does not indicate that!the product has attained potential growth.
3) To Make Decisions Related to Location and Resource Allocation: The decisions related to location of
the manufacturing activities and distribution centres is based on the market potential. It also helps in
designing the sales and advertising approaches in accordance with the product or location.
 96 MBA First Semester (Basics of Marketing) SPPU

4) To Set Objectives and Evaluate Performance: The accurate market potential helps in identifying the
organisational objectives and assessing performance of the organisation. The reasons for reduced sales can
also be examined. After such considerations, the organisational strategies and policies are modified. For
example, regions with equal market potentials are included in sales territories so ias to effectively evaluate
the performance of all salespersons without any differences. The sales quotas for such territories are also
finalised on the basis of market potential.
5) Acts as an Input to Forecasts: Market potential acts as a basis for determining the sales forecast. It is
viewed as the estimated amount of potential that has to be achieved on an annual basis in an organisation.

[Link]. Methods for Estimation of Market Potential

Market potential of a particular product for a specific market segment can be estimated by utilising secondary
sources in a quantitative approach. The secondary sources may comprise of publications, sales data or sales data
of competitors, census data, etc. A detailed analysis of the market can be developed using the assumptions of
demand, and promotional and distribution strategies to assess sub-categories of the total, in order to identify the
sales potential. The survey research method can be used as a tool to test the assumptions of target market which
would increase the marketing efforts and reduce the associated risks.

Methods for estimating the market potential are different for existing product and new product. These methods
are described below:
1) For Existing Products: The market potential for existing products can be estimated in absolute or relative
measures. Absolute measure defines the market potential in terms of rupees or number of units, whereas,
relative measure defines potential of one segment of the market in relation to other in terms of percentage.
Such approaches are used only for current products and services, whose future potential are to be determined.

Following three methods are used for estimating market potential for existing products: !.

i) Sales Index Method: This method is based on relative approach and measures the market potential for
existing products which are in the growth stage of PLC. A series of market potentials for different
regions can be achieved through this method. For example, the water softener industry analysis, is
carried out on the basis of market potential using sales index, which is as follows:
Region Industry Sales Sales Index % Potential %
North East 8,500,009 28.8% 28.8
South East 6,753,090 22.8% 22.8
North West 6,870,421 23.2% 23.2
South West 7,430,218 25.2% 25.2
Total 2,9,553,738 100 100
Different industry sales for different regions are given here. These values can be compared to estimate
the desired market potential.
ii) Market Factor Method: This method is based on absolute approach. It includes the determination of
factors responsible for affecting sales and developing a relation between the market factors and the market
sales. Here, it is very essential to first determine the population of the given market and their expenditure
rate. With the help of this method, absolute market potential of a particular market can be estimated. The
whole estimation is based on accurate projection of sales rate and die population of related market.
Region Sales (Rest) 1996 Population (000) Sales rate/1000
.North East 8,500,009 68,570 123.96
South East 6,753,090 38,720 174.40
North West 6,870,421 32,810 209.40
South West 7,430,218 66,730 111.34
Total 2,95,53,738 2,06,830 154.78

—
Population Projection (2000) » 2, 50,847
Sales Rate Average -» 154.78/1,000
Absolute Market Potential -> ? 38, 82,609
j
Segmentation, Target Marketing & Positioning (Unit 3) 97

iii) Regression Analysis Method: This method also determines the marketing factors affecting the sales. A
mathematical relationship is created between sales and marketing factors. Multiple regression analysis
is used in case of more than one marketing factor.
2) For New Products: Following three methods are used for estimating market potential of the new products:
i) Judgemental Estimate: This method utilises the product and market related views and knowledge of
different experts. The opinion of experts are compiled and aggregated to form an average estimate. The
judgement can also be made by using the ‘Delphi technique’ which involves panel of experts who
answer one or more questionnaires.
ii) Consumer Surveys: Another important method for estimating the market potential for a particular
product is consumer survey. Potential consumers are surveyed for the estimation of market potential of
a new product. Usually, this method is used for industrial products as it is easy to target industrial
consumers.
iii) Substitute Method: Commonly, new products are developed as a substitute for the existing products.
If current market potential is measured for available products, it can be used as a basis for
determining the potential of new products. It is also necessary to identify the acceptance rate to
calculate the number of customers who are shifting from existing products to new products being
introduced in the market.

[Link]. Market Potential Analysis

The market potential is considered as the most challenging measure to analyse the actual number of customers
for a proposed product. The problems related to the analysis mainly arises due to the calculation method used
and uncertainties related to maximum number of sales held. As the market potential analysis has little or no
similarity with the sales value, therefore these estimates are observed doubtfully. Despite of the doubts, market
potential estimates are of substantial importance to the marketing managers.

These estimates are utilised for effective resource allocation over a product line. As a result, high potential
products obtain more funds for their marketing activities rather than looking at the current sales, which is a biased
approach view. Products with high potential are capable of attaining significant goals and it also helps the sales
manager in developing sales territories, allocating salesperson to those territories and creating sales quotas.

Market potential analysis includes following three steps:

Step 1: Identifying the Potential Product Buyers: The first step in estimating the market potential of a given
market is to identify the potential buyers or users of the product. For this purpose, marketing managers
generally utilise the primary or secondary sources for research or other judgemental approaches. Any individual
or institution that has the need for a product, the capability to pay and ability to effectively utilise the resources
is known as a ‘potential buyer’.

Usually, all the end users or buyers are measured and then number of units not capable of buying the product
is deducted. For example, colleges are not potential buyers of tractors, farmers are not potential buyers of
software and applications, and law students are not potential users of medical apparatus. This step is totally
dependent on the skills and knowledge of the marketing manager and is considered as a judgemental
approach.

Step 2: Determining the Number of Individual Buyers in the Potential Buyers’ Group: In this step, the
marketing manager is responsible for calculating the exact number of individual customers in the potential
buyer group. It includes utilising the quantitative survey as in case of determining number of people living in an
apartment or what percentage of the population is suffering from diabetes.

Step 3: Measuring the Potential Buying or Usage Rate: The potential buying or usage rate can be estimated
by observing the results of different consumer researches or surveys. Generally, marketers count heavy or bulk
buyers as potential buyers, but this method assumes every buyer of the group as potential buyer. A marketing
manager can calculate the market potential of a particular product in a given market by simply multiplying the
number of potential buyers with potential buying rate.
 :
:
98 MBA First Semester (Basics of Marketing) SPPU

3.5.4. Market Share/Sales Potential

Market Share or Sales Potential represents the total sales opportunities for a product or service of a specified
organisation existing in a particular market segment, during a particular time-period. For example, the sales
potential of Tata Nano id 2015 across India would be determined by the maximum number of Tata Nano that
can be sold in 2015 across India. The sales opportunities for a specific organisation are identified by the ‘sales
potential’ such as Tata Motors, likewise, the sales opportunities for the entire industry are represented by the
‘market potential’.

The maximum percentage or portion of the market potential that an organisation is planning to achieve is
denoted as sales potential. For example, Apple iPhone accounted for 40 per cent of the total 100 million units
of smartphones sold in the United States in 2014. Therefore, it can be assumed that in future the sales potential
of Apple iPhone will be close to 40 per cent of the whole market. The sales potential acts as the basis for
designing the sales territories. In case of market monopoly, market potential and sales potential are equal while
in most 6f the industries, market potential and sales potential are different.
A'V :-;vC' ‘Af •: 'ÿ;? '

3.5.4.I. Determinants of Market Share

The sales potential or market share of a given organisation is determined by observing following factors: r
1) Access to Distribution Channels: The ability to develop and make effective use of distribution channels
and intermediaries helps to analyse the sales potential of an organisation in a specific marketplace.
2) Intensity of Competition: Competitors continuously strengthen and improvise their marketing strategies in
order to compete with the new entrants. It is a difficult task to foresee and perceive the activities of the
competitors.
3) Pricing and Financing of Sales Activities: The actions related to pricing and financing largely affect the
customers and channel intermediaries. It also influences the arrival of new entrants and their success.
4) Organisational Resources: The efficient and consistent utilisation of resources like financial system,
manpower, technology, etc., is fundamental in achieving the success of the organisation.
5) Market Entry Decisions: The estimation of market share is also dependent on the entry decisions adopted
by the marketing managers. There are two ways in which market entry can be made, i.e., gradual or rapid.
In gradual entry, the organisation gets ample amount of time to develop and manage suitable resources and
marketing strategies. In rapid entry, the organisation gets the first mover advantage leaving behind its
competitors, but it costs over the organisational resources and strategies.
6) Risk Taking Ability: The success of an organisation depends on the extent to which the manager is
willing to take risks. The level of risk associated is defined by the resources allocated by the top
management.
7) Existing Relationships: The ability of the organisation to maintain cordial relations with its suppliers,
intermediaries, and customers affect the success of the organisation, as good relationships help the
organisation to grab a larger market share.
8) Brand Name and Reputation: The brand name and goodwill of the organisation creates a strong customer
base. If a customer is aware of the brand beforehand, then it becomes easy to establish and develop a large
market share.

[Link]. Estimation of Market Share

The market share of an organisation can be estimated by using following methods or techniques:
1) Survey of Consumers and Distributors: The simplest and common way of identifying the market share or
sales potential for a given product is to conduct a market stirvey of customers or consumers and
intermediaries.
2) Retail Audits: Another method of estimating market share of a particular organisation can be retail audits.
In this method, several questions are asked from retailers based on the performance of a product, price level
of competitor’s product and major strengths of competitors existing in the market. The marketing managers
view the product image through the eyes of the retailers. This also enables the organisation to adopt new ;
distribution modes, recognise alternative outlets and indicate its position in relation to its competitors.
Segmentation, Target Marking & Positioning (Unit 3) 99

3) Competitor Analysis: Competitor analysis assists the organisation to set standards in comparison to its
competitors in terms of high sales potential by attracting maximum number of customers. But if the
competitor is doniinant and large, then this may lead to failure. In order to avoid such situations, an
organisation must research over those market segments which are untouched and then such markets can be
attracted by new entrants or small firms to achieve their goals.
4) Gaining Information from Local Partners: Local partners like distributors, licensees, or franchisees, etc.,
can be useful in gaining information about the market share and sales potential. Their experiences and
knowledge about market trends helps the marketers to improve their marketing strategies.
5) Limited Marketing Efforts to Test Market: There are some organisations which opt for limited entry.
This enables to analyse the market potential and estimate the long-term sales potential. This process is
termed as ‘test marketing’. It also provides future prospects of sales before introducing the product in the
market on a large scale.

3.6. EXERCISE
3.6.1. Very Short Answer Type Questions
1) What is target marketing?
2) List the bases of segmentation for consumer goods and services.
3) Give the meaning of geographic segmentation.
4) Name the levels of market segmentation.
5) What is meant by individual marketing?
6) State the meaning of mass marketing.
7) What do you mean by differentiated marketing?
8) Mention a few benefits of targeting.
J.
9) State differences between segmentation and market targeting.
10) What do you understand by company demand?

3.6.2. Short Answer Type Questions

1) Highlight the steps in target marketing.
2) Explain demographic segmentation.
3) What is psychographic segmentation?
4) State a few criteria for effective segmentation.
5) What do you mean by niche marketing?
6) Highlight the factors influencing market segmentation.
7) Illustrate the different forms of limited market coverage targeting.
8) What are the bases for identifying target customers?
9) Give the concept of differentiation and positioning.
10) State a few positioning strategies in brief.
11) Mention the uses of market potential.
12) What do you understand by demand measurement?
13) Highlight the estimation of market share.

3.6.3. Long Answer Type Questions

1) Highlight the concept of market segmentation. Also state the need for market segmentation.
2) Write a note on the benefits of market segmentation.
3) Give a comprehensive description on behavioural segmentation.
4) Discuss the bases for segmentation for business markets.
5) What is long tail marketing? How would you develop long tail marketing strategy?
6) Explain segment and local marketing in detail.
7) Discuss the process of market segmentation.
8) Give the concept of target market and the criteria for selection of target market.
9) Describe the differentiation strategies in detail.
10) Write a detailed note on value proposition and unique selling proposition.
11) What is market potential? Discuss market potential analysis.
12) Give the meaning of market share. Also stare the determinants of market share.
 ,

100 MBA First Semester (Rasies of Marketing) SPPU

UNIT 4 Consumer Behaviour

. CONSUMER BEHAVIOUR
i
4.1.1. Meaning and Definition of Consumer Behaviour
Consumer behaviour is the study of consumers and the processes they use to select, purchase and dispose of the
goods and services. These processes may consist of areas like psychology, sociology, anthropology and
economics. This study reveals the decision-making process of individuals, groups and organisations. Consumer
behaviour is also termed as consumer buying behaviour, end user behaviour or buyer behaviour. Broadly,
it is decision-making process of individuals to allocate their potential resources, i.e., time, effort and money for
consumption purpose.
;
In order to understand the consumers’ tastes and preferences, analysis of their buying behaviour is the most
preferable method. For example, if marketers want to study the behaviour of consumers in buying toothpaste, then
they should analyse certain points such as variants (gel, regular, stripped or with a pump), brands (national brand,
generic brand, private brand), reasons for buying (to prevent cavities, to remove stains, to brighten and whiten teeth,
to get rid of bad mouth odour), places of purchase (super market, general stores, medical stores), usage frequencies
(in the morning, after every meal, before going to bed), and the consumption rates (monthly, biweekly or weekly).

According to Belch and Belch, “Consumer behaviour is the process and activities people engage in when
searching for, selecting, purchasing, using, evaluating, and disposing of products and services so as to satisfy
their needs and desires”.
According to Solomon, “Consumer behaviour is the process involved when individuals or groups select,
r.
purchase, use, or dispose of products, services, ideas or experiences to satisfy needs and wants”.
According to Leon G. Schiffman and Leslie Lazar Kanuk, “Consumer behaviour can be defined as the
behaviour that consumers display in searching for, purchasing, using, evaluating, and disposing of products and
services that they expect will satisfy their needs”.

4.1.2. Characteristics of Consumer Behaviour

The nature of consumer behaviour is discussed below:
1) Varies from Customer to Customer: The manner in which all the consumers behave is not the same, i.e.,
it varies from one consumer to another. Several individual factors like the person’s culture, life style, social
class, etc., are responsible for this variation.
2) Varies from Product to Product: The behaviour of consumers also varies according to products. The
consumers may buy large quantity of one product, whereas they may consume very little or nothing of some
other product.
3) Varies Across Geographical Regions: The behaviour of consumers also varies across regions and
geographical locations. For example, the behaviour of consumers in rural and urban areas differs from each
other. Rural consumers purchase sachets of shampoos, whereas urban consumers tend to buy large packs.
Similarly, the consumers of South India vary in their behaviour from the consumers of North India for the
products like hair oil, edible oil, etc. i
4) Important for Marketers: It is very important for marketers to have an understanding bf consumer
behaviour. They need to understand the tastes, habits, likes and dislikes of their customers, as well as
prospective customers. This knowledge helps the marketers in making decisions regarding marketing mix
and designing other marketing programmes.
Consumer Behaviour (Unit’4) 101

5) Reflects Status: The buying behaviour of a consumer depends on his/her status. At the same time, the kind
of products and services that he/she buys also reflects the status. A person who buys luxury products like,
Mercedes Benz ora Rolex watch is considered as a person of superior social status in the society.
6) Results in Spread-effect: The buying behaviour of consumers also has a spread-effect, i.e., the purchase of
certain product made by one consumer may encourage another person to buy the same product. A person
may decide to purchase those brands of cars, electronic items, watches, TVs, etc., which his/her friends and
colleagues usually buy. This is one of the reasons why companies use celebrity endorsements to promote
their products.
7) Improves Standard of Living: The consumer behaviour also results into improved standard of living for the
consumer. The consumer increases his/her quality of life by buying superior quality of products and services.
8) Varies from Time to Time: The behaviour of consumers can also evolve over time. This is because of
changes in the person’s education, social status, stage in the family life cycle, disposable income, etc.
For example, a person who travels by his scooter may decide to buy a car after his promotion or due to
increase in number of family members.
9) Information Search: Consumer behaviour also depends on the information search. Consumers are not in a
position to purchase any product or avail any service until they have information regarding it.
10) Influenced by Various Factors: Behaviour of consumers is affected by a lot of factors such as, social,
psychological, personal, cultural, societal, demographical, marketing, etc.

4.1.3. Scope of Consumer Behaviour

Consumer behaviour has a wide scope in terms of its applications. It extends to the way in which consumers
behave as they purchase, consume and dispose products. Discussed below is the scope of consumer behaviour:
1) Consumer Behaviour and Marketing Management: Successful business firms recognise the immense
role played by marketing in their success. Marketing programmes can succeed only if there is a deep
understanding of the behaviour of the consumer.

In many respects, understanding consumer behaviour is considered an essential component for

implementing a marketing programme and a thought process that governs the mindset of most marketing
managers. The core of the marketing initiatives of an organisation centre around three concepts -needs and
wants of the consumers, objectives which govern the company and integrated strategy adopted by the
organisation.
2) Consumer Behaviour and Non-profit and Social Marketing: Consumer behaviour has its scope in non¬
profit and social marketing. It is worthwhile to consider if the alleviation of criminal tendencies, family
planning initiatives can be sold in the same manner in which FMCG products are sold. Many experts share
the opinion that even social initiatives need to be marketed by understanding the behaviour of a core set of
customers or target segment, in the same manner of FMCG products.

This marketing is done by institutions like NGOs, government agencies, religious bodies, etc. These groups
have to create a public appeal for obtaining their support. A very good understanding of consumer
behaviour, therefore, becomes a necessary activity for all organisations which are engaged in social work
and non-profit activities.
3) Consumer Behaviour and Government Decision-making: Recently, the extension of consumer
behaviour has also been seen in various governmental decision-making areas like:
i) Government Services: The government sector has gained immensely by understanding how
consumers behave and interpret the various governmental schemes and agencies. One example is the
frequently cited failure of mass transportation system. Experts revealed that government will not be
successful in this endeavour until they understand the needs and wants of the consumers. Until then, the
consumers will prefer to use private means of travel as opposed to mass transportation systems.
ii) Consumer Protection: Many government bodies also regulate businesses with the aim of safeguarding
the interests of consumers. Governmental programmes also reinforce certain activities positively (safe
driving) and some others negatively (drinking alcohols, smoking cigarette, etc.).
102 MBA First Semester1 (Basics of Marketing) SPPU

4) Consumer Behaviour and Demarketing: Nowadays, many products and services are increasingly falling
in the category of scarce products. Examples are water and electricity. The excessive and wasteful
consumption of these products is discouraged and consumers are motivated to conserve such products.
Consumers are also made to reduce the consumption of those products and services which have a
detrimental effect on their health, society, etc. Many educational programmes and initiatives have been
formed to explain the disadvantageous and wrongful acts of society like dowry, . gambling, etc. Such
initiatives are typically taken by the government, NGOs, development bodies, etc., and are aimed at
reducing the consumption of a good or service, also known as demarketing.
5) Consumer Behaviour and Consumer Education: Consumers are also benefited by getting a perspective
and understanding of their own behaviour. It can be attained by analysing the behaviour of a single
customer or by undergoing a formal education programme. For example, when consumers get to know that
a large portion of their purchases occurs in the form of unplanned or impulse purchases, they try to plan
their purchases in a better manner. Similarly, marketers can also plan their activities in a better manner after
learning about the various factors that influence consumer behaviour.

4.1.4. Need for Studying Consumer Behaviour

Below mentioned are the main reasons for studying consumer behaviour:
Need for Studying Consumer Behaviour
f
Affects Production Policies
Determines Price Policies
Decisions Regarding Channels of
Distribution Decisions Regarding Sales
Promotion
Utilises Marketing Opportunities
Consumers do not always Act or
React Predictably i
1
Rapid Introduction of New Products
Catering the Market
h
1) Affects Production Policies: Organisations need to study consumer behaviour as their production policies
depend upon it. The variation in the taste, preferences and habits of the customers are determined by studying
their behaviour which further helps in planning production strategies. In order to implement the required
changes in the products, it is vital for the firms to have a close eye on the behaviour of the consumers.
2) Determines Price Policies: Pricing policies are also determined on the basis of consumer behaviour. In
many regions, most of the products are sold due to their lower prices. Thus, the prices of such products are
not suitable to increase. While on the other hand, there are many products which are bought as they add to
the status and prestige of the customer. The social status and prestige of the customers can be used to
determine the price of these products and thus the prices of such products are easy to increase. Thus, the
behaviour of customers regarding particular products determines their pricing policies.
3) Decisions Regarding Channels of Distribution: Economical distribution channels are vital for those
products which are sold mainly because of their low prices. On the other hand, some different distribution
channels should be used for those products which require after sales service such as TV set, air; conditioners,
and so on. Thus, consumer behaviour also determines the decisions related to the distribution channel.
4) Decisions Regarding Sales Promotion: Companies analyse the behaviour of the customer to take
decisions related to sales promotions. The various motives of consumers behind buying a product are
analysed by producers which are further implemented in the advertising media to increase the desire of the
customer. There are a number of decisions related to the packaging, brand, discount, gifts and;SO on, which
are taken into account after studying consumer behaviour.
5) Utilises Marketing Opportunities: By studying the consumer behaviour, it is possible to hay6 an in-depth
knowledge of needs, aspirations, expectations, and problems of the customers. Such information can be
used by the marketers to utilise the various marketing opportunities and overcome challenges/
Consumer Behaviour (Unit 4) 103

6) Consumers do not always Act or React Predictably: In the past, customers, were sensitive towards any
change in price levels. They believed that the price and quality are directly related to each other. But now,
. customers prefer to have value for money, superior features at a lower price which, reflects the latest shift in
their behaviours.
7) Rapid Introduction of New Products: The study of consumer behaviour becomes more significant mainly
due to rapid changes in technology which lead to the introduction of new products.
8) Catering the Market: Since the customers are constituents of the market, it is important to analyse their
behaviour so as to cater to their needs in a better manner. In order to provide the desired customer
satisfaction and delight, it becomes quite vital to determine the target market before the production.

4.1.5. Factors Affecting Consumer Behaviour

There are various factors and determinants which directly influence the buying behaviour of customers. They
are as follows:
1) Cultural Factors
i) Culture: Culture is the key element for determining individual’s buying behaviour. The cultural factors
influencing the features of a society consists of earned values, norms, rituals, and ' symbols. ’ For
example, a child attains a defined set of values and behaviours from his family, friends and key
institutions. In U.S., a child is open to adapt values such as individualism, freedom, external comfort,
humanitarianism, efficiency, practicality and youthfulness.
ii) Sub-culture: A culture has several sub-cultures which assist the marketers to easily recognise and
socialise with its customers. It includes nationalities, religions, racial groups and geographic regions.
Many times, these sub-cultures are defined as a market segment and marketers offer products based on
needs and wants of these sub-cultures.
iii) Social Class: Mostly, every individual in the society is a part of some social class. These social classes
are defined on the basis of caste system indicating specific roles, which cannot be changed. Often, the
caste system is transformed into a social class. Social classes are comparatively identical and permanent
societies. These classes share similar interests, behaviour, and values.
2) Social Factors
i) Reference Group: A person or a group who is identified as a reference to an individual, defining the
fundamental or fixed attitudes, behaviours or values, is known as a ‘reference group’. Being a social
class member, an individual always compares his abilities and opinions with the defined abilities of a
reference.
ii) Family: Buyer’s behaviour is largely influenced by his family members. Family is the main buying
organisation in the society. There are two types of families, such as:
a) Family of Orientation: An individual attains an orientation from parents towards their religion,
politics, self-worth, etc. It is usually observed that grown-up children who are living with their
parents signify them as their ideal reference group.
b) Family of Procreation: In this type of family, the" buying behaviour is affected by every family
member such as spouse, children, parents, etc. They purchase products considering the
requirements of every individual in a family.
iii) Roles and Status: A person performs different roles and hais different status in Various groups such as
family, organisation, clubs, etc. The activity performed by a person is defined as a role and every role
carries a status. For example, an RBI manager has mbre status than a sales manager and a sales
manager has a more status than a receptionist. This is because of the difference in their income, which
directly affects the status of the individuals. Therefore, the buying decision of an individual is largely
based on his/her role and status in the society.
3) Personal Factors
i) Age and Stage in the Life Cycle: The requirements of a person changes with his age. Different stages
in life need different sets of products. For example, in childhood, baby food is consumed and in youth
healthy food is consumed. Things like taste of clothes, home decor and recreational activities are also
related to age. Therefore, consumption pattern is created on the basis of family lifecycle.
 B Ifl

!
104 MBA First Semester,(B3sics of Marketing) SPPU

ii) Occupation and Economic Circumstances: The consumption pattern of an individual is also affected
by the occupation. For example, a blue-collar employee will buy necessary items like formal clothes,
office shoes or lunchbox. While, a company head will buy luxury items like air, travel tickets, country
club membership, or a large sailboat. Here, marketers target those consumers who have high amount of
interest in their products. The selection of products also varies in regard with the economic
circumstances such as monthly income, savings, purchasing power, assets, debts, etc.
iii) Lifestyle: Lifestyle is a certain way in which an individual lives his life. It may comprise of
individuals’ activities, interests, opinions, etc. The lifestyle also depicts the manner in which a person
interacts with its surroundings, A marketer needs to find out the product which is most suitable for
customers’ lifestyle. For example, a person belonging to upper class will buy only luxury cars because
it suits his lifestyle.
iv) Personality: The personality is an individual characteristic of a person. This is distinctive
psychological feature that leads to relatively constant and long-term responses to the market
environment. Personality can be helpful in defining the consumers’ behaviour but the type of
personality should be identified precisely and there should be a strong relation between the personality
type and the products.
i-
4) Psychological Factors
i) Motivation: It is a reason to act in a particular way. The reasons can be physiological or psychological,
which usually arise out of human needs and wants. These physiological needs can be hunger, thirst, and
discomfort while the psychological needs can be self-esteem, recognition or belongingness. A need acts as
a motive when it reaches a certain level of intensity, then it pushes a person to act in the same direction.
ii) Perception: It is a process or a way of looking at a person or a thing. It not just depends on the physical
stimuli rather it also involves the reactions received from the surroundings and thinking process within
the individual. All these factors combine to form a perception.
!
iii) Learning: It is a process of acquiring skills, knowledge and experiences. Learning leads to changes in
one’s behaviour mainly with the increasing knowledge and experience. It generates out of the drives,
stimuli, responses, cues and reinforcements. Learning enables one to take wise decisions.
!<
iv) Beliefs: Beliefs are attained through actions and learning which strongly influence the buyer’s
behaviour. It is an idea that an individual accepts as being true. Belief depends upon one’s faith, trust, r
and opinion for a person or a product. For example, customers have a lot of faith or beliefs on goods
and services delivered by Tata Group.
v) Attitude: Attitude is a certain way of feeling or acting towards a particular thing or a person. People
have different attitude towards areas like religion, politics, clothes, music, and food. Attitude is a like or
dislike for a particular object which assists the buyer to decide about a certain product.

4.1.6. Types of Buying Decision Behaviour r

The buying habits are very important in decision-making process of customers and it is also known as buying
situations. For example, the purchase of a new house is one such situation which makes it necessary for each
consumer to follow all steps systematically with complete precautions. The suitability of location, quality of
construction, reasonability of offered price and the authenticity of seller are some factors which come in the
mind of the consumer prior to finalisation of a purchase deal. In accordance, the levels in which consumer
decision-making can be made, are as follows:
High Involvement Low Involvement
Significant Differences
Complex buying Variety-seeking buying
between Brands
behaviour behaviour

Few Differences between

Brands Dissonance-reducing Habitual buying . ,Vi‘
buying behaviour behaviour
'
Figure 4.1: Levels of Consumer Decision-making

A
Consumer Behaviour (Unfit 4) 105

1) Complex Buying Behaviour/Extensive Problem Solving/New Task: The first level of buying behaviour
involves an extensive problem-solving process. A substantial amount of time is involved in collecting
information and evaluating the alternatives. Under this process, consumer can go through cognitive
dissonance. The perceived risk is also high and the products in this category are generally expensive, e.g.,
buying a house, a car or an insurance policy. Hence, marketer should opt for low-key approach with
minimum perceived risk.
2) Dissonance-reducing Buying Behaviour/Limited Problem Solving/ Modified Buy: In this level, a
consumer follows all the steps involved in decision-making process. Here, consumers are more experienced
and knowledgeable than the complex buyers. The products purchased by consumers are used by them, but
not regularly. Therefore, the risk involved is less. For example, clothes, vacations, gifts, etc. To improve
this type of buying behaviour, a marketer needs to enhance its communication process by providing more
information about the product.
3) Habitual Buying Behaviour/Routinised Response Behaviour/ Straight Rebuy/Brand Loyalty: In this
situation, the customer is habitual to a particular brand over a period of time and does not spend much time
on decision-making process and skips few steps. Here, same product of a specific brand is purchased
regularly or repeatedly by the consumer, e.g., groceries, haircut, magazines, etc. The marketer must
understand the buying behaviour of potential consumers and inform existing consumers about the arrival of
superior brands in the market. This will help in improving the buying patterns of the consumers.
4) Variety-seeking Buying Behaviour/Brand Switching: In present scenario, there are several new brands of
similar products which are available in the market. This has brought a change in the behaviour of
consumers who seek variety and do not stick to a particular brand.

The brands which are already leading the market try to ensure that their products are in abundance in the
market to captivate their existing customers and also attract new customers. The new brands try to attract
the customer by lowering price, offering discounts on certain conditions such as bulk purchase, free
coupons or free samples for trial and putting advertisements on social media.
Table 4.1: Characteristics of Consumer Problem-Solving Approaches
Characteristics Routine Problem-solving Limited Probiem-solving Extensive Problem-solving
Purchase Involvement Level Low Medium High
Problem Recognition Automatic Semi-automatic Complex
Information Search and Evaluation Minimal Limited Extensive
Level of Prior Experience Very high Moderate Very low
Purchasing Orientation Convenience Mixed Shopping
Post Purchase Processes Very limited Limited Complex
Habit Inertia to re-purchase Loyalty if satisfied
Brand loyalty Brand switching if dissatisfied Complaint if dissatisfied
Frequency of Purchase Very high Moderate Very low
Amount of Perceived Risk Very low Moderate Very high
Time Pressure Very high Moderate Very low

4.1.7. Buying Motives of Consumers

Motive is the inner feeling that stimulates an individual to act in a certain way. It is an urge which results into
certain action by an individual. An individual buys a product or a service because of a set of inner desires, which
has made him to take a positive decision of acquiring the product. Motive to purchase a certain product can arise
from many sources - it may be a strong desire, a very positive feeling, an urge, a stimulus or a drive, etc.

According to DJ. Durian, “Buying motives are those influences or considerations which provide the impulse
to buy, induce action or determine choice in the purchase of goods or services”.

Therefore, it is very important to understand the motives of the consumers. This will help the marketer in
getting a very good idea about the attitudes of the consumers, explaining the way a consumer behaves, and
finding out why he/she chooses to buy or not to buy certain products and services.
 : '!iK:-'ÿÿÿi!: '3jigBÿo -’~ ; .... [Link] ... <

106 MBA First Semester (Basics of Marketing) SPPU

The underlying motives that govern the customer’s behaviour can be of two types:
1) Personal Motives: Personal motives can arise due to the following reasons:
i) Role-Playing: The shopping activities of individuals are learned behaviour. It is something an
individual learns by virtue of the role that he or she is performing. For example, a mother would buy
articles like baby food and clothing, whereas a housewife would buy the items which are of relevance i
to her household grocery list.
:
ii) Diversion: Shopping can be seen as an activity performed to escape from the routine events or to kill
the boredom. :
iii) Learning about New Trends: Shopping helps the individuals to keep them updated with the latest :
fashion, trends, and designs. For example, a shopping activity at Shoppers Stop can update the
consumers with the latest trend in office and formal wears.
iv) Sensory Stimulation: Shopping can be a source of sensory gratification to the consumers because of the
benefits like watching and feeling new merchandise, sensing the fragrances, listening to the music, etc.
2) Social Motives: Social motives can arise due to the following reasons:
i) Social Experience: Shopping gives the individuals an opportunity of making new friends or meeting
old friends, sharing experiences, or just watching what other people are purchasing.
ii) Status and Authority: Shopping gives the individuals a feel, of prestige as they are treated courteously
by the staff of the outlet. For example, shopping at a premium retail outlet will give the individuals a
very gratifying experience. ,

iii) Pleasure of Bargaining: Many people also enjoy shopping because it gives them the excitement of
buying a product through negotiation and bargaining. Another reason for their excitement is that the
sales person may visit their place to deliver or install the product.

