 Human wants are the form taken by human needs as they are shaped by culture

1. MARKETING CONCEPTS and individual personality.

 A myriad of factors contribute to making a business successful - strategy,  As people are exposed to more objects that arouse their interest and desire,
dedicated employees, good information systems, excellent implementation. producers try to provide more wants - satisfying products and services. People
 However, today's successful companies at all levels have one thing in common have narrow, basic needs (e.g. for food or shelter), but almost unlimited wants.
- they are strongly customer-focused and heavily committed to marketing.  However, they also have limited resources. Thus they want to choose products
 They share a dedication to sensing, serving and satisfying the needs of that provide the most satisfaction for their money.
customers in well-defined target markets. They motivate everyone in the  When backed by an ability to pay - that is, buying power - wants become
organization to deliver high quality and superior value for their customers, demands. Consumers view products as bundles of benefits and choose products
leading to high levels of customer satisfaction, and thus increased market share that give them the best bundle for their money.
and profits.
2. Products and services
 Marketing is the delivery of customer satisfaction at a profit. The goal of
marketing is to attract new customers by promising superior value, and to keep  People satisfy their needs and wants with products.

current customers by delivering satisfaction.  A product is anything that can be offered to satisfy a need or want.
 Usually, the word product suggests a physical object. However, the concept of
What is marketing?
product is not limited to physical objects - anything capable of satisfying a need
 A social and managerial process by which individuals and groups obtain what can be called a product.
they need and want through creating and exchanging products and value with  Products include services, which are activities or benefits offered for sale that
others. are essentially intangible and do not result in the ownership of anything.
1. Needs, Wants and Demands  If at times the term product does not seem to fit, we could substitute other

 The most basic concept underlying marketing. terms such as satisfier, resource or offer.

 A human need is a state of felt deprivation.  Many sellers make the mistake of paying more attention to the physical

 Humans have many complex needs. These include basic physical needs for food, products they offer than to the benefits produced by these products.

clothing, warmth and safety; social needs for belonging and affection; and  They see themselves as selling a product rather than providing a solution to a

individual needs for knowledge and self-expression. These needs are not need.

invented by marketers, they are a basic part of the human make-up.  The importance of physical goods lies not so much in owning them as in the

 Wants are described in terms of objects that will satisfy needs. As a society benefits they provide. We don't buy food to look at, but because it satisfies our

evolves, the wants of its members expand. hunger.

 3. Value, Satisfaction and Quality 4. Exchange, Transactions and Relationships
 Consumers usually face a broad array of products and services that might satisfy  Marketing occurs when people decide to satisfy needs and wants through
a given need. exchange.
 They make buying choices based on their perceptions of the value that various  Exchange is the act of obtaining a desired object from someone by offering
products and services deliver. something in return.
 Customer value is the difference between the values the customer gains from  As a means of satisfying needs, exchange has much in its favour.
owning and using a product and the costs of obtaining the product.  People do not have to prey on others or depend on donations. Nor must they
 Customers often do not judge product values and costs accurately or possess the skills to produce every necessity for themselves.
objectively. They act on perceived value.  They can concentrate on making things they are good at making and trade them
 Customer satisfaction is the extent to which a product's perceived performance for needed items made by others.
matches a buyer’s expectations. If the product's performance falls short of  For an exchange to take place, several conditions must be satisfied:
expectations, the buyer is dissatisfied. If performance matches or exceeds o At least two parties must participate and each must have something of value
expectations the buyer is satisfied, or delighted. to offer the other.
 Customer satisfaction is closely linked to quality. o Each party must also want to deal with the other party and each must be
 Quality has a direct impact on product performance, and hence on customer free to accept or reject the other's offer.
satisfaction. o Finally, each party must be able to communicate and deliver.
 Quality can be defined as 'freedom from defects'.  These conditions simply make exchange possible. Whether exchange actually
 But most customer-centred companies go beyond this narrow definition of takes place depends on the parties coming to an agreement. If they agree, we
quality. Instead, they define quality in terms of customer satisfaction. must conclude that the act of exchange has left both of them better off or, at
 For example, Motorola stresses that 'Quality has to do something for the least, not worse off. In this sense, exchange creates value just as production
customer. Our definition of a defect is "if the customer doesn't like it, it's a creates value. It gives people more consumption choices or possibilities.
defect".'  A transaction is marketing's unit of measurement.
 Customer-focused definitions of quality suggest that a company has achieved  A transaction consists of a trading of values between two parties. A transaction
total quality only when its products or services meet or exceed customer involves at least two things of value, conditions that are agreed upon, a time of
expectations. agreement and a place of agreement.
 Thus, the fundamental aim of today's total quality movement has become total  Transaction marketing is part of the larger idea of relationship marketing.
customer satisfaction. Quality begins with customer needs and ends with  Smart marketers work at building long-term relationships with valued
customer satisfaction. customers, distributors, dealers and suppliers.
 They build strong economic and social bonds by promising and consistently  Producers go to resource markets (raw material markets, labour markets,
delivering high-quality products, good service and fair prices. money markets), buy resources, turn them into goods and services, and sell
 Marketing is shifting from trying to maximize the profit on each individual them to intermediaries, who sell them to consumers.
transaction to maximizing mutually beneficial relationships with consumers and  The consumers sell their labour, for which they receive income to pay for the
other parties. goods and services they buy.
 Ultimately, a company wants to build a unique asset called a marketing network  The government is another market that plays several roles. It buys goods from
 This consists of the company and all of its supporting stakeholders: customers, resource, producer and intermediary markets; it pays them; it taxes these
employees, suppliers, distributors, retailers, ad agencies, and others with whom markets (including consumer markets); and it returns needed public services.
it has built mutually profitable business relationships. Thus each nation's economy and the whole world economy consist of complex
 Increasingly, competition is not between companies but rather between whole interacting sets of markets that are linked through exchange processes.
networks, with the prize going to the company that has built the best network.  In advanced societies, markets need not be physical locations. A merchant can
 The operating principle is simple: build a good network of relationships with easily advertise a product on a late evening television programme, take orders
key stakeholders, and profits will follow. from thousands of customers over the phone, and mail the goods to the buyers
on the following day without having had any physical contact with them.
5. Markets
 Businesspeople use the term markets to cover various groupings of customers.
 The concept of exchange leads to the concept of a market.
 They talk about need markets (such as health seekers); product markets (such as
 A market is the set of actual and potential buyers of a product.
teens or the baby boomers); and geographic markets (such as Western Europe
 These buyers share a particular need or want that can be satisfied through
or the United States).
exchange.
 Or they extend the concept to cover noncustomer groupings. For example, a
 Thus, the size of a market depends on the number of people who exhibit the
labour market consists of people who offer their work in return for wages or
need, have resources to engage in exchange, and are willing to offer these
products. Various institutions, such as employment agencies and job-counselling
resources in exchange for what they want.
firms, will grow up around a labour market to help it function better.
 Originally the term market stood for the place where buyers and sellers
 The money market is another important market that emerges to meet the needs
gathered to exchange their goods.
of people so that they can borrow, lend, save and protect money.
 Economists use the term to refer to a collection of buyers and sellers who
 The donor market has emerged to meet the financial needs of non-profit
transact in a particular product class, e.g. the housing market, the grain market.
organizations.
 Marketers, however, see the sellers as constituting an industry and the buyers
as constituting a market.
The main actors and forces in a modern marketing system o When the demand for a product exceeds the supply. Management should
look for ways to increase production.
o When the product's cost is too high and improved productivity is needed
Company to bring it down.
(marketer)  This concept thrives on the ability to increase output while decreasing costs.
Marketing End user
Supplier Companies that manufacture their products overseas are a perfect example of
( intermediaries market
the production concept. It decreases costs, savings they can pass on to the
Competitor
(m customer. Lower prices can be a might incentive for attracting new customers.
Unfortunately, there may be a decrease in quality, and eventually, a decrease in
sales if the process is not kept up to standards.
 The company and the competitors send their respective products and messages  However, companies operating under a production philosophy run a big risk of
directly to consumers or through marketing intermediaries to the end users. focusing too narrowly on their own operations.
All of the actors in the system are affected by major environmental forces -
demographic, economic, physical, technological, political/legal, social/cultural. 2. The Product Concept
 Each party in the system adds value for the next level. Thus, a company's success  This concept holds that consumers will favour those products that offer the
depends not only on its own actions but also on how well the entire value chain most quality, performance, or innovative features.
serves the needs of final consumers.
 Managers focusing on this concept concentrate on making superior products
and improving them over time. They assume that buyers admire well-made
products and can appraise quality and performance.
The core marketing philosophies
 However, these managers are sometimes caught up in a love affair with their
1. The Production Concept product and do not realize what the market needs. Management might commit
 The oldest of the concepts in business. the “better-mousetrap” fallacy, mistakenly believing that if they produce a
 It holds that consumers will prefer products that are widely available and inexpensive. technically better product than its competitors it will be more successful.
 Managers focusing on this concept concentrate on achieving high production  Many companies within the technology industry utilize the product concept.
efficiency, low costs, and mass distribution. They assume that consumers are These companies are constantly updating and releasing new products.
primarily interested in product availability and low prices.  However, releasing too often can leave customers frustrated that there were
 This orientation makes sense in developing countries, where consumers are very few changes while not releasing updates often enough can leave customers
more interested in obtaining the product than in its features. feeling that the company is out of date. Companies must review the needs of
 The production concept is a useful philosophy in two types of situations: the customer and implement those changes as quickly and efficiently as possible.
 Some manufacturers believe that if they can build a better mousetrap, the world on advertising. Candidate flaws are often hidden from the public because the
will beat a path to their door." But they are often rudely shocked. Buyers may aim is to get the sale, not to worry about consumer satisfaction afterwards.
well be looking for a better solution to a mouse problem, but not necessarily  The organization must, therefore, undertake an aggressive selling and
for a better mousetrap. The solution might be a chemical spray, an promotion effort.
exterminating service or something that works better than a mousetrap.  This concept assumes that consumers typically show buying resistance and must
Furthermore, a better mousetrap will not sell unless the manufacturer designs, be coaxed into buying. It also assumes that the company has a whole battery of
packages and prices it attractively; places it in convenient distribution channels; effective selling and promotional tools to stimulate more buying.
and brings it to the attention of people who need it and convinces them that it  Most firms practice the selling concept when they have overcapacity. Their aim
is a better product. is to sell what they make rather than make what the market wants.
 The product concept also can lead to 'marketing myopia'. For instance, railway  The problem with this approach is the assumption that the customer will
management once thought that users wanted trains rather than transportation certainly buy the product after the persuasion and if dissatisfied will not speak
and overlooked the growing challenge of airlines, buses, trucks and cars. to others. In reality, this does not happen and companies pursuing this concept
Building bigger and better trains would not satisfy consumers' demand for often fail in the business.
transportation, but creating other forms of transportation and extending choice
would.
4. The Marketing Concept
 This is a business philosophy that challenges the above three concepts. It
3. The Selling Concept originated in the 1950s. Surprisingly a relatively recent business philosophy.
 Many organizations follow the selling concept, which holds that consumers will  The concept holds that achieving organizational goals depends on determining
not buy enough of the organization's products unless it undertakes a large-scale the needs and wants of target markets and delivering the desired satisfactions
selling and promotion effort. more effectively and efficiently than competitors do.
 The concept is typically practised with unsought goods - those that buyers do  The selling concept and the marketing concept are frequently confused.
not normally think of buying, such as encyclopaedias, funeral plots, life  The selling concept takes an inside-out perspective. It starts with the factory,
insurance, firefighting equipment etc. These industries must be good at tracking focuses on the company's existing products and calls for heavy selling and
down prospects and convincing them of product benefits. promotion to obtain profitable sales. It focuses on customer conquest - getting
 The selling concept is also practised in the non-profit area. A political party, for short-term sales with little concern about who buys or why.
example, will vigorously sell its candidate to voters as a fantastic person for the  In contrast, the marketing concept takes an outside-in perspective. It starts with
job. The candidate works hard at selling themselves - shaking hands, kissing a well-defined market, focuses on customer needs, coordinates all the
babies, meeting donors and making speeches. Much money also has to be spent marketing activities affecting customers and makes profits by creating long-term
customer relationships based on customer value and satisfaction. Under the
 marketing concept, companies produce what consumers want, thereby  This concept questions whether the pure marketing concept is adequate in an
satisfying consumers and making profits. age of environmental problems, resource shortages, worldwide economic
problems and neglected social services.
Distinctions between the Selling Concept and the Marketing Concept:
 It asks if the firm that senses, serves and satisfies individual wants is always doing
o The Sales Concept focuses on the needs of the seller. The Marketing Concept
what's best for consumers and society in the long run. According to the societal
focuses on the needs of the buyer.
marketing concept, the pure marketing concept overlooks possible conflicts
o The Sales Concept is preoccupied with the seller’s need to convert their
between short-run consumer wants and long-run consumer welfare.
product into cash. The Marketing Concept is preoccupied with the idea of
 Consider the Coca-Cola Company. Most people see it as a highly responsible
satisfying the needs of the customer through the product as a solution to the
corporation producing fine soft drinks that satisfy consumer tastes. Yet certain
customer’s problem (needs).
consumer and environmental groups have voiced concerns that Coke has little,
nutritional value, can harm people's teeth, contains caffeine and adds to the
 The Marketing Concept represents the major change in today’s company
litter problem with disposable bottles and cans.
orientation that provides the foundation to achieve competitive advantage. This
 The concept calls upon marketers to build social and ethical considerations into
philosophy is the foundation of consultative selling.
their marketing practices. They must balance and juggle the often conflicting
 The concept has evolved into a fifth and more refined company orientation: the
criteria of company profits, consumer wants satisfaction, and public interest.
Societal Marketing Concept. This concept is more theoretical and will
 Originally, most companies based their marketing decisions largely on short-
undoubtedly influence future forms of marketing and selling approaches.
run company profit. Eventually, they began to recognize the long-run
importance of satisfying consumer wants, and the marketing concept emerged.
Now many companies are beginning to think of society's interests when making
5. The Societal Marketing Concept their marketing decisions.
 The marketing concept sidesteps the potential conflicts among consumer  Increasingly, firms also have to meet the expectations of society as a whole. For
wants, consumer interests, and long-run societal welfare. Yet some firms and example, society expects businesses genuinely to uphold basic ethical and
industries are criticized for satisfying consumer wants at society’s expense. environmental standards. Not only should they have ethics and environmental
 Such situations call for a new term that enlarges the marketing concept. policies, they must also back these with actions
 The societal marketing concept holds that the organization should determine
the needs, wants and interests of target markets.
 It should then deliver the desired satisfactions more effectively and efficiently
than competitors in a way that maintains or improves the consumer's and
society's well-being.
 Marketing Challenges into the Next Century

Society (human
 Marketing operates within a dynamic global environment. Every decade calls
welfare)
upon marketing managers to think afresh about their marketing objectives and
practices. Rapid changes can quickly make yesterday's winning strategies out of
Societal
Marketing date.
Consumer (want Company (profits) Today's companies are wrestling with:
satisfaction)

o changing customer values and orientations,

o increased global competition,
o environmental decline,
 A number of companies have achieved notable sales and profit gains by adopting o economic stagnation
and practicing the societal marketing concept. o Economic, political and social problems.
 Some companies practice a form of the societal marketing concept called cause-
 In the European Union (EU), as the concept of nationally separate markets
related marketing. Pringle and Thompson define this as “an activity by which a
vaporizes, competition among sellers will further intensify. There is increasing
company with an image, product, or service to market builds a relationship or
pressure on individual firms within member countries to adjust to evolving
partnership with a cause, or a number of causes, for mutual benefit.”
deregulation and advancement of universal trading standards within the single
 They see it as affording an opportunity for companies to enhance their
market. However, these problems also provide marketing opportunities.
corporate reputation, raise brand awareness, increase customer loyalty, build
sales, and increase press coverage. They believe that customers will increasingly
look for demonstrations of good corporate citizenship. Smart companies will Key trends and forces that are changing the marketing landscape
respond by adding “higher order” image attributes than simply rational and and challenging marketing strategy
emotional benefits.
1. The growth of non-profit marketing
 Critics, however, complain that cause-related marketing might make consumers
In recent years, marketing has become a major component in the strategies of many
feel they have fulfilled their philanthropic duties by buying products instead of
non-profit organizations, such as colleges, charities, churches, hospitals, museums,
donating to causes directly.
performing arts groups and even police departments. For example
 Thus societal marketing concept as related to cause-related marketing differs
mainly because here, the company makes a proactive effort to give back to the  Faced with the daunting task of selling the single currency to European
society. citizens, many of whom appeared disturbed by the economic sacrifices
involved, the European Commission turned to marketing and media experts
to develop a strategy to promote the 'euro'.
  To stem the falling number of church-goers, many Britain church groups
are seeking more effective ways to attract members and maintain financial
3. Rapid globalization
support. Despite the controversy, preachers are using TV and radio to
 The world economy has undergone radical change during the past two decades.
advertise religion. They are conducting marketing research to understand
 Geographical and cultural distances have shrunk with transportation and
member needs and are redesigning their 'service offerings ‘accordingly.
technological advances.
Some evangelical groups are even starting their own broadcasting stations.
 This has allowed companies greatly to expand their geographical market
coverage, purchasing and manufacturing. Many companies are trying to create
2. The information technology boom a global structure to move ideas swiftly around the world.
 It has created new ways to learn about and track customers, create products
and services tailored to meet customer needs, distribute products more
4. The changing world economy
efficiently and effectively, and communicate with customers in large groups or
 A sluggish world economy has resulted in more difficult times for both
one-to-one.
consumers and marketers. People's needs are greater than ever, but in many
o For example, through videoconferencing, marketing researchers at a
areas, people lack the means to pay for needed goods.
company's headquarters can look in on focus groups in other places without
 Markets, after all, consist of people with needs and purchasing power but in
ever stepping on a plane. A direct marketer can easily tap into online data
many cases, the latter is currently lacking.
services to learn anything from what car you drive to what you read.
 Many households have managed to maintain buying power only because both
 Using today's vastly more powerful computers, marketers create detailed
spouses work. However, many workers have lost their jobs as manufacturers
databases and use them to target individual customers with offers designed to
have automated to improve productivity or 'downsized' to cut costs.
meet their specific needs and buying patterns.
 Current economic conditions create both problems and opportunities for
 With a new wave of communication and advertising tools, marketers can zero
marketers. Some companies are facing declining demand and see few
in on selected customers with carefully targeted messages.
opportunities for growth. Others, however, are developing new solutions to
 Through electronic commerce, customers can design, order and pay for
changing consumer problems.
products and services - all without ever leaving home. From virtual reality
 These developments have raised customers' expectations of product quality,
displays that test new products to online virtual stores that sell them, the boom
performance and durability. Many are finding ways to offer consumers 'more
in computer, telecommunications and information technology is affecting every
for less'.
aspect of marketing.
 Perhaps the most dramatic new technology surrounds the development of the
Internet which is a vast and burgeoning global Web of computer networks, with
no central management or ownership.
5. Call for more socially responsible actions.  It is not enough to be product or technology-driven - too many companies still
 Recently, there has been an increased call for companies to take responsibility design their products without customer input, only to find them rejected in the
for the social and environmental impact of their actions, and few companies can marketplace. It is not enough to be good at winning" new customers - too many
ignore the renewed and very demanding environmental movement. forget about customers after the sale, only to lose their future business.
 The ethics and environmental movements will place even stricter demands on  There is an emphasis that the key to success on the rapidly changing marketing
companies in the future. Governments across the world must consider how to landscape will be a strong focus on the marketplace and a total marketing
handle such problems as the destruction of rainforests, global warming, commitment to providing value to customers.
endangered species and other environmental threats.
 Clearly, in the future, companies will be held to an increasingly high standard of
7. Social Responsibility and Marketing Ethics
environmental responsibility in their marketing and manufacturing activities.
 Responsible marketers discover what consumers want and respond with the
 The trend towards tougher environmental rules should drive non-conformers
right products, priced to give good value to buyers and profit to the producer.
out of business, while others who are committed to 'cleaning up' their practices
 The marketing concept is a philosophy of customer service and mutual gain. Its
and operations will emerge stronger. Specialist industries for environmental
practice leads the economy to satisfy the many and changing needs of millions
goods/services (e.g. paper, bottle recyclers) have expanded in recent years.
of consumers.
 In this era when the consumer is wiser to much more of a company's practice,
6. The new marketing landscape and when there are increasingly wide concerns about environmental issues,
 The new marketing landscape, especially in the last decade taught business firms animal testing and human rights, the need for social responsibility and sound
everywhere a humbling lesson. ethics in marketing has become crucial if customers' demands are to be fulfilled.
 Domestic companies learned that they cannot ignore global markets and  How companies behave in the broadest sense is beginning to have an impact on
competitors. Successful firms learned that they cannot overlook emerging how people view their products and services.
technologies and management approaches. Companies of every sort learned  However, not all marketers follow the marketing concept. In fact, some
that they cannot remain inwardly focused, ignoring customer needs. companies use questionable marketing practices, and some marketing actions
 Prominent Western multinationals of the 1970s which floundered at marketing, that seem innocent in themselves strongly affect the larger society.
including Philips, and Volvo, are all struggling to revive their fortunes today.
Consider the sale of sensitive products e.g. cigarettes. Ordinarily, companies should
They failed to understand their changing marketplace, their customers and the
be free to sell, and smokers free to buy. But this transaction affects the public
need to provide value.
interest. First, the smoker may be shortening their own life. Second, smoking places
 As we move into the twenty-first century, companies must become customer- a burden on the smoker's family and on society at large. Third, other people around
oriented and market-driven in all that they do. the smoker may suffer discomfort and harm.
Marketing terms viii. Market/Market place: - it is a place or a geographical area where buyers and
i. Relationship marketing: - a type of marketing with the aim of building long term sellers meet and function, goods and services are offered for sale and the transfer
relationships with key parties (customers, suppliers, distributers) in order to earn of title of ownership occur.
and retain their businesses. It builds strong economic, technical and social ties
ix. Market space: - it is digital as when one is buying via internet. Many buyers
among parties and cuts time and costs.
today have shifted to buying space from market places.
ii. Integrated marketing: - it is when all the company’s departments work together
x. Metamarket: - a cluster of complementary products and services that are
to serve the customers’ needs. These are the sales force, advertising, customer
closely in the minds of customers /consumers but are spread across a diverse set
service, product management and marketing research departments and they are
of industries.
coordinated from the customer’s point of view.
xi. Brand: - it is an offering from a known source.
iii. Market segment: - it is the identified and profiled distinct group of buyers who
prefer or require varying products and service mixes. Marketers identify them by xii. Exchange: - (core concept of marketing) it is the process of obtaining a desired
product from someone by offering something in return.
examining demographic and behavioural differences among buyers.
For any exchange to take place there must be the following:
iv. Market offering: - these are products and services specifically designed for a
 There must be at least two parties
specific market segment.
 Each party has something that might be of value to the other party.
v. Market segmentation: - it is the process of taking the total heterogeneous market  Each party is capable of communicating and delivery
for a product and dividing it into several submarkets or segments, each of which  Each party is free to accept or reject the exchange offer
tends to be homogeneous in all significance.  Each party finds it appropriate or desirable to deal with the other party.
vi. Marketing networks: - consists of the company and its stakeholders xiii. A transaction: - it is a trade of values between the parties.
(customers, employees, suppliers, distributors, retailers, agencies etc) with whom
xiv. Marketing channel: - it is a medium through which goods are made to final
it has built mutually profitable business relationships. Effective networks with key
products that are earned to final buyers.
stakeholders encourage better profits in the organization.
xv. Value: - it is the ratio between what the customer gets and the cost he pays
vii. Marketing mix: - these are the tools which the marketing management uses to
for the commodity. These costs may include energy costs monetary costs, psychic
meet the requirements of the consumers. It is used to describe the different kinds
costs etc. Benefits include emotional benefits and functional benefits etc.
of choices organizations have to make in the whole process of bringing a product
or service to market.
The marketer can increase the value of a good though the following ways:

 Raise the benefits

 Reduce the costs
 Raise the benefits and reduce costs
 Raise benefits more than costs
 Lower benefits by less than the reduction of costs.

xvi. Demarketing: - it is that aspect of marketing which deals with discouraging

customers in general or a certain class of customers in particular on either on
temporary or permanent basis. It is to reduce demand temporarily or permanently.
The aim of demarketing is not to destroy demand, but only to reduce or shift it.

xvii. Marketing management: - the analysis, planning, implementation and control

of programmes designed to create, build and maintain beneficial exchanges with
target buyer a for the purpose of achieving organizational objectives.
 2. MARKETING RESEARCH 2. Using the Internet - A company can collect considerable information at little cost
by examining competitors’ websites, monitoring chat rooms and blogs, and
Introduction
accessing published data.
 Marketing managers often commission formal marketing studies of specific
problems and opportunities, like a product-preference test, a sales forecast by 3. Checking out rivals - Small businesses, such as restaurants and hotels, routinely
region, or an advertising evaluation. visit competitors to learn about changes they have made.
 It is the job of the marketing researcher to produce insight to help the
4. Tapping into marketing partner expertise - Marketing research firms, ad agencies,
marketing manager’s decision-making.
and other marketing partners, especially those targeting small/medium-sized
 The American Marketing Association definition:
businesses, may be able to share relevant market knowledge they have accumulated.
 Marketing research - the function that links the consumer and public to the
marketer through information— 5. Tapping into employee creativity and wisdom - No one comes into more contact
o Information used to identify and define marketing opportunities and with customers and understands a company’s products, services, and brands better
problems, generate marketing actions, monitor marketing performance, than its employees. They observe customers from all walks of life and try to identify
and improve understanding of marketing as a process. problems that need to be solved.

Importance of marketing insights

 Marketing research is all about generating insights which provide diagnostic  Most companies use a combination of resources to study their industries,
information about how and why we observe certain effects in the marketplace competitors, audiences, and strategies. They normally budget marketing
and what that means to marketers. research at 1 to 2% of company sales and spend a large percentage of that on
 Gaining marketing insights is crucial for marketing success, which is why most the services of outside firms.
large companies have their own marketing research departments.  Marketing research firms fall into three categories:
 At smaller companies, everyone carries out marketing research—including the
1. Syndicated-service research firms - These firms gather consumer and trade
customers. Small companies can also hire the services of a marketing research
information, which they sell for a fee.
firm or conduct research in creative and affordable ways, such as:
2. Custom marketing research firms - These firms are hired to carry out specific
1. Engaging students or professors to design and carry out projects
projects. They design the study and report the findings.
Companies like Samsung and Shell have engaged in a “crowd casting” exercise via
the Innovation Challenge, where top MBA students compete in teams to address 3. Specialty-line marketing research firms - These firms provide specialized
company problems. The students gain experience and visibility; the companies get research services. The best example is the field-service firm, which sells field
fresh sets of eyes to solve problems at a fraction of what consultants would charge. interviewing services to other firms.
Overcoming barriers to the use of marketing research Step 4: Analyse the Information
 In spite of the rapid growth of marketing research, many companies still fail to  The next step is to extract findings by tabulating the data and developing
use it sufficiently or correctly. summary measures. The researchers now compute averages and measures of
 They may not understand what it is capable of or provide the researcher with dispersion for the major variables.
the right problem definition and information to work with.  They may test different hypotheses and theories, applying sensitivity analysis to
 They may also have unrealistic expectations about what researchers can offer. test assumptions and the strength of the conclusions.