4.1.8. Buying Roles of Consumers

Individuals normally play six different roles while purchasing an item:
1) Initiator: The initiator is the individual within whom the thought of buying certain product develops
originally.
2) Influencer: The influencer plays a role of influencing the purchase decision of some other person. He may
be a person of good social status, e.g., a professor can be an influencer for the purchase decisions of
students associated with him/her. b.'. >ÿ

3) Decider: The decider is the individual who makes the ultimate decision to purchase the product. These
include the decisions of what to purchase, when to purchase, how to purchase, from where to purchase, etc.
For example, children are the deciders for products such as toys. Similarly, housewives decide on the
purchase of many household items like groceries, Cosmetics, hbttie appliances, etc.
4) Gatekeeper: The gatekeeper is something or someone who helps the consumer in deciding to purchase
certain product out of all the alternatives available. Gatekeeper can either be a person, or an organisation, or
just a pamphlet, etc.
5) Buyer: The person who actually purchases the product is known as buyer. For example, a wife may be the ::
decision-maker on what brand of kitchen appliance to buy, but the buyer could be the husband.
6) User: The person who actually uses the product of avails the service is known as user. For’ example, an
infant may not be the buyer of a toy but he certainly is the user of it, : ; •

A marketer has to analyse the buying process, various stakeholders involved in it, and different roles that
they play during the process. He should decide suitable strategies for influencing each of them to buy the
product. v
v.
4.1.9. T mportance of Consumer Behaviour
The study of consumer behaviour assists the marketers, to identify the customers’ views and opinions about a
specific product or service. On the basis of consumers’ perception, marketers get an opportunity to make ;
improvements and re-build the image of a product. It also provides an added competitive advantage over
competitors:
Consumer Behaviour (Unit 4) ; 107

Importance of Consumer Behaviour

Attitude
Culture
Lifestyle
Experience
Decision-making
Product Use/Complements

1) Attitude: Attitude defines the consumers’ philosophy towards a specific product. This helps the marketer to
renovate and improvise the specific product and again approach the consumer to buy it. This also enables
the marketer to strengthen its marketing ability.
2) Culture: The marketing operations are widely influenced by the changing demographics. Therefore,
understanding of cultural differences and sensitivities may prove advantageous to marketers for recognising
their target market and customers.
3) Lifestyle: Lifestyle based products are in trend. By analysing the consumer lifestyle, marketers can sel1
those products which are most appealing to the customers. Thus, a particular segment is offered lifestyle
products for their further consumption and satisfaction.
4) Experience: After consumption of a product, experience also influences further buying decisions of a
customer. The marketer must be vigilant enough to observe and understand the consumers’ experience with
a product and accordingly promote the product.
5) Decision-making: While decision-making, consumers use their thought process. The marketer must try and
find out a way through which consumers can make a decision while evaluating a certain product. If a
marketer is able to identify the key points which the consumer looks up in a product then this act leads the
marketer to run the business successfully.
6) Product Use/Complements: Marketing is not just about selling of a particular product, rather recognising
the use of a product and its supporting items which add more value to a product. This helps the marketer to
design a perfect product, keeping in mind the requirements of customers.

This is a vital tool to attract more customers. The study of consumer behaviour is an essential part of
marketing management. If a marketer is unable to understand and identify the choice of customers, then it
may become a difficult task to retain the present and potential customers as well as the survival of the
organisation in the market.

4.2. FIVE STEPS CONSUMER BUYER DECISION PROCESS

4.2.1. Introduction
The buyer decision process includes five steps, which are explained below:

4.2.2. Problem Recognition Problem Recognition

A problem or a need is recognised when a customer identifies a significant
gap between the desired and the actual state of a product or service, which is
Information Processing
enough to provoke the process of decision making. The ‘actual state’ means
the process by which a need is already being satisfied, whereas the ‘desired T
state’ means the process by which an individual wants his demand to be Evaluation of Alternatives
fulfilled. There are many factors pertaining to the process of need
recognition. Information processing and motivation process of customers I
are some of the important facets. The customer must be conscious about the Purchase Processes
needs and problems, which are arising either from inside or from outside the
organisationÿ by the processing of information. This leads a customer to get
I
Post Purchase Processes
motivated. Therefore, the process of problem recognition can be defined as
a process wliich provokes and triggers a customer to get involved in some Figure 4.2: Five Steps Buyer
meaningful buying decision activities. Decision Process
108 MBA First Semester (Basics of Marketing) SPPU

4.2.2.I. Types of Problems Recognition

Various types of problem can be recognised. Some of them are as follows
1) Routine Problems: Routine problems are those problems, where some gap is likely to be found between
the actual state and desired state. The customer generally wants to satisfy these problems immediately.
Convenience goods, such as, sugar, coffee, tomato ketchup, etc., are some of the exaritples associated with
these types of problems.
2) Emergency Problems: These types of problems are often unanticipated by the customer and require a prompt
solution. For example, a businessman finds that the display of his laptop is broken. Display of laptop is
needed to be replaced immediately in order to avoid any kind of hindrance in the working of the businessman. £
3) Planning Problems: The problems which are expected to occur but there is no immediate requirement for
their solution, are known as planning problems. For example, a person is facing some problem in the
functioning of his mobile phone but still he can work with that, he may start looking for various alternative
brands of mobile phones, paying attention towards the advertisement of mobile phones, starts window
shopping, or may start asking for the suggestions about the mobile phones from his friends and peer groups.
Planning problem forces a person to buy ‘pre-need’ products, i.e., products which are not needed right now
but may be needed in the near future.
4) Evolving Situation: These are the situations in which unexpected problems occur but the immediate
solution is not necessary. Fashionable products can be seen as one of the examples of evolving situations. A
person may be aware of the changing fashion but still he does not react to new fashion styles now and may
adopt them in future.

[Link]. Conditions Resulting in Problem Recognition

There are several conditions which can result in recognition of consumer problem. Some of the important
conditions are explained below:
1) Reduced or Insufficient Inventory of Goods: This can be considered as one of the most common reasons
because of which customers recognise any problem. Firstly, the customers utilise various kinds of products
which they have in stock, thereafter the goods are repurchased to replenish the stock and continue the :

fulfilment of their needs. If the products are essential for the consumers, then the need of such products
arises as soon as the current stock is consumed.
2) Dissatisfaction with the Inventory of Goods: It has been observed that sometimes the customers become
dissatisfied with their existing products, which results in problem recognition. For example, a person
having an alphanumeric keypad mobile phone may think to change it with the latest version of smart phone
because many people are using smart phones and old fashioned mobile phone can result in social
discomfort for him.
3) Dynamic Environmental Conditions: Problems can be recognised by the customers due to dynamism of
environmental conditions. One of the most vital conditions is the changing attributes of family, which in
turn leads to several problem recognitions for an individual.
4) Changing Financial Conditions: The financial condition of any customer is one of the most important aspects
resulting into the problem recognition. Predictions about current and future financial condition of customer can
initiate problem recognition as he may estimate that how much he can spend on purchasing certain product.
5) Marketing Practices: Various types of marketing activities, such as, sales promotion, advertising, personal
selling, etc., are initiated by the marketers to provoke the problem recognition among the customers. With the
help of these marketing tools, a marketer tries to change the perception of a customer in such a way that the
customer begins to feel a major difference in his desired state (owing a product) and his actual state (not having
the product), which in turn forces him to search, compare, and finally purchase the product of marketer.

[Link]. Marketing Implications ; , ....... ,V«

Problem/need recognition or need arousal is the outcome of unsolved problems or unfulfilled needs and wants. This
feeling arises when a customer feels a gap between his actual and desired states regarding any product pr service.
When a customer recognises a problem or a need, it provides the following marketing opportunities to a marketer:
1) Developing a product or service which can satisfy the needs and wants or solve the problems of the
customer in a far better manner than that of the offerings of the competitors.
Consumer Behaviour (Unit,4) 109

2) Using a specific advertising technique which is known as ‘problem-solution advertising’. In such

advertisements, firstly a problem is highlighted and then marketer tries to show how effectively his product
is able to solve such problem, e.g., whiter teeth in 15 days, fairer skin in 7 days, etc. Marketer also uses the
‘consultative personal selling’ technique in which he tries to understand the problem of customer and then
he recommends the solution of problem with the help of his product.
3) Marketers take the help of ‘comparison advertising’ in order to increase the dissatisfaction of consumers
with any product or brand which they are using currently. Then, the marketers demonstrate that how their
product is better than that of competitors.
4) Informing the customers about the latent/hidden/intuitive needs and wants about which the customer is
either unaware or which are secluded under the layers of consciousness. For example, unhealthy life style
may cause a heart attack.
Marketers can produce those products which can satisfy the existing needs and wants of the customer but they
cannot generate new needs or wants, i.e., product of marketer can only increase the level of satisfaction of
customers which they are already achieving from any other brands. But, if marketer wants to create a new demand
then he may have to address the latent demands of die customers. For example, ‘Fair and Handsome’, a fairness
cream for men, may foster a sense of consciousness among the male customers regarding their dark complexion.

4.2.3. Information Search

As soon as the need is recognised, customer requires information related to different aspects of those products
which can satisfy his needs. Once a customer recognises the problem, he shifts to the subsequent stage of
decision-making process, i.e., information search.
Information search can be classified on the basis of motive of search as ‘on-going search’ and ‘pre-purchase
search’. Similarly, it can also be classified on the basis of its origin as ‘external search’ and ‘internal search’.
All of these types are explained below:
1) Pre-purchase Search: This is a very common mode of search a person does during this stage of buyer
decision process. As soon as a customer recognises a problem, the pre-purchase search initiates.
2) On-going Search: These are the search activities which do not depend on specific decisions or needs. In
other words, on-going search is not conducted for solving an immediate and recognised buying problem.
Rather, it is conducted in order to search those products which a customer wants because of his interest and
not because he has demand for them.
3) Internal Search: The first stage that takes place right after the problem arises in front of customer is known
as internal search. It is a process in which a customer analyses and recalls the information gathered by him
in the past, which may prove to be useful in current buying situation. For example, a person planning to
buy a motor cycle recalls that his younger brother has once given a negative feedback about the mileage of
the bike which he is planning to buy currently.
4) External Search: External search can be seen as a process of collecting information from all other
mediums apart from that information which can be recollected with the help of memory. Friends, store
display, advertising, product-testing magazines, sales people, etc., can be seen as some of the mediums
through which the information about the product can be collected.

4.2.3.I. Origin of Information for Purchase Search

Various sources through which information for purchase search can be collected are as follows:
1) Past and Direct Experience: One of the fundamental sources of information for a customer is his experience
which he gains directly by utilising and analysing the performance of products and services himself. If the
customer is satisfied with the product, he will repurchase the product. In order to help the customer to decide
his purchases, some exhibitions, product testing, and other experiences of product are provided to the customer.
2) Introduction to Mass Advertising: A customer’s attitude towards a certain product or service is greatly
influenced by the mass advertising and promotion which provides some vital source of information to the
customer! Continuous use of mass advertising can help the marketer to affect the buying decision of the customer.
3) Family:. Family is the primary group with whom a customer is connected. Family members such as spouse,
parents, siblings, children, etc., play a very important role in providing important inputs to the customer.
 !’
no MBA First Semester (Basics of Marketing) SPPU

4) Society and Peer Groups: As a customer transforms from childhood to teenage and then to an adult, the
* ;
society and peer groups have significant influence on him.
5) Internet: Due to deep and fast reach, internet is proving to be one of the most important sources of

.....
information for the customers in today’s scenario. The relevant information about all the products and
services can be obtained from the internet.

[Link]. Factors Affecting External Search

There are numerous factors which have the potential to affect external search, either by directly impacting the
cost/benefit perception of the customer or by acting as a hindrance in the information search process indirectly.
Some of such factors are described below:
1) Market Factors: The external search behaviour of a customer is significantly influenced by the features of
a marketplace. The factors that affect the external search are location of outlet, availability of information,
number of options available for the consideration, etc. Apart from these, various other market factors help
the customers in making purchase decision and in evaluating the possible alternatives. This results in
enriching the process of external-search.
2) Purchasing Strategies: The extent of external search can be minimised by the customers by adopting
various strategies. For example, the inclination towards certain brand or retail outlet is created over a
period of time by using the product or availing the services offered by them. It has been observed that the
customers follow the simple-choice approach when the process of information search is trivial or the
situations regarding the purchases are complex.
3) Personal Factors: The amount of external-search done by a customer depends upon many of his own
characteristics.
4) Situational Factors: Some special and unique factors related to a certain circumstance can also impact the
process of external-search. The amount of external-search can be minimised in the cases, when:
i) The availability of time is less and seriousness of demand is high.
ii) It is assumed that there will be lot of rush in the outlet.
iii) Some special conditions such as discounts, freebies, etc., also give rise to buying situations.
5) Assumed Risk: The total amount of information search which a customer performs is greatly affected by
the uncertainty and risk involved in making a buying decision or in the outcomes of the decisions.

[Link]. Marketing Implications

During the stage of information search, the customer collects the market information for satisfying his needs and
wants most appropriately, which ultimately changes his perception towards certain product and also minimises the
risk and uncertainty involved in purchase decision. This search for information starts from internal search, where a
customer uses his memory and past experiences to recall a satisfying solution to his needs. Memory can rely
either upon the knowledge of market information or upon the customer’s previous experiences. If the process of
information search provides a feasible solution to his unsatisfied needs, the customer will purchase the product.
The suggestions for the marketer are as follows:
1) Marketers should ensure that their marketing communications are attractive, convincing, and have the
element of brand recall in it. So that, whenever a customer needs a product, their brand should come first in
the mind of the consumer.
2) Marketers should also make sure that customers derive a positive experience from the brand, which in turn
will result in positive word-of-mouth publicity by the customers.
When a customer is not able to find substantial information through internal-search process, then he looks for
the information from external-search process. The customers usually take the following two types of decisions
for the process of information search:
1 ) Degree of Search: Amount of efforts and time to put into the process of information search.
2) Direction of Search: Type of information sources to be used.
The responsibilities of a marketer are as follows:
1) To use those controllable marketing mediums, that according to various studies, are most popular among
the consumers for information research.
2) Try to exploit more of the non-marketing mediums such as referrals, word-of-mouth publicity, etc.
Consumer Behaviour (Unit 4) Ill

4.2.4. Evaluation of Alternatives

When a customer is involved in the process of information search, simultaneously he is also involved in the
evaluation of that information by processing, amending, and updating his information continuously. There are
four different methods through which the information can be processed, which are as follows:
1) Exposure: Advertisements on radio, TV, newspaper, etc., or by a friend or colleague who has purchased
that product.
2) Attention: Observing the experiences of other users who have already consumed the product.
3) Awareness: Trying to find more information or to develop a better understanding of information.
4) Yielding: Creating a perception about the information.

Evaluation includes all those activities which a customer performs to assess the probable solutions to market-
oriented problems, by taking certain criteria into consideration. The information search process provides the
relevant inputs about the various alternatives, whereas the evaluation process compares these alternatives in
order to help a customer in taking a final purchase decision.
Every customer may have his own methods and measures of evaluation. There is no significance of number of
criteria being used by the customer for the evaluation because the weightage and effectiveness of every criterion
may be different from that of others. Therefore, some evaluation criteria may be vital for a customer, while on the
other hand some other criteria may be dominating, i.e., they are more important and effective than the former ones.

For example, a person whose major portion of job includes field work, will look for the style, make, features,
etc., in a bike but the most important factor to decide his purchase is the mileage of the bike as it will contribute
significantly in the daily operating cost of bike. There may be numerous competing brands available for certain
product, yet there are various reasons which will force a customer for not considering them. Some of such
reasons are as follows:
1) Some brands may not be affordable for the customer due to their very high prices.
2) Some brands may not match or fit in the present need of the customer.
3) Customer may lack full information on some brands, which is required to evaluate them.
4) Customer has already used and rejected them.
5) Customer is happy and satisfied with the brand he is using currently.

Customer has developed a negative perception about certain brands, due to negative feedbacks he has received
about them from the users and other resources.

4.2.4.I. Factors Affecting the Extent of Evaluation

The factors which affect the process of information search also regulate the extent of evaluation of information.
These factors are as follows:
1) Greater the urgency of the need, lesser will be the evaluation.
2) Higher the significance of the product to buyer, greater will be the evaluation of alternatives, e.g., car,
house, bike, etc.
3) Greater the complexity of alternatives, higher the efforts will be put on the evaluation.

[Link]. Marketing Implications

Both the stages, i.e., evaluation and the external-search take place at the same time. The customer determines
the criteria on which the evaluation of alternatives will be done, e.g., quality, price, features, etc., and at the
same time the 'weightage of these criteria is &fco determined by him The customer can compare various brands
on the basis of these criteria in order to take the purchase decision. A customer evaluates several brands in
accordance with his preferences, decisions, thoughts, etc. This analysis will help in developing a viewpoint
about the functionality of each brand on the basis of each criteribii, for example, Maruti Suzuki has a trusted
performance, high reliability, and diverse range of cars with large network of distributors and service centres.
A customer often develops a positive attitude towards certain brand, if he has a positive perception about the
brand’s performance mainly on the basis of some important features. The decision to buy certain brand is
created in favour of that brand, which a customer prefers the most, i.e., the alternative towards which the
customer has the most favourable attitude.
 .*

112 MBA First Semester (Basics of Marketing) SPPU

A marketer has to perform the following two main tasks, while evaluating the alternatives:
1) To make sure that the product performs best during the product development phase, especially in those
features of product which are among the important criteria of evaluation.
2) To highlight the performance of brand on those criteria where brand performs excellently, whereas avoiding
those criteria on which brand is not able to provide desirable performance. For example, a car brand will
never highlight that it has high maintenance cost.

4.2.5. Purchase Decision

In order to affect the purchase process of a customer, it is very important for the marketer to have a better
understanding of the situational influences and the motives behind the purchases. The purchase motives are
converted into a real purchase only when the situational factors become encouraging. Social environment,
physical environment, mental considerations, and previous conditions can be termed as situational factors.
Every consumer considers himself as an intelligent customer. But there are certain factors that force a customer
to buy from a certain outlet.

Actually, the customer creates specific evaluation criteria for the outlets in his mind, and compares these with
the perception he has actually developed about the features of the outlet. With the help of this comparison, he
decides whether the outlet is suitable or not for his purchasing activities, and then he acts accordingly. If the
shopping experience is pleasant, it will strengthen the learning experience and he will purchase the products
from that outlet again and again.
i
Retailer
strategies

Household/buyer Importance of
characteristics Store

•Location
•Demographic
•Role
•Lifestyle
n
Perceptions of Attitude
toward
Store choice
•Personality store attributes
stores
•Economic

General opinions In-store

and activities information
*— —ÿconcerning processing
shopping/ search

T
Strategies for
planning and /Product ancf\
budgeting brand purchase
j:
I
Figure 4.3: Store Choice Prdcess

The model shown in figure 4.3 depicts the process of store-choice. In this flowchart, corresponding directions
of effects among various factors of store-choice behaviour is shown. In this model, it is explained that lifestyle
factors, demographic factors, and various other customer related factors tend to create common Opinions and
activities related to the information search and purchase behaviour. These consumer factors also .Influence the
evaluation of features of outlets by the consumers. The perception then made about the outlet affects the
decision of selecting an outlet, which in turn affects the decisions related to brand and product selection. If the
consumers feel satisfied after this process then it may result in a feedback which will create a sustainable outlet
image, which further may result in the deep rooted loyalty of consumers towards a specific outlet.

v
Consumer Behaviour (Unit 4) 113

4.2.5.I. Marketing Implications

A customer’s decision in favour of certain alternative among the various available alternatives is considered at
this stage. A customer can select a less appealing alternative instead of selecting his most preferred brand due to
some unforeseen conditions, e.g., some special sales promotion offers on less favoured brand, some personal
factors like financial crisis, etc.

Following are the suggestions for the marketer to influence the purchase decisions of consumers:
1) In-store merchandising, such as, shelf space, sales assistance, in-store advertising, point-of-purchase
displays, etc., can be used for retail-distributed products as a prime influencing factor. Customer’s decisions
can also be influenced with the help of innovative and informative packaging of the products.
2) The products which are sold through online shopping websites have ‘ease of purchase’ as one of the
important factors. Many customers do not prefer online shopping only because they feel that the process is
very confusing.

[Link]. Consumer Decision Rules

Consumer decision rules are the methods which are used by the consumers in the process of choosing a brand
out of all the alternatives available. They are also known as decision strategies, information processing
strategies, and heuristics. These rules minimise the pressure of taking intricate decisions because they provide
procedures and guidelines which can make the process of decision-making less difficult.

Consumer decision rules can be categorised into following two categories:

1) Compensatory Decision Rules: With the help of compensatory decision rules, a customer analyses various
alternatives of brand or variant in terms of each important characteristic and also calculates weighted points
for every brand. The calculated points exhibit the relative merit of a brand as a probable buying option.
Here, it is assumed that customer will select only that brand which has the highest points among all the
alternatives analysed.
One of the special characteristics of compensatory decision rule is that a brand which is positively evaluated
on the basis of one characteristic can nullify the effect of any negative evaluation on any other
characteristic. For example, a mobile phone can be evaluated positively on the basis of its high RAM and
HD display, whereas it may be evaluated negatively due to poor batteryÿ backup.
2) Non-Compensatory Decision Rules: In case of non-compensatory decision rules, no one is allowed to
compensate a negative trait of a product with one of its positive traits. For example, the high RAM and HD
display will not make a cell phone as a prime choice for a customer as its poor battery back-up will
disqualify it from becoming the ultimate choice of the customer.
Non-compensatory rules are of three types, which are as follows:
i) Conjunctive Decision Rule: When a customer follows conjunctive decision rules for selecting a
product, he creates a minimum level of acceptance, separately for each characteristic, as a point to
qualify. If any characteristic of a product or brand is not able to reach the qualifying mark, the product
will not be considered in the process of purchase decision.
It is very important for a customer to have some otiier decision rules to select the final product because
conjunctive decision rule may end up providing various alternatives which he above the qualifying level.
This rule is mainly helpful in reducing the various alternatives available for the consideration. Several
other sophisticated and well-defined rules can be used by the customer to arrive at a final decision.
ii) Disjunctive Decision Rule: Disjunctive decision rule can be considered as “mirror image” of
conjunctive rule. To apply this rule, the customer formulates a minimal acceptable qualifying level,
separately for every characteristic (which could be greater than the qualifying mark established for
conjunctive rule). In this rule, if any alternative available to the customer meets or outpaces the
qualifying level for any of the characteristic, the alternative is selected. Again, it can be seen that there
may be many products or alternative brands which can outpace the qualifying level; hence the customer
has to implement any other decision rule in order to arrive at final purchase decision. When this kind of
situation occurs, it is up to the customer to either apply a different decision rule or to select the first
alternative which fulfils the minimum accepted qualifying level.
 r

114 MBA First Semester (Basics of Marketing) SPPU

iii) Lexicographic Decision Rule: When a customer follows lexicographic "decision rule, he first of all
ranks the various characteristics of product on the basis of their anticipated importance to customers.
The customer evaluates all the available alternatives based on that characteristic which is considered as
the most significant. If one particular brand accumulates significantly high ratings on the top-ranked
characteristic, the brand is chosen and the process terminates. But, in case of a tie, the same process is
conducted for second important characteristic and this process is repeated until the customer gets only
one alternative because it has out-performed all the other alternatives.

[Link]. Situational Factors Affecting the Purchase Decision

Various situational factors that affect the purchase decision of a customer are as follows:
1) Time Dimension: All the elements of marketing mix are influenced by time. The demand of some kind of
products is seasonal. For example, the demand of rain coats increases during rainy season, coffee and tea
experience increase in sales during winter, and sale of air-conditioners, coolers, and refrigerators increases
during summer.
2) Physical and Social Enclosure: The ambience in which a product is sold plays a very important role in
creating the perception of quality in the mind of the customer. For example, some cakes are placed in a
very neat and clean display, there are no flies, and the environment looks completely hygienic. In such a
case, the customer will create a perception that the cake is of high quality and is hygienic only because of
the ambience in which it has been put. The social enclosure is constituted by the profile, activities, and
number of other individuals present at the purchasing point. For example, going for a movie with friends
and going for a movie with the co-workers have different significances and the person’s wisdom in making
a decision may also vary in both the instances.
3) Conditions of Buying: Consumer buying decisions are influenced by the terms and conditions associated
with the sales. For example, when online shopping was introduced in India, customers were very doubtful
and were not sure to try it due to the security issues related to the online payments, product delivery, and
product conformation. But, as the doubts of customers are getting cleared, the online market is experiencing
rapid growth in India.
4) Motives of Purchase: The motives and reasons for which a product is purchased also determine the buying
i
decision. Customers show varying buying behaviour while purchasing a product for gifting it to someone
and when the same product is purchased for self-consumption. Every individual prefers different types of
apparels for different occasions, such as, formal wears, house wears, party wears, ethnic wears, etc.
5) Mental States and Moods: Sometimes the mental state, mood, health condition, etc., of a customer also
influences his purchasing decision. When an individual is getting late dr he is not feeling well, he will not
devote a lot of time in collecting the information about the product, comparing the alternatives, selecting the
product, etc. For example, a customer goes for dinner in a restaurant and finds that his favourite dish is
finished then he will choose any other dish because he is very hungry and wants something to eat
immediately. Various types of feelings such as joy, sorrow, or anger can result in the purchases of such
products which may not be purchased when a person is in normal state of emotions. A person sees a very
elegant pen used by his co-worker. While going home, he stops at an outlet and purchases the same pen.
The customer relates this pen to his status and personality, and these emotions motivate him to buy that pen.

4.2.6. Post Purchase Processes

When a customer takes the decision of buying a product, then that decision can give rise to various types of
behaviours related to it. The following two activities are very important:
1) Decisions Related to Product Application and Installation: Almost all the customers are aware about the
requirement of product setup or installation when they purchase any consumer durables. The products
should be made to function as soon as customer buys die product, e.g., mobile phones, bikes, etc. On the
other hand, there are some products which require the installation or set ups before being ready to be used,
e.g., air conditioner, televisions, DTH, etc. The installation must be done carefully in order to provide
maximum satisfaction to the customer. Sometimes, instructions book is provided with these types of
products to assist the customer with the set-up and installation of the product. Products such as camera,
microwave ovens, etc., require detailed explanations fof their operation.
Consumer Behaviour (Unit 4) . 115

2) Decision Related to Associated Products and Services: When a customer buys a certain product, he also
becomes the prospect, customer of associated products and services. For example, the buyer of a
smartphone may eventually buy mobile cases, covers, screen guards, etc.

Apart from the obvious behaviours which are derived from buying a product, the customer also evaluates his
buying decision. During the stage of post purchase, a customer re-evaluates his buying decision as he is not sure
about his wisdom to buy a particular product or brand. The functions of this stage are as follows:
1) It increases the variety of experiences that a customer stores in his mind.
2) It provides a feedback about the quality of his decision regarding the selection of products, brands, outlets, etc.
3) The feedback received at this stage serves as a guideline for altering the strategies related to purchasing
decisions that are to be taken in near future.

4.2.6.I. Marketing Implications

The marketers who believe in relationship marketing give importance to the stage of post-purchase behaviour.
Various marketing implications are as follows:
1) Getting in touch with the customers even after selling the product helps in knowing about the performance
of the product and level of customer satisfaction, i.e., whether customer’s expectations are fulfilled, all the
unsatisfied needs are entertained, and post purchase doubts are removed or not.

The marketers of current business scenario are constantly involved in various kind of activities to remove or
reduce the feeling of dissatisfaction or dissonance among the customers, e.g., providing after sales service
and support, customer satisfaction surveys, supporting in the buying decisions process through advertising
and follow-up calls, handling complaints of customers, etc.
2) Utilising the opportunity to sell more quantities or variety of products to the existing customers, e.g., cross¬
selling of related accessories of any product, giving luring offers to existing customers on upcoming
products to promote future buying, etc.
3) Making various types of offers, e.g., extended service agreements, extended warranties, etc., which increase
the time duration during which the producer will resolve the problems in the products without any charges.
4) Proposing reasonable buy-back, trade-ins, or exchange offers.

[Link]. Consumer Satisfaction and Dissatisfaction

One of the important elements of post-purchase stage is satisfaction. Satisfaction is the customer’s situation of
being adequately compensated in a purchasing situation for the sacrifices made by him. Adequacy of
satisfaction is measured by comparing actual experiences of previous purchase and consumption with the
expected need satisfying capability of the brand. This process is shown in figure 4.4. There are various
definitions and approaches which are accepted widely and can be used to explain the concept of satisfaction.

According to Hunt, “Satisfaction is a kind of stepping away from an experience and evaluating it. One could
have a pleasurable experience that caused dissatisfaction because even though it was pleasurable, it was not as
pleasurable as it was supposed or expected to be. So satisfaction/dissatisfaction isn’t an emotion, it’s the
evaluation of an emotion.” -
Evaluation of
Alternatives

I
Purchase

v
Pfoduct Confirmation or Product
Expectation Disconfirmation Performance

I
1
Satisfaction Dissatisfaction
T T
Figure 4.4: Post Purchase Process
 ::i

::
116 MBA First Semester (Basics of Marketing) SPPU

Every customer has some specific expectations from the products and services, some bf them are explained below:
1) The quality and functioning of the; products and services, i.e., expected advantages that a product can provide.
2) The efforts and the cost to be spent before achieving the direct benefits from the products and services.
3) The cost and social benefits that a customer can receive as an outcome of buying the product or service, i.e.,
expected benefit for society and other people, from the purchase Of the product.

[Link]. Cognitive Dissonance

Cognitive dissonance takes place after the purchasing of products or services. The marketers should try to
reduce it in order to persuade the customer for re-purchase. Post purchase dissonance results before the
customer evaluates the performance of the product or service; the customer initially may have some doubts that
whether he has bought the right product or not.

Different customers may have different level of intensity and experience of post purchase dissonance and it may
vary from purchase to purchase and condition to condition. Various situations where cognitive dissonance may
occur are as follows:
1) When the limit of tolerating the dissonance is crossed, i.e., the customer can bear or tolerate the
disagreements and discrepancies only up to a certain level.
2) When the customer is dissatisfied with any action which is almost irreversible. For example, when a
customer buys a new flat but suddenly he is not satisfied with it, then there is very little chance that he can
revoke his decision and receive the money back from the builder or authority.
3) When all the desirable attributes were present in those products which he has not selected. For example, if
a person selects Samsung Galaxy cell phone, and after buying he may start feeling that all the features
which he was looking for were present in the phones of Apple, HTC, and other brands.
4) When there are various options which are desired by the customer. With the help of many studies, it is found
that the intensity of post purchase dissonance is quite high in those customers who look for various brands and
stores and get confused. Such customers face difficulties in making decisions regarding buying a product.
5) When the quality of all the available options is quite different. For example, there are various cars with !
varying features and performances.
6) When the customer finds himself committed to a certain buying decision because that decision satisfies his
psychological needs. For example, while purchasing a car, customer can focus on the distinctive features,
such as, make of dashboard, interiors, length, and power of the car in order to flaunt in front of his peer
group which can satisfy his psychological needs. Ego also plays an important role in it.
7) When no pressure is applied to the customer during the process of making purchase decision. If any kind of
external pressure is exerted on the customer, then he may end up buying those products which he may not
be willing to buy, without giving any consideration to his own preferences about the products and brands.