Step 5: Present the findings

The Marketing Research Process  Researchers can play a proactive, consulting role in translating data and
Step 1: Define the problem, the decision alternatives, and the information into insights and recommendations for management.

research objectives Step 6: Make the decision

 Marketing managers must be careful not to define the problem too broadly or  The company managers who commissioned the research need to weigh the
too narrowly for the marketing researcher. evidence.

Step 2: Develop the research plan  If their confidence in the findings is low, they may decide against introducing

 We develop the most efficient plan for gathering the needed information and ultra-high-speed Wi-Fi service. If they are predisposed to launching it, the

discover what that will cost. findings support their inclination. They may even decide to study the issue

o Suppose a company made a prior estimate that launching an ultra-high-speed further and do more research.

Wi-Fi service would yield a long-term profit of $50,000. If the manager  The decision is theirs, but rigorously done research provides them with insight

believes the marketing research will lead to an improved pricing plan and a into the problem.

long-term profit of $90,000, he should be willing to spend up to $40,000 on

this research. If the research will cost more than $40,000, it’s not worth
doing.
 To design a research plan, we need to make decisions about the data sources,
research approaches, instruments, and sampling methods.

Step 3: Collect the Information

 This is generally the most expensive and error-prone step.
 Some respondents may be inaccessible, and so they must be contacted again or
replaced. Others will refuse to cooperate or will give biased/dishonest answers.
The seven characteristics of a good marketing research 6. Healthy scepticism
Marketing researchers show a healthy scepticism toward assumptions made by
1. Scientific method
managers about how a market works. They are aware of the problems caused by
Effective marketing research uses the principles of the scientific method: careful
“marketing myths.”
observation, formulation of hypotheses, prediction, and testing.
7. Ethical marketing
2. Research creativity
Marketing research benefits both the sponsoring company and its customers. The
In an award-winning research study to reposition Cheetos snacks, researchers
misuse of marketing research can harm or annoy consumers, increasing resentment
dressed up in a brand mascot Chester Cheetah suit and walked around the streets
at what consumers regard as an invasion of their privacy or disguised sales.
of San Francisco. The response the character encountered led to the realization
that even adults loved the fun and playfulness of Cheetos. The resulting
repositioning led to a double-digit sales increase despite a tough business
environment.

3. Multiple methods
Marketing researchers shy away from overreliance on any one method. They also
recognize the value of using two or three methods to increase confidence in the
results.

4. Interdependence of models and data

Marketing researchers recognize that data are interpreted from underlying models
that guide the type of information sought.

5. Value and cost of information

Marketing researchers show concern for estimating the value of information against
its cost. Costs are typically easy to determine, but the value of research is harder
to quantify. It depends on the reliability and validity of the findings and management’s
willingness to accept and act on those findings.
 3. CONSUMER BUYER BEHAVIOUR
Marketing Other Buyer's black Buyer's
Consumer buying behaviour - refers to the buying behaviour of final consumers Stimuli Stimuli box response
i.e. individuals and households that buy goods and services for personal Product choice
Product Economic
consumption. All of these final consumers combined make up the consumer market. Brand choice
Price Technological Buyer
Buyer
Models of Consumer Behaviour characteristics decision Dealer choie
Place Political process
 Companies spend more money than ever to study consumers, trying to learn Purchase timing
Promotion Cultural Purchase amount
more about consumer behaviour. Who buys? How do they buy? When do they
buy? Where do they buy? Why do they buy?
 The central question for marketers is; how do consumers respond to various
marketing stimuli that the company might use? A company that really Characteristics Affecting Consumer Behaviour
understands how consumers will respond to different product features, prices
1. Cultural Factors
and advertisements has a great advantage over its competitors.
Cultural factors exert the broadest and deepest influence on consumer behaviour.
 Therefore, companies and academies have researched heavily the relationship
between marketing stimuli and consumer response. Their starting point is the Culture
stimulus-response model of buyer behaviour.  Culture is the most basic cause of a person's wants and behaviour.
 Marketing stimuli consist of the four Ps: product, price, place and promotion.  Human behaviour is largely learned. Growing up in a society, a child learns basic
Other stimuli include significant forces and events in the buyer's environment; values, perceptions, wants and behaviours from family and other institutions.
economic, technological, political and cultural. All these stimuli enter the  Spotting cultural shifts can help marketers to imagine new products that might
buyer's black box, where they are turned into a set of observable buyer be wanted, e.g. greater concern about health/fitness has created a huge industry
responses: product choice, brand choice, dealer choice, purchase timing and for exercise equipment & clothing, natural foods, and health/fitness services.
purchase amount.  Concern for the environment is influencing consumer behaviour both through
 The marketer wants to understand how the stimuli are changed into responses legislation and through demand for less wasteful goods.
inside the consumer's black box, which has two parts.
Subculture
o First, the buyer's characteristics influence how he or she perceives and reacts
 Each culture contains smaller subcultures of people with shared value systems
to the stimuli. Second, the buyer's decision process itself affects the buyer's
based on common life experiences and situations.
behaviour.
 Subcultures include nationalities, religions, racial groups and geographic regions.
Many subcultures make up important market segments and marketers often
design products and marketing programmes tailored to their needs.
 Social Class  Reference groups are groups that serve as direct (face-to-face) or indirect points
 Social classes are society's relatively permanent and ordered divisions whose of comparison in forming a person's attitudes or behaviour.
members share similar values, interests and behaviours.  Reference groups to which they do not belong often influence people. For
 Social class is not determined by a single factor, such as income, but is measured example, an aspirational group is one to which the individual wishes to belong,
as a combination of occupation, income, education, wealth and other variables. as when a teen football player hopes to play someday for Manchester United.
 Class systems differ in various parts of the world; the relative class sizes also  Marketers try to identify the reference groups of their target markets.
vary with the relative prosperity of countries. Reference groups influence a person in at least three ways:
 The 'diamond'-shaped classification (few people at the top and bottom with o They expose the person to new behaviours and lifestyles.
most in the middle.) is common in developed countries, while in less developed o They influence their attitudes and self-concept because they want to 'fit in'.
countries, the structure is 'pyramid' shaped with a concentration of poor people o They also create pressures to conform that may affect their product and
at the base. brand choices.
 Some class systems have a greater influence on buying behaviour than others.  The importance of group influence varies across products and brands, but it
In most Western countries 'lower' classes may exhibit upward mobility, tends to be strongest for conspicuous purchases.
showing buying behaviour similar to that of the 'upper' classes.
 But in other cultures, where a caste system gives people a distinctive role,
buying behaviour is more firmly linked to social class. Upper classes in almost • Golf clubs • Video games
• Snow skis • Ice makers
all societies are often more similar to each other than they are to the rest of • Yachts

their own society.

Public Private
Luxuries Luxuries

2. Social Factors
Public Private
Groups Necessities Necessities
 Membership groups are groups that have a direct influence and to which a person • Wristwatches • Matresses
• Cars • Refrigerators
belongs. • Dress clothes
 Some are primary groups with whom there is regular but informal interaction -
such as family, friends, neighbours and fellow workers. 3.1The extent of group influence on product and brand choice.

 Some are secondary groups, which are more formal and have less regular
interaction. These include organizations like religious groups, professional
associations and trade unions.
 Family • Decider: The person who ultimately makes a buying decision or any part of it -
 We can distinguish between two families in the buyer's life: whether to buy, what to buy, how to buy or where to buy.
 The family of orientation which is made up of the buyer's parents. • Buyer: The person who makes an actual purchase. Once the buying decision is
o Parents provide a person with an orientation towards religion, politics and made, someone else could make the purchase for the decider.
economies, and a sense of personal ambition, self-worth and love. Even if
the buyer no longer interacts very much with his or her parents, the latter • User: The person who consumes or uses a product or service. Once bought, other
members of their family could use it.
can still significantly influence the buyer's behaviour. In countries where
parents continue to live with their children, their influence can be crucial. Roles and Status
 The family of procreation which is made up of the buyer's spouse and children.  A person belongs to many groups - family, clubs, and organizations. The
o They have a more direct influence on everyday buying behaviour. This family person's position in each group can be defined in terms of both role and status.
is the most important consumer buying organization in society and it has  With her parents, Anna Flores plays the role of daughter; in her family, she
been researched extensively. plays the role of wife; in her company, she plays the role of brand manager.
 Marketers are interested in the roles and relative influence of the husband, wife  A role consists of the activities that people are expected to perform according
and children on the purchase of a large variety of products and services. to the people around them. Each role carries a status reflecting the general
Husband-wife involvement varies widely by product category and by stage in esteem given to it by society.
the buying process.
 People often choose products that show their status in society, e.g. the role of
 Almost everywhere in the world, the wife is traditionally the main purchasing a brand manager has more status in society than the role of a daughter.
agent for the family, especially in the areas of food, household products and
clothing.
3. Personal Factors
Consumers' buying roles
Age and Life-Cycle Stage
For some products, the decision-making unit is more complicated with people
playing one or more roles:  People change the goods and services they buy over their lifetimes.
 Buying is also shaped by the family life cycle - the stages through which families
• Initiator: The person who first suggests or thinks of the idea of buying a particular
might pass as they mature over time.
product or service. This could be a parent of friends who would like to see a visual
 Marketers often define their target markets in terms of life-cycle stage and
record of a holiday.
develop appropriate products and marketing plans for each stage.
• Influencer: A person whose view or advice influences the buying decision, perhaps  Psychological life-cycle stages have also been identified. Adults experience
a friend who is a camera enthusiast or a salesperson. certain passages or transformations as they go through life, searching for a new
way to fulfill themselves.
 Occupation Personality and Self-Concept
 A person's occupation affects the goods and services bought. Blue-collar  Each person's distinct personality influences their buying behaviour.
workers tend to buy more work clothes, whereas white-collar workers buy  Personality refers to the unique psychological characteristics that create
more suits and ties. relatively consistent and lasting responses to one's own environment. It is
 Marketers try to identify the occupational groups that have an above-average usually described in terms of traits such as self-confidence, dominance,
interest in their products and services. A company can even specialize in making sociability, autonomy, defensiveness, adaptability and aggressiveness.
products needed by a given occupational group.  Personality can be useful in analysing consumer behaviour for certain product
or brand choices. For example, coffee makers have discovered that heavy coffee
Economic Circumstances
drinkers tend to be high on sociability. Thus Nescafe ads show people coming
 A person's economic situation will affect product choice.
together over a cup of coffee.
 Marketers of income-sensitive goods closely watch trends in personal income,
 Many marketers use a concept related to personality - a person's self-concept
savings and interest rates. If economic indicators point to a recession,
(also called self-image). The basic self-concept premise is that people's
marketers can take steps to redesign, reposition and reprice their products.
possessions contribute to and reflect their identities, i.e. we are what we have.
Lifestyle  Thus, in order to understand consumer behaviour, the marketer must first
 People coming from the same subculture, social class and occupation may have understand the relationship between consumer self-concept and possessions.
quite different lifestyles.
 Lifestyle is a person's pattern of living as expressed in their activities, interests
4. Psychological Factors
and opinions. Lifestyle captures something more than the person's social class
or personality. It profiles a person's whole pattern of acting and interacting in Motivation
the world.  A person has many needs at any given time. Some are biological, arising from
 The technique of measuring lifestyles is known as psychographics; it involves states of tension such as hunger, thirst or discomfort. Others are psychological,
measuring the chief dimensions (activities, interests, opinions). arising from the need for recognition, esteem or belonging. Most of these needs
 Knowing the social setting of a person can provide information about their will not be strong enough to motivate the person to act at a given point in time.
everyday life, such as work likes and dislikes, which helps in product  A need becomes a motive when it is aroused to a sufficient level of intensity. A
development and advertising. motive (or drive) is a need that is sufficiently pressing to direct the person to
 The lifestyle concept, when used carefully, can help the marketer understand seek satisfaction. Psychologists have developed theories of human motivation.
changing consumer values and how they affect buying behaviour. Two of the most popular - the theories of Sigmund Freud and Abraham Maslow
– have quite different meanings for consumer analysis and marketing.
 Freud's Theory of Motivation. Perception
 Freud assumes that people are largely unconscious of the real psychological  A motivated person is ready to act. How the person acts is influenced by his or
forces shaping their behaviour and they repress many urges. These urges are her perception of the situation. Two people with the same motivation and in
never eliminated; they emerge in dreams, in slips of the tongue, in obsessive the same situation may act quite differently because they perceive the situation
behaviour or ultimately in psychoses. Thus Freud suggests that a person does differently.
not fully understand his or her motivation.  Why the difference? We all learn by the flow of information through our senses.
 Motivation researchers collect in-depth information from small samples of However, each of us receives, organizes and interprets this sensory information
consumers to uncover the deeper motives for their product choices. They use in an individual way. Thus perception is the process by which people select,
non-directive depth interviews and various 'protective techniques' to throw the organize and interpret information to form a meaningful picture of the world.
ego off guard, such as word association, sentence completion, picture  People can form different perceptions of the same stimulus because of three
interpretation and role-playing. perceptual processes:
 Motivation researchers have reached some interesting and sometimes odd o Selective attention - the tendency for people to screen out most of the
conclusions about what may be in the buyer's mind regarding certain purchases. information to which they are exposed. This means that marketers have to
 For example, one classic study concluded that consumers resist prunes because work especially hard to attract the consumer's attention.
they are wrinkled-looking and remind people of sickness and old age. Despite o Selective distortion - the tendency of people to adapt information to
its sometimes unusual conclusions, motivation research remains a useful tool personal meanings. Even noted stimuli do not always come across in the
for marketers seeking a deeper understanding of consumer behaviour. intended way. People tend to interpret information in a way that will
support what they already believe. This means that marketers must try to
understand the mindsets of consumers and how it affects interpretations of
Maslow's Theory of Motivation. ads.
o Selective retention - People will also forget much of what they learn. They
 Abraham Maslow sought to explain why people are driven by particular needs
tend to retain information that supports their attitudes and beliefs.
at particular times. Why does one person spend much time and energy on
personal safety and another on gaining the esteem of others? Maslow's answer  Because of selective exposure, distortion and retention, marketers have to

is that human needs are arranged in a hierarchy, from the most pressing to the work hard to get their messages through. This fact explains why marketers use

least pressing. so much drama and repetition in sending messages to their market.

 A person tries to satisfy the most important need first. When that important  Although some consumers are worried that they will be affected by marketing

need is satisfied, it will stop being a motivator and the person will then try to messages without even knowing it, most marketers worry about whether their

satisfy the next most important need. offers will be perceived at all.

 Maslow's hierarchy is not universal for all cultures.

 Learning  Attitudes are difficult to change. A person's attitudes fit into a pattern and to
 When people act, they learn. Learning describes changes in an individual's change one attitude may require difficult adjustments in many others. Thus a
behaviour arising from experience. company should usually try to fit its products into existing attitudes rather than
 Learning theorists say that most human behaviour is learned through the try to change attitudes.
interplay of stimuli, cues, responses and reinforcement. Learning generalizes the
responses to similar stimuli. The reverse of generalization is discrimination.
 Marketers can build up demand for a product by associating it with strong
drives, using motivating cues and providing positive reinforcement. CONSUMER DECISION PROCESS
 They can either appeal to the same drives as competitors do and provide similar  The consumer's choice results from the interplay of all the above factors.
cues because buyers are more likely to transfer loyalty to similar brands  Although the marketer cannot influence many of these factors, they can be
(generalization). Or they may design their brand to appeal to a different set useful in identifying interested buyers and in shaping products to serve their
of drives and offer strong cue inducements to switch brands (discrimination). needs better. Marketers have to be extremely careful in analyzing consumer
Beliefs and Attitudes behaviour since consumers often turn down what appears to be a winning offer.

 Through doing and learning, people acquire their beliefs and attitudes. These,
in turn, influence their buying behaviour. Types of Buying Decision Behaviour
 A belief is a descriptive thought that a person has about something. They may Consumer decision-making varies with the type of buying decision. More complex
be based on real knowledge, opinion or faith, and may or may not carry an decisions usually involve more buying participants and more buyer deliberation.
emotional charge.
i. Complex Buying Behaviour
 Marketers are interested in the beliefs that people formulate about specific
products because they make up brand images that affect buying behaviour. If  Consumers undertake complex buying behaviour when they are highly involved

some of the beliefs are wrong and prevent purchase, the marketer will want to in a purchase and perceive significant differences among brands, or when the

launch a campaign to correct them. product is expensive, risky, purchased infrequently and highly self-expressive.
 This buyer will pass through a learning process, first developing beliefs about
 People have attitudes regarding religion, politics, clothes, music, food and
the product, then attitudes, and then making a thoughtful purchase choice.
almost everything else.
Marketers of high-involvement products must understand the information-
 An attitude describes a person's relatively consistent feelings and tendencies
gathering and evaluation behaviour of high-involvement consumers. They need
towards an object or idea. Attitudes put people into a frame of mind of liking
to help buyers learn about product-class attributes and their relative
or disliking things, of moving towards or away from them.
importance and about what the company's brand offers.
ii. Dissonance-reducing Buying Behaviour iv. Variety-seeking Buying Behaviour
 This behaviour occurs when consumers are highly involved with an expensive,  This behaviour occurs in situations characterized by low consumer involvement,
infrequent or risky purchase, but see little difference among brands, e.g. consumers but significant perceived brand differences. In such cases, there is a lot of brand
buying carpeting face a high involvement decision because carpeting is expensive switching, e.g. when purchasing biscuits, a consumer may hold some beliefs,
and self-expressive. Yet they may consider most carpet brands in a given price choose a biscuit without much evaluation, and then evaluate that brand during
range to be the same. Because perceived brand differences are not large, buyers consumption. But the next time, the consumer might pick another brand out
may shop around to learn what is available, but buy relatively quickly. of boredom or simply to try something different.
 They may respond primarily to a good price or to purchase convenience.  Brand switching occurs for variety rather than due to dissatisfaction.
Afterwards, they might experience post-purchase dissonance (discomfort)  In such product categories, the marketing strategy may differ for the market
when they notice certain disadvantages of the purchased carpet brand or hear leader and minor brands. The market leader will try to encourage habitual
favourable things about brands not purchased. buying behaviour by dominating shelf space, avoiding out-of-stock conditions
 To counter such dissonance, the marketer's after-sale communications should and running frequent reminder advertising. Challenger firms will encourage
provide evidence and support to help consumers feel good both before and variety-seeking by offering lower prices, deals, coupons, free samples and
after their brand choices. advertising that presents reasons for trying something new.

iii. Habitual Buying Behaviour

 This behaviour occurs under conditions of low consumer involvement and little
significant brand difference, e.g. salt.
 They have low involvement with most low-cost, frequently purchased products. The Buyer Decision Process
They do not search extensively for information about the brands, evaluate  Marketers can study consumer purchases to find answers to questions about
brand characteristics and make weighty decisions about which brands to buy. what they buy, where and how much. But learning about the whys of consumer
 Instead, they passively receive information as they watch TV or read magazines. buying behaviour and the buying decision process is not so easy - the answers
Ad repetition creates brand familiarity. Consumers select the brand because it are often locked within the consumer's head.
is familiar and may not evaluate the choice even after purchase.  There are five stages to the consumer buying process: need recognition,
 Because buyers are not highly committed to any brands, marketers of low- information search, evaluation of alternatives, purchase decision and post-
involvement products with few brand differences often use price and sales purchase behaviour. Clearly, the buying process starts long before the actual
promotions to stimulate product trials. Gaining distribution and attention at the purchase and continues long after.
point of sale is critical. In advertising, TV is usually more effective than print  Buyers may pass quickly or slowly through these stages and some of the stages
media because it is a low-Involvement medium suitable for passive learning. Ad may even be reversed. Much depends on the nature of the buyer, the product
planning should be based on classical conditioning theory. and the buying situation.
i. Need Recognition iii. Evaluation of Alternatives
 The buyer senses a difference between his or her actual state and some desired  The marketer needs to know how the consumer processes information to
state. The need can be triggered by internal stimuli when normal needs rise to arrive at brand choices. Several evaluation processes are at work.
a level high enough to become a drive.  Certain basic concepts help explain consumer evaluation processes:
 From previous experience, the person has learned how to cope with this drive • Benefits that can be acquired by buying a product or service.
and is motivated towards objects that they know will satisfy it. • Degrees of importance to each attribute.
 The marketer needs to research consumers to find out what kinds of needs or • A set of brand beliefs about where each brand stands on each attribute.
problems arise, what brought them about and how they led the consumer to • A utility function for each attribute which shows how the consumer expects
this particular product. total product satisfaction to vary with different levels of different attributes.
 Through this, they can identify the stimuli that most often trigger interest in the  The consumer arrives at attitudes towards the different brands through some
product and can develop marketing programmes that involve these stimuli. evaluation procedure.

ii. Information Search

 A consumer may or may not search for more information. If the drive is strong attitude of others
and a satisfying product is near, they are likely to buy it then. If not, they may evaluation of purchase purchase decision
alternatives intention
simply store the need in memory or undertake an information search related unexpected
situational factors
to the need.
 The consumer can obtain information from any of several sources:
• Personal sources: family, friends, neighbours, acquaintances.
3.2Steps between the evaluation of alternatives and purchase derision
• Commercial sources: advertising, salespeople, dealers, packaging, and
iv. Purchase Decision
displays.
• Public sources: mass media, consumer-rating organizations.  Generally, the decision will be to buy the most preferred brand, but two factors,
• Experiential sources: handling, examining, and using the product. come between the purchase intention and the purchase decision:

 The marketer should identify consumers' sources of information and the • The attitudes of others - based on factors such as expected family income,

importance of each source. expected price and expected benefits from the product.
• Unexpected situational factors – when they are about to act, unexpected
 Consumers should be asked how they first heard about the brand, what
situational factors may arise to change the purchase intention.
information they received and the importance they place on different
information sources.  A consumer's decision to change, postpone or avoid a purchase decision is
influenced heavily by perceived risk, which causes anxiety. The amounts of
perceived risk varies with the amount of money at stake.
 Actions to reduce risk: avoiding purchase decisions, gathering more information The Buyer Decision Process for New Products
and looking for national brand names and products with warranties.  A new product is a good, service or idea that is perceived by some potential
 The marketer must understand the factors that provoke feelings of risk in customers as new.
consumers and must provide information arid support that will reduce the  The adoption process is "the mental process through which an individual passes
perceived risk. from first learning about an innovation to final adoption'
 Adoption is the decision by an individual to become a regular user of the
v. Post-purchase Behaviour
product.
 After purchasing, the consumer will be satisfied or dissatisfied and will engage
in post-purchase behaviour of interest to the marketer. What determines
whether the buyer is satisfied or dissatisfied is the relationship between the Stages in the Adoption Process
consumer's expectations and the product's perceived performance. Consumers go through five stages in the process of adopting a new product:
 If the product falls short of expectations, the consumer is disappointed; if it
1. Awareness. Consumer becomes aware of the new product but lacks info about it.
meets expectations, the consumer is satisfied; if it exceeds expectations, the
consumer is delighted. 2. Interest. They seek information about the new product.
 Consumers base their expectations on messages they receive from sellers,
3. Evaluation. They consider whether trying the new product makes sense.
friends and other information sources.
 Almost all large purchases result in cognitive discomfort caused by post- 4. Trial. They try the product on a small scale to improve their estimate of its value.

purchase conflict. Consumers are satisfied with the benefits of the chosen brand 5. Adoption. They decide to make full and regular use of the new product.
and glad to avoid the drawbacks of the brands not purchased.
 Such satisfaction is important because a company's sales come from two basic
groups - new customers and repeat customers. It costs more to attract new Individual Differences in Innovativeness
customers than to retain current ones. Keeping current customers is therefore People differ greatly in their readiness to try new products. In each product area,
often more critical than attracting new ones, and the best way to do this is to there are 'consumption pioneers' and early adopters. Other individuals adopt new
make current customers happy. products much later.
 A satisfied customer buys a product again, talks favourably to others about the
The five adopter groups have differing values:
product, pays less attention to competing brands and advertising, and buys
other products from the company. • Innovators are adventurous: they try new ideas at some risk.
 Beyond seeking out and responding to complaints, marketers can take • Early adopters are guided by respect: they are opinion leaders in their
additional steps to reduce consumer post-purchase dissatisfaction and to help community and adopt new ideas early but carefully.
customers feel good about their purchases.
 • The early majority is deliberate: although they are rarely leaders, they
adopt new ideas before the average person.
• The late majority is sceptical: they adopt an innovation only after most
people have tried it.
• Finally, laggards are tradition-bound: they are suspicious of changes and
adopt the innovation only when it has become something of a tradition
itself.
 This adopter classification suggests that an innovating firm should research the
characteristics of innovators and early adopters and should direct marketing
efforts to them.
 Manufacturers of products and brands subject to strong group influence must
find out how to reach the opinion leaders in the relevant reference groups.
 Opinion leaders are people within a reference group who, because of special
skills, knowledge, personality or other characteristics, exert influence on
others.
 Opinion leaders are found in all strata of society and one person may be an
opinion leader in certain product areas and an opinion follower in others.
 Marketers try to identify the personal characteristics of opinion leaders for the
products, determine what media they use and direct messages at them. In some
cases, marketers try to identify opinion leaders for their products and direct
marketing efforts towards them
 4. MARKETING MIX  Once the company has chosen its overall competitive marketing strategy, it is

HISTORY OF MARKETING MIX CONCEPT AND TERMINOLOGY ready to begin planning the details of the marketing mix.