[Link]. Managing Cognitive Dissonance

Dissonance can be seen as an occurrence of unpleasant situation when the result of customer’s selection is not
in accordance with his pre-selection expectations. In fact, this dissonance results only after the decision is taken;
therefore, it can be said that the process of selection may result in dissonance. For example, a person can
consider the cost-benefit analysis for consuming liquor and decides to start consuming it.

After sometime, he starts feeling the consequences of consuming liquor, listening to various advices by the
doctors against liquor, and the social stigma which is faced by the drinkers, the person rethinks his decision of
consuming liquor and decides to quit it. The methods that can be used by a consumer in order to avoid or reduce
the cognitive dissonance are as follows:
1) Modify the Assessment of Alternative: One of the methods by which the consumer can decrease the level
of dissonance is to reassess the alternatives. In order to accomplish this, the customer can view the
characteristics of selected product more positively, and simultaneously he can try to give less importance to
the characteristics of unselected products. When the customer sticks to his choice for a long time then he
may forget the positive characteristic of unselected product and negative characteristic bf chosen product.
Similarly, this may also result in remembering only the positive attributes of selected product and the :
negative attributes of unselected product. ;
Consumer Behaviour (Unit 4) 117

2) Seeking New Information: The other way by which a customer can reduce his dissonance is to search for
more information (especially positive information) about the selected product in order to prove his decision
of product selection more justified. As per dissonance theory, dissonant person should have a tendency to
neglect all that information which can raise the level of his dissonance; instead he should look for that
information which will support his buying decision. It is quite evident that the customer will focus on the
advertisements of those brands which he has bought rather than the advertisement of competing brands.
3) Altering Attitudes: Another method of avoiding dissonance is that the customer should change his attitude
and should support his decision instead of deviating from it.

4.3. ORGANISATIONAL BUYING BEHAVIOUR

4.3.1. Introduction
Organisational/Business/Industrial buyers are the entities (individuals, manufacturers, producers or other
organisations), involved in buying goods and services to produce new goods and services. These buyers sell,
rent or supply the produced goods and services to others. The process of determining needs for buying products
and services and selecting the most suitable supplier or brand from available alternatives through identifying
and evaluating them, is called Organisational buying or Business buying or Industrial buying. The buying
approaches are different for different organisations or businesses.
However, the sellers try to identify and explore common buying methods and processes in order to develop
suitable marketing as well as targeting strategies. Understanding the phenomena and characteristics of
organisational buying is very crucial for the organisational marketers to develop suitable marketing strategies so
as to attract the organisational buyers. This involves exploring the buying situations, process of buying for
making buying decisions, the way different members of the organisation affect these buying decisions, the
criteria used in making such decisions, etc.
It is very essential for purchase managers to communicate with different people in the organisation having
variety of responsibilities, in order to design the purchase criteria. Generally, the normal consumers are
dispersed in geographical area, whereas organisational buyers are group of individuals who exhibit similar yet
derived demand. Therefore, it is very challenging to understand organisational buying behaviour as group of
decision-makers are associated with it.

4.3.2. Nature of Organisational Buying Behaviour

The nature of industrial buying behaviour is given below:
Nature of Organisational Buying
Behaviour

Multiperson Buying Activity

Formal Activity
Efforts _

—
Longer Time Lag between
and Results Rational yet Emotional Activity

Uniqueness of Organisations

1) Multiperson Buying Activity: Industrial buying behaviour is a very complex process because it involves
interactions among various people, e.g., the buying process of the industries or of the organisations such as,
hospitals, government organisations, educational institutions, etc. The people who participate in these
buying decisions may be from many departments like, production, purchase, design, maintenance, etc., and
these people may also have different educational qualifications such as, engineers, business graduates,
graduates, etc. Other than that, these people, may also be from different hierarchical levels in the
organisation ranging from front line staffs to the senior level managers. The people involved in the buying
situation may also adopt different roles in the buying process. This concept of varied roles in buying
process is known as ‘Buying Centre’.
 „UI1— XJl!--'. Z'.P-’.I _=3i.';S

118 MBA First Semester (Basics of Marketing) SPPU

2) Formal Activity: Technical complexities of industrial buying have high monetary value, but still it has to follow
all the formal procedures of the organisation. The organisation adheres to certain policies even at the times of
emergency and it is very important that suppliers have the knowledge of these policies. All the decisions made
during industrial buying lastly take the form of a contract, where the parties to contract are suppliers and buyers.
3) Longer Time Lag between Efforts and Results: Since the industrial buying behaviour is complex and
involves the interaction of many people, they take comparatively long time than individual buying. Thus,
there is a great time lag between the initiation of the marketing effort and the actual buying taking place. It
is very important for the marketer to have a good idea of the time lag in getting the response from the
customers; otherwise he may end up doing an impractical planning.
4) Rational yet Emotional Activity: Industrial buying is a formalised process with very clear rules and procedures,
yet it cannot be said that it is an unemotional or a rational process. The reason behind this is the entities that carry
out industrial buying, i.e., human beings. Therefore, the human characteristics can also impact the activities of
industrial buying, such as, buying of raw materials, commodities, standard products, components, etc.
5) Uniqueness of Organisations: Several commonalities exist in the industrial buying processes, yet no two
organisations possess same behaviour and make same decisions. This is because there is a wide divergence
with respect to the buying situations, resources, capabilities of the organisations, the suppliers and their
relationships, etc. Hence, it is very important to consider every organisational buyer as a separate entity in
the process of industrial selling.

4.3.3. Objectives of Organisational Buying Behaviour

The industrial buying process is handled by the procurement cell. This department is governed by the overall
strategy of the organisation and also by the specific rules which the department has laid down for itself.
Organisational buying has the following key characteristics:
1) Non-Task Objectives: These objectives should be used by the procurement department of a company in
order to achieve the task related objectives. Transparent and non-discriminatory policies, answerability of
management, and proficiency in die process of procurement, are some of the examples of non-task
;
objectives. The procurement process should not favour any particular supplier or a group of supplier. It
should also not be biased towards any supplier and should conduct the entire process in a fair and equitable
manner. The efficiency of the procurement department affects the efficiency of the entire organisation.
Hence, the procurement department should function effectively by acquiring the required resources of best
possible quality in the stipulated time. This also helps in building the brand image of the company; for
example, successful brands like Maruti differentiate themselves in the marketplace through their efficient
and transparent procurement policies.
2) Task-Oriented Objectives: The task-based objectives of the procurement department are determined in
order to achieve following specific objectives of the organisation:
i) Cost: Keeping control over the cost of acquisition is one of the important facets of the procurement
process. This can be done by ensuring that the procurement of right product of the right quality, in the right
quantity is done at the right time, and from the right source. In this process the procurement department
identifies the suppliers who meet their standards and then negotiate the rate at which the raw material will
be supplied. In this manner the procurement team delivers the maximum value to the company.
ii) Quality: The next important task for the procurement cell is to control the quality. This can be ensured
by supervising that the manufacturing of product is done by using the best quality of raw materials. The
quality specifications are usually set by the end user or the production department, while the
procurement department makes sure that these standards are being met. The procurement department
also undertakes value analysis of all the alternatives so that best among them can be selected such that
the quality of the end product is not compromised in any case.
iii) Service: The service aspect of the buying process should be well-defined before the product is bought
from the vendor. When the procurement department buys a product from a vendor, the department
should be very clear about the services that are bundled with the product. These can be in the form of
additional technical information that is provided, demonstration of functioning of machinery, after sales
service, etc. The procurement department of the organisation should negotiate’ on these service
parameters before it finalises the deal with any vendor.
 Consumer Behaviour (Unit 4) 119

4.3.4. Factors Influencing Organisational Buyer Behaviour

The factors which influence organisational buyer behaviour are broadly divided into following four categories:

Environmental Factors
1)Political
2)Economic
3) Technological
4) Legal
5) Physical
6) Ethical
i:1 7) Cultural

Individual
1) Learning
I
Organisational Buyer
Interpersonal
1) Power Relationships
2) Perception 2) Buying Centre and its Role
3) Motivation

Organisational
IFactors
1) Structure
2) People
-
3) Task
4) Technology

Figure 4.5: Factors Influencing Organisational Buyer Behaviour

1) Environmental Factors: Following environmental factors influence the organisational buyer behaviour:
i) Political: Political factors play a crucial role in influencing the organisational buyer behaviour. The
political system has the power to alter the organisational work environment, which ultimately affects -
the buying behaviour of organisations. Certain organisations/products get concessions or exemptions
under political considerations. The trade agreements involving foreign suppliers require government
approval. The attitude of government towards the organisation also influences the organisational buying
behaviour. Other political factors influencing the organisational buying behaviour are lobbying, tariff
barriers, defence expenditure, etc.
ii) Economic: The economic factors attached with the environment of the organisation also affect the
organisational buying behaviour. These factors include price and wage policies, inventory levels,
availability of cash-flow and credit, nature of consumer demand, etc. These factors enable the
organisation to determine the stock level of goods and services, the level of finance for buying purpose,
and the final price which is to be paid for goods and services.
iii) Technological: The organisational buyer behaviour is also influenced by the technological factors
present in the surrounding environment. It is the technological advancement that determines the quality
and compatibility of products and services. These technological factors determine the type and category
of products available in the market for organisational buyers.
iv) Legal: Local, State and Central Governments put certain legal and regulatory conditions, which can
encourage or even at times, put restrictions on the organisational buying. Product standards, policies
related to sales and marketing, and other market related terms and conditions are developed by legal
system, which influence the organisational buying capacity.
v) Physical: Physical factors include the geographical location and climate of the organisation. These
factors do affect the organisational buying. It may affect the behaviour of individuals involved in
organisational buying. The physical location of the organisation puts up limitations of time and money
involved in transportation of goods for the buying organisations. The supplier selection is affected by
the location of both the organisational buyer and the supplier. Organisational buyers prefer local and
cost-effectiVe suppliers for buying goods and services. Organisations operating globally prefer to buy
goods from domestic suppliers.
vi) Ethical: The ethical conduct constitutes the. bedrock of any negotiation or financial transaction related
to organisations. Lack of ethical conduct could lead to long-term ramifications for both organisational
buyers and its vendors. This lack of confidehce or mistrust hinders the organisational buying.
 [Link]£&: vsaÿ3?c3sa-ssÿ.

120 MBA First Semester (Basics of Marketing) SPPU

vii) Cultural: The culture may be described as set of established values that are being practiced in the
organisation. Every member of the organisation shares such values. Different large organisations
exhibit different cultural settings, having their own norms, customs, values'ahd traditions. The type and
method of organisational buying is highly influenced by these elements of ehltUral factor.
2) Organisational Factors: Organisational buying very much depends upon the organisational set up. There
are many factors like award system, product selection, level of authority, communication system, objectives
and policies of the organisation, organisational structure, etc., which individually or collectively, can
influence the organisational buying.
Following organisational factors influence the organisational buyer behaviour:
rI
i) Structure: The structure of an organisation affects the style of organisational buying. The
organisational structure of an organisation depicts the official hierarchical set up within the
organisation. The structure may be formal or informal. In formal structure of the organisation, a
hierarchy of different levels of management is maintained.

However, the informal structures are quite different, being based on personal relationships. The
organisational buying is very much influenced by its organisational structure, as structure determines
the quality and quantity of the required goods and services.
ii) People: The term ‘people’ here refers to the organisational members associated with the process of
organisational buying. There is always a group of people who participate and decide about the
purchasing process in the organisational buying. These people are interrelated to each other and each
has certain defined roles to perform. The combined effect of this group reflects the buying behaviour of n
the organisation.
iii) Tasks/Activities: The buying activity is done to fulfil the organisational objectives. In order to
effectively prioritise, it is categorised into various heads based on certain factors like purpose of buying,
amount of expenditure, variety of material, routine or one-time purchase, centralised or decentralised
purchase, etc. Organisational buying is also influenced by the tasks or activities involved in it.
iv) Technology: Organisational buyer behaviour is also influenced by the technology available.
Technological innovations influence both the type of product which is being bought and the method
used for buying. While many organisations still prefer the manual process of buying, few have started f
to take the process online also.
3) Interpersonal Factors: The factors responsible for influencing the organisational buying behaviour
through interpersonal influence are called interpersonal factors. The relationship amongst the people counts
high in organisational buying behaviour. This relationship develops with personal experiences and matures
with passage of time, bringing confidence, dependence and integrity which add to further strengthening in
relationships.
Following interpersonal factors affect the organisational buying behaviour:
i) Power Relationship: Relationship between members of buying centre is called power relationship, as
all the members have buying power. The purchasing intermediaries generally have a notion that their
involvement in decision-making process is more than others. Therefore, the nature of relationship
between members of buying centre greatly influences the organisational buying behaviour.
ii) Buying Centre and its Role: In organisational buying, the buying centre is a group of people who
negotiate for purchase on behalf of the organisation. Each of them has certain accountability,
professional standing, and ability of reasoning or arguments. The roles of different members of the
buying centre also influence the organisational buying.
4) Individual Factors: Individual factors refer to the psychological factors associated with individuals
involved in organisational buying. The persons involved in buying have their own feelings and thoughts.
These are very important and are as follows:
i) Learning: This is a process which is associated with experience and it has a strong influence on
organisational buying behaviour. The individuals learn from the satisfactory or decisions
made by them. This encourages sticking to the same decision-making pattern under similar conditions.
In course of time with repeated successful transactions it becomes an automatic choice.
Consumer Behaviour (Unit 4). 121

ii) Motivation: It is,difficult to understand the motivation level of individuals involved in organisational
buying. Their motives are classified into two groups:
a) Task Related: In this category,' the buying centre is motivated to find that all factors needed for
perfect buying, like right material, right price, right quality and desired reliability of supply at
desired schedule are being offered by the supplier.
b) No-Task Related: In such category, the buyers are motivated due to some other factors like
promotion, increment and other personal favours from the management. Such motives are
associated with personal recognition, personal growth and need for risk reduction.
iii) Perception: The same stimulus is received, interpreted and processed in different styles within
different individuals. The individuals form a perception about a thing in their mind from their past
experiences. Thus, it is very important for the marketers to visualise the buying centre’s perception
about their products and develop their plans accordingly. This has got two sides: perception of the
buying centre members towards the products and services of the selling firm and perception of the same
towards their own functions and responsibilities in the organisational buying activity.

4.3.5. Organisational Buying Situations

The issues and problems associated with any buying situation majorly affect the organisational buying activity.
Different buying situations are characterised by different types of buying processes. In case of individuals or a
group of few people, the purchase process is not so complex and challenging. However, the situations are
different in organisational buying process. Such processes require deep analysis of existing trends as these
decisions are full of risks and affect the organisation at large. The organisational buying situations have been
divided into following categories:
1) New Task: Sometimes a product is being purchased by an organisation for the first time or that product is
being put to use in a modified manner. These situations create a serious risk that the product might fail or
would not work as assumed. In such situations, the buying company needs to invest time to develop
specifications, search for the vendors and their authenticity, check the reasonability of the offered price and
search for existing users and their opinions, etc.

All these factors make the decision-making process slow and time consuming. The first time use of product
in the industry has chances of failures due to material quality or wrong procedures adopted by the workmen.
This makes the industrial buyers to get them very well informed about material specifications and get their
workmen trained for its use and development. This will develop a confidence in product as well as the
suppliers, which will also encourage future purchases. The satisfaction on the part of buyers and payment
receipt without delay by the suppliers develops a mutual trust relationship between them, which continues
in future and brings profit to involved parties.
2) Modified Re-Buy: In such cases, the buying organisation requires an existing product from the market or
its existing vendor, but with modified teims and conditions. Such terms could range from technical
specification, price, delivery time or other factors crucial to the purchasing organisation. No extensive effort
is required for this situation; however, moderate types of risks may be involved.

For example, a car manufacturing company may require body parts with some modified features like
photochromic front glasses, scratch-proof bonnets and doors, etc. The suppliers, who have earlier provided
the body parts, compete with each other to provide the best deals and maintain the business terms. Other
suppliers try their best to get into business.
3) Straight Re-Buy: This type of purchase takes place for regular consumable items like ink for computer
printers, photocopy paper, office stationery, room . fresheners, toilet and floor cleaners, etc. These are
generally low margin commodities, where the price negotiation is minimal and switching between vendor
leads to little change in experience.

The organisation maintains inventory of these items and automatically re-orders soon as the inventory
reaches re-prder point. The purchase department has already a list of approved suppliers who have been
supplying these materials in the past. No vendor verification or selection and no framing of specifications or
sale conditions is needed. The satisfaction of product already exists due to past experience.
 r
122 MBA First Semester (Basics of Marketing) SPPU

4) System Buying and Selling: Thispractice originated in buying defence and cpjxpnunication equipment for
government from a single source |ppe nation or one international seller). Ordinappe factories produce variety
of arms, tanks, guns, etc., which are 'procured by the government. This allows the buying company to save on
the cost of raw material from different vendors or suppliers. Hence, there is only ope supplier for all the raw
material, spare parts, components and servicing requirements of the buying organisation. Hence, the term
‘system buyer’ is used in this situation. Conversely, for each system buyer there is a ‘system seller’.

4.3.6. Organisational Buyer Decision Process

The organisational buying and consumer buying decision process differ from each other to a great extent.
Organisational buying decision process has eight stages:
1) Problem Recognition: The first and most important stage of
Problem Recognition
organisational buying is the problem recognition stage, in which, a
particular organisational problem or need is identified. This problem can
be eliminated through buying a particular product or service. There are General Need Description
many internal as well as external factors that become the root cause of the
problem in the organisation. 1
i) Internal Factors Responsible for Organisational Problem: It may Product Specification
arise due to decision of the company to launch a new product as per 1
market demand. This will require procurement of new material and Supplier Search
machinery. In any company, break downs do occur and repair of
machines require procurement of new parts. Even the machinery has 5"
service life, they do need replacement. The material procured Proposal Solicitation
sometimes gets rejected due to poor quality. This forces the company
to make urgent procurement through another vendor. Sometimes, a
J
better price or better quality source is found before final bid is made. Supplier Selection
This results in making fresh quotations on urgent basis. 1
ii) External Factors Responsible for Organisational Problem: The Purchase Routine Selection
marketers placed by the organisation in the market should act as the
external fact-informer, i.e., the performance of the product in the ±
Post Purchase Evaluation
market, the needed improvements to be immediately incorporated is
to be conveyed to the organisation along with the information of Figure 4,6: Industrial Buying
competitive products. This will act as an external stimulant for the Decision Process
company to make suitable purchases to remain competitive.
2) General Need Description: After understanding the problem, the next step is to estimate the quantity and
quality of the product required to solve the particular problem or fulfil the need. However, the
organisational buyers unlike common consumers will be constrained to budget considerations, cost-benefit
evaluations, set profit goals and expense quotas.
3) Product Specification: In this particular stage, the technical and other value related specifications of the
product are analysed. These specifications should match with the organisational requirements. The suppliers
may be offering products having wider applications but at an additional cost. The value analysis helps to
review product specifications and actual requirements to eliminate the waste.
4) Supplier Search: The next stage of organisational buying involves finding the suitable vendors. The
organisational buyers screen the available vendors or suppliers on the basis of their products’ quality and
performance. Generally, reliability, market reputation and fiiiancial status of the vendors are’considered. Some
vendors are dropped from consideration list due to their inability to supply at stipulated time or due to poor
brand reputation. The qualified vendors finally make the approved list, from which final suppliers are selected.
5) Proposal Solicitation: At this stage, the suppliers are requested to submit their quotations. This involves
using catalogues or sales representatives by the suppliers to communicate their quotations. In case of complex
and costly items, a written proposal may be requested fronj the vendors and a comparative analysis may be
made to finalise the most appropriate vendor. The proposal requested from vendors should incorporate i
marketing as well as technical information. The oral presentations can only be fruitful, if the vendor is able to i
win the confidence of the organisational buyer through demonstrating its capabilities and potential.

r i ;;
Consumer Behaviour (Unit 4)' 123

6) Supplier Selection: In this stage, different proposals are examined on the grounds of their relevance. After
careful analysis of different vendor proposals, the buying centre is ready to select the vendor for
organisational buying. It is generally done with the preparation of list of required vendor attributes and their
relevance. Some of the attributes are:
i) Nature of technical support services,
ii) Approach and quickness of delivery,
iii) Nature of handling customer needs,
iv) Quality of products provided,
v) Reputation in the market,
vi) Price of the products provided, and
vii) Credit facility.
At this stage, the vendor analysis is not restricted to technical aspect but reliability, punctuality, in-time
delivery, price and credit offers, etc., are also considered.
7) Purchase Routine Selection: At this stage, the organisational buyers put an order to the selected vendor
including the terms and conditions of the purchase and mode of payment. The vendor receives the order and
dispatches the product as soon as possible. After receiving and inspecting the product, the buying centre
makes the final payment. Status reports are prepared for every transaction to know the time consumed in the
entire process. In case, where a successful transaction takes place, companies generally follow a re-order
policy for a specific period of time.
8) Post-purchase Evaluation: This is the last stage of organisational buying process. An evaluation sheet is
prepared by the buyers, based on price, quality, delivery schedule, after-sale service, etc. Overall rating is
given after periodic consultation with various departments. This also helps to arrive at the decision for
continuation with the vendor or to search for another one. The evaluation sheet is also shared with vendors
to give them an opportunity to improve.

43.7. Comparison between Organisational Buying Behaviour & Consumer Buying Behaviour
The difference between consumer buying behaviour and organisational buying behaviour is illustrated in the
table below:
Organisational Buyer Consumer Buyer

buyer.__
1) Personal consumption is not the motive of this kind of Individual or household consumption is the motive of
_
this kind of buyer.
2) User of the product is not involved in buying. Final user generally buys the product.
3) A group of people is involved in making buying The buying decision is limited to consumer.
decisions.
4) The buying decision is made only after in-depth The buying decision is made on the basis of brand
analysis of product specifications by an expert reputation or recommendation of a close person. Product
committee. specifications are rarely considered.
5)
_ __
It is never under impulse; evaluation of alternatives is The buying decision is made on need based impulse.

6)
mandatory.

__
There is no place for emotions, the decisions are
always rational. buying.
_
Occasionally, emotions play very important role in

7) Generally, it, prolongs due to extensive evaluation of

different aspects. _ buyer. _
Quick decision-making is the key feature of consumer

8) Due to interdependency, the relationship between The buyer-seller relationship is generally one time or for
buyer and seller lasts for long. __ limited time. Customer is free to go to other sellers.
9) Buying decision is made after negotiations,
_ __
Generally, cash or credit/debit cards are used in such

_ __
competitive bidding and other financial provisions. buying decisions, on the list price.
10)
directly from the producers. __
The organisational buyer frequently buys products The buyer does not buy products directly from the
producers.
11)
_
The organisational products are complex and' costly,
hence high' risks are involved.
Consumer goods are cheaper and hence low risks are
involved.
 i
;ÿÿ

124 - MBA First Semester (Basics of Marketing) SPPU

12) Number of users is limited but the quantity consumed The number of users is large but they use small quantity.
by them is large. _
13) There are few buyers and they are located in limited area of The large number of buyers are scattered in the total
industrial belt. population.
14) The product use is complex and sometimes requires proper The product use is simple.
training before use. _
15) Demand of other products and services generate the demand Consumers’ needs and requirements determine the demand.
for organisational products. It may vary as it is inelastic in This demand is static over time, independent of other demand
short-run. The price remains stationary for a short time. and price elastic in nature.
16) The number of buyers is limited, hence personal selling is The sale is promoted through advertisements.
needed.

4.4. MOMENT OF TRUTH

4.4.1. Introduction
The service research has a long custom to recoginse the service encounter as a critical element for the
comprehensive success of the service organisation. Service encounter is an interpersonal encounter between the
representative of an organisation and the customer. From time-to-time this encounter is called as ‘moment of
truth’.
[

In marketing, the interaction between a brand and a customer which provides an opportunity to the customer to
develop a certain view point about the brand is termed as Moments of Truth (MOT). They are quite vital as
through these encounters a brand can generate feeling of delight and interest within the potential customers or
can result in total lack in interest.

$ r
((<ÿ» L

Stimulus First Moment of Second Moment of

truth (Shelf) truth (Experience)
Figure 4.7: Traditional Step Mental Model of Decision-making

Source: Google Shopper Sciences Research, 2011

In the views of Procter & Gamble, there is a lot of significance of initial seven seconds once the customer faces
the store shelf. Thus the “First Moment of Truth” (FMOT) is the shelf decision moment. “Second Moment of
Truth” (SMOT) arises when the consumption of the product or brand experiences takes place. Lafley, the CEO
of Procter & Gamble states that it is a new problem for brands to win these ‘moments of truth’. The moment the r
customer decides about the purchasing of a certain brand or the other at the store shelf in the first moment.

The consumption of the product by the customer resulting iii satisfaction or dissatisfaction is the second
moment. In present times, customers have a lot of knowledge related to the product under consideration during
the stimulus period due to presence of Smartphones. They have their first product expefifence on a digital
platform. A lot of information .HOout the products and brands is being gathered by majority of the customers
through internet before the actual offline purchase. X K . i,

Consumer behaviour is being modified by the digital technologies and these technologies, also help the
development of information cycle that is trustworthy and consumer-governed. Before making any decision
related to buying the product, the customers having digital connectivity look proactively fornthe brand and r
market information. A new “Moment of Truth” (MOT) is being introduced by this interaction between the
customers and brands which cannot be thought of earlier.

i
 ! -

Consumer Behaviour (Unit 4) 125

N,.

G
Stimulus ZMOT First Moment of Second Moment of
truth (Shelf) , truth (Experience)

Which becomes the

next person’s ZMOT
Figure 4.8: The New Mental Model of Decision-making Process

Source: Google Shopper Sciences Research, 2011

4.4.2. Zero Moment of Truth (ZMOT): Moderating Effects on Consumer Behaviour

Due to developing digital potentials, there is a change in the behaviour of consumers. The online
recommendations are gaining more significance in contrast to the brand assurance given by the marketers.
Customers are looking for the information about the brands provided by the peers and users (feedback, ratings,
and so on). This information is presented to the potential customers when a customer share his experience
online with the help of one to one interaction, suggestions or results obtained through online searches. This
moment is known a Zero Moment of Truth (ZMOT).

This phenomenon occurs when the customer faces a stimulus and in that moment he/she reaches out to a tablet,
laptop, etc., in order to obtain the authentic third party information available online for the product sought by
him. IRI Group was the first to use this term. The book titled “Winning the Zero Moment of Truth” published
by Google (2012), made this term popular. The experiences shared by the brand users online generate both
favourable and unfavourable moment of truths. These reviews are commonly used by the search engine results
in an indexed form. The customer searching for product related information seeks these search results which are
known as initial moment of truth (ZMOT).
The main features of ZMOT are stated below:
1) ZMOT occur through online platforms (such as search engines),
2) ZMOT are real time based moments and can happen at any moment of the day. In fact they usually take
place on-the-go with the help of Smartphones depending upon when the customers experience some sort of
stimulus.
3) The interaction takes place in different areas and multiple opinions can be gathered from friends, experts,
brands, strangers who strive for buyers’ attention.

The main objective behind the introduction of ZMOT is to have a balance between the online customer
experience and issues at the instance when some sort of information about a certain product or services is
searched by the person. This is the time when the customer goes through the feedback and more inputs related
to the product comes in knowledge before going to the next level. All the online feedbacks cannot be managed
by the companies; yet, their online repute can be managed positively by interacting with the customer and
improving product quality which will earn them some favorable feedbacks, which will motivate the customers
to move to the next purchase levels.

4.4.3. ZMOT Techniques for Marketers

Following techniques can be used for generating a favourable ZMOT:
1) Build a Single View of the Consumer: Having the single consumer outlook in all the different channels, social
media platforms and point of sales can help in' managing the ZMOT. In the absence of having the capability to
recognise the customer differently, the organisations will keep having the flaw of offering one product or service
2) Model for the Diverse Range of Customers: This will ultimately result in losing the customer focus in the
digital world.
 . .ÿÿ-iv..--/:ÿaaaB-'ar93£:-

126 MBA First Semester (Basics of Marketing) SPPU

3) Keep Pace with the always-on Consumer: Drastically changing the models of marketing operations to an
almost real-time involvement process which facilitates accurate customer knowledge in contrast to relying
on market operations based on ATL-led methods and agency support. Listen to ..the customers and be
actively involved in the social media discussion about the brand.
4) Speak the Language of the Consumer: Try to create ah appealing story which Can display the customer
experience rather than focusing on the individual brand campaign. In most of the cases, a lot of resources
are wasted by the organisation in order to re-gain the current customers for the extension in the brand by
using a trivial campaign plan. As each penny counts, the individual campaigns should be downsized so that
a more active, storytelling plans can be formed.
5) Make sure that First and Second Moments Live up to your Promises: Make sure every consumer is a
good reference for the brand. One must keep in mind that although zero moment is crucial but so are the
first and second moment experiences. This practice is important as the product or service experience of one
customer is the ZMOT of the next.

4.5. EXERCISE
4.5.1. Very Short Answer Type Questions
1) Define consumer behaviour.
2) List a few characteristics of consumer behaviour.
3) What is complex buying behaviour?
4) State the social motives of consumer buying.
5) What do you understand by problem recognition?
6) Present the factors affecting the extent of evaluation of alternatives.
7) Give the marketing implications of purchase decision.
8) State two objectives of organisational buying behaviour.
9) What is modified rebuy?

i
4.5.2. Short Answer Type Questions
1) State the buying roles of consumers.
2) Highlight a few reasons for studying consumer behaviour.
3) Give the types of problems recognition.
4) Explain the origin of information for purchase search.
5) Illustrate the marketing implications of alternatives evaluation with the help of an example.
6) Describe the consumer decision rules in brief.
7) Enumerate the marketing implications of post purchase processes.
8) State the zero moment of truth techniques for marketers

4.5.3. Long Answer Type Questions

1) Discuss the meaning and importance of consumer behaviour.
2) Illustrate a comparison between organisational buying behaviour and consumer buying behaviour.
3) Give a detailed description on the five steps consumer buyer decision process.
4) Explain the factors affecting consumer behaviour.
5) Discuss the conditions resulting in problem recognition. Also state the marketing implications [Link] recognition.
6) What is information search? Discuss the factors affecting external search.
7) Write a detailed note on evaluation of alternatives.
8) Explain purchase decision with the help of a diagram. Also state the situational factors affecting the purchase decision.
9) What is cognitive dissonance and how it can be managed?
10) Discuss organisational buying behaviour and organisational buying situations.
11) Describe the factors influencing organisational buyer behaviour in detail.
12) What is moment of truth? Also state the zero moment of truth.
Marketing Mix (Unit 5) I 127

UNITS Marketing Mix

. MARKETING MIX
5.1.1. Origin of Marketing Mix
The term ‘Marketing Mix’ was introduced by Neil H. Borden but he derived it from his associate James
Culliton, who in 1948 determined marketing manager’s role as a “mixer of ingredients”. Following his
associate, Neil H. Borden wrote an article “The Concept of Marketing Mix” and further started teaching the
term marketing mix.

The concept of ‘mixer of ingredients’ was based on the principle that all the business functions and marketing
efforts are ‘ingredients’ and a suitable blend of them is required for improving the business. Neil H. Borden
introduced the concept of ‘marketing mix’ in 1950’s and in the beginning it was understood by various means
of collaboration. When Borden gave the concept of marketing mix, it included twelve elements in it, viz-,
planning of product, pricing, branding, channels of distribution, advertising, personal selling, promotions,
packaging, -display, servicing, physical handling, and analysis and finding of facts.