 The concept gained popularity following an article titled “The Concept of the  Marketing mix - the set of controllable tactical marketing tools that the

Marketing Mix” by Neil Borden published in 1964. Borden explained how he firm blends/mixes to produce the response it wants in the target market.

started using the term inspired by James Culliton who in the 1940s described  It consists of everything the firm can do to influence the demand for its product.
the marketing manager as a ‘mixer of ingredients.’ The many possibilities gather into four groups of variables known as the 'four

 Borden’s article detailed these ingredients as product, planning, price, branding, Ps'; product, price, place and promotion.

distribution, display, packaging, advertising, promotions, and personal selling among • Product - the totality of goods and services that the company offers the
many others. target market, e.g. Honda Civics’ product is nuts, bolts, spark plugs, pistons,
 Eventually E. Jerome McCarthy clustered these multiple items into four high- headlights.
level categories that we now know as the 4 Ps of marketing. Its elements are the • Price - the amount of money charged for a product or service, or the sum
basic, tactical components of a marketing plan. of the values that consumers exchange for the benefits of having or using
the product or service.
KEY FEATURES OF MARKETING MIX
• Place - All company activities that make the product/service available to
1. Interdependent variables target customers.
These four unique variables need to be planned in conjunction with each other to • Promotion - activities that communicate the merits of the product and
ensure that their action plans are all complementary and aligned.
persuade target customers to buy it.
2. Help Achieve Marketing Targets  An effective marketing programme blends the marketing mix elements into a
Through the use of this set of variables, the company can achieve its marketing coordinated programme designed to achieve the company's marketing
targets such as sales, profits, and customer retention and satisfaction. objectives.
 Note that the four Ps represent the sellers' view of the marketing tools available
3. Flexible Concept
for influencing" buyers. From a consumer viewpoint, each marketing tool must
The focus on any one variable may be increased or decreased given unique
deliver a customer benefit.
marketing conditions and customer requirements.
 Companies should view the four Ps as the customer's four Cs.
4. Constant Monitoring
Product Customer needs and wants
It is vital to keep an eye on changing trends and requirements, within the company Price Cost to the consumer
as well as in the market to ensure that the elements stay relevant and updated. Place Convenience
Promotion Communication
PRODUCT POLICY • Costs incurred on promotions that are spread over large volumes of output.
According to the concept of product life cycle (PLC), every product goes through • the cost per unit of product manufactured is reduced (economies of scale)
four stages in its life.
Companies resort to various strategies such as aggressive pricing, product quality
1. Introduction: marketers introduce the product in the market. This stage is optimization etc., to sustain as well as to improve the sales of the product.
difficult for marketers due to the following reasons:
3. Maturity: The market is already saturated by too many players, leading to a
• Expenses incurred in R&D, marketing, and launch are high for new products. decline in sales. However, sales decline steadily i.e. the sales grow initially then
• The risk of a new product failure is very high. This stage is characterized by stabilize and finally begin to decline. Due to competition, the company invests
high expenses, negligible sales and zero or even negative profits. heavily in R&D to improve product quality. They also devise various marketing
Strategies for introduction stage: strategies such as increased advertising and communication to sustain profitability.
Rapid skimming: Companies may price their products very high and also promote the 4. Decline: The sales and profits decline at a fast pace. This could be due to the
products at a higher level. This is applied with a view to skim the market as quickly as inability of the marketers to cope with the increasing competition, advancements in
possible. It is useful when consumer knowledge about the product is low. technology that lead to the introduction of better products, shift in tastes and
Slow skimming: Used when the product is not new to the market and there is no preferences of consumers, etc. In this stage, marketers reduce the spending on the
threat of competition. Producers offer their products at a higher price and the product by cutting down the promotional budget, reducing the distribution
products are supported by a limited promotional budget. channels, etc. Marketers may also withdraw their products from the market.

Rapid penetration: When the product is unknown to the market and the market size is
relatively large, companies adopt this strategy. Marketers offer the product at a very
low price and the promotion budget is large.

Slow penetration: Marketers may offer the product at lower prices and the product is
supported by a limited promotional budget. The strategy is adopted when the product
is well known to consumers and when the market is very large in size.

2. Growth: The product gains huge demand, followed by an increase in sales. As a

result, the product delivers huge profits. However, marketers of these products
face the threat of competition from new companies with similar improved products.
The profits are at their peak initially, but they gradually tend to decline towards
later stages in this phase. Also, the initial increase in profits can be attributed to:
Limitations of the PLC concept  Differentiation arises and competition occurs on the basis of augmentation.
Each augmentation adds cost, and augmented benefits soon become expected
• Not all products undergo their life cycle in a uniform pattern. An increase
benefits and necessary points of parity/difference in the category.
in promotional activities during the maturity or decline stage may prolong
 As some companies raise the price of their augmented product, others offer a
the life of the product in these stages.
stripped-down version for less. Marketers must be sure, however, that
• The product life cycle only outlines the different phases of a product but
consumers do not see lower quality or limited capability versions as unfair.
cannot help in determining the duration of each of these phases.
 Marketing planning begins with formulating an offering to meet target customers’
needs or wants. The customer will then judge the offering on three basic Product classifications
elements: product features and quality, service mix and quality, and price. Marketers classify products on the basis of durability, tangibility, and use (consumer
 Technically a product is anything that can be offered to a market to satisfy a or industrial). Each type has an appropriate marketing mix strategy.
want or need, including physical goods, services, experiences, events, persons,
Durability and tangibility
places, properties, organizations, information, and ideas.
Products fall into three groups according to durability and tangibility:

Product levels: the customer-value hierarchy 1. Nondurable goods - tangible goods normally consumed in one or a few uses,
 The fundamental level is the core benefit: the service or benefit the customer such as beer and shampoo. They are purchased frequently, and so the appropriate
is really buying, e.g. a hotel guest is buying rest and sleep. strategy is to make them available in many locations, charge only a small markup,
 At the second level, the marketer must turn the core benefit into a basic and advertise heavily to induce trial and build preference.
product. Thus a hotel room includes a bed, bathroom, towels, desk, dresser. 2. Durable goods - tangible goods that normally survive many uses: refrigerators,
 At the third level, the marketer prepares an expected product; a set of machine tools, and clothing. They normally require more personal selling and
attributes/conditions buyers normally expect when purchasing this product. service, command a higher margin, and require more seller guarantees.
Hotel guests minimally expect a clean bed, fresh towels, working lamps, and a
3. Services - intangible, inseparable, variable, and perishable products that normally
relative degree of quiet.
require more quality control, supplier credibility, and adaptability. Examples include
 At the fourth level, the marketer prepares an augmented product that exceeds
haircuts, legal advice.
customer expectations. In developed countries, competition take place at this
level. In developing markets competition takes place mostly at the 3rd level.
 At the fifth level is the potential product, which encompasses all possible
augmentations and transformations the product might undergo in the future.
CONSUMER-GOODS CLASSIFICATION INDUSTRIAL-GOODS CLASSIFICATION
i. Convenience goods i. Materials and parts
 Purchased frequently, immediately, and with minimal effort, e.g. soft drinks,  They are goods that enter the manufacturer’s product completely.
soaps, and newspapers.  They fall into two classes: raw materials & manufactured materials and parts.
 Staples are convenience goods consumers purchase on a regular basis.
 Impulse goods are purchased without any planning or search effort, like candy o Raw materials in turn fall into two major groups:
bars and magazines.  farm products (wheat, cotton, livestock, fruits, and vegetables)
 Emergency goods are purchased when a need is urgent, e.g. umbrellas during a  natural products (fish, lumber, crude petroleum, iron ore)
rainstorm. Manufacturers of impulse and emergency goods will place them  Farm products are supplied by many producers, who turn them over to
where consumers are likely to experience an urge/need to purchase. marketing intermediaries, who provide assembly, grading, storage,
ii. Shopping goods transportation, and selling services. Their commodity character results in
 Those the consumer characteristically compares on bases such as suitability, relatively little advertising and promotional activity. Because users depend on
quality, price, and style, e.g. furniture, clothing, and major appliances. these materials, long-term supply contracts are common. The homogeneity of
 Homogeneous shopping goods are similar in quality but different enough in price natural materials limits the amount of demand-creation activity. Price and
to justify shopping comparisons. reliable delivery are the major factors influencing the selection of suppliers.
 Heterogeneous shopping goods differ in product features and services that may
be more important than price. The seller carries a wide assortment to satisfy o Manufactured materials and parts fall into two categories:
individual tastes and trains salespeople to inform and advise customers.  component materials (iron, yarn, cement, wires)
iii. Specialty goods  component parts (small motors, tires, castings)
 They have unique characteristics/brand identification for which enough buyers  Component materials are usually fabricated further—pig iron is made into steel,
are willing to make a special purchasing effort, e.g. cars, men’s suits. A Mercedes and yarn is woven into cloth. The standardized nature of component materials
is a specialty good because interested buyers will travel far to buy one. usually makes price and supplier reliability key purchase factors.
 They don’t require comparisons; buyers invest time only to reach dealers  Component parts enter the finished product with no further change in form, as
carrying the wanted products. Dealers don’t need convenient locations, though when small motors are put into vacuum cleaners and tires are put on
they must let prospective buyers know where to find them. automobiles.
 Most manufactured materials and parts are sold directly to industrial users.
iv. Unsought goods
Price and service are major marketing considerations, with branding and
 Goods that the consumer doesn’t know about or normally thinks of buying, e.g.
advertising less important.
smoke detectors, life insurance, cemetery plots. Require advertising.
  They are normally marketed through intermediaries because of their low unit
value and the great number and geographic dispersion of customers. Price and
ii. Capital items
service are important considerations because suppliers are standardized and
 They are long-lasting goods that facilitate managing the finished product.
brand preference is often not high.
 They fall into two groups: installations and equipment.
 Business services include:
o Installations consist of buildings (factories, offices) and heavy equipment
o Maintenance and repair services (window cleaning, copier repair) - usually
(generators, drill presses, mainframe computers, elevators).
supplied under contract by small producers or from the manufacturers of
 They are major purchases, usually bought directly from the producer, and a
the original equipment.
long negotiation precedes the typical sale.
o Business advisory services (legal, management consulting, advertising) -
 Producers must be willing to design to specification and to supply post-sale
usually purchased on the basis of the supplier’s reputation and staff.
services. Advertising is much less important than personal selling.

o Equipment includes portable factory equipment and tools (hand tools, lift
Differentiation
trucks) and office equipment (desktop computers, desks).
 To be branded, products must be differentiated.
 These types of equipment don’t become part of a finished product.
 At one extreme are products that allow little variation: chicken, aspirin, and
 They have a shorter life than installations but longer than operating supplies.
steel. Yet even here some differentiation is possible.
 Although some equipment manufacturers sell directly, more often they use
 At the other extreme are products capable of high differentiation, e.g.
intermediaries because the market is geographically dispersed, buyers are
automobiles, commercial buildings, and furniture. Here the seller faces an
numerous, and orders are small.
abundance of differentiation possibilities.
 Quality, features, price, and service are major considerations. The sales force
tends to be more important than advertising, though advertising can be used Form: the size, shape, or physical structure of a product. Consider aspirin. Although

effectively essentially a commodity, it can be differentiated by dosage, size, shape, colour,

coating, or action time.
iii. Supplies and business services
Features: Most products can be offered with varying features that supplement their
 Short-term goods/services that facilitate managing the finished product.
basic function. Marketers should consider how many people want each feature, how
 Supplies are of two kinds:
long it would take to introduce it, and whether competitors could easily copy it.
o maintenance and repair items (paint, nails, brooms)
To avoid “feature fatigue,” the company must prioritize features and tell consumers
o operating supplies (lubricants, coal, writing paper, pencils)
how to use and benefit from them. Each company must decide whether to offer
 Together, they go by MRO goods. Supplies are the equivalent of convenience
feature customization at a higher cost or a few standard packages at a lower cost.
goods; purchased with minimum effort on a straight-rebuy basis.
Performance quality: most products occupy one of four performance levels: low, Style: describes the product’s look and feel to the buyer and creates distinctiveness
average, high, or superior. Performance quality is the level at which the product’s that is hard to copy. Car buyers pay a premium for Jaguars because of their
primary characteristics operate. extraordinary looks. Aesthetics play a key role for brands such as Apple computers,
Quality is important for differentiation as companies adopt a value model and and Harley-Davidson motorcycles. A strong style does not always mean high
provide higher quality for less money. performance. A car may look great but spend a lot of time in the repair shop.
Firms should design a performance level appropriate to the target market and
Customization: customized products and marketing allow firms to be highly
competition, however, not necessarily the highest level possible.
relevant and differentiated by finding out exactly what a person wants—and doesn’t
They must also manage performance quality over time. Continuously improving the
want—and delivering on that. The demand for customization is certainly there.
product can produce high returns and market share; failing to do so can have
negative consequences. Design: the totality of features that affect how a product looks, feels, and functions.
A well-designed product offers functional and aesthetic benefits to consumers and
Conformance quality: Buyers expect a high degree to which all produced units can be an important source of differentiation.
are identical and meet promised specifications. A product with low conformance
quality will disappoint some buyers. Testing finished products ensure conformance