These elements were distributed into two groups on the recommendation of Frey. The first group was named as
‘offering’ and it included product, packaging, service, price, and brand. Whereas the other group was named as
‘methods and tools’ and it consisted of distribution channel, personal selling, publicity, advertising, and sales
promotion. Approximately at the same time, various researchers also introduced new theories based on similar
concept. For example, Lazer and Kelly introduced the concept of marketing mix which involved three
constituents, i.e., the distribution mix, the communication mix, and the goods and services mix.

Yet, the McCarthy’s concept of marketing mix is still the most popular among all and it consists of four Ps,
i.e., product, price, promotion, and place. It is derived from the marketing mix concept given by Borden.
Various theoretical and practical researches that have emphasised on different aspects of marketing mix were
based on this classification of marketing mix. Since then, the number of elements of marketing mix is
increasing. Judd introduced the Fifth P, i.e., people and Booms and Bitner further added three more ‘P’s, i.e.,
participants, process, and physical evidence.

Philip Kotler, a well-known marketing theorist also added two more elements (‘P’s) in marketing mix, i.e.,
public opinion and political power. Another important element added to the concept of marketing mix is
personalisation, which was added by Goldsmith. Since last few years it has been observed that no ‘P’ is further
added to the concept of marketing mix by any well-known scholar. One of the reasons behind this may be the
criticism that marketing mix has faced in recent times. The reason behind the criticism of this concept is its
failure in developing sound customer relationship, acknowledging customer expectations, and recognising
customers appropriately.

5.1.2. Concept of Marketing Mix

Marketing mix is a very basic and important concept of marketing management. It helps an organisation in
_
increasing sales by attracting consumers towards their products and services. So, every organisation must focus
on the four elements of marketing, i.e., product, price, promotion, and place (distribution channel), in order to
conduct the business more effectively. Hence, a good blend of these four elements (4 Ps) of marketing is
referred to as marketing mix. Marketing mix is considered to be the heart of marketing function. A marketing
manager uses these four components of marketing mix in a sensible manner in order to achieve marketing
goals, such as, increasing sales and profit.
 __ _! aasaatt •. .t;;saaaia2SB3i5a&a»tt

r
128 MBA First Semester (Basics of Marketing) SPPU
: 'o't <

According to Borden, “The marketing mix refers to the appointment of efforts, the combination, the designing
and the integration of the elements of marketing into a programme or mix which, on the basis of an appraisal of
the market forces will best achieve an enterprise at a given time”.
According to Stanton, “Marketing mix is the term used to describe the combination of the four inputs which
constitute the core of a company’s marketing system - the product, the price structure, the promotional
activities and the distribution system”.
The elements of marketing mix (4Ps) are used as marketing tools to promote and achieve the organisational goals.
These elements are controllable variables which should be managed cautiously to fulfil the needs of defined target
group. Marketing mix is considered as a core concept or a strategy to implement marketing operations. These
elements are mixture of numerous factors, which are interconnected and interdependent on each other.

5.1.3. Characteristics of Marketing Mix

Characteristics of marketing mix are as follows:
1) Core of Marketing Process: In marketing process, marketing mix is the key component. Marketing mix
influences important decisions related to different elements of the mix. Consequently, effective and
efficient use of marketing mix elements brings out the best outcomes for the success of the organisation.
2) Marketing Mix Revised Constantly to Meet Changing Requirements: The changing market conditions
and trends affect the marketing mix. Hence, it is very important for marketing managers to persistently
review the market and apply necessary changes in the marketing mix.
3) External Environment Influences Marketing Mix: Changes are inevitable in the external environment
and customers are the most fluctuating variable of the environment. The tastes and preferences, brand
loyalty and purchasing power affect the marketing mix extensively.
4) Internal Environment Influences Marketing Mix: The internal changes such as technological advances,
new product lines, or different production scale affect the organisation. These changes also directly impact
the marketing mix.

5.1.4. Elements of Marketing Mix

All the decisions related to the product, the pricing policy, the promotion plans, and the distribution strategy,
constitute to form ‘marketing mix’. These four elements of marketing mix are discussed below:
1) Product: Product is the simplest element of marketing mix. This element accompanies the attributes, benefits
and competitive advantage which it presents to its customers. The main aim of a product is customer
satisfaction. Before marketing the product, marketer must have a clear understanding of his product.
2) Price: The next element of marketing mix is price. Price is the money value of a product or service paid by
the customer. It is the most crucial element as it determines the sales volume and profit of the organisation.
Variations in price largely affect the price elasticity and marketing strategy of a product. It also influences
the demand and supply of products in the market. The price determination should be in accordance with the
other elements of marketing mix.
3) Place (Distribution): Place is the third vital element of marketing mix. Place is defined as a state of
providing the right product, in the right place, at the right time for the consumers. For this purpose,
middlemen are appointed who are also known as ‘channels of distribution’. These channels consist of
wholesalers, retailers and manufacturers. The entire process involves an effective distribution system which
assists logistical, transactional, and facilitating services.
4) Promotion: Promotion is the last element of the marketing mix. It is the technique tp, communicate and
inform customers about the product. These techniques may include advertising, sales promotion, personal
selling, direct marketing, public relations, word-of-mouth communication, etc. Promotion is the ability of
marketing managers to attract customers towards the offered product. With the increasing importance of
service products offered by different service companies, the* existing marketing mix has been extended. The
additional elements of marketing mix include people (employees involved in the service delivery system),
process (method of transaction, flow of information, and delivery of services), and physical evidence (the
physical environment associated with the service and customer). These elements combme' with the basic
4Ps and constitute the 7Ps of the services marketing mix.
Marketing Mix (Unit 5) 129

Extended Ps of Marketing Mix

There are three extended Ps of marketing mix, which is as follows:
1) People: In services marketing mix, people is the first additional element. ‘Iÿeaple’ refers to the employees
providing service delivery and also play the role of end users or final consurpfrs, Many times, customers
are the key component of the service delivery process. For example, educational service is not possible
without the students. Hence, customers along with employees are crucial in the service delivery.
2) Process: Another element of extended marketing mix is process. It is an important marketing function and
part of value chain in comparison with other functions. The marketer develops only those processes which
add value to the services delivered having no cost associated issues and are beneficial for both the
customers and the service organisation.
3) Physical Evidence: Physical evidence of service marketing mix can be of different types and appearances.
The evidence of physical aspects comprise of service delivery location like the aesthetics, design and
functionality of the particular place. The company portrays all the physical attributes of a place to the
customer. These attributes involve the exteriors, interiors, all tangible things such as furniture, vehicles,
machinery, service personnel, signboards, receipts, etc.

5.1.5. 7Ps of Marketing Mix

In case of services, some extra elements are added to the marketing mix in order to fulfil exceptional
requirements of service marketing. The three more ‘P’s, that the marketing mix for services involve are,
physical evidence, process, and people.
7Ps of Marketing Mix

Product
Pricing
Place
Promotion
People
Process

Physical Evidence
5.I.5.I. Product
A product is the item that is developed and refined for sale in the market. It aims to meet the customers’ needs and
wants. The concept of product can be categorised into two, i.e., narrow concept and wide concept. In its narrow
concept, a product is a combination of physical or chemical characteristics which has some utilities. It is not just a
non-living object or a physical substance. A product also has other functions than its utility like satisfying customer
needs and wants, e.g., fan, table, pen, cooler, chair, etc.
In its wider concept, a product having a variety of colours, designs, packaging and brand is said to be a different
product. For example, if a shampoo is made available in three different variants and smells, then these are three
products, as they are fulfilling needs of customers with varied choices. Hence, product is defined as a complete
package of benefits received by a consumer.

According to George Fisk, “Product is a cluster of psychological satisfactions”.

According W. Alderson, “A product is a bundle of utilities consisting of various features and accompanying
services”.
According to Rustam S. Davar, “A product may be regarded from the marketing point of view as a bundle of
benefits which are being offered to consumer”.
According to Philip Kotler, “A product is a bundle of physical services and symbolic particulars expected to
yield satisfactions or benefits to the buyer”.
In case of services, three levels are identified by the marketers in order to develop the product element of marketing
mix. The three levels are core level, tangible level, and augmented level. The objective of core level is to fulfil the
necessary requirements of customer, whereas the looks and presentation of product is managed in the tangible level.
Lastly, the augmented level deals with the ancillary services that are provided in addition to the basic services.
130 MBA First Semester (Basics of Marketing) SPPU

The three levels, as explained above, can also be adjusted into two levels; the first level is the core level that
fulfils the basic requirements,- whereas second level consists of both tangibleand augmented level of services.
The actual service that isijgenefally offered to a customer is considered;:tb <be the core level, while in the
secondary level the delivery-!of j service is the prime concern. For Example, the primary objective or core
service of the restaurant is*'to-serve best quality food to its customers, whereas' the secondary level of service
aims to provide the customers with good environment. Differentiating one product from another is easy in case
of products while in case of services it is not so easy.

For example, it is tough for a customer to distinguish between the services offered by two banks that provide
same interest rates and schemes. That is why in case of services; focus is always on creating advanced services
and adding new and creative features to them on regular basis. It is done in order to handle the fierce
competition by acquiring new customers and by retaining existing customers as well.

5.I.5.2. Price
The only component of marketing mix that generates returns is called price, however, others only generate
costs. Price can be easily altered, whereas, other product aspects like channel obligations and product attributes
cannot be changed so easily. Therefore, price is the most flexible component of the marketing mix. For a
manufacturer, price is that amount of money (or in case of barter trade, goods or services) which he will receive
from the buyer for his product. For a customer, price is something he sacrifices for owning the product or
service and therefore, it displays his perception for the product value. It can conceptually be defined as;
Quantity of money received
by theseller
Price =
Quantity of goods and servicesrendered/
received by the buyer
As per this equation, the numerator as well as the denominator is crucial while taking price decisions. A
product’s price is based on the seller’s decision regarding its monetary worth to the buyer. The method used to
convert the worth of a product or a unit of service into quantitative form (i.e., rupees and paisa) at a given time
for customers is called ‘pricing’.

According to Prof. K.C. Kite, “Pricing is a managerial task that involves establishing pricing objectives,
identifying the factors governing the price, ascertaining their relevance and significance, determining the
product value in monetary terms and formulation of price policies and the strategies, implementing them and
controlling them for the best results”.

Pricing can, therefore, be defined as the task of deciding the monetary value of an idea, a product or a service
by the marketing manager before he sells it to his target customers. In particular, pricing is the process of
formulating objectives, deciding the flexibility that is available, devising strategies, setting prices, and
implementing and controlling the above elements. Pricing is one of the strongest marketing instruments that the
company possesses. Pricing decision is an important aspect of a marketing plan. Thus, marketers need to take
exact and premeditated pricing decisions.

Pricing of services is done in very different manner than that of pricing of products and there are various
reasons responsible for it. Services can be distinguished pn the basis of their price, i.e., higher price of service
indicates better quality of service. Besides pricing, , another important factor that is, considered while
distinguishing goods from services is the cost component. When comparing a service with a product, it can be
seen that the fixed costs of services are higher and the, variable costs of services are lower. For example, the
cost a hotel incurs in hosting its guests is almost negligible in comparison to the cost for maintaining and
establishing a hotel, i.e., the fixed cost of a hotel is very high.
i
Hence, in case of service provider, the maximum portidri of the price paid by the customer, is directed towards
covering the fixed cost. On the contrary, in case of products, maximum part of the price paid by the customer is
directed towards covering the variable cost. One more feature of service pricing is that the price of the same service
can be increased or decreased as per its demand in the market. The price of various seasonal goods also goes under
a change according to their demand, yet the dependency of price on demand is associated with services only.
 r

Marketing Mix (Unit 5) ,?;,n A'V 131

5.I.5.3. Place
Distribution channel is the route between producers and users through which goods are distributed. This route is
also known as Channel of Distribution or Trade Channel. In case of services, the distribution channel is
direct, since the services are intangible in nature. A distribution channel generally requires a buyer and a seller.
The buyer can either be an industrial consumer or the end customer. Other than the buyer and seller in the
marketing channel, various middlemen are also involved in the supply chain. Here, middlemen may be
distributors, wholesalers, retailers or dealers.

Broadly, a distribution channel involves the movement of goods and services from the manufacturer to the
ultimate consumer passing through various intermediaries. Therefore, the key actors in the distribution channel
are manufacturers, intermediaries and consumers.

According to American Marketing Association, “A channel of distribution or marketing channel is a

structure of intra-company organisation, units and intra-company agents and dealers, wholesalers and retailers
through which a commodity product or service is marketed”.

According to Philip Kotler, “Every producer seeks to link together the set of marketing intermediaries that
best fulfill the firm’s objectives. This set of marketing intermediaries is called the marketing channel (also trade
channel or channel of distribution)”.

According to William J Stanton, “A Channel of distribution for a product is the route taken by the title to the
goods as they move from the producer to the ultimate consumers or industrial user”.

According to E W Cundiff and R S Still, “Channel of distribution is a path traced in the direct or indirect
transfer of the title to a product as it moves from a producer to ultimate consumers or industrial users”.

Here ‘place’ refers to the location where services can be availed conveniently. The production and consumption
of services take place at the same point because they are inseparable in nature. Due to this inseparability, neither
the service providers can produce the service at a place where the cost of production is low nor can they sell
them at higher prices where the demand for service is high. Hence, either there will be no distribution channel
for marketing of services or there will be a small one.

For determining the place for service, following decisions must be considered:
1) The nearby environment and physical appearance of the place must be considered while selecting a place
for providing service.
2) The locality from where the service is to be provided is also a very essential factor. For example, banks are
trying to establish their ATM’s at such locations where customers feel its importance the most.
3) The intermediaries should be selected carefully in such a way that they can easily provide the services to
customers and can enhance the organisation’s operational efficiency. For example, decision of a mobile
company to give service to their customers either by opening their own service centres or by giving
contracts to other service providers.

5.I.5.4. Promotion
The process, through which consumers (or potential consumers) are attracted towards the products and services
of different producers or manufacturers, is called Promotion or Marketing Communication. This process
informs and reminds the potential consumers about the products and services of the manufacturers. It is also
used to request and persuade the consumers to buy these products and services. However, this promotion may
either be performed in the presence of the product, or even before its market introduction.

According to Philip Kotler, “Promotion compasses all the tools in the marketing mix whose major role is
persuasive communications”.

According to Stanton, “Promotion includes, advertising, personal selling, sales promotion and other selling
tools”.
132 MBA First Semester (Basics of Marketing) SPPU

Since services are of intangible nature, so a high level of risk factor is attacfyecl with the consumer of service as
compared to the consumer, ,of product. Service providers must focus onveljminating the risk factors that are -
attached to the service and this, can be done by ensuring effective communication with the customers.
-iiJ '.it
. . . •

For this, the company needs to promote the services through positive word-of-mouth publicity, offer a trial
period to customers for using services, create a good brand image, adopt appropriate advertising strategies, and
manage public relations efficiently. Service offers should be promoted along with the service providers because
the consumers cannot accurately measure the effectiveness of intangible services without knowing about the
service provider. !

Hence, the importance of promoting service provider is same as that of services. For example, consider a
customer visiting an amusement park or a restaurant, then he will rate the service on the basis of behaviour of
service provider and on the basis of gentry available at that time. Hence, it is very important for the service
provider to attract right mass and employing right personnel.

5.I.5.5. People
Many researchers, academicians, and business houses are paying attention to the growing field of HRM
(Human Resource Management). Study of HRM is essential at such places where manpower is required for
carrying out manufacturing processes, like in factories, etc., because this study helps in managing the labours or
workforce who are involved in doing repetitive and monotonous tasks. Since last few years, in most of the
growing economies, manufacturing sector has witnessed a decline while the service sector is contributing more
in the growth of the economies.

As services are growing day by day, so the theories and approaches developed for the marketing of
products are becoming less useful. 4P’s of marketing are considered to be one of the main concepts of
marketing. These 4P’s were sufficient to carry out business operations when the manufacturing sector was
the dominant sector, but nowadays this concept is not completely suitable because of the dominance of
service industry.

Hence, three extra P’s, i.e., people, process, and physical evidence are added to the original 4P’s. This is fairly
acceptable because successful delivery of services mostly depends upon the personnel delivering them. In the
field of service marketing mix, ‘people’ are referred to as both the service personnel as well as the customers,
because in some cases not only the service personnel but the customers are also essential for delivering the
r
service successfully.

For example, in the field of education, students (customers) should also cooperate with the teachers (service
personnel) in order to make it successful. Similarly, in many other service fields the cooperation of customer is
very important for availing the services. Services are mainly based on people, as employees and customers
share a direct relationship with each other. In service organisations, employees play a vital role in carrying out
marketing activities.

According to the theory of internal marketing, the employer must use marketing research, market segmentation,
and old-style marketing activities, such as, advertising, sales promotion, etc., in order to attract service !ÿ

personnel and make them perform in desired manner. These old-styled marketing strategies must be followed
internally. The main objective of internal marketing activities is to encourage the employees for providing best
service to customers. The basis of internal marketing is that the employees are treated as the first internal
market for the firm. ,v\. 1

5.I.5.6. Process
Process is an essential component of marketing mix of services and is also an important element of the value
chain; the other elements of value chain are production, marketing, after-sales service, etc. ‘Process’
contributes as a significant part of marketing objectives, then also less attention has been paid to it. The
processes, which add some value to the services without incurring much cost, benefit the organisation as well
as the customers. v • - ! A
Marketing Mix (Unit 5) 'wii'i A"- 133

Process refers to the manner in' which the activities are originally performed and tfti steps that are undertaken to
perform such activities. For last few years the study of ‘processes’ is being given th&diifc consideration, especially
in the field of computer programihing, manufacturing, engineering, etc. ‘Process*; :tids set up some innovative
improvements, such as, ‘lean production’ and ‘just-in-time’ in the field of production and manufacturing. In the
present times, the importance of process is getting recognition even in the service industries and also becoming
one of the core competencies of the service industries.

Performing transactions, delivering information, and offering a service in most suitable way to the customers as
well as to the company, is known as the process. Several disciplines such as decision theory, operations
management, computer programming, etc., define the term ‘process’ in a different way by using different words
but the basic concept behind it remains the same. All the disciplines believe that a process should comprise of
logical sub-processes that can be used for making the process more efficient.

5.I.5.7. Physical Evidence

Physical evidence of a service can be seen in various aspects of the service, such as, physical features of the
place where the service is to be delivered, usefulness, design, and environment of the location, etc. In other
words, everything that an organisation physically demonstrates to the customer is referred to as the physical
evidence. Physical evidence consists of physical atmosphere, interiors, and exterior of the outlet and all the
tangible items (e.g., furniture, machinery, equipment, stationery, signboards, vehicles, certificates,
communication equipment, service personnel, receipts, etc.)

Customers readily anticipate the quality of service on the basis of tangible signs which are provided by the
physical evidence. The tangible environment not only supports the service provider but also the service
consumer in the process of service delivery. Since services are intangible in nature, so before paying for them,
the customers usually assess the tangible signs, physical evidence, etc., for appraising the service and for
anticipating the level of satisfaction that they may derive during and after consuming the service.

Physical evidence is one of the constituents of marketing mix for services. It permits the customer to review his
decision regarding the company for one more time. For example, if a customer visits a restaurant he usually
expects cleanliness and pleasant ambience. Similarly, if people travel in first class of an aeroplane then they
expect extra space, comfort, and facilities.

5.1.6. Reasons for Additional Ps for Services

Marketing mix is not derived from any philosophy, but it is developed to assist the marketing managers by
dividing their task of decision-making in several small decisions. The general 4Ps (product, price, place, and
promotion) involved in marketing mix are determined as per the needs of the manufacturing sector. These 4Ps
were not sufficient for taking the decisions related to the services.

Some problems that minimised the effectiveness of 4Ps are as follows:

1) The main reason behind the failure of 4Ps in case of services is that none of them gave insight on the
intangible elements of services. The product element of marketing mix is suitable for the products of
tangible nature, but is not appropriate in case of services. In the same way, the place element of traditional
marketing mix might not be suitable for service industries.
2) Physical goods are generally produced away from the consumer, so there is no direct contribution of
producer in the promotion activities of goods. This is why the promotion element of standard 4Ps fails to
execute the promotion of services because in service industries promotion occurs at the place of
consumption of service and is done by the producer himself. Promotion of service is directly dependent on
the delivery of service, e.g., hairdresser, bank, etc.
3) Price component of 4Ps ignores the reality that most of the services are created and provided by the
government, non-profit organisations, etc., without charging any price from the customer.

Service marketers, believe that the traditional marketing , mix is not sufficient for marketing of services. This
leads to several efforts for redefining the mix by adding some more elements in it. Booms and Bitner added
some useful elements in traditional marketing mix to make it more appropriate for service sector.
 .-i-sws »;s*

134 MBA First Semester (Basics of Marketing) SPPU

It must be noticed that this theory is not an outcome of any experiment, bUi from the study of several
decisions taken by serviceÿpefsonnel in order to satisfy the requirements of customer. Hence, the importance of
additional components, i.e., ‘people’ and ‘process’ have also been acknowledged.
i;

Physical evidence, the 7*IV had also been introduced by Booms and Bitner. Recently, professor Lovelock has
added ‘productivity and quality’ as 8th P. Improvement in the productivity of fundamental services in an
organisation is very essential for effective cost management. But, simultaneously quality of the service in the
eyes of the customers should also be maintained in order to distinguish the service from the services of other
providers.

Long term durability of the services depends upon the customer’s perception about the quality of the service. It
is also found in research that an effective production process helps an organisation in delivering better quality
and standard services to their customers.

5.1.7. Strengths and Weaknesses of 4Ps and 7Ps

4Ps 7Ps ::

Strengths 1) Very simple and easy to understand. 1) It is a broader concept to understand.

2) It can be easily remembered. 2) It is described in detail.
3) It is a good educational tool, specifically for 3) It is more advanced concept and is
understanding the basics of marketing. used for in-depth study of the subject.
4) 4Ps are capable of adjusting to different situations. 4) This concept also consists of people.
5) Structure of 4Ps is beneficial because it is 5) It is a broad concept.
conceptual in nature. 6) It depicts the theory of signal
6) 4Ps are easily executable. marketing.
7) It is a brief concept and hence it is helpful for 7) It is a standardised model.
marketers.
Weaknesses 1) Being a simple and concise concept it cannot 1) 7Ps are complex in nature.
analyse the marketing function in detail. 2) 3 additional Ps are needed to be
2) People, physical evidence, and process are not managed.
considered in it. 3) More components cannot be added in
3) It is rigid in nature and the coordination among it. r
variables is not present.
I:
5.1.8. Importance of Marketing Mix
The product, price, place and promotion combines to form the marketing-mix. Marketing manager is
responsible for the designing of effective marketing mix strategy. The importance of marketing mix can be
described with the help of following points:
1) Linking Channel: Marketing mix acts as a linkage between customers and organisation. It emphasises
towards the fulfilment of customer needs and wants. Hence, it is a ‘customer-oriented marketing’.
2) Improved Sales: The main aim of marketing mix is to design a perfect combination of product, price, place
and promotion. This helps to satisfy customers and as an outcome the organisation experiences high sales
and profit.
:
3) Balanced Relation between other Elements of Marketing: A balanced relation between different
marketing components can be achieved through marketing mix. For example, pricing of a product is
related to its attributes, packaging, and technology involved. Similarly, the product type would determine
the type of media used for its advertisement. The nature and utility of a product decides the distribution
channel.
4) Helpful in Fulfilling the Needs of Customers: The need of different types of customers is assisted by
marketing mix. The marketing mix design and strategies largely depend upon the purchasing power and
preferences of the customers. With the changing customer
requirements, new and innovative marketing-mix
strategies are adopted.
Marketing Mix (Unit 5) AO 135

5.2. PRODUCT LIFE CYCLE (PLC)

'03q' ,.s.l ,/
5.2.1. Concept of Product Life Cycle
All the products have a particular duration of life, similar to human beings. As-hnrrthn has different stages of
life (like birth, growth, aging, and death), product also passes through several definite stages, which can be
easily identified by marketers. Right from the time of concept generation, during product development, and
upto the time of product launch, the product is said to be in its pre-initial stage. The life of the product starts
with its introduction into the market. It then experiences a rapid expansion in its market. This stage is followed
by steady growth of the product resulting in its maturity. Subsequently, there comes a stage, when the market
for the product decays and finally its life ends. , .
Product life cycle can be defined as “the change in sales volume of a specific product offered by an
organisation, over the expected life of the product.”

According to Phillip Kotler, “The product life-cycle is an attempt to recognise distinct stage in the sales
history of the product”.

According to Arch Patton, “The life-cycle of a product has many points of similarity with the human life-
cycle; the product is bom, grows lustily, attains dynamic maturity then enters its declining year”.

According to William J. Stanton, “From its birth to death, a product exists in different stages and in different
competitive environments. Its adjustment to these environments determines to great degree just successful its
life will be”.
The concept of product life cycle (PLC) is used by marketers to design a series of strategies for dealing with
each and every stage, the product passes through. For a product, market conditions change with the change of
its position in the PLC, therefore, it must be managed through effective strategies.

5.2.2. Characteristics of Product Life Cycle

The pattern of demand associated with a product for a certain time period is known as its life cycle. The
characteristics of PLC are discussed below:
1) Every product not necessarily undergoes each and every stage. Most of the products even fail to go beyond
the introduction stage.
2) Each product spends some time in a particular stage of PLC. This time period may vary from one product to
another.
3) There are some products with very small span of life and they complete entire cycle in very less number of
days.
4) If the product is repositioned, it may get a new product life cycle. Repositioning refers to altering the image
of the product or perceived utility of the product.
5) In a product life cycle, a product goes through different stages starting with introduction and followed by
growth, maturity, decline and then ultimately deletion of the; product. Product(s) pass through all these
stages at varying speed.
6) The patterns in which revenues and profits are earned from the product are predictable depending upon the
stage in the life cycle of the product. Generally, a product earns profit during its growth stage, then it
becomes constarit during maturity stage, and finally starts coming down as the cycle progresses to the stage
of deletion.
7) The per unit profits earned by a product also vary from one stage to another in its life cycle.
8) Different risk factors and opportunities arise in different stages of the product life cycle, which in turn
requires different strategies for dealing with them.
9) Emphasis is paid on different functional areas during different stages, e.g., development stage requires the
attention of R&D whereas the decline stage stresses'upon how to control costs.
10) The product life cycle may be widened by expldring new utilities of the product or by discovering new
consumers or by convincing the existing consumers to increase their usage.
 .iVijFsnaasi;..?-

136 MBA First Semester (Basics of Marketing) SPPU

5.2.3. Types of PLC 7

Traditional life cycle of a product is depicted in figure 1.8 with the help of sales and profit curves. It should be
noted that every product does not have such type of product life cycle (PLC).iThe period (stage) of the curve as
well as the course of the curve may affect the PLC. In figure 1.8 given below, life cycle of some of the product
is shown. .ut> U
Sales
Traditional Classic

Time Time i

;ashion Fad Extended Fashion

Fad

Time Time :

Season or Fashion Revival

Time Time
Figure 1.8: Types of PLC

1) Traditional PLC Curve: In such type of curve, the period or the stage of the product is clearly seen. In
other words, the curve clearly depicts the introduction, growth, maturity, and decline stages of the product.
2) Classic PLC Curve: In classic PLC curve, firstly, the curve shows a tremendous increase in its sales and
then a plateau like shape is formed which shows that the sales volume has stopped increasing due to the
decrease in the number of new customers or new channels of sales.
3) Fashion Fad PLC Curve: There are certain products whose speed of gaining and losing popularity in
the market is almost same. Such products forms fashion fad PLC curves. Some of the examples of such
product can be toys and garments on the theme of Vodafone’s zoozoos, official jerseys during Cricket
World Cup, etc., in which the products suddenly gain too much popularity but it goes down with the
same pace as well.
4) Extended Fashion Fad PLC Curve: This is also similar to the above fashion fad curve; the only
difference is that here the sales growth does not decline completely. Instead it becomes stable at a level
comparatively lower than the initial phase of success. For example, the trend of joining yoga classes.
5) Seasonal or Fashion PLC Curve: As the name suggests, products falling in the category of seasonal or
fashion PLC curve have a particular season in which their sales level increases; and as soon as the season
ends its sales curve also drops down. The best example for such product are school uniforms, whose
demand increases during the beginning of the new session, after that it falls sturdily, and it again rises with
the start of winter season.
’’ •
f Vi!
6) Revival PLC Curve: Such curve is associated with old-fashioned products which had completely lost its
popularity but suddenly its popularity seems to have revived. For example, the Barbie dolls show a revival
by launching new version of Barbie dolls in the market. Other examples can be of cigar, which showed a
revival during 1990s. , ,,

The above mentioned PLC curves are examples of some of the products which can possibly be
differentiated and illustrated here. There is no surety whether the products will go through all the stages of
PLC. Due to the unpredictable nature of the market and products, it is very difficult to’determine product
life cycle in advance.

JL_
Marketing Mix (Unit 5) v;, ->aiH 137

5.2.4. Relevance of Product Life Cycle 3Jt

According to the terminologies' <b(f marketing, the stages of PLC are introductioftyÿlrowth, maturity, and decline.
These stages reflect the changing patterns of sales and market share of a product fiVer a period of time. It has
been suggested through the idea of product life cycle that all the products, regardless of their success in market,
ultimately fades away because of changing taste of the consumers as well as technological staleness.
1) Planning: One of the important benefits of PLC is that it supports the planning process of the business
organisation. It helps the organisation while planning long-term marketing strategies, especially in case of
stable markets and economies. Organisations realising that the demand of the product usually do not remain
the same helps them to make arrangements for the anticipated fall in their product’s sale. It gives a better
idea regarding allocation of funds for marketing purpose, keeping in consideration the current product life
cycle phase of the product. As the organisation fully understands that irrespective of how successful a
product is, it may require a substitute at some or the other point; it may call for making a plan for
developing and innovating the product.
2) Proactive Approach: It helps the organisation to plan out practical strategies for increasing sales and gains
during every phase, instead of just waiting and watching for the decline of the product. For example, in
case the organisation is able to make out that the product has started experiencing downfall; its endeavour
can be on removing the unprofitable delivery channels for bringing down the expenditure as the sales and
revenue are constantly decreasing.
3) Helps in Producing Products with Superior Quality and More Efficiency: Depending on the stage of PLC
one can easily attempt to identify the reasons behind the stagnation, downfall, etc., and can make the changes
accordingly to revive the product. For example, the success of Parle Bottling for introducing their mango
juice ‘Frooti’. The novel idea of tetra-pack was actually driver for its magical success; making it easy to drink,
easy to pack, and easy to deliver; and rendering it better looks than others mango drinks in the market.
4) Helps in Forecasting: PLC also helps the organisation in forecasting, which further helps them to explore
the complex market. It provides insight to the planning authorities during the process of forecasting about
the future of the product on a macro level (broader level). It also helps the organisation to take timely steps
while implementing strategies against competitors. When the PLC model is combined with the actual sales
data, it can serve as a medium to understand the sales pattern in the past and can help to predict the same of
the future. With the help of PLC model, the past events can be understood with an extrapolatory and
interpretive approach. This helps in effective planning and decision-making based on past events.
5) Ongoing Strategy: A PLC model can serve as an instrument that can validate the ongoing strategy as it has
the ability to show the ongoing market trends, technological advancements, and customer needs and
problems. Organisations always need to be prepared for dealing with the new and old competitors present in
the market; for this they need to strengthen their product’s positioning in market so that they can gain
competitive advantage over their rivals. This can be implemented with the help of PLC.
6) Helps in Eliminating Defeated Products: It is a reality that each and every product fades eventually and is
unable to bring back any gain; such products prove to be a burden for the organisation. The PLC model
helps in eliminating such products by determining the appropriate time for their elimination. Time, sales
figures, and PLC stages are used as factors for determining.