Durability: a measure of the product’s expected operating life under natural or PRODUCT MIX
A product mix consists of all the products an organization offers to its consumers.
stressful conditions, is a valued attribute for vehicles, kitchen appliances, and other
durable goods. Width: It is the total number of product lines a company carries.
The extra price for durability must not be excessive, and the product must not be
Length: It is the total number of items in the mix.
subject to rapid obsolescence, as PCs, TVs, and phones have sometimes been.
Depth: It is the assortment of sizes, colours, and variations offered in each product
Reliability: Buyers normally will pay a premium for more reliable products.
in the product line.
Reliability is a measure of the probability that a product will not malfunction or fail
within a specified time period. Consistency: It refers to the closeness exhibited by the product lines in the
production requirements, distribution, end usage, etc.
Reparability: measures the ease of fixing a product when it malfunctions or fails.
Ideal reparability would exist if users could fix the product themselves with little Product Mix Strategies
cost in money or time. Some products include a diagnostic feature that allows Marketers use different strategies to effectively manage the product mix.
service people to correct a problem over the telephone or advise the user how to
Expansion of product mix: It refers to increasing the number of product lines
correct it. Many computer hardware and software companies offer technical
and/or the depth within the product line. It is done by introducing products that
support over the phone, by fax or e-mail, or via real-time chat online.
are related or unrelated to the current product mix.
Contraction of product mix: It refers to when companies eliminate the entire Line stretching: It occurs when the company tries to stretch its existing range
product line or simplify the product lines through assortments. of products either upwards or downwards.
A firm tries to stretch downwards when it is in the middle market and wants to
Altering existing products: It can be done through redesigning, improving
introduce products at a lower price. Similarly, a company tries to stretch
packaging, adding new features, etc.
upwards when it wishes to enter the high-end market.
Positioning the product: This can be in relation to a competitor’s product, e.g. the Line filling: When marketers add more products to their existing range of
TV ads for Sprite and Mountain Dew are positioned directly against each other. products.
It can also be in relation to the target market or to the product class.
Product line modernization: Manufacturers using outdated machinery and
Products are also positioned by price and quality. For instance, HLL’s Wheel is
producing products that are not very contemporary have to adapt to the changing
positioned as a detergent that offers quality that is equivalent to a premium
market conditions and modernize their product line in order to stay competitive.
detergent, but at an affordable price.
Product line pruning: Manufacturers dispose of certain products that no longer
Trading up: To enhance the company’s image, marketers introduce premium-
contribute to the overall profitability. This way, companies can optimally divert the
priced goods to the existing range of products. Trading up also helps in improving
resources spent on such products to more profit-generating products.
the sales of the existing product line.
Reasons for line extension
Trading down: In trading down, companies introduce low-priced products to the
existing range of specialty products.  It is seen as a means to cater to a wide variety of customer segments.
 It provides something new to the customers thereby helping marketers in
retaining customers and in attracting new ones.
MANAGING PRODUCT MIXES AND LINES  Adding new products to existing product lines involves lesser costs than
developing a totally new product.
Product line analysis
A company must observe the sales generated by the various products in its product Limitations of line extension
line while also keeping an eye on the competitor’s moves in relation to its product  The product line may become saturated due to the introduction of too many
line. It is through this analysis that companies take crucial decisions like dropping a products in the line.
product from the existing range or adding a new product.  Brand loyalty may be diluted when many products are introduced under the
Product line length: It can determine the profitability of a company. A firm should same brand name. Sometimes products are introduced under existing brand
only carry products in its product line that can maximize its profits. Profits can be names even when they have the potential to be introduced as new ones.
improved by adding more products to the product line or by removing some of the  Line proliferation distracts the attention of the R&D department from
products from the product line. Can be increased by line stretching and line filling. developing new products and generating new ideas.
ADVERTISING IN INDUSTRIAL MARKETS the requirements of those markets, and evolving marketing programmes or
The word Industrial Marketing is also treated as Business-to-Business Marketing, or strategies to reach and satisfy target customers in a better and faster way than
Business Marketing, or Organizational Marketing. Industrial marketing/business competitors apply to both consumer and industrial marketing.
marketing is to market the products and services to business organizations:
The industrial markets are geographically concentrated; the customers are
manufacturing companies, government undertakings, private sector organisations,
relatively fewer; the distribution channels are short; the buyers (or customers) are
educational institutions, hospitals, distributors, and dealers. Business organizations
well informed; the buying organisations are highly organised and use.
buy products and services to satisfy many objectives like the production of goods
and services, making profits, reducing costs, and, so on. MBA-Marketing Industrial Marketing sophisticated purchasing techniques; the
purchasing decisions are based on observable stages in industrial marketing.
Further, industrial marketing consists of all activities involved in the marketing of
Industrial marketing is more a responsibility of general management in comparison
products and services to organizations that use products and services in the
to consumer marketing. Sometimes, it is difficult to separate industrial marketing
production of consumer or industrial goods and services, and to facilitate the
strategy from the corporate (company) strategy. But in case of consumer marketing,
operation of their enterprises.
many times the changes in marketing strategy are carried out within the marketing
The companies/selling organizations that sell steel, machine tools, computers, department, through changes in advertising, sales promotion, and packaging
courier services, and other goods and services to business firms/buying strategies. However, the changes in industrial marketing strategy generally have
organizations need to understand the buyers’ needs, purchasing power/resources, company-wide implications.
policies, and buying procedures. They have to create value (benefit) for the buying
In all, the concept of industrial marketing may be referred as marketing of goods
organizations (customers) with products and services and focus on buying
and services to business organizations: manufacturing companies, service
organizational needs and objectives. For example, a company manufacturing and
organizations, institutions and middlemen in private and public sector organizations,
marketing precision steel tubes to bicycles, a manufacturer is doing business
and Government undertakings. The differences between industrial and consumer
marketing. Industrial marketers of the precision steel tube company must
marketing exist in certain characteristics such as market, product, buyer behaviour,
understand the needs of bicycle manufacturers such as Hero Cycle and Atlas Cycle,
channel, promotional, and price. The demand for industrial products is derived from
in terms of their quality requirements, applications of tubes, availability or delivery
the ultimate demand for consumer goods and services. It is, therefore, called as
on a daily or weekly basis, and so on. Similarly, a small and proprietary firm, giving
derived demand. Joint demand occurs when one industrial product is required, if
technical advice (or services) to paint manufacturers is also doing business
other product also exists. Cross-elasticity of demand is the reaction of the sales of
marketing.
one product to a price change in another product.
Characteristics of industrial and consumer marketing
The basics of marketing management: deciding the target markets; finding out the
needs and wants of the target markets, developing products and services to meet
Differences between Industrial and Consumer Marketing
 5. HUMAN RESOURCE MANAGEMENT Nature of HRM
Introduction HRM is concerned with people’s dimensions in organizations.

 The whole context of Human Resource Management revolves around the core The core of HRM
matter of managing relations at the workplace. i. HRM Involves the Application of Management Functions and Principles.
 Since the mid-1980’s Human Resource Management (HRM) has gained The functions and principles are applied to acquiring, developing, maintaining
acceptance in both academic and commercial circles. and providing remuneration to employees in an organization.
 HRM is a multidisciplinary organizational function that draws theories and ideas ii. Decision Relating to Employees must be Integrated. Decisions on different
from various fields such as management, psychology, sociology and economics. aspects of employees must be consistent with other HR decisions.
 There is no best way to manage people and no manager has formulated how iii. Decisions Made Influence the Effectiveness of an Organization. The
people can be managed effectively because people are complex beings with effectiveness of an organization will result in the betterment of services to
complex needs. customers in the form of high-quality products supplied at reasonable costs.
 Effective HRM depends very much on the causes and conditions that an iv. HRM Functions are not Confined to Business Establishments Only. They
organizational setting would provide. Any Organization has three basic are also applicable to non-business organizations such as education, health care,
components, People, Purpose, and Structure. recreation and the like.
 The goal of HRM is to maximize employees’ contributions in order to achieve
optimal productivity and effectiveness, while simultaneously attaining individual
Scope of HRM
and societal objectives.
All major activities in the working life of a worker, from when they enter into an
organization until they leave, are under the HRM.
What is Human Resource Management?
The major HRM activities include: HR planning, job analysis, job design, employee
 The study of activities regarding people working in an organization.
hiring, employee and executive remuneration, employee motivation, employee
 A managerial function that tries to match an organization’s needs to the skills
maintenance, industrial relations and prospects of HRM.
and abilities of its employees, and is concerned with hiring, motivating and
maintaining people in an organization. The scope of Human Resources Management extends to:
 It involves designing management systems to ensure that human talent is used • All the decisions, strategies, factors, principles, operations, practices, functions,
effectively and efficiently to accomplish organizational goals. activities and methods related to the management of people as employees.
 It can be defined as the art of procuring, developing and maintaining a competent
• All the dimensions related to people in their employment relationships, and all the
workforce to achieve the goals of an organization in an effective and efficient manner.
dynamics that flow from it.
 The American Society for Training and Development (ASTD) conducted a fairly v. Organizational Development: This is an important aspect whereby the
exhaustive study in this field and identified nine broad areas of activities of HRM “Synergetic effect” is generated in an organization i.e. healthy interpersonal and
which are given below: inter-group relationships within the organization.
vi. Compensation and Benefits: This is the area where wages and compensations
i. Human Resource Planning
are fixed scientifically to meet fairness and equity criteria. In addition, Labour
ii. Design of the Organization and Job
welfare measures are involved which include benefits and services.
iii. Selection and Staffing
vii. Employee Assistance: Each employee is unique in character, personality,
iv. Training and Development
expectation and temperament. Each one of them faces problems every day,
v. Organizational Development
whether personal or official. Such worries must be removed to make him or
vi. Compensation and Benefits
her more productive and happy.
vii. Employee Assistance
viii. Union-Labour Relations: Healthy Industrial and Labour relations are very
viii. Union/Labour Relations
important for enhancing peace and productivity in an organization. This is one
ix. Personnel Research and Information System
of the areas of HRM.
ix. Personnel Research and Information System: Knowledge of behavioural
i. Human Resource Planning: It is to ensure that the organization has the right
science and industrial psychology throws better insight into the workers'
types of persons at the right time and at the right place. HR Planning forecasts
expectations, aspirations and behaviour.
demand and supply and identifies sources of selection. It develops strategies to
Advancement of technology of product and production methods have created
meet the manpower requirement.
different working environments. Globalization has increased competition.
ii. Design of Organization and Job: This is the task of laying down organization
Science of ergonomics gives better ideas of doing work more conveniently.
structure, relationship and responsibilities. This includes defining work contents
Thus, continuous research in HR areas is an unavoidable requirement. It must
for each position [job description], followed by identifying the attributes of
also take special care in improving the exchange of information through
persons who will be most suitable for each job [job specification].
effective communication systems on a continuous basis, especially on morale
iii. Selection and Staffing: This is the process of recruitment and selection of
and motivation.
staff. This involves matching people and their expectations with the job
specifications and career paths available within the organization.
iv. Training and Development: This involves an organized attempt to find out
the training needs of the individuals in order to impart the knowledge and skills
needed not only to perform the current job but also to fulfil the future needs
of the organization.
 Objectives of HRM The above-stated HRM objectives can be summarized under four specific objectives:

Primary objective: 1. Societal Objectives: seek to ensure that the organization is socially responsible
To ensure the availability of a competent and willing workforce to an organization. for the needs and challenges of society while minimizing the negative impact of
such demands upon the organization.
Specific objectives:
2. Organizational Objectives: it recognizes the role of HRM in bringing about
i. Human capital: To assist the organization in obtaining the right number and
organizational effectiveness. It makes sure that HRM is not a standalone
types of employees to fulfil its strategic and operational goals.
department, but rather a means to assist the organization with its primary
ii. Developing organizational climate: To help create a climate in which
objectives. The HR department exists to serve the rest of the organization.
employees are encouraged to develop and utilize their skills to the fullest and
3. Functional Objectives: Human resources are to be adjusted to suit the
to employ the skills and abilities of the workforce efficiently.
organization’s demands. The department’s value should not become too
iii. Help maintain performance standards and increase productivity: Done
expensive at the cost of the organization it serves.
through effective job design; providing adequate orientation, training and
4. Personnel Objectives: it is to assist employees in achieving their personal goals,
development; providing performance-related feedback; and ensuring effective
as far as these goals enhance the individual’s contribution to the organization.
two-way communication.
Otherwise employee performance and satisfaction may decline giving rise to
iv. Helping to establish and maintain a harmonious employer/employee
employee turnover.
relationship
v. Helping to create and maintain a safe and healthy work environment HRM Objectives Supporting Functions
vi. Developing programs to meet the economic, psychological, and social 1. Societal Objectives Legal compliance
Benefits
needs of the employees and helping the organization retain productive Union- management relations
employees. 2. Organizational Human Resource Planning
Objectives Employee relations
vii. Ensuring that the organization is in compliance with provincial/territorial
Selection
and federal laws affecting the workplace (such as human rights, employment Training and development
equity, occupational health and safety, employment standards, and labour Appraisal
Placement
relations legislation). Assessment
viii. To provide well-trained and well-motivated employees 3. Functional Objectives Appraisal
Placement
ix. To increase the employees' satisfaction and self-actualization
Assessment
x. To develop and maintain the quality of work life 4. Personal Objectives Training and development
xi. To communicate HR policies to all employees. Appraisal
Placement
xii. To help maintain ethical policies and behaviour. Compensation
Assessment
Functions of HRM 5. Total Rewards: Compensation in the form of pay, incentives and benefits are
All the functions of HRM are correlated with the core objectives of HRM. the rewards given to the employees for performing organizational work.
It can be thought of as seven interlinked functions taking place within organizations: Compensation management is the method for determining how much
1. Strategic HR Management: Human resource planning (HRP) function employees should be paid for performing certain jobs.
determines the number and type of employees needed to accomplish People are attracted to organizations offering higher pay. To be competitive,
organizational goals. It includes creating venture teams with a balanced skill mix, employers refine their basic compensation systems and may use variable pay
recruiting the right people, and voluntary team assignments. programs such as incentive rewards, promotion from within the team, recognition
2. Equal Employment Opportunity: Compliance with equal employment rewards, balancing team and individual rewards etc. They use rewards to motivate
opportunity (EEO) laws and regulations affects all other HR activities. personnel to achieve an organization’s goals.
3. Staffing: The aim of staffing is to provide a sufficient supply of qualified Benefits are another form of compensation to employees other than direct pay
individuals to fill jobs in an organization. Job analysis, recruitment and selection for the work performed. Benefits include both legally required items and those
are the main functions of staffing. offered at the employer’s discretion. Benefits are primarily related to the area
Job analysis is the process of describing the nature of a job and specifying the of employee maintenance as they provide for many basic employee needs.
human requirements such as knowledge, skills, and experience needed to
6. Risk Management and Worker Protection: HRM addresses various
perform the job. The end result of job analysis is job description. Job description
workplace risks to ensure the protection of workers by meeting legal
spells out the work duties and activities of employees.
requirements and being more responsive to concerns for workplace health and
4. Talent Management and Development: includes different types of training: safety along with disaster and recovery planning.
Orientation is the first step towards helping a new employee to adjust himself to 7. Employee and Labour Relations: The relationship between managers and
the new job and the employer. their employees must be handled legally and effectively. Employer and employee
Training and Development programs provide useful means of assuring that the rights must be addressed.
employees are capable of performing their jobs at acceptable levels. It is important to develop, communicate, and update HR policies and
Career planning is necessary as a result of the desire of many employees to grow procedures so that managers and employees alike know what is expected. In
in their jobs and advance in their careers. Activities include assessing an some organizations, union/management relations must be addressed as well.
individual employee’s potential for growth and advancement in the organization. Labour relations refers to the interaction with employees who are represented
Performance appraisal includes encouraging risk-taking, demanding innovation, by a trade union. Unions are organizations of employees who join together to
generating or adopting new tasks, peer evaluation, frequent evaluations, and obtain a voice in decisions affecting wages, benefits, working conditions and
auditing innovation processes. other aspects of employment. With regard to labour relations the major
function of HR personnel includes negotiating with the unions regarding wages,
and service conditions and resolving disputes and grievances.
Role of HRM Different management gurus have deliberated different roles for the HR manager
 The main role of HRM is to plan, develop and administer policies and programs based on the major responsibilities that they full fill in the organization.
designed to make optimum use of an organization's human resources. Pat Mc Lagan has suggested nine roles that are played by HR practitioners:
 Its objectives are:
o effective utilization of human resources o To bring up the issues and trends concerning an organization to the strategic