5.2.5. Stages of Product Life Cycle

Generally, product life cycle graph is a bell-shaped curve. This curve consists of following four stages:
1) Introduction: Introduction stage is the stage at which product is introduced into the market. This stage is
characterised by-presence of slow sales growth. There is no scope of profit generation, as it takes time to balance
the product launch expenses with its sales. Among the different stages of the PLC, the introduction stage is the
most costly stage, as it consumes a large amount of investment. Research and development, market testing, initial
promotion, etc., are the areas where a huge investment is needed, particularly, in a competitive market.
2) Growth: This is the stage wherein the product gains quick acceptance in the market and starts generating
profit. The rapid growth in sales and profit is the key feature of this growth stage. As the organisation
attains economy of scale in the production, it is abletp generate profit from the sales of the product.
* 138

This profit margin keeps on increasing as the

MBA First Semester (Basics of Marketing) SPPU

Introduction; Grpwth | Maturity | Decline stage

stage |
organisation maintains , the economy of scale. This
growth enables the organisations to invest more in
staSe \
* :.-V
promotional strategies to get the best from the Total market
growth stage. 12 \ sales
•
3) Maturity: In maturity stage, a level of maturity is 1 >!
reached in a product’s sale as it has now been
accepted by most target customers. The profit
generated by the product is stabilised or may
decline due to enhanced competition. In this stage,
t
+o
[Total market
| profit

the main objective of marketers is to sustain the Time

market share that the product has built up. This
stage is the most crucial stage in any product life Figure 3.3: Product Life Cycle
i-
cycle, and the marketers need to make wise and
mature decisions regarding marketing of the product. For gaining competitive advantage, marketers may
rely on product modifications or alterations in the production processes.
4) Decline: This stage is marked by sales going down and profits decreasing drastically. Here, the product
loses its position and makes a way for a new product to enter into the market. In this stage, the market share
of the product starts decreasing, and that is why, it is called decline stage. This decline could be because of
the market being exhausted (i.e., all the consumers who could purchase the product are already in
possession of it), or due to the switching of consumers towards a different product. Being unavoidable, this
stage may force the organisation to withdraw its product from the market. However, organisations may still
generate profit by adopting low-cost production processes and targeting cheaper markets.
!•:
Characteristics of Different Stages in Life Cycle
Characteristics Introduction Growth Maturity Decline
1) Marketing Attract innovators and Expand distribution & Maintain differential Cut back, revive, or
Objective opinion leaders to new product line
product
2) Industry Sales Increasing
_
Rapidly increasing
_
advantage as long as terminate
possible
Stable Decreasing
3) Competition None or small Some Substantial Limited
4) Industry Profit Negative Increasing Decreasing Decreasing
5) Customers Innovators Affluent mass market Mass market Laggards
6) Product Mix One or two basic models Expanding line Full product line" Best-sellers
7) Distribution Depends on product Rising number of outlets Greatest number of Decreasing number of
outlets _ . outlets _
'
I:
8) Promotion Informative Persuasive Competitive Informative
9) Pricing Depends on product Greater range of prices Full line of prices Selected prices

5.2.6. Strategies Across Stages of the PLC

Product Life Cycle or PLC serves as a useful yardstick for marketers to analyse a product’s demand in the
market and understand prevalent market conditions in different stages of its cycle. PLC describes the changes in
marketing environment, demand and supply of the product, consumer understanding and the extent of
competition in the market, therefore, it is of utmost importance that marketers should change their marketing
strategies and the marketing mix, as per these changes. Strategising is essential for the good health of any firm.
A good strategy helps in performing various actions and achieving required results which otherwise would not
be possible. The PLC as a concept plays a major role in the development of a marketing ‘strategy. Four stages
are there in every PLC, i.e., introduction, growth, maturity and decline stage. Each and evfcry stage of the PLC
dictates the market condition and its response to the product in terms of volume of sales orprofit. The strategy
to market a product keeps changing over its life cycle.1 Generally, for each stage of the PLC, there is a
corresponding set of marketing tactics: .
1) Introduction Phase: The introduction phase is the phase of launching a product into the market. In
organisational terms, characteristics of this phase are huge costs of operations stemming from inefficient
levels of production, extended duration of learning, resistance by the established trade to accept a new
product in the market, distributors and resellers demanding higher margins with longer credit periods, and
Marketing Mix (Unit 5) 139

need of extensive advertisement. Large amount of investment is needed to counteract this situation. Being
new in the market, the product faces the problem of credit as well. Therefore*,' lot of cash is required in this
stage. The features of this initial stage are:
i) Newly introduced product type. x
ii) Unawareness regarding the product among the consumers.
iii) Appropriate capitalisation holds the utmost importance.
iv) Initially, the sales in industry are insufficient, but increases gradually.
v) Generally, no profits are generated.
vi) Primary demand for the product is generated through advertising.
vii) Marketers focus on developing awareness and providing trial for marketing of the product.
viii) Sales promotion activities are used to set off product trials in the market.
ix) Nothing is known about the product.
x) Usually, the price of the product is high.
xi) Market placement is selective.
xii) The promotion of the product carries a lot of information and is generally personalised.

According to P. Kotler, in introduction stage, the management of an organisation may follow any of the
following four tactics on the basis of high-low promotion and price:
i) Rapid Skimming Strategy: For consumers with low
awareness about products, the best strategy is the rapid Promotion
High Low
skimming strategy of high promotion and high price. This
strategy also works best when consumers who are aware
about products are willing to pay any amount of money to •a Skimming
£
Rapid Slow
Skimming
purchase them. During the launch of a product, marketers Strategy Strategy
wish to balance the costs incurred in the launch phase of the
product by rapid skimming strategy. Rapid skimming
strategy also works with products having large market size or Rapid Slow
when the level of competition is severe. Products belonging
to the category of non-durables and consumer electronics
I Penetration
Strategy
Penetration
Strategy

generally prefer this strategy. This is why, the pricing of

Figure 3.4
consumer electronic items such as computer games, music
systems, TV, etc., are initially kept high to cover the high
cost of production and then subsequently decreased to sustain the market share.
ii) Slow Skimming Strategy: The essence of this strategy is that the company has enough time to balance
the expenses incurred during the product’s pre-launch period. In this case, the product is launched by
the company at a high price but a comparatively lesser amount of money is spent on the promotion.
This leads to greater profits being made by the company as the price of the product is high but the
marketing cost is low. This occurs when the level of technology used by an organisation is extremely
advanced and its competitors have to invest heavily to build up this technology. Moreover, as most of
the firms may not have the necessary resources to compete, competition is limited to one or a couple of
large firms. Slow skimming strategy is also utilised in the case of limited market size and consumers
are aware and ready to buy the product.
iii) Rapid Penetration Strategy: A company using this strategy charges low prices and spends quite a lot on
promotionalÿ activities. The rapid penetration strategy can be implemented on the same grounds and :
conditions of the environment as that of the rapid skimming strategy. The sole difference between rapid
penetration 9nd rapid skimming strategy is embedded within the long-term objectives of the company. If the
long-term objective of the company is to achieve market share and profit maximisation while the market is
characterised by severe competition and other entry barriers, in this case, a firm can use this strategy.
iv) Slow Penetration Strategy: In this strategy, a company launches a new product at a comparatively
lower price, and spends lesser money on promotional activities. This lower price helps the company to
capture the market while the low expenditure on promotion helps the company to earn more profits. In
case of cohditions like large market, low level, of competition, product being familiar in the market or
market being price sensitive, this strategy may be fruitful.
140 MBA First Semester (Basics of Marketing) SPPU

2) Growth Phase: Having, crossed the introductory phase, a product reached’ the growth phase. It has to be
said that the introductory phase is the most critical phase for a product, aS majority of products (more than
95%) are not able to survive in this phase. Nonetheless, the lucky 5% of the products, which make it to the
growth phase, encounter more intense competition here. Consumers are offered variety of product types,
with different packaging and pricing due to this increased competition! Consequently, the number of
customers for products increases, which extend the size of the market. Trade channels now show an
acceptance of the product and are willing to stock and deal with it. As more people in the trade are dealing
with the product, lowering of prices is commonly noticed. The features of this growth stage are:
i) Sales increase rapidly.
ii) The profits are generated, raised and start declining at the end of this phase.
iii) The company focuses to promote the product shifts from primary demand to selective clients’ demand only.
iv) The familiarity and consumption level of the product is high.
v) As more players are attracted in trade of the product, the price begins to decrease.
vi) A more widespread placement of the product takes place.
vii) The focus of the promotion is on the development of the product brand and product image.
viii) The organisation emphasises towards market share development.

According to P. Kotler, the following strategies may be used for sustenance of the market growth:
i) Improving the quality of the products.
ii) Addition of new attributes to the product and an improvement in styling.
iii) Selecting new channels of distribution.
iv) A reduction in the prices to lure buyers.
v) Increasing activities related to promotion. f

vi) Entering new segments of the market.

3) Maturity Phase: Products surviving the intense competition in the growth phase and winning the
customers’ approval, reach the maturity phase. This maturity phase is marked by a decrease in the growth
rates of profits and sales. A price and promotion war emerges during this stage due to immense
competition. The demand for the product multiplies manifold during this phase as an increasing number of
customers become interested in the product. Lowering of profit level may also be seen during this phase.
The features of the maturity stage are:
i) The sale of the product reaches to its maximum, but then levelling off occurs.
ii) Profits of the industry slowly shift towards declining phase.
iii ) There is an increase in the level of competition.
iv) There is an incr in promotional costs as demand for the product becomes selective. Organisations
commonly uti •s promotion tools to facilitate brand switching. It is quite common for companies
to motivate c; ;i s to change their old consumer products for new ones.

v) Price compt increases due to increased homogeneous products.

vi) Organisations focus on brand differentiation.
vii) Diversification of brands as well as models occurs.
viii) Other products made by the competitors are available as alternatives in the market.
ix) It is not wise to enter a new market in this phase. As profit margins are limited in this phase, it is not
appropriate to spend money on capturing market share. Therefore, organisations focus on retaining
market share.
x) Companies maintain efficiency all around to survive during this phase.
AA
xi) The prices are at their lowest level.
xii) There is intense placement. ;
xiii) Different promotional strategies are designed to enable repeat purchasing. .

To manage effectively, the marketing manager must focus on:

i) Improving the product’s quality.
ii) Increasing the usage among the present customers by exploring new and different utilities of the product.
iii) Trying to change non-users into users of the product, i.e., forming new buyers.
iv) Devising effective promotional and advertisement programmes.
Marketing Mix (Unit 5) 141

4) Decline Phase: The decline ( phase is the final stage in the life cycle of .ÿproduct. Profits and sales
continually decrease during this stage. Technological developments, changes in, the tastes and preferences
of consumers, development,of new products with comparatively low price ranges, and new fashion trends
are the major reasons behind the lowering of the sales. If the alternatives [Link] the market are latest in
fashion and are more eye-catching, buyers will probably turn their attention towards them. The features of
this decline stage are:
i) The product is confronted with lesser competition as the number of competitors declines.
ii) The volume of sales of the product drastically decreases.
iii) The price of the product is also expected to reduce drastically.
iv) There is selective placement.
v) The focus of the promotion is on sustaining the loyal customers.
vi) Profits decline and gradually are reduced to none.

According to Stanton, for generating profits, cost control is very crucial. The different alternatives
available for cost controlling and generating profits are as follows:
i) Ensure that the production and marketing programmes are as effective as they can be.
ii) A regular revision of all the organisational products is necessary to identify which models and sizes are
selling and making profits. The ones which are lagging behind should be done away with. Often, this
strategy will bring about a decline in sales, but a rise in profits.
iii) Improve the functions of the product or rejuvenate it, in some sense.
iv) “Run out” the product, i.e., reduce each of its costs to the minimum level which will cause it to earn
optimum profit over its remaining limited life.
v) One option may be to abandon the product.

5.3. EXERCISE
5.3.1. Very Short Answer Type Questions
1) Enumerate the 7 Ps of marketing mix.
2) Define product.
3) Highlight the importance of marketing mix.
4) Define product life cycle.
5) What is fashion fad PLC curve?
6) Tabulate the characteristics of different stages in life cycle.

5.3.2. Short Answer Type Questions

1) Mention the characteristics of marketing mix.
2) Explain ‘place’ as an element of marketing mix.
3) Tabulate the strengths and weaknesses of 4Ps and 7Ps.
4) Give reasons for additional Ps for services.
5) Illustrate the types of PLC.
6) Discuss the stages 6f product life cycle in brief.

5.3.3. Long Answer Type Questions

1) Discuss the origin and concept of marketing mix in detail.
2) Write a detailed note on price and promotion.
3) Describe the extended Ps of marketing mix in detail.
4) Explain the concept and characteristics of product life cycle.
5) Discuss the strategies across stages of the PLC.
6) Give a description on the relevance of PLC.
 142 MBA First Semester (Basics of Marketing) SPPU
:

CASE STUDIES

SOLVED CASE STUDIES

Case Study 1: Consumer Decision Making
Select two of the following product categories:
a) DVD players :»
-
b) Fast-food restaurants ::
c) Shampoo and

a) Write down the brands that constitute your evoked set.

One Possible Solution
Evoked Set
Brands Constituting the Evoked Set
DVD Players Fast-Food Restaurants Shampoo
Sony Pizza Hut Dove
Samsung McDonalds Pantene !i;
Panasonic
Philips
KFC
Dominos Sunsilk _
Head & Shoulder

b) Identify brands that are not part of your evoked set.

One Possible Solution
> Non-Evoked Set
Brands that does not Constitute the Evoked Set
DVD Players Fast-Food Shampoo
Restaurants
Toshiba Burger King Clinic Plus
Sansui Wimpy’s Ayush
Videocon Nirula’s Gamier
T-Series Lux
Moser Baer Chik

c) Discuss how the brands included in your evoked set differ from those that are not included in terms of
important attributes.
j
One Possible Solution
Difference & Description of Evoked and Non-Evoked Set
A consumer behaviour study has been on product, services, and brand choice decision. The experience of using products and
services as well as the sense of pleasures derived from possessing, collecting, or consuming things and also experiences
contributes to consumer satisfaction and overall quality Of life. These consumption outcomes or experiences in turn affect
consumers’ future decision processes. Brands included in evoked-set differ from those brands in non-evoked set:
1) DVD Player v< v
i) Brand Loyalty: When it comes to choosing electronic product such as a DVD player, people usually prefer to be
brand loyal rather than try out products of new companies. So, keeping in mind all these factors Sony, Samsung, ;
or Panasonic are old players and can be trusted easily. !

'

ii) Quality: When consumers want to buy costly products like a DVD player, they would gqÿfor the brand which is
well known for its quality and not the one which is not so popular like Toshiba, T-Series, or Moser Baer.
iii) Model or Design: Sony or Samsung has got much more variety to offer to its customers than the non-evoked set
such as Toshiba.
iv) Word-of-Mouth and Status Symbol: Consumer buying behaviour mainly depends on the word-of-month of
,ro, .
their near and dear ones. It plays an important role in selecting and rejecting a particular brand. Moreover, the
brands also play a major role in representing the status of a person. So the brand Sony or Samsung plays a major
role in showing-off.
;ÿ

Case Studies 143

2) Fast Food Restaurants . I mm,

i) Taste and Preference:’ 'KiM is always related to taste and preference of the Jÿiÿjner. If the food is good and
tasty, people do pay theÿÿÿ|:fe.,' nofrÿjefoment
even if it is costly. Secondly, people do with the taste of the
dishes. So, if they find a' pffiiouiar dish tasty in a restaurant, they will like to
viÿ$|$tiÿijather
than switching to a
new food joint. In this case Pififa Hut, McDonalds, or KFC are preferable as fresh, and delicious
fast food. my.
ii) Presence: Pizza Hut or McDonalds are nearly visible in all the major hang-out places compared to Burger King
or Wimpy’s. So, the visibility or presence matters.
iii) Price: Fast food is mainly consumed by teenagers or young people, who are mostly students or freshers. So, a
convenient rate chart is also a plus point for a fast food joint.
iv) Quality and Quantity: The quality as well as the quantity matters a lot. Pizza Hut or McDonalds or Subway does
offer its customers value for money.
3) Shampoo
i) Product Quality: In India, where people (including male and female) are very much concern about their hair,
shampoo’s quality play a very important role. Every shampoo brand is different from the other and are preferred
by different sets of people. So, a shampoo good for one, might not be preferred by the other person. In general
Dove, Pantene, L’Oreal, or Fiama de wills is preferred by the people as they are not harmful for hair, if not good.
ii) Price: Price plays an important role in the buying decision. So, people prefer to buy Dove than L’Oreal.
iii) Rural India: In the rural places, people prefer to use Clinic Plus, Ayush, or Chick. But in urban India people keep
these names in their last or no option list.
iv) Opinion Leaders: In case of shampoo’s or beauty products friends, family members such as sisters or other
female relative play an important role in case of females whereas men usually do not discuss above shampoo’s
among themselves. So, whatever they see in advertisement, they try that out. So in this case we can mostly find
women using L’Oreal, Dove, or Pantene in cities not really Chik or Clinic Plus. Sunsilk do have popularity in
cities too but the entry of new good brands has ruined its market.

Case Study 2: Promotion of Nirma Chemicals

Nirma chemical works is popular for its detergent/washing powder. It has plans to come out with toothpaste and wants to
retain the same brand name ‘Nirma Toothpaste’. Justify whether the company can retain the same advertisement copy
(washing powder) for promotion of the toothpaste with minimum modifications only.

One Possible Solution

Advertising introduces a new product to potential customers. Advertising can help to sell a new produced quickly, thus
enabling the manufacturer to recover the costs of developing the new product. Advertising is done to build brand
familiarity and brand popularity.

No, the company cannot use the same advertisement copy (washing powder) for the promotion of the product ‘Nirma
toothpaste’. As the product toothpaste is very different from detergent powder, it needs a different approach for
advertisement.

Reasons for avoiding same advertisement copy are as follows:

1) The advertisement used for detergent powder is women oriented; it cannot be used for toothpaste as it is used by whole
family.
2) Ultimate user is different in case of toothpaste; requiring different advertisement.
3) Using the same advertisement would reduce the reach of product in the market, as it may be anticipated as toothpaste
for women. V,'V.

4) Nirma company, itself used different ads for beauty soaps, as soap is different from detergent powder.

Case Study 3: Healthy Foods

Healthy foods, is a regional manufacturer of milk based health drinks. The company was planning to expand and had
recruited an experienced marketing manager to achieve this' goal. Mr. Rakesh, the new marketing manager found that
Healthy Foods had not executed its marketing programs in systematic way. He felt it was necessary to identify the right
segments.

Questions:
a) What is the possible segmentation approach that Rakesh can adopt any, why?
144 MBA First Semester (Basics of Marketing) SPPU

One Possible Solution ,;;.v , :

f
The concept of market segment is: based on the fact that the markets of commodities are not homogenous but they are
heterogeneous. Market represents a group of customers having common characteristics but two customers are never
common in their nature, habitsy hobbies, income and purchasing techniques. They Jiffer in their behaviour and buying
decisions. On the basis of these characteristics, customers having similar qualities are grouped in segments.

Mr. Rakesh, the new Marketing Manager of “Healthy Foods” should segment the market into homogenous groups of target
customers Called segments. There may be many bases for segmenting the market of milk-based health drinks. Some
important segmentation approaches are as follows:
1) Segmentation on the Basis of Area: The firm should target the customers living in city region because the people
living in rural areas will never prefer these products and they also do not have the necessary informations about these
products.
2) Segmentation on the Basis of Age Group: The group of the customer will play an important role in the selling of the
present product. These products are suitable for children or teenagers basically and this age group should be major
target market of milk-based health drinks.
3) Segmentation on the Basis of Income: A customer with high income will prefer these products but a customer with
low income class people can purchase the product but they will not prefer it always.

Reasons for Adopting these Approaches

The above discussed three approaches are suitable for the “Healthy Foods” because these approaches are suitable
according to the nature and kind of the products. By adopting these approaches, the company can increase its sales and
strong marketer-customer relationship.

b) Select one segment and develop the marketing mix for this segment.

One Possible Solution

Marketing Mix means to collect and mix the resources of marketing in the manner that objects of the enterprise may be
achieved and maximum satisfaction may be provided to the consumers.
Selected Segment: Children
1) Product: Since the products are the milk-based health drinks. So, the quality of the product should be good. Company
can add more flavours in its existing product, so that the children pan easily take this.
2) Price: The prices of the product should be neither too high nor too low. An appropriate pricing strategy should be
adopted. A good quality product at appropriate pricing yields maximum value for its customers,
3) Place: These milk-based products should be available at various department stores, so that people can easily purchase
the product. The distribution channel should be strong.
4) Promotion: Advertising plays an important role in the promotion of such product, since the target group is children, r
so the marketers should include animated and some other creative advertisement. Another thing that marketers should
include is any of the famous sportsperson as a brand ambassador.
;
Case Study 4: M/s. Tufleather Ltd. - “Tufcom Shoes”
For the last fifty years, M/s. Tufleather has been in the business of manufacturing and selling leather to companies, which
make leather shoes and other, related products. In the post liberalisation period, i.e., from 1991 onwards, the company was
contemplating entering the shoe manufacturing industry, primarily because the Government was giving substantial support
to this industry, particularly to firms that were export oriented. With the intention of selling shoes, the company set up its
own factory with R & D facilities in Hosur, Tamil Nadu. In 1993, the company’s R & D department developed a material
“Tufcom”, which it claimed had properties of shoe material permeability, strength, flexibility and durability. The company
also set up a sub unit to produce shoes with this new material and conducted test marketing to gauge the initial response.
The pilot study indicated positive consumer response. \
Tufleather also helped the shoe manufacturing companies by providing point of purchase an<l advertising materials
for a nationwide advertising campaign. The company developed a premium pricing strategy for the Tufcom material, r
based on the consumer perceptual process - the belief that high price is an indicator of high quality. They felt that
Tufcom offered quality that was superior to leather in terms of durability and ease of care. After adopting a skimming
pricing strategy, the company would later consider penetrating the lower priced shoe market segment. While the first
year after the launch of Tufcom shoes showed positive results, sales began to fall drastically after that. Feedback
from their sales team indicated that high price buyers did not get motivated by the factors emphasised by Tufleather,
namely durability and ease of care. In addition, some complaints were received from buyers of Tufcom shoes that
they found the shoes unusually warm.
Case Studies 145

Questions:
a) Where do you think the company went wrong in analysing consumer shoe buying behavior?
One Possible Solution
The company went wrong when the company developed a premium pricing strategy for the Tufcom material. Consumers
felt that Tufcom was offering quality that was superior to leather in terms of durability and ease of care. After adopting a
skimming pricing strategy, the company adopted penetration pricing to penetrate the lower priced shoe market segment
which affected the sales because as it was previously approaching high price customers through durability and ease of care
which was changed when low pricing was adopted which again indicated low quality, durability and less ease of care.
Since, the customers did not find it easy to care and unusually warm, the sales began to fall.

b) Do you think the company should identify a new buyer market, namely the lower priced shoe market segment?
One Possible Solution
No, the company should not find new customer segment, since its basic theme was to approach for premium customers,
hence it should stick to it, so that it cannot lose its high price customers because of low priced segment. The result of
penetration pricing adopted by the firm is the evidence of this phenomenon.

Case Study 5: Kellogg’s Positioning Strategy in India

Kellogg, the wholly owned Indian subsidiary of the U.S.-based Kellogg Company, entered the Indian market in September
1994 with an initial offering of cornflakes, wheat flakes, and Basmati rice flakes. Kellogg offered good quality products
and was supported by the technical, managerial, and financial resources of its parent, the world’s leading producer of
cereals and convenience foods. But its product failed in the Indian market. Even a high-profile launch backed by hectic
media activity failed to make an impact in the marketplace. Kellogg banked heavily on the quality of its crispy flakes. But
it had not taken into account the fact that Indians always boiled their milk unlike in the West and consumed it warm or
lukewarm. The hot milk made the flakes soggy, affecting taste. Indians also like to add sugar to the milk. If one used cold
milk, the sugar did not dissolve easily and the taste was not sweet enough.
Another factor that worked to Kellogg’s disadvantage was that a typical, average middle-class Indian family did not have
breakfast on a regular basis as their Western counterparts did. Those who did have breakfast, consumed milk, biscuits,
bread, butter, jam, or local food preparations like idlis, parathas, etc. According to analysts, a major reason for Kellogg’s
failure was the fact that the taste of its products did not suit Indian breakfast habits. Kellogg sources were, however, quick
to assert that the company was not trying to change these habits; the idea was only to launch its products on the health
platform and make consumers see the benefits of this “healthier alternative”. Avronsart (Managing Director of Kellogg’s
India) remarked, “Kellogg India is not here to change breakfast eating habits* What the company proposes is to offer
consumers around the world a healthy, nutritious, convenient, and easy-to-prepare alternative in the breakfast eating habits.
It is not just a question of providing a better alternative to traditional breakfast eating habits but also developing a taste for
grain-based foods in the morning”. The company’s advertisements and promotions initially focused only on the health
aspects of the product. In doing this, Kellogg moved away from the successful ‘fun- and-taste’ positioning it adopted in the
U.S. Analysts commented that this positioning gave the brand a ‘health product’ image, instead of the fun/health plank that
the product stood on in other markets. (For example, in the U.S., Kellogg offered toys and other branded merchandise for
children and had a Kellogg’s fan club as well.) Disappointed with the poor performance, Kellogg decided to launch two of
its highly successful brands - Chocos (September 1996) and Frosties (April 1997) in India, hoping to repeat the global
success of these brands. Chocos were wheat scoopscoated with chocolate, while Frosties had sugar frosting on individual
flakes. The success of these variants took even Kellogg by surprise and sales picked up significantly. (It was reported that
Indian consumers were even consuming the products as snacks.) This was followed by the launch of Chocos Breakfast
Cereal Biscuits. The success of Chocos and Frosties led to Kellogg’s decision to focus on totally indianising its flavours in
the future. This resulted in the launch of the Mazza series in August 1998 - a crunchy, almond-shaped com breakfast
cereal in three local flavours - ‘Mango Elaichi’, ‘Coconut Kesar’ and ‘Rose.’ Developed after a year of extensive research
of consumer patterns in India, Mazza was positioned as a tasty, nutritional breakfast cereal for families. Kellogg also began
working towards a better positioning plank for its products.
The company’s research showed that the average Indian consumer did not attach much importance to the level of iron and
vitamin intake, and looked 'at the quantity, rather than the quality, of the food consumed. Avronsart commented, “The
Kellogg mandate is to develop awareness about nutrition. There is a lot of confusion between nourishment and nutrition.
That is something that we have to handle”. Kellogg thus worked towards changing the positioning of Chocos and Frosties
- projected them as ‘fun-filled’ brands.
In 1995, Kellogg had a 53% share of the ?150 million breakfast cereal market, which had been growing at 4-5% per annum
till then. By 2000, the market size was ?600 million, and Kellogg’s share had increased to 65%. Analysts claimed that
Kellogg’s entry was responsible for this growth. The company’s improved prospects were clearly attributed to the shift in
positioning, increased consumer promotions and an enhanced media budget. The effort to develop products specifically for
the Indian market helped Kellogg make significant inroads into the Indian market.
 I
146 MBA First Semester (Basics of Marketing) SPPU

Questions:
a) What were the reasons behind the poor performance of Kellogg in the initial stages? Do you agree that a poor
entry strategy was responsible for the company’s problems? Give reasons to support your answer.
One Possible Solution
Reasons behind the Poor Performance of Kellogg in the Initial Stages :
Kellogg was the wholly-owned Indian subsidiary of the Kellogg Company. Launched in September 1994, Kellogg’s initial
offerings in India included cornflakes, wheat flakes and Basmati rice flakes. Despite offering good quality products and
being supported by the technical, managerial and financial resources of its parent, Kellogg!s products failed in the Indian
market. Even a high-profile launch backed by hectic media activity failed to make an impact in the marketplace. Reasons
behind the poOr performance of Kellogg in the initial stages are as follows:
1) Cultural Factors and Eating Habits - Population not Used to Processed Foods: Kellogg pitched itself as an
alternative to the regularly consumed breakfast. The Indian breakfast is heavy and there is a feeling of fullness at the
end of art Indian breakfast. What with oily Parantas, Puris and Dosas, the feeling of fullness is real and not imagined.
Kellogg’s Com flake breakfast does not give that feeling of fullness and that went against the grain of having a full
breakfast. In short after having a com flake based breakfast the Indian consumers were still hungry. Also Indians have
spicy and hot food for breakfast. To ask them to eat the sweet tasting and cold com flake breakfast was too much of a
sweet breakfast for the Indians to digest.
2) Easy Availability of Low-Priced Traditional Breakfast: Indian breakfast is known for its variety. There can be 30
types of Dosas (there is a restaurant in Hyderabad that offers 99 types of Dosas) or Idlis, Paranthas or other types of
native Indian breakfast items. Indians are used to a variety and one item that is eaten will not be on offer for the next
two or three weeks. Asking Indians to have the same type of com flake based breakfast was too much of a cultural
change for the Indians to accept.
3) Low Awareness about Processed Foods: Low awareness about processed foods and Calorie requirements about
various diet plans to be followed from health prospective. Also Kellogg in its advertising campaigns hinted that the
Indian breakfast was not nutritious and that Indian breakfast was not very good for health. This deeply hurt the
sentiments of the home maker. The home makers said to themselves “We have eaten and served the Indian breakfast
for decades and centuries. My family is doing fine”. Once the home maker’s ego was hurt they psychologically turned
themselves against the concept of com flake based breakfast.
4) Price Sensitive Customers: Indian customers are very price sensitive. With Kellogg price a third more than its nearest
competitor it created an image of being a high class product and also pushed it out of reach of just liberated Indian
middle class. Considering all these challenges, Kellogg India required to come up with a real brand equity and a
framework to convince Indian consumer to get out of from the long following breakfast eating pattern and face to an
entirely new range of products offered by the company.
Poor Entry Strategies of Kellogg
With so much of global exposure, success and the well renowned value that the company enjoyed in the world market, the
question that stuck in the mind is what is that that led to the initial failure in Indian market with its foray. India is a country
that has a history that comprises of traditional practices, that also includes the regular and long followed eating habits.
;;
Kellogg realised that it was going to be tough to get the Indian consumers to accept its products. Kellogg’s believed that it
is going to introduce the new breakfast product, heavily on the quality of its crispy flakes. But pouring hot milk on the
flakes made them soggy. Indians always boiled their milk unlike in the West and consumed it warm or lukewarm. They
also liked to add sugar to their milk or lukewarm.
/
With this it was also failed in understanding the very needs and taste of Indian consumer, perhaps the homework done was
not good enough. Kellogg’s failure was the fact that the taste of its products did not suit Indian breakfast habits. Kellogg
sources were however quick to assert that the company was not trying to change these habits; the idea was only to launch
its products on the health platform and make consumers see the benefit of this healthier alternative. Another reason for the
low demand was deemed to be the premium pricing adopted by the company. The prices of its products were way too
much than the nearest competitors. ,v

b) Is the company’s re-positioning of its products on the nutrition/fun platform a step in the right direction?
One Possible Solution
Company’s Repositioning on Nutrition/Fun Platform: Steps towards Success
The failure that the company witnessed with its launch, did not Stays for longer. The mistake that the corqpany did initially
in judging the Indian market was revamped as soon as company realised that the long continued policies is not going to
work here. There were several factors that lead to this progress. > ' .
1) Prices reductions.
2) Kellogg’s increase the retail packs of different sizes to cater the needs of different consumers group. >'
Case Studies 147

3) Kellogg’s repositioned the product as tasty nutritious food.

4) Products were not positioned in premium categories.
5) Indianising the products [Link] the sweeter products.
6) On ground promotion activities like Kellogg health week and free samples distribution in schools and to housewives.
7) Projection of products as ‘fun-filled’ brands rather emphasising only on the “nutrition value”.

Proposition and Positioning By Kellogg

From the day Kellogg’s forayed into Indian market, several parameters are taken care of while launching the product.
When Kellogg’s entered the Indian market in 1994 it positioned itself on the health platform, highlighting the nutritional
values of the brand. Disappointed with the poor performance, Kellogg decided to launch two of its highly successful
brands Chocos (September 1996) and Frosties (April 1997) in India. The company hoped to repeat the global success of
these brands in the Indian market. Chocos were wheat scoops coated with chocolate, while Frosties had sugar frosting on
individual flakes. The success of these variants took even Kellogg by surprise and sales picked up significantly. This was
followed by the launch of Chocos Breakfast Cereal Biscuits.

Kellogg launched the Chocos biscuits, claiming that cereals being a narrow category, the foray into biscuits would create
wider awareness for the Kellogg brand. Biscuits being amass market product requiring an intensive distribution network,
Kellogg’s decision to venture into this competitive and crowded market like Britannia, Parle was as a bold move in India.
The success of Chocos and Frosties also led to Kellogg’s decision to focus on totally indianising its flavours in the future.
This resulted in the launch of the Mazza series in Augustl998 - a crunchy, almond-shaped com breakfast cereal in three
local flavours - ‘Mango Elaichi,’ ‘Coconut Kesar’ and ‘Rose’. Developed after a one-year extensive research to study
consumer patterns in India, Mazaa was positioned as a tasty, nutritional breakfast cereal for families. Kellogg was careful
not to repeat its earlier mistakes. It did not position Mazza in the premium segment. The glossy cardboard packaging was
replaced by pouches, which helped in bringing down the price substantially.

UNSOLVED CASE STUDIES

Case Study 1: The Marketing Environment
Household spending by all UK households amounted to over £500 billion in 1997, or 63% of gross domestic product. This
level of expenditure is very closely related to conditions in the country's macro-economic environment. For marketers, it is
crucial to be able to read the macro-economic environment and to predict the effects of change in demand for their goods
and services. Identifying turning points in the economic cycle has become a work of art as well as science, as consumers
frequently confound experts by changing their expenditure levels in a way which could not have been predicted on the
basis of past experience.

Throughout 1998, prices of consumer goods had fallen significantly, with consumer durables down in price by an average
of 2% in a year and clothing by 5%. Economic theory would have suggested that lower prices would have resulted in
higher sales, especially considering the other favourable elements of the macro-environment. However, this did not appear
to be happening. What else could have been happening in the marketing environment to explain falling household
expenditure? At the time, the media was full of reports of an impending global economic crisis, triggered by difficulties in
the Asian economies.

Consumer confidence is crucial to many high value household purchases such as houses and cars, with consumers reluctant
to commit themselves to regular monthly repayments when their source of income is insecure.
Even this may be only a partial solution, as a survey of consumer confidence carried out in October 1998 by GFK on
behalf of the European Commission showed that although consumers were pessimistic about the state of the national
economy, they were quite upbeat about their personal financial situation.

For companies who need to commit resources a long while in advance in order to meet consumers’ needs, an accurate
understanding of the market environment is crucial if stock surpluses and shortages are to be avoided. But this case shows
that getting it right can still be very difficult.

Questions
a) Identify all of the environmental factors that can affect the demand for consumer durables and assess the
magnitude arid direction of their impact.
b) In what ways can a manufacturer of consumer durables seek to gain a better understanding of its marketing
environment?
c) How can a manufacturer of consumer durables seek to respond to environmental change as rapidly as possible?
148 MBA First Semester (Basics of Marketing) SPPU

Case Study 2: Organisational Buying

M.K.B. Products was an industrial company, undertaking the manufacture of chewing tobacco products. For the packing of
these products, tin containers were required in huge quantities. The company was buying these containers from Shaz
Metals, who were supplying the empty containers to M.K.B. Product @ ?1.60 per tin container. This arrangement carried
on for more than ten years.
M.K.B. Product was later joined by a young M.B.A., who advised the owner of M.K.B. Product, to go in for backward
integration (To make the tin containers themselves, instead of buying them from Shaz Metal Works).
The matter was put under deliberation, and it was decided to join for partial backward integration, i.e., to start the
manufacture of their own tin containers, as well as, keep buying from the supplier (Shaz Metal) in a lesser quantity, till
such time that the company M.K.B. Product could become self-sufficient.
In the pursuit of backward integration, another semi-automatic tin-container manufacturing plant was set up by the
company, and it started its production and initially faced a lot of teething troubles. They however, overcame them and
started fiinctioning smoothly.
A number of suppliers were interested in supplying tin sheets (out of which tin containers are made) for M.K.B. Product.
i
After buying randomly from a number of suppliers, the company came to terms with one Mr. Wali, who undertook all the
raw material supplies of tin sheets to the company at reasonable rates. He would make deliveries as and when necessary,
and developed a good relationship with the owners of M.K.B. Product. The supplies were reliable, they were reasonably
priced, were regular and timely.
This arrangement lasted for a decade. Later Mr. Wali, the tin supplier told the company that they would be charging an
additional two per cent on the prices quoted by them, due to the rise in prices, and the delivery time would have to be
rescheduled, and the company would have to pick up, or order for the entire material consumed by the quarterly, instead of
monthly arrangements.
This set the owners and managers of M.K.B. Product thinking whether to agree to Mr. Wall’s terms, or look for another
supplier. After a little research, they came across a supplier in scrap tin industries, who were happy to supply to M.K.B.
Product at the rates and terms of conditions at which Mr. Wali was originally supplying. They agreed to monthly
deliveries, and relaxed their terms of payments, as well.
When the deal was about to be finalised with the scrap tin industries, Mr. Wali sent a telegram to M.K.B. Product, that the
increase in rates was cancelled, and they were willing to renew their contract, or continue with the supplies at the earlier
rate for the next 12 months.
This again set the company thinking because they had good relations with Mr. Wali for a considerable period of time, and
also the fact that in industrial buying, market price plays a secondary role, but the quality, uniformity of products, timely
and regular suppliers are the dominant factors.
,

Questions:
a) What should the company do in this situation and why?
b) Should the company try scrap industries who are an unlisted supplier, and what precautions should the company take
for the future? 1

Case Study 3: Vikasa Steel Tubes Ltd.

Vikasa Steel Tubes Ltd. was a medium-sized engineering company. In order to maintain the leadership in the existing
business of manufacturing and marketing “precision steel tubes”, there was a need to manufacture a new product called
“Cold Rolled Cold Annealed” (CRCA) steel coils, which was a backward integration. CRCA steel coils were used as a raw
material for manufacturing precision steel tubes. Although the company had been procuring the CRCA steel coils from
Bokaro Steel Plant of Steel Authority of India Ltd. (SAIL), the quality of the raw material was not consistent and the
deliveries were uncertain.
Besides, other major competitors such as Tube Investment Ltd. arid Tata Steel (tubes division) had their own Cold Rolled
1 Ch Saÿdiem a competitive edge in terms of the quality and delivery of precision steel tubes. The CMD
ves from mark“u'e- R&D- pr°dm,i°n- “d purchase
1) Business Analysis: A detailed business analysis was done by
the taskforce.
2)
NTj5 u
ThC business analysis report was discussed by the CMD with Senior Executives.
It
the oh? S°
W1<n neW pr°jeCt with
**“initial capacity production of 24,000 metric tons per annum in
in,™diy for precision sttei mtes and
Case Studies 149

To improve profitability, it was decided to add 12000 MT per annum in the second phase, so that 65 to 70 per cent of
the new product could be marketed at higher prices and the balance 30 to 35 per cent to be used in-house after
completion of the second phase. The company decided to go for a public issue with the new product becoming a
separate division of the existing profit-making company.

The marketing department supplied the samples against trial orders from the automobile and bicycle customers. There are
certain suggestions from the customers on the technical parameters of CRCA coils since samples supplied were partly
acceptable. In the meantime, the marketing department worked-out the marketing plan for the new product.

The target market segments were initially identified as bicycle manufacturers and 2-wheeler automobile manufacturers.
Product catalogues were made, pricing and other commercial terms were decided, sales engineers from branches were
given training for the new product.

Questions:
a) Why would a marketer want to segment a market?
b) What strategies would you adopt for segmenting consumer market, if you were head of marketing department?

Case Study 4: Spring Pure Mineral Water

It is estimated that the Indian mineral water industry is worth ?700 crore. There were so many fringe players operating in
this industry till September 2000. The government then came out with an order that every player in this industry must
possess Bureau of Indian Standards (BIS) certification. It is sure, hence, that of the 250 odd brands in the market, only few
will survive. During the year 2000, a spate of brands from major players entered, viz., Aquafina from Pepsi, Pure life from
Nestle and Kinley from Coca-Cola India. It is expected that during 2001-2002, this industry be expected to grow at 50-60
per cent.

The home segment and the small packets are expected to grow by leaps and bounds. Bisleri is generic for bottled water.
During the year 2000-2001, it grew by 140 per cent. Adopting an aggressive pricing strategy, it made its presence felt in
various categories. The two-litre pack is offered at ?15 only. Also it introduced a 1.2 litre pack at ?12. Another brand from
Parle, ‘Bailey’ went into niche market and offered for the first time a 330ml bottle at ?3.50. This Chotu Bailey has created
smaller package market. In this intense competitive market, KS Foods introduced ‘Spring Pure’ brand of spring water.
‘Spring Pure’ is positioned as a premium product and is available in 300ml (?12), 500ml (?15), one litre (?25) and 1.5
litres (?30). The company expects growth in the 500ml market. According to Pepsi, the year 2000-2001 saw their brand
move at a slow pace mainly because Aquafina is priced at ?10 for 750ml, as compared to other players in the market who
were much in demand at ?10 for a litre bottle.

Questions:
a) Do you think the pricing strategy of ‘Spring Pure’ is right? Justify your answer.
b) What would be the competitive strategy adopted by Aquafina and Kinley as compared to Bisleri?

Case Study 5: New Coke

Battered by competition from the sweeter Pepsi-Cola, Coca-Cola decided in 1985 to replace its old formula a sweeter
variation, dubbed the “New Coke”. Coca-Cola spent $4 million on market research. Blind taste tests showed that Coke
drinkers preferred the hew, sweet formula, but the launch of New Coke provoked a national uproar. Market researchers had
measured the taste but had failed to measure the emotional attachment consumers had to Coca-Cola. There were angry
letters, formal protests and even lawsuit threats, to force the retention of “The Real Thing”. Ten weeks later, the company
withdrew New Coke and re-introduced its century-old formula as “Classical Coke”, giving the old formula even stronger
status in the marketplace.

Questions:
a) Managers try to stimulate sales by modifying the four - Ps - Analyse.
b) Customers are not always willing to accept an improved product - Comment.
 . ...'.rjgjgfc!

150 MBA First Semester (Basics of Marketing) SPPU

SAVITRIBAI PHULE PUNE UNIVERSITY

|MBA - FIRST SEMESTER EXAMINATION, 2014|
BASICS OF MARKETING :
Time: 2Vi Hours Max. Marks: 50
Note: 1) All questions are compulsory.
2) Each question has an internal option.
3) Each question carries 10 marks.
4) Figures to the right indicate marks for that question/sub-question.
5) Your answer should be specific and to the point.
6) Support your answers with suitable live examples.
7) Draw neat diagrams and illustrations supportive to your answer.
I
Ques 1 a) ‘Marketing is much broader concept than selling.’ Analyse the statement in context of concept of
Marketing. (10)

Ans: Generally, marketing is understood as a mean to sale and purchase of goods and services but it is too narrow view to
understand it so. The term ‘marketing’ is much wider in nature and scope. It is not limited only to needs, sale and purchase
of goods and services. It means entire process of satisfying the needs of consumers. It starts with discovery of needs and
wants of the consumers, and it continues till the wants are satisfied and the customers are delighted. Marketing is not only
about providing products or services but also about providing changing benefits to the changing needs and demands of the
customer. Marketing is thus the sum total of all the activities and processes including creating, communicating, delivering,
and exchanging offerings that have value for customers, clients, partners, and society at large.
The marketing concept is a philosophy. It makes the customer, and the satisfaction of his or her needs, the focal point of
all business activities. It is driven by senior managers, passionate about delighting their customers. Marketing concept is
the essence of the process of exchange for mutual satisfaction of the parties. It is a much broader concept than selling or
advertising. With increasing competition, it has evolved and developed from an activity of the firms to a management
function and further to a business philosophy.
Marketing is not only much broader than selling, it is not a specialized activity at all It encompasses the entire business. It
is the whole business seen from the point of view of the final result, that is, from the customer’s point of view. Concern
and responsibility for marketing must therefore permeate all areas of the enterprise.
Selling versus Marketing
:
Refer Unit-1, Page No. 21
Or
!
-
Ques 1 b) “Because the purpose of business is to create a customer, the business enterprise has two and only two - :
basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs.
Marketing is the distinguishing, unique function of the business.” Comment and define Marketing. Explain the core ;
concept of Marketing. GO)

Ans: The above lines have been said by Peter Drucker. Drucker’s assertion encapsulates innovation’s strategic role, to
create a customer, and thus it showcases the intimate relation of innovation with marketing. If the definitive purpose of all
innovation projects is not, at the end of the day, to help a company deliver better offers and experiences to its customers,
then those projects need to be re-examined. Even when innovations target internal processes and problems, the end results
should always impact the market, and especially customers.
Marketing should play the lead role in defining priorities based on strategy. Priorities include targets for idea generation
and defining the boundaries. This does not mean that marketing should dictate ideas; rather, they should lead the process,
involving other parts of the company and diverse external sources as appropriate. In the big picture, marketing brings
customers to the door and innovative approaches to customer service, repair quality, and meeting consumer expectations
(i.e. cycle time) will bring them back.

Marketing
Refer Unit-1, Page No. 11

Core Concepts of Marketing

Refer Unit-1, Page No. 13
 Solved Paper (2014) 151

Ques 2 a) i) Consumer wants to purchase ‘A microwave oven’. Explain the various factors, which would affect the
consumer buying behaviour. (05)
Ans: Factors Affecting the Consumer Buying Behaviour
1) Social Class: Mostly, every individual in the society is a part of some social class. These social classes are defined on
the basis of caste system which indicates specific roles, which cannot be changed. Often, the caste system is
transformed into a social class. Social classes are comparatively identical and permanent societies. These classes share
similar interests, behaviour, and values. Therefore, individuals belonging to a particular social class will generally
prefer a particular type of microwave oven with similar settings and technical specifications.
2) Reference Group: A person or a group who is identified as a reference to an individual, defining the fundamental or
fixed attitudes, behaviours or values, is known as a ‘reference group’. Being a social class member, an individual
always compares his abilities and opinions with the defined abilities of a reference. As a result, an individual will
generally purchase that microwave oven which either establishes his/her identity in the reference group or increases
his/her reputation in the eyes of others’.
3) Family: Buyer’s behaviour is largely influenced by his family members. Family is the main buying organisation in the
society. There are two types of families, i.e., family of orientation (religion, politics, self-worth, etc.) and family of
procreation (spouse, children, parents, etc.). The members of the family will influence the purchase of microwave
oven. As a result, such a type of oven will be preferred which fulfils the needs of all the family members. This is
because all the members have different tastes and preferences when it comes to food and food habits.
4) Occupation and Economic Circumstances: The consumption pattern of an individual is also affected by the occupation.
Here, marketers target those consumers who have high amount of interest in their products. The selection of products also
varies in regard with the economic circumstances such as monthly income, savings, purchasing power, assets, debts, etc.
The income and economic situation of the individual will influence the purchase of a microwave oven. If the income of the
individual is less, then an economic oven will be preferred whereas if the income of the individual is more, then he/she will
prefer a microwave oven which is superior and loaded with better technical specifications.
5) Lifestyle: Lifestyle is a certain way in which an individual lives his life. It may comprise of individuals’ activities,
interests, opinions, etc. The lifestyle also depicts the manner in which a person interacts with its surroundings. A
marketer needs to find out the product which is most suitable for customers’ lifestyle. If an individual has a very flashy
lifestyle, then he/she would want to reflect that in his/her oven and vice-versa.
6) Attitudes: Attitude is a certain way of feeling or acting towards a particular thing or a person. People have different
attitude towards areas like religion, politics, clothes, music, and food. Attitude is a like or dislike for a particular object
which assists the buyer to decide about a certain product. An individual might not go for a microwave oven whose
manufacturer was caught with regards to unethical practices, whereas he/she might opt for a microwave oven whose
manufacturer indulges in social responsibilities.

Ques 2 a) ii) What type of decision process would you expect most consumers to follow in their purchase of ‘Four
Wheeler’? (05)

Ans: Decision Process for Purchasing a Four Wheeler

1) Problem Recognition: The consumer buying process for a four wheeler begins with the identification of a problem or
a need. This identification may come from internal stimuli i.e., a person having a big family or an external one i.e., to
buy a more fuel-efficient same as that of a friend. When consumers recognise a need, the inner-drive to fulfil the need
is called motivation. Therefore, marketers must find out what motivates their customers so that they can appeal to
those motives. In order words, marketers must have a good knowledge of buying motives.
2) Information Processing: Having recognised a problem or need, the next step a customer may take is the information
search stage, in order to find out what they feel is the best solution. This is the buyer’s effort to search internal and
external business environments, in order to identify and evaluate infoririatioh sources related to the central buying
decision. The customer may rely on print, visual, online media or word of mouth for obtaining information.
3) Evaluation of Alternatives: As one might expect, consumers will evaluate different products or brands at this stage
on the basis of alternative product attributes - those which have the ability to deliver the benefits the customer is
seeking. A factor that heavily influences this stage is the customer’s attitude. Involvement is another factor that
influences the evaluation process. There is no single evaluation process used by all consumers or by one consumer in
all buying situations. There are several decision evaluation processes the most curreni models of which see the process
as cognitively oriented. It can also be on the basis of factors such as the price, features, space, fuel-efficiency, etc.
4) Purchase Decision: Once the consumer has narrowed down the possible alternatives to just a few, he/she may make a
decision to purchase. The consumer would decide whether to buy, and if so, then what, where, and when to buy.
i
Consumers may also postpone or forgo purchase decision, if none of the short-listed alternatives meets his/her needs.
 152 MBA First Semester (Basics of Marketing) SPPU

A consumer’s decision to modify, postpone, or avoid a purchase decision is heavily influenced by perceived risk. The
amount of perceived risk varies with the amount of money at stake the amount of attribute uncertainty and the amount
of consumer self-confidence.
5) Post-purchase Behaviour: In brief, customers will compare products with their previous expectations and will be
either satisfied or dissatisfied. Therefore, these stages are critical in retaining customers; This can greatly affect the
decision process for similar purchases from the same company in the future, having a knock-on effect at the
information search stage and evaluation of alternatives stage. After purchasing the product, the consumer will
experience some level of satisfaction or dissatisfaction. The marketer’s job does not end when the product is bought.
Marketers must monitor post purchase satisfaction, post purchase actions and post purchase product uses.
Or
Ques 2 b) i) Analyse the steps involved in buying decision process for ‘Touch Screen Mobile Handset’. (05)

Ans: Buying Decision Process for ‘Touch Screen Mobile Handset’

1) Problem Recognition: The first process of the consumer decision-making framework is problem recognition which is
generally caused by a significant difference between an ideal state and an actual state. In terms of mobile phone,
nowadays mobile phone is not only a device, but also a sign of vogue. Some consumers recognize their mobile phone
out of vogue as a problem. Mobile phone is not just a device for communication but also a way to express sense of
self-character. Consumers change the wallpaper and set the unique ring tones on their mobile phones because they
want their mobile phones to show out their self-character.
2) Information search: Once consumers realize that current product is not as it should be, it means a problem has been
recognized, and then consumers will proceed to search great information in order to resolve it. This process is called
information search, if people undertake this process by buying a product, it also can be called pre-purchase search.
Mobile phone is a mature market; the number of mobile phone users has already reached 4.6 billion around the world.
Therefore, most of consumers have prior experience of mobile phone, so they already have some degree of knowledge
of mobile phone. In terms of external information, there are ways for consumers to get information, such as magazine,
TV commercial, and internet.
3) Evaluation of Alternatives: In this process, consumers’ purchase intention is already quite strong, only the brand’s choice
still hesitating in their minds. In terms of mobile phone, if consumer is satisfied with the brand of their current mobile
phone, they may still look for another of the same brand’s new products, if not, they will choose others. “Brand awareness
is expressed as the power of the brand’s existence in the consumers’ minds and it is an important part of the brand equity”.
For example, mobile phone companies slogans, such as human technology by NOKIA, Hello Moto by Motorola.
4) Purchase Decision: Once the relevant options from a category have been assembled and evaluated, a choice must be
made between them. In terms of mobile phone, similar characteristic phones sometimes come with different secondary
features, For example, two same price mobile phones; one comes with higher quality camera, but the other one comes
with nicer speakers. Consumers generally will choose one of those determinant attributes as their purchase decision,
because of those products are already on their list.
5) Post-Purchase Behaviour: After choosing the product, the purchase behaviour will happen. Consumer will proceed
to pay the product which they mainly evaluated, and bring it home and enjoy it. After consumer experiences this new
product, the next purchase will happen in the future.
Ques 2 b) ii) Company ‘Saiganga’ wants to launch flavoured drinking water. As a marketing manager which
factors you would consider that affect the consumer buying behaviour. (05)

Ans: As mentioned in the question, there is a company that wants to launch the drinking water in various flavours. As a
marketing manager, it can be said that consumer’s taste and preference about the flavoured drinking water would be
; affected by following factors:
1) Social Class: Mostly, every individual in the society is a part of some social class. These social classes are defined on
the basis of caste system which indicates specific roles, which cannot be changed. Drinking flavoured water can be a
new thing in the society that can be quickly adapted by the upper class and upper-middle class rather than the lower
middle and lower class of a society.
2) Reference Group: A person or a group who is identified as a reference to an individual, defining the fundamental or
fixed attitudes, behaviours or values, is known as a ‘reference group’. Being a social
a!ways compares his abilities and opinions with the defined abilities of a
class member, an individual
reference. For example, Friends, family,
,ne factor in ,his case> ** peop1' ,“d adop, *hose “ngs
3)
th4 ” ’uicu* whkh !ÿ
Lifestyle: Lifestyle is a certain way in which an individual lives his life. It may
comprise of individuals’ activities
eÿLonÿtheconÿ Pÿple who live a dynamic life style and try new things in market to know and
Solved Paper (2014) 'i'i 153

4) Attitudes: Attitude is a,certain way of feeling or acting towards a particular thing or a person. People have different
attitude towards areas like religion, politics, clothes, music, and food. For example, some people prefer to drink clean
and natural water. These are those people who are health conscious and sensitive towards their fitness. Hence, these
people would not easily buy the drinking Water.
5) Motivation: It is a reason to act in a particular way. The reasons can be physiological or psychological, which usually
arise out of human needs and wants. For example, people can get the motivation of drinking flavoured water from
<
their friend circle, their family members, other people from the same society, and advertisements projected to them.

Ques 3 a) “Marketing managers have to constantly take and revise their marketing decisions considering the
changes in micro and macro environmental forces.” Comment. Explain various types of environmental forces and
factors influencing marketing decisions. (10)

Ans: There are various environmental factors which directly influence the marketing activities and decision-making ability
of the organisation. These factors combine to form the marketing environment. For example, the marketing environment
for a car tyre manufacturer may include technology for manufacturing, car buyers, manufacturers, dealers, distributors,
competitors, import-export policies, tax system, etc. These are the external environmental factors which influence the
company. Other than this, the company’s internal environment also affects the marketing activities such as production
system, finance, technology used, sales force, etc.

Therefore, marketing managers have to constantly take and revise their marketing decisions considering the external
environmental factors, i.e., micro and macro environmental factors.

Types of Environmental Fofces and Factors Influencing Marketing Decisions/Components of Marketing

Environment
Refer Unit-2, Page No. 57
Or
Ques 3 b) Undertake the Macro-environmental analysis for any two of the following markets: (10)
i) Mobile services provider

Ans: Macro-Environmental Analysis for Mobile Services Provider

1) Economic Factors: The economic environment consists of factors that affect consumer purchasing power and
spending patterns. Marketers must pay close attention to major trends and consumer spending patterns. As far as
mobile industries are concerned, the economic system is critical as it can control what the organization is to produce,
how it should produce and the category of recipient who should use their end products. For example, Nokia has
launched new handset Lumia 1020 in US not in India as company is focusing more on low budget handsets for India.
2) Political Factors: This environment is also very important from company’s point of view because marketing
decisions are strongly affected by developments in the political environment. It consists of laws, government agencies
and individuals in a given society. Any political decision can affect market.
For example, In Egypt and Libya there are ongoing a political riot and in this situation Nokia company decreased
their market. Another example can be of the case where Samsung violated a host of Apple patents and engaged in
“willful infringement”.
3) Cultural Factors: Cultural factors strongly affect how people think and how they consume. This environment is made
up of institutions and other forces that affect society’s basic values, perceptions, preferences and behaviors. Following
social factors affect the mobile industry:
i) Lifestyle changes
ii) Career expectations
iii) Age distribution
iv) Religion
v) Life expectation
vi) Birth rate
4) Technological Factors: Today technological advances are perhaps the most dramatic forces affecting today’s
marketing strategies. Forces that are creating new technologies are also creating new products and market
opportunities. The mobile phone in our hand is now packed with advanced tools that let you do so much more.
Examples of technological changes are:
i) Nokia launched wireless charging phone.
ii) Samsung launched phones with HD sensitive touchscreen.
iii) Recently Nokia launched phone with 41 megapixel camera.
iv) Sony launched a phone which is dust and water resistance.
 154 MBA First Semester (Basics of Marketing) SPPU

Ques 3 b ii) Pesticide

Ans: Macro-environmental analysis for Pesticide > f\‘V
1) Political Factors: They are how and to what degree a government intervenes in the econMiy. Political factors include
goods and service which' the government wants to provide or be provided (merit goods) And" those that the government
does not want to be provided. In this case, Government and various NGOs of zero budget farming and bio-pesticides
has started to create awareness amongst the farmers to reduce chemical usage. Increase in the demand of organic food !
has initiated fanners in Karnataka to adapt to organic farming.
2) Economic Factors: They include economic growth, interest rates, exchange rates and the inflation rate. These factors
have major impacts on how businesses operate and make decisions. Different new schemes of Government have
generated the efficient revenue in pesticide market. Low interest rates and other promotional tariffs have contributed well.
3) Social Factors: They include the cultural aspects and health consciousness, population growth rate, age distribution,
career attitudes and emphasis on safety. Trends in social factors affect the demand for a company’s products and how
that company operates. Now farmers are aware of the importance of the pesticides. This is due to increased promotion
and awareness programme of Government.
4) Technological Factors: They include ecological and environmental aspects, such as R&D activity, automation, j
technology incentives and the rate of technological change. A variety of production technologies are invented by
agriculturists to improve the production of pesticides for better crop yield. New farming techniques and seeds are
developed by R&D. k
Ques 3 b iii) Insurance
Ans: Macro-Environmental Analysis for Insurance Industry
1) Political Factors: Following political factors affect the insurance industry:
i) Increased Service Tax on Premium: The imposition of service tax on the services provided by the insurers has
been increased significantly over past few years by the government.
ii) Increase in FDI Limit: The hike in the insurance foreign direct investment (FDI) limit to 49 per cent from 26 per
cent has proved to be very beneficial for the insurance industry in India. It has encouraged foreign investors to
invest in Indian insurance industry.
iii) Favourable Regulations for Rural Insurance: To encourage insurance sector to increase its spread in rural
i>
India, government has made regulations more favourable for rural people by decreasing the amount of premiums,
introducing new group insurance plans and various other special plans for fanners.
2) Economic Factors: Following economic factors affect the insurance industry:
i) Increase in Gross Domestic Savings: The gross domestic savings of people in India have increased significantly,
due to which they are moving towards new ways of investing money for the future benefits including various
insurance plans.
ii) Contribution to Country’s GDP: According to goveniriient sources, the insurance and banking services’
contribution to the country’s gross domestic product is 7% but of which the gross premium collection by various
insurance companies forms a significant part.
iii) Role in Government Securities market: Insurance companies are fest emerging as one of the most prominent r
players in the govt, securities market.
3) Social Factors: Following social factors affect the insurance industry:
i) Low Insurance Coverage: In India insurance is considered as which is pushed upon the customers to buy. People
are unwilling to buy insurance due to.|atck of awareness.
ii) Increase in Life Span and Rise in Elderly Population: In India life span has increased over past few years due to
which the elderly population in India js rising day by day. To live a happy and independent life, more no. of educated
peoples is moving towards [Link] .insurance to ensure a respectful and independent life even in old age.
i
iii) Change in Family System: In today’s scenario there is no one to help a widow and her kids because everyone is
busy with his/her family. In such a situation more no. of people are opting for insurance to secure their spouse and
children’s future. A.p<-?
I.
4) Technological Factors: Following technological factors affect the insurance industry:
i) Automation of Processes: Nowadays, with advancement in technology the whole process. of insurance has
become automated.
ii) Internet Driven Information Era: With an increase ini internet usage and its increasing spread* Tit has become
easier for people to get informed about everything at their > home only. Now they don’t have .to, waste time in
gathering information before taking any financial step.
>
Solved Paper (2014)
;: •r . •
i
155

iii) Business Process Monitoring: It has become easier for people to track every event in a business process. It has
resulted in more transparency in every aspect of business processing.
iv) E-Banking Facility: More no. of people in urban sector are moving towards e-banking and credit card facilities
etc., which has made payment of premium much easier, convenient and hassle free for customer.

Ques 4 a) Name and describe the bases for segmentation that might be used in segmenting consumer markets.
Which segmenting variable(s) do you think ‘Dell’ is using for Personal Computer? (1°)

Ans: Bases of Segmentation for Consumer Goods and Services

Refer Unit-3, Page No. 73

Segmenting Variable(s) for Dell

Dell mainly uses customer segmentation in its market strategy for personal computers along with the product
segmentation where it is targeting several market segments and designing customised products or offers for them. On one
hand, geographically, Dell has segmented the market into the US/Americas, EMEA and Asia Pacific-Japan where each
area has different pricing and marketing strategies. On the other hand, demographically, there is no age, gender or race
bias but income, occupation and education play a role in deciding the customer needs and hence the product offer.

It is also worth noting that from a behavioural view, Dell focuses on the benefits sought by consumers such as low price
and good quality and service.
1

It also carefully selects customers with relatively predictable purchasing patterns and low service costs, allowing itself an
opportunity to develop a core competence in targeting and keeping a specific database for target customers.

Or
Ques 4 b) Thomson baby soap has taken early lead in terms of creating positioning in consumer mind. Company
launches various variances like Thomson soap for delicate skin and Thomson soap for men. Analyse various bases
of segmentation used by the company. (10)
Ans: Bases of Segmentation Used by Thomson Company
Market segmentation means breaking-down the total market into self-contained and relatively homogeneous sub-groups of
customers, each possessing its own special requirements and characteristics. This enables the company to modify its
output, advertising messages, and promotional methods to correspond to the needs of particular segments.
Accurate segmentation allows the firm to pinpoint selling opportunities and to tailor its marketing activities to satisfy on
consumer needs.
Following bases are used by Thompson baby soap manufacturing company to segment their market:
1) Behavioural Segmentation: This segmentation is used for delicate skin soap. In behavioural segmentation, buyers are
divided into groups on the basis of their knowledge of, attitude towards, use of, or response to a product. Many
marketers believe that behavioural variables - occasions, benefits, user status, usage rate, loyalty status, buyers-
readiness stage, and attitude - are the best starting points for consulting market segments. In this case, benefits
associated with the product are used as base for segmentation. Here, the marketer identifies benefits that a customer
looks for when buying a product. Buyers can be classified according to the benefits they seek. On a purchase of same
product different customer look for different benefit because of which they buy products from different companies
which satisfy their specific needs.
2) Demographic Segmentation: This segmentation is used for men soap. In demographic segmentation the market is
divided into groups on the basis of variable such as age, family size, family life-cycle, gender, income, occupation,
education, religion, race, generation, nationality and social class. In this case, gender is used as a base. The gender
segmentation is one of the most common forms of segmentation as around the globe man and woman have always
been vocal about their separate needs.