o desirable working relationships among all members of the organizations decision makers and to recommend long term strategies to support organizational

o maximum individual development. excellence and endurance.

o To design and prepare HR systems and actions for implementation to produce
 HR professionals are required to have a thorough knowledge of the
maximum impact on performance and development.
organization and its intricacies and complexities. The ultimate goal should be to
o To facilitate the development and implementation of strategies for transforming
develop a link between the employee and the organization because the
one’s own organization by pursuing values and visions.
employee’s commitment to the organization is crucial.
o To create a positive relationship with the customers by providing them with the
 The first and foremost role is to consistently communicate to the employees
best service and to create commitment among the people who help the
about the changes and challenges facing the organization in particular.
organization to meet the customers’ needs.
The primary responsibilities of Human Resource managers are: o To identify the learning needs hence to design and develop structured learning

• To develop a thorough knowledge of corporate culture, plans and policies. programmes and materials to help accelerate learning for individuals and groups.

• To initiate change and act as an expert and facilitator o To enable individuals and groups to work in new situations and to expand their

• To actively be involved in the company’s strategy formulation views so that people in power move from authoritarian to participative models

• To keep communication lines open between the HRD and individuals and of leadership.

groups both within and outside the organization o To help employees to assess their competencies, values and goals so that they can

• To identify and evolve HRD strategies in line with overall business strategy. identify, plan and implement development plans.

• To facilitate the development of various organizational teams and their working o To also assist the individual employee to add values to the workplace and to focus

relationship with other teams and individuals. on the interventions and interpersonal skills for helping people change and

• To relate people and work so that the objectives are achieved efficiently. sustain change.

• To diagnose problems and determine appropriate solutions, particularly in the o To assess the HRD practices and programmes and their impact and to

human resource areas. communicate results so that the organization and its people accelerate their

• To provide coordination and support services for the delivery of HRD services change and development.

• To evaluate the impact of an HRD intervention

According to Dave Ulrich HR play’s four key roles. 2. Operational and Employee Advocate Role for HR

 Strategic Partner Role - turning strategy into results by building organizations that  HR often act as the voice for employee concerns, and spend considerable time

create value dealing with employee problems that are both work-related and non-work-

 Change Agent Role - making change happen, and fast related. Employee advocacy helps to ensure fair and equitable treatment for

 Employees Champion Role - managing the talent within a firm employees regardless of personal background or circumstances.

 Administrative Role - trying to get things to happen better, faster and cheaper.  Sometimes the HR’s advocate role may create conflict with operating managers.
However, without the HR advocate role, employers could face even more
Current Classification of HR roles lawsuits and regulatory complaints than they do now.
 The operational role requires HR professionals to cooperate with various
departmental and operating managers in order to identify and implement
needed programs and policies in the organization.
 Operational activities are tactical in nature. Compliance with equal employment
opportunity and other laws is ensured, employment applications are processed,
1. Administrative Role of HR current openings are filled through interviews, supervisors are trained, safety
 HR has been heavily oriented to administration and recordkeeping including problems are resolved, and wage and benefit questions are answered.
essential legal paperwork and policy implementation. Two major shifts driving  By carrying out these activities HR manager matches HR activities with the
the transformation of the administrative role are: Greater use of technology and strategies of the organization.
Outsourcing.
 Technology has been widely used to improve the administrative efficiency of
3. Strategic Role for HR
HR and the responsiveness of HR to employees and managers, with more HR
 The administrative role traditionally has been the dominant role for HR.
functions becoming available electronically or are being done on the Internet.
 The strategic HR role means that HR professionals are involved in devising
 Increasingly, many HR administrative functions are being outsourced to
strategy in addition to implementing strategy. (having a seat at the table)
vendors. This outsourcing has grown dramatically in HR areas such as employee
 However, in some organizations, HR often does not play a key role in
assistance (counseling), retirement planning, benefits administration, payroll
services, and outplacement services. formulating the strategies for the organization as a whole; instead it merely
carries them out through HR activities.
 Many professionals are increasingly seeing the need for HR management to
become a greater strategic contributor to the “business” success of
organizations.
 HR should be responsible for knowing what the true cost of human capital is  According to McKinsey’s 7-S framework model HR plays the role of a catalyst
for an employer. For example, it may cost two times key employees’ annual for the organization. According to this framework, effective organizational
salaries to replace them if they leave. change is a complex relationship between seven S’s.
 Turnover can be controlled though HR activities, and if it is successful in saving  HRM is a total matching process between:
the company money with good retention and talent management strategies, o the three Hard S’s (Strategy, Structure and Systems)
those may be important contributions to the bottom line of organizational o the four Soft S’s (Style, Staff, Skills and Super-ordinate Goals).
performance.  Clearly, all the S’s have to complement each other and have to be aligned
 Part of HR’s contribution is to have financial expertise and to produce financial towards a single corporate vision for the organization to be effective. It has
results, not just to boost employee morale or administrative efficiencies. to be realized that most of the S’s are determined directly or indirectly by
Therefore, a significant concern for chief financial officers (CFOs) is whether the way Human Resources are managed, and therefore, HRM must be a
HR executives are equipped to help them to plan and meet financial part of the total business strategy.
requirements.

 However, even though this strategic role of HR is recognized, many

HRM in the New Millennium
organizations still need to make significant progress toward fulfilling it.
1. HR Can Help in Dispensing Organizational Excellence: there is a need for
Some examples of areas where strategic contributions can be made by HR are:
organizations to reform the way in which work is carried out by the HR
• Evaluating mergers and acquisitions for organizational “compatibility,”
department. By designing an entirely new role and agenda that results in enriching
structural changes, and staffing needs
the organization’s value to customers, investors and employees, HR can help in
• Conducting workforce planning to anticipate the retirement of employees
delivering organizational excellence.
at all levels and identify workforce expansion
• Leading site selection efforts for new facilities or transferring operations to HR should be a representative of the employees and should help the organization
international outsourcing locations based on workforce needs in improving its capacity for change.
• Instituting HR management systems to reduce administrative time,
HR will help organizations in facing competitive challenges such as globalization,
equipment, and staff by using HR technology
profitability through growth, technology, intellectual capital, and other competitive
• Working with executives to develop a revised sales
challenges that the companies are facing while adjusting to uncontrollably
• Compensation and incentives plan as new products
challenging changes in the business environment.
2. HR should be a Strategy Partner: by directing serious discussions of how the 8. Aligning Human Resources to Better Meet Strategic Objectives: Some
company should be organized to carry out its strategy. organizations don’t include key people during strategy formulation resulting in a gap
between the actual problems and the solutions.
Creating the conditions for this discussion involves four steps:
o HR needs to define an organizational architecture by identifying the company’s 9. Promote From Within and Invest in Employees: Promoting employees from
way of doing business. within sends a powerful message that the organization’s employees are valued. New
o They must then conduct an organizational audit. blood and fresh ideas often come from newcomers to the organization.
o They need to identify methods for restoring the parts of the organizational
10. Review the Recruitment and Selection Process: A key element of human
architecture that need it.
resource planning is ensuring that the supply of appropriate employees (with the
o HR must take stock of its own work and set clear priorities.
right skill mix) is on board when needed. It is important to identify the competencies
3. HR Accountability Should be fixed to Ensure Employee Commitment: HR being sought. The fit of the individual with the values of the organization and the
must be held accountable for ensuring that employees feel committed to the culture of the firm should also be considered when selecting employees (person-
organization and contribute fully. organization-fit).

4. The New HR Must Become a Change Agent: The new HR must become a 11. Communicate Mission and Vision: If employees are expected to contribute
change agent, which is building the organization’s capacity to embrace and capitalize to the attainment of the organization’s strategic objectives, they must understand
on change. what their role is. The mission communicates the identity and purpose of the
organization. Only those employees who understand this purpose can contribute
5. Improving the Quality of HR: The most important thing that managers can do
to the fullest extent possible.
to drive the new mandate for HR is to improve the quality of the HR staff itself.
12. Use Teams to Achieve Synergy: Synergy can be concisely defined as “two plus
6. Change in Employment Practices: The challenges for Employment Practice will
two equals five”. In other words, the whole is greater than the sum of the parts. So
require that there should be strategic involvement of the people and labour-
much more can be achieved as people work together. Through the effective use of
management partnerships as they both have to take the organization ahead.
teams, organizations can often achieve synergy. Team goals, however, must be
7. Benchmarking Tool Must be Mastered by HR Professionals: Through this, aligned with the organization’s strategic objectives. Aligning team objectives with
the HR department will start appreciating the changes happening within and outside overall corporate objectives ensures that people are working toward the same goal
the environment while expanding the knowledge about how to add value to
decision-making at the highest level of the organization.
 6. INTERNATIONAL MARKETING  The General Agreement on Tariffs and Trade (GATT) is an international treaty

ANALYSIS OF INTERNATIONAL MARKET OPPORTUNITY designed to promote world trade by reducing tariffs and other international
trade barriers.
Deciding Whether or Not to Go Abroad
 Before deciding whether or not to sell abroad, a company must thoroughly
understand the international marketing environment. Regional Free-Trade Zones
 That environment has changed a great deal in the last two decades, creating  In recent years, we have seen the growth of regional free-trade zones or
both new opportunities and new problems. The world economy has globalized economic communities - groups of nations organized to secure common goals
and world trade and investment have grown rapidly, with many attractive in the regulation of international trade.
markets opening up.  One such community is the European Union, which aims to create a single
 The international financial system has become more complex and fragile. In European market by reducing physical, financial and technical barriers to trade
some country markets, foreign companies face increasing trade barriers, among member nations.
erected to protect domestic markets against outside competition.