Ques 5 a) What is ‘Goods-service continuum’? Explain with a diagram and appropriate example. (10)

Ans: Goods-Service Continuum

Refer Unit-1, Fage No. 13
Or
Ques 5 b) ‘Product can be classified into broad categories based on who will use them and how they will use.’
Analyse the statement in context of classification of products. (10)

Ans: Out of Syllabus

.!
 156 MBA First Semester (Basics of Marketing) SPPU

SAVITRIBAI PHULE PUNE UNIVERSITY

-
MBA FIRST SEMESTER EXAMINATION, OCTOBER 2015 -
BASICS OF MARKETING
Time: 2Vi Hours Max. Marks: 50
Note: 1) All questions are compulsory.
2) Each question has an internal option.
3) Each question carries 10 marks. !
4) Support your answers with suitable live examples.
5) Draw neat diagram and illustrations supportive to yours answers.

Ques 1 a) “If pur product is good, we do not require any marketing; customer will come on their own and buy it”
says one business owner. Do you agree? With reference to above explain the term Marketing Myopia and
differentiate between Sales and Marketing orientations in the context of a Wrist Watch Company. (10)

Ans: No, it would not be appropriate to say that good products do not need marketing assistance. Marketing is very
necessary function for a company, no matter how good the quality of the product is. It not only provides benefit to the
marketer but it also proves beneficial for the customers and the society as well.

For the marketer, it helps in achieving long-term success by building the brand image, and by enabling the company -to
survive in dynamic marketing environment. Similarly, for customers, it helps in making them aware about different
products, and it assists them in comparing the specifications of similar product available in the market.

Market also benefits the society by making the products available at reasonable prices and it also provides job
opportunities to the members of the society. Therefore, without using effective marketing strategies it is not possible for
brands (even producing quality products) to attract potential customers.

Concept of Marketing Myopia

Refer Unit-1, Page No. 46

Sales/Marketing Orientations Used by a Wrist Watch Company

There are various orientations that companies adopt towards marketplaces, and each of them is different from the other
one. The companies that follow sales orientation suggest that the customers’ can be attracted towards the product. They
also believe that goods are not bought but they have to be sold. Consequently, the organisations focus on their efforts
towards communicating and attracting customers. They follow the philosophy ‘selling what you have’. For example, a
company that manufactures the wrist watches only with metal straps and they do not give any importance to the trend
going on in the market, like whether people are liking the chain straps or not, whether people are wanting any
modifications in their watches or not, etc. This orientation was prevalent majorly from the late 1920s till the mid of 1950s.
!

On the other hand some companies follow the marketing orientation. Marketing orientation is a customer-oriented
concept, it is also known as the modem marketing concept. The basic philosophy of marketing concept states that the
objective of an organisation can only be achieved by acknowledging consumers’ needs and wants as well as satisfying s
them. This also helps the organisation to maximise their profits. The organisations follow the customer-oriented concept to
develop products which can satisfy and attract the customers. For example, if a wrist watch company follows marketing
orientation, then it will understand the needs and wants of the consumers as well as the trends going on in the market. Such
wrist-watch company will probably launch its variants in chain strap, robber strap, leather strap, denim strap, etc., as per
the demands of the consumers.
Or
Ques 1 b) “The power of marketing and the way it can manipulate a person’s view of a company or brand is
something which has fascinated for several years”, Comment. Define marketing and explain the core concepts of
marketing. (10) r
Ans: Marketing
Marketing is a very powerful tool used by the companies to manipulate the viewpoint of a customer regarding a product or
V a company. Without marketing, a person may be unaware about the existence of a certain product or brand, or he may be
M unaware that he has a certain need which can be satisfied with an existing product. Marketing makes the customer aware
Solved Paper (2015) 157

about the developments going on in the market and it educates them regarding several products and service, theii; usages,
etc. People may perceive a product or a brand differently if they do not have accurate information about it, while their
perception may totally change as soon as they get to know about it.

In a narrow view, marketing is an activity of selling and purchasing of goods or services. But, the nature and scope of
marketing is a much wider perspective. Along with the fulfilment of needs and wants related to the sale and purchase of
goods and services, it encompasses the whole process of customer satisfaction.

Marketing
Refer Unit-1, Page No. 11

Core Concepts of Marketing

Refer Unit-1, Page No. 13

Ques 2 a) i) “If you are able to know why and how consumers buy, what they buy, you can be successful marketer”,
Comment and explain the various factors, which affect the consumer buying behaviour.

Ans: Knowing the needs and wants of the consumers, their buying motive, and their tastes and preferences is very essential
for a successful marketer. The study of consumer behaviour assists the marketers to determine how customers buy, what
they buy and why they buy.

Factors Affecting Consumer Buying Behaviour/Factors Affecting Consumer Behaviour

Refer Unit-4, Page No. 103

Ques 2 a) ii) Analyse the steps involved in the buying decision process for the product ‘Green Tea’. (10)
Ans: Steps of the Buying Decision Process (Green Tea)
1) ' Problem Recognition: The buying process starts with problem/need recognition by intemal/extemal stimuli. In case
of tea it is an internal stimulus that triggers the need. People want a natural drink and because of green tea’s herbal and
refreshing qualities, customers looking for such qualities in their beverage will chose green tea over others.
2) Information search: When the need for a drink like green tea arises, the information search is not an elaborate
process. Most families are loyal to a particular brand. But if there is a switch from regular tea to green tea the most
influencing factor is family and friends. Usually the reason to switch to herbal teas is for reasons of health. And in
such matters people trust their close ones (personal factors) before any other external factors. Commercial factors such
as advertising, promotional campaigns, etc. also play an important role.
3) Evaluation of Alternatives: When looking for an alternative for green tea in the market, a lot of options are available.
This makes it a very competitive market with the likes of soft drinks, coffee, juices, energy drinks, water, regular tea,
and black tea. But the buying decision is based on the closeness of attributes that the person is looking in the product.
And green tea with its unique health related attributes appeals to someone looking for similar attributes.
4) Purchase Decision: The decision to buy certain brand of green tea is taken after evaluating different available
alternatives and when all the needs that the customer is looking for are met.
5) Post Purchase Behaviour: Green tea is mainly known for its health benefits. This leads to post purchase satisfaction,
as the customers feel good about staying healthy and spreading the message to stay healthy.

Or
Ques 2 b) i) Consumer wants to purchase Tractor. Explain the various factors, which would affect the consumer
buying behaviour.

Ans: Factors affecting Consumer Buying Behaviour in case of Buying a Tractor

1) Cultural Factors: Culture is the key element for determining individual’s buying behaviour. The cultural factors
influencing; the features of a society consists of earned values, norms, rituals, and symbols. In case of purchase of a
tractor, the culture plays a role in a way that with what values the customer (farmer) had grew up. Whether he had
learned the values of ploughing the land using horses, oxen, etc., or he had always seen the land ploughing through
tractors.
2) Social Factors: Following social factors would influence the buying behaviour:
i) Reference Group: Being a social class member, an individual always compares his abilities and opinions with
the defined abilities of a reference. Hence, before buying a tractor, the customer will compare his opinions with
that of the members of his reference group; i'.e., other farmers of his village, people of farmer union, etc.
 ;

158 ' MBA First Semester (Basics of Marketing) SPPU

ii) Family: Buyer’s behaviour is largely influenced by his family members. Family is the, main buying organisation
in the society. There are two types of families, such as: , ,v ‘
a) Family of Orientation: An individual attains an orientation from parents towards their religion, politics, self-
worth, etc. It is usually observed that grown-up children who are living with theirparents signify them as
their ideal reference group.
b) Family of Procreation: In this type of family, the buying behaviour is affected by every family member such as
spouse, children, parents, etc. They purchase products considering the requirements of every individual in a family.
In case of tractors, the buying behaviour of consumer would be influenced by the family of orientation.
3) Personal Factors: In case of purchasing a tractor, the personal factors that would affect the decision of purchaser are
his occupation and economic circumstances. One of the basic uses of tractors is to plough land; hence the people who
are farmer by occupation are more likely to purchase it rather than a service person, etc, Similarly, some farmers
cannot afford to buy a tractor for ploughing land; hence, economic circumstances of farmers play an important role.

Ques 2 b) ii) Enlist and analyse the steps involved in the buying decision process for ‘Mobile Handset’. (10)
. ;V.
'

... . .
'
.
Ans: Steps of the Buying Decision Process (Mobile Handset)
Refer Solved Paper 2014, Ques 2 b) i)

Ques 3 a) “Marketing managers have to take and revise their Marketing Decisions considering the change in macro
environmental forces”, Comment, Explain various types of environmental forces and factors influencing marketing
decisions. (10)

Ans: An effective manager should keep himself updated with changes going on in the micro and macro environments of
the organisation in order to keep the marketing strategies in synchronisation with the changes in the marketing
environment. This practice is necessary for the marketing managers because the environmental factors or forces directly or
indirectly impact the functioning of the organisation.

According to Philip Kotler, “Marketing environment refers to external factors and forces that affect the company’s ability
to develop and maintain successful relationship with its target customers”.

Environmental Forces and Factors Influencing Marketing Decisions/ Components of Marketing Environment
Refer Unit-2, Page No. 57
Or
Ques 3 b) Undertake the environmental analysis for any two of the following markets: (10)
i) Medical Shop

Ans; Environmental Analysis for a Medical Shop

1) Micro Environment
i) Suppliers: The whole sale market and the medical representatives of the pharmaceutical companies act as a
supplier for a medical shop.
ii) Competitors: In case of a medical shop, price variation can come only due to the discounts offered by different
shops in order to increase their sales.
iii) Customers: Type of customers affects the functioning of a medical shop. Different customers have different
requirements.
2) Macro Environment
i) Economic Factors: The prices of some import based medicines may fluctuate with the currency exchange rates,
which in turn can affect the sales figure of a medical store.
ii) Government-Legal-Regulatory Factors: These factors greatly influence every industry and organisations
because the rules, regulations, provisions concerning every business organisations are [Link] amended by
the Government.

Ques 3 b) ii) Beauty Parlour

i :
j

Ansi Environmental Analysis for a Beauty Parlour :t *.v

1> Micro Environment ...
i) Suppliers: The whole sale market and the retailers of beaqty products act as a supplier for [Link] parlour.
Nature and availability of suppliers affect the functioning of beauty parlours.
Solved Paper (2015) 159

ii) Competitors: In ‘case 6f a beauty parlour, price variation cart easily be seen because this sector is partially based
on services, and by keeping the prices low it can enjoy the economies Of scale.
iii) Customers: Type, of customers affects the functioning of a beauty parlour. Different customers have different
requirements.
2) Macro Environment •
i) Economic Factor; Beauty parlours are usually considered as a luxury service. Hence, if the economy of a
country faces a downturn, then the business of beauty parlour may also see a decrease in the footfall of the
customers. /

ii) Socio-Cultural Factors: The cultural beliefs and traditions of the society"affect the mode of operation of the beauty
parlour. Different cultural aspects are associated with the beauty package provided by different beauty parlours.
iii) Technological Factors: Technological developments occurring in the field of beauty parlour industry affect the
operations of the beauty parlours. With the advent of new accessories and kits different new beauty methods are
invented.

Ques 3 b) iii) Telecom

Ans: Environmental Analysis for a Telecom
1) Micro Environment
i) Market Intermediaries: Retailers and agents are the intermediaries which affect the functioning of the telecom
company. Their customer reach and level of customer service affect the marketing of telecom company.
ii) Customers: The nature and types of customers also influence the marketing of telecom company. Different
customers have different requirements.
iii) Competitors: Telecom company may have numerous competitors working on different pricing and product strategy.
2) Macro Environment
i) Political Factors: Political factors that impact the telecom industry are the ways through which the government
intervenes in the functioning of the telecom industry. Government laws have always put restrictions on phones
and the tariffs that the telecommunication industry can easily produce.
ii) Economic Factors: Inflation rate, economic growth, and interest rates are known to have great impacts on the
telecommunication industry.
iii) Technological Factors: There has been matchless advancement in the technological sector. New phone models
and communication are being produced on daily basis and this clarifies that all companies are focused on new
technologies in the market.
iv) Environmental Factors: These are the environment related factors that surround the telecommunication sector.
Companies need to consider public opinions in order to have a great way to excel in the market. Global warming
and climate change are a few things that many companies have to look at and work their way out.

Ques 4 a) As a marketing manager of an organisation develop ‘market segment, targeting and positioning’ for
marketing plan for following: (10)
i) Organic Agriculture Product

Ans: Segmenting, Targeting, and Positioning of Organic Agriculture Product

1) Segmenting: Organic products can be segmented on the following bases:
i) Demographic Segmentation: Organic products are grown in very controlled environmental conditions and many
efforts are needed for it, which in turn makes it prices higher. Hence, the people with high income will prefer it
the most. Other than this, only those persons who are sufficiently educated to understand the benefits of organic
product may prefer it. Ki - :V ;1 'ÿ<ÿ

ii) Psychogfaphic Segmentation: Lifestyle of- a person also forms ah important basis for segmenting the market of
organic products. Those persons who are health conscious and lead'd healthy lifestyle may understand the worth
of these products.
2) Targeting: The company of organic products should adopt the ‘product specialisation’ as their targeting strategy.
Here, the company should mainly focus on the product and its features. It should specialise a product and then sell it to
various market segments.
3) Positioning: The ‘category positioning’ is the positioning strategy that best suits for the positioning of organic
products, because organic products are entirely ' different from the conventional product of similar characteristics. In
this type of strategy, the product is positioned other than its original category to which it belongs.
160 MBA First Semester (Basics of Marketing) SPPU

Ques 4 a) ii) Washing Machine

Ans: Segmenting, Targeting, and Positioning of Washing Machine

1) Segmenting: Market segmentation of washing machine can be done on following basis:
i) Demographic Segmentation: Many demographic factors can be considered in order to segment market for a
washing machine such as marital status because married person are more likely to purchase home appliances
instead of the bachelors. Similarly, market for washing machine can also be segmented on the basis of income
level of the consumer. Additionally, the size of the family can also be a basis for segmentation, e.g., a family of
two is less likely to purchase a washing machine than that of a family of 4 or more members.
ii) Psychographic Segmentation: The lifestyle of a person depends on his/her standard of living. Hence it also
forms an important basis of segmentation for washing machines.
iii) Behavioural Segmentation: It involves segmenting the market on the basis of understanding how customers use
a particular product, what they know about product or what their attitude towards a product is or how they
respond towards a particular product. Buyer readiness stage also forms an important basis of segmentation. There
are different readiness stages of consumers to buy a product. The market for washing machine can be segmented
as per the readiness of the consumers.
!
2) Targeting: The differentiated marketing strategy best suits for targeting the markets of washing machine. The
company should produce and design different product value propositions for different market segments. It therefore,
caters to the individual needs and wants of customers belonging to a particular segment. For example, every company
of washing machine serves various segments of customers by offering them variety of machines like semi-automatic,
automatic, front loading, top loading, etc. Other than these, they also offer a range of capacities.

Differentiated marketing is also called selective marketing or multi-segment marketing. Unlike undifferentiated
marketing, here, the firm brings different products to address different needs of customers in different segments. With
this, the firm is able to find out consumer groups who are loyal towards their products. Then the firm mainly focuses
on those customers and creates good relations with them. The parameters like age, income, gender, economic status,
and occupation are considered which are commonly found in customer groups.
3) Positioning: Attribute positioning strategy is used for positioning washing machines. Different attributes like easy to
use, friendly with clothes, electricity efficient, etc., are used for positioning washing machines.

Or
Ques 4 b) Pruthvi Private Ltd. manufactures variety of woollen garments. As a marketing manager of a company,
how would you segments the market for such products to be sold all over India? Analyse various segmentation
bases used by marketing manager of company. GO)

Ans: Market Segmentation for Woollen Garments

1) Geographic Segmentation: This includes the segmentation of market based on location, size, population density,
climate, etc. This type of segmentation enables the planning for better marketing. Rural and urban markets can be
easily segmented by such segmentation. The geographic location is very helpful for marketers to design the marketing
plan. For example, there are different regions in India like Assam, Bengal, Punjab, Gujarat and Tamil Nadu which
!
prefer clothes and food-items based on their regional culture and food habits. Marketers must be very much conversant
with regional languages. Also, places known for extreme climate conditions affect the need as well as the buying
behaviour. For example, in cold climate there is permanent need for woollen garments, heating systems and for hot
climate air-conditioners are needed. :
In case of woollen garments, the company should segment its market on the basis of climate, i.e., the hilly areas where
the climate is cold most of the times can be the market of Pruthvi Private Ltd. On the other hand, the desert and coastal
areas can be the seasonal markets of woollen garments.
2) Demographic Segmentation: Another important basis commonly used for market segmentation is the demography,
i.e. age, gender, income, education, religion, family size, social class, nationality, etc. This type of division of market
is admired by most marketers. These are age and life cycle stage, gender and sexual orientation, marital status, income,
social class, family size, occupation, educational level, religion, etc.

cm beSseÿmen2dgoTtil\fa?°rf S°me
“* fiT** segmenting the of woollen garments. For example, it
and foS nrints Purefersharp Colours and Printed desi8ns’ whereas adults want plain
 Solved Paper (2015) 161

3) Psychographic Segmentation: Psychographic segmentation of the market is not absolutely correct and it is generally
found that persons of same age, equal financial status, educational background and occupation adopt different
procedures in purchasing the products, selecting a new product or choosing a shop. This is due to some psychographic
factors which include personality, values, lifestyles, beliefs, etc. These are lifestyles, personality, values, beliefs, etc.
This basis of segmentation considers the factors such as lifestyles and personality. Company can also segment its
market of woollen garments on the basis of these factors. For example, the youngsters may prefer different and trendy
styles and fittings in garments, whereas the office going adults may like formal fitting and styles.
4) Behavioural Segmentation: It involves segmenting the market on the basis of understanding how customers use a
particular product, what they know about product or what their attitude towards a product is or how they respond
towards a particular product. The market segmentation is based upon the analysis of behavioural variables like
occasions, benefits, user status, usage rate, consumer’s loyalty and attitude of the consumers. The analysis of these
variables helps in developing the market segments. These derivatives are occasions, benefits, user status, quantity
consumed, buyer readiness stage, loyalty status, attitude, etc.

Pruthvi Private Ltd. can segment its market of woollen garments also on the basis of behavioural segmentation. For
example, one of the factors that come under this basis is occasion. Different customers may require woollen garments
for different occasions such as, marriage parties, as a school uniform, business meetings, sports meets, etc.

Ques 5 a) Define product Explain the Product Mix with respect to a FMCG company. Make necessary assumptions.

Ans: Product
Refer Unit-5, Page No. 129

Product Mix
Out of Syllabus

Product Mix Decisions

Out of Syllabus
Or
Ques 5 b) What do you mean by a product? Classify Consumer products and Industrial products in detail. (10)

Ans: Product
Refer Unit-5, Page No. 129

Classification of Consumer Products

Out of Syllabus

Classification of Industrial Products

Out of Syllabus

1
 i

162 MBA First Semester (Basics of Marketing) SPPU

SAVITRIBAI PHULE PUNE UNIVERSITY

[MBA - FIRST SEMESTER EXAMINATION, 201 6|
BASICS OF MARKETING
Time: 2*/2 Hours Max. Marks: 50 i
Note: 1) All questions are compulsory. . . .
2) Each question has an internal option.
3) Each question carries 10 marks.
4) Figures to the right indicate marks for that question.

Ques 1 a) ‘To be successful, each company that deals with customer on a regular basis must not only be customer driven
but also customer obsessed.” Explain the concept of selling versus marketing in the light of above statement. (10)

Ans: The modem concept of marketing is customer-based. According to this concept, no organisation can attain profit and sales
maximisation until and unless they aim to focus on the customer’s needs and wants. The main purpose of this concept is to satisfy
the customer in the best possible way. To be successful, each company that deals with customer on a regular basis must not only
be customer driven but also customer obsessed. This is very appropriate in recent times where customer is the king.
Selling versus Marketing
Refer Unit-1, Page No. 21
:
Or
Ques 1 b) Design a marketing mix for a milk chocolate product.

Ans: Marketing Mix for a Milk Chocolate Product named Zing

The Marketing mix of Zing discusses the 4P’s. Below are the products, price, placement and promotions of Zing:
1) Product: Zing is a milk chocolate product. It is offered in two different varieties, i.e., with nuts or without huts.
2) Price: In India, price matters the most. Zing has a very convenient price. A 30 gm packet is priced at 20 rupees. The
price charged for a milk chocolate can determine whether a consumer will buy it. Zing also works with a number of
third-party promoters and businesses in order to offer discount on the entry price.
3) Place: Zing is produced at the chocolate factory in Noida in India. After the chocolate is produced and has undergone
all the quality checks, it is transported to the stockrooms within India. After this, it is transported to shops that deal
with beverages and confectionery, e.g., corner shops, super stores. They then sell it to the general public.
4) Promotion: Promotion of Zing to various target audiences is a vital part of the management function. Different modes
through which company promotes its milk chocolate are:
i) Television
ii) Internet
iii) Print media
iv) Posters

Ques 2 a) Explain the comparison between organisational buying behaviour and consumer buying behaviour. (10)
f
Ans: Comparison between Organisational Buying Behaviour and Consumer Buying Behaviour
Refer Unit-4, Page No. 123
Or
Ques 2 b) Analyse the steps involved in buying decision process for a price.
Ans: Steps Involved in Buying Decision Process/ Five Steps Consumer Buyer Decision Process
Refer Unit-4, Page No. 107

Ques 3 a) Explain various macro environmental elements. How do they affect any business organisation - explain it
with suitable example. (10)
j
Ans: Macro Environmental Elements/Major Forces Impacting the Macro Environment and their Impact on
Business Organisation
Refer Unit-2, Page No. 60
Solved Paper (2016) 163

i Or
Ques 3 b) Undertake the micro environmental analysis for any one of the following markets:
i) Beauty parlour
-
r.v.v.v.v •

Ans: Micro Environmental Analysis for a Beauty Parlour

!>S

Refer SP 2015, Ques 3 b) ii)

Ques 3 b) ii) Fast-food restaurant

Ans: Micro Environmental Analysis for a Fast Food Restaurant
1) Suppliers: The wholesaler of vegetables, fruits, herbs and spices, oil, beverage, and groceries etc., will act as supplier
for a fast food restaurant.
2) Competitors: In case of a fast food restaurant the competitors can be other big restaurants offering same food at same
price in order to increase their sales.
3) Customers: Fast food restaurant customer pays attention to many different aspects. That is why biggest companies
offer so many various products. These days’ customers demand more and check who can provide them. Customers are
important because they pay for food to run somebody’s business.

Ques 4 a) Write a short note on any two of the following: (10)

i) USP (Unique Selling Proposition)

Ans: USP (Unique Selling Proposition)

Refer Unit-3, Page No. 93

Ques 4 a) ii) Niche Marketing

Ans: Niche Marketing
Refer Unit-3, Page No. 78

Ques 4 a) iii) Differentiation and Positioning

Ans: Differentiation and Positioning/Positioning and Differentiation
Refer Unit-3, Page No. 88
Or
Ques 4 b) What is meant by market segmentation? What will be the suitable base for market segmentation of a
Power Bank (for smartphones)?
Ans: Market Segmentation
Refer Unit-3, Page No. 72

Market Segmentation Base for Power Bank (For Smartphones)

Power Bank has been usually targeted at the upper and middle class. However, this category has recently expanded to
include middle class, housewives and upper-class rural consumers. Teenagers also form a major segment. For Power Bank
the base for market segmentation is benefits derived (behavioural segmentation). Therefore, here buyers are divided into
benefit segment. Here, the marketer identifies benefits that a customer looks for when buying a product.

Buyers can be classified according to the benefits they seek. On a purchase of same product different customer look for
different benefit because of which they buy products from different companies which satisfy their specific needs.

For example, Samsung Power Bank is considered the best Power Bank in India. Benefits that consumers get when using
Samsung Power Bank is fast charging, 2 USB ports, easy to handle, and waterproof.

Ques 5 a) Distinguish between consumer products and industrial products. Explain various classification of
consumer goods/products. (10)

Ans: Out of Syllabus

Or
Ques 5 b) What ar$ (he constituents of product mix. Explain them in context with any FMCG product of your choice?
Ans: Out of Syllabus
 i.
!
‘H .1.1

;
164 MBA First Semester (Basics of Marketing) SPPU

SAVITRIBAI PHULE PUNE UNIVERSITY'V

MBA - FIRST SEMESTER EXAMINATION 2017 -
BASICS OF MARKETING
Time: 214 Hours Max. Mark: 50
Note: 1) All questions are compulsory.
2) Each question has an internal option.
3) Each question carries 10 marks. ;
4) Figure to the right indicated full marks.

Ques 1 a) Choose any one kind of retail shop of your choice. Discuss the way it uses 4 P’s of marketing mix to
position itself to as a successful business. (10)
i) Electronic store.
Ans: Marketing Mix of Electronic Store
1) Product: In case of electronics store, product includes a wide range of national and international brands offering a
widest assortment of products spanning across audio & video products, digital cameras, durables like air conditioners,
refrigerators, washing machines, microwave ovens, water purifiers, kitchen and home appliances, gaming consoles &
games, computers, laptops, tablets & peripherals, mobile and fixed line instruments as well as a wide range of
accessories and new-age gadgets across all major product categories. It aims to provide customers a delightful
shopping experience and help them in bringing home the latest & best of technology at unbeatable price.
2) Price: Pricing in case of electronics store is same as that in case of wholesaler and retailer. The average profit of
electronic megastores and mobile retail stores in India ranges from 25% to 35% for each product. This depends on
various parameters like product type, market demand and brand of the product. There are two types of selling the
product, i.e., single payment and installment basis. Retailer always gets high profit in instalment than single payment.
In electronic megastores, for products like OTG cables, bluetooth headsets and mobile covers, the retailers get profit
from 80% to 90% due to its high purchasability and low price. For products like televisions and laptops, the retailers
get profit from 10% to 12% and it consumes a lot of space in the shops as well.
3) Place: The electronics store should be easily accessible by all the targeted customers. All the metro cities alongwith
major towns should be targeted where potential customers can be attracted. Electronic stores can either be opened at
shopping malls or can also be situated as a stand-alone store. However, chances of purchase increases when it is
placed at shopping malls as people tend to purchase more at a more convenient location. An electronic megastore must
target all the major cities of the country.
4) Promotion: Promotion is a communication process, by which the producers of the products or services draw attention
of the consumers or prospective consumers towards their products and services. In case of electronics store, promotion
can be done through direct mailers, discounts, newspaper ads, yellow pages, referrals through other local businesses,
radio ads, billboards, web banners on local information sites, etc.
ii) Mobile store.
Ans: Marketing Mix of Mobile Store
1) Product: A typical mobile store sells mobile phones of domestic and international brands like Apple, BlackBerry,
HTC, Karbonn Mobiles, Micromax, Motorola, LG electronics, Panasonic, Spice, Samsung, Sony, VIVO, OPPO,
Huawei, Lenovo, Xiaomi, OnePlus, etc. Some mobile stores also provide online mobile and DTH credit recharge.
2) Price: Pricing is a powerful marketing instrument for a company. In mobile retail stores, if for a particular handset, the

_______
MRP is ?8950 and DP (Dealer price) is around Rs.8200. When the retailer purchases from the distributor, he may get a
discount around 3 to 4% from DP. So, the retailer purchased the mobile from distributor around ?8000-8150. As
mobile retail market is highly competitive, the retailer sells if around ?8300 by getting a profit range of ?200 to ?300.
In case of instalment, he sells it , around ?8600. •

3) Place: Similar to the electronics store, a mobile store should also be located in those places where people find easier
and convenient to buy mobile phones. In addition, mobile stores can also be placed online where customers can buy
mobile phones through their web portals. However, it is seen in most of the custoriiers that they prefer to buy mobile
phones through a physical store where they can actually see and test what they are buying. \
i
4) Promotion: Similar to the electronics store, a mobile store should also aggressively use TV, print media and internet
for the promotion. Mobile stores $an provide exclusive discounts to their customers having special membership or for
those customers who buy bundle of products. Some mobile stores can put the flagships phones oh display so that
customers may attract to the store _. *

A- -
Solved Paper (2017) 165
i- V
ili) Grocery store.
4
Ans: Marketing Mix of Groteify Store
1) Product: A typical grocery store has a huge range of product offerings at its various stores. The product offering is
vast so as to cater to eypry.; need and preference of the customers from different segments of the market. Usually, the
products include food, pet care products, beverages, frozen food, bakery products, home electrical products, horiie and
garden products, toys, sports and leisure products, baby and toddler products, party and gift products, health and
beauty products, clothing and jewellery, entertainment and books.
2) Price: Most of the grocery stores follow the strategy of cost leadership in its pricing strategy. They provide the lowest
priced goods while at the same time maintaining quality. They use economies of scale and the best channels for
procurement to maintain low prices. They continuously work with their suppliers to improve and make the supply
chain efficient to reduce prices.
3) Place (Distribution): Large grocery stores rely upon serving the needs of worldwide customers with thousands of
stores. These stores can also classify sub-stores having different products like veg sections and non-vegetarian
sections. Such stores can be placed at different locations as well. While locating the stores, it should be kept in mind
that it is easily located and accessible by the customers as well as the suppliers so as to maintain an effective supply
chain management.
4) Promotion: Grocery stores aim at building strong brand image which relies on low prices. Their promotional
activities are centred on this theme. They usually use hoardings, television ads, and charitable events as promotional
channels. It also uses to a large extent promotional discounts and offers such as buy one get one.
Or
Ques 1 b) Selling and Marketing - these two terms are the one we often hear in our day to day life, but in fact they are
two different functions. Distinguish and explain selling and marketing concept in the light of above statement. (10)
Ans: Selling is an action which converts the product into cash. It focuses on the seller needs whereas marketing
concentrates on the needs of the buyer. Selling is the modem version of exchange under the barter system. When the focus
is on selling, the company management thinks that after production of the product has been completed. It is the task of the
sales department to sell whatever the production department has manufactured.

Some companies focus on meeting customers' needs, which is called implementing the marketing concept. In contrast,
implementing the selling concept involves doing whatever is necessary to increase sales. The selling concept refers to
orienting the business to sell as many products as possible. To make a profit, the company uses aggressive tactics, such as
heavy advertising and pushy sales strategies, to convince consumers to buy the product. Achieving a high sales volume is how
the company makes a profit. The marketing concept is a philosophy. It makes the customer, and the satisfaction of his or her
needs, the focal point of all business activities. It is driven by senior managers, passionate about delighting their customers.

Marketing concept is the essence of the process of exchange for mutual satisfaction of the parties. It is a much broader
concept than selling or advertising. With increasing competition, it has evolved and developed from an activity of the firms
to a management function and further to a business philosophy. Marketing is not only much broader than selling, it is not a
specialized activity at all It encompasses the entire business. It is the whole business seen from the point of view of the
final result, that is, from the customer’s point of view. Concern and responsibility for marketing must therefore permeate
all areas of the enterprise.

Difference between Marketing and Selling/Selling versus Marketing

Refer Unit-1, Page No. 21

Ques 2 a) Consumer wants to purchase a refrigerator. Explain the consumer buying behaviour process in the
context of above situation. (10)

Ans: Buying Behaviour Process for Purchasing a Refrigerator

1) Problem Recognition: The consumer buying process for a refrigerator begins with the identification of a problem or a
need. This identification may come from internal stimuli, i.e., a person having a big family or an external one i.e., to
buy a more energy-efficient refrigerator. When consumers recognise a need, the inner-drive to fulfil the need is called
motivation. Therefore, marketers must find out what motivates their customers so that they can appeal to those
motives. In order Words, marketers must have a good' knowledge of buying motives.
2) Information Processing: Having recognised a problem or need, the next step a customer may take is the information
search stage, in order to find out what they feel is the best solution. This is the buyer’s effort to search internal and
external business' environments, in order to identify and evaluate information sources related to the central buying
decision. The customer may rely on print, visual, online media or word of mouth for obtaining information.
 - : T-

166 MBA First Semester (Basics of Marketing) SPPU

3) Evaluation of Alternatives: As one might expect, consumers will evaluate different refrigerators and brands at this
stage on the basis of alternative product attributes - those which have the ability to deliver the benefits the customer is
seeking. A factor that heavily influences this stage is the customer’s attitude. Inyolyepient is another factor that
influences the evaluation process. There is no single evaluation process used by all consumers or by one consumer in
all buying situations. There are several decision evaluation processes the most current mpdels of which see the process
as cognitively oriented. It can also be on the basis of factors such as the price, features, space, energy-efficiency, etc.
4) Purchase Decision: Once the consumer has narrowed down the possible alternatives to just a few, he/she may make a
decision to purchase. The consumer would decide whether to buy, and if so, then what, where, and when to buy.
Consumers may also postpone or forgo purchase decision, if none of the short-listed alternatives meets his/her needs.
A consumer’s decision to modify, postpone, or avoid a purchase decision is heavily influenced by perceived risk. The
amount of perceived risk varies with the amount of money at stake the amount of attribute uncertainty and the amount
of consumer self-confidence. :
5) Post-purchase Behaviour: In brief, customers will compare the purchased refrigerator with their previous expectations
and will be either satisfied or dissatisfied. Therefore, these stages are critical in retaining customers. This can greatly
affect the decision process for similar purchases from the same company in the future, having a knock-on effect at the
i information search stage and evaluation of alternatives stage. After purchasing the refrigerator, the consumer will
experience some level of satisfaction or dissatisfaction. The marketer’s job does not end when the product is bought.
Marketers must monitor post purchase satisfaction, post purchase actions and post purchase product uses.
Or ;ÿ

Ques 2 b) Explain the comparison between organisation buying behaviour and consumer buying behaviour. (10)

Ans: Comparison between Organisational Buying Behaviour and Consumer Buying Behaviour
Refer Unit-4, Page No. 123

Ques 3 a) What are the various elements in a Macro Environment. Explain them by justifying how do they affect
any business organisation with a suitable example. (10)

Ans: Elements in a Macro Environment/ Major Forces Impacting the Macro Environment and their Impact on
Business Organisation
Refer Unit-2, Page No. 60
Or
Ques 3 b) Undertake micro environment analysis for any one of the following markets. (10)
i) Beauty parlour/salon.

Ans: Micro Environmental Analysis for a Beauty Parlour/Salon

Refer SP 2015, Ques 3 b) ii)
ii) Fast food restaurant.

Ans: Micro Environmental Analysis for a Fast Food Restaurant

Refer SP 2016, Ques 3 b) ii)

Ques 4 a) Explain what is markets segmentation? Which segmentation variables do you think Godrej is using for
Hair dyes? (10)

Ans: Market Segmentation

Refer Unit-3, Page No. 72
Segmentation Variables Used by Godrej for Hair Dyes 1
Godrej Consumer Products (GCPL) is focusing on expanding its product portfolio in the mid-priced hair colour segment as
part of strategy to cement its lead in the category instead of competing with French cosmetic major L’Oreal’s super
premium brands like Gamier and Excellence. Godrej doesn’t plan to enter the segment for now. The company is lining
up its research and development investments towards developing newer technologies in mid-price hair colour segment. For
GCPL, hair colour is the second biggest business for the company. GCPL’s hair colour brands include Renew, Anoop,
Kesh Kala oil, permanent liquid hair dye, Kali Mehndi and Colour Soft. The company uses the following segmentation
variables for segmenting market for hair dyes:
1) Demographic Segmentation: This type of division of market is admired by most marketers. These are discussed below:
i) Age and Life Cycle Stage: The requirements of consumers are related to age group and this can be divided into
four categories, i.e. children, young, adult and old. Godrej hair dyes are mostly targeted to youngsters, adults, and
old people.
Solved Paper (2017) 167

ii) Gender and Sexual Orientation: Males and females have different requirements and it is inherent in their nature.
Godrej hair dyes are also segmented accordingly. <jf«, ,

iii) Income: Buying 'behaviour of consumers,is derived from their mcfttfÿ:’ In our couiitfy, if varies from few
thousands rupees to eVen millions. Therefore, individuals have different buying behaviour. Godrej hair dyes are
segmented while taking income into Consideration as there are different halir dyes pertaining to different prices.
Jvj Occupation: Occupation of an individual affects the buying behaviour to a great extent. In case of Godrej hair
dyes, people belonging to fashion occupation or film industry will purchase the product.
2) Psychographic Segmentation: This is due to some psychographic factors which include personality, values,
lifestyles, beliefs, etc. These are described below:
i) Lifestyles: Lifestyle of a person greatly affects the consumer’s buyingibehaviour. The lifestyle is associated with '\
the standard of living and the amount of time and money spent by a person. Some people try different hair colours
irrespective of whether they actually need it or not.
ii) Personality: Another variable in psychographic segmentation is personality. Different individuals have different
personality which determines their buying behaviour. Marketers utilise this phenomenon to design products
having brand personality. Thus they segment the market according to the personality of individuals; Godrej hair
colours keep personality in considerations as there is a wide range of colours that might suit different personality.
3) Behavioural Segmentation: It involves segmenting the market on the basis of understanding how customers use a /
particular product, what they know about product or what their attitude towards a product is or how they respond
towards a particular product. These derivatives are described below:
i) Occasions: The marketers do recognise the occasions that are helpful in developing needs. The household items
are regularly purchased by the salaried people after every first working day of the month. Godrej hair dyes also
segment according to this variable as people dye their hairs for the purpose of some occasions whether some
meeting, festivals, social gathering, or dating.
ii) Benefits: The market is also segmented on the basis of benefits derived by the consumer. A consumer may chose
Godrej hair dye for taking advantage of the benefits shown in the advertisement.
Or
Ques 4 b) Write short note on: (any Two) GO)
i) USP (Unique Selling Proposition).

Ans: USP (Unique Selling Proposition)

Refer Unit-3, Page No. 93

ii) Niche marketing.

Ans: Niche Marketing

Refer Unit-3, Page No. 78

iii) Differentiation and positioning.

Ans: Differentiation and Positioning/ Positioning and Differentiation

Refer Unit-3, Page No. 88

Ques 5 a) What do you understand by Goods-service continuum. Explain with a diagram and appropriate example. (10)
Ans: Goods-Services Continuum
Refer Unit-1, Page No. 13
Or
Ques 5 b) What do you understand by Product Mix. Explain its elements in context with any FMCG product of
your choice. (10)

Ans: Out of Syllabus

A
i
168 MBA First Semester (Basics of Marketing) SPPU

SAYITRIBAI PHULE PUNE UNIVERSITY

Is;:; •

MBA - FIRST SEMESTER EXAMINATION - 2018

c’i:.

BASICS OF MARKETING
Time: 214 Hours Max. Mark: 50

Note: 1) All questions are compulsory.

2) Each question has an internal option.
3) Each question carries 10 marks.
4) Figures to the right indicates marks for that question.

Ques 1 a) Design a marketing mix for a fast food resto. (10)

Ans: Marketing Mix for McDonalds

McDonald’s Corporation’s marketing mix (4Ps) involves various approaches that meet business concerns in different fast
food restaurant markets around the world. The marketing mix defines the strategies and tactics that a company uses to
reach target customers, in terms of products, place, promotion, and price (the 4Ps).
1) Products: McDonalds is one of the world’s leading fast food chains. McDonalds primarily sells hamburgers, chicken
products, cheeseburgers, breakfast items, soft drinks, milkshakes and desserts. McDonalds has also included salads,
smoothies, fish wraps and fruits. It is widely known for its hamburgers. All these are the product strategy in its
marketing mix. The original restaurant, which was started by McDonalds brothers, sold only hot dogs, hamburgers,
cheeseburgers, milkshakes and French fries.

The other products sold across the world include Beef Burgers, Big Mac, Big n Tasty, Double Cheese burger, Me
Spicy Burger. In chicken, McDonalds sells Me Chicken, Premium chicken sandwiches, snack wrap, Chicken Fajita,
Chicken Me Nuggets, Crispy Chicken Deluxe, Grilled chicken deluxe, Artisan grilled chicken. In Fish products such
as Fish McBites and Filet O Fish is known. McDonalds offers a range of breakfast sandwiches that include bagels,
biscuits, Hamdesal etc. In beverages, Coca Cola is the primary supplier of McDonalds. It also sells hot chocolates and
other juices. It adopts the product as per the local taste preference and cultural identity.
2) Price: McDonalds involves various price bundling strategies that offer bundling products with meals and other
products for customers. To ensure customers buy more products McDonalds focuses on psychological pricing
strategies in its marketing mix that appear affordable to customers. They had reduced prices in India by almost 25 %
so that customers prefer McDonalds as lunch and dining place. Its primary competitors are KFC, Subway, Pizza Hut
and Dominos. As part of the promotional pricing strategy, McDonalds offer discounts or bundling on certain products
and combination of different menu items as packed together. Their pricing strategy is also adapted to tap the lower
middle section of the society. McDonalds’ target customers are mostly young teenagers who wish are brand conscious
and want convenience.
3) Place: McDonalds restaurants are found in 110+ countries and it operates more than 36,000 restaurants worldwide.
The different types of restaurants formats are Me Drive, Me Cafe, Me Express, McDonalds Next and create your own
taste restaurant. Most McDonalds restaurants allow customers to drive through service with facilities such as indoor
and outdoor seating and counter service. Me Drive locations are near highways that do not offer seating service. Me
Cafe is a Australian subsidiary creation and it has increased the sales by 60%. As an open concept design, McDonalds
Next used digital ordering and offered free mobile charging and table service. It also banned smoking in its
restaurants. McDonalds maintains high quality standards and stringent hygiene norms.
4) Promotion: This element of the marketing mix defines the tactics that the business uses; to communicate with
customers. Among the 4Ps, this variable focuses on marketing communications with target customers. For example,
the company provides new information to persuade consumers to purchase new products. ,McDonald’s uses the
following tactics in its promotional mix, arranged according to significance in the business:
i) Advertising (most significant)
ii) Sales promotions
iii) Public relations
iv) Direct marketing I
Advertisements are the most notable among McDonald’s promotion tactics. The corporation uses TV, radio, print
media and online media for its advertisements. On the other hand, sales promotions are liked to draw more
customers to the company’s restaurants. For example, McDonald’s offers discount coupons antffreebies for certain
Solved Paper (2018) \v •’sV>r-I'IC 169

products and product bundles, as a way of attracting more consumers. In addition, the company’s public relations
activities help promote the business to the target market through goodwill and brand strengthening. Occasionally,
the company uses direct marketing, such as for corporate clientele, local governments, or community events and
parties. In this elementbjf: its 'marketing mix, McDonald’s Corporation advertising as its main approach
to promote its products.
5) People: The employees in McDonalds have a standard uniform and McDonalds specially focuses on friendly and
prompt service to its customers from their employees. All new franchise’s are trained in customer management and in
keeping the customers happy. They are also trained for handling negative responses from customers and what to do
when there is high pressure on the outlet. Such kind of training is especially useful when the employee has no job
experience and is working in a McDonalds outlet which is bound to get crowded on weekends or festivals.
6) Process: The food manufacturing process at McDonalds is completely transparent i.e. the whole process is visible to
the customers. In fact, the fast food joint allows its customers to view and judge the hygienic standards at McDonalds.
The customers are invited to check the ingredients used in food.
7) Physical Evidence: McDonalds focuses on clean and hygienic interiors of its outlets and at the same time, the
exteriors are attractive and the fast food joint maintains a proper decorum at its joints.
Or
Ques 1 b) Define marketing. Explain the core concepts of marketing with suitable examples. (10)

Ans: Marketing
Refer Unit-1, Page No. 11

Core Concepts of Marketing

Refer Unit-1, Page No. 13

Ques 2 a) Enlist and analyse the steps involved in the buying decision process for the product ‘i’ phone. (10)

Ans: Steps Involved in the Buying Decision Process for ‘i’ phone
1) Problem Recognition: The presence of decision making problem is obvious in developing a need or a want which the
consumer want to be fulfilled. Some problems that the buyers can identify may be:
i) Losing iPhone at school.
ii) Sending messages to people.
iii) In case of a car trouble whereby the buyer may not be able to contact anyone to let them know what happened.
2) Information Processing: The search process is the initial stage to purchase and use a commodity. The buyer can:
i) Search for different phones online at Amazon and Flipkart
ii) Ask friends and family what they thought was the best phone to buy
iii) Look at consumer reports to compare smartphones
3) Evaluation of Alternatives: There are some other factors like the quality, price, quantity, guarantee etc., on the basis
of which the consumers evaluate alternatives. The buyer can:
i) Wait and hope someone turns his/her iPhone in to the lost and found place at school
ii) Get an old iPhone’s, his/her first iPhone, cracked screen fixed, etc.
4) Purchase Processes: After evaluating the alternatives, the buyer can go on to purchase a new iphone.
5) Post Purchase Processes: The marketing strategy of Apple should be active after the purchase of the product by the
customers to retain the old customers as well as the new customers as the repeating lifetime customers. The buyer
might be:
i) Happy with the decision made
ii) The new iPhone looks and works great.
iii) No more rising the old iphone to contact friends and coworkers, and be in the ecosystem.

Five Steps Consumer Buyer Decision Process

Refer Unit-4, Page No. 107
Or
Ques 2 b) Explain the comparison between organisational buying behaviour and consumer buying behaviour. (10)

Ans: Comparison between Organisational Buying Behaviour and Consumer Buying Behaviour
Refer Unit-4, Page No. 123
 sÿ'ahzi:

r 170 MBA First Semester (Basics of Marketing) SPPU

Ques 3 a) Undertake the macro environmental analysis for any one of the following: (10)
i) Family holiday package. v4? ; .. '

And: Macro Environmental Analysis for Family Holiday Package (Makemytrip)

.w -
1) Political Factors; political factors pJajfjca significant role in determining the; factqrs-tbaFJC3n impact MakeMyTrip
Limited’s long term profitability in a certain country or market. Some political factors that need to be considered here are;
i) Political stability and importance of General Entertainment sector in the country's economy.
ii) Risk of military invasion C" ; .
iii) Level of corruption - especially levels of regulation in Services sector.
iv) Bureaucracy and interference in Generÿgntertainment industry by government.
2) Economic Factors: MakeMyTrip Limited can use country’s economic factor such as growth rate, inflation and
industry’s economic indicators such as General Entertainment industry growth rate, donjshmer spending etc., to
forecast the growth trajectory. Some economic factors that Makemytrip can consider are:
i) Type of economic system in countries of operation - what type of economic system there is and how stable it is.
ii) Government intervention in the free market and related Services
iii) Exchange rates & stability of host cphntxy currency.
iv) Skill level of workforce in General Entertainment industry.
3) Social Factors: Shared beliefs and attitudes of the population play a great role in how marketers at MakeMyTrip
Limited will understand the customers of a given market. Certain social factors to be considered are:
i) Demographics and skill level of the population
I ii) Class structure, hierarchy and power structure in the society: •
iii) Culture (gender roles, social conventions etc.)
iv) Attitudes (health, environmental consciousness, etc.)
4) Technological Factors: Some technolbgical factors that can be considered are:
i) Recent technological developments by MakeMyTrip Limited competitors
ii) Technology's impact on product offering
iii) Impact on value chain structure in Services sector
iv) Rate of technological diffusion
5) Environmental Factors: Some of the environmental factors that a firm should consider beforehand are -
i) Weather
ii) Climate change
iii) Laws regulating environment pollution
iv) Recycling
v) Waste management in Services sector
vi) Attitudes toward “green” or ecological products
vii) Endangered species i=
viii) Attitudes toward and support for renewable energy
6) Legal Factors: Some of the legal factors that MakeMyTrip should consider are:
i) Anti-trust law in General Entertainment industry and overall in the country.
ii) Discrimination law
iii) Copyright, patents / Intellectual property law
iv) Consumer protection and e-commerce

Ques 3 a) ii) LED smart TV.

Ans: Macro Environmental Analysis for LED Smart TV (Sony)

1) Demographic Environment: For a company like Sony, which has different product lines in Smart LED TVs for
different location, ages and occupation, need to keep a close eye on the demographic environment. So that when a new
product is launched it is targeted to right age group, or occupation at a right time and location.
2) Economic Environment: Sony has to consider its Smart LED televisions’ prices and quality before the launch of its
J products. For example, the buying power in Europe and North America is considerably more than the third world countries.
3) Technological Environment: The changes in the technology are so rapid that no one can predict it. Sony is a
technology dependent company. So keeping an eye on the technology of latest smart LED TVs and keeping ahead of
the competitors play a vital role for Sony’s survival.
4) Political Environment: The political environment consists of Laws, Government agencies and pressure groups that
influence or limit various organisations and individuals in a given society. Sony, before mass producing a smart LED
TV for a country or a region, has to take permission from Government and other authorities.

jT
Solved Paper (2018) TilU'-l'V

Or .
w.

Ques 3 b) Explain the various elements of micro environment and how do they affect business organisation with the
help of suitable examples. (10)

Ans: Elements of Micro Environment and their Effect on Business Organisation/Major Forces Impacting the Micro
Environment is*

Refer Unit-2, Page No. 67

Ques 4 a) Explain the concept of differentiation and positioning in the context of today’s competitive environment (10)
Ans: Concept of Differentiation and Positioning in the Context of Today’s Competitive Environment
Refer Unit-3, Page No. 88

Or
Ques 4 b) Name and describe the bases for segmentation that might be used in segmenting consumer markets.
Which segmenting variables do you think ‘Godrej’ is using for ‘Hair Dyes’. (10)

Ans: Bases of Segmentation for Consumer Goods and Services

Refer Unit-3, Page No. 73 t

Segmentation Variables Used by Godrej for Hair Dyes

Refer SP 2017, Ques 4 a)

Ques 5 a) What are the elements of product mix? Describe product mix in the context of any FMCG product. (10)
Or
Ques 5 b) Write short notes (any Two): (10)
i) Convenience Goods.

Ans: Out of Syllabus

Ques 5 b) ii) Unsought Goods.

Ans: Out of Syllabus

Ques 5 b) iii) Goods and services continuum.

Ans: Goods-Services Continuum
Refer Unit-1, Page No. 13

r-,U

/I 4.

,nh.y i
172 MBA First Semester (Basics of Marketing) SPPU

UNIT-WISE CLASSIFICATION OF ,
PREVIOUS YEAR QUESTION PAPERS

UNIT-1
==»**
First Semester Examination, 2014 \
1 a) ‘Marketing is much broader concept than selling.’ Analyse the statement in context of concept of Marketing.
-
1 b) “Because the purpose of business is to create a customer, the business enterprise has two - and only two basic
functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs. Marketing is the
distinguishing, unique function of the business.” Comment and define Marketing. Explain the core concept of Marketing.
5 a) What is ‘Goods-service continuum’? Explain with a diagram and appropriate example.

First Semester Examination, 2015

1 a) “If our product is good, we do not require any marketing; customer will come on their own and buy it” says one
business owner. Do you agree? With reference to above explain the term Marketing Myopia and differentiate between
Sales and Marketing orientations in the context of a Wrist Watch Company.
1 b) “The power of marketing and the way it can manipulate a person’s view of a company or brand is something which
has fascinated for several years”, Comment. Define marketing and explain the core concepts of marketing.

First Semester Examination, 2016

1 a) “To be successful, each company that deals with customer on a regular basis must not only be customer driven but
also customer obsessed.” Explain the concept of selling versus marketing in the light of above statement.

First Semester Examination, 2017

1 b) Selling and Marketing - these two terms are the one we often hear in our day to day life, but in fact they are two
different functions. Distinguish and explain selling and marketing concept in the light of above statement.
5 a) What do you understand by Goods-service continuum. Explain with a diagram and appropriate example.
f:
First Semester Examination, 2018
1 b) Define marketing. Explain the core concepts of marketing with suitable examples.
5 b) iii) Goods and services continuum

\ UNIT-2
First Semester Examination, 2014
3 a) “Marketing managers have to constantly take and revise their marketing decisions considering the changes in micro
and macro environmental forces.” Comment. Explain various types of environmental forces and factors influencing
marketing decisions.
3 b) Undertake the Macro-envifonmental analysis for any two of the following markets:
i) Mobile services provider
ii) Pesticide, and ;
iii) Insurance.

First Semester Examination, 2015

3 a) “Marketing managers have to take and revise their Marketing Decisions considering the change in macro
environmental forces”, Comment. Explain various types of environmental forces and factors influencing marketing
decisions.
3 b) Undertake the environmental analysis for any two of the following markets: • >V
i) Medical Shop
ii) Beauty Parlour
iii) Telecom
 Classification 173

First Semester Examination, 2016

3 a) Explain various macro environmental elements. How do they affect any business organisation - explain it with
suitable example. '• ,
3 b) Undertake the micro environmental analysis for any one of the following markets:
\ .* -
i) Beauty parlour
ii) Fast-food restaurant

First Semester Examination, 2017

3 a) What are the various elements in a Macro Environment? Explain them by justifying how do they affect any business
organisation with a suitable example. V
3 b) Undertake micro environment analysis for any one of the following markets.
i) Beauty parlour/salon.
ii) Fast food restaurant.

First Semester Examination, 2018

3 a) Undertake the macro environmental analysis for any one of the following:
i) Family holiday package.
ii) LED smart TV.
3 b) Explain the various elements of micro environment and how do they affect business organisation with the help of
suitable examples.

UNIT-3
First Semester Examination, 2014
4 a) Name and describe the bases for segmentation that might be used in segmenting consumer markets. Which segmenting
variable(s) do you think ‘Dell’ is using for Personal Computer?
4 b) Thomson baby soap has taken early lead in terms of creating positioning in consumer mind. Company launches
various variances like Thomson soap for delicate skin arid Thomson soap for men. Analyse various bases of segmentation
used by the company.

First Semester Examination, 2015

4 a) As a marketing manager of an organisation develop ‘market segment, targeting and positioning’ for marketing plan for
following:
i) Organic Agriculture Product
ii) Washing Machine

4 b) Pruthvi Private Ltd. manufactures variety of woollen garments. As a marketing manager of a company, how would
you segments the market for such products to be sold all over India? Analyse various segmentation bases used by
marketing manager of company.

First Semester Examination, 2016

4 a) i) USP (Unique Selling Proposition)
4 a) ii) Niche Marketing
4 a) iii) Differentiation and Positioning
4 b) What is meant by market segmentation? What will be the suitable base for market segmentation of a Power Bank (for
smartphons)?

First Semester Examination, 2017

4 a) Explain what is markets segmentation? Which segmentation variables do you think Godrej is using for Hair dyes?
4 b) Write short note on:
i) USP (Unique Selling Proposition).
: ii) Niche marketing.
iii) Differentiation and positioning.

First Semester Examination, 2018

4 a) Explain the concept of differentiation and positioning in the context of today’s competitive environment.
4 b) Name and describe the bases for segmentation that might be used in segmenting consumer markets. Which
segmenting variables do you think ‘Godrej’ is using for ‘Hair Dyes’.
 474 MBA First Semester (Basics of Marketing) SPPU

UNIT-4
First Semester Examination, 2014
2 a) i) Consumer wants to purchase ‘A microwave oven’. Explain the various factors, which would affect the consumer
buying behaviour.
2 a) ii) What type of decision process would you expect most consumers to follow in their purchase of ‘Four Wheeler’?
2 b) i) Analyse the steps involved in buying decision process for ‘Touch Screen Mobile Handset’.
2 b) ii) Company ‘Saiganga’ wants to launch flavoured drinking water. As a marketing manager which factors you would
consider that affect the consumer buying behaviour.

First Semester Examination, 2015

:
2 a) i) “If you are able to know why and how consumers buy, what they buy, you can be successful marketer”, Comment
and explain the various factors, which affect the consumer buying behaviour.
2 a) ii) Analyse the steps involved in the buying decision process for the product ‘Green Tea’.
2 b) i) Consumer wants to purchase Tractor. Explain the various factors, which would affect the consumer buying
behaviour.
2 b) ii) Enlist and analyse the steps involved in the buying decision process for ‘Mobile Handset’.

First Semester Examination, 2016

2 a) Explain the comparison between organisational buying behaviour and consumer buying behaviour.
2 b) Analyse the steps involved in buying decision process for a price.

First Semester Examination, 2017

2 a) Consumer wants to purchase a refrigerator. Explain the consumer buying behaviour process in the context of above
situation.
2 b) Explain the comparison between organisation buying behaviour and consumer buying behaviour.

First Semester Examination, 2018

2 a) Enlist and analyse the steps involved in the buying decision process for the product ‘i’ phone.
2 b) Explain the comparison between organisational buying behaviour and consumer buying behaviour.

UNIT-5
First Semester Examination, 2014

First Semester Examination, 2015

5 a) Define product.
5 b) What do you mean by a product?

First Semester Examination, 2016

1 b) Design a marketing mix for a milk chocolate product.

First Semester Examination, 2017 j

1 a) Choose any one kind of retail shop of your choice. Discuss the way it uses 4 P’s of marketing mix to position itself to
as a successful business.
i) Electronic store.
j ii) Mobile store.
iii) Grocery store.

First Semester Examination, 2018

1 a) Design a marketing mix for a fast food resto.
 Index 175

Index
; A Homogeneous Preferences, 80 Jk* o ; - Product OrieptafitM}, 32
Product Specialisation, 85
Affiliate Marketing, 30 > >V
I .• <ÿ f - -n
Product User Positioning, 90
Attribute Positioning, 90 Production Orientation, 32
Image Differentiation, 93
B Imperfect Market, 24
Indirect Competition, 25 R
Behavioural Segmentation, 74
Individual Marketing, 79 Rapid Penetration Strategy, 139
Benefit Positioning, 90
Industrial Market, 24 Rapid Skimming Strategy, 139
Blog Marketing, 29 Influencer, 106 Really Simple Syndication (RSS), 30
Brand Endorsement Positioning, 91
Information Search, 109 Regional Market, 23
Bricks and Clicks Model, 31 Initiator, 106 Relational Marketing Orientation, 36
Budgeted Competition, 25
Internal Marketing Environment, 57, Relationship Marketing, 16
Bullion Market, 24
Internal Search, 109 f\ , Revival PLC Curve, 136
C International Market, 23 Routine Problems, 108
Category Positioning, 90 L s
Channel Differentiation, 93
Legal Environment, 66 Sales Orientation, 33
Classic PLC Curve, 136 Sales Potential, 98
Lexicographic Decision Rule, 114
Clustered Preferences, 81 Limited Market Coverage Targeting, 84 Search Advertising, 30
Cognitive Dissonance, 116 . Seasonal or Fashion PLC Curve, 136
Local Market, 23
Company Demand, 95 Secondary Market, 23
Local Marketing, 79
Compensatory Decision Rules, 113
Long Tail Marketing, 78 Segment Marketing, 77
Competition, 69 , Selective Specialisation, 85
Competitive Positioning, 90 M Stock Market, 24
Customer Satisfaction, 16
Macro Environment: Components and STP Approach, 71
Customers, 68
Characteristics, 59 Straight Re-Buy, 121,
D Manufactured Goods Market, 24 Suppliers, 68
Market Demand, 94 System Buying and Selling, 122
Decider, 106
Market Intermediaries, 68
Demand Measurement, 94 T
Market Potential, 95
Demands, 13
Moment of Truth, 124 • Target ISdiarketing, 71 ,
Demographic Environment, 65
Multimedia Messaging, 29 Targeting, 83
Demographic Segmentation, 73 Technological Environment, 64
Differentiated Marketing, 85 N- Terminal Market, 23
Diffused Preferences, 81
National Market, 23 Time Utility, 15
Digital Marketing, 28 Traditional PLC Curve, 136
Natural Environment, ,66
E Needs, 13 Transaction, 16
New Task, 121 Transactional Marketing Orientation, 34
Economic Environment, 62 Niche Marketing, 78 V Trend, 59 •
E-Mail Marketing, 30 Non-Compensatory Decision Rules, 113 *
Emergency Problems, 108
Evaluation of Alternatives, 111
Non-Profit and Government Markets, 26 .U
Undifferentiated Marketing, 85
v
Extended Fashion Fad PLC Curve, 136
External Marketing Environment, 58
o Unique Selling Proposition (USP), 93
On-going Search, 109 Usage and Use Time Positioning, 90
External Search, 109 Use or Application Positioning, 90
Online Advertising, 30
F Organisational Buying Behaviour, 117 User, 106
Ownership Utility, 15 Utility, 15
Fad, 59
Fashion Fad PLC Curve, 136 p y
Form Utility, 15 Value, 15 1 1 '

People, 132
Full Market Coverage Targeting, 85 Variety-Seeking Buying Behaviour, 105
Perfect Market, 24 '
Future Market, 23 Video Marketing, 30
Personal Motives, 106
G Personnel Differentiation, 92
Physical Evidence, 133 W
Gatekeeper, 106 Planning Problems, 108 Wants, 13
Geographic Segmentation, 73 Political Environment, 60 Wholesale Market, 24
Global Markets, 26 Post Purchase Processes, 114
Goods-Services Continuum, 13 Postioning and Differentiation, 88 Z
/ Product Class Positioning, 90 Zero Moment of Truth (ZMOT), 125
H
Product Differentiation, 91
Habitual Buying Behaviour, 105 Product Life Cycle (PLC), 135
Holistic Marketing Orientation, 35
 176 MBA First Semester (Basics of Marketing) SPPU

Bibliography
Kotler, Philip, Keller, Kelvin Lane, Koshy, Abraham & Jha, Mithileshwar. Marketing Management
(A South Asian Perpective) 13th Edition. Pearson.
Saxena, Rajan. Marketing Management. Tata McGraw Hill.
Lamb, Charles W., Hair, Joseph F., & McDaniel, Carl D. Marketing. Thomson Publishers.
Kotler, Philip & Armstrong, Gray. Principles of Marketing. Pearson.
Panda, Tapan. Marketing Management. Excel Publications.
Ramaswamy, V.S. & Namakumari, S. Marketing Management, Planning, Implementation and Control.
Macmillan.
Etzel, Michael J., Walker, Bruce J. & Stanton, William J. Fundamentals of Marketing. Tata McGraw-Hill.
Baines, Paul, Fill, Chris, & Page, Kelly. Marketing: Asian Edition. Oxford University Press.
Masterson, Rosalind. & Pickton, David. Marketing: An Introduction. SAGE Publications.
Winer, Russ. & Dhar, Ravi. Marketing Management, 4th Edition. Pearson.
Kurtz. Principles of Marketing. Cengage Learning.
Schiffman, Leon G. & Kanuk, Leslie Lazar. Consumer Behaviour. Pearson.
Still, Richard R. Cundif, Edward W. and Govoni, Norman A. Sales Management (Decision, Strategy and
Cases). Pearson.
Capon, Noel and Singh, Sidharth Shekhar. Managing Marketing. Wiley.

Selected Sites
www. [Link]
[Link]
www. [Link]
www. wisegeek,com
[Link]
[Link]
[Link] N S:
[Link]

'V
\
J

-c