The International Trade System Economic Environment

 The company looking abroad must develop an understanding of the  Two economic factors reflect the country’s attractiveness as a market: the
international trade system. country's industrial structure and its income distribution. The industrial
 When selling to another country, the firm faces various trade restrictions. structure shapes its product and service needs, income and employment levels.
 The most common is the tariff, which is a tax levied by a foreign government
1. Subsistence economies: the vast majority of people engage in simple agriculture.
against certain imported products. The tariff may be designed either to raise
They consume most of their output and barter the rest for simple goods and
revenue or to protect domestic firms.
services. They offer few market opportunities.
 The exporter also may face a quota, which sets limits on the amount of goods
the importing country will accept in certain product categories. The purpose of 2. Raw-Material-exporting economies: These economies are rich in one or more

the quota is to conserve foreign exchange and to protect local industry and natural resources, but poor in other ways. Much of their revenue comes from

employment. An embargo is the strongest form of quota, which totally bans exporting these resources. e.g. Saudi Arabia (oil).

some kinds of imports. 3. Industrializing economies: manufacturing accounts for 10—20 per cent of the
 Firms may face exchange controls that limit the amount of foreign exchange country's economy. As manufacturing increases, the country needs more imports
and the exchange rate against other currencies. The company may also face of raw textile materials, steel and heavy machinery, and fewer imports of finished
nontariff trade barriers, such as biases against company bids or restrictive textiles, paper products and motor vehicles. It typically creates a new rich class and
product standards that favour or go against product features. a small but growing middle class, both demanding new types of imported goods.
4. Industrial economies: They are large exporters of manufactured goods and 4. Government bureaucracy: the extent to which the host government runs an
investment funds. They trade goods among themselves and also export them to efficient system for helping foreign companies: efficient customs handling, good
other types of economies for raw materials and semi-finished goods. The varied market information and other factors that aid in doing business.
manufacturing activities of these industrial nations and their large middle class make
them rich markets for all sorts of goods.
Cultural Environment and Building Cultural Empathy
 The seller must examine the way consumers in different countries think about
Political-Legal Environment and use certain products before planning a marketing programme. The cultural
Nations differ greatly in their political-legal environments. At least four political- barriers in target country markets must be identified.
legal factors should be considered in deciding whether to do business in a given  Culture is defined simply as the learned distinctive way of life of a society.
country:  Culture generally influences the customer's actions in the marketplace, which,
in turn, impact upon the firm's marketing decisions.
1. Attitudes towards international buying: Some nations are quite receptive to
foreign firms, and others are quite hostile. Western firms have found newly  Business norms and behaviour also vary from country to country. Mistakes due

industrialized countries in the Far East attractive overseas investment locations. In to lack of understanding of foreign business behaviour affect business relations.

contrast, others like India are bothersome with their import quotas, currency  The firm must build cultured empathy and overcome the cultural differences
restrictions and limits on the percentage of the management team that can be non- with a view to establishing long- term market position. Cultural empathy is
nationals achieved in a number of ways:
o Acquire in-company knowledge and experience
2. Political stability: a government may decide to respond to new popular feelings.
o Continuous market research
The foreign company's property may be taken, its currency holdings may be
o Visit foreign country and customers
blocked, or import quotas or new duties may be set. International marketers may
find it profitable to do business in an unstable country, but the unsteady situation
will affect business and financial matters. Deciding which markets to enter
Defining International Marketing Objectives and Policies
3. Monetary regulations: Sellers want to take their profits in a currency of value
 First, it should decide what volume of foreign sales it wants
to them. Ideally, the buyer can pay in the seller's currency or in other world
currencies. Short of this, sellers might accept a blocked currency if they can buy  The company must choose how many countries it wants to market in

other goods in that country that they need themselves or can sell elsewhere for a  The company must decide on the types of countries to enter. A country's
needed currency. Besides currency limits, a changing exchange rate, as mentioned attractiveness depends on the product, geographical factors, income and
earlier, creates high risks for the seller. population, political climate and other factors.
 After listing possible international markets, the company must screen and rank 1. Exporting
each one on several factors, including market size, market growth, cost of doing  The simplest way to enter a foreign market is through exporting. Exporting
business, competitive advantage and risk level. All aspects of the product involves the least change in the company's product lines, organization,
concept should be considered in relation to these indicators: investments or mission.

1. Demographic characteristics Indirect Exporting

 Size of population  Indirect exporting involves less investment because the firm does not require
 Rate of population growth an overseas sales force or set of contacts. It also involves less risk.
 Degree of urbanization  These home-based intermediaries – export merchants or agents, co-operative
 Population density organizations, government export agencies - bring know-how and services to
 Age structure and composition of the population the relationship, so the seller normally makes fewer mistakes.

2. Geographic characteristics Direct Exporting

 Physical size of a country  Sellers may eventually move into direct exporting, whereby they handle their
 Topographical characteristics own exports. The investment and risk are somewhat greater in this strategy,
 Climate conditions but so is the potential return.

3. Economic factors 2. Joint Venturing

 GNF per capita  Joining with foreign companies to produce or market the products or services.
 Income distribution  Joint venturing differs from exporting in that the company joins with a partner
 Rate of growth of GNP to sell or market abroad. It differs from direct investment in that an association
 Ratio of investment to GNP is formed with someone in the foreign country. There are four types of joint
venture: licensing, contract manufacturing, management contracting and joint
ownership.
Establishing market entry mode
Licensing
Once a company has decided to market in a foreign country, it must determine the
The company enters into an agreement with a licensee in the foreign market. The
best mode of entry. Its choices are exporting, joint venturing and direct investment.
company thus gains entry into the market at little risk; the licensee gains production
Each succeeding strategy involves more commitment and risk, but also more
expertise or a well-known product or brand name without having to start from
control and potential profits.
scratch. Coca-Cola markets internationally by licensing bottlers around the world
and supplying them with the syrup needed to produce the product.
Contract Manufacturing gained experience in exporting, and if the foreign market is large enough, foreign
The company contracts with manufacturers in the foreign market to produce its production facilities offer many advantages:
product or provide its service. The drawbacks of contract manufacturing are the
1. The firm may have lower costs in the form of cheaper labour or raw materials,
decreased control over the manufacturing process and the loss of potential profits
foreign government investment incentives and freight savings.
on manufacturing. The benefits are the chance to start faster, with less risk, and the
later opportunity either to form a partnership with or to buy out the local 2. The firm may improve its image in the host country because it creates jobs.
manufacturer. 3. Generally, a firm develops a deeper relationship with government, customers,

Management Contracting local suppliers and distributors, allowing it to adapt its products better to the local
market.
The domestic firm supplies management know-how to a foreign company that
supplies the capital. The domestic firm exports management services rather than 4. Finally, the firm keeps full control over the investment and therefore can develop
products. Management contracting is a low-risk method of getting into a foreign manufacturing and marketing policies that serve its long-term international
market, and it yields income from the beginning. The arrangement is even more objectives.
attractive if the contracting firm has the option to buy a share in the managed
The main disadvantage of direct investment is that the firm faces many risks, such
company later on. Management contracting also prevents the company from setting
as restricted or devalued currencies, declining markets or government takeovers.
up its own operations for a period of time.
In some cases, a firm has no choice but to accept these risks if it wants to operate
joint Ownership in the host country.
Joint-ownership ventures consist of one company joining forces with foreign
There are therefore direct and indirect ways of entering a foreign market. The
investors to create a local business in which they share joint ownership and control.
important point is to note that entry mode decisions are dependent on market
A foreign government may require joint ownership as a condition for entry. Or the
conditions and die firm's product characteristics, objectives and capabilities.
firm may lack the financial, physical or managerial resources to undertake the
venture alone. Joint ownership has certain drawbacks. The partners may disagree Developing a Strategic Marketing Plan
over investment, marketing or other policies. To enjoy partnership benefits, The marketing programme for each foreign market must be carefully planned.
collaborators must clarify their expectations and objectives and work hard to Managers must first decide on the precise customer target or targets to be served.
secure a win-win outcome for all parties concerned. Then managers have to decide how, if at all, to adapt the firm's marketing mix to
local conditions. Two options are available,
3. Direct Investment
The biggest involvement in a foreign market comes through direct investment - the Standardized marketing mix ; An international marketing strategy for using
development of foreign-based assembly or manufacturing facilities. If a company has basically the same product, advertising, distribution channels, and other elements
of the marketing mix in all the company's international markets
 Adapted marketing mix = An international marketing strategy for adjusting the -Limited domestic growth and/or intense domestic competition is a key reason why
marketing mix elements to each international target market, bearing more costs firms enter foreign markets and was a prime motivator behind the Japanese
but hoping for a larger market share and return companies' overseas expansion programme during the 1970s and 1980s

International marketing takes place when a business directs its products and -Geographic market diversification to reduce country-specific risk - that is, the risk
services toward consumers in a country other than the one in which it is located. of operating in only one country, due to different political-economic cycles - is a
While the overall concept of marketing is the same worldwide, the environment popular reason behind firms' international expansion drive
within which the marketing plan is implemented can be dramatically different from
The overriding factor spurring international marketing efforts is, of course, to make
region to region.
money, and as the systems that comprise the global economy become ever more
Common marketing concerns—such as input costs, price, advertising, and interrelated, many companies have recognized that international opportunities can
distribution—are likely to differ dramatically in the countries in which a firm elects ultimately spell the difference between success and failure
to market its goods or services. Business consultants thus contend that the key to
Around the world there are potential customers with needs and money to spend.
successful international marketing for any business—whether a multinational
Ignoring those customers doesn't make any more sense than ignoring potential
corporation or a small entrepreneurial venture—is the ability to adapt, manage, and
customers in the same town."
coordinate an intelligent plan in an unfamiliar (and sometimes unstable) foreign
environment. While companies choosing to market internationally do not share an overall profile,
they seem to have two specific characteristics in common. First, the products that
Businesses choose to explore foreign markets for a host of sound reasons. In some
they market abroad, usually patented, are believed to
instances, firms initiate foreign market exploration in response to
- have high earnings potential in foreign markets.
-Unsolicited orders from consumers in those markets.
-Second, the management of companies marketing internationally must be ready to
- Many others, meanwhile, seek to establish a business to absorb overhead costs at
make a commitment to these markets. This entails far more than simply throwing
home,
money at a new exporting venture.
-diversify their corporate holdings,
Indeed, a business that is genuinely committed to establishing an international
-take advantage of domestic or international political or economic changes, presence must be willing to educate itself thoroughly on the particular countries it
chooses to enter through a course of market research.
- tap into new or growing markets.
A company can commit itself to one or more of the above arrangements at any
time during its efforts to develop foreign markets. Each method has its own distinct
advantages and disadvantages.
New companies, or those that are taking their first steps into the realm of PROBLEMS AND DIFFICULTIES IN FOREIGN TRADE
international commerce, often begin to explore international markets through There are several difficulties in foreign trade due to geographical distance. These
exporting (though they often struggle with financing are as follows

THE IMPORTANCE AND SIGNIFICANCE OF FOREIGN Rules and regulations-licenses and quotas are required in import and export of
TRADE goods. Importers and exporters have to comply with government rules and
The following benefits can be derived from foreign trade regulations related to customs, exchange control and etc.such formalities are
expensive in time and money.
Optimum utilization of resources -it facilitates the international division of or
specialization. Different countries are endowed with different resources and Risk in transit –in foreign trade, air and sea transport is used in which risks involved
through trade every country can specialize in the production of those resources are comparatively high. Good therefore have to be insured.
that it can manufacture most economically.
Physical distance-as goods have to be transported over long distances time cost
Economic growth-Economies of scale import is a means of economic growth for involved in transport t is so high. Face to face contact between customers and
developing countries. Such countries can import technical experts, machinery and buyers on account of the physical barrier.
equipment from developed countries to accelerate economic growth.
Creditworthiness of dealers-Due to lack of personal contact an exporter does
Economies of scale help in production of large scale because a country can export not know correctly the credit worthiness of the importer.
or import its surplus outputs.
Difference in customs and language- each country has got its own language and
Employment-Production of goods and services for external consumption or scripts. This creates a problem between of communication between exporters and
exports generates additional employment importers.

Higher standards of living- Most of the countries do not have the resources they Currency–Different countries use different currencies and for exchange to take
require through foreign trade they can procure these products and which they do place then there is conversion. Fluctuations of currencies is bound to happen and
not manufacture themselves and live comfortable lives. this may create differences in settlements of accounts.

Equalization of prices between countries-A country can check the rise in the Time lag-in foreign trade, traders have often to depend upon a chain of
prices of a commodity by increasing the amount of its imports. Similarly a intermediaries. There is a long time gap between the dispatch of goods by the
commodity in surplus can be exported to avoid glut and unreasonable fall in prices. exporter and the receipt and payments by the importer therefore the capital of the
exporter is blocked for a long time.
International brotherhood-foreign trade helps to promote economic
cooperation, mutual understanding and peace among nations as different come into INTERNATIONAL MARKETING FACTORS
contact with each other.
Although firms marketing abroad face many of the same challenges as firms affects the way information is delivered—which in marketing means
marketing domestically, international environments present added uncertainties promotion."Attitudes based on religious beliefs or cultural norms often shape
which must be accurately interpreted. Indeed, there are a host of factors that need marketing choices in fundamental ways as well.
to be researched and evaluated when preparing an international marketing strategy.
Legal Environment. This includes limitations on trade through tariffs or quotas;
Key aspects of any potential foreign market include: demographic and physical
documentation and import regulations; various investment, tax, and employment
environment; political environment; economic environment; social and cultural
laws; patent and trademark protection; and preferential treaties. These factors
environment; and legal environment.
range from huge treaties (North American Free Trade Agreement-NAFTA,
Demographic and Physical Environment. Elements that needs to be assessed that fit General Agreement on Tariffs and Trade-GATT) that profoundly shape the
under this category include population size, growth, and distribution; climate factors international transactions of many nations to trade barriers erected by a single
that could impact on business; shipping distances; time zones; and natural resources country.
(or lack thereof).
Political Environment. Factors here include system of government in targeted
Economic Environment. Factors in this area include disposable income and market; political stability; dominant ideology; and national economic priorities. This
expenditure patterns; per capita income and distribution; currency stability; aspect of an international market is often the single most important one, for it can
inflation; level of acceptance of foreign businesses in economy; Gross National be so influential in shaping other factors. For example, a government that is
Product (GNP); industrial and technological development; available channels of distrustful of foreigners or intent on maintaining domestic control of an industry or
distribution; and general economic growth. Obviously, the greater a nation's wealth, industries might erect legal barriers designed to severely curtail the business
the more likely it will be that a new product or service can be introduced opportunities of foreign firms.
successfully. Conversely, a market in which economic circumstances provide only a
tiny minority of citizens with the resources to buy televisions may not be an ideal
one for a television-based marketing campaign.

Social and Cultural Environment. This category encompasses a wide range of

considerations, many of which can—if misunderstood or unanticipated—
significantly undermine a business's marketing efforts. These include literacy rates;
general education levels; language; religion; ethics; social values; and social
organization. "The ability of a country's people to read and write has a direct
influence on the development of the economy—and on marketing strategy
planning," observed McCarthy and Perreault. "The degree of literacy